Lili Gamache: PRODUCT INNOVATORS TURN NEW IDEAS INTO MARKET SUCCESS.

>> KEEP PUTTING THE PRODUCT, AND THE LITERATURE AND THE MESSAGE IN A FORM THAT THEY SAY, "OH, I KNOW WHAT TO DO."

>> YOU HAVE TO HAVE SOMEONE WHO'S SAYING, "WE WANT TO GO IN THIS DIRECTION," BE WILLING TO REALLY PUT THEIR CHIPS ON THE TABLE.

LiliGamache: FIRST MOVERS ON "VENTURING."

>> HI, I'M LILI GAMACHE, WELCOME TO "VENTURING," A SERIES DEVOTED TO BUSINESS SUCCESS.

IN OUR LAST EPISODE WE LOOKED AT ORGANIZING A BUSINESS.

HEAVY STUFF, BUT NOT AT ALL RELEVANT TO SUCCESS UNLESS IT CONTRIBUTES TO THE BOTTOM LINE.

THE SINGLE MOST IMPORTANT ELEMENT OF COMPETITIVE SUCCESS IS MARKET POSITION, AND THE BEST WAY TO ENSURE GOOD POSITION IS TO CREATE OR EVEN RECREATE A MARKET TREND.

NOTHING SELLS LIKE EMOTION.

WHEN A COMPANY'S MESSAGE STRIKES A SENSITIVE NERVE IN CONSUMERS, THEY'LL FLOCK TO BUY ALMOST REGARDLESS OF THE PRODUCT ITSELF.

IN THE CASE OF PET TOYS, CONSUMER EMOTION HAD LONG BEEN CONSIDERED A LOST CAUSE; THAT IS UNTIL A LITTLE COMPANY CALLED FAT CAT PROVED THAT A PET TOY CAN BE FUN FOR BOTH KITTY AND OWNER.

>> FOR YEARS THE PET INDUSTRY HAS JUST BEEN A COMMODITY-DRIVEN INDUSTRY.

>> THAT'S REALLY WHY WE STARTED THIS WHOLE BUSINESS, BECAUSE WHEN WE WENT TO THE STORE TO BUY A CAT TOY, THERE WERE JUST A FEW BRANDS AND THEY WERE JUST REALLY BORING.

John Lika: IT WAS ALMOST LIKE THEY WERE WAITING FOR THIS OPENING TO TAKE PLACE, AND WE FILLED THE NICHE.

Lili Gamache: THE WAY FAT CAT FILLED THAT NICHE WAS BY PROVIDING TODAY'S BURGEONING ANIMAL LOVING PUBLIC WITH A HIGH QUALITY PET TOY ALTERNATIVE, THEN BUILDING AN ENTIRE CULTURE AROUND IT.

John Lika: OUR PRODUCT LINE HAS FILLED A HUNGER, A NEED THAT HAS BEEN THERE ON THE PART OF THE CONSUMERS.

IN BUILDING THIS BRAND IS TO SHARE THE BRAND WITH THE CONSUMER, GIVE IT DIMENSION SO THE CONSUMER CAN REALLY PARTICIPATE AND REALLY FOLLOW US, FOLLOW OUR PRODUCT LINE, GO BEYOND JUST PRODUCTS.

Anne Lika: AND THAT WE'RE REAL PEOPLE MAKING FUN TOYS THAT MAKE PEOPLE LAUGH.

THE COMPANY IS DEVELOPING A CULTURE AND A FOLLOWING OF CUSTOMERS THAT REALLY CONNECT WITH OUR HUMOR.

EVERYTHING THAT WE DO, THE LITTLE COPY THAT WE WRITE WITH EACH TOY HAS A STORY.

Lili Gamache: THE LIKAS ESTABLISHED FIRST-MOVER ADVANTAGE IN AN OTHERWISE LACKLUSTER PET TOY MARKETPLACE BY CONNECTING WITH CONSUMERS ON A BASIC HUMAN LEVEL AS FELLOW PET OWNERS, AND THEY MANAGED TO FIT THEIR MESSAGE ON A 3X5 INCH PIECE OF PACKAGING.

Anne Lika: ON OUR HEADER CARD WE TALK ABOUT THE TRUE STORY OF STARTING AT CHRISTMASTIME WITH FUNNY CAT TOYS FOR ALL THE FAMILY CATS.

AND THEY LOVE THAT.

THEY WANT TO BUY INTO MORE.

AND WE TALK ABOUT MEL AND CHUCK, OUR SPOKESCATS.

AND MEL AND CHUCK GET FAN MAIL FROM ALL OVER THE WORLD EVERY DAY, 30, 40 PIECES A DAY, JUST TO SAY, "THANKS FOR MAKING GREAT TOYS, WE LOVE YOUR STUFF, WE LOVE YOUR COPY."

SO WE'RE GETTING ALL OF THAT FEEDBACK.

