Ken Weisbacher, president and owner of KW Flooring is no stranger to adversity and overcoming obstacles in his business. The company owns and operates seven different flooring brands such as Carpetland Carpet One, Big Bob’s Flooring Outlet and Buddy’s Flooring America. The 150-employee, $42 million company finds ways to take advantage of its niche markets in carpet, hardwood, tile and concrete flooring.
“The keys to our success generally have been our ability to market to different niches of floor coverings,” Weisbacher says. “We have many different models that we operate that makes us unique. We don’t just have one company that sells to everybody.”
It’s that attitude and constant industry awareness that has allowed KW Flooring to push past tough times and continue to offer various specialty flooring brands.
Smart Business spoke to Weisbacher about how he overcomes obstacles and creates niche markets.
What have been some of your toughest challenges lately?
The biggest challenge recently has been the decline in demand for flooring both residentially as well as commercially. With 22 locations selling flooring, when things are good, we have 22 locations that do very well. When things are bad and you’ve got 22 locations, it becomes a big challenge. We’ve had to downsize. Because there is not as much demand we’ve had to right-size to the market. We’ve had to figure out avenues that we’re involved in that will be successful going forward and which are best to get away from. Over the last three years those have been the types of decisions that have been most difficult.
Most business owners open up a store or get into a type of business and that becomes like a child to you. You want to see it grow and succeed and prosper so it’s very difficult to pull the plug and say, ‘Get out of this or I get in deeper.’ You have to be willing to close your failures and promote your successes. Too many people waste their assets and their energy on trying to turn around their failures and their time and money would be better spent promoting their successes.
How do you grow your successful businesses?
We created half a dozen different companies that specialize in a particular area of flooring. We focus on that and are able to provide a level of service for people that they’re not likely to find in a store that has a more general outlook.
You have to identify a niche that is ignored by other people or underserved by other people or that is really fast growing. The first step is to identify the niche and then determine what you can do to differentiate yourself from others who are trying to serve that niche. You’ve got to do it better than anybody who’s out there doing it now.
What have been some challenges of growth in your company?
The progress has been three steps forward and one step back. It has not been a continual improvement, but things are getting better and I am optimistic about the future. One challenge has been ignoring the impulse to be too quick to hire back a number of employees. Personally I believe you should hire back more slowly because you’ll be more profitable as business ramps back up.
You have to hold back the impulse to bring more people in as you see business pick up. You have to make sure that the people you have can manage the growth by doing a little bit more business than they’re currently doing now. If people are paid on commission and are money motivated, they will appreciate that and it works out well for both sides.
What are the keys to finding a new area of business?
A new area for us is concrete grinding and polishing. There again we saw a niche that was underserved. A lot of retail space is now polished concrete and finished floor as opposed to carpet or tile. So we decided that rather than try to compete against that we would learn how to do it ourselves and get into that market. It is an opportunity that traditional flooring has lost to polished concrete. As we saw more and more of that, we realized we were missing out on it.
You have to be open-minded and flexible enough to say what I did for the last 20 years may not be what I need to do for the next 20. It’s not easy to do because everybody gets into a comfort zone. We all want to keep doing what we’ve been successful at, but there comes a time when you have to say it’s not the same as it used to be, therefore my actions and activities have to change.
HOW TO REACH: KW Flooring, (513) 771-2345 or www.carpetlandcincinnati.com
Billy Cyr had been leading a company that had operated with the same supply chain and technology for the past 15 years, lacked a competitive product line-up, and was dabbling in businesses that weren’t helping the company grow.
Cyr, president and CEO of Sunny Delight Beverages Co., a 600-employee, $550 million drink business, knew the company needed to make changes to grow. The challenge would be figuring out what changes would have the biggest impact.
He acquired two new brands to expand the Sunny Delight line-up, sold an underperforming European business, and made a significant investment in the company’s supply chain and overall operations in the US.
“We have built a supply chain that’s both chilled and shelf-stable, increased the wholesomeness of our products, and invested in the supply chain and built that out,” Cyr says. “As a result of that, we are more profitable than we were several years ago and we’re certainly in a stage now where we have a clear path to some pretty significant growth.”
Through acquisitions and a $70 million investment in the future of Sunny Delight, Cyr has made a push for the company to be more competitive in a tough beverage industry.
Here’s how Cyr revamped the company with new products, technology and a narrowed focus on U.S. growth.
No matter how hard you look within your own company for growth opportunities, sometimes they just aren’t there. You have to be willing to bring in opportunities from outside.
“(Acquisitions) are always tricky because it’s where opportunity meets strategy,” Cyr says. “You could have the best idea on the best acquisition, but if it’s not available at the right time and you’re ready for it, there’s really not much you can do about it. We like to think of ourselves as staying very, very close to the industry and constantly aware of where the opportunities might be and how they might fit with us. You have to be open to the unexpected and be ready to say no. We say no nine times out of 10, because if it’s not right, why waste your time and why waste the seller’s time?”
Being open to the unexpected is exactly what put Cyr and Sunny Delight in front of the Fruit2O water and Veryfine juice brands deal, both from Kraft Foods.
“The Fruit2O and Veryfine acquisitions have been a gold mine for us and have done extremely well,” he says. “When we first saw the materials on it we looked at it and we said, ‘You’ve got to be kidding, why in the world would we want this thing?’ We went in and took a look at it and said, ‘Well, there’s something here.’ We kind of entered the process a bit reluctantly and ultimately turned out to get a deal.”
Not every opportunity works out that way. You have to constantly pay attention to your industry.
“At the end of the day, you’ve got to be connected to your industry, you’ve got to know what you’re looking for and have people knowing what it is you’re interested in,” he says. “You’ve got to pursue those things at the right time, but you have to at the same time be open to some things being a little unexpected.”
A CEO has to be very clear about where value creation is going to come from.
“Value creation is what acquisitions are all about,” he says. “Every acquisition has sources of value creation and sources of value erosion. You have to minimize value erosion from things that might go wrong or could go wrong or might result in a one time cost. You want to maximize value creation on things where you’re going to get operating synergies or revenue growth or cost savings. Keeping those out in front of you and optimizing those that make the most sense is critically important. Be clear, decisive and transparent about how things are going to run. If you’re not, people will muddle along and do the work, but they won’t understand where value is created.”
Focus on the best performing units
Shortly after installing Fruit2O and Veryfine into the company’s product line-up, Cyr had to make another big decision about the direction of the organization.
“We were looking at our opportunities and looking at where we want to spend our management time and energy,” Cyr says. “We quickly concluded that the European market was going to be one of our slower growing markets. It was a market where we did not have significant scale. If we wanted to build the scale there to become more competitive, we were going to have to make several very sizable investments—either acquisitions or infrastructure. When we compared that to the opportunity to make further investments in our North American business, we quickly concluded the North American business would be more lucrative for us.”
At the same time Cyr and his team were contemplating their decision, a Japanese company offered to buy the European business to build its own presence there.
“When you have somebody who is as determined as they were knocking on your door and wanting to own your business in Europe and you’ve already mentally decided that it’s OK to separate your business, it makes for a fairly simple and easy decision to separate the US business from the European,” he says. “It has paid very big dividends in terms of focus and the ability to make the investments we want to make in the US.”
