When CEO Lauren John Reid joined PuroSystems Inc. in 2010, the company’s PuroClean brand was already the fastest-growing franchiser in the $210 billion property damage restoration industry. But despite a decades-long track record of restoration industry experience, Reid had no concept of what it meant to run a decentralized franchising operation.

“You are dealing with a group of people that in some cases maybe were at an executive level one day, and then all of a sudden they are out of a job, and the next day they are running their own business,” Reid says.

“This is my first kind of ‘ivory tower’ experience. When you are operating a decentralized business, the branch manager or district manager or franchisee that is out there in the field — they are the brand.”

Because PuroClean had recently gone through a growth spurt of expanding its franchise organization, many new entrepreneurial business owners were now part of its franchisee network. Reid was now leading 320 other CEOs, all of whom were responsible for the brand’s success or failure, and many of which lacked experience in key management areas, whether it was with managing cash flow, marketing the business or generating inquiries.

To immerse himself in the franchisee culture, Reid launched an ambitious “100-100 Tour,” to meet with more than a third of the franchise network in his first 100 days in office. The goal was to give people a chance to put a face with a name but also for him to hear about what kind of support they needed from corporate to successfully deliver services.

Get buy-in

Before Reid could continue to scale the $190 million business for growth, the first step was getting everyone in the company’s franchise network on the same page, delivering restoration services in a way that outshined competitors in the eyes of its customers.

“We backed away from focusing on growth of new franchisees because we really needed to take an introspective look at our network and make sure that our current community had all the tools necessary to start to take on additional growth,” Reid says.

Convincing franchisees to fully commit to this focus was a little different than getting buy-in from any employees. To get a diverse group of entrepreneurs thinking like businesspeople and salespeople, Reid needed to sell them on his vision of the company.

“In a lot of my former positions, I was the boss, and as a boss, you can tell people what to do,” Reid says. “With franchisees, I have to appeal to more of the making them understand, and then encouraging them that it’s in their best interest, because they are independently owned and operated businesses.”

During the 100-100 Tour and through 18 regional follow-up meetings, Reid spent time meeting with franchisees to discuss the 10-year vision plan, using his industry expertise to gain support for the company’s long-term goals. When talking about the vision, he sticks to what he calls “the vital few” in terms of the areas he wants the company to focus on.

“When you are out in the field looking back at corporate, you’re thinking, ‘Don’t these knuckleheads see what needs to be done?’” he says. “They want to see results. When you try to do 25 things, you don’t get anything done. You focus on a few things and say ‘These things we are going to get past.’”

Once people see the long-term goals, you then need to show them how changes involved in the big picture connect to and benefit them.

“It’s more about influencing and making them understand what’s in it for them,” Reid says. “So ‘If I go on to this program it means that I’m going to get more business, and that means I can grow my top line.’

“When you get people started thinking about that and they can start to think in a bigger scope, a bigger framework, it makes it a lot easier to get there.”

Once franchisees saw the benefit of bringing consistency into the network with new policies and standards in service delivery, the next step was giving them the tools and guides to make the necessary changes successfully.

“They said we want to be in these national programs,” Reid says. “My response was that if we want to be in those programs, we’re going to have to put a lot more focus on being consistent if we’re going to make that commitment.”

Give people the tools

If you want to have consistency in service across hundreds of offices, you need to give people a common set of service standards and guidelines for everyone to follow. So upon joining the company, Reid began work on installing a new operating system and launching a national Certified Priority Response program for franchisees.

With CPR, Reid says one of the benefits to ensuring consistent protocol is making the program optional. While whoever opts in can gain benefits for their business such as getting referrals from the company’s call center — enticing franchisees to participate — they also then must agree to adhere to a common set of service expectations.

“We have 300-plus offices across the U.S. and Canada,” Reid says. “I have to get all 300 offices delivering a consistent invoice with consistent data, consistent response times.

“So we go out to them and say in order to be a part of this program this is the way that you are going to have to do the work, and we actually make them sign an agreement that, ‘OK. Yes, I signed up to do this.’”

The second part of consistency in service is the human element of selling a brand.

“People do business with people they like,” Reid says. “Making everyone understand that is a very important part of the process.”

While some franchisees had no experience managing a P&L or operating in the restoration industry, they really needed help with selling themselves as the brand. For example, one of the challenges Reid saw numerous franchisees having was getting past gatekeepers, such as the receptionist in the front office or assistant, to the decision-makers with whom they could build relationships.

“They are the ones that are going to have control over whether or not you are going to get past them to in this case, the agent or the broker,” he says. “So it’s treating them nicely and with respect. Just because they aren’t in many cases the decision-maker — they are the decision-maker in whether or not you are going to get past them.”

To address this issue, the company began providing interim sales training for all franchisees. When you are building consistency in a brand, how your sales people handle relationships is extremely important in what kind of reputation you gain with customers. Having good relationship-building skills is critical when you are trying to get in the door or, in a franchisee’s case, on a list.

“You have the loss of your house and you call your insurance agent,” Reid says. “Your agent wants to help you, so he or she will call in a restoration company, and you want to be at the top of that person’s list.

“The innovation and the technology — those are all nice things to build into the value proposition, but as a general rule, if people like you, they have a hard time firing you, which means you are going to get some chances if you stumble. And you are going to stumble because we are in the service business.”

Hold people accountable

Today, approximately 60 percent of PuroClean’s franchisee network has enrolled in the CPR program. But to keep people operating within a new set of guidelines, Reid has had to institute methods to hold them accountable to the higher standards.

“We are at such a size right now that there’s a 90-plus percent chance that if somebody calls to do business with us, they are going to be doing business with the franchisees,” Reid says.

“We can’t afford to lose a vendor program or a national account because of the actions of a few franchisees that aren’t following the process.”

For one, he put in place a desk audit system to poll a sampling of work from franchisees and ensure people are acting within the guidelines. In addition, a network leadership council, composed of a tribunal of franchisees, now serves as a disciplinary group for franchisees who deviate from the standards of the brand. If there is a deviation, management goes and works with that particular franchisee to help him or her improve.

For a decentralized business, giving people support in the field is vital in keeping franchisees accountable as well as motivated. With offices throughout the U.S. and Canada, the company’s ability to maintain alignment relies heavily on having strong, effective communication from management.

“The most difficult thing for a decentralized business is communication,” Reid says.

In addition to using training programs and regional meetings to maintain operational consistency, Reid uses field support specialists who can go out in the field and work with franchisees, talk to them about the vision and mission and answer their questions. These are people who have significant restoration industry experience and who Reid brought into the organization to lend another level of support.

“We’ve got to support our franchise community with the best trained folks,” he says.

