It looked to be another great year for Republic Steel.
Coming off its 2005 acquisition by Industrias CH, S.A de C.V. (ICH) — a fast-growing steel producer and processor based in Mexico City — the company had cleared up all its previous debt, the steel industry was flush with opportunity, and as the new
was laser-focused on building a strong team and investing in best-in-class facilities to position the 125-year-old steelmaker for growth.
And that, of course, is when everything went south.
“After October 2008, the whole world changed for the industry,” says Vigil, who joined the Canton, Ohio-based steel company in 2005. “The recession threw us a curveball that we were not planning. I don’t think we were looking ahead. We had really relied on intelligence based just on market view.”
As the largest maker and supplier of special bar quality (SBQ) steel in North America, Republic produces steel for applications such as automotive and energy. It has been developing its steelmaking practices for more than a century. But even a company with annual sales of more than $1 billion wasn’t immune to the shock of the 2008 financial downturn.
Declining demand and struggling customers, who were urgently looking for ways to cut costs and scale back, hit the company hard. Almost overnight, Republic Steel saw its volume of business nosedive.
Streamline your structure
Not yet knowing the full scope of the downturn, Vigil knew that Republic Steel — like its customers — needed to cut costs to minimize the financial fallout. So the first step was to look for ways the company could streamline plant operations.
“At that point, the volume with the plants that we had had a lot of fixed costs,” Vigil says. “We were forced to shrink our footprint to be able to manage our costs and have a profitable business.”
Increasing efficiency without sacrificing quality can be tricky. You need to examine the profitability of every segment of operations thoroughly. First, identify the areas that have the most efficient costs, and second, identify where costs overlap. This process allows you to consolidate the most efficient operations and shut down equipment and functions that no longer make sense.
By making these changes, Republic Steel was able to shrink its footprint to that of a much smaller company in a short time period.
“That was a very different situation for us from 2005, but it was also a very good experience for us to try to model our business for the future,” Vigil says. “It allowed us to look at things in more detail and understand our business and our cost and the opportunities that we had to be more efficient.”
Taking cost out of operations not only allowed the company to produce SBQ steel more efficiently, but it also freed up resources, which Vigil reallocated to enhance the company’s quality, delivery and range of products in its SBQ steel business to provide more value to customers.
“We have to be right there with them making a product that suits their needs,” Vigil says. “Our No. 1 qualification or differentiation in the market is our ability to work with technicians of our customers to develop the products that fit their needs and then produce them consistently with a low cost and high quality and delivering them on time.”
When you’re not making a commodity, you need to be more focused on quality and continuously improving your products to stay competitive, Vigil says. The key to staying relevant was investing in the company’s strengths, such as its years of experience in the steel industry. The fact that the company’s Canton plant was the first-ever producer of SBQ steel provides it with a strong competitive advantage.
“Our brand has good recognition, and we continue to build on that by making our customers really comfortable in the long run that they have a true partner with Republic Steel, a company that knows what it wants and that can adapt to the changing market as needed,” Vigil says.
“With more than 125 years of know-how, you get a very good result. You can continuously provide the same quality that your customers are used to with more efficiency. It allows you first to be more competitive in the marketplace and maintain and improve your quality in the product.”
Since 2005, Republic Steel has reinvested close to $130 million in new equipment and new processes into its core Northeast Ohio facilities, which include plants in Canton, Lorain and Massillon, Ohio. In 2012, the company also announced that it would invest more than $87 million in a new electric arc furnace and equipment at the company’s Lorain, Ohio, steelmaking facility — a move that is adding approximately 450 employees.
The company chose the Lorain plant for the investment because of its close proximity to the existing customer base and to other Republic Steel facilities. Having a smaller physical footprint allows you to allocate resources to growing areas more easily to develop strong teams, while delivering a consistent experience for customers.
“We see a strengthening automotive industry as well as a lot of growth in the energy sector side through the gas horizontal drilling process,” Vigil says. “We see ourselves in a very good position to serve those markets in the long term.
“It gives us an opportunity to serve our customers with more product and a very solid footprint in the long run. Our customers have a supplier that has no debt and that is investing in its business. So we feel that our customers see us as a long-term partner, and they can stick with us for years to come.”
Look to your core
When your company is facing market volatility, past plans and strategies may get tossed out the window rather quickly. To ensure that Republic Steel didn’t lose sight of its identity in the chaos, Vigil used the company’s core values to guide the strategy — specifically two values passed down from its parent company, ICH.
The first was carrying a debt-free balance sheet.
“When we acquired the company in 2005, we inherited some debt from the previous administration,” Vigil says. “We worked very hard to pay it off with our own resources and some support from the parent company.”
Even when the company was losing volume during the recession, Vigil wasn’t willing to take on debt in favor of gaining more financial flexibility. In fact, he says borrowing money often results in the opposite outcome for companies by stifling their spending. Carrying zero debt allows you to make decisions without dealing with banks or lenders.
“Some companies have different opinions about debt, and in certain cases, it allows companies to be flexible and grow faster when an opportunity comes, but we still have that flexibility because having no debt makes us attractive to banks,” Vigil says.
“The recession has been the best proof of the strategy. We tested it through this downturn, and we were able to manage through the recession a lot better than some other companies who have big debt or a lot of interest to pay.”
As a result, the company has been debt-free since March 2006, operating as a true cash-flow company.
