Under Pressure: Manufacturer WillowWood Survives, Thrives in Wake of Court Setback
Looking back at a storied history that stretches back more than a century, Ryan Arbogast remembers Nov. 1, 2013, as a low point for the company his great-grandfather founded in 1907.
Arbogast, fourth-generation president at prosthetic product manufacturer WillowWood, sat anxiously in a Florida courtroom and listened to a judge deliver the most devastating blow yet in a legal battle that spanned nearly a decade - and, up until recent years, seemed to be moving in their favor. WillowWood, the judge said, was blocked from selling its Alpha® Classic and Hybrid Liners and sleeves because a key ingredient was found to infringe on a competitor’s patent.
Arbogast remembers picking up the phone and calling company headquarters, tucked away in a village southwest of Columbus, Ohio, to deliver the news.
“I was totally blindsided,” he said. “I hadn’t foreseen any possibility we’d have this product taken away from us.”
Calling the now-halted Alpha Liner merely a product is an understatement. In the 17 years since its introduction to the market, the sock-like sleeve that slides over a residual limb to make amputees’ prosthetics fit comfortably had become WillowWood’s lifeblood, composing nearly three-quarters of the annual revenue for a company at the lower end of middle-market range.
The product that helped triple WillowWood’s revenue and work force in just a generation was packed up and bound for a storage facility. What remained were nearly 200 employees wondering what might happen to their jobs come Monday and a cavernous company warehouse that had been bursting at the seams just hours before.
“You could hear your voice echo in that room,” Development Engineer Chris Kelley said.
Almost instantly, WillowWood was left with a gaping, multimillion-dollar hole in its top line that wouldn’t be plugged by legal appeals or going on record to “respectfully disagree” with the decision.
Arbogast and his team needed to act, and the next steps they took charted a path that helped WillowWood survive, thrive and innovate without a pink slip in the process.
A century of growth
WillowWood itself sprang from an act of innovation in the face of adversity. Ryan Arbogast’s great-grandfather, William, survived a railroad accident but emerged a double amputee, albeit one unwilling to settle for the poor prosthetic options before him. He took it upon himself to carve prosthetic legs that best met his needs using wood from willow trees on his farm, giving the company its name and first burst of inspiration.
A direct precursor to the Alpha Liner WillowWood would introduce at the end of the century came in 1921 with the rollout of the Sterling Stump Sock, a wool prosthetic sock the company says quickly became the industry standard.
The next 70 years of growth for WillowWood, then named Ohio Willow Wood, weren’t without pivots and setbacks. The company turned to making polo mallets and balls at the height of the Great Depression in order to survive, and a decade later made parts for airplanes and boats during World War II. Major innovations came from the 1950s through the 1980s as William Arbogast’s children and grandchildren introduced new prosthetic feet and knee-shin units to the industry.
The last drastic change for WillowWood came in 1996 with the introduction of the Alpha Liner, which prompted the company to shed its profit-leading wool sock department and focus the bulk of its research and development resources on the product. The comfort and performance of the Alpha products hit the market 10 times more expensive than its wool-sock predecessor – not that the industry minded.
“That changed the company entirely,” Arbogast said. “Demand was so huge we threw everything into production capacity and maintaining quality.”
Payroll more than doubled in several headcount increases, and sales followed right along. This secured for WillowWood a market niche ahead of very small, mom-and-pop operations but still a fraction the size of some overseas manufacturers.
“We had the innovation and the engineering technique to command a price that keeps a small company like us profitable,” Arbogast said.
On the heels of its product successes and growing intellectual property portfolio, WillowWood made a formal commitment to process improvement in 2006, when it joined the Fisher College of Business Center for Operational Excellence at The Ohio State University.
Amid this growth, small licensing skirmishes weren’t uncommon for WillowWood, but it was a pair of patent-related lawsuits the company filed in 2004 and 2005, respectively, against St. Petersburg, Fla.-based competitor ALPS South that set its future troubles in motion. Leaders say the lawsuits created few ripples at the company in the ensuing years, but that was before the tables turned.
WillowWood eventually found itself on the defensive, losing a 2012 jury trial sparked by a lawsuit ALPS filed and, in March 2013, facing a court order to halt selling Alpha® products containing a specific formula whose ownership was in dispute. That ruling marked the first true disruption to WillowWood’s day-to-day operations, but paled in comparison to the broader November order that pulled the plug on all Alpha Liner products containing the formula in question.
“I called a group of people into a big conference room and told them to shut everything down,” Operations Manager Mark Alter said. “We’re done.”
For front-line employees, the ongoing legal battle to which they paid little notice over the years was very much on their minds.
“The biggest question on the floor at the time was, ‘Are we gonna survive this?’” Chief Financial Officer David Pierson said.
Of the options before WillowWood, leaders immediately took the quickest, easiest route off the table: Layoffs.