THEY REALLY WANT A PART OF THE COMPANY AND TO KNOW MORE.

Lili Gamache: IN ADDITION TO THEIR CULT APPEAL ANTICS, FAT CAT HAS LAUNCHED A UNIQUE STRATEGIC ALLIANCE, PROVIDING WEB SITE SPACE TO A RESPECTED EUROPEAN PET MAGAZINE IN EXCHANGE FOR CONTENT.

MOREOVER, FAT CAT'S WHOLE APPROACH TO WEB MARKETING IS NOT TO MARKET AT ALL BUT TO SUPPORT THEIR RETAILERS BY HELPING THEM PROVIDE PET INFORMATION.

IT'S THAT KIND OF WIN-WIN THINKING THAT GOES A LONG WAY THESE DAYS.

>> THE OWNERS OF FAT CAT, FELINE FANCIERS THEMSELVES, SENSED A MARKET NEED, THEN PROCEEDED TO CAPTURE THE HEARTS AND MINDS OF PET LOVERS READY FOR EXPOSURE TO EXTRAORDINARY PET TOYS.

IT TAKES A TOUCH OF LUCK AND A LOAD OF INTUITION TO BE CORRECTLY POSITIONED AT THE START OF A CONSUMER TREND, BUT NOTHING LESS THAN NERVES OF STEEL ARE REQUIRED TO TAKE ON A NEARLY OBSOLETE PRODUCT.

LET'S LOOK AT AN OUTDOOR RECREATION REVIVAL GIVEN FORM, FUNCTION AND MARKET STATURE BY AN ENTREPRENEUR WELL VERSED IN THE ART OF BREATHING NEW LIFE INTO A STALE PRODUCT AND THEN WEATHERING THE INEVITABLE COMPETITION THAT FOLLOWS.

MEET ED KINIRY.

>> MY VERY FIRST JOB OUT OF COLLEGE WAS TO WORK WITH WILSON SPORTING GOODS, AND I WAS FORTUNATE ENOUGH TO WORK ON THE TEAM THAT DEVELOPED THE FIRST METAL TENNIS RACKET, AND THAT TENNIS RACKET, KNOWN AS THE T2000, WAS THE BEGINNING OF THE TENNIS EXPLOSION WHICH ESSENTIALLY CREATED A MARKET THAT WENT FROM $14 MILLION TO $450 MILLION.

ALL PRODUCTS GROW FROM REALLY 4 BASIC VARIABLES, AND ONE OF THOSE IS YOU HAVE TO INTRODUCE NEW TECHNOLOGY.

THAT SAID DIFFERENTLY, PEOPLE TODAY DON'T BUY WHAT THEIR GRANDFATHER USED.

SO YOU HAVE TO CREATE FOR THEM SOMETHING THAT WORKS A LITTLE BIT BETTER BUT LOOKS SIGNIFICANTLY DIFFERENT.

SNOWSHOEING WAS VERY POPULAR IN THE EARLY 1920s, AND I BELIEVE THAT TUBBS AT ONE POINT IN TIME WAS MANUFACTURING UP TO AS MANY AS 20,000 PAIR OF WOOD SNOWSHOES AT A TIME.

ITS EARLY ORIGIN AND ITS MOST NOTABLE EVENT WAS THAT IT SUPPLIED ADMIRAL BYRD THE SNOWSHOES THAT HE TOOK TO THE SOUTH POLE.

IT WAS MOVED TO WALLINGFORD, VERMONT, AND WAS MANUFACTURING A LOT OF SNOWSHOES FOR THE ARMY.

TRAPPERS DID IT, UTILITY COMPANIES WERE BUYING SNOWSHOES, BUT AS A SPORT IT REALLY HAD EVAPORATED FROM THE AMERICA SCENE.

IT WAS OUR NOTION WHEN WE BOUGHT TUBBS IN 1987 THAT WE COULD TAKE A SPORT AND A PRODUCT WHICH HAD REALLY LANGUISHED OVER THE LAST 30 YEARS, BRING SOME MODERN TECHNOLOGY TO IT, CREATE A MARKET FOR IT AND DO EXACTLY WHAT HAS BEEN DONE IN TENNIS, AND IN-LINE SKATING, AND MOUNTAIN BIKING AND SPORTS THAT HAVE COME BEFORE US.

Lili Gamache: ED KINIRY HAS TRANSFORMED AN HISTORIC SEPIA-TONE ARTIFACT INTO A SPORTS MERCHANDISING PHENOMENON.

IN 5 YEARS TUBBS SNOWSHOES HAD CONVINCED AMERICA TO WALK IN THE SNOW.

>> SNOWSHOEING HAS ALWAYS GIVEN ME THE OPPORTUNITY TO SEE THE OUTDOORS IN THE WINTER IN A WAY THAT I NEVER COULD ANY OTHER WAY.

YOU HAVE TO CREATE IMPRESSIONS.

