This is the story of E. Douglas Hougen, founder and owner of Blair Equipment and Hougen Manufacturing, both of Flint, MI, as summarized from a talk he gave at the Inventors' Council of Michigan (INCOM) in 1988.
Doug Hougen is a Flint, MI industrialist. He founded two multi-million dollar Flint companies — Blair Equipment, which builds tools for auto body shops, and Hougen Manufacturing which builds metal-cutting tools for industry. But Doug Hougen is more the inventor, tinkerer, creative genius.
I've exercised journalist freedom in what follows. When a modest man talks about himself, he tends to understate his accomplishments. I'm under no such constraints. So I've followed the thread of his story as he told it, but where I don't think he did himself justice, I did. Just keep in mind that what follows are my words, not his.
Hougen is 72 years old. He has 240 foreign and domestic patents, and 47 pending. In his words, "You're never too young and never too old to invent". He cites his first invention as an electric doorbell back around 1930 when he was 14. This was in northern Saskatchewan — no electricity. He used a car battery. It worked fine — except that the battery had to be shared with the family car.
Hougen became an auto body repair man. He was good at it. He improvised many of his own tools. By the early '40s, he had become reasonably recognized in the field. He was one of the people you took the difficult problems to. It was for this reason — despite his limited education — that General Motors Institute (GMI) in Flint hired him to teach body work and construction. He taught at GMI for 9 years. His neighbor at the time was the person who invented the magnetic door catch for cabinets. One day his neighbor suggested, "You keep coming up with these great tools. Why don't you try to sell them?". Lightbulb! Why not.
One of the tools he was working on was the body clamp. The practice at the time to get dents out of sheet metal was to pound them out. Hougen reasoned it would be easier to "stretch" them out. If you wanted to take a bend out of a piece of paper, you just pulled it taut (and the sheet metal in car bodies was becoming paper thin). He came up with a pair of clamps that clamped to opposite sides of a (dented) car door. By using a body jack to force them apart, you could stretch the metal and "pop" out the dent. The clamps were easy to make. He proceeded to make a few in his basement, and took them around to the Flint body shops. Bomb! They just laughed at him. The way to take dents out of a door is to pound them out. What'd they need a contraption like that for?!
Well, if he can't tell them, maybe he can show them. On the way home, he stopped at a junkyard and picked up a junk door. The next day, he took his clamps around the Detroit body shops. But this time he brought along the door. Pound in a dent — use the clamps to straighten it out — every shop he stopped at bought a pair. Hougen became a believer in sales by demo.
Late in the day, a guy came up to him and said, "I want your line.". What means "I want your line"? This was Hougen's introduction to distribution. The guy was a sales rep. He had seen the clamps at a shop he had called on earlier, and had been following him around all day, shop to shop, trying to catch up with him. Anything that was selling like those clamps were selling, he wanted!
This was his first distributor. The rep kept him hopping, building clamps in his basement. He was hiring students to help him. Pretty soon he was making more money from his clamps than from GMI. So he quit GMI.
Now he wanted national distribution. He reasoned that the people who had the most to gain from his clamps were the insurance companies. So he set up an appointment with one of the major companies, headquartered in New York. Since he planned to drive, he decided to try to set up some distributors along the way. His Detroit rep set him up with a Toledo rep. The Toledo rep set him up with a Cleveland rep, the Cleveland rep with a Pittsburgh rep, etc., and that's the way he worked his way to New York.
What he was looking for from the insurance company was a little national recognition — maybe sell a few to their adjusters. Well, the insurance company was interested — interested enough to buy a pair for every one of their 1500 adjusters! He offered to sell them wholesale — they insisted on paying retail.
Why would a company buy a product at a higher price than was offered? Good management! They weren't buying clamps. They were buying talent — Hougen's talent. They recognized his creativity. They understood that this was only one of many products to come that would save them money. It was important to them that he succeed. That was smart management. They were looking at the future — not just this quarter's bottom line.
Blair Equipment was off and running. Was Hougen lucky? Of course he was lucky. But he worked hard and he worked smart. He could have given up that first day when the Flint shops laughed at him. But he didn't. It's hard to say how much luck happens, and how much it's made.
