Shortly after he began with First Financial Bank some nine years ago, Claude Davis felt so strongly about building brand awareness that each year he and his team engaged a study to measure the awareness of the bank in each of the states where it operates. The year-to-year report showed the progress — and the momentum the bank was achieving.
“We did a lot of work,” says Davis, who is CEO, president and chairman of the bank. “It has been about constant marketing, constant awareness building and the consistency and the look and feel of the brand.”
The payoff has been impressive. The bank has locations in Ohio, Kentucky and Indiana. With 1,400 employees and company revenue of about $300 million, Davis has been leading a significant expansion for the bank since 2008. In Indiana, awareness has increased from less than 10 percent to 53 percent. It’s a similar story in Ohio where the bank went from less than 10 percent awareness to almost 50 percent.
Here’s how Davis builds awareness for First Financial Bank in a highly competitive industry.
Go for innovation
With 20 local banking centers, 90 consecutive quarters of profitability and the continuation of a 100 percent dividend payout ratio, it’s no surprise that Davis’ leadership has garnered praise across the banking industry for his efforts to grow the bank despite an economy in the doldrums.
If you had to pick the “must haves” to grow your business, innovation has to be among them.
“One of the real changes in the business is that you have to be focused on really being more innovative as a company,” Davis says.
That focus, which is becoming more 24/7 every day with the Internet and smartphones, has been spawned by the rapid advances in technology. While you can keep up with competitors and offer every product they do, it only goes so far.
“You always have to be in touch with what the competition is doing,” he says. “We certainly don’t have a lock on good ideas.”
There are a lot of people in the industry who are very innovative and develop interesting ideas that you may choose to follow.
“You have to think about it and look at all aspects and say, ‘What is the best thing for our client, and what can we offer?’
“The challenge is also being in touch with the technology companies that serve the banking industry,” Davis says, “and to make sure you are drawing the connection between your client and what is being developed in the industry — and deciding when is the right time to offer that as part of your product suite.”
It’s not a good idea to second-guess consumers on the subject of technology and online banking.
“Our younger clients start out very electronic-based and just grow with that,” he says. “But what we are finding with our more mature clients is that they are adopting the electronic form of banking more quickly than I would say is common wisdom — and it is because of the ease-of-use. Secondly, with the introduction of mobile banking and smartphones, we are all very comfortable now making transactions online. The rate of adoption is increasing among all our clients.”
Adopt a ‘client first’ model
If innovation is among the “must haves,” another requirement involves exceptional customer service. To stand out against your competitors, think about how you base your decisions.
“All our decisions have to be based on the client,” Davis says. “We believe we have to be a client-intimate oriented company. We call it being ‘client first’ in our operating model.”
It means taking care of all your customers without any favoritism. It has to cut across every business line.
“For us, that’s from small business to large corporate clients to individuals and in the individual states from those who were maybe just establishing bank accounts and bank business to those who are high net worth and who really need investment advice and stated advice,” he says.
“You try to serve that full-spectrum and serve all of them in a very personalized way.”
To stay in touch with both consumers and developers, it takes doing your own research and tapping into industry research.
“Talk to your own clients about how they want to be served, what products they would like and more importantly, what delivery channels they want to use to interact with you.
“So if you are a consumer client, you want to be able to interact with your bank whenever and however you want to interact,” Davis says. “We have every touch point covered as well as we are continuously asking consumers what do we not have in our products that they would like to see.”
First Financial launched a product called Panorama by which users can assemble their accounts from all their banks and credit cards on one online site.
Such a step requires some stepping out of the comfort zone for a company.
“It is our recognition that while we would like everybody to do business only with us, we understand that that is not the case with most consumers,” Davis says.
Blend the cultures in acquisitions
A third “must have” to employ during the growth efforts pertains to acquisitions. While such growth was often thought to be only in the realm of large companies, small and midsize companies are taking successful ventures into the once-exclusive territory.
The focus, not surprisingly, is that the cultures of the two or more businesses are aligned.
