January 28: Nick McKay & Robert Winborne
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This week's guests were Nick McKay - CEO of EnviroScent and Robert Winborne - Founder and Managing Director of Brookwood Associates.
EnviroScent is a home fragrance company that develops authentic natural products including ScentSicles, ScentSticks, and AutoSticks which are sold by major retailers nationwide. Brookwood Associates provides M&A, financing and advisory services to help business owners meet their strategic objectives.
Our conversation touched on "mild to wild" product development, the value of disruptive innovation, the impact of a great board of directors and how to get your car and Christmas tree to smell better.
Nick McKay on the Mild to Wild Product Development: "Mild product developments are things like fragrance changes, or we might alter the size of the ScentStick, make it longer or shorter for a particular purpose. The wild product development is very different. That is development where you're really trying to reinvent the way the world uses fragrance, in a disruptive way, or you're trying to fundamentally change the way the product performs. Mild development is very sequential. It is very linear and the Stage-Gate product development processes work really well for those things. You just need to stay on track. You have deadlines and critical paths and so on, and things get launched on time, hopefully, and successfully. Real innovation and wild product development is not linear. It is much more like a pinball machine. You oftentimes have to follow that pinball until you find a winner. As a consequence, you end up needing a team of people, some of whom are right brained, some of whom are left brained. You need process. You need Stage-Gate. But you also need to have the willingness to take a step back and say, "No. Go back to the drawing board with new learnings, and start over again." The wild part is where you can really create a lot of value if you do it right."
Robert Winborne on the Value of Innovation: "A company's valuation is very driven by the competitive barriers in the business. A lot of the middle-market companies, privately-owned businesses in America, don't have a technological edge, or they don't necessarily have patent protection. They're not a biotech company that's got a new molecule. But to the extent that they can have that innovative product, it definitely drives much higher values. There is a very easy way of testing that. If you say that something is special, that means that people will pay for it. So you don't have to go much farther than the gross margin of the business to understand whether industrial or individual consumers value it. So if a company has been able to sustain high margins, then you know that they're doing something that's unique."
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