“They want to know that you know that they are out there every day trying to make it happen on behalf of themselves. They are looking for whatever support they can, and they want to know that you are there to help them.”

That is also why Reid travels at least once a month to meet with franchisees throughout the network. Rather than being a removed CEO, he enjoys this time out in the field, connecting with franchisees and renewing focus on the brand’s mission and vision. He even encourages franchisees to come up with their own mission statements, which helps people stay focused on their part of the brand’s success.

“When you are in a decentralized business, the brand is you,” Reid says. “You are the only one who can look yourself in the mirror at the end of the day and say, ‘Did I do something today that advanced the mission?’”

With the goal of growing to a $1 billion company with 1,500 locations by 2020, Reid knows that having this group of people who can deliver the brand’s products and services consistently will be vital to future expansion.

“If we are going to be a player in the industry, we have to be able to deliver this consistency of our services if we are going to be successful,” Reid says.

“Everybody’s got the same equipment. Everybody has the same dehumidifiers, the same air movers, the technical equipment we use at the actual job site. There might be slight variations or differences, but it’s the way that you handle their client that differentiates you.”

How to reach: PuroSystems Inc., www.puroclean.com or (800) 775-7876

The Reid File

Lauren John Reid

CEO

PuroSystems Inc.

Education: MBA, Northwestern University, Kellogg School of Business

Born: Toledo, Ohio

What was your first job?

Short-order cook at a pizza place

What is one part of your daily routine that you wouldn’t change?

I speak to everyone daily in the office and let them know I recognize their contributions.

What would your friends be surprised to find out about you?

I didn’t go to undergraduate school but earned my MBA.

If you could have dinner with one person you’ve never met, who would it be?

George W. Bush — The challenges he dealt with and decisions that had to be made every day and his reliance on his team were some of the most challenging in this time.

Reid on learning the franchising business: In my former life, I reported to the CEO. Now I have 320 CEOs. They all want a piece of you, and you have to recognize what is the core issue, what is the main issue. Nine times out of 10, a lot of the issues come back to communication and maybe lack of follow through or follow up. It’s really no different than any other business. The challenge is just recognizing that and making people understand that ‘I understand this is a big concern of yours, however, in the grander scheme of things, we have this issue that is affecting a third of the network, and we’re really focusing on that first, and your issue we’re going to put on the list. We’re going to get at it, but it’s not going to be today.’ Or trying to figure out some sort of a workaround. … I think the good news about entrepreneurs is that if they believe that you are trying, first of all that you are listening, you’re documenting and you are doing something about it, that’s a big part of it.

Published in Florida

When a company plans to expand operations into a new state, there are many important issues to consider.  However, between keeping the business running profitably, finding a new location and hiring new employees, companies often overlook state licensing requirements and tax issues.

“If you have to go back to prior years and pay a tax liability that you were not aware of, there’s typically interest and penalties associated with that liability that a company would have to pay as well,” says Sara Goldhardt, CPA, tax senior manager at GBQ Partners LLC. “It’s good to know everything up front and start fresh when a company begins doing business in a state, so you don’t have any surprises a couple years down the road.”

Smart Business spoke with Goldhardt about what to think about when doing business in multiple jurisdictions and why up-front planning is important.

How do you begin to plan for doing business in multiple jurisdictions and what factors need to be considered?

A company needs to fully understand exactly what business activity is going to be taking place in a state.  Some questions to consider are:  Will the company have a physical location in the state? Will there be employees living in the state? Will the company sell tangible personal property in the state?  Will company employees or independent agents perform services in the state?  Knowing the answers to these questions will make the planning process much easier.

Once a company decides it’s going to do business in a state, a company representative typically speaks with an attorney first.  An attorney can help the company register with the state’s Secretary of State’s Office and obtain any applicable licenses or permits. A company should also speak with its tax advisor to understand all of the state and local tax ramifications.

Other licensing requirements will depend on the company’s business activity. If it’s an insurance agency, for example, the company may be required to register with the state’s Board of Insurance. If the company is a contractor, it may need to register with the state’s Contractors Board.

Why is this planning important?

If a company begins doing business in a state and doesn’t consider the proper registration requirements or state tax impact, the company  will not be compliant. As a result, the company could end up incurring an unexpected large tax liability or hefty fines and penalties years later.

How do you determine what taxes you will need to register for and remit to a state?

To determine which taxes to register for and remit to a state, a company needs to analyze the activities being performed in that state. For example, if the company will have employees in the state, it could be subject to withholding taxes on those employees.  If the company will have property in a state, the company may be subject to real estate or personal property taxes. Some states, such as Ohio, have a gross receipts tax, which means that a tax is levied on the total taxable gross receipts of the company. Moreover, depending on the type and amount of activity being done in a state, the company may also be subject to sales/use taxes and income/franchise taxes.  In some states, such as South Carolina, simply registering with the Secretary of State can necessitate an income/franchise tax filing.

How do you determine if your taxes are being filed correctly, and why is this important?

Businesses can change each year —they may begin selling in new states or may move out of states in which they were not profitable. When completing the state tax returns, look at where the company is filing and where the company should be filing to make sure it is filing in all proper jurisdictions.  A company should discuss any changes with its tax advisor to help avoid tax compliance issues.  Incorrect filings can result in tax notices, assessments, additional taxes, interest and penalties.

Also, it is important to stay on top of the latest tax changes. States change their rules seemingly every year, so it’s important to keep up with new state tax legislation to, again, avoid additional tax notices and assessments.

What should you do if you realize that you should have been filing in a state but have not?

If a company realizes that it has not been filing and remitting tax to a state and should have been, we typically recommend the following course of action.  First, calculate what the tax liability is that the company owes for the current and prior years, depending on how long the company has been doing business in the state.  If the tax liability is very small, it may not make sense  to go back and file returns for all open years. The company may consider  filing on a prospective basis only.

However, if the expected tax liability is large, a company generally has two options. One is a state amnesty program. Many states have been using amnesty programs as a way to help taxpayers resolve their tax issues while bringing in more revenues to the states. With participation in a tax amnesty program, a company has the opportunity to resolve an outstanding tax liability without paying any interest and/or penalties. Usually there’s some type of abatement offered for involvement in the program. The other option is to do a voluntary disclosure. States will allow a company to come forward voluntarily and pay to become compliant in the state. Similar to the amnesty program, a state will generally offer some type of abatement on interest and/or penalties.

Sara Goldhardt, CPA, is a tax senior manager with GBQ Partners LLC. Reach her at (614) 947-5243 or sgoldhardt@gbq.com

Published in Columbus

As Royce Pulliam walked out of the gym he exercised at more than a decade ago, he was disgusted at its poor condition and told his wife he could do it better. He wasn’t just talking – he bought and opened his first gym in Lexington, Ky., just six months later.