When making decisions that will shift the focus of the company, you have to be as certain as possible that you are making the right move.
“It’s always easy to give advice on this one from the outside in or looking back,” Cyr says. “I think every CEO would tell you that they always wait too long to make some of the decisions that could help narrow and tighten the focus. Part of being eternally optimistic is you believe that every part of your business — every child that you have is going to succeed and be great. You don’t want to decide to narrow your scope to focus on the few things that have the greatest chance of being successful. You don’t stop paying attention to two children to focus on the other two. You have to always be focused on all of them, but in reality when you look back and look at it as a business and not as your children, you quickly figure out that there are some things you do need to do when you’re narrowing your focus and that’s always a tough call. The minute you think it’s a possibility, you might really want to think it’s time to go do it.”
Invest in operations
With a narrowed focus and a new product line-up, Cyr could turn his attention to growing the North American business and improving the company’s operations.
“We’re making a very sizable investment in our manufacturing operations,” Cyr says. “We bought a plant in Texas. We’re buying all new filling lines that are going to speed up our manufacturing processes. We’re automating all of our warehouses. We’re upgrading our IT system. We made several very significant improvements and those are things that would have been tougher to do if we hadn’t made the decision to focus on North America.”
Making those improvements took a lot of evaluation of areas where there were opportunities that hadn’t been seen before.
“In this particular case, we stepped back and said, ‘It’s been 15 years since our supply chain and our packaging lineup was last revisited,’” Cyr says. “Sunny Delight’s supply chain in North America had basically been frozen with the technology and the basic platform it was built on in 1994. So in 2009 we said, ‘Maybe after 15 years the world has changed.’”
There were three fundamental changes that had a big impact.
“No. 1 is our gallon bottle business had gone from being a relatively small part of our total business to being more than half of our business in North America. So when it was originally designed for our manufacturing operations, it was designed to be sort of an adjunct to the portfolio rather than a key part of the portfolio. The second thing is our customer base had changed. In 1994 we were selling virtually nothing to Wal-mart and in 2009 and 2010 when we started looking at this project, Wal-mart was our single largest customer. The third thing is our technology changed. The speed of filling lines and the capability of equipment to operate at higher speeds had all changed dramatically. They all changed in different ways and when that many different things change that much over a 15-year period, you know there has to be opportunity to do the business better.”
Cyr and his team spent a year analyzing the entire operation and found that moving to higher-speed lines and developing a new bottle would help save money and meet consumer’s needs.
“It would allow us to reduce our operating cost in our plants,” he says. “It would allow us to run with much higher-speed lines, which are higher-quality, higher-reliability lines than we had before.”
The faster lines sparked a new design for the SunnyD bottle, called the quadro-bottle, which took Sunny Delight’s iconic cylindrical bottle and replaced it with a rectangular one.
“That rectangular bottle offers four very distinct benefits,” he says. “One is its less packaging material so there’s a savings and it’s more environmentally responsible. The second is it fits in the refrigerator door so the consumer can easily use it in the refrigerator. Third is it moves to an off-center spout so it’s much easier to pour. The fourth is because it’s rectangular it’s much more efficient through the supply chain. It fits on the store shelf and allows the retailer to fit 22 percent more product on the shelf and it fits on pallets more efficiently and fits in cases and in warehouses more efficiently. It gave us these four significant steps up versus what we had before and that became the basis for our business building opportunity.”
Much like the decision to sell the European business, this project took some major foresight and planning on Cyr’s part.
“I didn’t know what the solution was, but I knew that the world had changed and we needed to respond to that change,” he says. “You have to focus on the big drivers, not the little ones. What are the big broad strokes that are going to have a dramatic impact? Those will give you 99 percent of the benefit and you’ll be able to do it with 50 percent of the effort as opposed to pushing so far that you push all the little pieces too. The other part is focusing on making sure you’re harnessing the full capability of the organization.”
The best way to harness the full capacity of your business and see all the potential opportunities is to gather and consider the advice of others in your company.
“It always starts with having people around you that you trust who can give you very good information and input,” Cyr says. “The second thing is to start trying to figure out where all the biases are. When your folks have been looking at the business over an extended period of time and looking at it through the same lens, they’re pretty much going to see the same thing. At some point you have to step back and say, ‘I need to find a different lens, a different way to look in at the same issue.’ Where can you see an obvious sign that you aren’t seeing the whole market or somebody’s seeing the market differently than you do? Where do you find that the choices and directions that you’re making aren’t consistent with what others may be doing? That’s because they have a different lens on the same set of circumstances.”
To get a different lens, Cyr relies on the perspective of his board.
“They look at the business through a lens that is different than the lens that I have,” he says. “When I hear them say something that inherently makes no sense to me or doesn’t seem to fit the situation, rather than thinking it must be wrong, I always ask myself the question, ‘In what context is that statement true?’ If you ask yourself that question, you ultimately will find a different way to look at the exact same set of circumstances and almost always it is dead-on right. It teaches you something else about the set of circumstances that you completely missed. Start with understanding where the biases are and then go directly after those. If your biases perceive the world this way, eliminate that bias and you’ll see it a completely different way.”
HOW TO REACH: Sunny Delight Beverages Co., (800) 395-5849 or www.sunnyd.com
- Look outside your business for growth opportunities
- Find chances to narrow your company’s focus
- Invest in and grow your business
The Cyr File
President and CEO
Sunny Delight Beverages Co.
Born: Palmerton, Pa.
Education: Graduated from Princeton with a degree in history and East Asian studies.
What was your first job and what did you learn from that experience?
I was self-employed. I did everything from snow-shoveling to lawn-mowing to house-sitting to having a newspaper route. I did anything to make a buck. If you’re willing to do something that other people are less willing to do or aren’t willing to work as hard at, you could make a lot of money. It was also self-reliance, independence and dealing with customers.
What is the best business advice that you’ve ever received?
My father always encouraged us to take risks. That’s one of the biggest sources of advantage that I have and one of the things that is most in shortage today. We’re all far more capable of doing things than we think and the downsides of failing are much less than we think. The upside is usually much bigger than you think.
If you opened your fridge, what Sunny Delight beverages would we find?
We have a lot of Fruit2O in our refrigerator right now. We have a regular 64oz bottle of Sunny Delight. One of my kids loves it and I certainly drink it. We have the Veryfine red fruit punch that’s very good. My daughter likes some of our fruit simple smoothies and our Bossa Nova products, so some of that is in there as well.
Do you have a personal favorite?
I have seasonal favorites. In the summer I need the water when I’m running, so the Fruit2O fits in there. I drink a lot of SunnyD in the winter time.
Three years ago, Mark Adamson was staring at a company that was losing more than 50 percent of its demand in some of its global businesses. It was the height of the credit crunch, and the situation called for immediate action. Adamson, president and CEO of Formica Corp., an $800 million building products company with more than 3,000 employees, had to make quick decisions to help restructure and refocus the nearly 100-year-old organization.
