Dustin S. Klein
Today’s business executives want more than attention-grabbing ads they are demanding ad messages that are in sync with their company’s strategic plan for growth, says Peter Krivkovich, president and CEO of Cramer-Krasselt Co., a 500-employee marketing communications firm that last year billed more than $550 million from clients including CareerBuilder, Hyatt Hotels, Master Lock and Steve Madden shoes.
“Creativity by itself is nothing,” says Krivkovich. “Creativity that is rooted in strategic insight is the key to success.”
Over the past year, powered by effective ads such as CareerBuilder’s “Working with Monkeys” campaign, Krivkovich and his team have delivered just that. Smart Business spoke with him about how CEOs are adapting to this brave new world and what it takes to remain on the creative cutting edge.
How have technological advancements altered the dynamics of advertising?
The fundamentals of compensation our revenue stream have changed dramatically. The bulk of compensation came out of traditional media television, newspaper, radio and magazines. At one time, it was a very simple formula of a fixed percentage; now, it’s a combination of hourly and percentage. But it’s always been tied to some expenditure of dollars.
Now, when you get into new media and the Internet, there is not a lot of cost involved. All of a sudden, your budget parameters are different, yet your labor costs can be fairly high because your labor intensity can be higher.
[Previously,] if you did three or four television commercials, you sat back and ran them. Now everything is viral, so on-demand in terms of messaging, that it is a constant action.
What new factors should a CEO take into consideration when thinking about how to craft and disseminate a message?
[There is] a whole series of different talents you have to incorporate. That doesn’t mean that those other ones go away, but there is a much broader spectrum of communication opportunities. It also requires certain kinds of people that, 10 years ago, you didn’t need. Think about it text messaging, product placement, a mini-series. We’ve done [that] for Sea-Doo and Ski-Doo eight half-hour shows on The Outdoor Network. This is something that just wasn’t done before.
Or even doing viral Web sites, as we have done for CareerBuilder, where we created a fictitious company that is run by monkeys. All of those things get young people involved in the product, the category and, ultimately, with the brand.
How does that affect creativity?
Creativity, more or less, hasn’t changed. The spectrum of opportunities for the creativity that can be utilized is much broader. There are more avenues to express it and more avenues that are extremely untraditional.
It’s everything from creating unusual Web sites to wrapping buses and posters to text messaging to video streaming.
How do you foster that type of creative thinking?
The biggest thing is getting people enthused and aware of all the opportunities. We have lots of group sessions. We bring in people who are working on niche technology or niche ways of getting something more interesting done, [such as] putting a chip on a cup of Coke that sings to you every time you drink it.
You constantly try to expose your people to many ideas and options, which may or may not be relevant, but may spark an idea somewhere else. You create a very fertile ground for ideas. (That) absolutely has to start at the top. It’s not going to be at the bottom; otherwise, it would get squashed.
Who are some of the most creative CEOs and how do they separate themselves from the pack?
Clearly, Phil Knight at Nike. All of the things that [Gregory D. Brenneman, CEO of] Burger King is doing. Also, [Matthew Ferguson, CEO of] CareerBuilder.
They are willing to look outside the box at ways to solve a problem. If you are solving problems in the traditional way, then your only hope is to outdo someone who is doing the same thing.
You may have a shot of outdoing someone once. Maybe you outdo someone twice. But it is highly unlikely that you are outdoing other competent competitors if they are doing the same thing you are doing and you are doing the same thing that they are doing.
It’s those CEOs who look at something and say, ‘We could do this, but here is a different avenue or two or three that we can get at the same consumer with the same loyalty, whatever the needs are.’
How important is it to integrate that thinking into a company’s strategic planning process?
It’s critically important. In today’s environment, you have technology and competition in almost any industry moving at such an incredible pace. Your ability to differentiate is windows that are increasingly open and closed at a faster and faster rate. What used to be a year advantage becomes eight months’ advantage becomes five months’ advantage. Sometimes, it’s literally weeks.
When you hit the market, when you launch something, when you introduce something, when you expose something to your user, whether it is B-to-B or B-to-C or any other combination, it has to be something that gets immediate attention, not attention that they’ll think about in six months, because in six months, they’ll have five other options.
What can happen in the execution stage that turns a good idea into a bad one?
When the people who are creating the idea get so wrapped up in the idea itself that they forget who they are talking to. They are more enamored with the execution of an idea than they are with the strategic underpinning of an idea.
What has made Cramer-Krasselt so successful?
We are basically brand transformers. We look at a brand and take all the attributes on the left hand side the rational things that a company is proud of and try to distill them down to one sentence. That is very hard to do. It takes us months of working with the company.