First Financial Bank has had five acquisitions since 2009, three in Indiana and two in Ohio. The company also has a long history dating back to the 1980s of doing more than 20 acquisitions in Indiana and Ohio.
“Cultural integration is the most important part of that process,” Davis says. “It is not the data processing conversion. It is not the financial metrics. It’s how well you integrate the associates of the company you are buying and how well you integrate the clients that are a part of that company you’re buying and making both feel like your company is a better place for them to be.
“Be open and willing to say that they may do something better in one or more areas than you do, and you decide to adopt that practice,” he says. “When you take that attitude, then you create a foundation and a trust level between the two organizations that says you really do value the merger process and it is not just a function of you want to buy their assets and move on.
“Begin with openness: ‘Look, we’re going to take the best of both and not make assumptions, just because we may be the buyer, everything we do may not be better than what the seller has been doing.’”
It takes time. It can sometimes take a few years to work through that process to really have everyone feeling like they are equal partners in the newly combined company.
“It takes a couple of years typically for that process to occur and to leave behind what that company used to be,” Davis says. “There is typically a lot of loyalty and pride that is built up in that prior company that doesn’t just leave you in three, six or nine months.”
How to reach: First Financial Bank, (877) 322-9530 or www.bankatfirst.com
Some four years ago, Tom Daulton was given $250 million by GTCR Golder Rauner LLC, a private equity firm that specializes in the health care industry, and was told to purchase a medical device company that had the potential to be turned into a public company. Fortunately for Daulton there was such a company for sale, and it had everything he wanted.
That company was called Biopsys, which had been acquired by Johnson & Johnson’s Ethicon Endo-Surgery for about $310 million 12 years prior to Daulton’s search. Ethicon renamed the business Mammotome after the company’s breast biopsy system, which was the first vacuum-assisted, minimally invasive system for determining breast cancer.
Over the years additional image-guided products were introduced and the Mammotome brand became the market leader in breast biopsies. More than 4 million women worldwide have had an image-guided, minimally invasive breast biopsy using the Mammotome Biopsy System.
“Mammotome is like saying a generic term like Kleenex — that’s how well-known the name Mammotome is,” Daulton says.
Eventually, the biopsy procedure moved out of the hands of surgeons and into the hands of radiologists due to the extensive imaging used. Since Johnson & Johnson was focused on the operating room, it decided it was best for Mammotome to find a new home.
“That’s right about the time I was looking,” says Daulton, CEO of Devicor Medical Products Inc., the parent company for medical device businesses such as Mammotome. “GTCR and I had been talking for years and said, ‘Let’s go see if we could build, through a series of acquisitions, a $500 million revenue, $100 million earnings medical device business.’
“I said, ‘OK, let’s try it.’ They gave me $250 million and told me I could borrow additional money and wanted me to find an excellent business to acquire as a platform to build a much larger company so that GTCR could take it public.”
Daulton looked at 125 businesses before he found Mammotome.
“I narrowed it down using a thesis for what I thought was the best type of business that included being physician specific, the reimbursement pathway was clear and it needed a regulatory path that made sense,” he says.
With those three criteria serving as a crude filter for what company would be acquired, Daulton purchased Mammotome in July 2010 and headquartered it in Cincinnati.
“This was a great business to acquire,” Daulton says. “It’s in a very, very important clinical space of breast cancer, which has no cure. It’s worldwide, and the product is excellent for the patient, hospital and doctor.”
Now, three years later, Mammotome is growing at a blistering pace. There are offices in France, Germany, Italy, Shanghai, Tokyo and the U.S.
Here’s how Daulton redeployed Mammotome and gave the business new life.
Turn assets into a business
Daulton was searching for much more than just a company to acquire and grow. His search was for a business that could become much larger by acquiring additional businesses and going public.
“I was looking for a platform,” Daulton says. “When you look at the company does this thing have water coming over the fourth bulk head and there’s no way, or if you just turn on the pumps and build a better mouse trap will you have a good fighting shot. We felt Mammotome was an excellent business.