“Fifty percent of our revenue was disappearing overnight,” Adamson says. “It didn’t happen gradually as you might expect if you have a category decline or a major competitor advance; this happened one week to the next. Any of the normal business decision-making processes that you might expect in largish companies, we just didn’t have the luxury of time to go through that. It was interesting watching management resort back to the old techniques of good judgment, having the balls to make a decision quickly based on the data available and just act.”
The business was kicked into survival mode. The company was losing money, losing employees, and no one could help the organization but itself. Since Adamson was a new CEO at the time, he had begun some restructuring just a few months before the crisis hit.
“We had the management team focused on the need to improve,” Adamson says. “We were ready to hit the deck running, whereas I think some companies were hit unaware and took a couple months to react. It really sorted the men from the boys so to speak in terms of the management team. I thought we really went into the crisis, not in good shape per se, but certainly in good shape managerially in terms of our focus and our ability to address it.”
Adamson had to make quick, sound decisions, rally his team around changes and do what he could to keep Formica from succumbing to the recession while positioning the organization for future growth.
The financial crisis has forced businesses to throw out the old ways of decision-making and implementing changes. It’s a new game, and if you don’t act quickly, you lose to those that do.
“I think the biggest challenge was to react quickly,” Adamson says. “In some respects I’d rather have made an 80 percent correct decision than none at all because the level of need at that time was huge. You needed people that come with a focus and were bright people, intelligent people who could make quick decisions and execute them quickly, and I was fortunate enough to be surrounded by enough of those sorts of people that, within six months of the Lehman situation, we pretty much found a level. The base of earnings was established — it wasn’t good, but it was a base of earnings.
“Those six months during the credit crunch was like triage. You had a patient wheeled in from a traffic accident and there’s blood everywhere. You just have to stop the bleeding. Once you got the patient stabilized … you really did have to redesign your business model for the new edge. The five years of boom — where if you wanted to argue, a fairly average CEO could run a company and make money — was over.”
In any situation where quick decisions and changes are necessary, you have to be able to rally your team together, analyze data quickly and confidently, and make a decision without second-guessing yourself.
“I always find it useful to look to the sporting world for advice on management,” Adamson says. “Alex Ferguson, the manager of Manchester United, is really good at creating a kind of siege mentality — us against the world. I think we did manage to create that internal need where everybody pulled together against a common enemy, which was the economic woes. To do that however, you have to be able to look the people and that team in the eye, and it’s very difficult to do that if you don’t act quickly.”
In order to implement necessary changes and move forward, you need to have the right team in place to do so.
“Unfortunately, you do have to release people,” he says. “You do have to very quickly gauge the people that you think will be at your shoulder acting in a way that you think will get you through the recession. It’s not always the guys and girls who are good at managing status quo. I released some very sound senior management who had served us well in the past but who I just didn’t think were going to get us through the difficult times. You have to have balls, and you have to be cruel in some cases and release those people and create the team that you think will get you through.”
Adamson stopped Formica from bleeding and turned his focus to creating a company that could live on leaner times. Companies have to be able to adjust business models appropriately.
“Having kind of saved the business, it was a matter of growing the earnings with flat revenue,” he says. “I think during the good times a lot of businesses had extended their products, grown their SKUs and grown their product portfolios. What we did was we stripped the product offer right back to what we genuinely thought the customer wanted and needed because during that time of boom, people didn’t talk to their customer base enough. I think a lot of companies during that phase became internalized and just assumed what customers wanted.”
If getting past the survival stage isn’t hard enough, it’s crucial to keep plugging along to restructure what is no longer working and determine where you want to go.
“You’ve got to have people with intellect and experience, some young ducks and old heads, and quickly come up with a destination,” he says. “The key is the destination. There’s always enough brains in an organization to work out how you’re going to execute to get there, but determine where it is you want to get your business. It may be in phases like we did — survival, restructure the business model and then grow. You shouldn’t have 20 phases, but you shouldn’t have one so big that people can’t get their head around it. Break it down into phases of 12 to 18 months. People can get their head around that in the business.
“You then have a rallying call and you can say, ‘In the next 18 months, we’re going to do this. This is what success looks like and this is what happens after that.’”
Part of forming a new destination for your company in a time of restructuring is seeing the positive.
“We were able to paint a picture of what the business could become and in some respects turn the recession into a positive,” Adamson says. “You explain how it would enable us to make the decisions that maybe in the past we wouldn’t have been empowered to make. Our parent company gave us an awful lot of autonomy and leeway to make big, quick decisions and some of these decisions in truth may well be decisions we’ve always wanted to make, but we didn’t have the bravery to do so. This was an opportunity to actually do stuff that historically we might have shucked.
“I don’t want to talk so warmly about the recession, because it was ugly for a lot of people, but it was a great enabler to allow you to do all sorts of things that you might not have otherwise got away with. Any manager that didn’t take advantage of that should be shot. See it as an opportunity.”
During such a time of unrest and uncertainty, you have to remain strong and confident or your employees will lose confidence in the changes.
“I look back now and the management team and I used to walk around smiling,” he says. “People take their lead from the senior management. If you walk into the office every day with a face like a fiddle, looking as if you’ve got the weight of the world on your shoulders — it surprised me in my early days of senior management just how much people would base their rumor mill and their views and emotions on how I looked in the morning when I came into work. You have to be cognizant of that. In times of crisis, do a lot more walking around, a lot more smiling, a lot more talking. People need reassuring.”
Once you have decided on a destination to take the company, make sure you keep everyone in the business informed.
“The ultimate destination was a stronger company with a platform for growth was what the objective was,” he says. “Once you’ve established that destination, very frequently measure against it and communicate. Don’t leave people in the dark.”
Re-evaluate customer relationships
Adamson knew that for Formica to restructure and return to growth, he would have to change how the company worked with its customers.
“What we did was we were very honest and we went to our customers with our assessment of the profitability of that customer, and in some cases, we don’t make money on you,” he says. “We were very pleasantly surprised in how that honesty was repaired with the customers and nobody wants to be a loss-making customer. We were able to work with them and said, ‘Well, one option is to increase price, but it’s really an option of last resort, because you’re in the recession as well and you’re suffering and we don’t want to do that to you. What if we supplied you once a week instead of twice a week? What if we reduced your product offer? Do you really need all these range of products? Could we not reduce that and still be able to give you the chance to fight in your marketplace?’
“As a result of that, we reduced the number of SKUs by over 50 percent. We rationalized our shipping routes, and by and large, we achieved fairly significant increases in profit without necessarily relying on the old levers of just trying to jam the customers with price or slash cost.”
Having engineered the business after the immediate recession to be what they thought was cost efficient, the company generated more revenue out of the customer base and doubled earnings in an 18-month period. To return to growth mode, you have to look externally.
“For those who have had the foresight to have a base to move on from, it’s about consciously changing your focus from inside to outside,” Adamson says. “The recession did bring us all back internally. It focused us all on fixing our cost bases, restructuring our management and our product offer.”
Formica went through this for a period of about six months. Adamson quickly moved to the next phase and focused on customers, top-line growth and innovation.