Then we take the right side, where the consumer is, and look at the issues the consumers have happiness, fears, anxiety, joys, etc. We take all of those things and distill that down to a sentence that is relevant to the issue.
And then we try to find a connection between the two. That connection is the insight that begins to drive you toward an execution that resonates.
How to reach: Cramer-Krasselt, (312) 616-9600 or http://www.c-k.com
What is innovation?
The word can mean different things to different people. For a manufacturer, it may be the introduction of a new product. For an accounting firm or law practice, it might be the addition of a new service line. And for a maverick business leader, it could be his or her management style.
In a nutshell, innovation in its simplest form is the idea that savvy management stirs the pot occasionally, never sitting on its laurels and is constantly tinkering with a company and its offerings.
Just as important, innovative CEOs encourage their employees to consider what’s never been done or how something can be done better. And they develop corporate cultures that reward innovative thinking at its best.
Each year, we honor innovation through the Smart Business Innovation in Business Conference, presented by Anthem Blue Cross and Blue Shield, by looking at how companies develop ideas, implement them and take them to market. We also look at how the region’s business leaders creatively run their organizations.
Award recipients have created new companies, introduced new products or services and even changed entire industries. There are four distinct groups of honorees Master Innovators, Visionaries, Rising Stars and Innovators.
The Master Innovators are also conference panelists. For this region to continue to thrive and grow, there must be a healthy dialogue of ideas, insights and strategies to kickstart brainstorming and inspire new innovation. This year’s panel discussion features best practices on vision and keys to develop and implement strategic plans to take your business to the next level.
Visionary awards are presented to well-established organizations and experienced business leaders who demonstrate a long-lasting commitment to the development and implementation of smart ideas.
Rising Stars reflect up-and-coming business leaders and companies that are on the cutting edge of their industries, either with newly minted innovative products and services, or by employing unique management styles or strategies.
And finally, Innovators are those companies or individuals whose ideas cannot be overlooked and deserve to be shared with the region’s business leaders. On behalf of Smart Business and our conference sponsors, I invite you to read through the profiles of this year’s honorees and think about one question: How does your company innovate?
“It’s absolutely critical to innovate,” says Desai. “In the information technology industry, things are changing and evolving all the time. We see our role as helping clients figure out how they can use innovative technologies to create a competitive advantage in their business. That is a continually ongoing process.”
Accordingly, Desai, who launched the company in 1980 with $2,000 and an MBA from the University of Michigan, has been among the most daring in his industry. In 1992, when competitors were focused on delivering on-site services, Desai was spearheading offshore operations in Mumbai, India. Today, he’s put the emphasis on using his company’s own products and services to create better efficiencies within Syntel’s operations before offering them to the public.
“We thought that we first had to make our own example,” he says. “And only after we drive our own example home can we really take our message to our clients.”
Smart Business spoke with Desai about the importance of innovation and how the prevalence of outsourcing has changed the IT industry landscape and Syntel.
What is your philosophy for fostering innovation?
I emphasize the importance of innovation across the whole organization through constant communication. The best ideas come from people closest to our clients’ businesses.
We encourage people to innovate and take risks in delivering superior value to clients. We recognize people who take risks and come up with new ideas to push the envelope on how we can bring additional value to customers.
Let me give you a few examples. We launched two new service offerings in the last couple of quarters SSN Secure and Synapp Test. SSN Secure was in response to clients’ escalating need for security of information.
The Social Security number is used extensively in financial services and health care applications. And yet, there is heightened need for security. Syntel came up with an offering that would help these clients create a security blanket around Social Security numbers.
The other one is Synapp Test. As more software is developed, there is an explosion in the use worldwide. There is also an increased need to ensure that software is really well field-tested so that people don’t encounter bugs once it is in use. We created this offering which allows clients to field-test software.
We applied various sophisticated tools and techniques to ensure that when software comes out, it is very well tested and there is a high degree of confidence in its robustness.
How do you solicit input from clients to address their escalating needs?
Through constant communication. The best way to understand customers’ needs is to be very close to them and learn more about their business. One of the initiatives we have taken is that even though we are a technology company, we’ve increased recruitment of people that understand specific industries and specific industry domains well.
It is these people (who are) communicating with clients, understanding their challenges and opportunities, then coming up with solutions proactively that we believe will help solve those problems or help them take advantage of opportunities.
What steps do you take to communicate the message that you’re encouraging employees to take risks?
