Former franchisee turned franchisor, Wan Kim reinvigorates Smoothie King as CEO

Wan Kim, Global CEO, Smoothie King Franchises Inc.

Wan Kim, Global CEO, Smoothie King Franchises Inc.

Imagine it’s a hot day. You’re thirsty and hungry, but don’t want anything unhealthy. There aren’t many options available to meet all those needs. In the early ’70s, the concept of the smoothie was born out of this unmet need. Opened in 1973, Smoothie King Franchises Inc. was the original smoothie brand.

In 2001, Wan Kim had this same urge to find a healthy option to quench his thirst and satisfy his hunger. He had his first experience with a Smoothie King smoothie while studying at University of California at Irvine. The high quality, healthy product had him hooked immediately.

Kim was so impacted by the product that he became a Smoothie King franchisee in South Korea. Since 2003 he has owned several Smoothie King franchises, and in 2012 when the opportunity came about to own the brand, he jumped at the chance.

“I bought the company in July 2012,” says Kim, Global CEO. “I really love this brand. It’s not because I’m the owner, but because we have great products. There are a lot of changes still happening, but it’s exciting.”

Smoothie King, a 300-employee, more than $230 million organization, is now 40 years old. The brand has more than 700 stores and a presence in the United States, Korea and Singapore. Despite the company’s established age and fairly big size, a new owner and plenty of potential market opportunity leave the brand in growth mode today.

“Our next five-year growth plan is to open 1,000 stores in the U.S. and 500 outside the U.S.,” Kim says. “Last year the company did about 26 franchise openings. This year in the first quarter the company has done 40 to 45 signings.”

Kim’s experience as a franchisee and now a franchisor has given the company new life and Kim is excited about where he can bring the brand and its smoothies in the near future.

Here’s how Kim is spreading the word about Smoothie King in the U.S. and overseas.

Understand all areas of your business

Kim was a franchisee for nearly a decade in South Korea. His stores were some of the highest grossing for Smoothie King before he became CEO.

“Obviously franchisees and franchisors have some different views, but eventually the bottom line is to make a better brand,” Kim says. “The path they take can be different, so you have to keep communicating to each other and look at the bigger picture.”

Kim has a very unique advantage over numerous other franchise CEOs. He now has experience as a franchisee and a franchisor.

“I have both aspects and know what a franchise wants and needs, and I know how I need to communicate,” he says. “In any kind of business, sometimes people forget why we do it. So that’s why I keep communicating and keep telling our people why we do this business. We have a great mission and a great vision. We just have to talk about it.

“A lot of people want to make money and be comfortable and I get that and that’s very, very important, but there has to be another reason why we do this. Smoothie King is a healthy choice and our mission is to help people live a better lifestyle.”

While the company’s mission is to help people live a healthier lifestyle, Kim wanted to make sure that the company’s franchises were in good health also.

“As soon as I bought the company I looked at how many single franchisees we have, because when I was a franchisee I thought becoming a multi-unit franchisee was actually very challenging,” he says. “As a franchisor, they don’t understand what kind of challenges franchisees have when they have a second or third location.

“I started to visit some multi-unit franchisees that we have to look at what kind of system they have in place. Today, we are assembling all those systems so that whenever we have a single franchisee try to become a multi-unit franchisee we have some system to help them grow.”

Having those systems in place will become very beneficial as Kim continues to look at ways he can expand the brand.

“Right now we are in growth mode and are opening a lot of stores and also expanding into other countries,” Kim says. “When you grow, you are hiring a lot of people and when you’re expanding outside the United States you encounter different cultures. In order for me to assemble all those differences I need a really strong mission for why we do this business so that it doesn’t matter what kind of culture or background you’re from.”

Prepare for growth mode

Today, Kim is focused on growing the Smoothie King brand outside the U.S. and in the Southern parts of the U.S. where the company has a strong presence, but a lot of potential still remains.

“We want to make sure that we secure our market before we expand to a different part of the U.S.,” Kim says. “That expansion is happening in Florida, Texas, Georgia and other southern parts of the U.S. Going outside the United States we are looking at Malaysia, Indonesia, Thailand, Taiwan, Japan and the Middle East. Our goal is to open two markets this year and two more markets next year.”

Fast-paced growth like Smoothie King is expecting requires a strong culture and mission that make the company attractive anywhere it goes.

“When you are in growth mode I would advise that you want to have a really strong culture in your organization, so that whomever you hire can be blended into your culture,” he says. “You have to set up a strong mission, vision and keep communicating with your employees.”

When you take your company outside of the United States you will experience a lot of cultural difference, and you have to be prepared for it.

“A lot of times when people don’t have any experience with different cultures they will think it’s wrong, but in fact it’s different,” Kim says. “In order for you to go to other countries and do business you have to learn how to respect their culture. If you don’t respect their culture they will know immediately. You have to educate your employees.”

The vast cultural differences Smoothie King employees will experience as the brand continues to expand isn’t the only change they’ll have to accept, they’ll also have to buy into the sheer amount of growth that Kim sees in the company’s future.

“A lot of times when companies grow employees don’t really see how far we can go,” he says. “When we start to grow there is a lot of work coming in and a lot of things are changing. It is very important that I need to keep communicating with employees that we can get there, because if you don’t believe we can get there, then it’s not going to happen.”

One of the first things Kim did when he bought the company was to tell the employees about the growth plan and a lot of people didn’t buy in.

“They were thinking, ‘Oh, it’s a new owner; of course he’s going to be thinking of growth, but it’s not possible,’” he says. “So I had to keep communicating that it’s going to happen and one by one, I started to show them that this would happen and then it really happened and people believed in the plan. I know there are still people who don’t believe where we can go, so I still have to communicate.”

Kim bought the company a little more than a year ago and he is having a blast seeing the company succeed little by little.