“It was in a wonderful market space, a global market space, in an important clinical area that wasn’t going to be fixed soon, and a little bit of innovation was going to go a long way.”
The type of acquisition Daulton did with Mammotome is one he calls an “uber carve out.” Everything, short of some employees had to be created.
“A carve out is a place to create tremendous value,” he says. “Anybody that can take assets and turn them into an operating business with revenue, gross profit, cash flow, and net earnings, that’s pretty hard to do.”
Daulton’s first step after acquiring Mammotome was to bring in a team of eight very experienced people. His goal was to hire by function, with each function serving as a spoke on the wheel.
“To run a company like Mammotome we literally brought in a CFO, a corporate strategy M&A person, a head of HR, a head of sales, a head of marketing, a head of regulatory and quality, and a head of manufacturing,” he says. “We literally set up each one of those functions, and each one of those functions built their infrastructure. Had we not done that, we would have gotten lost.”
Once a team was in place Daulton had to put a lot of focus on what would build value for the company.
“If you’re going to take the company public one day, what builds value?” Daulton says. “We were pretty ruthlessly focused on those two or three things, and in our world that was quality, cost and people.
“We hired 300 people in 24 months. There was a tremendous focus on finding people that could deal with a blank sheet of paper. A carve out is not a place for someone who hasn’t done the job you’re looking for.”
Now that he’d purchased Mammotome and found his executive team, Daulton’s hard work was just beginning — he had to build up and grow the business.
“We started with about 120 people and today we have about 560,” Daulton says. “We have grown substantially. That’s a blistering pace in those 24 months and we had to do everything.
“What I essentially bought was assets. I didn’t get a building, a computer system, all the employees, accounting, a factory, nothing. In 24 months I took the Johnson & Johnson folks and some other people that we brought into the company and literally built a $200 million company.”
Daulton built a state-of-the-art medical manufacturing factory. He and his team put in all the systems — marketing, finance, regulatory, etc. While all that was being done, there was a second thing that had to happen — the products within the company were starting to get old and updating was in order.
Update the business
The original Mammotome, while state-of-the-art when they launched it, was now old, outdated and losing competitive share.
“I think people get way too excited to make stuff that no one wants to buy,” Daulton says. “In our world it’s much easier. Is it faster, safer, less expensive, gets a better diagnosis? It has to do something better or you’re wasting R&D dollars. If you can’t answer those kinds of questions crisply, you’re wasting money. We spent a lot of time answering those questions.”
Two things happened that necessitated innovation for Mammotome. No. 1 was concern in hospitals around minimizing exposure to blood and blood-borne pathogens. No. 2 was doctors wanted the procedure to be faster because the patient is awake, has anxiety and the needles look pretty big.
“Even though everybody was trained on it, it worked incredibly well and it made the best quality sample, these other two things started seeping their way into the technology and Mammotome slowly started losing sales in the U.S.,” Daulton says.
“Our device, while still the worldwide market share leader, was a little like the Sony Walkman. When it first came out it was awesome, but other ways to do it started coming out.”
A development program was started in 2004 to see if a new product could be made that not only fixed its two issues, but also added a whole new clinically relevant feature. Mammotome had started that project, but Daulton inherited the business halfway through the project.
“It cost me $40 million to finish it,” he says. “There was a clinical need in this new ultrasound space, so we took some really bright engineers and marketers and talked to a lot of customers and made a product that fit that and reintroduced it.
“The new product not only addresses the speed and the closed system, but what’s most important now is how fast you get the patient in and out without compromising anything in the procedure.”
Daulton’s $40 million investment in R&D happened in the first two years of acquiring the business and it got the company a new version of Mammotome. The company also developed a whole new product called Elite, which is a tether-less, self-contained, battery-powered biopsy device.
“That was a massive undertaking between getting the old products to grow and then moving puzzle pieces around to build and grow the business,” he says.