“It makes us a stronger company, and it allows us to keep reinvesting even in the downturn because the money that we generate is really for us and not to cover any debt obligations that we have,” Vigil says.
The second core value that helped guide the company through the recession was having a diversified mix of sales. Carrying a wide range of products makes the company a one-stop shop for many customers. So even in the downturn, Vigil continued to make investments to expand Republic Steel’s capabilities in emerging markets, such as natural gas and energy.
“The volatility in our customers’ industries continues to be something that we’re monitoring very closely,” Vigil says. “The economic situation worldwide, starting with Europe being so volatile, continues to have a big effect on our customers’ ability to project their levels of operations.
“Having a more diversified mix of sales allows us to not have all of our eggs in one basket and participate in different industries, and we’re able to better ride the cycles. We, as a company, believe that if we stick with those two values — remaining debt-free and continuing to have a diverse mix of sales — we can deal with the volatility in different markets.
“We’ve prepared our company to be better geared to react now than we were in 2008. Through these changing circumstances, we’ve created a more flexible company with the investments that we’re making, allowing us to grow our strength faster.” ?
How to reach: Republic Steel, (800) 232-7157 or www.republicsteel.com
1. Find ways to cut cost by shrinking your footprint.
2. Allocate resources to growth areas.
3. Guide your strategies with core values.
The Vigil file
President and CEO
Born: Mexico City
Education: Universidad Anahuac in Mexico City
What is one part of your daily routine that you wouldn’t change?
I like running every morning before going to work; it really makes a difference helping me start every day with great energy and a clear head ready for business.
Best piece of business advice:
I’ve benefited a lot from the experience that my team brings to my decision-making process. That saying that more heads are better than one — that does apply in practice. It’s particularly important in soft science to surround yourself with good members willing to openly give their take on problems so that together you come up with the best solutions.
What do you do for fun?
There is no better way for me to spend my time when I’m not at work than with my wife and kids. From training for a marathon with my wife, to being attacked with toy swords by my three and four year old boys … it’s the best time of my day!
The times were tough for Roeslein & Associates in 2001. Sales had grown from just more than $1 million in 1990 to some $20 million in 2000. Now the volume of work was practically nonexistent.
“When you go without work for almost a two-year period and you use up every bit of retained earnings that you had, it starts to challenge your own beliefs,” says Rudi Roeslein, founder and CEO for a company that engineers, fabricates and constructs unitized modular industrial systems. “We were faced with this real identity crisis of was it all smoke and mirrors? Was I just delusional?”
Indeed, Roeslein and his company were in pretty dire straits. He let two members of his management team go and the six who remained each took a 30 percent pay cut. Roeslein and his partner, who only owned 25 percent of the 250-employee business, did not take any pay for 18 months.
“I said, ‘I’m not going to force you to do it,’” Roeslein says. “He had a family and both of us had kids at the time. We had the same bills that everybody else has. We just had to live on whatever we took out of the business previously in earnings. We tried to keep as many people as possible.”
As hard as he was working to keep the business going, Roeslein also had to fight the perception that it wasn’t ever going to get better. He had complete confidence that he would make it work, but it wasn’t shared by everyone.
“When people see that, how do you keep them enthused?” Roeslein says. “You start letting people go, and (others) want to bail out. They want to leave.”
As it turns out, Roeslein was right and his company did survive the business drought and emerge on the other side, growing to a $100 million organization today.
But Roeslein emerged a new man and a new leader. He was willing to look at himself in the mirror and ask the question that few brash, successful entrepreneurs ever want to ask of themselves.
“The big soul-searching that I did was, ‘OK, once I get out of this, even if we get the business, what am I going to do differently so I don’t get into this predicament again?’” Roeslein says. “That’s where you have to identify what are the necks in the hourglass? Am I the neck in the hourglass? I came to the conclusion that I was because of how I managed my business.”
The transformation began in 2002 with a realization that Roeslein needed to get his people more involved in guiding the business.
Empower your people
As Roeslein looked at his role in leading his company, he began to understand the problem.
“I wanted all customers to discuss their opportunities with me,” Roeslein says.
He had a CFO who handled the day-to-day personnel issues and Roeslein managed the engineering, business development and product management. But he also did selling and implementing and wanted in on every sales discussion.
He realized that had to change.
“You have to get over your own ego and really accept that maybe you’re the problem and not the solution,” Roeslein says. “Maybe the solution is right in front of you because you have all these brilliant employees and you’re just not releasing their talent.”
So as things began to pick up, Roeslein appointed the six managers who had been department managers and made them directors.
“I assigned specific customers and accounts on a regional and global basis, regardless of whether they were technical or nontechnical,” Roeslein says. “I divided it among them.”
The key to making this work was that Roeslein didn’t just call them into his office, tell them about the change and then expect them to figure out how to do it on their own.
“I said, ‘I will mentor you for a period of a couple of years,’” Roeslein says. “‘I will go with you to these customers, but ultimately, I’m turning these customers over to you. I’m turning these projects over to you. Then you guys figure out how to complement each other. Figure out who is best at construction, engineering and business development. One of you is going to become the president of the company.’”
It was a bold move, but Roeslein quickly knew it was exactly what his business needed.