“The challenge I now face, which is a very different challenge to cost-cutting and profit execution, is how you grow the top line,” he says. “There’s three ways you can grow the top line. You can sit on your ass and wait for the economy to come back, but we’re not doing that. You can convince your existing customers to buy more or you can go out and find new customers. What we’re trying to do is the second one, which is to convince our existing customers to purchase more from us. A key component to that is innovation.”
To aid in the search for innovation, Formica is trying to get to the customer in the marketplace and understand the dynamics of what they want and what they need.
“I think traditionally people think innovation is R&D. If you throw a load of money at your scientists, keep your fingers crossed, something might come out of the other end. What we’ve said is, ‘Innovation is a virtuous circle.’ R&D does have a role in that, but so does customer need. It’s one thing inventing new stuff, but that’s no good if the customer doesn’t want it or if the customer really wants you to go down this path and not the other path.”
Formica is focusing on gathering feedback from its sales force, customer service reps and other avenues the company has to better analyze data on what customers want.
“You’ve got to be able to analyze the feedback and see trends.”
Establishing trends in the marketplace is helpful, but you still have to be certain that the trends work for both you and the customer.
“The customer isn’t necessarily always right. You have to help him understand what he really needs. We’ve done it before and developed products that in truth people said they wanted and when we went to market with a product it was, ‘We said we wanted it, but we’re not going to pay for it.’
“Make sure you understand what they truly want and what they truly value and are prepared to pay for and put your dollars into developing that.”
HOW TO REACH: Formica Corp., (800) 367-6422 or www.formica.com
The Adamson File
President and CEO
Born: Newcastle, Northern England
Education: Graduated with an honors degree in business and finance from Newcastle University
What was your first job, and what did you learn from that experience?
The government in the U.K. decided it didn’t really have a handle on its roads network and needed to survey all of its major trunk roads (interstates) and they needed people who would walk around all summer with these little wheels and computers and … try to take a digital snap shot of every mile of road right across the U.K. We were given these utility trucks and given so many miles a week that we had to perform and were asked to survey these roads. The speed of execution, the prioritization, setting targets, I guess you could say it all started then. It was an outdoors job and you used to get wolf whistled by all the girls driving passed in cars. It was a perfect job for a 19-year-old boy.
What would you say is the best business advice you’ve ever received?
It was the importance of networking. You’re never too senior to benefit from the ability to make a phone call and ask a favor. The power of networking and communicating is huge.
What Formica product are you most excited about?
There’s the 180fx products. It’s a product that really hit the market strongly and is a product that has the look of real granite — big bold patterns with texture. That’s a really exciting product. The other product is a departure for Formica. Formica’s traditionally seen as an interior decoration product. We’ve just embarked in the last 12 months on a product for the exterior of buildings. All the colors and patterns that you got internally from a Formica product, you can now apply to the outside of the building. It’s called Vivix.
If you were going to remodel your kitchen, what Formica products would you use?
I’m not an interior designer, but I operate in this field so some of it rubs off. I think modern kitchens are quite like contrast. I would probably use two patterns. I would have one on the island and on the island I would use our 180fx product and then maybe a more sedate, darker pattern around the outside with one of our etchings products. That allows the 180fx island in the middle to really standout.
Kathy Selker, president and CEO of Northlich LLC, a full-service advertising agency with just under 100 employees, knows that to be successful you have to stay true to your values and what you do best. By sticking to this philosophy, Northlich has become a leader at what it does and has attracted the attention of customers looking to do the same.
“One of the challenges is not to chase every opportunity and just to stay focused on that which we do with excellence,” Selker says. “We’ve held ourselves to that standard, but sometimes it’s tempting to do other things.”
To make your core values a key ingredient in the everyday functionality of your business, you have to abide by them in everything you do.
Smart Business spoke to Selker about how she makes decisions with the company’s core values in mind.
Identify core values. I was given some very wise advice a few years ago, and it’s become wiser over the years. You have to really take the time to identify your core values. I went through that exercise, shared that with the agency and have kept those close to our heart.
You have to do the work to identify your values, and you have to share your values; otherwise you can cheat. You have to do your best to hold yourself accountable to those values. I know people say that all the time, but it was the best advice I’ve ever gotten.
If you use that instead of filters to say, ‘Is this client a match for us? Will we be able to demonstrate our commitment to transparency, courage, greatness, passion or not?’ That’s been very helpful. There have been times where I’ve been in a relationship, and it’s not going well and you have to step back and say, ‘You know what, here’s the core issue here.’ We are committed to doing great work here, excellent work, not compromising, and we’re in a relationship with a client where their objective is different than that and it’s causing us great stress internally.
Determine bad relationships. No. 1, are we the right match for them? Can we do what they need to have done? No. 2, is there a value and chemistry match? We’ve all had difficult relationships and sometimes in a client-serving business you’re going to have challenging relationships, but you have to have a certain amount of chemistry and a certain amount of clarity about what we’re trying to accomplish and if it’s possible to make sure it’s the right match. The economics have to make sense. There are certain kinds of things we choose to not work on, certain products we choose not to work on. It’s just not a match for our folks, and certain industries we try to stay out of because we don’t have the depth in that area. Sometimes you make a decision to pursue something or accept an assignment and then you realize it was a mismatch. It’s an art; it’s not a science.
I’ve had relationships where I’ve taken the deep breath, had the important conversations and made the decision and walked away. I’ve had other relationships where I’ve just kept it going and it didn’t get better, it got worse, and it probably cost more than it helped me. You have to make value-based decisions. You have to be true to yourself and you have to do what’s right in the best interest of your employees and, in our case, our agency’s reputation. If you compromise something that’s core, that’s a mistake. In my head I can think of four mistakes where I failed to decisively make a hard decision. Every single one of them later I knew where I didn’t do what I needed to do when I needed to do it. It’s tough and you’re not always going to get it right, but you have to hold yourself to that standard.
Stay true to your business. The first thing you have to do is take care of your current relationships. Start by taking good care of your people, because they are your ambassadors to your clients and to your community. Take equally excellent care of your current clients and current relationships. That has helped us really weather through this tough, tough economy; keep great clients and great people and it’s also been a door opener to more great clients and great people. That’s a fundamental.
Secondly, really doing the hard work and identifying the intersection between the kind of work you can do with excellence and what the market conditions are interested in hiring. You have to really have a hard conversation with yourself. What are we great at? Not what do we want to be great at. But what are we great at and how do we go connect with that in the marketplace. So you have to both do the thinking work and then you have to also execute.
HOW TO REACH: Northlich, (513) 421-8840 or www.northlich.com
For Jack Fusco, the first day on his new job was anything but laidback. Calpine Corp., a major U.S. power company that owns, leases and operates power plants across the country was in complete disarray in 2008. The company had just come out of bankruptcy and its stock was hovering in the $4 range. Morale in every area of the business was as low as it could be and to make matters worse, the economy was just starting to take a dive. Fusco, the new president and CEO, had his hands full.
“My first day on the job was extremely hectic,” Fusco says. “The company was announcing its second quarter earnings on the morning that I started my job here at Calpine. The business processes or systems were antiquated and didn’t keep up with what you would expect for a publicly traded company. So it was extremely hectic getting the financial numbers together and presenting those to the street. It happened to be the very last day that our [earnings report] could be filed on. That’s something I try to forget about is my first day of my first week.”
