At Spin Master’s hivelike downtown Toronto headquarters, two distinct approaches to innovating in the toy business co-exist. One is represented by Iain Kennedy, the company’s straightlaced chief operating officer, whose office walls are covered with charts: supply chain velocity, supply chain effectiveness, quality, product development. The other approach is personified by Ben Varadi, the young-at-heart vice-president of product development, who in 1994 co-founded the company with CEOs Anton Rabie and Ronnen Harary (below). Varadi’s darkened, cluttered second-floor den is home to kitschy playthings and two capacious tropical fish aquariums, and is the kind of place where some gag prop beneath the couch occasionally emits the sound of flatulence.
The dichotomy is stark: Kennedy uses innovative techniques to analyze data to improve Spin Master’s global business through highly refined real-time measurement of its operations; Varadi is all gut-feel about what makes kids look at a toy and say, “Wow!” It’s rare that an executive culture sustains both methods, but those twin innovation engines are powering the soaring success of Spin Master, making it the third-largest toy manufacturer in North America after Mattel and Hasbro.
Spin Master has long produced blockbuster lines that have redefined entire categories. It’s known for putting elaborate twists on traditional kinds of play, like using compressed air to power modern versions of paper airplanes with its Air Hogs line of vehicles, or creating a 21st-century version of marbles with its Bakugan strategy game, complete with magnetic spring-loaded miniature figures that are concealed in spheres and pop open when they roll onto metal game cards.
The privately held company,which has grown to more than 700 employees and is estimated to be approaching $1 billion in annual sales, is the paragon of an entrepreneurial firm that has matured as a business without losing the spark that made it successful in the first place. The transformation began in 2005. The company’s sales had rocketed into hundreds of millions of dollars, and Harary and Rabie decided they needed a larger executive team with expertise in new areas. “We were having good years,” says Rabie, “but we realized we were now swimming in a different fish tank.”
Kennedy was one key recruit. Formerly a senior executive at Toronto-based electronics manufacturer Celestica, Kennedy joined in 2006 and quickly overhauled the business processes from the ground up, establishing new IT systems to track and analyze data throughout the company’s supply chain. The systems have given executives an unparalleled ability to see what’s happening with individual products at specific retailers in any region, for instance, so they can up supply within a day or two to better meet demand, or drop prices to move inventory. In addition, on-time delivery with retailers — once in the dreadful mid-60% range — is now 97%, and forecast accuracy of end-consumer demand is more than 80%, up from less than 20% three years ago. Inventorylevels have plunged even as the company has sold more toys than ever.
Streamlining the operations has allowed the company to shorten development time by some 25%, and increase the number of product launches. In fact, if not for its well-oiled machine, Spin Master could not have seized the opportunity to break into the highly competitive doll category this year with its new Liv line. A legal dispute among competitors offered Spin Master, which had been working on Liv for three years, the chance to supplant the successful Bratz dolls from shelves this holiday season — but it had to launch a year early and compress eight months of development into 3½ months.
Will Liv be another blockbuster franchise for Spin Master? As their business exploits the vagaries of children’s fads, there are no sure things. But the Spin Master team is improving at the fine art of knowing when to trust the data, while knowing when to still trust their guts. – Andrew Wahl