We publicize new ideas internally. We have several publications, and one of the things they [feature] are great ideas that were presented and how an idea helped deliver value to a given client.
We recognize people who go out of their way in driving innovation. We also have rewards for people who have really strong performance financial incentives. And then, for people who have really superior performance, they get nominated for our annual president’s award program. This is a program where roughly a dozen (out of 5,000 employees) of the top performers worldwide are invited on a cruise that my wife and I host.
It puts them in very elite company. Anyone can nominate someone. Typically, people nominate people who have shown exemplary performance in their group or in their interactions with them. We used to get 50 to 70 nominations. Last year, we put it on the intranet and got over 200 nominations.
How do you recruit these top-notch people?
You have to define the profiles of people who you think will be successful in your industry and who are aligned with your culture. Our culture is to be very customer-driven. We want people who are customer-driven, who are responsive to the needs of customers and who are motivated by growth and innovation.
We look for those attributes in people because those are the people who we know will be successful in our company and will have a multiplied effect on the innovation at Syntel.
How does your Indian operation create a competitive advantage for you and your clients?
There are several key benefits. First, availability to a highly talented work force. India has 500 million people under the age of 25, and there is a huge focus on education. Access to this very vast, very deep talent pool is No. 1.
Two, because the talent pool is so large, it allows clients to take on large projects. By outsourcing to us, they can ramp up or ramp down very quickly.
If they had to do that project in-house, to staff up 200, 300 or 400 people would be very difficult. But they can come to us and say, ‘We have this project that needs to be delivered in 15 months. We looked at the staffing profile, and it looks like we may need 50 people for the first six months, then 300 for the next nine and then 50 for the next three.’
We can quite easily manage that. So the second is scalability.
Third, because of the first two, it allows them (clients) to get a time-to-market advantage over their competition. A development cycle or innovation cycle that normally would have taken 12 to 18 months we can sometimes collapse to three to six months.
Finally, because the wage rate is so attractive there because the cost of living is so much lower, it allows them all of these benefits at a very attractive price point.
How do you identify opportunities without distracting from your core competencies?
By being in the marketplace all the time. My job is to figure out where are the next set of opportunities for Syntel. I do that by communicating with clients, talking to employees, talking to people in the industry and listening to my advisers. I encourage our leaders to do the same thing.
We have a periodic review process to decide which one of the many ideas that we have on the table we want to actually pursue.
Three quarters of your sales are driven from the applications outsourcing division. How do you ensure you’re diversified enough to weather a downturn in the marketplace?
We are actually further segmented by industry. We have penetration into financial services, health care, insurance, automotive, telecommunications, transportation, and logistics, and retail.
We have very specific plans for expansion in each industry. Applications outsourcing is really a service type, and each of these industries has their own drivers. By servicing multiple industries, leading the innovation process and driving the message innovation across the enterprise, we think we can mitigate the risk of a downturn in any one segment.
Do you practice what you preach for your clients within Syntel?
One of the things a leader has to do is drive change. Syntel has reinvented itself multiple times. Twenty-five years ago, when we started the company with $2,000, we were a local IT staffing company.
We grew from a local IT staffing company to a national staffing company that had lots of foreigners in the work force to a solutions company to an offshore outsourcing company. As we made each of those turns, it was very important to drive a message of change across the organization.
Human nature is to resist change. A leader has to successfully communicate where the enterprise is headed and get the organization aligned behind the change. I was lucky to have a team that understood the reason and motivation behind the change.
Therefore, we were able to successfully execute on that change. I firmly believe that you have to practice what you preach.
What lessons did that experience teach you?
As you are transitioning work, you have to recruit top talent that is capable of executing on that work. You have to have a very well-defined process for making the transition work.
And, most importantly, if you are going to transition from one mode of operation to another mode of operation, it is very important that the new mode of operation work so much better than the previous mode that people don’t even question it. They say, ‘Wow. This is so good. Why didn’t we do this before?’
HOW TO REACH: Syntel Inc., (248) 619-2800, http://www.syntelinc.com
We are a very focused enterprise. We are strategic. We are clear in our communication of our goals, and we are clear in the execution and accountability measurements related to those goals. So everybody in the company understands what we’re trying to accomplish, the timetable upon which that has to be accomplished and the measurement of success that we will utilize to determine whether we do a good job.
The fundamental business model that we have is to be the Dell or Southwest Airlines of the Internet. We were in a category where we pioneered the notion of being value-priced. We were the ones who built the low-cost provider model, and we created such an automation-based company that we were able to do what our competitors were doing, with, in some cases, one-seventh to one-tenth the number of employees. So we generated in excess of $700,000 of annual revenue per employee, when most of our competitors were less than half of that. While they had thousands of people, we had hundreds. A lot of that had to do with our investment in state-of-the-art software and hardware architecture that would allow us to scale the company without having to increase our manpower base on a linear basis.
