Scott Kirsner spent three years immersed in the movie industry in order to write a book called “Inventing the Movies: Hollywood’s Epic Battle Between Innovation and the Status Quo, from Thomas Edison to Steve Jobs.”
He talked with directors like Francis Ford Coppola and James Cameron, editors, cinematographers, studio chiefs, producers, tech companies that sell technology into Hollywood and even actors with an interest in new technology like Morgan Freeman.
He discovered that Hollywood serves as a great case study for how any long-established, successful and self-satisfied industry responds to new technologies and new ideas.
Even when a new idea seems to have obvious merit and even when its inventor can make a strong case for it, 95 percent of the people involved in the industry fight the new idea with all their energy for as long as they possibly can until they realize it has the potential to grow their business in surprising ways.
Case in point: Within a decade of Hollywood’s fight against the Betamax video recorder, which went all the way to the Supreme Court, the studios were earning more from home video business than they were from ticket sales.
Here are several movies — all of which you’ve likely seen — each with an important backstory that innovators can learn from.
Sometimes technology needs to be just good enough, not perfect. “The Jazz Singer” will forever be remembered as Hollywood’s first talkie — even though it wasn’t among the first dozen to try to sync up the pictures on the screen with a soundtrack. But the technology that Warner Bros. banked on, developed at AT&T’s Bell Labs, was better than what came before it. It was just good enough to turn “The Jazz Singer” into a hit — especially combined with a performance from Al Jolson that practically leapt off the screen. The system still relied on phonograph records that could scratch. If the film broke and needed to be spliced back together, the entire movie would veer out of sync. The Warner Bros./AT&T technology was just good enough to start the sound revolution in Hollywood, though it didn’t endure for very long as a standard. Five years after “The Jazz Singer,” even Warner Bros. had switched over to a technology that more reliably linked the audio with the visuals.
Innovators never underestimate the importance of allies. Shot in glorious Technicolor, “Gone with the Wind” won the Best Picture Oscar in 1939, marking the start of Hollywood’s transition from black-and-white to color. But Technicolor had been working on its technology for making color movies since 1915, developing new kinds of cameras and film-processing techniques.
Like most start-ups, the company nearly ran out of money several times and had to continually hunt for new investors and allies who’d make movies using Technicolor’s technology to show how it was improving. These allies included the swashbuckler Douglas Fairbanks and Walt Disney, who won one of his first Oscars for a short cartoon made in Technicolor. Technicolor co-founder Herb Kalmus met another key ally at the racetrack at Saratoga Springs: Jock Whitney, a rich playboy who used his money to option a novel by Margaret Mitchell and help turn it into a movie starring Clark Gable and Vivien Leigh.
Innovators spot market opportunities first and chase them relentlessly. Entrepreneur Andre Blay had no connection to Hollywood, but in the mid-1970s, he was among the first to realize that home video machines like Sony’s Betamax (which sold for about $1,000 at the time) presented the potential for a new business.
He sent “cold call” letters to most of the major Hollywood studios asking them for the right to sell their movies on videotape. Only one studio, 20th Century Fox, consented, offering movies like “Butch Cassidy and the Sundance Kid.” Blay’s first ad in “TV Guide” netted his company $140,000 in revenue, and within a year, Fox acquired his company for $7.2 million in cash.
Innovators find collaborators who share their vision, and they’re prepared for things to take longer than expected. Computer graphics pioneer Ed Catmull, while he was still a graduate student at the University of Utah, was one of the first people on the planet who believed that it’d be possible to make a full-length computer-animated movie that people actually would pay to see. As he marched toward that goal, he connected with two people who bought in to his vision: John Lasseter, an ex-Disney animator, and Steve Jobs, who purchased the fledgling Pixar from George Lucas and helped develop it into a company that could stand on its own two feet, selling hardware and software while also pursuing Catmull’s ambitious, audacious goal.
Catmull admits that he thought the goal of making Pixar’s first film would take a decade — it took two. Disney eventually bought Pixar in 2006 for $7.4 billion.
As a business owner, there are many lessons to learn about innovation from the movies.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at firstname.lastname@example.org.
Left or right? Up or down? Yes or no? The human life is full of choices. We make them on a minute-by-minute, hour-by-hour, day-by-day basis. It’s what we do, how we live and move and have our being in the world.
Consider some choices you may have made in the last few years:
- What car should you buy?
- Should you ask her to marry you?
- Are you ready for another baby?
- Is this house right for you, or should you keep looking before you make an offer?
- Who should be let go in the next round of budget cuts?
- Will your department reach its goals this year?
- Should you ask for a raise?
- Is it time for your mom to enter a nursing home?
- What do I need to do to lose weight?
- What will you eat for dinner tonight?
Decisions are usually easier when we are only faced with two choices. Blue or red car? Two-story or ranch-style home? Slim Fast or Weight Watchers diet plan? Our brains are somehow wired better to choose between two competing choices.
It’s when we have more options that we sometimes stall, flutter or downright choke.
- Three people from a team of eight in the department must be let go.
- Should we marry now, when we finish college or after we find secure jobs?
- In order to best reach our yearly goals, should we focus our attention on X, Y or Z, and how much of our remaining budget should we allocate to the project we choose?
Life is full of hard choices, and the bigger they are and the more options we have, the harder they get.
Through my years in working with individuals, groups, companies and organization, I have narrowed the questions we need to ask in order to make the right choices both in our life and in business.
Here are 3 of my best tips for making the right choice:
1. Analyze outcomes, not pros and cons.
Many of us have been taught somewhere along the way to take out a sheet of paper and divide it down the middle with a line. On one side we list the “pros” of a certain choice, on the other, the “cons.”
