Better than sliced bread

Better than sliced bread

When the price of imported kitchen appliances is plunging - how does a domestic manufacturer use innovation to fight back?

The pursuit of the perfect piece of toast may not be as glamorous as searching for a cancer cure, developing a guided missile system or creating a new piece of software. But for Sunbeam chief executive Jonathan Lord, innovation is the key to his company's survival. Sunbeam is Australia's biggest-selling manufacturer of small electrical products, including toasters, kettles, irons, espresso machines and electric blankets. It's a tough business. Most of these products have come to be seen as commodities, such that consumers can walk into any department store and pick up a no-name version imported from China for as little as $10. This avalanche of imports forces prices down, which in turn eats into margins, so competing with cheap Chinese goods is not an option. The only way Sunbeam can entice customers away from cheap, commoditised toasters and kettles is to keep innovating to make its products look and work better.

It is easy to see how innovation is important in high-tech industries such as biotechnology, aerospace and information technology. But for companies that manufacture low-value-added products - such as consumer products, components and consumables - the need for innovation is not as obvious. After all, isn't a rubber glove just a rubber glove? Not quite, according to the chief executive of glove and condom maker Ansell, Doug Tough. "That's what I thought at first," he says. "But the closer you get to these things, you realise the nuances and the differences."

He explains the need for constant innovation in the rubber-glove business by pointing to the humble gardening glove. Gardeners wear gloves to protect their hands, but often complain that they do not fit properly, make their hands sweat and making them feel clumsy. The innovation process at Ansell is designed to fix those flaws.

"As an ultimate goal, we want people to have all the protection and benefits of a glove without the feeling they are wearing one," Tough says. By subtly changing designs, working with new materials and harnessing new technologies, Ansell is taking steps towards that goal.

It will take years of innovation before Tough's ultimate goal is achieved, but each change, however minor, results in a new product that helps set Ansell apart, and hopefully ahead, of its competition.

It is a similar story at Sunbeam, where director of product design and development Brian Johns understands that the difference between winning and losing a customer could be as simple as the feeling they get when twisting the knob on a toaster. In fact, one of his team's latest innovations is a knob that makes a clicking sound as it turns. Johns says it creates a tactile sensation that helps customers connect with the product. It's only a little thing, but when a customer is examining two toasters in a department store, the feel of a knob could make all the difference. "These are the details that could be the deciding factor."

Sunbeam launches about 70 new products each year. The company's innovation process can begin in a number of ways. First, there is the natural product lifecycle: products are refreshed every three or four years, although some may remain largely unchanged for a decade with only minor cosmetic changes. Then there is innovation prompted by changing tastes: Johns travels to events such as the Milan Furniture Fair to gather new ideas and the company surveys customers to get ideas about what they want from new products. Sunbeam's marketing manager for kitchen appliances, Damian Court, says customer complaints also spark the product development team into action.

Lately, much of the product development team's focus has been centred on Sunbeam's Café Series range of commercial-quality kitchen appliances. Sunbeam started the range about five years ago, after conducting market research which found customers were prepared to pay a premium for high-quality, well-designed appliances.

This research was music to the ears of the company, which was keen to push into higher-margin products and protect its business from the import onslaught.

Working on higher-margin products also means Sunbeam can take more risks with new products, designs and features.

The decision to launch the Café Series also coincided with GUD Holdings (Sunbeam's parent company) closing Sunbeam's Australian manufacturing facility and moving manufacturing overseas, mainly to China. Lord says that immediately changed Sunbeam's mindset towards innovation. "When we manufactured in Australia, we spent a lot of time taking costs out to protect our margins. As we've taken manufacturing offshore, we saw there was a chance to put some features back in."

To further strengthen the credibility (and no doubt the marketability) of the Café Series products, Sunbeam employed 2003 World Barista Championship winner Paul Bassett and television chef Geoff Jansz as advisers.

Some innovations have created entirely new products, such as Sunbeam's world-first espresso machine that has two thermoblock heating systems. Other innovations have been more subtle, such as a special ratchet-like hinge on the Café Series sandwich press, which allows the user to bring the top half of the press to pre-set levels and stops food getting squashed. The hinge took about 12 months to develop. "It's a huge investment from a time perspective and a cost perspective," Johns says. "But when you are up close to these products, the finish and the fit have to be right."

Just like a car company puts new features into top-of-the-range-models first, innovations from the Café Series will slowly trickle down to Sunbeam's cheaper toasters, kettles and blenders. Johns says that for some products, the company's design team will be able to start with the Café Series and work backwards, removing features and using different materials to suit various price points.

An important part of the innovation process is education. Many of the changes the Sunbeam design team makes are subtle (like the ratchet handle on the sandwich press) and need to be explained to retailers and customers. Sunbeam holds regular sales conferences and has product trainers and demonstrators out on the road to show off new ranges. Every customer who buys an espresso machine from the Café Series range gets a free one-and-a-half hour barista training session.

Another issue Sunbeam must consider as part of the innovation process is a product's lifecycle. An espresso machine lasts for four years. If Johns and Lord try to include every conceivable feature when the machine is launched, it may become too expensive or take too long to develop. So they may hold some new features back for 12 months and launch a second, upgraded version of the espresso machine a year later.

The seasonality of some products - for example, an electric blanket has to be ready for winter - can also affect development times. Innovation at Sunbeam involves the careful balance of cost pressures, timeliness and the realities of the consumer goods sector. "There's a fair bit of risk analysis," Johns says.

Sunbeam's big new product range for Christmas 2007 is a ceramic toaster and kettle. There are few practical benefits to using ceramic (although the kettle is quieter) but the products do look and feel different and will stand out on the shelf. Court says it took Sunbeam about two-and-a-half years to perfect the use of ceramics, which are notoriously difficult to work with from a manufacturing point of view. But he is confident the gamble will work. "We were looking for new materials to work with and offer consumers more choice."

Lord says there are still plenty of ways to improve household appliances such as the toaster. Materials will continue to change and technology will improve. Many of Sunbeam's products now feature microprocessors to control temperature much more accurately. Perhaps that will help Lord achieve his dream of the perfect piece of toast. "It's not impossible," he says with a grin. "Technology is improving all the time. We can do it."

Three lessons from Sunbeam

1. Many products have become commoditised by cheap, no-name imports, so innovation - however small or subtle - is the only way to stand out from the crowd.

2. Improving an existing product or feature can be just as important as creating a new one, especially if it fixes a customer complaint.

3. A product can be over-improved - leave room to upgrade it at a later date. This will help to extend the product's lifecycle. BRW

© Fairfax Business Media

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