“I tell my employees to imagine if we were the size of any big fast food company, the world could be a different place,” he says. “It’s not just about making money and having success. It’s also about influencing more and more people to live a healthier lifestyle.”

How to reach: Smoothie King Franchises Inc., (985) 635-6973 or www.smoothieking.com

Ron Lynch is ensuring Tilted Kilt Pub & Eatery is much more than lassies in plaid skirts

Ron Lynch, Tilted Kilt Pub & Eatery

Ron Lynch, Tilted Kilt Pub & Eatery

Staffed with beautiful servers in sexy plaid kilts and matching plaid tops, Tilted Kilt Pub & Eatery has its roots deep in the tradition of Scottish, Irish and English pubs. Originally coming to life in Las Vegas, the contemporary, Celtic-themed sports pub is headquartered in Tempe, Ariz., and has been doubling in size for the past couple of years. Today, it has 3,500 employees, revenue of $240 million and locations across the country.

While many patrons may come to Tilted Kilt to view the attractive servers, President Ron Lynch wants to make sure the brand is seen for much more than that. To help him get a better view inside the restaurant chain’s stores and get a firsthand account of how its employees were performing, Lynch went undercover on CBS-TV’s “Undercover Boss” in 2012.

“Going undercover made me realize that we really employ a lot of young people,” Lynch says. “Human resources are always a challenge and more so in our brand because we do hire so many young people. For some of them, it’s their first job. Some haven’t even been employed as servers or kitchen help or bartenders for that long of a period of time.”

One of the biggest lessons Lynch learned from his time under wraps was that Tilted Kilt and some of its younger staff could greatly benefit from a mentoring program. In addition, he discovered that there were a number of superstar employees going unnoticed.

Here is how Lynch took his undercover findings and translated them to make Tilted Kilt a better place for patrons and employees alike.

Educate through mentoring

Many young people looking for some early work experience will often find jobs at an area restaurant. Tilted Kilt is no exception, and that led Lynch to launch a mentoring program to improve the Tilted Kilt experience.

“We assumed at the store level that the management/young-employee relationship was enough, but they talk more along the lines of taking care of the guests, providing good product, being upbeat and entertaining people,” Lynch says. “A mentor relationship can be more of a personal thing for them.”

The idea for a mentoring program surfaced because of the actions of one Tilted Kilt server in particular who appeared on “Undercover Boss” with Lynch. She was seen telling off-color jokes and using language that wasn’t acceptable.

“That doesn’t represent our brand,” Lynch says. “A mentoring program for those young people allows a more experienced server to talk to them and give advice. Coaching in these areas is for their own good.

“This isn’t just our brand. It could apply for any brand that hires young people. Sometimes they need a little bit of coaching when those young people are in the adult world.”

The mentoring program allows Tilted Kilt’s young employees, like the one seen on the show, to speak with more experienced members of the staff.

“The mentor program is set up so that they have monthly meetings and talk for a period of time,” he says. “We want to enroll all the 18-, 19- and 20-year-olds before they are legally adults at 21. That’s where we have started.”

What Lynch has found so far in the company’s mentoring efforts is that you have to be persistent at getting involvement in the program.

“No. 1 is you have to persevere at it because your young people are going to be resistant to it,” he says. “They don’t think they need it. That’s the hardest part. We may need to rename the program something like Big Sister, Big Brother program — anything other than the mentoring program.

“At that younger age, they think they know everything, and so they think they don’t need it, and that’s the difficulty we are having with it. We need to put a different face on it and call it something different but have it accomplish the same thing.”

Lynch and his team are putting their heads together because so far the mentors and mentees are getting together, but they feel obligated to meet instead of wanting to meet with a mentor. That’s a problem Lynch is looking to fix.

“It takes time, but it’s also the approach that our servers take,” he says. “Rather than them coming up to that person and saying, ‘Hi, I’m your mentor, and we need to meet,’ and they go, ‘Why?’ Maybe there is a better approach.”

Seek out superstars

Much like with the mentoring program, Lynch found out that Tilted Kilt had some real hidden gems inside its restaurants during his experience undercover, which made him realize the company needed a better way to find these employees and recognize them.

“Another thing I noticed was that we have some fabulous people in the field that are going unnoticed,” Lynch says. “I would have never actually seen some of these people without going undercover. So our operations people and I are going to spend more time, particularly in the kitchen.”

Tilted Kilt needed a way to find those superstars within its system and make sure they prosper.

“I’ve challenged our operations people to go beyond that and get into the kitchens,” Lynch says. “Observe and talk to the kitchen people, maybe work on the line a little and assist them where you can. Then a great way to meet the servers is to offer to help run the food with them. That will help get feedback as to who those superstars are.”

To find those employees who are high achievers but might be going unnoticed, you have to challenge your staff to dig in deep.

“I know it’s uncomfortable and you’re in a restaurant that you don’t work in every day, but you have to pick out those roles that you can function in and dig in. You have to help them run and help them prep food and meet those people who are actually doing the job for us rather than just the owners and managers,” he says.

Finding great talent already in your business is one thing. Having the ability to hire those high achievers from the beginning is another. Lynch is also devoting time and resources to improving the hiring process.

Tilted Kilt uses a hiring process called HOST, which stands for hiring only spectacular talent. It’s a process that takes a minimum of 30 to 45 minutes to do.

“We have that potential bartender or potential server role-play with us,” Lynch says. “One of the common scenarios is I play the customer and the new person is the server. We want to know if they will communicate with us and connect. Are they a people person? Will they smile at the customer? That’s very, very key to us in the hiring process, and we spend a lot of time on it.”

You have to make sure that if you have one person in charge of a hiring process that he or she doesn’t get complacent and tired of it.