This old school way of making choices is time worn and tested, but I think there is a better focus: outcomes. In the end, the outcome of a choice made is what truly matters.
Working through a big decision can give us a kind of tunnel vision, where we get so focused on the immediate consequences of the decision at hand that we don’t think about the eventual outcomes we expect or desire.
When making a choice, then, it pays to take some time to consider the outcome you expect. Consider each option and ask the following questions:
- What is the probable outcome of this choice? (This is the list we should make.)
- What outcomes are highly unlikely? (This allows them less weight in the choice.)
- What are the likely outcomes of not choosing this one? (These are negative outcomes.)
- What would be the outcome of doing the exact opposite? (Play “devil’s advocate.”)
Our thinking should be in terms of long-term outcomes and not short-term pros and cons. And we should broaden our thinking to include negative outcomes. In doing so, we will find clarity and direction in making the right choice.
2. Ask why – five times.
The Five Whys are a problem-solving technique invented by Sakichi Toyoda, the founder of Toyota. When something goes wrong, you ask “why?” five times. By asking why something failed, over and over, you eventually get to the root cause.
Although developed as a problem-solving technique, the Five Whys can also help you determine whether a choice you’re considering is in line with your core values as a person and a business.
- Why should I take this job? It pays well and offers me a chance to grow.
- Why is that important? Because I want to build a career and not just have a string of meaningless jobs.
- Why? Because, I want my life to have meaning.
- Why? So I can be happy.
- Why? Because that’s what’s important in life.
We now see how the first two tips are interrelated. By asking the Five Whys, we learn that having meaning and being happy are desired outcomes that influence the choice made in asking the first question: Why should I take this job?
The continued relationship can be seen in revealing the third tips for making the right choice.
3. Follow your instincts.
This tip affords you the ability to work through the first two tips with a sense of personal confidence.
Because research shows that:
The conscious mind can only hold between five and nine distinct thoughts at any given time. That means that any complex problem with more than (on average) seven factors is going to overflow the conscious mind’s ability to function effectively, leading to poor choices.
Our unconscious mind is much better at juggling and working through complex problems. People who follow their instincts actually trust the work their unconscious mind has already done.
When we allow ourselves to focus on long-term outcomes rather than short-sighted pros and cons, take on the task of asking “Why?” five different times, and trust and follow our instincts, we put ourselves in a much better position to make the right choice in any given situation in life and business.
Like anything we go through as human beings, this process takes work. Get to work and let me know how it goes.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email email@example.com or visit her website at www.delorespressley.com
If you run a small business that has had difficulties obtaining a loan, there is some good news. Preferred lenders can help businesses navigate through the U.S. Small Business Administration (SBA) loan programs to obtain financing needed for growth and expansion. The SBA loan process can be confusing, and small businesses may experience unknown challenges when applying, such as a collateral shortfall or not enough cash down payment to put into the transaction. However, preferred lenders, like community banks, can help small businesses with this process.
“We’re likely experiencing the lowest interest rates in history,” says Edward L. Wood, CTP, regional vice president of commercial lending for National Bank & Trust. “The ability to lock those rates in for a longer period makes today a compelling time to get an SBA loan.”
Smart Business spoke with Wood about SBA loans and how obtaining one could benefit your business.
What types of businesses can benefit from an SBA loan?
Typically, the SBA’s goal is assist small businesses with their growth and lending needs, rather than large corporations that do more than $100 million annually in sales. However, there are a variety of SBA rules that companies must abide by to qualify for an SBA loan. It is always recommended that the borrower find an experienced SBA lender who participates in the Preferred Lender Program (PLP) and can help you navigate the SBA requirements.
How do SBA loans differ from other loan products?
There are many advantages to SBA loans, including a lower down payment, sometimes as little as 10 percent, which is typical of two SBA programs known as 504 loans and 7A loans. You also can get extended payment terms with these loans. For example, lenders with working capital loans prefer to keep amortizations between 36 to 48 months. Under the SBA 7A guaranteed loan program, many lenders allow longer amortization periods, usually up to seven years, which provides an even greater benefit to the borrower.
Also with a SBA 7A loan, the bank is lending all of the funds for the project and the SBA provides the lender with a guarantee, generally around 75 percent of the total loan amount. These loans offer working capital to fund growth, accounts receivable and inventory.
The SBA 504 loan is geared toward equipment financing and/or owner-occupied real estate. With this type of transaction, the borrower has two loans — one with the SBA who finances 40 percent and the second with the lender who finances 50 percent. The borrower is only required to provide 10 percent equity in the project. Under the 504 program the lender maintains a first mortgage on the collateral while the SBA takes a second position. Additionally, with the SBA 504 loan, the borrower should be aware there are prepayment penalties within the first 10 years.
The effective rate for the SBA portion of the 504 loan in August 2012 was a fixed rate of 4.45 percent. The lender portion is usually handled with a five-year adjustable rate.
What is the process to obtain an SBA loan?
The process starts when a borrower contacts his or her preferred lender. The lender will assist him or her through every step of the process. The lender drives SBA 7A loans and capital lines of credit from start to finish and submits the transaction to the SBA for approval. For SBA 504 loans, the lender will also work with a third-party non-profit entity that will underwrite and submit the transaction to the SBA for approval.
To apply, simply provide the same information you would for any other type of loan. Lenders are looking for the last three years of business and personal tax returns of the guarantors and accountant-prepared financial statements covering the three previous years. A personal financial statement from each year and an aging of the business accounts receivable and payables are also needed.