“When I said that to myself and to my wife 17 years ago, I didn’t know what I meant. But I knew I could have a facility that was clean, had good equipment and offered a good service,” Pulliam says.

While those were good starting points, he is now the owner and CEO of Urban Active, a brand consisting of 38 clubs in seven states. Years of subsequent growth have given him greater insight into the needs of a larger company encompassing multiple locations.

The most important component for growth is choosing a successful location. Establish criteria you deem essential and evaluate potential sites against them.

“We look at competition, we look at the education of the demographic in a three-mile ring, we look at population density in that market and we look at income,” Pulliam says.

“Once those four things match up, if the lay of the land changes at all or the design changes, we’re nimble enough that we can work with the model and tweak it. But if it doesn’t fit with the main criteria, we won’t pass it.”

While expanding, maintain strong investment in existing company locations to ensure a solid foundation, and choose new locations with traveling distance in mind.

“We were definitely going to continue to develop out our existing territories, but also to geographically try to expand into neighboring states that were an hour, hour and a half flight time away and easy for our people to get to,” Pulliam says of his initial growth plan.

Another component of growth is the challenge to maintain effective communication with clients.

“We expected all the club-level people to get the information up the ladder, and as we grew, we found that that became more challenging,” he says.

“It was just taking too long and there were too many middle people, and that’s what happens with companies until you go straight out and put yourself out there.”

To improve communication, empower customers to contact senior executives directly through email. Back up the gesture by making sure each concern is addressed.

“(Another CEO told me) ‘It’s a gutsy thing to do but it’s the right thing to do, because everybody needs to have access and you need to know.’”

Although management must strive to be directly informed, growth challenges the ability of executives to control all areas of business. This makes investing in employees instrumental to success, as they will be working directly with customers.

“You’ve got to trust your people. You can train them, you can spend endless hours, but they’ve got to execute,” Pulliam says.

Hire friendly, energetic employees who can set customers at ease. Instruct employees to smile and wear name badges to make them seem more accessible.

 “I want our members to be able to walk up to someone and know their name – not have to ask what their names are. We have a lot of members in our facilities and I want them to feel comfortable.”

How to reach: Urban Active, (877) 824-3571 or www.urbanactive.com

Published in Akron/Canton
Tuesday, 06 September 2011 14:58

Thinking about expanding your business?

Canada and the United States enjoy an economic partnership unique in the world, sharing one of the world’s largest and most comprehensive trading relationships. Growth in bilateral trade between Canada and the U.S. increased by almost 10 percent between 2009-2010. In 2010, total trade between the two countries exceeded C$502-billion, with C$1.38-billion worth of goods crossing the border every single day. For this reason, businesses looking for their first international foothold invariably look to Canada first.

While Canada is geographically proximate and closely tied to the U.S. by a common language and culture, there are distinctive legal, business and regulatory differences of which any business looking north of the border should be aware.

Taxation

Tax considerations will drive the structure of virtually any expansion into Canada. If it is desired to consolidate the Canadian operating results with those of a U.S. parent for U.S. tax purposes, consideration may be given to using a fiscally transparent entity, such as an Alberta or Nova Scotia unlimited liability company, having regard for the anti-hybrid rules in Canada’s tax treaty with the U.S. Such entities are taxed in Canada in the same manner as any other Canadian corporation. It is also possible to carry on business in Canada through a branch of the U.S. parent. There may be Canadian withholding tax on cross-border payments of dividends, interest or royalties. Canada’s tax treaty with the U.S. contains certain exemptions from and reductions in Canadian withholding and other taxes that may be applicable in certain circumstances. Canadian transfer pricing rules require cross-border payments for goods and services to be made on arm’s-length terms.

Foreign investment review

Every acquisition of control of a Canadian business or the establishment of control of a new Canadian business by a non-Canadian is notifiable or reviewable under the Investment Canada Act. Generally speaking, an investment that is reviewable cannot be completed until the responsible federal minister has declared the investment likely to be of “net benefit to Canada.” A monetary threshold test applies to the determination of whether an investment is reviewable. A higher threshold applies to investments by non-Canadians that qualify as “World Trade Organization (WTO) investors” or to acquisitions from WTO investors that are not Canadians. This higher threshold does not apply to investments in the following sensitive areas: uranium production, transportation services, financial services and culture businesses.

Beyond the Investment Canada Act, there are Canadian ownership and licensing restrictions on businesses providing, among others, telecommunications, transportation and financial services. Canada has also identified certain culturally sensitive areas, such as publishing and broadcasting, that may be subject to ownership restrictions.

Corporate and securities laws

Canadian corporate legislation exists at both the federal and provincial levels while securities legislation only exists provincially. Mergers and acquisitions transactions are broadly similar to those in the U.S. Private transactions are effected as share or asset purchases while public transactions proceed as take-over bids (tender offers), amalgamations (mergers) or plans of arrangement (a court-supervised process more flexible than a merger).

International Trade

Canada is a member of the World Trade Organization and a party to the various WTO trade agreements. Canada and the U.S. are both parties to the North American Free Trade Agreement (NAFTA). Therefore, many of Canada’s customs and trade laws should be similar to those applicable in the U.S.

All goods imported into Canada are subject to Canada’s customs and sales tax laws. Issues such as tariff classification, valuation, origin, marking and labeling should be considered before commencing to ship goods to Canada. It is important to properly structure the Canadian business in order to minimize or eliminate customs duties and taxes whenever possible. Determining whether NAFTA rules of origin are satisfied (and supplying documentation if they are) will avoid potential civil liability for non-compliance with customs laws and manage customs costs.

As Canada’s Export and Import Permits Act imposes significant restrictions on the movement of goods into, around and out of Canada, it may impact the valuation of operations and strategic planning. However, virtually all domestic regulation in Canada is subject to NAFTA, and certain American parties may request review of an alleged violation by a NAFTA panel.

Antitrust

Mergers that exceed certain prescribed thresholds are subject to mandatory pre-merger notification under the Competition Act. These mergers cannot be completed until the parties have submitted their respective notifications and the mandatory waiting period has expired, been waived or terminated early. All mergers, regardless of whether they are subject to pre-merger notification, are subject to the substantive provisions of the Competition Act.

Intellectual Property

Canada’s patent eligibility is based on “first to file,” unlike its American “first to invent” counterpart. Novelty bars, the obviousness test and prosecution history all differ vastly from the U.S.

The importance of licenses is heightened in Canadian trademark law, which requires licenses even for wholly owned subsidiaries. Canada has not adopted the Nice International Classification System, which provides a distinct cost advantage. Registrants can also renew trademark registrations without proof of use.

