Innovation at the Innovation at the Speed of ThoughtSpeed of Thought

Kelly FoxDunn Lumber Co.

In-nov-a-tion…In-nov-a-tion…

►Taking something from good to great Taking something from good to great and filling the vacuum left by inferior and filling the vacuum left by inferior products or ideas with a strong value products or ideas with a strong value proposition. proposition. Sounds easy enough, let’s get started!Sounds easy enough, let’s get started! Super-sized and self checkout…Super-sized and self checkout…

ScienceScience

►““It’s not rocket scientry”, Senator Mike It’s not rocket scientry”, Senator Mike Gravel (D- Alaska 1968-1980) Gravel (D- Alaska 1968-1980) It is “building scientry” you silly SenatorIt is “building scientry” you silly Senator

►The evolution of building materialsThe evolution of building materials Building materials then and nowBuilding materials then and now

ThenThen

► Jobsite millsJobsite mills►Continuous framingContinuous framing

““Yes, I need all 16’ers”Yes, I need all 16’ers”

► InsulationInsulation ““President Sackmann Catches Delicious President Sackmann Catches Delicious

Bass”Bass”►Young Westerner’s News (February 6, 2010) Young Westerner’s News (February 6, 2010)

NowNow

►Mills and Lumber DealersMills and Lumber Dealers Look around, we are these guys!Look around, we are these guys!

►Engineered ProductsEngineered Products ““Can I span 48’ with that?”Can I span 48’ with that?”

► InsulationInsulation Fiberglass and Levi StraussFiberglass and Levi Strauss

It happens all the timeIt happens all the time

►From concept to reality From concept to reality Product driversProduct drivers

►Market needMarket need►Use of byproductsUse of byproducts►Add valueAdd value

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In-nov-a-tion Again…In-nov-a-tion Again…

►Taking something from good to great Taking something from good to great and filling the vacuum left by inferior/ and filling the vacuum left by inferior/ superior products or ideas with a superior products or ideas with a strong value proposition. strong value proposition. The life cycleThe life cycle The LBM IndustryThe LBM Industry

The Whole LogThe Whole Log

► In the beginning… and on the twelfth In the beginning… and on the twelfth day he created random lengths...day he created random lengths... Cutting down the trees to fill up the land fillCutting down the trees to fill up the land fill Made sense for mills, not for retailers or Made sense for mills, not for retailers or

consumersconsumers And the box stores saved us all (those who And the box stores saved us all (those who

wanted to be saved anyway)wanted to be saved anyway) And on the 197,897,146,378,634And on the 197,897,146,378,634thth day he day he

created engineered lumber… created engineered lumber…

Engineered WoodEngineered Wood

►PlywoodPlywood Used since the 1700’s for furnitureUsed since the 1700’s for furniture

► I Joist and beamsI Joist and beams A miserable failureA miserable failure Over priced and under deliveredOver priced and under delivered

► I Joist and beams 2.0I Joist and beams 2.0 Competitively pricedCompetitively priced Yes I can span 48’ with that…Yes I can span 48’ with that…

Designer’s DreamDesigner’s Dream

►Engineered wood allowed mills to use Engineered wood allowed mills to use the waste and created and opportunity the waste and created and opportunity for designers to stretch the limits of for designers to stretch the limits of size and shape in construction.size and shape in construction. ““Win/Win”Win/Win” 1300 SF rectangle v. 4300 SF framing 1300 SF rectangle v. 4300 SF framing

nightmarenightmare

Wood ProductsWood Products

►DeckingDecking Nice lookingNice looking Maintenance heavyMaintenance heavy Quality fiber became expensiveQuality fiber became expensive

►Looking for something easier…Looking for something easier…

Composite GoodsComposite Goods

►Composite deckingComposite decking Use of poly and wood fiberUse of poly and wood fiber Offered a better mouse trapOffered a better mouse trap

►These were easier but people still want These were easier but people still want more…more…

PVCPVC

►PVC decking delivers on the promise of PVC decking delivers on the promise of what composite decking wanted to bewhat composite decking wanted to be The deck of a lifetime with…The deck of a lifetime with… Minimal maintenanceMinimal maintenance What is the vacuum they leave in their What is the vacuum they leave in their

wake for innovation?wake for innovation?►Are you going to be ready to capitalize on the Are you going to be ready to capitalize on the

opportunity?opportunity?

