By Eric Peterson | Jun 10, 2014
Fort Collins, Colorado
Protective cases for smartphones
Fort Collins, Colorado
Employees: About 800 (700 in Colorado)
Now the company's chairman, Curt Richardson founded OtterBox in 1998 to make cases for river rats and fishermen to keep water away from their personal items. Next, the company latched onto the PDA market when a Blackberry was the gadget du jour.
But OtterBox truly boomed as smartphones took over the mobile market by creating a whole new category: protective cases for iPhones and other smartphones.
To wit, there are now 1.75 billion smartphones on Earth. That number is scheduled to triple by 2020. And each of them are one false move from having a shattered display.
CEO Brian Thomas joined OtterBox in 2003 (he's been in his current position at the helm since 2011) when sales were $2 million. In 2013, they approached $1 billion, after growing at an astounding 1,081 percent clip between 2009 and 2012 and earning kudos from Forbes and Inc., among others.
"Most of that growth has happened in the last couple of years," says Thomas. The keys? "Building relationships, being first to market and creating the category, and the expansion of that category."
OtterBox now makes about 600 different SKUs for phones, tablets, and other gadgets, an impressive number that keeps rising as new phones hit the market and OtterBox introduces new case colors. "We have changed how retailers think about accessories," notes Thomas. "First it was a secondary thought. Now it's a very primary thought."
The OtterBox model has always been to work with contract manufacturers. "We don't do any of our own manufacturing," says Thomas. "We chose to do that because of the scalability for the business."
About a third of OtterBox's products are made in Asia, a third in the U.S., and a third in Mexico. A small percentage is made in Germany, and same goes for Colorado, where an undisclosed "R&D manufacturer” specializes in first runs of new products.
As the volume has increased, Thomas says strong best practices are critical.
"We're always looking at ways of cutting minutes out of the process and making sure handoffs are smooth," he says. "We standardize everything we do and we have all of our suppliers agree to standardized best practices. If one of our suppliers has a better way of doing something, we make it a best practice across all of our suppliers."
This collaborative model trumps a competition among suppliers, he adds, and has helped add efficiencies to both tooling and manufacturing. For example, Asian partners making tools for OtterBox would ship them to Mexican factories encased in a thick layer of grease -- unnecessary, Thomas says, because they were being shipped by air, not sea. A light layer of oil sufficiently protected the tool in the absence of salty sea air.
"It would take up to two weeks to remove all of that grease," he explains. The change "cut it down from two weeks to two days to get it up and running."
While the heady year-over-year growth might be hard to replicate as the company eclipses $1 billion in annual sales, "I think the growth is going to continue," says Thomas, forecasting a slower rate as the company scales up. "Smartphones will continue to grow the business."
But the company will soon move into other categories to catalyze growth. Look for OtterBox battery cases, headphones, and other accessories by the end of 2014.
"Our customers are asking us to use the brand and leverage what we have," Thomas explains. "They're basically asking us to make accessories for the accessories -- armbands and stuff like that."
"Some of those categories, we would be considered late to market," he adds. "A little bit is changing the consumer awareness of what OtterBox does."
Challenges: "Scale is always a challenge," says Thomas. "You need huge amounts of labor for launches and then you don't need them in between." The company has coped with this issue with "sheer force," he adds, and quickly notes that increasing income in China has made for unexpected investments in automation that help smooth out labor demand.
Opportunities: B2B and international sales. The former market is hurdling security concerns associated with a mobile workforce, says Thomas. "Everyone is figuring that out now and how to use mobile in the business space."
As for the latter, North America represents more than 90 percent of OtterBox's market, and Thomas highlights opportunities in Australia, Japan, Europe, and "the big one," China. "If we could get traction in China, we could double our business," says Thomas, citing China Mobile's 750 million-plus subscribers. "It's a tough nut to crack but it's huge."
Another opportunity for OtterBox: "Some of the carriers are looking at zero-percent financing of accessories. They're seeing a huge uptick."
Needs: "One big thing that would help is the category which our products is imported is luggage, and luggage has a 20 percent duty," says Thomas. "This is not luggage. The duty should be 5 percent. That is something I am working on with our competitors."