When it comes to measuring success, Bedri Erdem and his team tend to look at one metric above all others: shelf space. Erdem is the Vice President of Research and Development and Corporate Quality at Rust-Oleum, a top manufacturer of protective paints and coatings with about 1,000 employees. His goal is to have his company’s products taking up as much shelf space as possible at stores like Home Depot, Lowe’s, and Menard’s.
In a recent conversation with InnoLead, Erdem shared insights on why this metric is so important and why it makes a good rule of thumb for killing projects. This interview with Erdem is a part of InnoLead’s most recent research report, “Developing Innovation Metrics & Reports That Really Matter.” For more data and interviews on how big companies are using metrics to track innovation, visit the main report page.
What financial metrics do you look at when measuring the success of a project?
We look at the dollar contribution to our new products to baseline, the percentage of the product commercialized every year, and then the margins of the new products. Those generic things. But at the end, we all say, “Competing, it’s not a financial thing.” We want to make sure that we’re growing our presence in our customers’ shelves, that our product shelf size in [stores like] Home Depot grows, and then we maintain our growth. It’s not a metric at the end that contributes to that bottom line, but that’s really important for us.
Are there any non-financial metrics that you use to gauge whether your team is performing at a good pace?
We look at the number of new product launches per platform. … We look at the number of new accounts gained, not necessarily the value of that. Let’s say we are selling to Home Depot and Lowe’s, but we don’t have anything in Mendard’s … [and] we get [the products] on [the shelves]. Those are very important internal advertisements, as well as market gains, for us.
Have you encountered any challenges in identifying and reporting the right metrics?
There’s always this discussion: What is the value of each product launch…versus how you could make more innovative, breakthrough products. But at the end, the metric is not really differentiation, it’s just basically growth of sales and margins. We do have discussions around that, I don’t think that we settled it — the project selection criteria. …
The customer comes first, and then your innovation and differentiation depends on what the customer wants. Oftentimes, customers are not really looking for rocket science. Customers [like Home Depot and Lowe’s] are trying to find a product that solves their consumer needs, [and then] the consumers will come and buy the products. We have some very simple products, solutions, they become our biggest sellers. And then you say, “Why?” Because people like to paint their cushions.
Do you have any best practices when it comes to reporting metrics to your senior leadership?
A lot of companies struggle with innovation, when sales, marketing, and R&D have different criteria. R&D might be thinking that I want to make a new molecule that solves this problem, [but] marketing says that the customer wants the [simpler] low-VOC [paint] product that does it. One is an incremental development. The other one is a breakthrough development.
So that creates a lot of friction and then issues in the organizations that I grew up in doing innovation for years. Whereas, in our boardroom, again, the talk is how happy we keep our customers, how much they appreciate us…
We get asked questions by our parent company sometimes [like] “Why did you do this?” … They say, “Why did you make that color? … Because you don’t make too much [of that color].” But the customer is happy. And who pays the bill? And that, to me, is the nuance that we have to find out to say…should we really focus on making the customer that detail? Or should we just spare resources to solve the three-year, five-year problems? Right, that’s the kind of discussion we have.
At what point you decide you have to push your projects forward or kill it?
Our projects usually go see daylight because they’re really linked to customers. The way that we do innovation, it’s not really a lot of blue sky things. There are some blue skies… But most of our projects are linked to the customers. To be honest with you, we struggle a lot more not being able to meet those timelines, versus killing the project because it’s not going anywhere.
The rule of thumb is once you have two, three meetings with marketing, and marketing is not showing an interest [in a product] to take it, to showcase this technology to Home Depot, Lowe’s, Walmart, wherever you call them…then basically, you might be in the kiss or kill time for certain projects. So if the customer is not pulling it [off the shelves], usually you start to sideline those kinds of projects.