Fire Retardant or Not?Fire Retardant or Not?

The Cycle of LifeThe Cycle of Life

►A bright idea (read start up)A bright idea (read start up)►This little piggy went to market (read This little piggy went to market (read

got venture capital)got venture capital)►Everybody wants one… (read IPO and Everybody wants one… (read IPO and

$$$)$$$)►““Ooh, ooh… Pick me coach I got the Ooh, ooh… Pick me coach I got the

good crap” (read COMMODITY/ good crap” (read COMMODITY/ Everybody has three)Everybody has three)

Up v. DownUp v. Down

► Up MarketUp Market Higher volumeHigher volume Lower marginLower margin Growth mechanismGrowth mechanism

►Large CompanyLarge Company

Better customersBetter customers►Maybe…Maybe…

Commodity tradersCommodity traders

►Down MarketDown Market Lower volumeLower volume Higher MarginHigher Margin Growth mechanismGrowth mechanism

►Small CompanySmall Company

New customersNew customers►Used to be your Used to be your

customers…customers…

Value addersValue adders

Size Matters to the MarketSize Matters to the Market

► In any market the size of the opportunity In any market the size of the opportunity will match the size of the organization, up will match the size of the organization, up or down!or down! A small organization can not be a significant A small organization can not be a significant

player in a large market segmentplayer in a large market segment►Typically will lack the infrastructure or the Typically will lack the infrastructure or the

resources to competeresources to compete

A large organization can’t fill the growth A large organization can’t fill the growth need with a small market opportunityneed with a small market opportunity►Typically need large markets to satisfy sales goalsTypically need large markets to satisfy sales goals

Filling the VoidFilling the Void

►As companies look for new business in As companies look for new business in the “Up-Markets” they leave a vacuum the “Up-Markets” they leave a vacuum of opportunity in the “Down-Markets”of opportunity in the “Down-Markets” Up is opportunity in BIGGER MARKETSUp is opportunity in BIGGER MARKETS small markets are downers… small markets are downers…

Real World ExampleReal World Example

►Steele’s StudsSteele’s Studs► $300,000,000,000.0$300,000,000,000.0

0 in annual sales0 in annual sales► 10% annual growth 10% annual growth

= = $30,000,000,000.00$30,000,000,000.00

► Up markets and Up markets and disappointed share disappointed share holders (unless it is holders (unless it is 2006)… 2006)…

►Blake’s Blake’s BoardsBoards

► $30,000,000.00 in $30,000,000.00 in annual salesannual sales

► 10% annual growth 10% annual growth = $3,000,000.00= $3,000,000.00

►Down markets and Down markets and happy share happy share holders… holders…

Acquisitions and Spin-offsAcquisitions and Spin-offs

► Big business gets bigger through acquisitionBig business gets bigger through acquisition Increase market shareIncrease market share Increase stock holder anxiety to meet growth needsIncrease stock holder anxiety to meet growth needs

► Big business can’t meet the demands of the Big business can’t meet the demands of the market and spin-off companies to regain focusmarket and spin-off companies to regain focus Ability to target marketsAbility to target markets Growth demands from share holders are attainableGrowth demands from share holders are attainable

► Proof in the puddingProof in the pudding Russell 2000 Index 10%, Parent’s after Spin-off 31%, Russell 2000 Index 10%, Parent’s after Spin-off 31%,

Spin-off company 37% ROI after three yearsSpin-off company 37% ROI after three years

What’s NextWhat’s Next

►Everything we already talked about Everything we already talked about but…but…

GREENGREEN

Innovative ValuesInnovative Values

► Selling trust and add valueSelling trust and add value Trust the experts (hint; you have to be the experts)Trust the experts (hint; you have to be the experts) Experts add value to the customerExperts add value to the customer Value is why the customer pays top $$$Value is why the customer pays top $$$