Our core competencies are what drove us to acquire these companies. Our core competencies are our marketing ability, our ability to create scalable software and our ability to bill people on a monthly, recurring basis at a cost that’s virtually lower than anybody in the industry. Those are our three core competencies. So when we look for companies to acquire, they have to fit within our strategy of consumer Internet subscription services, and they have to fit within those three core competencies.
The most difficult part of the [NetZero-Juno] merger was creating the spirit that we were one. These were two companies that spent the better part of two years just slugging it out against each other. (They were) very competitive and sued each other several times. The hardest part was getting everyone to understand that business is business, and now we’re all one big happy family and on the same team.
We don’t manage by consensus. You want to get a lot of people’s input and create a forum for spirited debate. You want to allow people to have their day to disagree with what might be the accepted group opinion. But at the end of the day, you have to call the ball. Rarely will we have anybody come to me saying, ‘I wouldn’t have done it this way.’ Our top management has been here together for a long time. So our continuity the top 40 or 50 people in the company is virtually unparalleled. If you look at some of the great companies of the Internet eBay, Amazon or Yahoo the management teams have turned over. We’ve got people here who have pretty much built this company brick by brick. They’re really living in a house that they’ve built.
I am a real student of marketing. I’ve spent my entire career in marketing and consumer products, so I have a very distinct way of looking at business opportunities, where I tend to do a very sophisticated level of segmentation of the markets I’m thinking of either going into or acquiring companies within.
The best advice that I ever got came from my dad. He passed away right when I got out of graduate school. The first job I took was with Johnson & Johnson. I worked on the marketing team for Tylenol. The best advice he gave me was, ‘You have to be passionate about what you’re doing, but most importantly, you have to try to figure out how to develop your go-to-war skill.’ He said that if they declared World War III tomorrow and we all had to be specialists in something, regardless of how broad your experience and responsibilities are today, what would your specific go-to-war skill be? That one thing that you think you do better than anybody. I decided that my go-to-war skill would be marketing. Even though over the years I’ve done a lot turnarounds, management and the like my go-to-war skill has always been my marketing. I always come at something from a marketing bent. And so I seek opportunities that need better marketing. I’m trying to play off my strength.
How to reach: United Online, (805) 418-2000 or www.unitedonline.net
It's a simple question, really. What makes an entrepreneur?
Entrepreneurs are a unique breed. They differ significantly from professional managers, such as Jack Welch.
That's not a knock against Welch, who assumed the reins at GE and, over the course of 20 years, transformed it into a global powerhouse. He was a visionary leader who became America's most admired CEO. But he wasn't an entrepreneur.
Professional managers are essentially handed a larger, well-established company and tasked by the board of directors with building market share, turning around a troubled enterprise or, in some cases, just keeping the business from crashing into the ground.
An entrepreneur, on the other hand, builds a business from scratch, rarely starting off with more than an idea. Entrepreneurs have that can-do attitude that rubs off on others and gets them to line up and shout, "How high?" Here are four traits that you'll find in nearly every entrepreneur.
* Risk-taker. Entrepreneurs lay all their money on the table. They aim high and bet big, accepting the fact that the odds are they'll lose more often than they'll win. Successful entrepreneurs, however, learn from their mistakes and apply the lessons to their next ventures or initiatives.
* Vision. Visionaries clearly see what they want to accomplish and remain focused on their goals. How many people 20 years ago would have been willing to bet on the guy claiming people would buy $4 cups of coffee? But Howard Schultz did just that when he founded his first Starbucks coffee house. Today, he runs a company with a market cap of more than $21 billion.
* Confidence. Failure is never an option to an entrepreneur. There's always a solution waiting to be found that results in success. Failure happens, of course, but that's the down side of taking risks. True entrepreneurs exude a steady, confident attitude that says if they just stick with it, the business will succeed. They have utter faith in their product or service, and never, ever waver.
* Motivator. Because they're not content with the long process of working their way up at a large company, proving themselves at every level and building legions of believers along the way, entrepreneurs possess the ability to inspire employees, build champions and get the most out of talented rising stars.
Gas prices continue to skyrocket with wild abandon. Inflation is creeping up despite the Fed's best efforts to keep it in check. We're playing nation-building in the Middle East while the North Koreans mock us, boast of having nukes and lob missiles into the Sea of Japan.
