In the mid-1980’s, GWiz (fictional name) company selling custom-molded products to the packaging industry, developed and patented its first technology that became the backbone for its success. For the next few decades GWiz grew complacent.
A new management team was put at the helm with the challenge to profitably grow the company, which had experienced stagnant revenue for several years, excessive spending and relatively high debt levels. To further exacerbate the situation, multiple patents were nearing expiration. 4 years prior, 96% of the products sold were patent protected. By now, these same products represented only 44% of sales.
The first major accomplishment was the identification and elimination of unprofitable custom business and refocusing on the profitable packaging products. Management team also believed that investing in the future was critical to improving the longer-term cash outlook and ultimately to grow the business beyond market growth rates.
Initial investments were made in the technical staff and rebranding in preparation for new product introduction. Product development focused on the core packaging markets and began exploration of new market segments. A selection of 3 new target segments was made and the executive team agreed on strategic plan to grow the business through new product lines introductions to new and existing markets.
The company saw a solid growth opportunity in two new market segments. Adequate resources were allocated to developing these markets and products specific to their needs.
To enable the successful transition and ongoing innovation, Several new processes and structures were established and resourced, including:
- Innovation pipeline and stage gate process
- R&D and marketing teams collaborative frames
- VOC for R&D and product concept testing
- Detailed market segment analysis and monitoring
- Structured competitive reviews
- Modular pricing structure
- Diligent product management of product lines profitability
- Rebranding with new value message
- Lead generation and qualification process
- Companywide training on new branding assets and policies
GWiz invested in 5 new product lines within 24 months and opened three new markets that have proven to be more profitable than traditional markets. Investment into next-generation product lines led to reignited interest in GWiz products in their traditional markets as well.
The increase in profitable revenue allowed for increased capital investments, leading to increased efficiencies as well. . Additionally, new manufacturing capabilities were added: the plant no longer just molded products, but also was able to decorate them.
Overall, swift execution was important to the company’s renewed success. Significant spending in operations modernization and new product development were completed and the company was stable and well positioned for continuous growth. When GWiz was sold to a strategic buyer, it realized higher-than-average multiplier to EBITDA and continued to be the shining star within the bigger entity created after the merger.