Fusco didn’t let a bad first week get in the way of his determination to overhaul and turnaround the struggling power company. Here’s how Fusco boosted morale, created a vision and mission and led the company through a dark time.
Asses the situation
Calpine Corp. got itself into trouble because the company was too focused on growth instead of paying attention to the factors that allow for growth.
“I wasn’t here, but from what I can asses, it was the typical founder’s dilemma, which is build, build, build,” Fusco says. “Whether it’s grocery stores or drugstores or whether it’s power plants, they get into really focusing on new stores or new power plants and not keeping your eye on the ball. It was a phenomenal growth that the company had undertaken and the economics of it just didn’t keep up with the growth projections. They basically ran out of cash flow.”
As the organization came out of bankruptcy, there were a lot of different moving parts within the company and it was up to Fusco to make sense of it all and begin to make changes for the better.
“The company still had an enormous amount of consultants that were in running the company in various forms and fashions that were legacies from the bankruptcy,” he says. “So working through the organizational structure and trying to define a structure that made sense where we would have full-time Calpine professionals in those seats rather than consultants was something I had to address within those first weeks of being on the job.”
Due to the uncertainty that bankruptcies carry with them and the worry of what the future held, morale in the company was awful.
“The employee base had just come through an extremely difficult bankruptcy,” he says. “A lot of reorganizing and reorganization had taken place and there wasn’t a whole lot of organizational clarity on who was doing what, so there was a lot of overlap and people were worried. There was a lot of worry that the company was going to be sold, so morale was bad. I think there are still folks and I know there are still employees that worry that the company may be sold or that we won’t survive.”
Despite the tough situation, Calpine had its best financial performance during the worst economic recession and that hasn’t been easy. It’s required the company to increase productivity through a lot of reductions in headcount.
“We tried to do it swiftly,” Fusco says. “You have to try to get it done as quickly as possible so you can start recovering. It doesn’t always work that way, but we tried. We tried to do it on a voluntary basis. If we knew that we were getting rid of one whole group or one whole area, we would do a voluntary program first versus an involuntary program. You have to move quickly and don’t let the company suffer from a 1,000 cuts.”
Calpine didn’t just let go of ground-floor employees, it had to restructure its management team, as well.
“Most of the other management team either left or were asked to leave prior to or at bankruptcy,” he says. “The people that I brought in from the outside were replacing bankruptcy consultants. Bringing in somebody in that case that was going to be a Calpine employee stabilized that position rather than having a third-party consultant firm. Some of them were folks I have worked with in my past, others were here. As I got into the organization and got down a few layers, I uncovered a lot of very talented individuals and gave them an opportunity to rise to the top. They were rough-cut jewels. It makes a much bigger impact if you are able to utilize the existing work force.”
Once cuts had been made and people were put into key roles, it was time to get the company stabilized and moving forward.
“Remember, when I started it was right at the beginning of the recession and our stock dropped into the $4 range very quickly,” he says. “So stabilizing the company and making sure that we could strengthen our balance sheet, keep an eye on our cash flow and understand where all the cash is going so we didn’t run into any tough situations again was paramount. We came out of that very, very well. That was probably the most challenging part of taking over was just the time of when I took over and then having all the other forces outside of us that collapsed.”
Address the issues
The next step in Fusco’s turnaround was to develop a vision for the company that would allow it to be a great organization without overextending itself as it did prior.
“The company went through a couple of different cultures,” he says. “The first culture of Calpine was build, build, build. It was very much a development company run by developers. They would acquire sites and construct power plants. That rapidly changed to a company that was focused on trading in a very large commodity trading floor here in Houston. I wanted to change the company to be more asset-centric, to be more focused on power plant operations and not speculative trading and not building for the sake of building. That’s where we developed a vision to be the premier independent power plant company in the U.S.”
To make a significant change like the culture of your company, you need to take a good hard look at your business and what you ultimately want to achieve.
“You need to figure out what your strengths and weaknesses are as an organization or at least try to be nimble enough to anticipate where your sector is going,” he says. “It’s a little bit of a double-edged sword. We were very fortunate that we had great people already in place that could move the company forward for where we thought the sector was headed. In other cases, I can envision a CEO may have to acquire or divest businesses.”
Fusco not only had to review the organization to make changes, but he had to make sure his management team was behind the idea as well.
“We ended up pulling together the executive officer team to develop the new vision, mission and value system so we were all bought off on it,” he says. “I think it is imperative, because it is more than just a one-person job that at least the core group of officers are all bought off on the new direction that the company is heading before it gets rolled out to the work force.”
When moving forward with a new vision, mission and value system, it is critical that once they are changed and put in place that they remain constant.
“For me I know what has been successful is we didn’t change our values or vision or mission. We stayed true to it and we’ve held it steady. We’ve tweaked it a little bit, but for employees to have that consistency and that focus, and they’re not trying to shoot at a moving target, I think is very important. You have to stay true to it until you feel like you’ve achieved it and everybody feels like they’ve achieved the original mission.”
Along with a change in the culture came a change in the company’s focus. Calpine didn’t want to get caught up in too much as they brought the business back from bankruptcy.
“We’ve had a crystal clear focus to be in the wholesale power generation business, period,” Fusco says. “We haven’t tried to confuse the work force by getting into other aspects of the business. We weren’t running off building electric vehicles or trying to build recharging stations or getting into other flavor-of-the month types of strategies. We said, ‘We’re just going to be the absolute best company at providing wholesale electric power to the utilities and retail aggregators.’ That’s what we stayed with and that seems to be rewarding us.”
Once the key organizational changes had been put in place, Fusco turned his focus to the customers and mending those relationships.
“When I came on board, I asked for a list of our top 10 electric customers and our top 10 natural gas providers, and then I proceeded to call them and introduce myself and my No. 1 electric customer wouldn’t take my phone call,” Fusco says. “I had to work through one of the regulatory commissioners to get them to force the CEO to meet with me just so I could introduce myself. That’s how bad the relationship was. I had to start at the highest levels. It really had to start from CEO to CEO.”
With the company’s new direction came an increased drive to give customers what they needed and that took cooperation on both sides.
“The other key was [customers] giving us time to get our house in order so we could prove to them that we could be the premier operator in the space,” he says. “We focused on delivering above and beyond what the customer expected and not just having a smiling happy person on the end of the phone line to take a phone call when they were upset. Organizationally, we actually created customer origination teams in our different regional offices where they could focus on developing products and services that the customers needed. It was somebody’s full-time job instead of just something they were supposed to do on the side.”
Implementing changes throughout the entire organization takes a lot of communication to make it work. You can’t communicate enough and you can’t give up.
“Don’t assume that the communications are effective at all the different levels in the organization,” he says. “I find even as much as we try to communicate with the work force, it’s never quite enough getting everybody on the same page and getting them all aligned. I’m a firm believer that if everyone has the information that we have, we’d all end up in the same place. So trying to go a little bit deeper and describe why we did what we did and what we expect to get out of it I think is very important organizationally for the employee base.”
