the innovative LEDGER
An e-Newsletter from The Innovative Edge™ Inc.

  Vol. 4, No. 2, Summer 2004
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Bricks & Mortar ... and Wax
By Jeffrey A. Govendo

The term "bricks & mortar" may be unfamiliar to those of you born later than, say, 1997 (I do realize this newsletter doesn't have much of a following among the 7 year-old and younger set). But back in the late '90's to early 2000's, this was a phrase used, often with a touch of arrogance, to describe businesses of the Old Economy - firms that made "products" that were produced in "factories" and sold in "stores." These were the businesses that were thought likely to be left in the dustbin of economic history while those of the New Economy - those heavily-leveraged, high-tech, internet-based e-commerce firms selling everything from pet supplies to messenger services to the hardware and software needed to run e-commerce sites - were to become the way of the world. These were the companies, we were told, on the leading edge of innovation. To many, they were the very definition of innovation.

In a recent edition of the Boston Globe, authors Scott Kirsner and Peter Howe compared the fates and fortunes of a number of Massachusetts companies that went public in the year 1999. The majority of them were telecom, network software and e-commerce firms (New Economy companies), most less than several years old at the time, all wildly overvalued (through hindsight), and now worth a mere fraction of their capitalization at IPO time, if in existence at all.

And then there was the Yankee Candle Company.

Yankee Candle, founded in 1969, is headquartered in Deerfield, Mass. (or, as those in Greater Boston call it, "somewhere east of Chicago… I think."). If you smell something pleasant in a shopping mall and it's not coming from the food court or Mrs. Field's cookie kiosk, it's probably coming from a Yankee Candle store, of which there are over 300 in 42 states and counting. Yankee also sells its products through print catalogs and, yes, via a nicely-done website which they've developed over the years at what some would consider a leisurely pace by Internet standards. "High tech" for Yankee is their line of plug-in air fresheners. There's nothing in Yankee's product portfolio, growth strategy or even market value numbers (about a 33% increase since IPO) that would particularly impress the young MBA, Porsche Cayenne crowd. And yet, as Kirsner points out, it's precisely Yankee's deliberate and focused approach to growth and diversification that has served it so well. The company continues to thrive where others haven't, and is in no danger of being overtaken by a newer, flashier technology that renders its product offerings obsolete (after all, if the light bulb couldn't do it…).

Is Yankee Candle, a bricks & mortar company producing, essentially, cylinders of wax - innovative? To many people, the term innovation is synonymous with the stuff that dazzles - the camera-cellphones, PDA's, computers, TiVo's, high-def plasma TV's, games, software, etc., etc. But an innovation isn't necessarily an invention; in fact, it doesn't have to be a "thing" at all, nor qualify as a breakthrough. Innovative thinking and action can just as well be applied to challenges far less sexy: discovering new ways of reducing costs and waste, finding new applications or distribution channels for an existing product, improving communications among office staff members, creating a forward-thinking strategic plan, to name a few. Real innovation comes as a result of people encouraging each other to draw upon their creative energies to come up with new ideas, then working together to apply these to real-world problems and opportunities. The principles of innovation holds just as true in the candle-making business as in the newest electronics or biotech industries. So, considering Yankee's great success over many years, I would say, yes - they are quite an innovative company.

Besides, which would you rather have when the lights go out … a nice, scented candle or your PDA?