PEOPLE BUY BECAUSE OF IMPRESSIONS THAT THEY HAVE OF AN ACTIVITY OR A SPORT, AND NOT ONLY IS IT IMPRESSION, BUT IT'S AN IMPRESSION THAT THEY CAN IDENTIFY WITH.

PEOPLE HAD THIS NEGATIVE IMPRESSION THAT WE HAD TO OVERCOME WHICH WAS A TRAPPER WITH HIDES ON HIS BACK AND A RED AND A BLACK PLAID COAT.

WE NEEDED TO MAKE THIS A MORE FRIENDLY ACTIVITY, AND WE NEEDED TO MAKE IT FAMILY ORIENTED.

SO, BY HELPING PEOPLE TO UNDERSTAND THAT ALL SNOWSHOEING IS IS WINTER HIKING, IT ALSO ENABLED US TO DRIVE THIS MESSAGE OF IF YOU CAN WALK, IF YOU CAN HIKE, YOU CAN SNOWSHOE.

AND OVER THE LAST COUPLE OF YEARS WE HAVE FOCUSED A LOT MORE ON THE FITNESS PART OF THE MESSAGE.

EVERYBODY WANTS TO KNOW HOW MANY CALORIES AN HOUR DO YOU BURN, SO WE PROVIDED GRANT MONEY TO 3 OR 4 COLLEGES IN THE UNITED STATES, AND WE DID STUDIES THAT WOULD TELL US WHAT THE OXYGEN UPTAKE WAS, AND THE CALORIE BURN WAS, AND WHAT THE IMPACT WAS ON JOINTS.

WE REALLY GET MILEAGE OUT OF THAT PARTICULAR MESSAGE.

>> YOU'RE BUILDING YOUR BRAND OR CREATING A MESSAGE THAT'S VIABLE FOR THE PUBLIC, THAT'S EASILY UNDERSTOOD.

TYPICALLY YOU ATTEMPT TO CREATE AWARENESS BY USING THE MEDIA.

>> I THOUGHT WHAT WE WOULD DO TODAY, GANG, IS TALK A LITTLE BIT ABOUT OUR 2 PROMOTIONS SCHEDULED FOR THIS YEAR.

THE FIRST EVENT IS SLATED FOR DECEMBER 19TH.

>> MIKE, LET ME JUST INTERRUPT FOR A SECOND IF I COULD.

WOULD YOU PLEASE SORT OF GIVE ME AN OVERVIEW WHAT THE BUDGETARY CONSIDERATIONS ARE FOR THESE TWO PROGRAMS?

>> SURE.

Lili Gamache: DESPITE THEIR FIRST-MOVER ADVANTAGE, TUBBS SNOWSHOES HAS AVOIDED BECOMING COMPLACENT.

Ed Kiniry: BEING FIRST IN A CATEGORY, IN A RECREATIONAL CATEGORY, COUNTS FOR A LOT.

>> THIS IS A HIGHER END CATEGORY.

THIS IS A HIKING CATEGORY.

Ed Kiniry: WE NOW HAVE PROBABLY 15 OTHER COMPETITORS.

THE WAY YOU MAINTAIN YOUR MARKET SHARE IS TO OUTMANAGE YOUR COMPETITORS BUT ALSO TO OUTPRODUCE THEM IN TERMS OF PRODUCT ENHANCEMENTS, THINGS THAT WORK BETTER.

TUBBS HAS ALWAYS ESTABLISHED THE FACT THAT IT WOULD DOMINATE A PART OF THE SNOWSHOE KNOWN AS THE BINDING, AND SO WE OWN 3 PATENTS THAT ALLOW YOU TO BRING THE HEEL OF YOUR SHOE BACK TO THE MIDDLE OF THE SHOE WHICH CREATES EVEN DISTRIBUTION OF WEIGHT.

PROPRIETARY TECHNOLOGY IS A VERY IMPORTANT ASPECT OF NOT ONLY PRICE BUT PRODUCT MARGIN, AND WITH MARGIN COMES YOUR ABILITY TO SPEND MONEY TO BUILD MARKETPLACES.

IN 1990 WE MANUFACTURED ONLY 2 SNOWSHOES, ALL MADE BASICALLY THE SAME WAY, THAT SOLD FOR $225 AND $250.

BY 1995 WE HAD I THINK 14 OR 15 DIFFERENT SNOWSHOES.

THEY RANGED FROM A PRICE OF SOMEWHERE IN THE VICINITY OF $150, AND THEN SINCE 1995 WE'VE INTRODUCED ADDITIONAL PRICE POINTS THAT TAKE US DOWN TO $100.

THERE ARE DISTINCT ADVANTAGES, REALLY IN ALMOST $50 INCREMENTS, TO THOSE VARIOUS SNOWSHOES.

