Managing Innovation - Nypro

Managing Innovation: Nypro (A)

Assessing NovaPlast as a Disruptive Technology

Executive Summary

In early 1995, Gordon Lankton, president of Nypro, Inc., and his management team found themselves at a major crossroads in determining the future direction of their company. Nypro, a leading supplier of high volume custom injection molded parts, for years had been the dominant supplier to over 50 large companies in the healthcare, electronics, and other non-automotive industries. They achieved dominance in their industry by developing and sustaining a high level of precision and quality in their injection molding processes and working closely with their customers and suppliers to ensure success.

However, in recent years, competitors had developed processes of sufficient quality to successfully challenge Nypro dominance, and customers were focusing more on shortening the development cycle, rather than improving precision. Lankton determined that Nypro should explore other markets to maintain Nypro’s impressive growth rate. In 1990, Nypro began development of a new injection molding machine designed to target the low volume, high mix, quick turn-around market, a sector that Nypro previously could not supply. The new machine, called NovaPlast, took four years to develop, the first being placed in operation in late 1994 at their Clinton headquarters.

Nypro established development, marketing, and sales teams to generate business for the new machine, and orders began arriving in early 1995. The Nypro management team needed to develop a long-term strategy for growing this new business area. They considered three options for developing the technology:

1) Build new facilities specifically to house the NovaPlast machines close to customers.

2) Install two or three machines in each of Nypro’s plants.

3) Install few NovaPlast machines in only one of the current plants

Importantly, the NovaPlast technology demonstrated characteristics of a Disruptive Technology as defined by Christiansen. The NovaPlast machines were designed to be set up very quickly, and optimized for small runs of parts, the antithesis of requirements for most of the large multi-national customers that Nypro traditionally courted. Therefore, using Christiansen’s method for cultivating disruptive technologies, the first option is recommended. Building machines at dedicated facilities allows Nypro to locate markets for the new technology independent of its high volume customers. Additionally, this would make it easier for Nypro to establish an independent organization to oversee the operation.

Introduction

Nypro, Inc. has just developed a revolutionary molding machine called the NovaPlast. This machine allows operators to change the molds in less than a minute instead of the typical couple hours to change molds on their current line, the Nestal modeling machines. Gordon Lankton, president and majority owner of Nypro, Inc., is unsure of how to integrate this new machine into their plants. He is contemplating building one plant full of NovaPlast machines or integrating them into their existing plants around the world.

Gordon Lankton’s strategy for Nypro was to develop superior technology compared to other molders. The molding business has traditionally been an easy market to enter and Nypro obtained a competitive advantage by staying on the leading edge of technology. Lankton maintained this technology advantage by utilizing “progress through conflict” techniques by creating competition between the separate plants within Nypro. Performance results were distributed to all the plants to show which divisions were performing the best in the company. As a result, separate plants would visit the leading plant to learn their processes and see how they can incorporate their innovations into their plant. This would help the underperforming plants increase their numbers and jump up the ladder in the competition. Lankton believed that maintaining a vigorous growth rate helped him to retain his entrepreneurial staff and encouraged innovation. In his eyes, growth was the key to success for Nypro, Inc.

Each plant was organized as a company with its own board of directors which consisted of management and engineering heads from separate Nypro plants. The board diversification allowed other plants to keep in the loop of new innovations taking place at each plant. Once a plant created a new process innovation, separate plants would pick up these ideas and incorporate them into their production processes. With the following organizational structure, Lankton is now forced to make a decision of how to incorporate this disruptive technology into Nypro.

Analysis

In the early 1990’s, Nypro was the largest non-automotive supplier of custom injection molded parts in the world, primarily supporting the healthcare, electronics/telecommunications and customer/industrial industries (reference figure1.1). They held a dominant position in the industry, with profit margins over four times the industry average. The company achieved this position by focusing on the following strategies:

1) Nypro located manufacturing facilities close to the primary customers, and then teamed with the customer and key suppliers in all phases of the manufacturing process to ensure the customer’s needs were being addressed.

2) Management fostered a competitive, entrepreneurial environment amongst facilities to encourage innovation and increased performance. Successes were shared among the other facilities and implemented at the discretion of local managers.

3) Nypro facilities were built from a standard plan, using clean room technologies, underfloor piping, and Nestal injection molding machines that we optimized for high volume injection molding operation.

By the mid-1990’s, several of Nypro’s competitors had achieved a level of process improvement that allowed them to produce injection molded parts of sufficient quality and precision to challenge Nypro. The basis of competition shifted away from high-precision, toward reducing delivery times. Lead times had shrunk from 20 weeks down to six week, with four week or less lead times on the horizon. Nypro addressed this