Hougen was doing a million in sales before he moved out of his basement. He didn't start commercial inventing until he was 35 — he was a millionaire at 40. Many more products did follow — clamps for every part of the car, tools to cut spot-welds to separate sheet-metal from frames, the paint shaker, etc. His neighbor introduced him to a good patent attorney. And he learned the patent process and learned it thoroughly.
For his spot-weld cutting tools, he got a method patent as well as patents on the tools. Nobody was able to get around his method patent. By the time his patent expired, he was so entrenched (manufacturing equipment and marketing channels) that Blair Equipment still has 90% of that market.
His neighbor, who had invented the magnetic latch, taught him another lesson. His neighbor sold his rights away — early and cheaply — and died at 42. Hougen vowed that wouldn't happen to him. His royalty rate is 7-1/2% (of sales), and he chooses whether to license and to whom.
Many inventions he doesn't patent. He looks for strong patents, especially ones where he can get method claims — ones that he believes he can easily license or build a business around. The others — the majority — he just doesn't pursue. Heed his lesson. A key to successful inventing is to get rid of weak inventions as quickly as possible.
In the early '70s, Hougen became interested in hole-cutting, and invented the Rotabroach (described below). He took it to the major drill bit manufacturers. They laughed at him. "The twist drill's been around for years — it does the job — who needs your gadget?"! So he formed Hougen Manufacturing to pursue the Rotabroach, and turned Blair Equipment over to his sons. He took the Rotabroach to industry — they were interested, but not enough to buy. He took it to the fabricators — construction steelworkers — and they were very interested.
They were using a magnetic drill that weighed 100 lbs. It took 2 men to carry up the structure. Worse, it was called the "widow maker" because it had a nasty habit, when the drill bit bound, of the drill breaking free and throwing workers off the structure. They really liked his bit (it was less likely to bind), but couldn't he solve the rest of the problem? Whatever it takes. He went back and designed a new magnetic drill — 28 lbs., could be carried up by a single man, 2 fail-safes. If the Rotabroach ever bound, the motor would shut off. And to back that up, you could "peg" the drill to the steel. It couldn't break free. Needless to say, he sold a lot of Rotabroaches — and magnetic drills. Another lesson — there's always a way. Be optimistic. Stubborn. Don't give up. Use the same creativity you used in coming up with the product in marketing it.
At this point I'll describe his Rotabroach and his newest tool, an end mill. I had the privilege of visiting his plant and seeing them demo'd. He described them in his talk, but he didn't do them justice. These are exciting tools.
The Hougen Rotabroach is simply a drill bit — but a drill bit with a difference. The ordinary drill bit reduces all the material in the hole to chips. Hougen reasoned, "Why waste all that energy?". Why not just cut a ring, and leave the slug in the middle of the hole intact?
And that's what he did. The Rotabroach is simply a drill bit with a hole down the middle. Picture a conventional hole saw used to cut large-diameter holes in wood. Just a cylinder of sheet-metal with saw teeth at the bottom. It doesn't work badly with soft materials, if you take it slow and easy and don't try to push it through too hard. But with denser materials, like hardwoods, it's tough to get a clean hole. And with metals, it's next to impossible. The sheet-metal isn't thick enough to hold its shape. The saw teeth just chew away at the bottom of the cut and chatter, heat builds up from the friction with nowhere to go and, with a really dense material, it's problematical whether the material or the saw teeth are wearing away faster. So what Hougen did was thicken the cylinder and put cutting edges at the bottom in place of the saw teeth. Now the cylinder doesn't distort — you get nice clean holes. You're cutting chips at the bottom of the tool, instead of just trying to abrade the material away. More efficient cutting — much less heat.
Now compare that with the conventional drill bit. The drill bit has two cutting edges — the Rotabroach has as many as will fit around the periphery — the larger the diameter, the more cutters. The drill bit doesn't cut anything in the center. The two cutting edges extend to the tip in the center — but a rotating dot doesn't cut anything. All you're doing is forcing the tip into the material through sheer thrust on the tool, deforming the material outward to a point where it can be cut. The drill bit has to convert all the material in the hole to chips. The Rotabroach just has to convert the ring (it's cutting) to chips.