“It’s an interruption in their busy day, which is wrong, because that is the most important thing — getting the right people,” he says. “The hiring process is the No. 1 priority and the No. 1 priority that they do it right. If you have one person in charge of that hiring process, that one person will do it over and over and get really good at it and have the experience of knowing what makes the best employees.”

How to reach: Tilted Kilt Pub & Eatery, (480) 456-5458 or www.tiltedkilt.com

The power of optimism for Bert Jacobs and The Life is good Co.

Bert Jacobs, Chief Executive Optimist, The Life is good Co.

The Life is good Co.

Twenty years ago, Bert Jacobs and his younger brother, John, were looking for ways they could avoid getting typical jobs. Jacobs and his brother never agreed with the standard path for someone coming out of college. In fact, at that time, Jacobs was delivering pizzas and teaching people how to ski to earn a living. The brothers were looking for a unique path to live life how they wanted to live it.

“We wondered if we could create something that fit us better,” Bert Jacobs says.

That fit was The Life is good Co., an apparel and accessories company that spreads the power of optimism in its products and through its nonprofit organization, The Life is Good Playmakers.

Fast-forward to today and Life is good has 260 employees and saw 2012 revenue north of $100 million. Not bad for two brothers who wanted to maintain the fun in their lives.

Jacobs serves as CEO, or chief executive optimist, while his brother John serves as chief creative optimist. The two started their company 19 years ago aided by a drawing of a smiling character named Jake, who has become more than just a logo on the T-shirts but a symbol of optimism and the driving force behind the company and its inspiring message.

“Jake is our hero here at Life is good, and we like to say that Jake has superpowers,” Jacobs says. “Those superpowers guide our decisions.”

Simplicity, gratitude and humor are just a few of the 10 superpowers in total that help shape how the company does business. In recent years, the Jacobs brothers have had to do some self-evaluation as leaders and plan more strategically to understand where to go next with their company and its message.

“We’re 19 years in business and we’re really less about being a clothing company and more about the clothing being a vehicle for an important message,” Jacobs says.

Here’s how Jacobs has overcome the growing pains of leading a small private company into a larger corporation.

Find your direction

Since early in Life is good’s existence, the company’s inspirational message has been both a strength and a challenge for Bert and John Jacobs.

“Our message is so clean and simple that it applies to a tremendous array of different things,” Jacobs says. “So we have a lot of choices, which is a great place to be for a business, but it can also keep you up at night thinking about what we should do and shouldn’t do.”

Jacobs remembers one instance when the company was just above $1 million and he got a call from a large liquor company wanting to purchase more than $6 million worth of T-shirts from Life is good.

“We could have had 600 percent growth, and it was really, really tempting, but it really didn’t have anything to do with the reason why we liked the brand, started the brand or the vision of the brand,” he says.

“There has always been that pressure, and when you’re given an opportunity to go and hit the gas, it’s real tempting to do it.”

That call was the late ’90s, but in recent years, Jacobs says it’s too dissimilar.

“There are always people bringing ideas and opportunities, and I think we have to look and say, ‘How do those opportunities line up with our mission? How do they line up with our vision and with what we’re trying to do with our lives?’” he says.

Knowing what move to make next is one of the biggest challenges in any business. The way to attack that challenge and consider it an asset is to know who you are and act like it.

“That’s how we define branding internally at Life is good,” he says. “The mission of our company is simple — to spread the power of optimism. If we’re going to make a business decision that drives revenue, that’s great. But if it drives revenue and it doesn’t spread the power of optimism, it’s not so great.”

These business decisions come back to the company’s inspirational leader — Jake and his superpowers.

“These superpowers have to start showing up in the deals we do,” Jacobs says. “A big driver of these decisions is knowing our brand. We had good gut instincts back in the early days. Today, we can really line it up against criteria, and it’s pretty easy to take a look and see whether it’s a fit or not.”

Decisions regarding company direction take a great deal of focus. You must consider all that is at stake and who will be impacted by the decisions.

“You need to get away from the details of the business and ask what you want to do with your life,” Jacobs says. “If someone is trying to make a decision about their business and they’re not looking at how that’s going to serve their life, then they’re not going to make the right decision, in my opinion.”

Once you answer that, you have to look at who the stakeholders are of the business and what they want to do.

“You have to start with the highest priorities and who owns that organization and what are they trying to do and where do they want it to be,” he says. “A big part of that is including your customer base in those stakeholders, because a business can’t continue, it can’t thrive, and it can’t grow or do new things without your customers. Then make a decision based on that.”

Regardless of what decision you ultimately make, you have to ensure that you go through a process to understand why you’re making that decision.

“There have been times with this business that we didn’t go through that process, and those are the times that it stings you,” Jacobs says. “We’re lucky that none of those times we did things that sank the ship and we can still live our dream. But if you don’t watch those things, you can lose your dream.”

Enable autonomy

Just as understanding the company’s direction in recent years has been a challenge, so too has having to let go of some of the leadership responsibility both Jacobs and his brother have had in the past.

“Like many small businesses — the people who started the business play a very critical role,” Bert Jacobs says. “You can sort of kid yourself at some point that nobody can do something better than you can.”

The Jacobs brothers began reading about the struggles that companies go through and the mistakes that leaders make. One thing they saw over and over was that leaders have a tendency to place blame on others for issues in the company, but they’re afraid to have a self-evaluation.

“That was a big step for us,” Bert Jacobs says. “What we did was we created a task force at Life is good and we asked them to critique my brother and I and our other four partners. It was sobering. They were really honest and really candid. There were many areas where we weren’t doing a great job.

“The task force and the criticisms forced us to put some structure in place to reorganize the whole company and align on all our major strategies.”

Going through that evaluation opened doors and enabled autonomy to Life is good and its top management and general managers of its different business units.

“When we clearly paint the vision of where we want to go and we get out of the way, they’re not as good as us, they’re better,” Jacobs says. “That decision has been a real revelation and a breakthrough that a lot of small business owners sometimes never make or make too late.”