Why is now a good time to apply for an SBA loan?
The uncertainty in the interest rate market makes today a compelling time to apply. Because of this uncertainty, the SBA loan becomes an incredibly viable product that could allow you to fix part of your total debt service for up to 20 years. Getting longer amortizations on working capital loans are compelling because it allows the borrower to stretch payments out over a longer period of time, thus reducing your debt service requirements.
There is also uncertainty in the market, not only in terms of where interest rates will head but also where inflation will be and the debt level the U.S. has taken on. While interest rates will rise no one can be sure when that will happen, so it is to a company’s benefit to act now.
How can working with a community bank to obtain an SBA loan be beneficial?
A community bank has the ability to better execute an approval. There are fewer people at the top involved in the approval process than at a larger bank.
Depending on the type of transaction, it could take three weeks to get an approval once the lender receives all necessary information. Community banks are well suited to obtain all the necessary information upfront, which can help avoid delays.
Edward L. Wood, CTP, is regional vice president of commercial lending and the HCDC (Hamilton County Development Corporation) 2011 lender of the year. Reach him at (800) 837-3011 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by National Bank and Trust
Most businesses want the same thing when it comes to their phone system: quality phones, reliable service and helpful features, designed with flexibility in mind and fitting neatly within their budget.
To achieve those things, some companies are letting their service provider do the heavy lifting. A hosted IP private branch exchange (PBX) solution integrates multiple locations in a feature-rich package, while eliminating the upfront costs that often make businesses reluctant to upgrade.
“The premise behind hosted IP PBX is that your company will run its phones off the hosting company’s switch — a large, expensive piece of equipment that you are sharing with a bunch of other companies,” says John Putnam, national sales director for PowerNet Global. “The only equipment in your building is the phone handsets themselves.”
Smart Business spoke with Putnam about the advantages of switching to a hosted phone system and how to determine if doing so could help your company.
Why are companies moving to a hosted IP solution?
It comes down to a couple of different reasons. Obviously, financial reasons play a major part, but also, companies are looking for features that allow them to run their business better.
Many organizations upgraded their phone systems for the year 2000. Those systems don’t have the features and capabilities that companies want, but the capital expenditure of buying a new system in today’s economy makes them uncomfortable.
However, if they choose a hosted solution, the capital expenditure is much less because they are running their system off the hosting company’s phone switch. With some of the handset leasing programs available, companies can get by without a large capital expenditure up front.
What types of features are available?
Aside from financial concerns, many companies decide to switch to a hosted solution because they want features their current system is unable to provide, such as caller ID, individual voice mail for everyone in the company and the ability to forward calls to cell phones. If your phone system is missing these features, but you don’t want to write a check for $30,000 to $60,000 for a new phone system, a hosted solution is ideal. Even for smaller companies, a $5,000 capital expenditure for a new phone system is daunting given the uncertainties in today’s economy.
Now those features are available without a huge upfront capital expenditure. For a small business with 10 handsets, you may be looking at $60 a month versus a $5,000 to $10,000 capital expenditure.
What are the benefits of integrating multiple sites through hosted telephony?
Multisite companies with premise-based PBX systems have to maintain, upgrade and support those systems at each site. Sending someone out to make the necessary changes to each system is costly and is not the most effective use of resources. With a hosted solution, companies can make a change at one location to update the phone systems at each of their sites, reducing their continuing cost. Each phone handset is running off the hosting company’s equipment, so they are all integrated.
That allows you to treat the customer in a different manner. For example, if a customer calls one store and it doesn’t have the item he or she is looking for in stock, the hosted system can transfer the customer to another store without requiring that person to call another number. If someone at one store doesn’t answer, the system can automatically dial another store. If a store needs to transfer a customer back to the corporate headquarters for centralized billing functions, the customer is transferred, not called back from a different number.
What are the other advantages of using a VoIP system for telecommunications?
Typically, if you are using VoIP technology, there is a lower cost for the service itself. Companies can take advantage of VoIP services that are normally less expensive than traditional services. The cost per line is lower, the cost for long distance is lower and the continuing costs are lower. And because it is an IT-based solution, if you call from one store to another, there is no long distance involved at all. A Milwaukee store calls a Chicago store, and because all phones are on the same switch, that is now a zero-cost call.
For what type of companies does this strategy makes sense?
Smaller businesses, the three to 20 handset market, have been the early adopters. Now, larger corporations are adopting this strategy, as well, as this technology is particularly well suited for large companies with 200 small sites. These enterprise clients have recognized that they aren’t necessarily an enterprise; they are a bunch of small businesses.
For example, if a business has 1,000 sites and each of those sites has five to 10 phones, this strategy becomes very attractive. It looks like an enterprise play, but, in fact, it’s a small business play multiplied a thousand times.
What kind of results can companies expect from a switch to a hosted IP phone solution?
A number of clients have been able to take advantage of a new phone solution for either the same price or less than they were paying for service before. So, in essence, it is a free service, because if you paid $500 for service before and save enough on the service that, when taken in conjunction with the handset leasing program, your total spending is about the same as it was before. However, you’re getting all these new features and capabilities with the service.
John Putnam is national sales director for PowerNet Global. Reach him at (866) 764-7329 or email@example.com.
Insights Technology is brought to you by PowerNet Global
Settlement of a claim and a handicap reimbursement award are two cost containment strategies available to employers to manage claim costs and impact annual premiums. A settlement fixes the claim cost, which then allows the premium to reflect the settlement amount and possibly reduce the employer’s premium. If a handicap award is granted, a portion of the costs of the claim will be charged to the Surplus Fund and not to the employer’s experience.
