Globe 100 | Roundtable

How you build innovation

The change game: Four CEOs reveal their secrets

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May 22, 2011

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How do chief executives think about making their companies more innovative? Globe columnist Scott Kirsner spoke with four CEOs about creativity and fostering job creation in Massachusetts: Gail Goodman, chief executive of Constant Contact, a Waltham company that sells digital marketing services to businesses; Johnny Earle, founder and chief executive of Johnny Cupcakes, a clothing chain (specializing in high-end T-shirts) based in Hull; David Vieau, cofounder and chief executive of A123 Systems, also in Waltham, a maker of batteries for power tools, electric vehicles, and utilities; and Jeffrey Anderson, founder and chief executive of QuickHit, a developer of Internet football video games based in Foxborough.

The Globe: Jeff, what would you say is the vision for the video game cluster here? The industry in Massachusetts is about 1,300 people by the most optimistic estimates. Is it going to be 50,000 or 100,000 people, or are we investing in growing something that’s relatively small?

Jeffrey Anderson: I think the potential is enormous. What’s great about the games industry is that it has low capital requirements, and it’s multiple swings at the ball. You don’t have to have a billion-dollar factory. You can have a small team of creative, highly motivated individuals.

I think that [state] tax credits are ways the government can incentivize businesses with large opportunities, and given the size that it’s at today, I think that it’s an interesting experiment for the Commonwealth to look at that growth opportunity. It’s not a big investment, and you don’t have to put a lot of money into it, but it has a big long-term value creation.

Globe: Johnny, how do you create demand, when every other T-shirt maker is probably cranking out hundreds of thousands or millions of their product?

Johnny Earle: When I first started, I was designing the T-shirts out of my parents’ house, and while everyone else was going out partying, I decided to gear my time and money towards this business. I wanted it to be something that had longevity, so I chose not to sell to some stores. We had some offers from Macy’s, Nordstrom, Urban Outfitters, and even Barneys, and we just went a different route. We started numbering shirts, and once we’d sell out of something, we’d never make it again. We began focusing on packaging, which I think is a big thing when you come out with a product. Growing up, we’ve all been addicted to McDonald’s at one point because of the Happy Meals. Instead of plastic bags, we started making food boxes for our shirts, and even cupcake mix boxes for some of the releases. When you pull out the shirt, you have to dust off real flour and sprinkles. We sell our shirts for anywhere from $35 to $75, and they usually sell out pretty quick.

Globe: David, there was a lot of state and federal money that encouraged you to build your manufacturing plant in Michigan, where they’re in dire need of jobs. Do you feel like the model for a lot of Massachusetts companies now is:

Do the R&D here, but do the manufacturing elsewhere?

David Vieau: Massachusetts is one of the most expensive places in the country to live and to do business in. We try to attract talent, and bring people in from Michigan here. It’s difficult. We did a “bake-off’’ between five states when we were trying to figure out where our factory should be. Michigan got very, very aggressive. Since that time, in two years, they’ve got 17 new companies in and around the electrification of vehicles and transportation. They’re all employing people and hiring people.

Globe: Gail, you built the Constant Contact brand around the idea that everyone should be doing e-mail marketing. What do businesses want to do with Facebook, Twitter, and YouTube? How are you expanding into that universe?

Gail Goodman: Aggressively. For small businesses, it’s about how you stay connected to your customers. Their largest source of revenue is repeat business, and word-of-mouth from existing customers. How do you get repeat business? Stay in touch. The ways you stay in touch keep evolving and changing.

Globe: What do you do to foster new ideas from employees?

Earle: We speak to our employees every day, talk to our customers every day. It’s always just a big brainstorm frenzy. Our employees know what sells, and what doesn’t. They hear what the customers are asking about, and what they’re wearing.

Goodman: We have a tool in-house called UserVoice. Every member of the company can say, “I think we should do this,’’ and all the other members of the company can vote on it.

Globe: What about balancing longer-term investments in research and innovation with having to report to Wall Street every quarter?

Vieau: You start off with nothing but pure innovation, but then you get a legacy that you’ve got to maintain, and all your resources get poured into that and fighting competition. Pretty soon, you’ve got an innovation engine that is getting starved for resources.

At A123, we did a spinout of a company, called 24M, that was an innovation that we had for next-gen [battery] technology. Could be a world-beater, but there’s a lot of risk in it. The question was, do we have enough resources? We said, we’ll spin that out, and we’ll hold a piece of it. We brought in venture capitalists to fund it, and we put in a team of entrepreneurs to go drive the thing. And we secured a position to spin it back in, potentially.

Goodman: We’ve done three acquisitions. We’re growing 30 percent a year, and we’re going to grow our R&D budget that much or more, because we need to be at the front of the innovation space. So we’ve used a combination of organic innovation and mergers and acquisitions to keep innovating fast. We created a “labs’’ organization about three years ago that is doing next-gen technology investigation. They’re able to get hands-on with stuff that’s totally impractical, and not worry about delivering products. But they’re doing homework for what then turns into product.

Globe: If we made all of you mayor or governor, what would be one thing that you would do to make Boston more fertile as a place for creating great companies?

Goodman: We’ve got to keep our young talent here. We are bringing an unbelievable talent pool into our universities, and then letting them move away. Staying in Massachusetts is a very expensive proposition, and we don’t make it easy.

The second is working on H1B visa problems, so that we can keep foreign talent here.

Vieau: The innovation engine that we’ve got, and the universities that we’ve got, and then the way the VC community works there’s a tremendous amount of bubbling activity that’s going on.

I don’t know how the state solves the housing cost problem, because it’s a benefit of the success we’ve had as a state. With dozens of people we’ve tried to bring in, the issue is that it’s too expensive for them.

Globe: Johnny, you do a lot of speaking to college students and high school students around the country. What’s the perception of Boston out there?

Earle: I think everyone, when they’re young, has this California dream of moving someplace warm, and then they realize that if you have the same season year-round, it doesn’t feel so special any more.

Anderson: I think the identity of Boston has always been one that young people have struggled with. It is viewed as more traditional, slower, maybe more business-to-business oriented. For people who are coming out of college and are looking to do something exciting — you know, they’ve got their hair on fire, they’re ready to go take on the world — it doesn’t always fit with the culture they’re looking for.

If I was going to pick one more thing, I think we do a very poor job of promoting what we are about in Boston. I think there are so many exciting companies that are out there that I never hear about.

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‘We’ve got to keep our young talent here. We are bringing an unbelievable talent pool into our universities, and then letting them move away.’ GAIL GOODMAN, CONSTANT CONTACT