For Jacobs, realizing that taking an extra day skiing up in Maine isn’t a bad thing every once in a while has helped him and the business grow.

“The business might be better off without me on a given day,” he says. “Maybe by being around we can get in the way of things. Instead, if we put people in place and we trust the job that they can do, then unexpected things can happen.

“I can point to spots through the years where we probably could have grown stronger, faster and smarter if we did a little less. When something is your baby, you hold it white-knuckled sometimes, and I think we have gotten over that and we’re enabling more things to start happening.” ●

How to reach: The Life is good Co., (617) 266-4160 or www.lifeisgood.com

How David Kong is keeping 67-year-old Best Western relevant through the customer experience

David Kong, President and CEO, Best Western International Inc.

David Kong, President and CEO, Best Western International Inc.

When you stay in a hotel there are so many things that could go wrong. The hotel could lose your reservation, a TV remote control might not work, a light could be burnt out, the air conditioner may be noisy, or in David Kong’s case, the room may not contain an iron and ironing board.

On a trip to Germany to attend a black-tie event, Kong’s attire became wrinkled while traveling. His hotel had no extra irons or ironing boards, but the staff took his clothes and got them ironed. The next day, the staff bought a new iron and ironing board for his room and also sent a fruit basket to apologize for what had happened.

“My impression of the hotel went sky high, because they went out of the way to make it right,” says Kong, president and CEO of Best Western International Inc. “When something goes wrong, it’s an opportunity to build guest loyalty if you take care of the problem correctly.”

The customer experience is exactly what Kong is focusing on to keep the Best Western brand relevant after nearly seven decades. Headquartered in Phoenix, Ariz., Best Western International Inc. is the world’s largest hotel family with more than 4,000 hotels in more than 100 countries and territories. The company has 1,200 corporate employees and annual revenue of more than $6 billion worldwide.

Over the past eight years, Kong has been working diligently to build and capitalize on Best Western’s strengths surrounding the customer experience.

Here is what he and his team at Best Western have done to keep the company’s brand relevant through the years.

 

Unlock potential

When Kong joined Best Western, most of his friends couldn’t understand why he would make the move to Phoenix to work for the midscale hotel.

“I saw tremendous potential at Best Western, and I wanted to be a part of the team to unlock that potential,” Kong says. “When I started as CEO, I wanted to define the key strengths of Best Western but also look at how we can make the brand more relevant and contemporary.”

The Best Western brand is 67 years old, making it the most senior hotel brand. Kong’s objective was to not appear as anything less than relevant and contemporary and to fit with today’s customer tastes.

“In that regard, we had a concerted effort in separating from hotels that detract from the brand, meaning they didn’t provide the cleanliness, upkeep or service that the brand should be known for,” he says.

Best Western split from more than 1,000 hotels during the last eight years and implemented standards that ensured delivery on the brand promise. The hotel family also created partnerships with Harley Davidson, Disney, AAA and others to not only penetrate those customer bases but better position the Best Western brand.

“We’ve done a lot in terms of how we keep the brand relevant and contemporary and deliver on the brand promise,” Kong says. “That was just step one. You have to do the basics.”

Kong also thought that Best Western needed to be known for certain aspects of the hospitality industry, so the company launched the I Care Clean program, which uses UV wands for cleaning and black light for inspecting cleanliness in rooms. It also launched the Descriptor program, which allows travelers to choose the Best Western that meets their needs out of the company’s three different hotels — Best Western, Best Western Plus and Best Western Premier.

“Ultimately, when I talk about unlocking potential and looking at who we are and what we stand for and capitalizing on that, it’s really about what is Best Western,” Kong says. “If you look at how Best Western is different from any other hotel brand, it’s because we have some very caring, sincere, salt-of-the-earth type of owners in our brand who are very passionate about the brand.

“The big opportunity for us was to capitalize on that, because that is something we have at Best Western that nobody else has and we want to turn that into something that’s relevant to the consumer.”

 

Connect with the customer

To drive that desire forward, Best Western crafted its vision statement to lead the industry in superior customer care. Today, everyone talks about customer service, but in this digital world, the human touch is disappearing very quickly.

“Everybody is focused on innovation, efficiency and productivity like using kiosks to check in and ordering food and beverage from a tablet computer, and there is very little chance to interact with the guests,” Kong says.

“Our industry is the hospitality industry, and it’s about hospitality and caring for people. We have made that our vision, and we started to create programs to capitalize on how we care more than anybody else.”

If you’re looking to keep your brand relevant or expand upon it, you have to find what you want to be best at.

“Take a look around you, study the environment and assess what the unmet need is,” Kong says. “I talked about us living in a fast-paced digital world and ‘humanity’ is disappearing because people are so focused on efficiency and productivity. So our unmet need was that ‘humanity’ was disappearing.

“Then you have to define yourself. Look at yourself and see if you have any attributes that can be leveraged to capitalize on that unmet need. The third thing is to begin to develop a plan to meet your end goal. The last thing is you set measurements and you make continuous improvement.”

To make the message of caring and top-notch customer experience stick, you have to ingrain it into your culture.

“That cultural shift is what we are working on now,” Kong says. “To live our vision, we have to make sure that every single employee cares. We have put together a cultural change initiative that involves selecting the right employees and giving them the right training and resources.

“It involves aligning all our business systems and business processes along this caring initiative, so at the end of the day, all our people, systems and processes are all aligned to deliver superior customer care.”

Creating this culture change is so important because a lot of companies simply have a program of the day, which is a one-time event rather than a system for creating a company mentality.

“Employees can see right through that,” he says. “It doesn’t stick. You have to have the right people in place. They have to feel empowered. They have to feel like they have all the tools to do what it is that you want them to do. There needs to be compensation systems and performance management systems aligned with that, and it has to be customer-centric.