“By removing costs from an employer’s experience, an employer may be able to lower its annual premium rate calculated by the Ohio Bureau of Workers’ Compensation (BWC), thus reducing its annual spend,” says Lisa O’Brien, director of rates and underwriting services for CompManagement, Inc. “Employers should always review these two very effective cost containment strategies when managing their workers’ compensation claims to make an impact to their bottom line.”
Smart Business spoke with O’Brien about these cost containment options available to employers in Ohio.
What is a settlement?
A settlement is an agreement among the employer, the injured worker and the BWC for a specific amount to settle one or more workers’ compensation claims. All three parties must agree to the settlement amount before a claim can be settled either in full, which settles all allowed conditions and benefits, or a partial settlement, which settles only certain conditions and/or benefits, either medical or indemnity (compensation).
What happens when a claim is settled?
When a claim is settled, the injured worker will receive a lump sum payment from the BWC. Settlement affords injured workers the freedom to manage their treatment priorities, on their timeline and on their schedule.
If the claim is settled for both the indemnity and medical portions, the injured worker will receive no additional compensation or medical benefits in the settled claim. If the claim is settled for either medical only or indemnity only, the injured worker can no longer receive the benefit type that has been settled (either medical or indemnity).
For employers, settlement can help manage costs and bring closure to a claim for their employee. Settling the claim removes reserves (indemnity, medical or both depending on the type of settlement) associated with the claim from all future rate-making. However, costs already paid out, plus the settlement amount, will continue to be charged to and impact the employer’s premium rate.
When will a settlement impact the employer’s premium?
Settlement of a claim will affect an employer’s premium rate only going forward. In order for a settlement to be included in the employer’s upcoming year’s rate, the fully executed settlement application (signed by both the employer and the injured worker) must be filed by May 15 for public employers or by Oct. 15 for private, state-funded employers.
These deadlines do not apply for settlements that occur through the court of common pleas. Common pleas settlement inclusions in the employer’s experience are based on the date the settlement is paid.
For a court of common pleas settlement to be included in an employer’s upcoming rates, the settlement must be paid to the injured worker before the applicable survey date, June 30 for public employers and Dec. 31 for private employers.
What is a handicap reimbursement?
The BWC encourages employers to hire and retain employees with handicapped conditions. To help offset the challenges those with handicaps often experience in the job market, the BWC offers the Handicap Reimbursement program as a means for employers to reduce their claim costs. Ohio law defines a handicapped employee as one who has a physical or mental impairment, whether congenital or due to injury or disease, whose impairment jeopardizes the person’s ability to obtain employment or re-employment. Also, the impairment must be due to one of the 25 eligible diseases or conditions that Ohio law recognizes.
The most commonly recognized conditions are arthritis, ankylosis, diabetes, cardiac disease and epilepsy.
When should an employer file an application for handicap reimbursement?
If an injured worker suffers a lost-time claim (eight or more days away from work) and a handicap condition is met, the employer can file a CHP-4 application with the BWC requesting reimbursement of claim costs charged. The employer must show the handicap is a pre-existing condition (prior to the date of injury) and that it either caused the claim or contributed to increased costs or a delay in recovery. Applications are reviewed and awards are granted by the BWC’s Legal Operations Department. Once awarded, the BWC will apply the handicap reimbursement award to chargeable claim costs, thereby reducing costs and possibly premium rates.
Private, state-funded employers must file handicap reimbursement applications by June 30 of the calendar year no more than six years from the year of the date of injury. Public employers must file handicap reimbursement applications by Dec. 31 of the year no more than five years from the year of the date of injury.
Claims with a handicap reimbursement can be settled and settled claims can continue to be considered for handicap reimbursement.
What is the typical range of handicap reimbursements awarded?
Per BWC public information, handicap reimbursements typically range between 5 and 100 percent, depending on the degree to which the handicap condition impacts the claim. On average, current public information shows a handicap award to be approximately 26.17 percent.
Lisa O'Brien is the director of rates and underwriting services for CompManagement, Inc. Reach her at (800) 825-6755, ext. 65441, or Lisa.Obrien@sedgwickcms.com.
Insights Workers’ Compensation is brought to you by CompManagement
When Jonathan Theders, president of Clark-Theders Insurance Agency Inc., needed a new cell phone but didn’t have the time to drive 45 minutes to the nearest Verizon store that had it in stock, a Verizon employee offered to do it for him.
That salesperson recognized a problem and found a solution that created a lifelong customer.
“I’ve certainly become an advocate for them, which is what you ultimately want your customers to become — those raving fans, those people who spread your selling proposition, who you are and why you’re different,” Theders says. “If you follow the model of identifying an unrecognized problem and delivering an unanticipated solution, you will create raving fans. And they will become your most cost-effective salespeople in delivering referrals to you.”
Smart Business spoke with Theders about three traps businesses run into when failing to differentiate themselves and how to escape commoditization.
What stops businesses from successfully differentiating themselves from competitors?
The three basic traps that every business runs into are the commodity trap, the perception trap and the anxiety trap.
The commodity trap is when there is no recognizable difference between two brands other than price. Businesses like to separate themselves from their competitors with customer service or value-added products, but a lot of times, people don’t understand that difference. The value-added services a company provides are very likely the same ones their competitors are providing. Then it gets down to price again.
Some successful businesses consider their product or service to be a commodity. Think of online retailers that have no personal relationship with their customers; their strategy is to sell in volume, with lower margins to get the price as low as possible and hit their targets through quantity.