“We quickly became a $100 million company, which under my leadership and style, probably never would have happened,” Roeslein says. “We would have been stuck at $20 million to $25 million because that’s what I could manage and that’s what I could keep my thumb on and have enough daytime hours to manage.”
If you feel like your company is stuck, it could be that you’re unwilling to let the people you’ve brought in to work with you and for you stretch their legs and use their talent. You’re only one person and if you keep all the important work to yourself, your company is severely limited in how much it can grow.
“You have to take the risk,” Roeslein says. “Put those people out there. Put them on the front line, put them in difficult situations and see how they respond. From that, you can start to formulate a plan as to who your leadership is and who your next generation is. That’s what I’ve challenged my six managers to do.
“Give guys an opportunity. Challenge them and push them beyond what you believe they can do and see what they can do. If you just keep them on the bench, they’re never going to be able to demonstrate their capabilities and you’re never going to know.”
Back up your words
If Roeslein had talked to his people about having a bigger role in the business or being empowered but continued to make the same decisions he had always made and lead the way he had always led, his company would not have grown.
“There are signals and indicators that employees read,” Roeslein says. “You say certain things. But it’s eventually what you do. What we did was we engaged them in a concept that signaled that we believed there was a future.”
That engagement was made with his six directors but also with every employee who had concerns about the company’s future during those dark days.
“Why would I have them working on all these improvements, cost reductions and things that work toward the future?” Roeslein says. “What I really focused on was let’s build and work toward the future. The future is confident, as far as I’m concerned. Why would I risk every penny that I have and everything I’ve worked for if I didn’t believe in it?
“That resonated with my employees and certainly with six out of eight managers.”
It resonated even more with those six directors when Roeslein rewarded their hard work and effort in getting the company turned around.
“These guys are going to sacrifice a tremendous amount of their lives to this company,” Roeslein says. “I told them a portion of their bonus each year could be applied toward ownership of the business. You’ve already made a huge sacrifice taking a 30 percent pay cut for two years to keep our business alive. Here’s your reward.”
The directors took advantage of the offer, buying out Roeslein’s partner and eventually reducing Roeslein’s share of the business from 75 percent to 51 percent.
“I don’t want to sell this business to outsiders,” Roeslein says.
Build for the future
Just as Roeslein mentored his six directors, he expected them to do the same for another group of leaders.
“If we want to grow the business to the next level, each of you needs to mentor six people,” Roeslein says of his message to his six directors. “That is the next step in the evolution of this company. You mentor six people, and you get the same level of confidence in them that I have in you.”
You’ve got to approach your business as though it were a team and you all make contributions to that team or you’re going to run into problems.
“It’s easy to be a really good guy and smile when things are great,” Roeslein says. “But when things are really bad, that’s when you find out your own character and your own ethos.”
So when failure occurs, approach it with the perspective of how the team can improve instead of focusing on the person who screwed up.
“Every leader needs to put their employees in a situation where they can succeed,” Roeslein says. “When they fail, they need to recognize they are part of the failure. You can’t have your people be so concerned about, ‘What are we going to do if we fail?’”
Roeslein says running a business is a lot like the whitewater rafting he used to do in Colorado and Utah.
“You’re just slowly going down the river and the sun is shining and you relax and your mind wanders,” Roeslein says. “Then, all of a sudden, you hit those rapids and those giant holes, and it scares the hell out of you. You wonder if you’re even going to make it through. It’s how you perform and how you treat everyone during those periods that really forms your character.”
How to reach: Roeslein & Associates Inc.,
(314) 729-0055 or www.roeslein.com
The Roeslein File
founder and CEO
Roeslein & Associates Inc.
Born: Salzburg, Austria. I was born in 1948 and came to the United States in 1956. I remember seeing the Statue of Liberty. One of my most lasting impressions was the train ride to St. Louis with my face plastered against the window looking out at the countryside. I didn’t speak a word of English.
Education: Bachelor’s degree in electrical engineering, Saint Louis University.
How did your childhood shape you? All of us had this work ethic where we believed no one was going to take care of us. We had to take care of ourselves. Kids can be cruel. Me and two of my German friends, instead of the three Amigos, we were the three little Nazis. So we went through some tough periods.
But I think the great equalizer for me was always sports. I started playing soccer at an early age and when you’re very good at something, kids accept that you’re good at that and a lot of that other stuff goes away.
Did the tough times then help you deal with them better now? I didn’t look at it as leaving long scars. Did it toughen me up and make me more able to take ups and downs in life? I think so. But I’ve never looked back and said, ‘Gee, those kids that held me down and tried to carve a swastika in my forehead were bad kids.’ It was just a sign of the times. Things were going on and you just fought your way through it and just keep on going.
Who has been the most influential person on who you are? My father. He’s the example of a completely selfless person. His whole life was focused around us.
Let people put use their talents.
Mentor leaders through growing pains.
Reward employees who help you meet goals.
When my great grandparents immigrated toAmericafromItalyin the late 19th century, they sought to assimilate. Like many newcomers, their goal was to work hard and blend in with their American neighbors.
A lot has changed since then. We’re a far more diverse nation than we were 100 years ago and technology has made the world a much smaller place. Success still requires hard work, but it no longer hinges on blending in. In fact, the opposite is largely true: In order to compete and thrive, individuals increasingly need to identify and magnify what it is that makes them different.
The same holds true for organizations: They must stake a claim to what separates them from the rest and create environments where employees’ diversity is an asset and an advantage.