“All those things need to be lined up. That’s how you can affect the cultural change.”

In addition, the leadership team has to be involved for the cultural change to take effect and for it to be sustained.

“If the leader doesn’t walk the talk, then employees see right through it,” Kong says. “If the leader is always, every day, every moment, living what he is preaching, then people get invigorated and inspired by that. The leadership is everything.”

Through these brand relevance initiatives, Kong and his team at Best Western want to be the dominant player in the broad midscale market.

“If you take all the industry measures, whether it is revenue per available room, market share in that respect, our relationships with all the major buyers, whether they are travel agencies, big corporations or independent travelers — in all those aspects, we want to have the superior market share,” he says.

“Every company should set goals for themselves, because if you don’t set goals, you don’t know whether you’ve gone there or not, and you can’t stay on that path.” ●

 

How to reach: Best Western International Inc.,
(800) 780-7234 or www.bestwestern.com

Paul Davis doubled Coinstar Inc.’s revenue in five years by divesting 17 of its businesses and focusing on its core two

Paul Davis, CEO, Coinstar Inc.

Paul Davis, CEO, Coinstar Inc.

When Paul Davis joined Coinstar Inc. in 2008, the leading provider of automated retail solutions had recently acquired 18 different businesses and was at an inflection point, capable of moving in several directions. The Bellevue, Wash.-based company had gone from a single line of business — coin counting — to five lines — money transfer, electronic payment services, Redbox DVD rental, entertainment and coin counting.

Davis had the task of reining in these different businesses that the company had acquired and deciding where to go next.

“One of the first things I did when I joined the company was a deep dive to understand and get alignment throughout the organization about what our core was,” says Davis, CEO of Coinstar Inc.

As a result of that deep dive, Davis landed on the automated resale platform as the company’s core, which two of Coinstar’s businesses — Redbox and coin counting — were focused on. Davis and his team then did an analysis of the remaining 17 businesses, which revealed that they weren’t the right fit.

“Of those 18 companies that were acquired, we sold off 17 in the first two years, so it was a major reshift,” Davis says. “We ended up with our two core businesses today, which are our coin-counting business and Redbox.”

With a much clearer focus on the company’s future direction, Davis was able to play to the strengths of Coinstar. His execution on the strategy to grow the coin-counting business and Redbox earned Davis a No. 4 ranking on the Fortune 500 list for technology visionaries in 2012.

Here’s how Davis evaluated the company and placed Coinstar on a path that would leverage its strengths.

 

Find your direction

Coinstar, a more than $2 billion, 2,700-employee company had primarily been growing through acquisitions before Davis became the CEO in 2008. By divesting the majority of those acquisitions, Davis shifted the focus of the company and its growth strategy to a more organic one.

The company was a clear leader in the DVD rental space, not No. 1 at the time, but it had the clear potential to get there, and in coin counting, it had more than an 80 percent share of the market.

“In these other businesses, they really didn’t leverage what we knew,” Davis says. “Money transfer had very little to nothing to do with kiosks. E-pay had very little to do with kiosks. In the business that they called entertainment, it was a fairly antiquated business that was capital-intensive and we weren’t seeing any growth.”

When Coinstar focused on Redbox and its coin-counting business, it found that all of its money and all of its growth were coming from those two businesses. The other businesses were drains on the bottom line.

“They were prohibiting us from doubling down on those growth sectors and realizing our potential,” he says. “It meant that we had to get rid of these other businesses that had not been integrated.”

Davis’ biggest key to finding Coinstar’s next direction was asking what the “core” of Coinstar was and how the company could leverage that.

“I see a lot of companies, and we were the same way, doing a lot of things that were outside of the core,” he says. “If you think in concentric circles, once you’ve identified the core, we were two, three and four jumps out in terms of concentric circles.

“What ends up happening is it creates a culture where you’re not winning, you’re not in the leadership position, and you start to potentially lose some credibility with your retail partners because you’re not coming to the table as the true leader.”

In Coinstar’s two core businesses, the company was the clear leader and Davis saw great opportunities if the company could leverage that, take advantage and grow that circle.

“The first thing we needed to do was gain alignment around the fact that we thought there was decades of growth in this (automated retail) space,” Davis says. “We did a lot of analysis and saw that there were all these macro-trends around consumers not having time available. Time-starved consumers are comfortable with technology and they love to control their own destiny.”

Coinstar also found that its retail partners could greatly benefit as well.

“We concluded that this was a great space for us to be in and there was a lot of growth potential,” Davis says. “We thought of the category as the intersection between brick and mortar and e-commerce.”

 

Grow and innovate

To build on the opportunity in that space, Davis and his team started their new strategy by focusing on Redbox, because it was a business with immense opportunity. Coinstar had a joint venture with McDonald’s on the Redbox business, so its first step was to buy out the rest of the company.

“We doubled down on Redbox,” Davis says. “At the same time, we said, ‘We’ve got to shift the focus of the company from all the growth through acquisition and instead focus more on organic growth.’”

Coinstar started a new ventures team and put leadership in place to start vetting ideas. The company got ideas from venture capital firms, private equity firms, idea contests, whiteboard contests and an inventor’s network.

“We started getting ideas from all sorts of different pockets and corners of the country,” he says. “Once we saw ideas and thought this had some real potential, this team that we put in place started vetting them.”

Today, Coinstar has eight new ventures on top of both its coin-counting and Redbox businesses. Six are organic and two are strategic investments.

“We looked around as we focused on this automated retail space and there really weren’t a lot of people doing things in there that would be companies we would acquire, so we needed to create the category on our own, and we’ve had quite a bit of success at doing that,” Davis says. “The seeds are at various stages — some are in their infancy with just a few kiosks and others we have multiples of hundreds.”

