Designing and manufacturing heat recovery ventilators (HRVs) for residential and commercial markets has been a solid business for Windsor, N.S.-based Nu-Air Ventilation Inc. since 1992.
But the 50-employee family business, which generates about $8-million in annual revenue, has always invested some of its profits back into research and development, making increasingly efficient units. (HRVs, which exhaust stale indoor air and replace it with fresh outdoor air, are mandatory in buildings in many provinces.)
Seven years ago, president and founder Earl Caldwell gave the okay for his team to start development on a very different product: a high-efficiency fireplace that acts like a furnace, air conditioner and HRV all in one.
The company invested about $1-million to develop the innovative fireplace, and has had working prototypes for the past two years. Knowing of no other product like its Enerheat unit on the market, Mr. Caldwell’s established company is in some ways starting from scratch in creating and breaking into a new market.
“Without a doubt, this is going to be a challenge for us,” Mr. Caldwell acknowledges of the time, expense and risk his company is taking to both educate potential customers and create a new market for itself.
Established companies may have some advantages when it comes to launching new products or services. But though years of experience, a track record, resources to develop and self-fund a launch, and an existing customer base can certainly help a company break into unfamiliar territory, it’s not enough.
Bringing out something really new can force an established company to have to think like a startup again, from product research to developing new ways of marketing to finding new customers, and avoiding doing the same old.
If companies don’t do some reinvention and be overconfident, they can get into trouble with their new effort, warns Ray Bakker, a Toronto-based consultant who has extensive experience in new product launches. “A lot of people feel entitled to success this time around [because] last time things were a success.”
For many businesses, new offerings are crucial to continuing to grow and stay relevant, Mr. Bakker says.
That’s why Toronto-based Tenet Computer Group Inc., which has operated as a computer reseller and service provider for 29 years, moved into the software business a dozen years ago, first adding custom software development to its roster of services, and then developing a new app called Green Rack, which it launched in limited release last December.
Green Rack is a mobile and Web-based application that allows schools, tourism groups and other organizations to transfer their paper brochures into electronic ones that consumers can access via mobile devices and public touch screens.
Developing the app was part of a much-needed long-term growth plan for Tenet, says founder, president and chief executive officer Carlos Paz-Soldan. “The business had changed.”
So how do old companies best launch new offerings? For one thing, they have to get past the belief that just because they were successful once, they can easily do it again, says Jennifer Lomax, a principal of Torque Consulting Group in Toronto. “Many business owners believe a great product will save the day. But a great product is not enough.”
She says success lies in really understanding a new market they are entering. Leveraging an existing client base is helpful, but doesn’t go far enough, she says. She favours moves like market research, such as running focus groups.
At least some new customers may be the same as your old ones. If there’s some overlap, use them to get introductions, she suggests. To raise customer awareness, Mr. Bakker says companies should visit trade shows, join associations, offer free seminars and shake a lot of new hands.
That’s what Nu-Air has done, leveraging its inside knowledge of the building industry to try to forge direct relationships at utility companies and with condo and apartment developers and engineers. These are not customers with whom the company has worked in the past since it sells its HRVs through distributors and wholesalers, Mr. Caldwell says.
To reach the customers that would hard-wire its Enerheat unit into new buildings, Nu-Air’s five-staff marketing team has targeted specific trade shows and set up one-on-ones. Quickly, they found out that, to get their message across, they needed to speak the language of engineers.
“The big thing we have to get over is the fact that engineers are a bit like bankers; they’re very careful about what they do. They don’t want to put something in their buildings that doesn’t have a track record,” Mr. Caldwell says.
So Nu-Air has installed a working Enerheat in a lab in Montreal for industry contacts to see, as well as a couple of demos that have been put into two new condo units in the city. Mr. Caldwell is working to get more demonstration units set up in new buildings across the country.
Mr. Bakker says that developing a customer base has to involve not just selling, but listening – which, he says, can be a challenge for longtime business owners who feel they know their industries well.
“A lot of owners talk too much. Rather than asking for someone’s true, honest opinion, they try to sell them on the idea,” he says. He thinks even businesses with track records and experience need to press contacts for true, critical feedback that will reveal a product’s flaws, whether price, too much novelty or the existence of a strong competitor.
While launching a new product can get a longstanding company out of its comfort zone, it’s still important to capitalize on the strengths that brought success in the first place.
“Some of the target markets we are going after are markets in which we have some experience,” Mr. Paz-Soldan says. For instance, he’s tapped into existing relationships at suppliers Research In Motion Ltd. (being rechristened BlackBerry) and Samsung Electronics Co. Ltd. for support in promoting Green Rack, and has found new customers by leveraging his experience with large, public-sector organizations.
This and his multilingual staff helped land a pilot project with Rio de Janeiro. The company is rolling out Green Rack with the city to promote local sites in time for the 2014 World Cup.
Once customers are in place, companies may have to deal with what amounts to running a second business with existing resources. At Tenet, Mr. Paz-Soldan expects to retrain some staff. He may also need to open satellite offices to serve international clients.
One thing that companies need to guard against: The costs of the development and launch can take resources away from a company’s old product lines. “All too often, people become too busy and forget to focus on their main core business just to expand for the sake of expansion,” Mr. Bakker warns.
Yet having a new product and being on the cutting edge has its perks, too. Tenet’s staff is thrilled to be involved with cities and organizations involved in high-profile events such as the World Cup through Green Rack.
“Everyone is quite into it. It beats setting up printers," Mr. Paz-Soldan says.
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