Flextank - The Secret to this Innovative Start-up
At the Industry and Investment NSW seminar ‘Turning Opportunity into Commercial Reality' held in Griffith on 27 July, 2010, one of the speakers was Peter Steer, Managing Director of Flextank. Flextank was a start-up company in 2001 when its engineering founders designed high oxygen barrier bulk storage bags for the wine industry. The bags tended to languish in the marketplace, but they spawned a series of innovations which have led to the companies growth and success.
Peter says that the key to successful commercial innovation is to recognise that probably the first idea is not the best idea, but in taking the first idea to market, it does provide the knowledge to progress to the next idea, and then the next idea and so on. In fact, Peter believes that successful commercial innovation is about having a progression of ideas which are based on an increasingly savvy understanding of the market and how to meet the needs of the market. It took Flextank four ideas before they felt that they were ‘on a winner'.
So Flextank progressed from the storage bags in 2001, to a revolutionary idea of permeable bags in 2004. Allowing oxygen to permeate the bags meant they could mimic oak barrels! Not the oak flavour, but the way that oak barrels allow a small amount of air into the wine which aids maturation.
Then their next idea was rigid plastic permeable tanks. Initially they designed these in a cylindrical shape, and the product did not catch on. However, when they developed the fourth idea, which was stackable plastic permeable tanks, they hit the ‘sweet spot'. This product was patented in 2006, and sales have increased since then by 41% to $1.24 million.
Peter provided a number of key requirements for new start-up companies - including the need to understand that growing companies ‘should always be short of cash', and that you need a lot of ‘fortitude' to keep going in the face of the trials and tribulations of bringing new products to market using what is generally capital from your own pocket and from immediate family. And you need both Professional Liability and Professional Indemnity insurance. As Peter said, 'If you have a commercial innovation you will get commercial theft!'
Finally, another key to the Flextank success was the recognition by the engineering founders that they needed a good businessperson to run the business; hence they recruited Peter in 2007. Peter said that the new growing company had to be ‘radically rebuilt' every three years or so because of the 30% plus growth rate which drove the need for new and better management and systems.
So the road from the first ‘light bulb' moment to successful commercialisation is a thrilling ride and always has the chance of failure, but by listening to the experience of others who have trodden this road it is possible to increase your chances of success.