The company follows a very similar launching process for each of its new businesses.

“We go out and vet it and we look at the size of the category and see if we think that there’s ways or an opportunity for a new solution that’s more convenient and leverages what we know,” he says. “Then we go out and hire someone with deep domain expertise and give them a bucket of money that we tightly control and we put a clock on them to go out and prove the concept.”

The new ventures start with one kiosk and are compared to Redbox and Coinstar in their infancy before being allowed to grow.

“As they clear the hurdles, they get permission and more money to go from three kiosks to 30, 30 to 300 and 300 to 3,000,” Davis says.

The process Coinstar has made so successful is a result of having an innovative culture that breeds creativity.

“You have to be pretty disciplined about creating a culture of innovation,” Davis says. “We really encourage people to try stuff. The way we have managed innovation internally is we think really big. We start small, and once we land on an idea, we scale quickly. But if you fail, you fail cheaply. That’s what we have tried to do over and over again.”

Under Davis’ leadership, Coinstar has grown tremendously. The company has more than 42,000 Redbox kiosks and 20,000 Coinstar kiosks. Redbox recently celebrated its 10-year anniversary.

“Our market share now is 10 points over the next closest competitor in the physical space,” Davis says. “That business at the end of 2007 was about a $500 million business, and we are projected to be over $2 billion for 2012.”

The company’s success in its two main businesses and its new ventures stems from maintaining an innovative, hardworking environment.

“There’s a certain paranoia we have inside the company and a need to constantly innovate and stay focused to deliver,” Davis says. “That’s the mindset that we’ve adopted across the company.” ●

How to reach: Coinstar Inc., (425) 943-8000 or www.coinstar.com

Keeping your company’s secret information secret is a matter of increased focus on protecting company intellectual property

In the last three decades, international trade has increased by a factor of seven — but unfortunately, this advance has also ratcheted up the rate of trade secret theft, an impediment that costs corporations hundreds of billions of dollars a year.

That rate of growth has catapulted multinational commerce to such prominence that it now accounts for a third of all economic activity worldwide.

principal, Zavitsanos, Anaipakos, Alavi & Mensing

principal, Zavitsanos, Anaipakos, Alavi & Mensing

“The world is getting to be a smaller place at a remarkably fast pace,” says Joseph Ahmad, a principal in the Houston law firm Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing. “When we were kids, there might have been a handful of companies that did a particular thing and probably most or all of those companies were in America.

“Nowadays, we’re seeing competition come from everywhere,” says Ahmad, who primarily represents business executives in trade secret cases and employment-related litigation. “The barriers to entry are rapidly declining, so now a lot of companies are facing competition from all over the world.”

Other factors driving the increased incidence of trade secret theft include large pockets of economic stagnation around the globe and the widespread conversion of analog business information to digital formats, which lends itself more readily to leaks and cyber attacks.

Pamela Passman, president and CEO, Center for Responsible Enterprise & Trade

Pamela Passman, president and CEO, Center for Responsible Enterprise & Trade

“In the last few years, there are a couple of key reasons why trade secret theft has grown,” says Pamela Passman, president and CEO of the Center for Responsible Enterprise & Trade, a nonprofit group whose mission is helping companies reduce counterfeiting, piracy and trade secret theft.

“One reason is the economic times we’re going through. People feel constrained, and they’re working under great financial pressure, so many people are cutting corners. Also, a great deal of companies’ information is becoming digitized and, therefore, more easily transferable.

“So instead of walking out of a place with stacks and stacks of papers, a person can walk out with a USB drive that has a huge amount of information on it.”

Increased cyber leaks and cyber attacks are also contributing to the problem, Passman says.

“There are some fairly aggressive third parties that have stepped up their activity in that area,” she says.

Ahmad agrees but points out that the lion’s share of trade secret misappropriation he encounters is a consequence of actions taken by a company’s employees or ex-employees.

“Of course, we do hear from time to time about individuals or organizations — especially overseas — who hack in to companies’ systems,” Ahmad says. “But, in my experience, that’s not a common occurrence. Most of the trade secret theft I see occurs via a current or former employee.”

That is why, Passman says, it’s essential to be straightforward with employees about your company’s policies regarding confidentiality, particularly as it pertains to trade secrets and other types of intellectual property.

“You have to be very clear with your own employees about your policies and about how serious you are about protecting your intellectual property,” Passman says. “Because that’s definitely where your greatest risk lies. And this is a critical issue both while those employees are at the company and after they leave the company.”

The labor market factor

Unemployment and sluggish job markets are also key factors contributing to the increased risk surrounding trade secret theft.

“Unfortunately, in this type of market, job seekers sometimes resort to extreme measures to gain the kind of edge they feel they need to get a job,” Ahmad says. “I’ve seen many new hires — whether consciously or subconsciously — come into a job with the belief that their value is increased if they can, as some of them would put it, ‘hit the ground running’ when they get on the job.

“In other words, they feel that with the help of their previous employer’s trade secret information, they can do a better job for their new employer. Sometimes this happens with the complicity of the new employer, but sometimes employees do it on their own, because they feel it makes them more marketable.”

What, then, are some practical strategies CEOs and their teams can employ to insulate their companies against the risk of having their trade secrets stolen? One of the important early steps executives can take is to enlist the help of a broad cross section of people in their organization to tackle the issue.

“First off, what I suggest is establishing a cross-group team of people to focus on protecting the company’s intellectual property,” Passman says. “This team should include somebody senior in the legal department, somebody senior in R&D, somebody from business development, somebody on the operations side, for example if they have a manufacturing division, and somebody responsible for procurement and the supply chain. It’s important to bring all these disciplines together and instruct them to establish some policies in this area, including trade secret policy.”

Another step that should be taken by companies that have significant intellectual property to protect is requiring employees to read and sign confidentiality agreements.