It’s obvious to me that this is the wave of the future. Yet, I still encounter a surprising amount of resistance to embracing differences on a personal level. Many work environments continue to be characterized by an atmosphere of conformity. I can only assume that this is because people find differences to be threatening and uncomfortable. In this setting, employees are stifled rather than encouraged when they think or behave differently from the norm.
Working exclusively alongside people who share similar skill sets and worldviews is like trying to comprise a winning football team with 11 quarterbacks: You’ll be great at passing, but the rest of your game will be lacking. Or like trying to win a game with only two plays: It doesn’t matter how brilliant those plays are, you need greater versatility.
Today’s pioneering businesses know that thriving in a complex, ever-changing market requires being nimble and well-rounded. They know they must respond quickly and creatively to challenges and barriers. They do that by leveraging their “originality factor” — getting the most from the distinct skills and talents of each member of their workforce.
How do you maximize the benefit of your employees’ different skills, talents and views? By fostering a work environment that supports limitless, non-conformist thinking. The way work is produced dramatically influences what work is produced. You can’t separate process from outcomes. Here are a few proven ideas:
Cross-train. We can deepen our strengths when we actively seek to develop new, boundary-spanning skills and knowledge, like athletes who work their muscles through a variety of exercise routines. In the process we make ourselves more well-rounded and bring greater value to our businesses.
Limitless idea-making. Provide employees with an innovation room — a dedicated physical space where free-thinking is not only encouraged but expected. The space should inspire creativity. Its design is hemmed in only by your imagination. Think large work tables or no tables at all, pedestals, chairs in uncommon configurations, writing tablets, colorful pens or even crayons.
This space shouldn’t be reserved for special-occasions, but accessible at all times with the understanding that it’s for generating innovative and creative ideas.
Boost morale. A strong sense of team membership fosters feelings of inclusion. Once each team member believes that they are a valued member of the team, they’ll feel much more comfortable to offer creative solutions to problems.
Promote teambuilding through an emphasis on open and honest communication; encourage broad input during meetings, making sure that the stage isn’t monopolized by a few; publicly applaud team successes; and create opportunities for team members to develop relationships.
Push your boundaries. Most people have strong notions of what they are and are not good at doing. They tend to play to their strengths and quickly dismiss the time and energy required to learn a new skill, cutting off opportunities for growth. Push yourself and others to go beyond current strengths by experimenting with new and different skills and behaviors.
Businesses and people that embrace differences and actively experiment with them will overcome barriers and gridlock in an accelerated way and reach their targets more rapidly. Those who resist will be left behind.
As a leader, what are you doing to create an environment where differences are encouraged and valued? You can start by modeling what you value and desire: If you’re not afraid to be an individual and go against the grain, it frees others to do the same. Leaders who demonstrate a willingness to be different and set themselves apart will prompt others to follow suit.
But it doesn’t stop there. The work environment has to be one where different skills and strengths are valued equally.
Are you making the most of your originality factor?
Donna Rae Smith is a guest blogger for Smart Business. She is the founder and CEO of Bright Side Inc., a transformational change catalyst company that has partnered with more than 250 of the world’s most influential companies. For more information, visit www.bright-side.com or contact Donna Rae Smith at email@example.com.
The world is changing faster than ever. We now face megatrends of monumental proportions: a global population of 7 billion, greater disparity between rich and poor, increasing numbers of cataclysmic events, the rise of emerging countries, increased consumerism, increased social and technological complexity, increased globalization trends, and so forth.
As leader of a business, how do you face these trends and events?
Can you survive by conducting “business as usual,” or do you embrace, adapt and leverage their potential? Fundamentally, can a firm and its leaders operate without facing these trends and transforming their business to play a productive role in society?
For many decades now, economics and management scholars and behavioral scientists have studied and debated the role of the firm in society.
Why does the firm exist, and what is its role? From these discussions, the theory of the firm has evolved over the years from concepts of profit maximization (neoclassical economics) to customer satisfaction (customer-value theory of the firm) through the management of resources to create competitive advantage (resource-based view of the firm) and the organization of agents and actors to make choices and decisions (behavioral theory of the firm).
Among the vast array of derivative theories and multiple schools of thought surrounding the theory of the firm, none of them actually captures the fundamental question facing our businesses today: Why do firms exist in society, and what will their role be during the next 50 years?
More recently, the concept of sustainable value has emerged at the nexus of discussions about sustainability and corporate social responsibility. Based on Chris Laszlo’s work, this concept proposes that just “doing good” is no longer enough. Firms need to think strategically about their long-lasting value to all stakeholders and make it part of their strategic orientation.
This is a holistic approach that requires vision, action, support and resources. The following quote captures this concept well:
“Companies that are breaking the mold are moving beyond corporate social responsibility … to social innovation. They view community needs as opportunities to develop ideas and demonstrate technologies, to find and serve new markets and to solve long-standing business problems.” — Rosabeth Moss Kantor
So, you might ask, what does this mean for me? It means that you cannot ignore the megatrends. You and your firm can make a difference in society. The question then becomes how to get started.
The following are some recommendations for starting your journey.
Start small, but do it fully.
Select a few programs and partnerships to work on, and fully engage your firm and your staff. Less is better. At Ardex, we work closely with Habitat for Humanity and the local food bank, and we support veterans in need every holiday season. It starts at the top: Business leaders and owners are the organizational champions.
