Strix plans for global growth

Strix develops key technologies for small domestic appliances, such as safety control systems, thermostats and filtration systems (for filter kettles, fridge jugs and chilled water units). Employing around 750 people worldwide, the company markets its products through some of the world’s best known home appliance brands, such as Bosch, Siemens, Philips, Black and Decker and Rowenta in over one hundred countries. The Head Office is in the Isle of Man with sales offices across the United Kingdom, Belgium, Russia, China and Hong Kong. The company’s core product of thermostatic controls for small appliances dominates its market, with over 50% share: global market penetration is such that “one in five people across the world use a Strix safety control on a regular basis, resulting in over one billion uses of its products per day”.

For the past thirty years, Strix has benefited from strong margins and good sales growth, based on its technological leadership and close customer relationships. The company has taken great care of its intellectual property rights: extending and defending patents on its inventions and careful management of licensing agreements around the world. In a recent legal case early in 2010, Strix made history by winning a patent infringement case against two local Chinese companies in a Beijing intermediate court. This decision was applauded by commentators outside China, many of whom share the opinion of the CEO of Strix, Paul Hussey, that the case could mark the beginning of a new era in business relationships with China.

“We protect our intellectual property vigorously and, as a matter of principle, will fight for it around the world. That’s not just about defending our own business: it is also a powerful signal to our customers that we protect the technology they depend on, and have licensed from us, to ensure that their brands remain distinct.”

Innovation is now the centre piece of Strix’ strategy for renewed growth.

“When you have more than 50% share of any market, it is going to be increasingly expensive to gain additional percentage points of share.”

“Back in 2008 my management team and I decided to focus the company’s energy toward growth in new product markets. There was a large and under-utilised potential for innovation within the company: we had many great ideas, engineering competence and access to the development teams at our major customers. Rather than restrict our energy to serving the thermo-electrical control business within one segment – principally electric kettles – we could apply our know-how to other segments which could benefit from similar technologies. Worldwide sales of electric kettles (a growing business itself, particularly in markets like the USA and China) represents about 75 million units a year. By considering how we can serve markets such as steam irons, pressure cookers, hot water dispensers and coffee makers, we increase our potential market to around 550 million units a year”.

The company defined three levels of innovation, each representing a greater level of investment in research and development and associated with higher risk:

• “Heartland” – technologies and markets close to what the company does today, but where a breakthrough in performance can be achieved either in terms of cost, speed or size.
• “Adjacencies” – new markets where Strix technology can provide a significant improvement in performance – for instance in steam cookers, or irons.
• “Disruptive” – where innovations from Strix can lead to radical new ways in which a product is used, opening up new market potential for Strix’ OEM customers.

Instigated only two years ago, the Strix ‘Ideas to Innovation’ (or ‘i2i’) programme is generating an increasing number of new products. Designed to scout both internally and externally for sources of profitable innovation, the i2i programme consists of a series of rigorous stage gates through which ideas must pass before they are approved for investment and further development. In 2008, only ten ideas were passed through the programme. In 2009, 129 ideas entered the i2i pipeline, but only nine of these received funding. At the current rate, 2010 will surpass 2009.

“We partner with our customers on determining attractive new ideas, and to some extent with our suppliers. We also finance some research projects at universities and competitions at business schools. But the majority of these ideas come from our own people. Of our total non-manufacturing staff of 250 about 75 of these are engaged in development activities, such as R&D and marketing. It’s a big commitment for a company of our size.”

“In our 4 step development process, we do most of the R&D ourselves, before passing to a market test with mock-ups of the proposed new product. In the third stage we test feasibility of manufacturing and commercialisation. Finally we evaluate the most appropriate partners with whom to take it to market. 93% of ideas, based on our 2009 experience, don’t make it all the way through to market.”

Entering the recession in 2008 in a strong and stable position, Strix is now firmly on the path to growth, driven by the potential of the new markets it is addressing:

“I would say that for many businesses one of the biggest risks is complacency. Even in a business like ours, with a distinct core technology, changes in customer needs can happen quite dramatically and potentially threaten the survival of the company. Strix is somewhat exceptional in adopting change before we are forced to do so. One of our core strengths has always been in capturing value through our development, patenting and licensing processes. Added to this, we are now improving our innovative capacity: stepping up our value creation.”

Editors Note: Paul Hussey is one of the speakers at the EFQM Forum in Bilbao (4th – 6th October). Why not join us in Bilbao and take the opportunity to listen to Paul share his views on innovation within a Panel debate with two other speakers from completely different sectors?