Privacy

Canadian privacy legislation requires informed consent to the collection, use and disclosure of personal information, instead of merely notice of those purposes as permitted in the U.S. Public as well as non-public personal information is covered by legislation, which applies to affiliated organizations and third parties. There are both provincial and federal privacy standards that apply to the collection, use and disclosure of personal information before, during and after a transaction.

Information Technology

Federal misleading advertising, provincial consumer and French language protection laws may apply when parties use the Internet for sales or advertisement purposes. Provincial sales taxes may apply to software licenses depending on the server and user locations. This may result in double tax if not structured strategically. Custom software use by an affiliate may result in loss of provincial sales tax exemptions.

Blake, Cassels & Graydon LLP (Blakes) is one of Canada’s leading business law firms with more than 550 lawyers in offices in Montréal, Ottawa, Toronto, Calgary, Vancouver, New York, Chicago, London, Bahrain, Beijing and associated offices in Al-Khobar and Shanghai.

John Kolada is the Chicago Office Managing Partner of Blake, Cassels & Graydon LLP. Reach him at (312) 739-3612 or john.kolada@blakes.com.

Stefan Timms is an Associate of Blake, Cassels & Graydon LLP. Reach him at (312) 739-3625 or stefan.timms@blakes.com.

Published in Akron/Canton
Thursday, 30 June 2011 20:01

Ravi Kathuria; Reinventing executives

The unrelenting economic changes and cycles have forced companies to rethink everything. In increasing numbers, companies are now asking their executives to re-engineer themselves by taking on roles in which they have no prior experience. For instance, a company may ask its head of sales to manage IT or ask its CFO to run sales.

Widespread phenomenon

In a recent survey, conducted by Cohegic Corp., 75 percent of the respondents said their companies are indeed asking executives to take on roles in unfamiliar areas.

Two-thirds of the large company and half of the midsized company respondents indicated the primary driver for reassigning executives was to facilitate career growth. Smaller companies, on the other hand, specified downsizing and financial constraints as the primary driver. More than 60 percent of the small and midsize company respondents felt cross-assignments for executives is a trend here to stay.

Changing your perspectives

As an executive, you must be prepared and willing to reinvent yourself. In order to serve your company well, you must stop thinking of yourself only as a functional expert. At lower levels, functional expertise is a plus, but at upper-management levels, limited cross-functional exposure could be a liability for the company.

Managing areas of the organization in which you have no prior experience could be a potent way to change the “silo” mindset. Challenge your new team’s assumptions and standard procedures and challenge your own perspectives.

Steps to achieve success

Taking on an unfamiliar role is a daunting challenge and involves great risk. When assigned an unfamiliar role, you must consider several steps to achieve success.

Rediscover yourself: You must have a clear understanding of why the company specifically chose you for the opportunity. What does the company expect you to deliver? You must realize that your new responsibility is all about change management. The company expects you to introduce change — change in mindset, approach, culture, process, people, pace of progress, performance, etc.

Research: You must first listen. Do not be impulsive and impatiently thrust your knowledge on your team. Do not be superficial in your assessment. If you take the time to understand and diagnose the situation in detail, you will gain greater respect and cooperation from the team as you push for difficult changes. It will also give you an opportunity to build a relationship with key influencers within the team.

Relearning: Develop a new perspective. Learn how things work in this unfamiliar area of the business. Remove your previous filters, preconceived notions and biases. Do not be a know-it-all, because what got you here may not help you get there. Make it clear to the team that you have a lot to learn and remind the team they have a lot to learn from you. It is a partnership, their technical knowledge and your new approach will create the right recipe for success.

Reapply yourself: Bring to bear your management, leadership, analytical and problem-solving skills and your ability to work the organization and make things happen. Leverage your energy, enthusiasm, and confidence to help the team rise to the occasion. In order to produce change, you have to make the case for change and help your team appreciate the sense of urgency. Explain your vision and the steps to realize the vision. You will need to enlist key people from the team so you can build a coalition for success.

Results: Solve the problem, address the need and produce results. Resist the temptation to fixate on tactical issues. Do not forget why the company assigned you the role and what it expects you to deliver. Keep your focus on the big picture and never waver from the overarching goal.

Ravi Kathuria is president of Cohegic Corp., a management consulting and executive coaching firm, and he is president of the Houston Strategy Forum. Quoted in the Wall Street Journal, Barron’s, WorldNews and featured on CBS Radio and the BusinessMakers Show. He is the author of the highly acclaimed book, The Coherent Company: The Struggle for the Next Level.

Published in Houston

NEW YORK (CNNMoney) -- Google and rooftop solar power company SolarCity announced a $280 million investment deal Tuesday, the largest such deal for home-based solar power systems in the United States.

The investment will give San Mateo, Calif-based SolarCity the funding to build and lease solar power systems to a 7,000 to 9,000 homeowners in the 10 states where it operates.

Founded five years ago, SolarCity has 15,000 solar projects around the nation completed or under way. Customers who wish to have the company's solar system installed at their home can pay for it outright, but most choose instead to let SolarCity retain ownership of the equipment and rent back the use of it through monthly solar lease payments.

As SolarCity's financing partner, Google (GOOG, Fortune 500) plans to recoup its investment over time through those lease payments.

"We hope to be seen as a model," said Rick Needham, Google's director of green business operations.

Needham wouldn't elaborate on the exact terms of the deal, but said "these investments are designed to earn us a good return on our capital."

War veterans go solar

Funding arrangements like this are not uncommon in the energy businesses, but they have previously been restricted mostly to utilities and a handful of banks with specialized industry knowledge.

Google's entry into this type of financing is both a sign that more companies may be interested in funding alternative energy ventures and a nod to the fast-growing market in leasing residential solar panels.

"Google is out in front on this," said Nathaniel Bullard, an analyst at Bloomberg New Energy Finance. "It's a sign of confidence in the space."

Google likes to experiment with clean energy investments -- witness last year's wind farm investment -- but the SolarCity deal marks its first move into the residential market. SolarCity is one of a handful of companies that lease solar panels to homeowners.

The idea behind leasing is to keep things as simple and cheap for the customer as possible.

In SolarCity's case, the customer signs a multi-year agreement with the company and begins writing a monthly check to the firm that's ideally 10% to 20% percent lower than what they were previously paying for their monthly power bill.

SolarCity then handles the rest -- everything from purchasing and installing the panels to claiming the various tax credits offered by the federal, state, and sometimes even local governments.

Eliminating the often hefty upfront costs for buying a solar system, as well as handling the maintenance and tax issues, has been a boon for the industry. Nationwide, the number of homes installing solar has gone from under 10,000 annually in 2006 to nearly 50,000 in 2010, according to the Solar Energy Industries Association.