Further, one party in Congress screams about "activist judges" who, coincidentally, were mostly appointed by presidents within their own party. And the other party threatens to slow down all congressional business rather than develop its own ideas and then sitting down at the negotiating table.
As if that weren't enough, as a nation, we've blindly allowed private beliefs to creep into politics and dictate our public policy.
It's clear we're focusing on the wrong things these days. But in the midst of this madness, I found a bright spot from the unlikeliest of places -- Bill Gates, chairman and founder of Microsoft.
Rather than bash his company as countless others have, let's look at Gates, the man, and how he truly understands the importance of his wealth and power.
As the world's richest man -- his fortune is estimated at $46.5 billion -- Gates is also the most philanthropic man on the planet, perhaps the greatest philanthropist in history. His Bill & Melinda Gates Foundation has been busy giving away its nearly $29 billion endowment at an unprecedented rate in the face of attacks against his company.
But what makes Gates' foundation impressive beyond its sheer scale is the focus of his grants -- education and health. Not coincidentally, they are the two areas of society with the greatest impact on our world and its future.
Nearly every CEO cites finding skilled workers and controlling rising health care costs among the top three issue for his or her business. Simply put, a well-educated and healthy work force is the key to making our free-market society work -- whether you subscribe to the economic philosophies of Adam Smith or Alexander Hamilton.
I don't know Gates' political bent, and quite frankly, I don't care. But his ability to identify and fund solutions to the critical problems that society faces gets to the heart of not just what's right in our personal lives but also what it requires for our businesses to survive and thrive.
And for that alone, Gates should be a role model.
Look at your organization and ask, "What have we done well?" You'll be surprised at what you find -- modest revenue growth, job creation, new product development.
And when you quit listening to the partisan hype from both sides, blow away the storm clouds that have hung over Stark County since last year's presidential election and take a good, hard look at what business leaders are doing, you'll realize things aren't as bad as they seem.
Without question, the loss of jobs at Hoover and Timken was a major blow to the community's labor, economic and tax base. And as such, they pose a serious challenge to overcome. But those are only two companies out of tens of thousands, and many of the rest have stories worth hearing.
Smart Business is proud to join the Canton Regional Chamber of Commerce as a sponsor of its annual Business Excellence Awards of Greater Canton. Together, we're helping focus attention on the best this area has to offer rather than dwell on the worst.
It's easy to talk about the bad things. They get our blood boiling, bring out our passion, create a rallying cry and, to be honest, "Hoover cuts 1,000 jobs; community doomed," is a more salacious headline than "XYZ Co. sales rise 10 percent; 18 jobs added."
But that's the point.
In a quick-hit, ratings-ruthless, 24-hour news cycle, we've been reduced to junkies scrambling to latch on to the latest tragedy and watch it dissected from every angle until it is bled dry.
We don't have to accept it. It's just as important to make success part of our regular regional discussion. And whether it sells newspapers, garners TV viewers or gets the mob mobilized becomes irrelevant when you cast away the façade and recognize success is achieved one job, one percentage point growth and one dollar at a time.
It's up to you -- and us -- to create that buzz and make the public dialogue meaningful. If we don't, we'll remain a nation of zombies, letting others dictate what's worth our attention.
"I've been an entrepreneur who started a company at a very young age with very little capital and I grew a small business and ultimately, it got much larger," says Leach. "We're looking for people who have ideas or talent in technology or intellectual property that can end up creating $30 (million) to $50 million companies."
Leach began his career at IBM and later co-founded Publishing Solutions Inc., a systems integrator that was recognized by Case Western Reserve University's Weatherhead School of Management as the sixth fastest-growing company in Ohio from 1990 to 1995. He sold that business in 1997.
He also founded Capella Investments Inc., a firm that provided angel and management consulting to start-up technology organizations. And he was the Entrepreneur-in-Residence for CommonAngels, the largest angel investing organization in Boston.
Today, Leach manages JumpStart, a nonprofit organization owned by founding entities NorTech (the Northeast Ohio Technology Coalition) and Case Western Reserve University. JumpStart invests in early stage, high-growth-potential companies. Early stage companies are defined as those with less than $10 million in revenue, while high-growth means the owner has a solid plan for reaching $30 million to $50 million in annual revenue within five to seven years.
JumpStart's fund has $9 million in the bank and Leach hopes to raise an additional $9 million soon. The organization invests an average of $250,000 in a client company, with a potential investment range of $50,000 to $800,000.