When you’re trying to compete with companies using that type of model, you have to come up with a differentiating connection with your customer because if you’re in the commodity trap, why wouldn’t you select based solely on price? If I can buy the exact same product 20 percent cheaper online, why would I not? You need to position yourself so that you can leverage your unique qualities or create unique qualities that allow you to stand out from the competition.
How can businesses escape the commodity trap?
There are two things businesses must do to get out of the commodity trap: Identify an unrecognized problem that the customer or potential new client did not realize it had, and then, in turn, present it with an unanticipated solution. If you’re going to live outside the commodity world, you must do these two things.
Copier paper is a good example. We all need it but it isn’t so drastically important that you have a particular brand. It is easy to obtain and there are a lot of vendors that can supply it. That is an item that you would shop — it’s in that commodity trap area.
But if a copier paper company told you its paper jams 80 percent less than a competitor’s paper, it could change your view on the product as a commodity because there is a solution for a problem that you can’t find one for — if it delivers on that promise.
Things that have the perception of being easily commoditized can still be differentiated in the marketplace based upon delivering that model of recognizing a problem and providing a solution the customer wasn’t anticipating.
What is the perception trap?
The perception trap is the perception that people believe they already know everything about your company before they hear the story. People automatically think they know your business, and it already has a connotation for them. It could be a lawyer, accountant, or someone who manufactures widgets — the prospective customer has a pre-existing perception of each of them.
You have to recognize what that perception is and create bridges to get over that if you’re going to differentiate yourself.
How can you overcome someone’s perception of your company?
You get past perception through addressing three things. I call it I3: issues, implications and interventions. First, identify your clients’ issues. Then allow them to understand the implications of those issues. Finally, have an intervention that ties into delivering an unanticipated solution.
If you can deliver on I3, you can bridge any perception issues that exist. Then people will look to you as a trusted adviser rather than as a supplier of a good or a service.
What is the anxiety trap, and how can businesses avoid it?
The anxiety trap is nothing more than the fear of standing out from the crowd, of thinking, ‘This is what everybody else does and it’s safe.’ Everyone, at some level, has fear and anxiety regarding change. When you realize that different people in an organization will have different levels of that anxiety, you have to address it, and you do that through communication.
Give people comfort. It’s not easy, changing and trying to stand out as the copier paper that is different from just the price-driven model. It’s fearful to put yourself out there and try to differentiate yourself. Recognizing that, understanding it and being able to communicate around it will allow you to stand out.
Jonathan Theders is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or firstname.lastname@example.org.
Insights Business Insurance is brought to you by Clark Theders Insurance Agency Inc.
Dan Neyer entered the period of the past three years the same as anyone else running a business: uncertain what to expect moving forward. As president and CEO of Neyer Properties Inc., a commercial real estate company, he saw that his industry was greatly affected due to the economic downturn. While he didn’t have any secret weapons or information others didn’t, he did have something that kept his company pushing onward — a positive approach to a bad situation.
Rather than hunker down or look elsewhere for business, Neyer gathered his employees to explain the situation the economy had created and how the company needed to operate. If they could stick to the plan, the company would come out the other side ahead.
“One of the most important things is you have to look every employee in the eye and be very clear and don’t sugarcoat the facts,” Neyer says. “Just tell them the way it is. Tell them the challenges that will lie ahead and tell them what you’re planning to do.”
Neyer took a strategic approach to business during the recession buying key properties at attractive values and keeping his employees informed.
“I said, ‘Our existing legacy properties are going to go down in value. I know that, the market knows that, and that’s just reality. We’re going to position ourselves to buy undervalued assets, and that’s what we’re going to do to offset the decline in existing values of our existing portfolio,’” Neyer says. “That’s the mantra we have, aggressively pursuing real estate assets.”
Here’s how Neyer used to a dire business environment to create opportunities for growth.
When the downturn hit home for Neyer Properties no one tried to pretend as if the economy wasn’t going to have an effect on business. Neyer told his employees what they could expect to see and what the plan was for moving forward. Doing that proved to be very helpful.
“So many companies like to hide bad things or hide struggles and not inform the employees, and the employees know; they feel it and people are thinking what’s going to happen to me and what are we going to do,” Neyer says. “Just be honest and straight forward. It’s tough in our industry when everyone says, ‘Everything is bad, everything is miserable and the banks are going down.’ It’s hard to stay positive when you’re surrounded.”
Getting through a tough business environment relies heavily on being able to trust your employees and use small victories to build a positive outlook.
“We have a great nucleus of people who believe in what we’re doing, and seeing the results breeds the optimism so you can fight the negativity that may be around,” he says. “It starts with the people. I can’t do this alone, nor do I want to do this alone.”
To overcome uncertain times and difficult business obstacles, you have to have strong employees who believe in the direction you’re taking the company.
“It’s always best to surround yourself with the people who will help get you to that next level,” he says. “If that means changing people, you need to change people and don’t be afraid to do that because what’s best for the organization is always best for the organization. You have to invest in existing people, but if existing people are not functioning properly then you have to change.”
In both good times and bad, the key to remaining successful is being able to anticipate change to keep your business moving in the right direction.
“People say, ‘We embrace change,’” Neyer says. “Well, yeah, you’ve got to embrace change, but you’ve got to pursue change. Embrace means you’re accepting what is happening to you. Pursuing is much stronger. You’ve got to change before you have to change. You have to see around the corners before you come up to the corners and not react. If you’re waiting to react, you’re too late.”
Develop a plan
Instead of waiting for the economy to tell him where to steer his business, Neyer developed a strategy to take advantage of the business environment and real estate market. He focused on keeping things simple.