"The biggest constraint is financing," said SolarCity chief executive Lyndon Rive.

Generous government subsidies are the main reason the economics for solar work in the United States. Between federal, state and local incentives, up to 50% of the cost of a solar system can often be subsidized.

The government is funding this industry because it hopes that creating a market will foster technological innovation in the space, driving down the cost of solar panels to the point where they are competitive with fossil fuels.

Rive hopes more companies will follow Google's lead and use some of the trillions in cash they have stockpiled to invest in the clean-energy market.

Google may well be getting a return on its investment, but the company also sees an advantage in promoting cheap, renewable energy. Its server farms eat up massive amounts of electricity.

"Energy drives our businesses, and we want our energy to be clean," said Needham. "Over time renewable energy will be cheaper than fossil fuel. We're doing what we can to make that happen faster."

Published in National

BERLIN (New York Times) -- Nokia said Tuesday it had settled a two-year-old global patent fight with Apple over smartphone technology through a licensing agreement that will commit Apple to make a one-time payment to its Finnish competitor and to pay regular royalties in the future.

The agreement settles all outstanding patent litigation between Apple, the leader in the smartphone market, and Nokia, its main rival. The companies also agreed to withdraw complaints against each other with the International Trade Commission over the use of intellectual property.

“We are very pleased to have Apple join the growing number of Nokia licensees,” said Stephen Elop, the Nokia president and chief executive. “This settlement demonstrates Nokia’s industry-leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market.”

Nokia did not disclose the financial terms of the settlement. It did say the agreement would have a “positive financial impact” on Nokia’s revised second-quarter results.

Nokia shares rose 1.8 percent in Helsinki trading following the announcement to 4.37 euros per share. The Finnish company’s shares had plunged on May 31 after Nokia revised its second-quarter sales and profit forecasts sharply lower, and abandoned its previously announced full-year targets for 2011 amid rising competition.

Apple appeared to describe the agreement as limited in scope, and emphasized that the patent settlement did not extend to most of the unique features of the iPhone, the world's best-selling smartphone.

“Apple and Nokia have agreed to drop all of our current lawsuits and enter into a license covering some of each other’s patents, but not the majority of the innovation that makes the iPhone unique,” Apple said. “We are glad to put this behind us and get back to focusing on our respective businesses.”

The mobile phone makers had been embroiled in more than 40 patent lawsuits in Germany, England and the United States since 2009 over basic technologies relating to a handset’s user interface, power management, antenna and camera.

Florian Mueller, an intellectual property analyst in Starnberg, Germany, said the announcement was a victory for Nokia, which in the first quarter ceded its long-held lead in global cellphone revenue to Apple.

Mueller said while Apple benefited by settling its legal differences with Nokia, it was likely that the patent settlement with Apple involved “significant” payments by Apple to Nokia.

“I’m sure Nokia had to go down from its maximum demands because otherwise there wouldn’t have been a settlement,” Mueller said. “But the deal structure is very telling: a combination of a payment for past infringements as well as running royalties is a clear indication that there’s serious money in this for Nokia.”

Mueller said the agreement was the first fruit of a new Nokia strategy to more aggressively defend its patent portfolio, which includes more than 10,000 groups of handset patents called “patent families” that it developed over the last two decades. Nokia has said it invested more than €43 billion ($62 billion) to develop its patent archive.

“Having proven its ability to defeat Apple after the most bitterly contested patent dispute that this industry has seen to date is clear proof of” the effectiveness of Nokia's more aggressive strategy, Mueller said. “Other companies whom Nokia will ask to pay royalties will have to think very hard whether to pay or pick a fight.”

Mueller said Nokia may now turn its sights on Google, the maker of the Android open-source phone operating system, which is the world’s fastest growing mobile operating system. Mueller asserted that Android is technologically similar to Apple’s iPhone operating system and may invite a legal challenge from Nokia.

“Android-based devices are highly likely to infringe on largely the same Nokia patents that Apple now felt forced to pay for,” Mueller said.

Published in National

When Chip Perry moved from Los Angeles to Atlanta in 1997 to start AutoTrader.com for Cox Enterprises, he was given a one-page business plan, significant financial backing and an empty office and told to go for it.

“It was the Wild West days of early startups,” says Perry, the company’s president and CEO. “It was before the meltdown of 2000, 2001. There was tremendous capital flowing in that formed a bubble that burst. There were many different ideas about how the Internet could participate in the automotive industry, and we were there with a clean sheet of paper.

“How would we build a service that consumers would want to use and dealers would want to use and create a source of competitive advantage that would sustain the company through the early years and help it have a foundation from which to scale?”

From the beginning, he didn’t want to have a company where people bought and sold cars online — he wanted it to be a marketplace to help people locate vehicles and provide more comprehensive information than newspaper ads provided — the transactions themselves would happen offline. But from that simple vision, he had to build a business that could scale.

“To scale a company, once you discover a successful model, it requires very careful year-over-year execution of a plan that needs to change every year,” Perry says. “One of the ways we were able to grow was we created a new plan every year. We called it the ‘Annual reinvention of AutoTrader.com.’”

Creating a new plan every year has taken AutoTrader.com from nothing when it started to more than $700 million in revenue today. While it’s not easy to come up with a new plan each year, it’s the key to ensuring you create a scalable business.

“Every year we reinvented ourselves by setting new objectives,” Perry says. … “Our vision to dramatically improve the way people buy and sell cars was consistent. Our vision to be the best car-shopping destination and the best advertising vehicle for marketers, that was constant, and the business model of enabling our sellers to advertise to consumers for this pay-for-placement style was constant. But many of the details around exactly how to execute that strategy changed every year.”

Solicit ideas

If you want to create a new plan every year, you have to start with getting plenty of new ideas. At AutoTrader.com, the ideas from Perry’s 2,000 employees don’t go into a suggestion box and die. They’re parked in what Perry calls the “innovation garage” as they wait to be reviewed.

Encouraging employees to submit ideas is one way that he gathers possibilities for his strategic plan.

“One of the hallmarks of successful companies is being open-minded and receptive to ideas for improvement from the employees, who are closer to the work than the executives are,” Perry says. “It’s kind of built into your DNA. Either you are or you aren’t receptive. You have to be curious and receptive and then be willing to work with it. Then you need to set up a pattern and a tempo of consistency on this topic. If you do it once, and it goes away — a flash in the pan idea — it becomes not effective. If you do it every year, you’ve been doing it for 10 years, people come to expect it, and it becomes part of the culture.”

The main way he does this is through a comprehensive annual survey of the employees. The survey addresses culture-related questions about their jobs and how they feel about the company, but they also have an opportunity to provide input.