“We said right off, ‘We’ll do everything possible not to lay people off,’” said COO John Matera. “It’s not part of our culture. We don’t do it.”
WillowWood instead turned to triage on its revenue side, its next steps a blend of survivalist-minded innovation and a determined effort to continue holding fast to the customer-centric values its founders established a century ago.
That determination was at once noble and pragmatic: The Alpha Liners contained what’s called a thermoplastic elastomer gel that gained traction among customers for the soft, comfortable barrier it created for a residual limb against the prosthetic. That wasn’t the case with silicone-coated liners, another WillowWood offering that contributed but a fraction of Alpha’s haul to the top line and appealed to the minority of customers seeking a sturdier, harder material.
Silicone liners weren’t seemingly the answer to WillowWood’s very big revenue problem, but its R&D team saw in them a lingering possibility: Was it possible to align one to customer demand and save sales in the process?
An under-development silicone liner that featured a softer-grade silicone proved to be the answer. One problem still, however, stood in the way: That liner didn’t make it far enough through the R&D pipeline to have shop floor-level tooling designed, and WillowWood lacked the production capacity to install new equipment. Luckily, the company had plenty of very concerned employees ready to save their jobs and their company. Within a few weeks of the court ruling, company leaders sought volunteers for a second shift and had it up and running, employees more than willing to overhaul their own schedules to help WillowWood through the tough stretch ahead.
That launched the fastest, most fraught R&D project in WillowWood history.
All hands on deck
Call it semi-organized chaos.
WillowWood employees plunged themselves headlong into development of a soft, silicone-based liner and designing – virtually from scratch - the proper tooling for a notoriously complex process. Employees turned out one newly designed production tool a week, scavenging equipment originally purchased for other products and retrofitting shop-floor tools.
“It was a full-court press with everyone involved in designing the tools and making them,” Kelley said.
What was once guided by written documentation and established processes was being determined on the fly, problems in the morning shift becoming solutions in the early hours of the afternoon.
“There was a lot of waking (R&D) people up in the middle of the night,” said Randy Elzey, supervisor of the Alpha line.
Elsewhere in WillowWood’s headquarters, silos were falling out of necessity. The company’s custom fabrication and Design group moved into production on newly formulated liners. Front-office staffers pitched in on the production floor.. Arbogast himself spent time on the factory floor running electrical wires.
“Everybody pulled down their own piece of the action,” Chief Marketing Officer Doug Kreitzer said. “We moved a lot of people around and there was a real sense of camaraderie.”
It paid off. Within a few weeks, WillowWood successfully developed the soft-silicone Express Liner with a limited supply set to leave the building on Dec. 1, exactly a month after the court decision. The company strategically designed liner profiles that matched the largest swath of customer demand and, in the following weeks, moved on to other configurations to align supply with as much of the market as possible.
Wasting no time, WillowWood in December began developing a different kind of thermoplastic elastomer gel that stayed outside the restrictions of the patent ruling but would be attractive to Alpha customers as well. This brought two potential new products into the R&D pipeline, but one very big challenge to the shop floor: Liners with different fabrication methods that literally clashed like oil and water.
Among many other differences, silicone liners cured by a drastically different process than the in-development thermoplastic elastomer liners, dubbed K12 and K27. In the frenzy to turn out the Express Liner, engineers cleverly retrofitted production equipment production equipment to have both in process on the floor.
The company’s decision to run development of two similar thermoplastic elastomer liners at roughly the same time eventually became fortuitous. The K12 Liner made it to the customer testing phase by early in 2014, but initial feedback pointed to durability problems, prompting the company to scrap it and pivot to K27, losing little time in the process.
“Had we not identified the K12 problems through testing, we would have been in trouble,” said Jeff Doddroe, the company’s new products director. “We were very fortunate to be able to do that switch in a very small time window.”
WillowWood may not have batted 1,000, but the upheaval to its long-established R&D processes was unprecedented and transformational. The company typically begins with a New Product Development department feasibility study and moves to finding materials, shaping processes and developing prototypes for internal validation, before creating several iterations and eventually involving all WillowWood departments as market arrival nears. From the first stirrings of a new product through training, manufacturing and shipping, the process can take anywhere from nine months to two years.
It’s a tried-and-true approach, Doddroe, “but it’s also mundane.” The more software development-like approach to WillowWood’s rapid-fire Express Liner rollout, in fact, wasn’t entirely unwelcome.
“If we say we’re going to make a silicone liner,” Doddroe said, “we’re talking a high 90th-percentile that it goes to market. If we were to work the way we did on this project, we’d have a higher percent fail, but this really worked out for us.”
WillowWood leaders acknowledge this drastically sped-up process didn’t merely involve working faster. While entirely confident in the safety and quality of the finished product, they say risk-taking – heretofore an under-exercised muscle inside WillowWood’s walls – played a key part.
“As far as I’m concerned, though, we had no choice,” CMO Kreitzer said.