Capture the energy of your employees.
You will surprised by the amount of employee support you receive, as well as the positive impact on the organizational climate. You might not reach everyone, but many of your employees will be motivated and enthusiastic.
Leverage the power of social innovation.
Study the trends and capture their innovation potential without trying to make additional profit. Make it part of your regular business model and be realistic.
Include it as part of your DNA.
Sustainable value is not short term. It is a journey for the long term, and programs cannot be cut at every downturn. It is a transformational journey toward becoming a better corporate citizen and leading with compassion at the organizational level.
Whether you work for a small business or a large corporation, you can make a difference and create lasting value. Everything counts. The role of business is changing, and the best-in-class companies have emerged. Do not sit on the sidelines. Your community, your customers and your employees are watching. The world is watching. ?
Stephan Liozu (www.stephanliozu.com) is the founder of Value Innoruption Advisors. He specializes in disruptive approaches in strategy, innovation, pricing and value management. He earned his PhD in Management at Case Western Reserve University and can be reached at firstname.lastname@example.org.
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
The last month of the year has historically been a prolific month for mergers and acquisitions, and December 2012 did not disappoint.
In the U.S. market, according to S&P CapitalIQ, the dollar value of closed transactions with disclosed values for December 2012, compared to December 2011, was up 4.4 percent, while the number of transactions was down 6.5 percent.
Likewise, for all of 2012, the number of transactions decreased 4.4 percent compared to 2011. The transaction dollar values made up for the lack of volume with an increase of 7.8 percent across the same period.
Regarding the M&A industry, the purchasing power of private equity groups has been on a steady decline since 2007 as they seek to put money to work, while strategic purchasing power continues to climb. Conversely, private equity partnership commitments to all types of funds, according to Dow Jones, are up 30 percent from last year.
With respect to corporate buyers, Applied Industrial Technologies acquired Parts Associates Inc. of Cleveland. The distributor of maintenance supplies and solutions, including fasteners, fluid flow, chemicals and shop supplies has two locations, Cleveland and Atlanta, staffing an estimated 200 employees.
Gulfport Energy Corp. dug up $372 million to purchase 37,000 acres from Windsor, Ohio, in the Utica Shale region. This purchase increases Gulfport’s interests in the Utica Shale region to 137,000 acres.
DDR Corp. acquired two shopping centers for $151 million in December. This brings DDR’s total acquisitions in 2012 to $2.1 billion. First Communications Inc. in Akron sold subsidiary First Telecom Services for an electrifying $110 million to the Zayo Group. First Telecom Services is a provider of bandwidth infrastructure services.
With respect to private-equity-related transactions, Linsalata Capital Partners Inc. acquired Stag-Parkway Inc. from Ares Capital Corp. Stag is the largest aftermarket distributor of recreational vehicle parts and accessories in North America and is based in Atlanta. The Weinberg Capital Group, in conjunction with the The Riverside Co. and Hicks Equity Partners, acquired Overton Chicago Gear Corp., a manufacturer and distributor of large-diameter precision gears.
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.melcap.co. For more information about the Association for Corporate Growth, please visit www.acg.org/cleveland.
Deal of the Month
This month, the honor goes to the Cleveland Indians for the sale of SportsTime Ohio to News Corp.’s Fox Sports Media Group for $230 million. This acquisition is part of a push by media and entertainment companies that target regional sports channels, since broadcast rights for professional sports events are locked in for years. Fox Sports Ohio serves more than 5 million homes throughout the Midwest and is the exclusive regional TV home of the Cincinnati Reds, Cleveland Cavaliers, Columbus Blue Jackets, Columbus Crew, Xavier Musketeers and Cincinnati Bearcats.
“The acquisition of Sports Time Ohio solidifies our business in Ohio, and Fox Sports Media Group’s new long-term agreement with the Indians reunites the team with the Fox Sports family,” said Jeff Krolik, executive vice president of Fox Sports Networks. “We look forward to once again showcasing the Indians to their fans, as well as working with the Indians ownership to continue to enhance the value of this iconic franchise.”
Cleveland-based Creekside Financial Advisors LLC has announced that Jeanne Cowart joined the financial services firm as a client manager supporting Alan Yanowitz, J.D., a Creekside financial adviser.
Cowart’s strong analytical skills combined with her deep client-service experience makes her the ideal candidate to work with clients on a day-to-day basis and provide them with the data and information they want, in a manner that suits their particular needs.
Cowart comes to Creekside after serving in client management roles at Edward Jones and AmTrust Bank. At Edward Jones, she was responsible for managing the operations of the office and, most importantly, delivering a consistently exceptional client experience. She wore many hats and was the first line of contact for the entire firm’s clients.
Alliance Solutions Group, a full-service staffing and recruitment agency, has recently expanded its presence to Lake County by opening a new staffing facility at 8334 Mentor Avenue in Mentor, Ohio.
This new office will offer recruitment and staffing services from the company’s nine business units to individuals in Mentor, Painesville, Willoughby, and the surrounding communities. The Mentor office is the fifth new or expanded office that Alliance Solutions Group has opened in the past year, with earlier expansions taking place in Mahoning Valley, Akron, Elyria and Upper Sandusky, Ohio.
