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Whether a business runs with the gazelles of the 2012 PROFIT 200 or takes a more conservative approach to growth, it can never assume that what works today will suffice tomorrow. Sustaining a company’s success—or just safeguarding its survival—is always a function of innovation.

Smart entrepreneurs continually adjust their products and practices in response to changing market demands and conditions; and smarter entrepreneurs get ahead of the curve and define the next big thing.

The leaders of Canada’s Fastest-Growing Companies are some of the smartest entrepreneurs you’ll meet—and they’ve proven their ability to generate great ideas and turn them into reality. These are the innovation practices that deliver results for them.

1 RAISE YOUR PERISCOPE

Staying abreast of emerging business opportunities and threats is one of those basic management practices that’s far easier said than done. The challenge is twofold: first, you have to gather good intelligence; then, you have to disseminate it within your firm.

This challenge used to hold back Toronto-based Cognition LLP (No. 155 on the 2012 PROFIT 200), a virtual law firm whose 29 lawyers work out of their homes and client offices to service clients nationwide. Although the model reduces costs dramatically, it also eliminates all those water cooler conversations that are so vital to knowledge transfer.

Cognition addressed that problem with ConnectedN, a communication platform designed for knowledge-based businesses that depend on a constant flow of relevant information to stay on the cutting edge.

The web-based tool acts like an online clipping service, constantly scouring the Internet for any content relevant to Cognition’s practice areas and passing it on immediately. Users also are able to share content with colleagues and clients and to post comments and articles on blogs, Facebook, Twitter and LinkedIn that reinforce the company’s brand as an innovator in the legal services industry. The platform is also customizable, allowing Cognition attorneys to tailor ConnectedN’s output to their individual needs.

“It’s an incredibly convenient way to stay on top of things,” says co-founder Joe Milstone. “And because it’s immediate, our people can make comments or respond to trends and developments in the industry quickly.”

Intelligence gathered on ConnectedN often sparks discussion and debate within the firm that helps identify opportunities, says cofounder Rubsun Ho: “Technology like this allows us to operate the way we do.”

Attending industry events such as trade shows, conferences and seminars allows you to see first-hand what your competitors are doing and gain insights from experts that you can apply to your business. To facilitate that, Montreal-based Revision Military Inc. (No. 105) requires any staff member who attends a trade show to make a related presentation during one of the company’s weekly R&D meetings. Staff reveal what they learned and whom they met at the event that could lead to new opportunities. This tactic gives the broader employee base a lot more intelligence to work with, given that staff of the maker of protective military equipment attend more than 60 trade shows and industry events annually.

Crelogix Credit Group Inc. (No. 193) provides non-bank financial services in a range of niche lending markets in which traditional banks are not active. Because these individual markets are small, the Burnaby, B.C.-based firm must constantly grow its product line to grow its business. Crelogix president and CEO Karl Sigerist says the company generates discussion of new opportunities using Chatter, a collaboration platform sold by Salesforce.com.

Sigerist describes Chatter as “an internal Facebook for your company.” Each employee on the platform has a profile page on which they can post ideas and information about the work they’re doing and comment on items posted by co-workers. The system works well for Crelogix, says Sigertist, because employees are spread across multiple markets and have few opportunities to meet with co-workers.

Sigerist credits Chatter for the genesis of at least one big idea: a financing product for families trying to pay for a tutor for a child in elementary school: “Many of our employees are young—lots of university students—and they are very comfortable communicating in this type of environment.”

2 partner with an innovator

Good ideas to improve your business don’t have to come from inside your firm. Research-driven institutions, such as colleges and universities, and innovation minded companies in other sectors, can open your eyes to an idea you can adapt for your business that you otherwise wouldn’t have known about. That’s why it makes sense to explore innovation partnerships.

“We are being copied every day by somebody,”says Sylvain Boucher, president and CEO of Laval, Que.-based Ergoresearch Ltd.(No. 140). “So, the only way for us to survive is to keep moving forward with new design software, new technologies and new products we can take to market.”

Ergoresearch develops, manufactures and sells orthotics and orthopedic products designed to alleviate chronic pain. The company has partnered with l’Université Laval and l’Université du Québec on research projects that have contributed to the development of innovative new products to combat pain caused by osteoarthritis. Both Ergoresearch and the learning institutions benefit from the research, says Boucher. The best part is that government grant programs, administered through the National Research Council and the Natural Sciences and Engineering Research Council of Canada, often cover much of the cost. “Partnering on research is a great way for an entrepreneurial company to innovate, because you can really leverage your money,” says Boucher. “For every dollar you invest in a project, government programs may invest two or three times that.”

On one university research project, Ergoresearch even partnered with an electronics company to cover its part of the cost. “They are not in exactly the same field as us,” says Boucher, “but the key elements of the research made sense for both of us.”

3 form innovation teams

As an entrepreneurial company grows, employees can sometimes get lost in an ever-expanding cube farm. And even if the business is still relatively small, just keeping up with day-to-day tasks forces some individuals to drop out of the innovation loop. Dedicated innovation teams offer one way to combat creeping isolation within your company and keep the creative juices flowing.

All 192 employees at Paradigm Quest Inc. (No. 96), a Toronto-based provider of back-office services for mortgage lenders, belong to one of seven business unit lab (BUL) teams within the company. These teams meet once a month for two-hour lunches, during which they formulate and debate ideas for new products, enhanced services or improved processes. “We’re looking for anything that will add value for our three main stakeholder groups: borrowers, investors and the firms where the mortgages originate,” says Katherine Gregory, Paradigm’s president and CEO.