>> AND AS YOU MOVE FROM THE TECHNICAL TO THE RECREATIONAL TO THE BEGINNING USER, YOU MOVE THROUGH A FOOD CHAIN, IF YOU WILL, OF DISTRIBUTION.

Ed Kiniry: IN 1990 WE SOLD THROUGH WHAT'S CALLED SPECIALTY OUTDOOR RETAIL, AND THEN SINCE 1995 WE SELL TO NOT ONLY SPECIALTY OUTDOOR BUT WHAT WE CALL SPORTING GOOD SHOPS.

WE SELL TO SPECIALTY SKI SHOPS.

ONE OF OUR KEY STRATEGIC GOALS IS TO BE THE LOW COST PRODUCER IN THIS PARTICULAR MARKET, TO MANUFACTURE A SNOWSHOE LESS EXPENSIVELY THAN ANYBODY ELSE.

YOUR CHALLENGE IS BEING SURE THAT YOU ALWAYS MAINTAIN YOUR HIGH-END PERFORMANCE CAPABILITY EVEN THOUGH YOU'RE TRYING TO MOVE INTO SUCCESSIVELY LOWER PRICE POINTS.

>> WE LOOK AT OUR REAL CHALLENGE AS GROWING THE CATEGORY OF SNOWSHOEING SO, IN FACT, WE CAN GET A BIGGER PIECE OF THE PIE.

>> THE TUBBS MARKETING MESSAGE IS BUILT ON 4 PILLARS: TECHNOLOGICAL INNOVATION, CONSUMER AWARENESS, ACCESS AND CREDIBILITY.

OVER THE 7 YEARS SINCE THEY'VE INTRODUCED THEIR HIGH-END SNOWSHOE THEY'VE NEVER LOST SIGHT OF THAT MESSAGE.

>> IT'S EVERY ENTREPRENEUR'S DREAM TO COME UP WITH A ONE-OF-A-KIND PRODUCT.

WHY NOT?

NO DIRECT COMPETITION AND THAT CERTAIN MARKET APPEAL ASSOCIATED WITH BEING FIRST, BUT FOR A MARKET TRENDSETTER THE CHALLENGE OF SUCCESS IS SOMETIMES A MATTER OF HAVING TOO INNOVATIVE A PRODUCT.

THOUGH THERE ARE ADVANTAGES, CONTROL OF AN ENTIRE MARKET NICHE MAY MAKE THE JOB EVEN HARDER.

QUESTECH METALS IS A GOOD EXAMPLE OF HOW TO EXPLOIT BEING FIRST ON THE BLOCK WHILE TAKING CARE OF THE USUAL MARKETING CHORES.

SINCE TAKING UP THE REINS AS QUESTECH'S FIRST HIRED C.E.O., BARRY CULKIN HAS EXPERIENCED BOTH THE OPPORTUNITIES AND DANGERS OF FIRST-MOVER ADVANTAGE.

>> THE REASON I CAME TO QUESTECH AND THE APPEAL THAT I SAW WAS, FIRST OF ALL, I THOUGHT THAT WE HAD A CHANGE IN THE COMPETITIVE LANDSCAPE TECHNOLOGY WHICH COMES ALONG ONCE IN A LIFETIME.

THE SECOND OPPORTUNITY THAT I SAW WAS THE ABILITY TO CREATE A BRAND BECAUSE A BRAND IN THE MARKETS THAT WE'RE OPERATING IN HAD NOT BEEN ABLE TO BE ESTABLISHED BECAUSE IT'S PRETTY MUCH EVERYTHING IS THE SAME.

AND WE HAD A POINT OF DISTINCTION AND DIFFERENTIATION THAT I THOUGHT WE COULD DRIVE HOME.

Lili Gamache: WHAT SETS QUESTECH METAL APART FROM THE COMPETITION IS THE FACT THAT IT ISN'T METAL AT ALL BUT PLASTIC WITH A METAL FINISH, A SYNTHETIC PRODUCT THAT'S EVEN BETTER THAN THE REAL THING.

Barry Culkin: WHAT WE WERE LACKING WAS THE VEHICLE TO CAPTURE THAT AND GET IT TO THE TARGET CUSTOMER.

THE FIRST THING THAT WE DID IS WE SORT OF DEFINED, ALL RIGHT, WHAT BUSINESS ARE WE IN AND WHAT MARKETS DO WE WANT TO GO AFTER, BECAUSE THE SEDUCTIVE NATURE OF OUR PRODUCT AND OUR PROCESS IS THAT WE LITERALLY CAN MAKE ANYTHING.

>> THE MOST VALUABLE RECURRING THING THAT I'VE LEARNED IN DOING THIS IS TO STAY FOCUSED ON THE IMPORTANT ONE GOOD IDEA AS OPPOSED TO THE 12 GREAT IDEAS SO THAT THAT ONE IDEA BECOMES A SUCCESS BEFORE LAUNCHING THE OTHER 11.