Alliance Solutions Group serves the broadest scope of industries among any staffing recruitment agency in Northeast Ohio, giving its customers single-source convenience across multiple specialties.
Medical Mutual has recently announced several new appointments here in Cleveland — the health insurer has appointed Traci Fabrizi as vice president and corporate controller, Ann Vickers as senior marketing director, Gregory Young as director of strategic initiatives, and welcomes back Debra Green after a year and a half as the director of community
Traci Fabrizi will be responsible for the overall direction of various divisions including corporate financial reporting and forecasting, cost accounting and budget, cashiers, collections, corporate taxation, payroll, self-funded billing, broker administration, and financial analysis. She will also have responsibilities for the Life Group accounting and analysis for the company’s life insurance subsidiary.
With an extensive background in the health insurance industry, Fabrizi’s most recent role was vice president of finance and network at WellCare of Ohio. She also served as the vice president of finance and controller for QualChoice.
Ann Vickers is taking on additional responsibilities in her new position leading the marketing, advertising and corporate identity areas, which provide marketing and communications support to help Medical Mutual meet sales objectives.
Vickers’ new responsibilities include managing the sales and broker special events function, along with coordinating all purchased promotional items across sales and corporate communications. She has also assumed responsibility of the Consumer Advisory Council, and will work to refocus its objectives to better support Medical Mutual’s changing business and the needs of its customers.
Vickers joined the company in 2009 as marketing communications director. Prior to joining Medical Mutual, she was director of marketing and communications for MemberHealth LLC and director of communications for Delphi Packard Electric.
Gregory Young will be responsible for identifying and addressing strategic challenges and opportunities brought about by the quickly evolving health insurance industry. He will also be responsible for monitoring emerging trends and evaluating the impact on the company, and on the marketplace as a whole.
As he has done in his previous role as manager of government relations, Young will continue making presentations about the Affordable Care Act to various internal and external audiences with a focus on the company’s strategic initiatives.
Young joined the company in 2008 and served as government relations senior analyst before being promoted to manager in 2011.
Debra Green rejoins Medical Mutual from the Cleveland Clinic where she served as director of community outreach for the Taussig Cancer Institute. At Medical Mutual, Green will be responsible for developing and executing all community outreach programs and will serve as principal corporate representative in community affairs.
Green began her career with Medical Mutual in 1984 serving in customer service as a generalist in human resources, and later joined corporate communications as senior community relations specialist. She was named manager of community relations within a year of joining the department.
When Terry Lundgren was first approached by Macy’s in 1993, the retail company was bankrupt. Lundgren, who was chairman and CEO of Neiman Marcus at the time, was asked to come to New York to help turn around the company.
However, Lundgren had little interest in joining an insolvent company, especially since he had a good thing going at Neiman Marcus in Dallas.
With Lundgren’s ties to Neiman Marcus and his previous ties to Federated Department Stores as a former president and CEO of Bullocks Wilshire, executives at Federated persuaded Lundgren to come back with the idea of buying Macy’s.
“I thought that sounded pretty interesting, because I saw the synergy and the idea of the Macy’s brand being spread through the Federated stores,” Lundgren says. “It took six months to convince me, and then six months after that, we bought Macy’s.”
Today, Lundgren has built Macy’s Inc. into one of the biggest and strongest department stores in the country. The retail giant accounts for a third or more of the business for the brands that Macy’s is associated with. However, if you rewind just seven years, Macy’s wasn’t even big enough to advertise during its own Thanksgiving Day Parade.
“The No. 3 most-watched television program in America is the Macy’s Thanksgiving Day Parade after the Super Bowl and the Academy Awards,” says Lundgren, Macy’s chairman, president and CEO. “Fifty-eight million people watch the Macy’s Thanksgiving Day Parade every year. It was a spectacular event, and I couldn’t advertise on it, because we weren’t national.”
Lundgren watched the telecast as advertisements from Target Brands Inc. and JCPenney Co. Inc. aired on the parade, but none from Macy’s.
“I said, ‘We’ve got to fix this. We’ve got to think about how we get that Macy’s brand out there,’” Lundgren says.
Through well-planned and well-timed acquisitions and a strategy that brought Macy’s closer to its customers, Lundgren began to turn Macy’s into a force to be reckoned with, and the goal of advertising on the company’s own parade was beginning to look like reality.
“We had a lot of interesting turns in our industry and our company that really represent a lot of what happened in the industry over the last several years,” he says.
In October 2012, Lundgren spoke at an ACG Cincinnati luncheon event about the journey he and Macy’s has been on and what it took to build Macy’s into the powerhouse it has become.
After Federated Department Stores bought Macy’s in 1994, Lundgren became the president in 1997 and then the CEO in 2003. At that point, Macy’s was a $14 billion company with multiple brands and 250 stores.
Lundgren began to test the waters of expanding the Macy’s brand by combining it with other Federated stores.
“Business didn’t go up and it didn’t go down; it just became a non-event,” he says. “It surprised most of us, but we knew it wasn’t a negative.”
During the time of this testing, a prized department store came up for sale — Marshall Field’s in Chicago. Marshall Field’s had a stranglehold on the Chicago market and was powerful in the Minneapolis and Detroit markets as well.
“Those were three markets where we didn’t have any representation,” Lundgren says. “This was a natural opportunity for us to fill in the geography and have key stores in these very important markets.”