The drill bit builds up tremendous heat, especially at the tip where you're forcing it through. You're forcing solid metal into solid metal. If you want to cool the tool, the best you can do is try to force coolant down the rotating flutes. With the Rotabroach you're feeding a hollow cylinder into the material. To cool it, you simply force coolant into the cylinder. It not only operates cooler naturally, it's easier to cool.
Compared to the conventional drill bit, the Rotabroach does the same job with dramatically less horsepower, less thrust, less tool wear. It's advantage increases with hole diameter — for a 2" hole, it requires 1/2 the horsepower — for a 4" hole, 1/4 the horsepower. Conversely for a given machine, this translates into dramatically higher feed rates, greater productivity, greater production. I watched a cooled Rotabroach cut through aircraft steel like it was butter.
It does have some disadvantages. It's limited to through-hole applications — there's no way to detach the slug in a blind hole. And it's limited to hole sizes above like a 1/2" — that's where a cylinder with the needed wall thickness degenerates to a solid.
But it has other advantages. Try drilling out the web between two closely-spaced holes (eg., to rough out a slot) with a conventional drill bit. Next to impossible, because the center tip wanders. The Rotabroach does it easily because it doesn't depend on a center tip to guide it. For the same reason, the Rotabroach easily cuts holes in inclined surfaces that the conventional drill bit simply can't do.
Given that the Rotabroach is clearly superior to the conventional drill bit (at least for holes 1/2" and up), it should have replaced all those drill bits, right? Wrong! It's found many applications off the factory floor, e.g., in construction steelwork. But it's made tortuously slow progress working itself onto the factory floor. Why? Because it produces slugs.
Drilling stations on the factory floor have systems to dispose of chips and shavings — not slugs. Despite the fact that it requires much less energy to produce slugs than chips and that the slugs have a greater salvage value, the inertia involved in changing the disposal system mitigates against the change. The very attribute that is the major advantage of the tool is what impeded its acceptance on the factory floor!
This illustrates the risks inherent in new product introduction, despite the best of market research. Our market research readers will swear they would have anticipated it. But experience tells me otherwise. Problems like this are a lot easier seen in hindsight.
Hougen Manufacturing's not hurting from it. They have a multi-million dollar market off the factory floor, they're on the factory floor in applications where conventional drill bits simply don't work (drilling inclined holes, cutting webs, etc.), and they're slowly gaining acceptance in the other applications.
Hougen has the Rotabroach tightly patented, domestically and internationally (with many continuing refinements). He's used his patent position to control his market. He wanted to be the dominant supplier, and he is. He's licensed only a couple of overseas manufacturers, to service particular markets that he found difficult to handle from here.
We said earlier that there's "no way" to detach the slug in a blind hole. Well that's the kind of statement that gets Hougen's juices flowing. He thought, "What if I add cutting edges around the periphery of the Rotabroach, as well as at the bottom?". Well that doesn't do much for getting rid of the slug. The inside cutters make it a little smaller... But if we move the material in a direction perpendicular to the tool, we'll cut a slot — and, hey, that's an end mill.
And an end mill with a difference. It makes the initial plunge cut dramatically faster than conventional end mills. Being hollow, it operates cooler naturally, and is easier to cool. So it can cut dramatically faster — again greater productivity, greater production.
As with the Rotabroach, he's developed a strong patent position — method claims as well as structure claims. Unlike the Rotabroach, he's thinking about using his patent position differently. All the end mill manufacturers are interested — the tool is that much better. He's thinking he may see a higher return by licensing them as well as making them himself.
But he's in no hurry. Right now he's experimenting and running tests to document just how much better. In his mind, if the tool performs 4 times better, it ought to be worth 4 times as much. And he wants that data before going into negotiations. In the meantime, he's just giving them away — it doesn't hurt to whet a few appetites.
Doug Hougen is a pro. Over the years he's learned to take advantage of the opportunities a situation presents. He uses patents for market control, and he plays them like a maestro. We can all take lessons from his example.