Barry Culkin: SO WE DECIDED TO FOCUS ON THE TILE MARKET, WHICH IS A HUGE MARKET ON A WORLDWIDE BASIS, IT'S SOMEWHERE IN EXCESS OF $15 BILLION.

Lili Gamache: QUESTECH EMBARKED ON A TWO-PRONG STRATEGY THAT INCLUDED THEIR FIRMLY ESTABLISHED FOOTHOLD IN THE VISUAL MERCHANDISING MARKET.

Barry Culkin: AND OUR STRATEGY REALLY WAS NOT TO LEAVE THAT BEHIND BECAUSE IN VERY REAL TERMS IT'S OUR HERITAGE.

SO THE STRATEGY REALLY WAS TO DEVELOP A BALANCE, TO DEVELOP A STOCK PRODUCT LINE THAT WE COULD SELL TO DISTRIBUTION THROUGHOUT THE WORLD, AND EVERY SINGLE MONTH THEY WOULD CALL UP AND ORDER THE PRODUCT.

THAT'S WHAT OUR TILE BUSINESS DOES FOR US.

Lili Gamache: BUT AS WITH ANY CUTTING-EDGE TECHNOLOGY, GETTING A PATENTED METALLIC RESIN TILE TO BECOME AN ACCEPTED PART OF THE MARKETPLACE VERNACULAR HAS BEEN THE BIGGEST CHALLENGE OF ALL.

Dan Shea: THAT'S REALLY WHAT THE HEART OF THE TASK HAS BECOME IS A TEACHING TASK.

I THINK WE'VE CREATED A FANTASTIC PRODUCT WITH A COMPANY THAT CAN MAKE HUNDREDS OF THOUSANDS OF TILES OR WHATEVER ELSE WE NEED, BUT NOW IT'S A QUESTION OF HAVING PEOPLE OUT THERE IN THE WORLD SAY, "OH, I KNOW WHAT TO DO WHEN I SEE COPPER."

AND, IN FACT, ARCHITECTS GOT VERY EXCITED WHEN THEY SAW IT, WERE SAYING, "NOW YOU CAN USE COPPER, AND BRONZE AND BRASS," BUT THEY WERE NOT IN THE HABIT OF DOING IT.

SO, THIS WAS REALLY A WHOLE NEW ANIMAL AND YOU HAD TO TURN ON THE LIGHTS.

AND SO WE HAVE TO KEEP PUTTING THE PRODUCT, AND THE LITERATURE AND THE MESSAGE IN A FORM THAT THEY SAY, "OH, I KNOW WHAT TO DO.

I CAN DO WAINSCOTING, OR I CAN DO A FRAME AROUND A DOOR, OR I CAN DO TILES IN MY BACK SPLASH.

HERE'S A PICTURE OF IT.

MY BACK SPLASH CAN LOOK LIKE THAT," IN ORDER TO UNDERSTAND IT.

SO THE HEART OF THE MATTER IS TEACHING PEOPLE HOW TO USE A NEW PRODUCT, NOT JUST CREATING A NEW PRODUCT.

(background:) YEAH, I'VE GOT THE BRASS THAT WE TALKED ABOUT.

I'VE GOT AN ENTIRE PRESENTATION FOR YOU.

Lili Gamache: ANOTHER KEY STRATEGIC MOVE FOR QUESTECH HAS BEEN TO HIRE THE BEST AVAILABLE TALENT TO ADD DEPTH AND EXPERIENCE TO A PREVIOUSLY NEGLECTED IN-HOUSE SALES TEAM.

IN ADDITION, A RECENTLY ESTABLISHED NETWORK OF INDEPENDENT SALES REPRESENTATIVES MAKE SURE THAT NATIONAL LEVEL SALES OPPORTUNITIES AREN'T BEING MISSED.

>> WHAT THEY ARE DOING FOR US FOR THE FIRST TIME IN THE HISTORY OF THE COMPANY IS GETTING US ON THE CONSIDERATION LIST FOR HUGE PROJECTS.

WE HAVE JUST BEEN SPECIFIED FOR A CHAIN OF MOVIE THEATERS IN THE UNITED STATES THAT'S DOING BETWEEN 30 AND 40 RENOVATIONS NEXT YEAR THAT REPRESENTS A HUGE REVENUE SOURCE FOR THE COMPANY.

Lili Gamache: PROJECTS LIKE THE THEATER CHAIN HARK BACK TO QUESTECH'S ORIGINAL IDENTITY AS A CUSTOM DESIGNER MANUFACTURER BUT WITH A POTENTIALLY PROFITABLE TWIST.

Barry Culkin: INTERESTINGLY ENOUGH, WHILE IT IS "CUSTOM," IT'S A REPEATABLE PRODUCT.

IT'S THE SAME PRODUCT THAT'S GOING INTO EVERY SINGLE MOVIE THEATER.