“If you were the CEO of AutoTrader.com, what would you do to make the company stronger?” Perry says. “We ask that question every year.”

He typically gets about two 3-inch binders full of ideas — single-spaced and using both sides of the paper. But when those ideas come in, he also communicates back to them a clear message.

“We also provide employees with a response,” he says. “This is what you told us, this is what we heard, and this is what we’re going to do with your input. Every year, we tell them, ‘This is what you told us last year and this is what we’ve done about it.’ Then we ask on the survey, ‘Do you think we did a good job of acting on the things that you told us last year or not?’ People can become very cynical about surveys if you don’t take them seriously.”

In addition to listening to employees, Perry also goes to clients and consumers for input. Three to four times a year, he has dealer advisory meetings where he takes dealers off-site and shares with them where AutoTrader.com is at and what plans the company has for improving services. He asks what they think and listens to their feedback.

He does the same thing with consumers. They come into a lab they have in the building and use both AutoTrader.com and competing sites and they ask consumers what they like about each and what they don’t like about each. They also ask what unmet needs they have in the car-buying process.

Prioritize

As the market leader, Perry never has a shortage of opportunities or ideas to explore, but the next step to creating a new plan every year is to actually figure out what to incorporate and what not to. He uses an initial litmus to determine if an idea is even worth considering.

“Our true north — the beacon that guides us — is, ‘Does the idea help the consumers shop for cars easier?’” he says. “Does the information make it easier, more convenient for them to locate the car they want to buy and be smart about how they’re going to buy it, and if it helps consumers do that and if it helps a dealer or manufacturer be more efficient about how they explain their offering and influence car shoppers, we’re interested in it.”

If it fits that, then they have to dig a little deeper to see which ones can be most beneficial.

“It’s important to be as objective as you can and gather objective facts and information,” he says. “One of the things we try to do is whenever it’s possible, to go out and do some research about the potential impact of an idea, so we’ll go talk to consumers and dealers and manufacturers and ask them for their guidance on how valuable they think it is, so research is a very important part of it.”

Perry says sometimes it’s not easy to quantify the benefit associated with a new idea, but that’s where research comes into play. Ultimately, he wants to move on ideas that provide the biggest bang for the buck — affecting his consumer audience as well as his advertising clients.

“We try to make our best estimate or guess about the benefit to the consumer and dealer and try to quantify the amount of value that the idea provides to our customer and the amount of revenue the idea could produce,” Perry says. “We make our best guesses and then we prioritize accordingly. We also weigh in the cost and effort and complexity of implementing the idea — some are easy and some take months and months of work.”

Another way Perry prioritizes ideas is to rely on the people in his organization to help him.

“Gain multiple perspectives from inside the company from different sources,” he says. “Having a diversity of ideas and perspectives to debate the merits of different ideas is very important.”

When all the ideas come into the innovation garage, Perry doesn’t let them sit around for long periods of time.

“The suggestions get organized by department, and the department heads read them and use them to create his or her action plan for their department,” Perry says. “Then that action plan is communicated to the employees in that department.”

At the department level, ideas are reviewed and absorbed in about a week after all the information is gathered. A comprehensive report goes out to all the employees about the compiled results.

“Within a month, we’re back to our employees saying, ‘This is what we heard, this is what we’re doing, and you’ll be hearing more at the department-level soon,’” Perry says.

Then the department heads determine how the suggestions provided can roll into their goals that will help the company achieve its goals.

Taking all the input from the research, he then works with his team to rank order what opportunities to pursue.

“We’ve let our common sense guide us in how to create processes in the company that generate ideas, research them as objectively as possible, debate them from multiple perspectives, try to quantify benefits and then ultimately make a judgment call about where is the most bang for the buck,” Perry says.

Test pilot

Once ideas have been vetted and align with the company’s goals, then the last phase before implementing them into your strategy is to test them.

“A willingness to take risks and experiment is very important, because the good ideas stop coming if people think there’s no chance it will ever get implemented because they’re viewed as too risky,” Perry says. “You have to be willing to experiment, make mistakes and iterate toward a better solution in order to promote an innovative environment where people feel safe to make suggestions that are outside the box, and then the company has to be willing to methodically test and evaluate them.”

The key is to start small.

“The good approach is to try and test an idea in a portion of your business,” Perry says. … “Test in a portion of your total-served market and then observe success and problems and try to iterate and evolve toward a better solution before you roll it out.”

At AutoTrader.com, when it wants to try out a new idea, it is tested in one or two markets. For example, one offering AutoTrader.com has been working on is a tool that offers a seller an instant offer on their car. Sellers describe it, and then dealers can make offers to them, which are contingent on the car matching the description provided. If a seller sees an offer he or she likes, he or she can go to that dealer, have the inspection, and then get a check on the spot. Dealers like it because it brings in prospective buyers. Sellers like it because they can get an offer fast.

“You do your best job you can in launching something new like this, but by definition, it’s not perfect,” Perry says.

You have to look at what works and what doesn’t work and how you can improve the program to make it better.

“If it works, we figure out what does it take to scale this idea up and make it easy for consumers to use and adapt nationwide,” he says. “If it involves little training, we can roll it out very quickly. Consumers adopt things that are good for them very fast.”

In this particular case, it started in two cities in late 2009, and now it’s in 200 markets across the country, and there are now upward of 80,000 instant offers each month through the site.

“It was so popular that we pulled forward and accelerated the launch plan,” he says. “There’s an example of one that takes off. Then there’s other things that take longer or stumble.”

For example, AutoTrader.com has many customers with low credit ratings, but the company wants to be able to serve those people, so it has been working to help them find dealers that really serve that segment of the market. It’s a tool that Perry has had trouble finding the sweet spot that meets both the dealers’ needs as well as the customers’. But because it’s a great need in the market, the company will continue to refine it and make that process better.

Sometimes ideas just aren’t feasible at all. This was the case with auction-style listings AutoTrader.com did with eBay back around 2000. While it might be interesting to bid on a car online, what Perry and his team realized was that when you couldn’t see the car in person and inspect it and test drive it, consumers generally weren’t willing to pay more than wholesale.

“Most dealers are not interested in selling cars to the public for wholesale prices — they sell retail, that’s how they make money,” Perry says. “So if consumers only want to pay wholesale, why should (dealers) participate?”

When an idea works, it gets implemented into the plan, and the greatest thrill Perry has is being able to celebrate it and thank the person who suggested it.

“We present ourselves as an open-minded, flexible company that can change over time,” he says. “We can’t implement every idea tomorrow, but I can’t tell you how many hundreds of ideas our customers have given us, and it’s a lot of fun when you get a chance to call them up and say, ‘Remember that idea you gave us three or four months ago? It just went live on a national basis.’ That’s very exciting.”

