Past Midway Ramblings on Business & Life

Looking for Opportunity

When I was working at GE Appliances (Dishwasher division) in Louisville, Kentucky as an engineer, we had an opportunity to potentially switch suppliers for the bag of insulation that covered the dishwasher. The bag served two purposes: (1) reduce noise, and (2) retain heat. At the time, the large corporation Owens Corning was the exclusive supplier.

We were approached by a smaller, family-owned business to produce the insulation cover for us for a significantly reduced price. As we explored this option, Owens Corning reminded us that they held the patent on this product, which would prevent us from switching suppliers. Like most patents, their patent was written very generically. It said something like,

Any covering over a dishwasher, made from any material (including but not limited to plastic, insulation, wood chips, etc.) used for any purpose (such as noise abatement, heat retention, etc.).

This pretty much covered everything.

Although we were impressed by the family-owned business, their operations and staff, it seemed that our hands were tied… even though we thought the patent was a bit dodgy. Further, we were pretty sure GE had covered their dishwashers with insulation blankets before the patent was issued but we could not prove this because we did not have CAD product drawings dating that far back in time.

Within a few weeks of our meetings, it so happened that the head sales guy from the family-owned business was driving down the road and saw an old dishwasher out on the curb waiting for trash pickup. He screeched the brakes, put the car in reverse and looked at the dishwasher. It looked old and had an insulation blanket around it. He knocked on the door of the house and asked if he could buy it. They said, “You can have it if you just haul it off. It’s old and no longer works.”. So, he threw it in the trunk and sent us pictures of the dishwasher along with the model number.

Based on the model, we were able to determine the date of production, which was prior to the date of the Owens Corning patent filing. To be clear, we had looked back at our drawings at old, pre-patent dishwasher models but the insulation specification was unclear – at least not sufficient to go to court as evidence (we felt at the time). But now, we had an actual product in hand to nullify the patent. In the patent world, this is called “prior art”. You can’t patent something that has already been in production and out in the marketplace as a common product (unless it’s your product I guess).

So how did this end? We had a meeting with Owens Corning. I would describe this meeting as cordially-tense. They were obviously not happy. The price for the low-end insulation blanket was $1.03. Our family-owned supplier was quoting $0.65. Owens Corning dropped their price to $0.68. I guess they figured that we wouldn’t bother switching suppliers and the risks associated with the supplier change and the potential disruption to production for $0.03. The GE purchasing department was satisfied to accept the price reduction from Owens Corning and move on with a win. I, however, felt we should reward the smaller firm for their ingenuity and award them some business rather than simply use them as leverage for negotiating purposes against our current supplier. It would be beneficial for us to have multiple suppliers and the $0.03 represented an additional $36,000 per year in savings (cost avoidance).

In the end, we gave the smaller company the low-end insulation blanket contract at $0.65. I sincerely hoped they would produce it on time, on budget and deliver without issue… because I went to bat for them. They did. The net effect… GE saved $0.35 per dishwasher on the low-end products. At the time, we were producing about 1.2 million of these units per year. That’s $420,000 per year in savings. More importantly for the purposes of this story, the new supplier landed a $780,000 annual contract and a foot in the door with General Electric. Why? Because a guy at the smaller company was trying to solve a problem and he was paying attention.

Opportunity often favors those who are in the game, actively looking for solutions to business problems. Most people would have driven past that dishwasher on the side of the road without even noticing it. But this guy used it to land a $780,000 contract. He was in the game.

By Andy Jones
Past Midway Ramblings on Business & Life

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