Master: Nurse Next Door
Key Indicator: On track to double its franchisee base in one year
If you think the famously innovative cultures of corporate giants such as 3M and Google are beyond your firm's reach, you might want to reconsider. An innovative approach might provide the competitive advantage you've long been seeking—and a big boost to your growth rate, too.
A 2008 Georgia Tech study of manufacturers in that state found that firms that competed mainly by innovating or using new technologies posted a three-year average return on revenue of 14.5%, compared to 7.6% for ones competing on price alone. Those that employed process innovations to, say, boost efficiency, achieved 15% faster productivity growth than non-innovators.
"When you focus on innovation, it's easier to get distribution, easier to develop product awareness, easier to hold your price, easier to get repeat purchases and easier to get appointments with customers, because they're excited about your business," says Doug Hall, founder and CEO of The Eureka! Ranch, a Newtown, Ohio based innovation think tank. To build a culture of innovation, he says, you need to communicate to your staff that your firm is always on the hunt for better ways to do things. You also need to weave processes for brainstorming and implementing good ideas into your operations.
Ken Sim and John DeHart took this approach when they launched Nurse Next Door (NND) in 2001. The Vancouver-based firm is a franchisor of home health-care services for seniors, which might not seem like fertile ground for innovation. But the co-founders have made NND exactly that by scouring the world for best practices they can learn from, and institutionalizing a culture based on a ceaseless quest to streamline operations. Sim says this innovation streak has been fundamental to NND's rapid growth as it builds a national network and lays plans to go global.
NND starts by hiring people who are keen on the "Find a better way" ethos that animates the firm. During job interviews, it outlines how NND manages a given aspect of its operations, then asks applicants to suggest a better way to do so. It isn't seeking the "right" answer, but an applicant who shows an aptitude for such challenges and eagerness to address them.
Once on board, these hires join NND's Kaizen Club ("kaizen" is Japanese for "continuous improvement"), which works to relieve bottlenecks. Staff meet weekly to analyze feedback forms from colleagues outlining an operational issue, its cause and effect, and its costs. In 2008, the club successfully implemented one new idea a week, from simplifying invoices to improving scheduling systems.
Sim and DeHart have also copied or been informed by ideas gleaned from visiting successful firms in countries such as the U.S., Japan and India. One widespread best practice they noted was to be ruthless in simplifying your business processes. When they applied a technique called value stream mapping to their workflow, they were stunned to find it took 37 steps from a client's first call to completing the care for the client. NND has now culled the non-essential steps from this process.
The firm's never-ending questioning of its own practices also revealed that its paper-intense internal procedures—what Sim calls "people running around to fill out data, which is put in a file cabinet where no one can see it"—was wasting $1.6 million per year. NND did away entirely with file cabinets so there'd be no room to store paper documents, leaving itself no choice but to make its massive switch to digital-based processes work.
This yielded huge efficiency gains. Combined with those from the rest of NND's steady stream of ideas, it has allowed the firm to reduce its staff count by 50% over three years through attrition. This is even though system-wide revenue has jumped by 50% in the past year, and the number of franchises is on track to double from 19 last year to 40 by the end of 2009.
Sim says NND's constant tinkering with its processes allows its franchisees to deliver a more reliable and personalized service to seniors, maximizing their revenue. This, in turn, allows NND to attract a top calibre of franchisee. "We don't compete on price anymore," he says. "Our competitors are no longer a choice (for customers and franchisees) because we offer something no one else does."