Paradigm used to rely on individuals within the company to submit ideas at quarterly innovation meetings, but Gregory found that too many employees stayed on the sidelines. The groups have created a “culture of collaboration” she says, “and the energy level is 1,000 times higher.”

Each BUL team at Paradigm is responsible for pitching one to three ideas at a semi-annual, company wide innovation meeting. Senior management uses a points system to rate each idea put forward, then hands out prizes. (Members of the first place team receive iPads, while the second and third-place teams receive iPhones and iPods, respectively.) Once a winning idea gets the green light from the finance and tech departments for feasibility, a senior innovation team takes over and moves the concept toward implementation.

Toronto staffing agency Tundra Technical Solutions (No. 86) employs a similar system, dividing its staff into “scrum” groups of five or six people. It charges each scrum with driving innovation forward in a specific area of the business, such as social networking, web technologies or green initiatives. Each group has its own budget and sets goals for the year. Again, ideas are presented to senior management at a semiannual meeting, and then the best ideas move on to further stages of development.

Tundra president and founder Jonathan Prothero credits the scrums with originating the loyalty, referral reward and channel exclusivity programs the firm has pioneered. “We are a small company going up against global companies, so we really depend on having strong differentiators to compete,” he says. “Many of those concepts came out of the scrum groups.”

And scrum group members have a major incentive to make a contribution. Tundra employees are eligible for an annual bonus if they meet the objectives in their personal- development plan. Twenty percent of that bonus is based on scrum group work, and the other group members decide whether or not a particular employee has been pulling his or her weight.

Before Tundra had moved to the scrum group model, the task of coming up with new ideas fell largely to Prothero. He says the group model has raised the energy level around innovation “tenfold.”

4 borrow great ideas

Grant Bourdeau used to bring in expensive outside consultants to help maximize efficiency at nutriceutical manufacturer Suntrition Inc. (No. 88). Then, in 2010, his Tecumseh, Ont.-based firm joined a regional consortium of non-competing manufacturers whose CEOs take turns hosting monthly lunch-and-learn events that include a guest speaker and a facility tour. The CEOs also share the challenges they face in their business and get feedback on how to address them.

“We all operate manufacturing facilities, so we all have to find ways to do the same things better—inventory management, process mapping, health and safety, ergonomics,” says Bourdeau, Suntrition’s president and CEO.

Bourdeau and his senior managers were inspired by a visit to another consortium member’s facility to rethink Suntrition’s inventory management. They subsequently made changes that have reduced inventory by almost 15%.

Jon Pole, president of Renfrew, Ont.- based My Broadcasting Corp. (No. 149), a chain of radio stations across southern and eastern Ontario, has been a member of a similar industry organization, called the Idea Bank, since 2004. This group consists of 100 broadcasting companies operating in small markets across North America, as well as from as far away as New Zealand and Australia. The group meets twice a year to share ideas and talk about the state of their industry.

As with Suntrition’s consortium, members of the Idea Bank don’t compete with each other, although all of them are in the same business. And because their markets are similar in size, consortium members can often adapt sales and promotions ideas from one place to work in another. “We have taken ideas that stations in Alaska use when broadcasting high-school football games and applied them to our own junior-hockey broadcasts,” says Pole.

5 leverage an advisory board

Not only do the advisory boards at Medical Futures Inc. (No. 131) help the company bring new products to market, it probably couldn’t stay in business without them.

The Richmond Hill, Ont.-based firm brings niche medicines developed in other countries into Canada and, therefore, has to be extremely vigilant about meeting all Canadian research and testing standards and complying with strict marketing and advertising regulations. “Everything we say and do has to be approved,” says CEO Colin Campbell.

To help navigate this minefield, Medical Futures maintains three advisory boards, each focused on a single therapeutic area. Each board is made up of three doctors, some of them renowned specialists in their field, who meet three times a year to review the medicines the company is hoping to launch and make recommendations about everything from patient efficacy to how best to market a given medicine to doctors.

“They look at all aspects of the research behind the product, and they have to believe in the merits of it,” Campbell says. “Having them definitely gives us an edge.”

6 don’t let it bring you down

Intermittently shouting out for big, new business ideas on a moment’s notice is an unreliable way to produce results. As a process, innovation works best when it becomes part of a consistent routine. But you know what they say about routine: it gets dull after a while.

Not so at ThinkWrap Solutions Inc. (No. 106). On the last Thursday of every month, the Ottawa-based e-commerce software developer holds a three hour lunch session dubbed Food for Thought. The theme is always innovation, but the menu and even the agenda vary from meeting to meeting.

Sometimes, there’s a guest speaker; other times, small groups of employees research a relevant topic and prepare a short presentation for the rest of the staff. Discussion and debate follows, and if an idea emerges that the group feels warrants further exploration, senior management is present to commit the time and resources required to move the idea along.

The employee(s) who come up with an idea for a new product or process improvement get to lead the development team— under the supervision of senior management— so they have a personal stake in seeing the project come to fruition. Extra motivation comes from stock options that are rewarded upon implementation.

Steve Byrne, ThinkWrap’s CEO, says Food for Thought sessions often end up going well past the three-hour limit, and usually result in a whiteboard full of ideas and areas for further research. “We have pulled some real nuggets out of the pile,” says Byrne—including one idea that ultimately led to a suite of proprietary social-media monitoring tools.

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