Fusco and the Calpine management communicated in a variety of ways. From personal visits to filming quarterly DVDs, they made sure to keep up communication through the change process.
“You need to be clear about what your expectations are,” he says. “Be consistent and follow through when something doesn’t turn out the way you had expected or if somebody’s not following your value system that you enforce it appropriately so that everybody understands that you mean it and it’s not just writing on the wall.”
While communication plays a huge role in driving the company through change, not everyone will get onboard and you need to be prepared.
“That’s the harder part is trying to give people ample time to get onboard with the new vision or the new mission or the new company and when do you cut the cord versus when do you keep continuing to counsel or work through the issues,” Fusco says. “It’s not always going to work. In some cases it may just be better for the employee and for the company for them to move on.”
While letting someone go who isn’t willing to adapt to change is the right move, no one wants that to happen. You have to be out in front of employees and customers making sure you are aware of what is going on.
“I’m a very informal person, so on the employee side, I just like to show up at the plant and talk to them,” he says. “Since I have been in power plants most of my career, I actually understand what the issues are and the technology that they’re dealing with. So I think that helps add some credibility. It’s the same with the customers; I think I’m an approachable person. Getting the customers to trust the new management team was important and part of that trust was that we actually heard what they were telling us and we made changes to make it better for them. Reorganizations are hard. Change is hard for everybody and we’re all human beings. You have to be fair.”
A turnaround is the hardest thing a company will ever go through, and it takes a strong group of employees to help drive a company through such a hard time.
“The biggest factors for success as a company today have been our employees,” Fusco says. “They’ve been extremely professional through all the change and extremely hard working. You have to get a great team. It’s much too big for any one person and you’ve got to surround yourself with great people that you all trust and you all work together seamlessly. That’s the No. 1 most important thing for a CEO.”
Through Fusco’s hard work and determination the company is once again in a good position. Relationships with customers are strong and operations have improved.
“We focused a lot on our customers and making sure we were meeting the needs that they needed from us, which was very important,” he says. “We focused on our operations and our productivity. Here at corporate, we put in a new business system that helped us process our financials a lot faster and much more transparent. At the plants, we put in a new scheduling and operating system that helps us plan our work better and actually got us to figure out more of the root cause of our problems we were having. We fixed those and we got our fixed outage factors to come way down from where they were in the past. So we were delivering a much more reliable product that our customers needed and wanted, and they felt more comfortable with our operations and in return we got higher-priced, longer-term contracts from them and that helped stabilize the company quite a bit.”
Things have improved to the point where growth is back on the agenda. Last year, the company bought Connective Energy for $1.6 billion in cash.
“That to me is a real success story to go from bankruptcy to where you’re buying a former competitor and consolidating that into the business,” he says. “I think we’re in an era now where we have stabilized the company.”
Today, the company employs more than 2,100 people and had operating revenue of $6.54 billion in 2010, up from $6.46 billion in 2009.
“We are Calpine, and we’re back and we’re strong and we like our position in the market, and we applaud our employees for everything they’ve been through and now we’re moving forward.”
HOW TO REACH: Calpine Corp., (713) 830-2000 or www.calpine.com
The Fusco File
President and CEO
Born: Modesto, Calif.
Education: Bachelor of science degree, mechanical engineering, California State University in Sacramento
What was your first job, and what did you learn from it?
The first power plant job I had was when I was a junior and senior in college. I worked out at Rancho Seco Nuclear Power Plant. My first job ever was working for my father in his janitorial business. At about the time I could walk, I worked for my dad washing windows, picking up wastepaper baskets and cleaning bathrooms. That’s where I got a lot of my work ethic from were those early days.
What was your biggest fear when you took over as president and CEO of Calpine?
My biggest fear was that we were going to have to file for bankruptcy again. I’m well beyond that today, but when I started, when you’re fresh and the economy does what it did within the first month of being on the job, it was very uncomfortable.
Who is someone you admire in business?
Jack Welch. He changed the way I thought about work when I read his first book, “Control Your Destiny or Somebody Else Will.”
What is your definition of success?
For me, it centers on employee development. If I can take the treasurer and help him become the best CFO, I get a lot of satisfaction out of that. We spend an enormous amount of time on our succession planning throughout the whole organization. So trying to create something that’s long lasting and sustainable that has multiple layers and professionals on the bench means more to me. Concurrent with that would be our reputation. When people think of Calpine, they have good thoughts that we are a leader in the space or a leader in environmental quality and not something else.
Larry Lawson, president and CEO of eCardio Diagnostics LLC, a provider of cardiac monitoring products and services, has had to check his own pulse once or twice because of the rapid growth his company has seen in the past few years. ECardio has been one of the fastest-growing companies in Houston and has no plans to slow down.
“We’ve continued to experience solid growth,” Lawson says of the $44.8 million, 350-employee company. “That growth has come from our ability to continue to meet the needs of our customer base through the suite of products and services that we offer. We are rapidly becoming the No. 1 company in the world doing what we do.”
From excellent customer relationships to innovative products and a drive to be the best, eCardio is positioned to achieve great things.
Smart Business spoke to Lawson about how he keeps growing a company that’s already at the top of its game.
Develop a vision. You have to provide a vision. You have to listen to your senior leadership team on how to carry out the vision and listen to each of the teams about their daily implementation and what it takes to meet the needs of the customer. Sometimes the things that you hear back will provide you with an opportunity to expand your vision, which will further enhance your strategies. It not only gives employees a sense of contribution, but it also can be an important element to future success.
Once you provide the vision of your company, you need to listen to your senior leadership on how to carry out that vision. Many times, that senior leadership will bring things to the table from previous employment and previous opportunities they’ve had in the past. It’s very important for a CEO to listen to his senior team about these opportunities. A lot of CEOs think they have all the answers and they don’t do a lot of listening and I think that’s a huge mistake. The more successful CEOs do exactly that. They have the initial vision, but they rely upon their executive team and their senior leadership teams to carry out that vision and to come up with the incentivizing programs that will give them the results they are looking for.
Look to other industries. I think it’s important for every CEO out there to see beyond their industry that they’re in today. Even though our primary focus is in remote cardiac monitoring, we see technology trends in other companies that have been helpful for us to work with as we develop our technology. All CEOs need to look beyond their industry and look at all technologies beyond their industry.
You have to go to seminars outside of your own industry. Attend seminars that deal with the financial culture of their business and learn from other industry leaders, other key opinion leaders of other industries. I think that’s really beneficial to CEOs to get outside of their own forest so they can see how other trees are grown. CEOs need to look to other areas of high growth where they could extrapolate from.
Communicate with customers. We listen to our customers. That’s how we started our company, by listening to our customers, what they wanted and needed most. The cardiologists and electro-physiologists who are ordering our monitoring diagnostic tests for their patients know what tools they need to provide to get the best diagnosis possible. That technology stems from our ability to work with and understand our clients’ needs and our physicians’ needs.
One thing that we do that our competition doesn’t do is that we have very close conversations with our customers and clients. How we know that we are going above and beyond what our competition is doing is the physicians are telling us that we are. They’re collaborating with us and helping us develop processes and controls. That’s how we know we are exceeding our competition. We are continuing to grow and exceed year after year in our business where our competition isn’t.