How to reach: AutoTrader.com, (866) 288-6872 or www.autotrader.com

The Perry File

Education: Civil engineering degree, University of Virginia; MBA Harvard Business School

First Car: Perry paid $350 in 1975 for a turquoise green, 1965 Plymouth Valiant with a three-speed shift on the steering column.

Number of car purchases Perry has made through AutoTrader.com: Four

Prior experience: Before joining AutoTrader.com, Perry was vice president of corporate development for the Times Mirror Co. and vice president of new business development for the Los Angeles Times. While there, he launched TimesLink, one of the first major online newspaper services, which later became known as LATimes.com. Earlier in his career, Perry worked as a management consultant at McKinsey & Co.

Published in Atlanta
Saturday, 30 April 2011 20:01

Market may be ready to bust out of rut

Those hoping for a boost in merger and acquisition activity in March were disappointed. It continued a trend of slow activity that persisted throughout much of the first three months of 2011. This first-quarter lag can be attributed to the push in the fourth quarter to complete deals due to the threat of an increasing capital gains tax. But fear not, better days may be right around the corner. Despite the slow start, it appears there will be a significant increase in M&A activity, and 2011 should be a robust year.

Some of the key drivers supporting deal activity in the near future are a direct result of the improving economy. Many companies have rebounded from a dismal 2009 and returned to profitability in 2010. The availability of capital has increased as banks have returned to lending, and private equity groups, which have been sitting on the sidelines for the past 18 months, are looking to deploy capital in order to raise new funds.

In addition to seeking new investment opportunities, private equity groups will look to divest portfolio companies over the near term. Furthermore, many corporations have record levels of cash on their balance sheets, which is fueling a flurry of deal activity as strategic buyers look to grow and diversify.

Although M&A activity was sluggish in March, media and print companies were active in the Cleveland area. Cleveland-based American Greetings Corp. acquired Watermark Publishing Ltd. through its European subsidiary, UK Greetings Ltd. Located in Corby, England, Watermark generates around $40 million in revenue annually and has assembled more than 4,500 greeting card designs in their portfolio. This acquisition broadens the product offering of American Greetings and will allow its European subsidiary to increase its market share.

Another entertaining print company located in the Cleveland area is Mental Floss LLC, publisher of Mental_Floss Magazine. The quirky magazine, “where knowledge junkies get their fix,” is located in the Geauga County suburb of Chesterland and delivers informational facts on just about everything from the most dangerous pieces of art to cheat sheets about the theologian Augustine. Felix Dennis, who introduced the magazines Maxim and Stuff to the U.S., announced his intention to purchase the company and move the headquarters to New York.

Albert D. Melchiorre is the president of MelCap Partners LLC, a middle-market investment banking firm. He is also a director on the ACG Cleveland board. For more information on MelCap Partners, please visit www.melcappartners.com. For more information about the Association for Corporate Growth, please visit www.acg.org/cleveland.

Deal of the Month

March was an excellent month for Wickliffe, about a 10-minute drive east of downtown Cleveland, as Berkshire Hathaway Inc. announced it would acquire Lubrizol Corp. for $9.7 billion. The price was a 28 percent premium above Lubrizol’s closing price before the transaction was announced. Expected to close this fall, the transaction would represent Berkshire Hathaway’s third-largest acquisition to date behind General Re Corp. and BNSF Railway Co. The $135-per share bid price is quite a jump from the $23.56 low hit only two years prior in March 2009. However, the company has rebounded with solid revenue and income since the economic downturn of 2008. Lubrizol, a specialty chemical company primarily engaged in the production of lubricants and additives, has itself been acquisitive. It just recently purchased the personal care business of Nalco Holding Co. for $166 million in January. Lubrizol’s headquarters will remain in Wickliffe and the current management team, led by James Hambrick, will continue operations. Congratulations to Lubrizol on achieving great value with excellent performance.

Published in Cleveland

Jack Ouellette knows that he is fortunate to be in charge of a company with rich history and he takes pride in celebrating that fact. In 2010, American Textile Co. celebrated 85 years of business. The company made a day out of it. Employees at the Pittsburgh facility brought their families and they enjoyed food, costumes and false store fronts that would have been in vogue in 1925. While celebrating where you came from is certainly important, looking forward is critical, as well. Ouellette, CEO of the 325-employee company, knows that he has to keep his eye on the future in order to stay in business for another 85 years and beyond.

In 2005, Ouellette saw that the company was becoming too one-dimensional. So he did what any CEO would do: He looked for ways to expand the business and break out of a stagnant slump by focusing on the company’s core competencies.

“We have intentionally been looking to grow the business,” Ouellette says. “We did that by looking around and asking ourselves, ‘What products are similar to the ones that we currently are involved in?’ It’s using all of the same skills that we have in basic mattress covers and pillow covers to make these items. We felt that there was a tremendous tie-in and a high correlation between those items and sleeping pillows.”

Here’s how Ouellette expanded into a new market by utilizing existing competencies and more than tripled revenue between 2007 and today.

Do the research

Making the decision to create a new product or enter a new market can make or break you. It can’t be taken lightly or done too quickly before knowing how and if you can do it.

“You have to make certain that you’re doing your homework upfront,” Ouellette says. “When we were first trying to determine what products we wanted to expand into, we checked with our customers to find out if some of the items we were looking at would have enough room for a new supplier. When we went to the retailers and said we’re interested in getting into the pillow business, they welcomed that idea. They said the industry does need another supplier.”

In American Textile’s case, the company had good products and an audience buying them. The company wanted to expand its business of making mattress and pillowcases by manufacturing something that wouldn’t require a huge change in the company, and pillows were a perfect fit.

“For us, the question became what product do you want to get involved in?” Ouellette says. “We are in the textile business and we make things that protect mattresses and pillows. The one thing that we required of ourselves was we didn’t want to write a plan that saw ourselves making batteries for automobiles two years from now. We wanted to make certain that whatever we did we utilized our existing core competencies the best we could.

“I would suggest that any company that wants to grow should look around and ask themselves, ‘What are similar types of products that can be manufactured or distributed?’ You have to look at who the competition is and understand what the market looks like. Is the market ready for another manufacturer or distributor of those products? You also have to be honest with yourself and ask whether you’re just going to be me-too or will you be able to provide some innovation in that category that will differentiate you from the competition?”

Build your plans

Entering a new market, whether it’s a new product or a new geography, takes time and careful planning in order to do it successfully. You must be willing to listen to the advice of your team members.

“When it comes to identifying a new area in which to grow, you have to trust your executive management,” Ouellette says. “When they are giving their expert opinion on where to go, you have to believe in them. People who have been in a leadership position for a long time, I think their real expertise comes in being the experts in what has happened in the past, but that may not be the path to the future. To be able to listen to and not have all the answers on where you want to go in the future and trust those people who might have a better vision of the future is really critical.”