To date, Leach and his team have put their financial backing behind five regional companies -- Ayalogic, Day-Day Ltd., Embrace Pet Insurance, PreEmptive Solutions Inc. and Stanton Advance Ceramics.
Smart Business caught up with Leach to discuss his thoughts on entrepreneurship, managing a start-up venture fund and identifying the best of the best.
What lessons from your own business experiences do you apply to your job?
Many. It always takes longer than you would expect for you to accomplish your goals. That's a fundamental truism across any entrepreneurial business. Most entrepreneurial organizations are run by optimists, and optimists have shorter time windows in their own minds than reality.
So the first lesson is that it's always a little harder. There will be things that occur that you cannot anticipate ahead of time, and it's going to take you longer than what you might initially have envisioned to accomplish your goals.
The second lesson is, you never do yourself justice if you dream small. One of the biggest lessons I learned early in my business was when I contemplated who I wanted for my board or what kind of company would be interested in my product or offering, that you have a tendency as an entrepreneur to sell yourself and your idea short.
So while it's difficult, and while it may take you longer to get to where you want to go, that should not prevent you from going after the absolute most capable board member or investor that could bring the most significant benefits to your business.
Also, don't be bashful. Go after a marquee player. You hurt yourself if you don't dream big and try to find resources and relationships around your business that help you do that.
What are the key traits you find in entrepreneurs?
There's no textbook entrepreneur. (They) come in all shapes and sizes and backgrounds and perspectives and disciplines. You look for people who can communicate, who have a vision, that are ethical and who have energy.
But they can be from any kind of discipline. They can be a housewife, a researcher at Case or a programmer working for a large company that wants to start a new one. Fundamentally, there is no textbook example of the kind of entrepreneur we're looking for.
We're more interested in individuals that have the ideas that can be significant wealth-creating entities. And we meet lots of individuals that have restaurants or have service businesses that are great entrepreneurs, but we don't necessarily engage with those kinds of scenarios because we're looking for things that could be $30 million to $50 million businesses.
I think there's a big [misperception] about entrepreneurship, that entrepreneurs are born with everything they need to grow a fast-growing high-potential businesses. One of the reasons Jumpstart exists is that we fundamentally believe and know it's true that you can meet a great Type A entrepreneurial person who may have the vision and the sales skills, and may have part of what that entity needs, but if that opportunity is actually going to grow and be a sustainable organization that can grow into a business of the size we're going to focus on, they'll need a lot more than just that.
We're trying to bring the most critical resources that entrepreneurs we meet will need in order for them to actually be successful in the earliest stages of their development.
What are those resources?
There are three fundamental sets. First, we intend to act as a convener for all interested stakeholders in high-growth entrepreneurship in 15 counties across Northeast Ohio. So hopefully a year from now, people who approach or get engaged with JumpStart recognize that Jumpstart has the ability to connect people to great ideas and connect ideas to resources that are required for them to take the next step of their development.
The second piece is we have a team of individuals that have been involved in business development activities for start-up, venture-backed companies, as well as a handful of founders of former venture-backed companies, who are on a full-time basis advising and assisting, and ultimately mentoring and working with what our business plan calls for -- 225 companies over the next three years.
Finally, we'll actually be making investment decisions for the best of the best companies that we engage with and provide intellectual capital to. Our plan calls for us to invest $9 million in 40 companies over the next three years, and we're going to invest in the businesses that we think have the greatest likelihood of attracting additional capital after ours as the company develops, as well as create economic wealth for the region.
So how do you identify which companies to fund?
It's a huge challenge. Every 120 days we have an application deadline. We evaluate and score every plan and go through a process to try to identify the plans that have the greatest potential to generate long-term economic wealth.
We select those companies, do significant due diligence and ultimately make a decision on which of the companies we'd like to invest in by the end of that round. We're the farm system for potential venture-capital backed companies in Northeast Ohio.
How to reach: JumpStart, (216) 363-3406 or www.jumpstartinc.org
The meetings focused on three things -- streamlining Graeter's image, beefing up its online sales and establishing an expansion plan for the 135-year-old company's long-term future.
"Brand management, brand identity, logos and all that nonproduct-oriented type of thing was stuff that my father and uncles (didn't worry about)," Richard Graeter says. "They were just making the ice cream and getting it out in the stores. My aunt was worried about getting the doors opened on time.
"They were so close to the day-to-day operations of the business that they never had the time to pull back and look at the strategic part. That's what the three of us are doing."
Graeter, who pursued an accounting and finance degree at Miami University before earning a law degree from the University of Cincinnati, recognized early on that a successful past didn't guarantee a successful future. In fact, less than 3 percent of family-owned businesses ever reach the fourth generation.