“The confidentiality agreement is first and foremost,” Ahmad says. “You have to make sure that every employee understands the significance of holding your company’s information confidential. All employees must be required to agree in writing they will do so.”

There are a number of items and types of information that companies can put into their employee confidentiality agreements to help protect their intellectual property.

One approach is to list or enumerate the company trade secrets and other types of information that are required to be held confidential. Another tactic is to include language stipulating that inventions and similar types of newly created information automatically become the confidential property of the employer.

“This helps the company in several ways,” Ahmad says. “First, you get to define what your trade secrets are and what information is expected to be held confidential and you get to formally notify the employee about it. This also enables you to make sure that whatever new intellectual property your employees develop will be the property of the company, and they will agree to hold that information confidential.”

Vetting third parties

Another area where companies seeking to protect their intellectual property need to be vigilant is conducting due diligence on third parties, such as suppliers and customers, as well as companies they may be seeking to acquire or merge with.

“For any key third parties that you’re going to be sharing your intellectual property with, it’s essential to conduct due diligence on them,” Passman says.

Due diligence encompasses activities such as research, interviews and online searches. A key part of the process is being alert to “red flags” — potential problem areas signaling that the third party may not be effective at helping co-protect the company’s sensitive information.

“Basically, you want to see if [the third party] has any red flags you need to be aware of,” Passman says. “For example, if they’ve been involved in different kinds of litigation, especially litigation involving intellectual property or trade secrets. And you’d want to explore and make sure you understand how they go about managing and protecting the intellectual property of the third parties that they in turn do business with as well.”

Regarding the employee confidentiality agreement, Ahmad says it’s unwise and potentially dangerous for a company to regard this process as a one-and-done deal. In other words, it’s insufficient to simply have employees read and sign the agreement and then file it away. Companies need to remind employees periodically about their confidentiality agreements and about the importance of keeping the company’s sensitive information private.

“Companies sometimes leave themselves vulnerable to trade secret theft loss if they approach these confidentiality agreements like a checklist,” Ahmad says. “By that I mean they can’t just have the employee read and sign the agreement, and then they knock it off their checklist and forget about it. The problem with doing this is you can be sure the employee will forget about it too.

“Many times, an employee will enter into a confidentiality agreement, and then they’ll work for the company for 10 or 20 years, and they’ll forget they even have the agreement. As a result, they don’t really respect the company’s trade secrets the way they should.”

Thus, it’s important to periodically remind employees about their confidentiality agreement — and even more important to underline that agreement’s significance when the person’s employment with the company ends.

“That’s probably the most critical aspect — how the matter is handled at the end of the employment relationship,” Ahmad says. “I’m often shocked at how many employees I see who have signed confidentiality agreements, and at the end of their employment, whether they resign or are terminated, they’re not even reminded that they have these agreements. Many of them don’t even know they have them.”

Business executives would be wise to take advantage of the employee exit interview because it represents their company’s last chance to underscore the imperative of keeping its trade secrets just that: secret.

“At the exit interview, employees must be required to sign and confirm that they understand their responsibilities in regard to keeping the company’s information confidential,” Ahmad says. “By doing that, you’re drilling in to the employee as they’re leaving the company — and presumably going to work for someone else, who just may be one of your competitors — that, ‘Hey, listen, this is serious. We take this matter very seriously.’”

How to reach: Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, www.azalaw.com; The Center for Responsible Enterprise & Trade, www.create.org

Do customers know your business?

Barb Rechterman, Senior Executive Vice President and Chief Marketing Officer, GoDaddy

Back in the early days of Go Daddy, Barb Rechterman and the company’s executive team struggled to figure out why more business wasn’t coming their way. Go Daddy, a Web hosting provider and domain name registrar founded in 1997, had one of the least expensive domain names in GoDaddy.com, but it had excellent customer service, the best price in the market and a great value proposition.

So why weren’t people flocking to use Go Daddy’s services? The answer was simple — not everyone knew who or what Go Daddy was.

“From that research, we started down the path of the Super Bowl, because if people really have no idea who you are, there is no possibility for them to do business with you,” says Rechterman, senior executive vice president and chief marketing officer at Go Daddy. “In the history of Go Daddy, it’s been one of our biggest challenges.”

The Scottsdale, Ariz.-based Go Daddy decided to do two Super Bowl ads in 2005 to build the brand and gain an audience. Those Super Bowl ads were the company’s first on television.

“The marketer in me today says, ‘Holy smokes, I can’t believe we didn’t try to air a television ad before the Super Bowl so that we actually knew what might happen,’” Rechterman says.

Today, Go Daddy has advertised in eight consecutive Super Bowl campaigns and is set to air ads on the 2013 game. Before the first Super Bowl ad in 2005, Go Daddy had 16 percent market share of new domain names. Today, Go Daddy enjoys a 52 percent market share.

“We’re overachievers, so we tend to always want to outperform the prior year,” she says.

Here is how Rechterman has developed marketing strategies that have elevated Go Daddy’s brand and business.

Make your business known

Up until and through 2004, Go Daddy was growing, business was profitable and things were happening for the company. However, something just didn’t feel right.

“We were growing at this nice, steady rate, but it wasn’t the up and to the right acceleration,” Rechterman says. “So we decided at that point to make a Super Bowl ad that was brand building.”

At the time that Go Daddy decided to air those Super Bowl ads, the concept of a domain name and that language was somewhat difficult to explain.

“Rather than trying to tell people, ‘You need a domain name, you need a website, you need hosting, and you need email,’ what we did instead was used humor and made something memorable so people would then remember our name and might even do us the favor of checking out who we are online and what we do,” she says.

Go Daddy’s ads were successful in overcoming what had been the company’s biggest challenge: getting people to understand who and what Go Daddy was.