AND SO AS WE CAN DEVELOP MORE AND MORE EXPERTISE AND AWARENESS IN THE SPECIFICATION MARKET, I THINK THE COMPANY IS REALLY GOING TO TAKE OFF BECAUSE WHAT WE BRING TO THE ARCHITECT AND DESIGNER IS THE WAY OF PUTTING THEIR OWN SIGNATURE ON IT BY THE WAY OF WE ALLOW THEM TO DIFFERENTIATE THEIR PRODUCT.

Lili Gamache: EVEN AN EXCLUSIVE PRODUCT LIKE QUESTECH'S IS WORTHLESS IF THE MARKET PERCEPTION IS OFF.

SO THE COMPANY TAPS THEIR NEW SALES NETWORK FOR COMPETITIVE INTELLIGENCE.

>> WE TALK TO OUR SALES REPS OUT IN THE MARKETPLACE.

THEY ARE IN MANY REGARDS OUR EYES AND EARS ON WHAT'S GOING ON IN THE COMPETITIVE ENVIRONMENT.

WHAT DO YOU THINK ABOUT OUR SERVICE, WHAT DO YOU THINK ABOUT OUR QUALITY, WHAT DO YOU THINK ABOUT OUR PRICING.

(background:) YOU KNOW THE PACKAGE YOU SENT TO US LAST WEEK?

>> YES.

>> AND WE PRESENTED IT TODAY FOR THE FIRST TIME.

>> GREAT.

AND HOW DID IT GO.

>> IT WENT VERY WELL.

Barry Culkin: OUR SALES REPS TELL US HOW DO WE STACK UP VERSUS THE COMPETITION.

Lili Gamache: QUESTECH REFLECTS THAT IRONIC COMBINATION OF ADVANTAGE AND LIABILITY THAT ALL TRENDSETTING COMPANIES EXPERIENCE.

Dan Shea: WE'RE STILL A VERY YOUNG COMPANY AND WE'RE STILL VERY SMALL AND JUST BEGINNING TO GET UP ON THE RADAR SCREEN IN THE WORLD OF ARCHITECTURE, BUT WE'VE BEEN VERY LUCKY BECAUSE WE'VE ALWAYS BEEN IN A LEADERSHIP POSITION.

NOBODY HAS BEEN ABLE TO CREATE A PRODUCT LIKE THIS.

I THINK ONE OF THE PROUDEST MOMENTS FOR ME WAS WHEN OUR COMPETITORS STARTED WALKING INTO OUR CUSTOMERS LIKE SEARS AND SAYING, "WE'RE DOING EXACTLY WHAT QUESTECH IS DOING."

AND I SAID, "GREAT.

THE MORE THEY SAY THAT, THE BETTER OFF WE ARE."

WE'RE NOW WORKING ON THIRD AND FOURTH GENERATIONS OF PRODUCTS, AND WE'RE COMMITTED TO OBSOLETING OURSELVES BECAUSE IN THE END THAT'S THE ONLY WAY YOU'RE GOING TO BE A SUCCESS.

I'M VERY HAPPY TO SAY THAT THE CULTURE HERE IS REALLY ABOUT REINVENTING ITSELF ALL THE TIME.

>> FOR A MARKET TRENDSETTER LIKE QUESTECH METALS, WHICH MAY EVEN CONTROL AN ENTIRE NICHE, THE CHALLENGE OF SUCCESS IS OFTEN CREATING A MARKET BEFORE BEING ABLE TO SELL THE PRODUCT.

THIS EFFORT CAN CONSUME RESOURCES, LEAVING YOU VULNERABLE IN OTHER AREAS.

IT'S A SITUATION THAT REQUIRES VIGILANCE ON THE PART OF COMPANY LEADERS.

LEADING-EDGE TECHNOLOGIES CUT BOTH WAYS.

ON THE ONE HAND, BEING FIRST TO MARKET CAN REAP ENORMOUS PROFITS, BUT ON THE OTHER HAND, RESEARCH AND DEVELOPMENT ARE AN ENORMOUS EXPENSE, ESPECIALLY WHEN YOU HAVE TO CONVINCE AN ESTABLISHED MARKET TO ACCEPT THE NEW CONCEPT.

IN 1988 AUDREY ENGELSBERG DISCOVERED AND PATENTED A LASER CLEANING PROCESS, THEN PROCEEDED TO DEVELOP A PRODUCT FOR USE IN THE SEMICONDUCTOR INDUSTRY.

BUT CONVINCING OTHERS OF ITS VALUE HAS TAKEN TIME.

>> THIS HAPPENS TO BE A MEGABIT WAFER, 8 INCHES.

THE WAY THIS THING WAS BUILT AND CLEANED WAS BY CONVENTIONAL TECHNIQUES USING WATER AND CHEMICALS.

Lili Gamache: BUT AS TECHNOLOGY EVOLVES EVER SMALLER CHIPS, WATER WILL NO LONGER BE ABLE TO REMOVE THE MINUTE DEFECTS THAT ADVERSELY AFFECT THE CHIP'S PERFORMANCE.