Graeter's, itself, almost didn't make it. The company's ownership transfer to Richard, Bob and Chip required more than three years of planning and a family business consultant to end the squabbling among the third generation of Graeters.
But that's all in the past. Today, more than a year after Richard, Chip and Bob reached an agreement among themselves and with their parents, business is booming.
Richard, who serves as president and CEO of Graeter's Franchising Corp. and Graeter's Inc., oversees a two-fronted operation -- a 12-store ice cream retail business that employs more than 300 people and generates nearly $14 million each year; and a 25-store franchising operation.
Under his leadership, Graeter's has updated its image, strengthened its foundation and expanded its reach. To accomplish this, he recognized essential components that simply had not been previously necessary. He, Chip and Bob have rebranded the venerable Cincinnati icon and set it on a solid path for its next phase of growth.
Streamlining the brand
There are few companies in Cincinnati with more name recognition that Graeter's.
"I could probably put it in a brown paper bag and wouldn't have a problem (selling it)," says Graeter.
However, knowing the Graeter's name and being able to identify its logo are two different things.
"Our brand appeared probably five different ways in our stores," Graeter says. "The Columbus stores had their look and feel, we had ours. The Kentucky ones were a little different, even the stores in the same city were a little different. Our Kenwood store looked different than our Western Hills store."
And that, he says, created identity problems that had the potential to hamper expansion.
"We thought that if we were going to franchise, we needed to have those essential foundation blocks - the brand ID and the store look and feel. In a very big way, the projects my partners and I have worked on are building blocks."
The idea of developing building blocks for a 135-year-old company may sound strange, but for any consistent growth strategy to succeed, the brand is an essential component. Companies go to great lengths to protect their brands - consistent brands provide consumers with trust and reassurance that if they purchase a product, it will be the same quality no matter where they buy it. The same goes for consumables, such as ice cream.
So last May, with the help of Cincinnati-based branding firm Libby Perszyk Kathman Inc., Graeter adopted various components from existing logos and compiled them into one streamlined version, rolling out a new corporate logo and an updated package design.
"We now have a very high-end, classy, professional-looking logo," Graeter says. "Our pints carry that logo and our candy and bakery product line will soon be carrying it. We also have gift cards that have that identity."
This achieved Graeter's most important building block -- a consistent, upscale look that could compete nationally.
"(The) brands now look and feel the same caliber as the quality as, say, Godiva chocolates," he says. "There is a big difference between one that has been well-thought-out and executed and one that has been done on the side, as a secondary product or project, over a hundred years. That's what we had. We haven't had a real brand other than the quality of the product.
"People recognize Graeter's, but I wanted them to recognize the brand and identify it together with the ice cream."
Reaching the masses
Even with a new brand identity in tow, for Graeter, as with his parents and grandparents before him, the business remains about one thing -- the ice cream.
"It is what it is because it's special," Graeter says. "It's made two or three gallons at a time."
The process, called the French Pot method, is the backbone of the company's long-term success. But because of its manufacturing limitations, Graeter's French Pot method for making ice cream is its greatest weakness as well as its greatest strength.
"You can't make our ice cream on a modern machine," Graeter says. "We basically had to design our own machine that gave the same quality of the French Pot ice cream as machines made before 1908. It still only makes two gallons at a time."
And in a world where mass production rules and competitors can churn out hundreds, if not thousands, of gallons of ice cream quickly, having to manufacture your own machines one at a time for franchisees or company-owned stores presents another set of growth challenges.
"We're not going to build a giant plant somewhere to ship our ice cream across the country. That defeats the purpose of Graeter's ice cream," Graeter says. "The product doesn't travel well. It's not meant to sit on a shelf in a warehouse, to be shipped in trucks and then sit in a back room waiting to be stocked. National brand ice cream actually has a shelf life of a year. I can't imagine and don't want to eat ice cream that's more than a few weeks old. Ours isn't.
"At any one of our stores, at any Kroger's store, you can get ice cream that's days and maybe a couple weeks old, at most."
This helps explain why, despite numerous requests, Graeter and his parents have not expanded nationwide as quickly as other specialty ice cream shops.
"People ask why we're not coast-to-coast," says Graeter. "That's because we're making about as much ice cream as we can make here. Our goal is to be the very best ice cream. The other ice cream companies are all about franchising. Their No. 1 goal is to sell another franchise."
So while Graeter gets calls almost daily from entrepreneurs who want to introduce the Graeter's brand to markets beyond Cincinnati, Columbus, Dayton, Northern Kentucky, Lexington and Louisville, he and his cousins have settled on a more controlled process for adding franchises.