Lundgren negotiated to buy Marshall Field’s against one of his largest competitors at the time, The May Co., which was also looking to go national. Lundgren felt confident he had submitted a bid that was in the ballpark, but May Co. ended up offering several hundred million dollars beyond what Marshall Field’s was worth.
Although Macy’s lost to May Co. for the Marshall Field’s stores, Lundgren didn’t lose sleep, because he knew that it would have been wrong to overpay for the stores. He had seen that scenario before.
“We walked away, and that was probably the best decision that the board and my team made because everything changed and the credibility that I developed with my board from that point forward was a game-changer, because I had been CEO only for a year,” he says. “That process turned out to be really positive for all of us.”
One year later, in 2005, The May Co. was in trouble — it had paid too much for Marshall Field’s. The board fired its CEO and Lundgren went in to talk with May Co.’s lead director.
“We did a deal and got great talent merged in with our company,” Lundgren says. “Still today, some of my top leaders are from that May Co. acquisition. It was all good timing, and of course, we got Marshall Field’s through that.”
Now Lundgren had to make sure the company saved some money. It went from 11 operating divisions down to seven, taking out $1 billion of operating expense.
It sold Lord & Taylor for $1.2 billion, which May Co. owned, but was not consistent with what it was trying to do. David’s Bridal business was sold for $800 million. It closed or sold 80 department stores that overlapped and sold the credit card business to Citi Group for about $5 billion.
“That was a very big deal — this now was paying for the acquisition in a very significant way,” Lundgren says. “We were quickly getting our balance sheet in order as we were moving forward with these changes.”
Part of those changes was spending a year researching whether they could change the store names to the Macy’s brand.
“What would that feel like?” he says. “If you asked somebody, ‘Would you like to change the name from your favorite store called Lazarus or not?’ They’re going to say, ‘No, don’t touch my store.’ But if you just do it and you treat the store right and treat the people right and put in the right merchandise, people will generally respond to that, and that’s what happened.”
When it came time to make the national announcement that the department stores would take on the Macy’s name, Lundgren went to Chicago to announce it.
“In one day, we changed 400 department stores to the Macy’s brand,” he says. “We went from 250 stores in 2004 to 800 in a two-year time frame. We finally were a national organization and could advertise on the Macy’s Thanksgiving Day Parade for the first time in 2006.”
With Macy’s becoming a national brand, Federated decided it needed to align with its new direction. In 2007, Federated Department Stores became Macy’s Inc.
“Eight hundred of our 836 stores were called Macy’s and 36 were called Bloomingdale’s,” Lundgren says. “Calling the company Macy’s Inc. made more sense when people were thinking about who to invest in.”
Get close to the customer
Following the name change, Macy’s was on the move. However, the financial collapse in 2008 caused customers to cut down on shopping.
“They literally put their credit cards away and stopped shopping,” Lundgren says. “We knew we had to do something, and I wanted to do something anyway, but this was a really good time for change.”
Macy’s got rid of three operating divisions in the Midwest from seven and replaced them with a new idea.
“The idea of having a division that’s based in Cincinnati, Atlanta or San Francisco was to be closer to the customer,” Lundgren says. “The problem was we had gotten so big now that each division was looking after 100 or 200 stores, and they were in three, four or five states. They weren’t close to the customer. We had lost that connection.”
Macy’s took the three divisions that it eliminated and replaced them with 20 small satellite groups called districts. The districts had approximately 20 people acting as merchants and planners in each of these areas that would supervise 10 to 11 stores.
“They are in these stores every day, they are talking to our customers and sales associates and they are guiding us for what we should buy for Cincinnati or Columbus, Ohio, or Detroit and Chicago,” he says. “They are the ones who are influencing size, color, types of fabric and the brands that we need to carry.”
Becoming more in tune with the local communities forced Macy’s to do a lot of communication.
“It’s a missed point by a lot of big companies,” he says. “Lots of face time with me and my executive team is important. People want to follow your lead. They want to do what you want them to do, but you have to be clear and consistent.
“You can’t have a list of 28 things. You have to be clear, simple, direct, and you’ve got to say it over and over and over again. If you do that, people will respond.”
Having that local focus made all the difference in the world. It worked so well that even in 2009, when the recession was still clearly under way, those stores were outperforming the rest of the country because of the responsiveness to the local city.
“It didn’t take long for us to say, ‘We’re going all the way,’” Lundgren says. “We eliminated the other divisions and replaced them with 69 of these district teams around the country and had one buying office.”
Creating one buyer in New York City for all of Macy’s rather than the previous seven was a crucial move.
“Most of our suppliers are right up the street on Seventh Avenue in New York City,” he says. “One buyer goes to the Ralph Lauren showroom and says, ‘I’m ready to place my order.’ And they are standing at attention because instead of one of seven buyers, they better hope we like the line, because we’re a third of their business.
“We’re a third or 40 percent of everybody else’s business — Estee Lauder, Coach, you name it — Macy’s is the largest customer for almost everyone that we do business with.”
That consolidation has turned Macy’s into the only store you can buy certain brands because of the power it has with the one purchase mentality.
“The combination of that with the localization of the stores has really made all the difference in the world,” he says. “That was all rolled out in 2009.”
Macy’s executed on that strategy in 2010 and had one of the best years in the history of the company.