“I wanted to preserve, protect and position,” Neyer says. “‘Preserving’ was preserving our cash, preserving our existing tenants and the loans that we had. We had to protect our existing assets from too much decline. We’re going to invest in our assets so it doesn’t look like the properties are declining, and we’re going to protect our cash amount and hopefully have that grow with proper cash management.
“Then positioning, it’s really positioning with lenders, sellers, borrowers, banks and other organizations that take the properties back. So we’re going to position ourselves to work with those organizations to be able to acquire the properties. Was it a real long and complex plan? No, but when difficulties arise, you need to focus more and keep it simple.”
To form a plan for the business, Neyer first had to think about what he would want to accomplish if there were no hindering circumstances and then factor in any obstacles.
“You have to step back from your own situation and say to yourself and your team, ‘If there were no limitations, what would we be doing? If finances and personnel were not limited, what would you be doing?’” Neyer says.
“In our case we would be buying as many high-quality assets as we possibly could get our arms on. So step back and initially don’t burden yourself with the current restrictions or hurdles that the organization has. Come up with an approach that is in the best interest without the limitations.
“Then figure out how to pursue the desired results while you work on the restrictions. Don’t start with the restrictions because if you start with the obstacles and the hurdles and the difficulties, you’ll never get to the shining light that’s out there.”
In Neyer’s case the company had a premise that it needed to acquire $40 million to $50 million a year in real estate assets. The company had a plan, and it refused to waiver from it.
“Our MO for our equity is pretty clear: we’re going to pursue and purchase properties in the $1 million to $12 million range within a 100-mile radius at good locations, good accessibility and average about 50 percent of replacement value,” he says. “We stuck with that focus. We had opportunities to look at things outside that geographic range, but we stuck to our homegrown, homespun approach and maximized the potential within.”
In order for a plan to have the best results possible, communication is vitally important to remain aligned with goals.
“We went through our three main areas of focus: preserve, protect and position,” he says. “Then on a monthly basis we would bring everybody in and it would be like a report card — this is what we said, this is what we did, this is what we’re doing, this is what is working or not working, this is how we’re adjusting, and this is how we’re moving forward.
“You have to bring all those elements and people are generally empowered if they know they’re making a difference. It wasn’t easy at times because you always have difficulties, but if you align everybody’s interests you can move mountains.”
Stick to what you know
In difficult times, it’s very easy to stray from your intended plans and pursue different options. The key to success is to find the one path you want to go down and pursue only that path.
“There’s always more opportunities out there than one can ever accomplish,” Neyer says. “When we’re in uncertain times, sticking to your past success and narrowing your focus so you’re pinpoint laser-on is even more important. A lot of times companies that are suffering, whether it’s big or small, they say, ‘If this isn’t working, let’s try something else.’
“Whether that’s a different geographic market or a different product line or whatever the case is, they forget what got them to where they were in the first place and they try something else. I’ve seen too many companies try to do everything for all people and it just never works.”
Because Neyer Properties sticks to its strengths and is prepared to function in any business environment, it has seen its fastest growth periods during recessions.
“You have to be poised and positioned to excel when times are tough,” Neyer says. “You have to be careful when times are prolific that your tools are not sharpened and volume just comes and you don’t have to keep to your principles. You have to be consistent in the good times and the bad times. You have to hopefully excel in the tough times and when things are robust, you put the governor on and you’re careful not to grow too quick.”
Any tough times equals great opportunities and great results. When you make a decision you’ve got to go for it. You can’t be indecisive.
“We are one of the few Ohio commercial real estate companies that have been able to capitalize during the recession,” he says. “Our employment has been constant, but we have grown, and our real estate portfolio is now more than double the size that it was as of the end of 2008.
“Most real estate development companies cannot say that they’ve doubled the size of their business in the last three years. A lot of that is attributed to our conservative, strategic and long-term planning and also being strong stewards of proper financial measures and taking advantage of the opportunities that are out there.”
Over the past few years, Neyer made sure his company never waited for opportunities to arise. His team went out and found properties that best fit the company’s objectives.
“If you buy key properties at attractive values and are able to obtain financing with providing the right mix of equity, there is no better time to purchase real estate,” he says.
“I’ve looked at investing in other asset allocations other than real estate since I’m so heavily invested in real estate. I just have not found any other asset allocation that has the upside that real estate does.”
Since 2008 Neyer Properties real estate has doubled in portfolio size and its ROI has more than doubled in the last three years giving the company 2011 revenue of $55 million. This success is due to both increasing the occupancy level on existing legacy properties and purchasing assets in an aggressive mode.
“Fortunately, we’ve been able to acquire where most people are falling back because they have no choice,” he says. “They are too highly leveraged, they don’t have cash and they’re stuck. Our usual approach is buying things for 50 percent of replacement value and buying properties highly accessible and highly visible. If you have key properties at key locations and your base is much lower than your competition, even though the vacancy might be higher than you want, you win.”
How to Reach: Neyer Properties, (513) 563-7555 or www.neyer1.com
- Be honest with your employees.
- Develop a strategic plan to achieve your goals.
- Once you know your direction, stick to it.
The Neyer File
President and CEO
Neyer Properties Inc.
Education: Attended Miami University and received a degree in finance and accounting
What was your first job and what did you learn from that experience?
I worked as a bus boy at Perkins Restaurant in the early mornings, which made me realize I had to get up early and as soon as I arrived, I had to work hard. At times I had to work at breakneck speed because back in the ’70s. Perkins was the place to go.