► Or, do what you always do and get what you Or, do what you always do and get what you always got and eventually you will lose it all to always got and eventually you will lose it all to the person/ company who…the person/ company who…

► Sells trust and adds valueSells trust and adds value Trust the experts (hint; you have to be the experts)Trust the experts (hint; you have to be the experts) Experts add value to the… Experts add value to the…

““Whatever made you Whatever made you successful in the past successful in the past won’t in the future”won’t in the future”

Lew Platt, Chairman and CEO, Lew Platt, Chairman and CEO, Hewlett-PackardHewlett-Packard

Value of EducationValue of Education

►LEARN, LEARN, LEARN…LEARN, LEARN, LEARN… Your customers are, and because you are Your customers are, and because you are

here I am hoping you are!here I am hoping you are! Share your knowledge, it really is a great Share your knowledge, it really is a great

service to your customers!service to your customers! If for no other reason;If for no other reason;

►The “learners” out perform the “knowers” The “learners” out perform the “knowers” every time! every time!

Half Life of EducationHalf Life of Education

►Half of everything you know will be Half of everything you know will be gone in 4 yearsgone in 4 years New products and applications make what New products and applications make what

you know obsolete very quicklyyou know obsolete very quickly In 20 years just about everything will have In 20 years just about everything will have

changedchanged We cannot stop the loss; all we can do is We cannot stop the loss; all we can do is

refill the void with current knowledge…refill the void with current knowledge…

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Market D emand

““If you have two people If you have two people who think the same, fire who think the same, fire one of them. What do one of them. What do you need duplication you need duplication

for?”for?”

Jerry Krause, General Jerry Krause, General Manager,Manager,

Chicago BullsChicago Bulls

Product or ServiceProduct or Service

► ProductProduct TangibleTangible ConsumableConsumable Bought and soldBought and sold Take it or leave itTake it or leave it

► ServiceService IntangibleIntangible Relationship drivenRelationship driven Bought and soldBought and sold Harder to leave Harder to leave

behindbehind

Product + Service = OfferingProduct + Service = Offering

►Tangible + intangible = OfferingTangible + intangible = Offering►Consumable + relationship = OfferingConsumable + relationship = Offering►Bought and sold + bought and sold = Bought and sold + bought and sold =

OfferingOffering►Take it or leave it + harder to leave Take it or leave it + harder to leave

behind = Offeringbehind = Offering► If you don’t get it yet you should be If you don’t get it yet you should be

combining your products and services to combining your products and services to create an…create an… OFFEROFFER

The More You KnowThe More You Know

►This is the life cycle of all businesses This is the life cycle of all businesses and the reason that good management and the reason that good management will eventually run your business into will eventually run your business into the ground!the ground! This does not have to be the case! Each of This does not have to be the case! Each of

you sitting here today have the opportunity you sitting here today have the opportunity to buy my plan for three easy payments of to buy my plan for three easy payments of $199.95 and if you act now I will give you $199.95 and if you act now I will give you my book of secrets for FREE! Do not delay my book of secrets for FREE! Do not delay as this will change the life of your business. as this will change the life of your business.

Payment OptionsPayment Options

► Please send self addressed, stamped Please send self addressed, stamped envelope containing cash payments to envelope containing cash payments to Dewey, Cheetham, and Howe Publicists LLCDewey, Cheetham, and Howe Publicists LLC PO Box 111777PO Box 111777 Felony Way WA 98003Felony Way WA 98003

►206-465-8589206-465-8589►www.facebook.com/kellytfoxwww.facebook.com/kellytfox

Were do you put your Were do you put your armor?armor?

The story of Abraham WardThe story of Abraham Ward

““He came within 800’ He came within 800’ of immortality…”of immortality…”

Obituary of Raymond Obituary of Raymond Lambert, 1914-1997Lambert, 1914-1997

““To be courageous… To be courageous… (and this) is an (and this) is an

opportunity sooner or opportunity sooner or later to be presented to later to be presented to

all of us”all of us”

John F. Kennedy, John F. Kennedy,

Profiles in CourageProfiles in Courage