Britain’s Dyson knows a thing or two about innovation and shaking up tired consumer products. But over the past year it has lost its leadership of the US vacuum cleaners market, the largest in the world.
Euro-Pro, a 100-year old company that had a mere 1 per cent share of vacuum cleaner sales in 2008, now controls more than 20 per cent of the US market.
Over the past seven years, its Shark vacuum cleaners and Ninja blenders and food processors, all manufactured in China, have increased sales at a compound annual growth rate of 25 per cent, enabling the firm to triple its workforce from 250 to 800 employees.
This growth has been aided by an aggressive push on television shopping channels, with $130m spent on TV advertising last year.
But the company has doubled revenues from $800 million to more than $1.6 billion and usurped Dyson as leader of the US vacuum cleaner market since bringing in consultants Gap International two years ago.
Chief executive Mark Rosenzweig, the third generation of his family to lead the company, kick-started the growth by moving the privately-owned company’s headquarters from Montreal, Canada to Newton, Massachusetts back in 2003.
Five years later, the firm radically overhauled its product portfolio, dumping what Rosenzweig referred to as “opening price products” and replacing them with a focus on innovation. Design was moved in-house from external contractors, sharp new brands were created and work began on creating a loyal consumer base.
Sales responded accordingly but Rosenzweig and Euro-Pro president Mark Barrocas wanted the firm to commit to near and long-term “breakthrough goals” in revenue, profit, and customer satisfaction that they believed would require a significant shift in its culture and talent development.
Gap, an executive consultancy with clients including Kraft Foods, Diageo and PNC Bank, was tasked with helping it meet its business challenges and introduced the firm to a new approach to the process of setting goals.
Relentless focus on “breakthrough outcomes”
Before working with Gap, Rosenzweig and Barrocas felt that they were generally misunderstood by middle management within Euro-Pro and therefore could rely only upon themselves to make sure that projects were executed the way they wanted.
The problem as they saw it was that associates within Euro-Pro were not clear about their intentions, their way of thinking, the business model and overall strategy. The result was that in many cases people were confused and felt disconnected with them as leaders and with the broader organisation as a result.
Gap worked with Rosenzweig and Barrocas to share their thinking and to have the organisation understand and own Euro-Pro’s strategy, business model and approach to product innovation, development, sales and marketing.
The result, says Barrocas, is that the focus of Euro-Pro’s staff changed from what they thought their business leaders wanted them to concentrate on to working to achieve “purposeful marketplace breakthrough outcomes.”
He says all employees are encouraged to own this focus and work together to achieve Euro-Pro’s mission of “Positively impacting people’s lives every day in every home around the world.”
Changing the organisational mindset
Barrocas and Rosenzweig also realised that they weren’t going to be able to easily recruit top executive talent that could quickly run key parts of the business, so it would be much more beneficial to promote existing Euro-Pro talent.
To accomplish this, the firm now sends aspiring leaders on an executive challenge course structured around Gap’s conviction that leadership is only as good as the outcomes it produces.
On the course, managers are tasked with designing and implement a “breakthrough project” that shows the relevance of leadership lessons learned and empowers them to focus on outcomes that promote better results.
Ten people have so far completed the course and the firm has promoted four emerging leaders into executive positions as a result.
“The big step has been growing the next level of leaders,” says Jon Greenawalt, Gap International vice-president. “Euro-Pro also needed to empower folks in the organisation to have a common way of working.”
Return on Investment
Barrocas believes the success of the past year is a direct result of working with Gap. “It put in a structure that I think would have been very difficult to achieve alone because something would have just taken a higher priority,” he says. “Doing this meant that we had a focus, a priority and a partner. We made it a priority for the leadership team. It gave us a focus. Our business was on a positive trajectory prior to us meeting Gap but working with them enabled us to make it more fun for people and to translate a sense of purpose. A lot of times when folks are working long hours and a business is growing at the rate that we’ve been growing at, it’s easy to lose sight of why you’re there and what contribution you’re making. The work we’ve done with Gap has really helped us focus on that and in turn our associates feel energised and excited about the work that we’re doing.”
Despite its US market leadership and growing sales in Canada, the UK and Japan, Barrocas feels there is plenty of growth left to target, both overseas in Europe and south-east Asia and in its strong domestic market.
“We still feel that there’s a significant opportunity for growth in the categories that we’re in,” he says. “Although we are market leaders, I think the upside growth opportunities are there. We weren’t in the kitchen appliances business five years ago. Five years from now, there will be other categories and segments that we’ll be able to be in. Your will see our Shark and Ninja brands in more products and in other areas of the home. If you look at our product pipeline I think that if we continue to execute off that like we have, our business is going to continue to positively grow. We want every product to delight consumers. If we can achieve that, we’ll have a long-term sustainable business.”
Might that include a stock market flotation? Barrocas says it’s not currently on the agenda. “We take a very long-term view of things,” he says. “And I don’t know that the public markets really afford us a lot of advantages, versus where we currently are.”