THE CHALLENGE
No entrepreneur can afford to waste precious time, resources or energy pursuing opportunities - or false alarms - that don't exist. This is especially true for owners of young, up-and-coming businesses because the only way they can challenge established firms is by launching new, innovative products.
Joanne Papari faced this issue when she founded Biochem Environmental Solutions, and she's learned how to scrutinize her ideas systematically and, in turn, avoid false alarms.
THE BACKGROUND
Biochem Environmental Solutions, based in Toronto, Ontario, is now the largest company in Canada producing and servicing washroom hygiene systems, and one of the top three companies in North America. The company has over 10,000 customers worldwide - owners and operators of establishments with public washrooms such as commercial, institutional, industrial and retail buildings - who want to reduce cross contamination and improve washroom hygiene. Many of these customers operate nationally or internationally, and want a supplier that can provide great service across their locations.
Papari came to Canada at age 18 to study chemical engineering at the University of Windsor. After graduating, she was the first woman hired as a sales representative by a large chemical manufacturer. In just three months, she became the top salesperson in Canada, and then the top sales representative in North America. In 1996, after 12 years of working in a corporate environment, Papari decided to go out on her own and founded Biochem Environmental Solutions. Since the beginning, Biochem has been developing environmentally-responsible products, and all new products must meet or exceed environmental standards.
A key to Papari's success is being able to distinguish between product ideas that are truly great, those that merely seem great. "This is a huge issue for entrepreneurs, because no one can afford to make mistakes," she says.
THE SOLUTION
Papari examines her ideas pragmatically. "I'm an engineer and like to analyze things. I have to be convinced that a new product yields tangible benefits that our customers want, at a price they are willing to pay. There is no point in developing a state-of-the-art product if it is too expensive for your customers."
You have to know your market inside out to be able to determine in advance how customers are likely to respond to a new product. Papari surveys all her customers on a regular basis, asking whether existing products meet their expectations and what other products they might be interested in. Importantly, she also asks customers to identify one new thing that Biochem could do that would be useful for them. Papari studies the survey results very carefully and probes them when she's visiting customers and prospective customers. "It's important to spend a lot of time talking to people about their business needs and how they might change. It's also important to gain insights about how much they are willing to pay for your products."
To provide evidence that new product ideas are technically feasible, the company builds a prototype. In order to keep costs down, this prototype is usually quite rudimentary and doesn't look good enough to place with a customer, so they test it in-house. Papari states, "It can take three years and cost over $250,000 to develop a new product, and I don't want to do that until I'm sure that the product is feasible and will yield measurable performance advantages."
Once a new product has been developed, Papari protects her investment using intellectual property protection mechanisms. The company holds two patents in the U.S. and Canada, with two more patents pending, and also holds two trademark registrations.
THE RESULT
Papari has implemented efficient systems yielding relevant, reliable data, and supplements these with constant attention to her customers' needs. She believes that even though judgment and intuition play a role in product innovation decisions, moving ahead without solid information can be a mistake.
Her approach has paid off. Biochem Environmental Solutions is the first Canadian firm in this industry to successfully challenge the market dominance of established multinationals, and the first in the industry to become ISO 14001 certified. In 2004, Papari won the Canadian Woman Entrepreneur of the Year Award for Innovation. The business has achieved double-digit growth each year, outgrowing a 7,000 square foot building and moving in 2008 into one that's 25,000 square feet. Recently, Papari's systematic approach to innovation has enabled her to become a leader in providing eco-friendly products. Biochem Environmental Solutions received an Environmental Leadership Award last year for introducing a non-polluting odour neutralizer and the Ecodrip, an environmentally-friendly bowl cleaner.
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.