“We picked up more than $1 billion in same-store sales that year,” Lundgren says. “The year 2011 was significantly better than 2010. We picked up another $1.2 billion in same store sales. In 2012, we are off to a great start.”
Macy’s Inc. had fiscal 2011 sales of $26.4 billion across its more than 800 Macy’s department stores, 37 Bloomingdale’s stores, seven Bloomingdale’s Outlet stores, bloomingdales.com and macys.com. The company employs 175,000 people.
“I really relate it to that structure — the name change and allowing us to have a national presence but to act locally, and then the strategy, which we have executed the last couple of years,” Lundgren says.
- Look for the opportunities to build your business.
- Make strategic moves that position your company for growth.
- Understand what makes your business more effective for customers.
How to reach: Macy’s Inc., (513) 579-7000 or www.macys.com
Voss Industries Inc. is a vertically integrated, employee-owned business composed of three divisions: Clamp Technology, which serves the industrial marketplace; Voss Aerospace, which serves manufacturers of airframes, jet engines and space vehicles; and Voss Technologies, which serves high-tech markets such as hydrogen fuel cells, medical technology and telecommunications.
Key product lines include extensive prototype and OEM components, sheet metal and machined V-retainer couplings and mated flanges, band clamps, strap assemblies, sheet metal ducting, bulge-formed shapes, custom-welded fabrications and specialty fasteners.
In order to effect continuous improvement in its manufacturing processes, Voss, led by CEO Daniel W. Sedor Sr., has developed benchmarks for performance that specify relative goals and expectations. Through this process, the company has gained a better understanding of its capabilities and has created a focus for training programs to meet the needs of its employees and customers.
The focus on continuous improvement in virtually all of its processes utilizing lean manufacturing concepts has provided advantages to Voss beyond the shop floor. Through the implementation of lean principles in every aspect of its business, the company consistently exceeds its customers’ expectations by providing added value to its offerings.
In the last few years, Voss employees have traveled extensively in North and South America, Europe and Asia to meet with companies and discuss their requirements and needs. These visits have enabled the company to develop stronger relationships with distant customers. Voss plans to continue these travels with cross-functional employee groups representing its engineering, development, manufacturing, quality and sales disciplines.
How to reach: Voss Industries Inc., (216) 771-7655 or www.vossind.com
The Rubik’s Cube — you may have seen this toy as a child and either solved it or became frustrated with and discarded it, never to think of it again. However, I ask that you recall this strategic puzzle now, as it is more relevant than ever in your business life.
There are more than 43 quintillion different combinations in which a Rubik’s Cube can be exhibited — that’s 18 zeros. That huge number makes it seem as though it would be impossible to solve the cube and have a solid color on each of the six sides, but it’s not.
In fact, speed-cubing competitions are often held and people try to break Australian Feliks Zemdegs’ world record time of 5.66 seconds to solve the cube. Michal Pleskowicz of Poland even holds the record of solving a Rubik’s Cube with one hand in less than 13 seconds.
Sales cycles, or buy cycles as I like to call them, are growing increasingly complex like a Rubik’s Cube. Information is readily available on the Internet and sales representatives — while still crucial to a sale — are brought in at later and later stages.
In fact, some reports say that a customer can know up to 80 percent of the information they will need to know before making a purchasing decision prior to speaking with any sales representatives.
As all this occurs, the Rubik’s Cube of that sale becomes more and more scrambled.
The analogy of the cube
Not only does the complexity of the Rubik’s Cube contribute to this analogy, but the sides of a Rubik’s Cube adeptly describe a sale.
Each of the six sides represents a person or department a sales representative will interact with in a cycle.
The salesperson never knows which combination he will be given in the Rubik’s Cube each time he calls on a customer. Things change on a daily and even hourly basis as customers deal with situations in their business, staff changes, budget requirements and every other critical detail of sales cycles.
It takes a very adept salesperson to understand how to solve each of these new combinations of colors by working with the situation to finesse the colors into the solved puzzle and — in a buy cycle — close the sale.
An untrained salesperson may find a sale daunting, but like those who train to compete in speed-cubing, a salesperson who trains in the best practices of selling, a complex sale can seem relatively simple.
Just like with a Rubik’s Cube, there are salespeople of varying capabilities. Some can solve the cube in six seconds, some in three minutes, others in a couple of days, and still others take months. It all depends on how much time they devote to the practice of turning those blocks and learning the intricacies of the cube.
Make an assessment
I am not advocating that you go out and purchase your own Rubik’s Cube to practice your sales — though they are a fun puzzle to play with. Instead, making an assessment of your strengths as a seller and then working to improve those areas where you’ve been lacking would be a better use of your time.
Even bad salespeople will close a sale every once in a while. But just like a person might solve a Rubik’s Cube by turning the sides without a plan, luck is not repeatable. You must know, as in any science — and selling is definitely a science — what you’re doing if you want to be able to repeat the action.
Over time, discipline in how you approach sales can speed up the process. I’m not saying that practicing selling will lead to a very quick sale as customers set their own parameters on their schedule, but if you know what you’re doing, you can speed up your portions of the sales process.
Practice will also help you better anticipate the twists and turns of the Rubik’s Cube that the sale will present to you. ?
Thomas M. Nies is the founder and CEO of Cincom Systems Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, health care and insurance. Go to tomnies.cincom.com/about/