In the meantime, Graeter is reaching the masses in a more high-tech and targeted way -- through his company's Web site at www.graeters.com.
Relaunched in late 2003, just before the purchase agreement that transferred ownership of the company to Richard, Bob and Chip, Graeter's online store provided an immediate ability to compete nationwide, albeit in a somewhat limited manner.
Consumers can purchase the company's ice cream in specially made six- or 12-pint reusable shipping coolers and have it shipped via next-day air across the continental United States. The company's other products -- candy and gift certificates -- are also offered through its online operations.
"We use old-world technology to make the ice cream," says Graeter, "and new-world technology to deliver it."
Expanding the company
One of the biggest mistakes generational owners commit is trying to run the family business the same way their parents or grandparents did. Graeter and his cousins refused to fall into that trap.
"Our consultants were very adamant about that," Graeter says. "They said, 'Look, you guys, if you are out there driving and loading trucks and making ice cream, you can't possibly plan where you want the business to go five or 10 years down the road because you're worried about the next five or 10 minutes.' That's the real critical difference between our fathers' generation and ours."
Instead, they've set up a management structure that allows them to focus on their strengths. And, for the first time, they've hired nonfamily members to fill out the senior management team.
"In the past, you had employee members and you had Graeters, and that was that," Graeter says. "There was no in-between."
Graeter sought to fill that "in-between" with strong team members who could serve as a link between the family members and the company's other employees.
"The most important thing was (to find) someone who was as dedicated to the quality of the product (as we were)," he says. "Someone who cared about it, who looked at that ice cream or candy or bakery item as it's going out the door, knowing that they were wrapped up in it. Our name is on that, and we want the best to be out there carrying our names."
Graeter says he found two of those people already inside the company -- one managing the bakery and another in ice cream operations.
Adding them to the team -- and having them oversee those key aspects of the business -- allowed Richard to focus on his role as company leader, managing the accounting, legal, finance and marketing functions of the business. Bob oversees all plant operations and Chip is the trio's natural salesman, designing and managing the company's retail sales.
The moves led Graeter to work on developing incentives beyond ownership for the new senior managers. "That's another project we're working on," he says. "Obviously, with a small corporation, there isn't stock, so you look to use other ways to benefit them -- salary and bonus. You're basically trying to give them the incentive to stay for a long time. If they stay for 10 years and contribute to the company's success, at the end of that time period, there'll be a nice pool of wealth created for them."
But despite all the changes, all three Graeters are interested in one thing -- ensuring the product's quality.
"We could try to do 100 different things, extend our brand to different product areas," Graeter says. "But Graeter's is ice cream. And when you get back to the product, it requires hard work and staying true to who you are."
HOW TO REACH: Graeter's Inc., (513) 721-3323 or www.graeters.com
Amanda Wurzinger contributed to this article.
Recently, Orville-based J.M. Smucker Co. was the latest to announce layoffs -- about 180 positions at a California plant it's closing. Smucker also intends to restructure its operations and sell off its industrial bakery ingredients and dairy ingredients businesses. So add it to the list of companies in the region, such as The Timken Co. and The Hoover Co., which have contributed to the loss of jobs.
It doesn't have to be this way, Mr. President. You can help. As you begin your second term, don't forget about Northeast Ohio. What we need during the next four years isn't another round of tax cuts that expands the budget deficit, but well thought-out business-related incentives to help manufacturers adapt to the global economy and pump money into the sagging economy.
Moral values were a key factor this past year, so don't forget what the New Testament said about teaching a man to fish rather than feeding him fish. With a little push, manufacturers can be on the road to self-sufficiency.
It's being done at companies like ISG, where a savvy investor bought the assets of a left-for-dead steelmaker and installed a keen CEO, who scrapped the old model of U.S. steelmaking and remade the industry to make it globally competitive.
Mr. President, you can't pass laws, but you influence Congress' legislative agenda. So please consider sending to the Hill the following proposals:
* Tax credits to manufacturers that undertake Six Sigma or lean manufacturing initiatives. These credits can be given based on effectiveness of the programs.
* Hard dollars allocated to work force development and other training programs to update the skills of traditional manufacturing employees
* Money to retrain the hundreds of thousands of displaced manufacturing workers who have lost their jobs over the past five years
Mr. President, Ohio did its part to provide you with the opportunity to lead this country for four more years. Now it's time for you to do your part and provide Ohio an opportunity to remake its manufacturing economy. After all we've been through together, it's the least you can do.