You have to stay in constant contact with your customers and listen to your customers. You have to stay in touch with all those clients who are ordering your products. They know the tools that are needed and you have to listen to them and give them the tools. That’s how you know whether you’re keeping up with the change needed by adapting and innovating.
HOW TO REACH: eCardio Diagnostics, (888) 747-1442 or www.ecardio.com
Patrick Treado, chief technology officer at ChemImage Corp., knows what it means to be innovative. He founded the 75-employee provider of imaging technologies for chemical and biological applications, the first company of its kind.
Treado has worked to gather the talent, develop the market and produce the innovative technology to build his company during the past 17 years.
“We were the first company that was formed to do this,” Treado says. “The technology we had to create really didn’t exist 20 years ago. The company is now 17 years old, and we’re still working at a research and development level with our technology for medical diagnostics, but along the way, we have had to exploit the technology in many other applications.”
Smart Business spoke to Treado about how he has developed innovations that lead a very specialized market.
Find innovation. I think the invention comes from many places, including some surprising locations. We have a process here at ChemImage where anybody in the company can invent something. Everybody becomes trained in reporting innovation, because if it’s not visible within the organization, then it’s not going to go anywhere.
Good ideas often come just from seeing what others are doing in the community and then adapting our particular approach, so it’s still our own intellectual property or something we can innovate around. You have to listen. If you’re not listening to the ideas that percolate around the organization or within the organization, then they may be right in front of you and they just don’t happen. It’s easy to suppress good ideas. To encourage them, companies need to have incentive programs in place to incentivize their employees to make disclosures, to say, ‘Here’s a good idea, and I want the company to exploit it.’ Recognize people within organizations when a significant technical achievement or innovation turns into a product and that product gets launched.
It often also takes, somewhere in the organization, somebody who’s driving the creation of innovative concepts. Someone like Steve Jobs at Apple is a perfect example. He obviously doesn’t do everything at Apple, but he drives the innovation at that organization. You need a strong leader in that sense.
Make it part of your culture. Every company’s innovation culture is a little bit different. We have processes here to foster innovation, and that kind of doesn’t make sense. How do you have a process that makes people creative? It is kind of a hard thing to do. We want to make sure we capture all the good ideas that could turn into products or future revenue streams. So that means we have product development processes, we have a patent committee that’s responsible for reviewing new intellectual property.
Those are things any company can do at a certain size. It’s the informal stuff that we try to do to track the performance of the company by monitoring on a monthly basis. You have to constantly be watching, monitoring, checking, and when it’s clear that maybe you’re focused on more execution than creation, it’s possible to get a bunch of people in a room and set a goal and create new technologies. You can’t guarantee that what comes out of those brainstorming sessions is any good, but it’s surprising how that process of getting people to think about that allows them to be creative. They might walk out of that room and a week later come back with an idea and say, ‘Why don’t we try this?’ We periodically have brainstorming sessions where we try to invent technologies that are relevant to our business strategy.
Develop a strategy. You have to try to understand and communicate throughout your organization what the goals are. It starts with a business strategy and that flows into your technology and innovation strategy. If you don’t know what it is, it’s hard to communicate that vision.
Executives are much more tactically focused to survive or to thrive on a weekly, monthly, quarterly basis. Strategy is usually looking up more on a yearly or multiyearly basis. It’s hard to find the time, so you have to allocate enough time so you can clearly articulate your business strategy and then try to align your technology and innovation strategy up with whatever that business strategy is.
It could mean you need to go buy new products through acquisition or some type of a merger or partnering activity to bring that innovation in. Don’t limit yourself to organic innovation. Sometimes it’s more effective to bring it in through external relationships. There are organization’s out there that do nothing but invent things and are looking for ways to bring them to market.
Don’t innovate just for the sake of innovating. Every modern company today has a technology strategy whether they know they have it or not. You have to make sure your technology strategy fits with the fundamentals of your business strategy. Innovate to either establish or maintain whatever competitive advantage you have to have to succeed.
HOW TO REACH: ChemImage Corp., (412) 241-7335 or www.chemimage.com
Michael Zavoina has never agreed that you should change your company depending on the business climate. He subscribes to doing things right the first time and making sure the organization continues that consistency. That’s how The Gateway Engineers Inc., an engineering firm, has remained an industry leader.
“People talk about a difficult business climate,” says Zavoina, CEO of the 128-employee company. “That’s not something I’m a fan of, because it suggests we should do something different in these times than we do in other times and when the economy is good and when the economy is bad. I’m more in favor of the status quo. If you set something up right in the first place, let’s keep going with that.”
The company’s drive to remain consistent and efficient has been paying off and has led to growth.
Smart Business spoke to Zavoina about how he makes efficiency and consistency the company’s top priority.
What are some of the ways you keep the company consistent?
We look at efficiency statistics, and we do benchmarking just like anybody else comparing ourselves to other similar firms. It seems like a lot of companies tend to look at absolute stats, and we tend to look at either relative stats or efficiency stats. Instead of looking at things like pure revenue, we look at the efficiency of revenue, like profitability as opposed to profit. We’ve always tried to continuously improve and get better at the efficiency side as opposed to, ‘Times are good right now; let’s raise prices. Or times are bad right now; let’s lower prices.’ We didn’t do any of that because we’ve always focused on the efficiency side. So when good times come we just do that over a broader volume. When bad times come and everyone’s saying, ‘We need to get more efficient in these bad times.’ Well, we always were efficient. That’s what has always bugged me about operating differently. You should have been thinking about operating efficiently all along.
How do you get the company to focus on efficiency?
The key is trying to get everyone involved with that. We do a lot with focus, and I think focus and efficiency go together. One of the things we say is we focus the project people on projects and the support people on support. A lot of companies have the project guys doing support functions. You could say it doesn’t matter, but then their focus is not there. It’s not just me being efficient. It’s all of us doing those things. You have to find the value in everything and everybody. If you need accounting, then you need accounting. If you need IT, then you need IT. Every one of those plays an important piece and can actually help you.
How do you turn that efficiency and consistency into growth?
We broke ourselves up into nine different market segments, and we have leaders of those that focus purely from a business development standpoint. There isn’t just one person marketing or one person developing business. We set it up to broaden that out a bit and they always have their ears to the [ground], they’re well attended at the industry conferences and well read.
We were successful through the recession, and there is something to be said for being the opposite of complacent. We could have stopped there and not looked for more work and said, ‘We’re good. We’re fat and happy.’ We could have done that, but we just kept doing our gig and developing business and spreading it to different segments and keeping our ears to the ground. Certain things pop up and you have to take advantage of those things and be nimble.
That’s a benefit of being relatively small. We’re not bogged down in structure. We can move quickly and did that on the Marcellus stuff and got in early with some of the pre-eminent companies that are doing business here.
What are the keys to finding new opportunities like the Marcellus Shale?
Try not to prejudge things too much. Try to keep an open mind. You could hide your head like an ostrich in the sand, but then you’re not out there. If you do that, then you’re not out at industry conferences, you’re not reading, and you don’t know what’s going on. You have to remain in tune with what’s going on.