“Not everybody has the money for a Super Bowl ad,” she says. “Executives need to think about the fact that there are lots and lots of great businesses out there, and with the emergence of the Internet, if you don’t have a website and leverage that website effectively, you, as a business, will have a harder time getting noticed.”

Go Daddy’s Super Bowl ads have been notorious for sparking interest. After its 2006 campaign, out of all the advertisers in the Super Bowl that year, Go Daddy accounted for 80 percent of Internet traffic during the game.

In 2008, more than 1 million views were tracked to GoDaddy.com and the company’s commercial had 2 million views the day of the game. In 2010, the website had 1.1 million visitors per minute, according to Akamai Technologies.

“What people don’t realize about the Super Bowl is it’s not just about the ad,” Rechterman says. “It’s about preparing our systems and internal website structures for the eventual traffic load that we’ll take on that day and making sure that the site and the systems are as optimized as they can be for that particular day.”

Form your marketing strategy

When Go Daddy first started its television advertising campaign, the goal and the strategy of that campaign was brand awareness. Today, the strategies are to still maintain brand awareness but to also build and layer in the pieces of Go Daddy’s customer and product stories that are important for people to know.

“We want to have people understand what it is we do and that our goal is to enable small business success,” she says. “Our ads have started walking down the path of telling people about products that we have other than domain names.”

Go Daddy has begun highlighting its websites, hosting services and its customer care center.

“There are three separate, distinct ads that we are airing now to re-emphasize those particular messages, but we didn’t give up our girls [models] in these ads, and we didn’t really focus on the girls either,” Rechterman says.

To know where to focus the company’s marketing strategies, Rechterman and her team do a lot of research.

“It’s not simply about a gut feel or a passion,” she says. “We do a ton of research to help us identify what we should be doing to grow our customers and to know our customers.”

Go Daddy uses four core values to help drive its business forward. No. 1 is to take care of the customer above all else.

“Get to know them,” she says. “Take care of them and understand their needs.”

No. 2 is give people individual accountability and create passion in the employee base.

“They become connected to the business and we pride ourselves on connecting our employees to our business,” she says.

No. 3 is to never be satisfied.

“Our chairman, Bob Parsons, has 16 rules, and the first rule is to get and stay out of your comfort zone,” she says. “We live that forever and ever.”

No. 4 is to be part of something special.

“Here at Go Daddy, something special for us is to be part of our customer’s business success and enabling them to have business success,” she says.

The key to truly understanding your customers and finding a direction for your marketing strategy is to talk to your customers.

“If you’re just starting out, get to know who your potential customers are,” Rechterman says. “A lot of people have really great ideas that they don’t then spend the time to figure out how to get those ideas to market. The answer is always in a discussion with either the customer or the potential customer.”

Getting the research to do that is valuable. That will almost always tell you what your strategy needs to be.

“Let’s say that our customers were saying, ‘We’re tired of Go Daddy girls,’” she says. “That might build a marketing strategy. That’s a problem from a marketing standpoint that you’ve got to solve.”

Through constant research to better understand the customer and delivering on those points, Go Daddy has become the world’s largest Web hosting provider with more than 5 million active hosting accounts. The company has more than 53 million domain names under management and more than 10.6 million customers worldwide.

Go Daddy employs more than 3,200 people, and in 2011, it exceeded $1.1 billion in sales.

“Just because you think you have the right idea, doesn’t mean you have the right idea,” Rechterman says. “You have to actually talk to people who would be the consumer of your good or service to know the right answer.” ●

How to reach: Go Daddy, (480) 505-8800 or www.godaddy.com

2013 Columbus Pillar Award Winners Unveiled

COLUMBUS, OH (Jan. 21, 2013) – Smart Business Network Inc. is pleased to announce the category winners of the 2013 Medical Mutual Pillar Award for Community Service program, presented by Smart Business and sponsored by Rea & Associates, GREENCREST, Capitol Square Review and Advisory Board, and Catering by Design.

At an awards recognition program held at the Ohio Statehouse January 17, 2013, 15 organizations were unveiled as Pillar Award winners in five distinct categories and participated in a series of panel discussions with TV-10’s Kristyn Hartman about the tie between the for-profit and nonprofit worlds.

Pillar Award for Community Service
• Cardinal Health
• Columbus Crew
• Donatos
• Fifth Third Bank
• Mettler Toledo
• RockBridge
• Safex

Medical Mutual SHARE Award
• Safelite®

Rea & Associates Executive Director of the Year Award
• Jay Jordan, president & CEO, OCLC
• Tammy Wharton, CEO, Girl Scouts of Ohio’s Heartland Council

Nonprofit Board Executive of the Year Award
• Brooke Billmaier (Victoria’s Secret), St. Stephen’s Community House
• Michael J. Fiorile (The Columbus Dispatch), Columbus College of Art and Design
• Laura Warren (Limited Brands), Girl Scouts of Ohio’s Heartland Council

Kent Clapp CEO Leadership Award
• Jane Grote Abell, chairman, Donatos
• Mark Swepston, president & CEO, Atlas Butler Heating and Cooling

“This class of honorees, combined with this year’s group of finalists, is truly inspirational,” says Dustin S. Klein, publisher of Smart Business. “They give back individually and as organizations. They get involved in causes they care about. And the nonprofit leaders have forged meaningful relationships with the for-profit companies and their executive teams to better deliver upon their missions. All told, the Pillar Award class of 2013 truly understands how to strengthen the regional communities where we all live and work.”

The Pillar Award program was founded in 1998 and honors organizations and individuals that best demonstrate a commitment to making a difference. For information on the award winners, along with profiles of the finalists for this year’s Pillar Awards, visit www.sbnonline.com. To receive a nomination for the 2014 awards program, or to learn more about the Pillar Awards, contact Smart Business at [email protected] or (440) 250-7026.