>> AND THAT'S BECAUSE WATER IS SORT OF A MECHANICAL CLEANING EFFECT.

IT'S PUTTING PRESSURE ON PARTICLES TO MOVE THEM, AS OPPOSED TO THE RADANCE LASER PROCESS WHICH USES PHOTONS OR LIGHT TO PENETRATE THE PARTICLES AND SPLIT THE BONDS.

BECAUSE OF LASERS, WE ARE OPERATING AT THE MOLECULAR LEVEL AND THE DEFECTS ARE REDUCED TO A MUCH LOWER LEVEL.

THIS WAFER THAT WE JUST TALKED ABOUT WILL HAVE $12,600 MORE REVENUE POTENTIAL THAN THE ONE THAT WAS DONE WITH WATER.

SO, THIS WILL BE A TREMENDOUS FINANCIAL LEVERAGE FOR COMPANIES THAT USE THIS TECHNOLOGY IN THE FUTURE.

AND OF COURSE, MOST FABS THAT WE'RE TALKING ABOUT THAT MAKE MICROPROCESSORS, PROBABLY WILL BE PROCESSING 1,000 OF THESE WAFER STARTS A DAY, WHICH MEANS THEN THE FABS THAT ARE USING LASER CLEANING WILL HAVE OVER $12 MILLION MORE REVENUE PER DAY, AND IF YOU REALLY WANT TO GET THE MIND BOGGLING, IS MULTIPLY THAT BY 365 DAYS A YEAR AND YOU'LL SEE WHAT WE'RE TALKING ABOUT HERE.

>> WE HAVE A FUTURE TECHNOLOGY.

THE IDEA OF SOMEBODY BUILDING A TOOL FOR IT NOW, IT'S ALMOST LIKE WE'RE A SOLUTION LOOKING FOR A NEED.

TO GET SOMEBODY TO INVEST THEIR MONEY IN DEVELOPING IT FOR SOMETHING IN THE FUTURE THAT HASN'T BECOME A PROBLEM YET NECESSARILY IS A BIT OF A LEAP OF FAITH, AND SO THEA BET.

ONCE YOU HAVE THE PARADIGM SHIFT ESTABLISHED, IT'S ALMOST LIKE A FREE-FOR-ALL IN WHO'S GOING TO COME NEXT.

EVERYONE WANTS TO GET IN ON IT BECAUSE COMPANIES, JUST AS PEOPLE, DON'T WANT TO BE SECOND.

>> THE FASTER YOU CAN IMPROVE YOUR YIELDS, THE MORE PRODUCT YOU GET TO THE MARKET.

THAT IS REFLECTED IN THE REVENUE THAT THE CHIP MANUFACTURERS SEE.

IN THE FIRST 6 MONTHS THE LION'S SHARE OF THE MONEY IS MADE IN THE FIRST 6 MONTHS, BUT THEY'RE VERY CAUTIOUS.

IF YOU THINK OF YOURSELF IN THE POSITION OF LAB MANAGER, YOU MAY BE PRODUCING LITERALLY BILLIONS OF DOLLARS OF PRODUCT A YEAR, AND IF YOU CHANGE YOUR PROCESS EVEN SLIGHTLY, AND YOUR YIELDS DROP EVEN SLIGHTLY, AND WHEN YOU'RE DEALING WITH BILLIONS OF DOLLARS, IT DOESN'T TAKE A HEAVY MATHEMATICIAN TO REALIZE YOU CAN LOSE BIG TIME LOTS OF MILLIONS OF DOLLARS VERY EASILY.

THE CATALYST THAT WILL TAKE THE LASER CLEANING PROCESS TO MARKET WILL BE AT THE POINT WHERE THEY CAN NO LONGER CLEAN WITH WATER.

AT THAT POINT THERE WILL BE A PATH TO THE DOOR, AND IF WE AREN'T READY WITH A TECHNOLOGY AT THAT POINT, A MULTITUDE OF OTHER PEOPLE WILL COME OUT OF THE WOODWORK WITH OTHER TECHNOLOGIES.

THE ONLY DISADVANTAGE IT'S GOT RIGHT NOW IS BEING ABLE TO BE PROVEN THAT IT IS COMPETITIVE, THAT IT IS VIABLE.

IF YOU CAN DO IT, IS WHAT WE'RE BEING TOLD, IT WOULD BE A SPECTACULAR PRODUCT.

THE QUESTION IS THE DEVELOPMENT END.

AND IF WE CAN DEVELOP IT, WHICH WE BELIEVE WE CAN, AND WE'VE GOT A MAP THAT MAPS OUT ALL THE LEVELS THAT WE NEED TO GET THERE AS A PLAN, THAT WE WILL HAVE A MARKET WHEN WE GET TO THE END OF THE LINE.