Voice of the customer
Customers responded as well as – or better than – WillowWood could have expected in light of its troubles.
Sales initially were decimated but climbed to hover about 50 percent below prior-year revenue through the quarter following the court decision. A prosthetic foot product whose sales soared beyond expectations, also helped cushion the blow.
Linda Wise, WillowWood’s sales and marketing manager, credits much of the company’s survival in those days to the relationships it has built over the years with its 19 distributors in 18 countries across the globe.
“There’s a lot of history, a lot of trust, between us and these companies,” she said.
Still, it required some difficult conversations with distributors and end customers, Wise said.
“They stuck with us, but we didn’t sugar-coat it,” she said. “We continued to try and partner with them and find solutions for patients, whether they involved us or not.”
WillowWood’s sales in the spring of 2014 indicate patients’ solutions very much involved them. The April 2014 release of the company’s innovative, heat-absorbing Alpha SmartTemp Liner and the K27 formula liners buoyed sales right back to year-ago levels – even beyond.
“Our reputation, and that relationship base we built, saved our business,” Arbogast said.
The company’s remarkable customer retention speaks to a bond, the effect of which extends well beyond the walls of WillowWood’s sales and marketing department. In fact, leaders say, it contributed to the all-hands-on-deck attitude seen throughout in the roughest days. Many prosthetic businesses began just like WillowWood, driven by a tragedy or disability that lends immense personal significance to the work at hand and the customers whose lives it impacts. WillowWood’s slogan calls its work nothing short of “freeing the bodies and spirits of amputees.”
“There’s a personal investment in what we make here that our folks believe in,” Chief Administrative Officer Dave Curtis said. “We’ll have amputees come here, we have test patients running all over the place. It’s very easy to know you make a difference in what you do.”
A year out from that game-changing court decision, sales have leveled off to a predictable pace unheard of in the dead of last winter, though they’ve retreated from the highs seen in the wake of the Alpha SmartTemp Liner’s rollout.
“We introduced new products, made a lot of changes and a lot of additions,” Product Release Director Pat Thomas said. “We’re kind of on clean-up duty now to get our product line back in shape.”
Meanwhile, at least one major unknown in the wake of the case has come to a conclusion. The WillowWood competitor’s liner gel formula patent expired in August, clearing the way for the company to once again legally make the liner once so popular with customers. The company went back into production on the liners in late September, while sales began in early October.
Now, the company is left with a full production schedule and many lessons learned.
One of the most transformative effects of the court decision was the collaborative environment that developed among employees, many of whom found themselves at least temporarily in new departments and roles. That exposed an opportunity and a flaw, Thomas said.
“We need to emphasize cross-training more,” he said. “This really exposed a lot of holes in our processes, especially ones that overlapped.”
The events of the last year also have Arbogast completely reevaluating the company’s approach to developing and protecting products.
“We can’t rely on intellectual property like we did,” he said. “There are a lot of loopholes in the U.S. legal system, and it’s not one that’s going to protect us. We just need to stay ahead of the competition by a generation or two.”
To do so, leaders agree a new approach to R&D is in store. In the years WillowWood turned out the liners at a breakneck pace, the company added more and more testing to the R&D process. This was by no means required by federal safety standards – as an externally worn medical device, prosthetics are comparably low-regulated – but rather an effort to keep aligning with the product quality the market appeared to demand.
“We discovered we can move a lot quicker than we ever thought we could,” Operations Manager Alter said.
Not that the pace seen amid the frenzied days of silicone Express development is where WillowWood wants to be.
“We don’t want to stay where we are or go back to where we were – but we do need to pick a point in between,” Arbogast said.
The future for WillowWood, leaders say, will bring changes inside and outside the company’s four walls. Not the least of them is a much-needed culture change Arbogast said he was rolling up his sleeves to lead just as the company’s legal troubles peaked.
“I took over in 2010 and spent two years positioning the culture and the employee base to be more strategic in our planning, to think further out, and November (2013) hit just as that machine was starting to run,” Arbogast said. “We had a hundred-year-old company with an ‘If it’s not broke, don’t fix it’ mentality, and now that’s completely gone.”
One crucial area of future change for WillowWood is its product spread, which leaders admit relied entirely too heavily on liners. Arbogast says he hopes to diversify product mix through a number of new opportunities, which range from a high-potential software package for patient care to its LimbLogic vacuum system that helps amputees ensure their prostheses don’t come off.
“We want to pick those niche problems and attack them,” Arbogast said.
A natural progression from a broader product mix is a broader sales footprint, which the company is pursuing as well. Plans are in the works for an expansion to the South American market this year.
“The more sales we have internationally, the better off we are,” CMO Kreitzer said.
Wherever these paths take the company, leaders say they hope WillowWood can maintain the urgency and energy that carried them through those unprecedented rough waters – with growth and innovation, not survival, as the driver.
“It made for some exciting days, to be sure,” Thomas said. “I just don’t know I’d want to do that again.”