What is the best business advice you have received?
Follow your passion and realize that if you work hard, good things will happen. People always say, ‘You’ve been really lucky.’ Well, I’ve been really fortunate, and I’ve had some good luck, but good planning almost always gives good results. You can call that whatever you want, but planning equals results, equals opportunities, equals luck. Stick with what you believe. Don’t deny your gut feeling.
Whom do you admire in business?
One is my father, who taught me the importance of detail. I also appreciate the creativity of somebody like a Steve Jobs. He created history by following what he believed was necessary even though he may have been the only one on earth that believed it. He made people believe the impossible.
What was the toughest thing about the recession for your company?
It was the uncertainty from the lending community. They were in a state of total chaos, and what were they going to do? They could have just pulled the plug (and some did) and found reasons to basically cause the total demise of commercial real estate because if you eliminate credit, you eliminate all value. Fortunately, for the most part, they kept their head on. They could have effectively wiped out the economy of the U.S.
What are you looking forward to in the future of real estate?
What I see on the horizon is great, valuable, long-term enduring real estate assets growing over the future. With the boom of natural gas in this country, I think you’re going to see a tremendous influx of investment in the U.S. because this place is still the biggest buying power. The cost to manufacture now is the same as it is in China because of their increasing inflation and cost to ship goods. So I see a tremendous upswing in the future of the U.S. in the next number of decades.
We recently celebrated what we call “Quixote Day” at Cincom. It’s the day where we recognize our top performers of the previous year and inaugurate them into our “Quixote Club.”
Ever since I saw the Broadway musical “Man of La Mancha,” I’ve admired the story of Don Quixote. The musical is so inspiring, and I brought its ideals back to Cincom where we’ve adopted the Miguel de Cervantes character as a sort of corporate mascot.
Anyone familiar with the 17th century novel or the 1960s musical may be scratching their head in confusion. Isn’t Don Quixote the story of the crazy man who jousted with windmills?
Yes, it is, but the story of Quixote can teach us so much more if we look a little closer.
The impossible dream
Quixote may appear crazy to the casual observer, but the man of La Mancha stands for everything an entrepreneur should. He dreamt the impossible dream. He ran where the brave dared not go. He continued to try even when his arms were too weary and fought to reach the unreachable star.
These words, these modified lyrics from the theme song “The Impossible Dream” from the musical, are an overly formal way of saying Don Quixote possessed the characteristics of perseverance, creativity, vision and endurance.
Creativity and vision
Entrepreneurs need to be able to see things no one else can. For Quixote, that meant seeing windmills as giants, monks as enchanters and inns as castles. For me, it meant seeing the rise of the importance of software when everyone else in the technology industry was focused on hardware.
While Quixote’s creativity and vision might not have led to the birth of industries or new products and services, his imagination follows that of a true entrepreneur. He could look at an object and see it in a new, unique way.
Quixote’s creativity often got him in trouble. The “giants” break his lance and throw him to the ground, and he receives multiple injuries during a great “battle” in which he slew sheep. But even so, Quixote does not sway from his vision.
His ideal of not dismissing what he saw even though others pleaded with him and tried to show him “the truth” is a key component of an entrepreneur’s personality. How many goods and services wouldn’t exist if their creators had listened to those who couldn’t see their vision and design?
Throughout the epic tale, Quixote is broken, beaten and scoffed at. When he isn’t being physically harmed, it appears as though he is mentally harming himself by forgoing sleep to reminisce about his lady Dulcinea del Toboso as he believes any good knight-errant should, among other activities. None of this stops him from trying to reach his goal to honor Dulcinea with his knight-errantry.
The same is true of many entrepreneurs. There are very few, if any, stories of anyone creating something new in which they weren’t opposed in some way. Entrepreneurs can meet road blocks at every turn, be they a lack of understanding of the product, a lack of funding, a competitor moving at a faster rate, and even their own potential to be burnt out.
Products and services don’t come to market in an instant. It takes time, effort, buy-in from friends and family, money and what some might consider a bit of craziness to be an entrepreneur.
I urge you to take a lesson from Miguel de Cervantes’ epic knight-errant. Persevere, endure, and see things that others don’t see. Allow your mind to run wild and always dream the impossible dream and reach for the unreachable star.
Thomas M. Nies is the founder and CEO of Cincom Systems, Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, healthcare and insurance. http://tomnies.cincom.com/about/
Many companies sponsoring 401(k) plans may not be aware that they’re facing a critical regulatory deadline on August 30.
That’s the federal deadline for disclosing to employees the amounts of fees that they’re paying for their plans. The overwhelming majority of these investors don’t have the vaguest idea how much they’re paying in fees. If you’re an employer at a small or mid-sized company, there’s a good chance that you don’t either.
That’s right. Fees, one of the biggest determinants of whether 401(k) plans make or lose money for investors, are a big question mark. For decades, this has been neglected by employers, employees and federal regulators. This state of affairs has been fine for service providers, including the large insurance companies that package up these plans and supply them to employers. After all, less disclosure means less attention paid by investors, and higher fees for lack of comparison shopping.
Because of new federal rules that expand and reinforce existing regulations and reverse years of lax regulatory enforcement, all of this is changing. Employees will soon be informed exactly how much money is being deducted from their 401(k) accounts to pay fees. They’ll learn of these fees this fall in their account statements, as required by the new federal rules.
Previously, these statements merely showed investment account totals after fees were taken out, so employees likely attributed low returns to poor investment performance rather than damage done by fees.
The amounts of these fees shown in the statements will doubtless come as a rude surprise to many employees, sending them streaming into your company’s HR department. They won’t be smiling.