AND THAT'S WHAT OUR INVESTORS HAVE TO HAVE FAITH IN IN BELIEVING IN THAT.

>> SO IT TAKES A LONG TIME FOR NEW AND NOVEL TECHNOLOGIES TO DEVELOP, AND ALL TECHNOLOGIES HAVE THEIR NICHE.

ONE MAY WORK BETTER THAN ANOTHER.

THERE'S NOTHING WRONG WITH THAT.

SO YOU ARE COMPETING, AND THAT IS IMPORTANT.

IF THERE WAS NO COMPETITION, YOU'D GET KIND OF WORRIED.

>> GUARDING AND FULLY EXPLOITING A GREAT NEW PRODUCT CAN BE HARDER THAN COMING UP WITH THE CONCEPT IN THE FIRST PLACE.

LEGAL ADVICE ON THE COMPLEXITIES OF PATENT PROTECTION, LICENSING AND VENTURE FINANCING IS CRITICAL FOR THE EMERGING ENTREPRENEUR.

"VENTURING'S" WENDY WILTON SPOKE WITH KEN MERITT OF THE CORPORATE LEGAL FIRM OF MERITT & MERITT TO GAIN HIS PERSPECTIVE ON WHAT MAKES FIRST MOVERS TICK.

>> KEN, YOU HAVE MADE A LEGAL CAREER WITH INNOVATORS, FIRST COMPANIES.

A CLEAR VISION AND REAL PASSION TO ACHIEVE THAT VISION.

>> DO YOU EVER WORK WITH AN ENTREPRENEUR THAT REALLY NEEDS TO THINK ABOUT THEIR MARKET POSITION WELL BEFORE THEY EVEN WANT TO CONSIDER INTELLECTUAL PROPERTY PROTECTION?

>> CERTAINLY THERE ARE MANY COMPANIES THAT THE FOUNDER HAS STRENGTHS IN ONE PARTICULAR AREA, IT MAY BE PRODUCT DEVELOPMENT, IF MAY BE FINANCE, BUT DOESN'T HAVE THE SKILLS IN OTHER AREAS.

SO, WE CLEARLY ADVISE THEM TO SEEK MARKETING ASSISTANCE AND CONSULTATION, IF THAT'S A KEY PART OF THE BUSINESS PLAN.

>> WHEN YOU WORK WITH INVESTORS, ONE OF THEIR BIGGEST CHALLENGES IS FINDING CAPITAL.

WHAT ARE THE THREE MOST IMPORTANT CRITERIA BY WHICH INVESTORS JUDGE THESE PROPOSALS?

>> I THINK THE KEY CRITERIA IS INTEGRITY OF THE ENTREPRENEUR.

THE INVESTOR IS PUTTING HIS OR HER MONEY IN THE HANDS OF THE ENTREPRENEUR AND HAS TO FEEL THAT THE ENTREPRENEUR HAS INTEGRITY IN TERMS OF MANAGING AND INVESTING THAT MONEY.

THE SECOND THING IS MARKET POTENTIAL.

HAS THE ENTREPRENEUR IDENTIFIED A MAREKT THAT TRULY HAS POTENTIAL?

>> IS THERE A THIRD ELEMENT?

>> I THINK POSSIBILITY OF OUTSIZED RETURNS GIVEN THE HIGH RISK PROFILE.

THE BUSINESS HAS TO BE ABLE TO HIT A HOME RUN.

VERY FEW DO, BUT IT HAS TO HAVE AT LEAST THAT POTENTIAL.

>> THE RETURN ON INVESTMENT, RIGHT?

>> RIGHT.

>> KEN, THANKS FOR BEING WITH US.

>> MY PLEASURE.

>> AS EXHILARATING AS FIRST MOVER ADVANTAGE CAN BE, IT USUALLY INVOLVES EDUCATING AND CULTIVATING THE MARKET FOR ALL THOSE WHO FOLLOW.

EVERY NEW PRODUCT CONCEPT IS A MAGNET FOR COMPETITION AND CAN BE QUICKLY ECLIPSED BY ANOTHER ENTREPRENEUR RIDING THE COATTAILS OF YOUR SUCCESS.

SO IF YOU'RE THINKING ABOUT INTRODUCING A NEW WIDGET, BETTER BE CONSIDERING WHAT COMES NEXT.

IF YOU DON'T, THE OTHER GUY WILL.

AND ON THAT VERY COMPETITIVE NOTE, WE END OUR PROGRAM.

NEXT TIME OUR ENTREPRENEURS WILL ILLUSTRATE MORE SMART STRATEGIES TO HELP YOU SHARPEN THE SAW IN YOUR COMPETITIVE TOOL KIT.

WE HOPE YOU'LL JOIN US AGAIN NEXT TIME WHEN THE SUBJECT IS COMPETING SMART.

UNTIL THEN, FOR "VENTURING," I'M LILI GAMACHE.

BE PROSPEROUS.