You have to try to be consistent. Don’t only develop business during bad times. Try to keep up your business development efforts even during good times. Don’t just say that. You have to develop goals.
Do the same with relationship building and networking type things. You want to stay in touch with partners even when there is no work. You know at some point it’s going to turn around and you want them to say, ‘Hey, who do we go to?’ They will be thinking of you.
HOW TO REACH: The Gateway Engineers Inc., (412) 921-4030 or www.gatewayengineers.com
Scott Friedman and his team at Seegrid Corp., a developer of vision-guided robotic trucks, founded their company on the idea that taking the driver off of a forklift would be safer and save money. They didn’t know it at the time, but they were on to something big.
“We actually went out and we talked to about a dozen customers who are responsible for about $200 billion worth of retail spend,” Friedman, co-founder and CEO of the 60-employee company says. “It was tough to get the meetings, but we said, ‘If we were successful technologically and we made such a product that could work like this in your warehouses, would it mean anything to you or would it mean everything to you?’”
Seegrid’s innovations have impressed companies like Toyota and Kion Group, which are part of the $38 billion forklift market.
Smart Business spoke to Friedman about how he is growing his company in a niche market.
Market innovation. We had a very strong and informed vision of what we wanted to achieve. It was on the edges of realistic, so between early customers and knowledgeable technologists, we had a very strong product vision that everybody agreed could be achieved and would be of value.
We use a camera system and a bunch of advanced robotic software that we reduce the complexity of deploying a robot to something we call ‘walk through then work.” To make our products make deliveries in a big industrial space, somebody who works at the facility takes the equipment and walks it around and shows it the routes and when its doing that the cameras take a bunch of pictures and it builds a 3-D map of the facility like a video game map, and then afterward, it will repeat those routes that somebody has shown it.
Once we were able to get a product in the market, we had to listen twice as much as we talked. Listening is an active process, but you have to also watch because people can’t articulate everything they need. You have to be focused on understanding, listening, looking and documenting what works well and what doesn’t work well and what people said they need and don’t need. That is what will help your products take off.
Make tough choices. The true innovation is taking the thousand things you’ve heard and choosing to do just one. That’s the hardest thing, because it’s easy to compile wish lists but it takes a lot of conviction and courage to take all that in and say we have the resources and this is what the customers need to get to the next place, we are going to do a fantastic job on just this one. The hard part is figuring out the right one and really nailing it to the wall.
You have to look at what can propel the business. Everything has to be as simple as possible and still maintain fast growth. If you want the boat to go 50 miles per hour, you want as little dragging as possible. Simplicity is a requirement for speed. What’s the one thing on the list that you could do that will give you the speed, the pull-through and the growth?
Take it to the next level. There’s a point in businesses when you hit X millions in revenue and more than 35 or 40 people where it can’t be run out of the back pocket of a few people anymore. It has to be broken up into systems and management and all of that. In the past year, year and a half, we went through that transition. We broke the business apart and realigned it under more normal business functional units so it could scale.
That was a very big challenge. I think it was mostly around an honest look at what we were doing and where were we now and where did we want to go and how were we going to get there. You need a big dose of intellectual honesty because when you start a business and when you start growing it and it starts getting customers and you’re actually doing the thing, you don’t have a sense of its natural scale or its natural growth arch. Every business has its own course and it has very little to do with what you thought it would when you started it.
That’s very tough for people who start businesses to pull back, and it’s like looking at your own kids. You have to pull back and look at it, not just passionately but out of the context in which you built it to understand what it needs and what it really is. If the founders are going to make that move, they have to understand that the thing that sustained the early days is not the thing that’s going to make you successful going forward. You have to really understand what your business is and what potential it has and what potential it doesn’t have.
HOW TO REACH: Seegrid Corp., (877) 733-4743 or www.seegrid.com
Elaine Bellin has worked at Paragon Food Service, a distributor of fresh foods to the restaurant and prepared foods industry, for 27 years. She has served as president of the $47 million company for 18 years, and during that time, she has worked to make Paragon an industry leader.
“Fresh foods have gained in popularity over the last two decades and are still popular and gaining more popularity because of the health benefits of eating fresh foods, particularly fresh fruits and vegetables,” Bellin says. “As that has grown and that interest has grown, our business has naturally grown as a result of the demand.”
That growth has pushed her to position the company as one of the best in the industry.
Smart Business spoke to Bellin about what it takes to bring your company to the top.
Lead your industry. What we have done over the years is we’ve tried to put ourselves in a position of leadership in the industry and in our market by being really proactive. We recognized the potential in really high-quality fresh foods and the potential and the benefits of local and sustainable foods long before others had. Our motto is not necessarily to supply the demand but also to bring forth and promote what is healthy and what is environmentally productive for everybody and to bring that awareness to our customers and ideas about that to our customers.
You have to look at opportunities and potentially innovative products or solutions that are indigenous to your industries. You also have to have the right team in place to promote innovation. That is critically important to get ahead and to change or bring different ideas to an industry. You have to have a team that is dedicated to wanting to be innovative and wanting to be a leader in their industry and can take advantage of any innovation that is available to them in the industry.
Allowing really qualified employees to develop their ideas and to develop their initiatives, to work with them and support them is important. If they feel they are making a difference and they’re contributing to the overall strategy, plan or goal of the company, you have the potential of getting a highly productive work force and ultimately a successful business.
Offer quality service. We have been focused on really high service levels and high-quality levels. All of the areas of business that have made us successful, we have to continue to do that extremely well. We cannot waiver; we cannot make a mistake because with all the economic pressures, customers have an even higher demand of their vendors and their distributors.
If you want to be successful in this economically challenging environment, you have to have the consistencies and a workforce that has a strong desire to want to be the best at what they do. Happy employees tend to show that. You have to make them feel like they’re being treated well and treated fairly and that comes from an enhancement of the benefits package to make sure that their wages are in line and that they have an opportunity to continue to do better with the company. You have to focus on employees and focus on the economic challenges and the uncertainty of the economy.
Stay focused on what you know how to do and don’t lose sight of what you do well. You have to redouble your efforts so that the competition is not able to take away your business in a price sensitive market. If you develop the relationship and you are covering your customers and building that relationship through excellent customer service and excellent quality, then I think you have a better chance of maintaining good customer relations.
Differentiate yourself. We were the first distributor in our area to introduce locally grown food products to our customer base. We did it before it became vogue and now its vogue and its here to stay. For me it always starts with quality and that’s been the main ingredient in the success of our company is that we provide quality first. The exploration of broadening the local segment of our business is going to be very helpful in sustaining the growth and leadership position of the company.
You have to be open-minded and when there is an opportunity or somebody brings an idea forth, you have to be open to exploring that. Being open to new and innovative ways of doing business is very helpful. You have to bring good information to your customer base and be innovative and propose changes. If you just accept that customers will do the same thing then you’re not going to be a benefit and you won’t add value to your customers. In order to add value, you have to be at the forefront of new product identification. You have to be at the forefront of trends and be aware of those ideas and bring them to your customers to try.
HOW TO REACH: Paragon Food Service, (412) 621-2626 or www.paragonfoods.net