Because of a big pillow company going out of business, there was plenty of room for American Textile to come in and pick up the slack.

“When we first had an opportunity to ship some pillows in 2005, we knew that there would be some good growth opportunities — or assumed that there would and that turned out to be true,” Ouellette says. “An important ingredient in identifying when and how you want to grow is making sure you talk to your customers. Identifying an area that might suit your competencies is only really good if the customers are ready for another company to come into that market.”

Once it is clear that you can expand into a new market, planning must be the next priority. You have to have the ability to plan for further out than just your initial launch.

“I think the biggest thing is to have a strategic plan,” Ouellette says. “You generally plan for just one year and you have to force yourself to look out further than that, like three years. To look out any further than that is difficult to really come up with good, solid ideas. I would advise actually following that strategic plan and making certain that there’s the right group of people. Once you have that plan, you have to make certain that everybody in the company knows what your goals are.”

Once a strategic plan is in place, it is to your advantage to continue to follow and update that plan. If you create it and never look at it again, there is little point to it.

“I know a lot of people talk about strategic planning. I think there’s a couple of ways a company can go,” Ouellette says. “One is to have a plan and just (put) it away. The other, which I highly recommend, is having a plan and really working it every single month. It requires an individual in the company to have responsibility for that plan and have responsibility for making certain that everybody’s working toward it. Finding the time to work on the longer-term strategy takes a lot of discipline.”

Communicate and monitor your plan

Strategic plans can get complex and will help guide your company for a long time. It is very important that the CEO be out in front communicating the direction of the company and how that plan is coming along.

“A strategic plan can be kind of complicated, because it touches all of the company and it goes out for an extended period of time,” Ouellette says. “The thing that we did was boil it down into a very concise statement. Ours is called ‘Focus on five.’ The five means the five letters in focus and each of those letters means something. The F stands for ‘first to market.’ The O stands for ‘optimizing sales.’ The C is ‘channel expansion.’ The U stands for ‘us or the employees’ and the S stands for ‘systems and processes.’ Every month, we have an event where we pull the company together and we call it a ‘Focus on five’ meeting. The first thing we do is to have one of the sponsors of each of those initiatives talk about what they have been doing in that area. It’s that constant reinforcement. With our planning team we have quarterly updates where we get in a room and spend two hours going over the strategic plan.”

When your plan takes effect, you have to continue to monitor the growth you are seeing. Check your growth against your plan and communicate the results as you go.

“In the long term, you have to absolutely set goals,” Ouellette says. “You have to make sure people understand those goals, and you have to make certain that you’re tracking those goals on at least a quarterly basis. That shows everybody a commitment to it and makes certain that everybody is making a contribution to that plan on a regular basis. Otherwise it’s kind of like college where you go to the classes but the only time you study is for the final. We don’t want that. We want people studying for the final every single month.”

When new initiatives are created it is easy to forget about other areas of your business. It is important to keep tabs on the core areas of your organization.

“You should also make certain that you don’t take your eye off of the core business,” Ouellette says. “Oftentimes because something is new and exciting in the developmental stages, a lot of the resources that you apply to your core business can be siphoned off to go to the new venture. Growing another product line is not an additional duty for the people who are involved in your core business. You have to keep that core business funded properly and the proper attention on it. You have to make the investment in people and in resources to fund that new business.”

Drive innovation

A big reason that Ouellette and American Textile have been successful is because they stuck to what they were good at, but they have also been innovative in how they improved upon their core competencies. Having people who can foster innovation is important to be able to continue to grow your company.

“Innovation plays a significant part in our company,” Ouellette says. “We were once told by a major retailer in this country that ‘new’ sells, and it does, provided that ‘new’ makes sense to the customer. Having a group of people responsible for product development is a major ingredient in being able to grow. If you come out with a product that’s just the same as everybody else’s, it becomes a commodity and a price war. When you come out with a product that is new and different, that’s what the retailers are looking for and that’s what the consumers are looking for. Have a group of people who are trying to develop ideas based upon where trends are going, what the consumer is doing, how people live today and how that differs from how they lived last year. If you can find products that can solve their problems or fit their newer lifestyle, that’s a way you have an opportunity to grow more rapidly.”

It’s very difficult to just create innovation out of thin air. You have to work at it and create a culture that will support innovation within your organization.

“You really need to create and invest in developing an innovative culture,” Ouellette says. “When most people think of Pittsburgh, they think of steel. We tried to get people from Pittsburgh who knew the textile industry, but unfortunately, most of the people who know textiles are located in the southeastern part of the country. You can either try to move the talent to where you are, or you can move where you are the talent. The latter has really worked for us. The major catalyst is getting the experienced people in the industry.”

Having people that understand your industry in and out is crucial for growth. If you are unable to properly understand your market you will lose to the competition. You have to be willing to do what it takes to get the right people.

“The first dollar spent on the right talent is so critical,” Ouellette says. “If you don’t have the right people who are charged with the responsibility and know how to execute the plan, not just have the desire but the know-how, that makes all the difference in the world. You’ve got to get the right talent and you’ve got to pay for that talent. They have to have all the right experience and background, not just 80 percent of it. You’ve got to have the whole thing in our opinion.”

HOW TO REACH: American Textile Co., (412) 948-1020 or www.americantextile.com

The Ouellette file

Jack Ouellette

CEO

American Textile Co.

Born: Springfield, Mass.

Education: Bachelor of science degree from West Point; MBA from Duquesne University

What was the first job you had out of college, and what did you learn from it?

My first job after college was second lieutenant of the United States Army. I was a fire direction officer. I was responsible for computing the data required to fire 155 millimeter artillery weapons. I learned the importance of how to manage a small team, and I’ve found that those same skills for managing a small team apply to larger organizations. It’s all about people.

Did you see any action?

I was a pilot in Vietnam for one year between 1970 and 1971. I flew an army reconnaissance plane on the Cambodian border for six months, and then I flew a twin-engine transport plane for the last six months all over Vietnam, Cambodia and Thailand.

What is the best business advice you’ve ever received?

It is taking care of the people whom you work with. You have to always be aware of that.

If you could invite any three people to dinner, whom would you invite and why?

I would invite Dwight D. Eisenhower because it would be fascinating to hear about the Normandy invasion. I would love to invite [George] Herbert Walker Bush to dinner because I think he had one of the most interesting resumes of any president. And I would like to invite Arnold Palmer to dinner. Not only was he a tremendous golfer, but he had the ability to excite people and motivate people and anybody with those types of skills would be worth talking to.

Published in Pittsburgh