If you’re following federal rules, however, your employees will already know about these fees when they receive their accounts statements. The new rules require employers to send employees a simple document showing fees in an easy-to-understand format by August 30. This way, the fall account statements won’t come as a shock to employees. Employers are also required to determine whether these fees are reasonable relative to the broad market.
By adopting and enforcing the new rules, the U.S. Department of Labor (DOL) is shedding light on not only the fees service providers are charging, but also the quality of these plans.
For example, if plans are paying a service provider substantial fees but employees receive little, if any, education on how to construct and maintain their portfolios within their plans, this makes for the worst of all possible scenarios: high fees and poor service, resulting in low potential for good investment returns.
Without reasonable fees and knowledge of how to use their plans, employees can’t be effective in serving as their own financial planners, which is essentially their role as 401(k) investors.
Employers are required to prepare the disclosures due this month from information that they should have received by now from service providers.
But many employers, doubtless, will be between a rock and a hard place. While employers are on the hook for clear disclosure this month according to a set format, the new rules don’t require service providers to provide this kind of clarity when they supply the fee information to employers.
Regardless of their size, companies that fail to comply with the new rules may be hit with severe fines and other sanctions. This prospect is intimidating, but the sweeping new regulations should be viewed as an opportunity to make your plan work better for workers and management alike, possibly while lowering fees.
After determining what your plan’s fees are and what you’re getting in return, you’re required to determine whether they’re reasonable by benchmarking them against the current national market.
You may well find that you can get better service with lower fees – improving employees’ understanding of plans and increasing net returns after fees are taken out of their accounts.
But first, employers face rigors surrounding the disclosures of the coming weeks.
To deal with these challenges:
1. If you haven’t done so already, get to work pronto on the fee disclosures due August 30. The first step is to determine whether your service providers have fulfilled their regulatory obligations by supplying the fee information – including the specific services being provided for each amount – to your company.
2. If you’ve received this information, set to work interpreting these documents. This can be a lot tougher than it sounds, as some plan providers are burying pertinent information in lengthy documents. If, at the outset, this task seems too difficult or time-consuming, consider hiring an independent fiduciary advisor to assist you with this, as well as with benchmarking your fees against the market. Using a fiduciary can significantly reduce your company’s liability.
3. If service providers have failed to supply the required fee information, document this by writing to them and requesting speedy submission. This can insulate you from liability for not disclosing the information to employees on time. If these providers don’t respond immediately (after all, the deadline is fast approaching), protect your company by blowing the whistle on them with the DOL.
4. Prior to making the fee disclosures this month to employees, notify them in meetings and/or in emails of what is coming their way. Tell them this is the first step in a process to review – and, possibly, to lower – fees and to improve service, including the provision of better plan education. Again, an independent advisor can help with this.
5. Throughout this notification/disclosure process, document all questions that employees ask and the answers they receive. This helps manage your legal and regulatory liability, and it helps you develop the best answers to give when the same questions come up again.
If you haven’t started this process or are behind schedule, don’t think about water that’s passed under the bridge. Instead, look upstream. Even the sternest of regulators will acknowledge that well-meaning efforts to comply, however belated, are far better than inaction or ignorance of the new rules.
Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.
An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.
Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at email@example.com.
Being able to tell your story is critical in today’s fast-paced world, where cutting through the noise to be heard gets harder each day. With so many media options fighting for attention, it’s imperative to identify new channels where you can stand out.
That’s why as part of our expansion last year, we saw an opportunity to tell entrepreneurs’ stories in greater detail and share lessons learned by launching a book division.
Our book division is unlike traditional publishers, because we do all the work for you. We develop the story and outline, conduct the interviews with the author and other contributors, and then write the book and handle all of the other elements through publication of an e-book and hardback editions.
The time commitment from you is minimal. Once the story is determined, we will conduct a series of short interviews to get the information we need to write the book. You approve everything that goes into the story and have final say on every aspect of the project. We help you take an idea for a book and turn it into a reality that you can share with others.
As an example, last year, we worked with auto dealers Rick and Rita Case to produce “Our Customers, Our Friends.” In the book, the Cases lay out their theory that the secret to successful retail sales is through building long-lasting relationships with customers and treating them as you would your best friend.
Whether your goal is to use a book as a business card for your organization by sharing knowledge with others or to further a cause and help raise awareness for something you believe in, we work with our author-entrepreneurs to identify what makes them unique and what insight they can share with others. We also build an author’s website and set up social media channels to help them promote the book. And, we’ve recently established an authors’ speakers’ bureau that will help extend the reach of sharing that entrepreneur’s knowledge across the national footprint of Smart Business Network.
So far this year, we have eight books in various stages of production. Among them are books for the CEOs of three publicly traded companies on topics ranging from mergers and acquisitions to building sustainable businesses to how to conduct successful turnarounds. We’re also publishing books that introduce exciting new business theories, as well as one that explains how to lead with a philosophy of giving back to the community.
What direction your book takes is up to you. It can tell the story of how your business started small and grew into what it is today, or it can explain the details of what you see as the keys to being successful in business.
Breaking through the clutter of information is tricky, and writing a book is one way you can make yourself heard. It’s also a great way to explain your philosophies to employees, customers and your peers.
There’s a widespread belief that everyone has at least one book within them. In the business world, that’s even truer. If you think that’s you, we’d be happy to help you turn your ideas into reality.
If you are interested in learning more about publishing a book, please contact our publisher, Dustin Klein, at firstname.lastname@example.org or (440) 250-7026.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.