Don’t rest on your laurels
Despite all the growth, innovation and success Daulton and Mammotome have seen in the first two years plus, there is no time to relax. Daulton is focused on introducing new technology and further growth opportunities.
“We’re very interested in acquisitions that make logical sense to the customers we call on,” Daulton says. “We’re not interested in acquiring things just to generate revenue or profits. We’re interested in things that our sales people know how to sell and that our exact same customers already buy and we can add some value.
“What value do we bring to them and what value do they bring to us? If you can’t answer those two questions crisply, you should not make the acquisition.”
The company also plans to expand further globally.
“Our Asia business in three years could be larger than our U.S. business just based off the sheer growth of the population and the trajectory of the business,” he says.
To accomplish all of that, it is very important that Daulton and Mammotome have the right team in place.
“You’re not going to be successful unless you’ve got a bunch of people that are really motivated, really smart, know what to do, and feel like they can make a few mistakes and they won’t get in trouble,” Daulton says. “Those people have to be led by people who have enough experience that we don’t drive this thing into a ditch. There will be guardrails so that we can take a few chances and a few risks, but still get down the road in the right direction.”
How to reach: Mammotome, a division of Devicor Medical Products Inc., (513) 864-9000 or www.mammotome.com
Find a business that adds value to you and that you can add value too.
Work to build and grow the acquired business.
Never stop looking for future opportunities.
The Daulton File
Mammotome, a division of Devicor Medical Products Inc.
Born: Ames, Iowa
Education: He went to Arizona State University and received a degree in marketing.
What was your first job and what did you learn from it?
I worked at a camera store. I started when I was 14. I learned that working builds character.
What is the best business advice you’ve ever received?
Focus on the customer and really give them what they want. Also, call them proactively, even if it’s bad news. People want you to be truthful with them.
Who is someone you have looked up to in business?
My father, Merritt. He was a very successful, local, small-town merchant who had a great reputation and worked really hard.
What are you excited about at Devicor/Mammotome?
I think we’re going to have a very sizeable company. Things are going incredibly well with the new products and the employees are really excited and the customers are excited. If I cast forward three years, I think we have a good opportunity to build this to the $500 million mark.
Crisis management is something you hope to never be confronted with as a professional, yet you intuitively know and understand it’s something for which you must be prepared. There are many ways to handle and manage a crisis, but it always begins and ends with a plan.
In my experience, I find that less than 10 percent of organizations actually have a crisis management protocol or plan — and even fewer actually practice their response on a regular basis. Why? The boss doesn’t view it as a priority.
Get focused on the importance of a plan
Smart bosses understand the importance of being prepared — the critical nature of practice, rehearsal and messaging.
So, for all of you without a crisis communications plan or protocol, walk into the boss’s office today and say, “I’m going to get started on our crisis communications planning.” I will bet you a doughnut you’ll get one of the following two responses: 1. “Why? What’s that for?” 2. “We don’t need that and that’s not what we’re focused on right now.”
Smart bosses already have a crisis plan in place, review it every six months like clockwork and practice it regularly. Other smart bosses that don’t have this in place are looking to their communications team to proactively suggest and develop a crisis plan in the absence of one, or in the event it’s out of date (more than a year old).
But, as we all know, most bosses just aren’t that smart
Remember, most bosses don’t think in terms of today — they think in terms of tomorrow and how what is happening today will impact and affect the future. It’s critical to impress upon them that the very nature of crisis management is designed not to make a crisis go away, but to respond professionally in a manner that makes the organization and its leadership appear to be in control and mitigate long-term negativity.
If confronted with “we can’t focus on that today, we have X next week,” remember, those types of excuses will always come up. Ask for a good time, and mention that this must be a communications and leadership priority, then work to set and get on a schedule. I encourage the use of a Gantt Chart that details involvement, timelines, anticipated delivery dates and milestones.
Outline the steps
The first step in creating this program is to get the necessary parties involved and sitting at the same table. An email with a request is probably not going to suffice. Sit down and talk to each and every stakeholder that’s part of the equation. Relate to that specific public on the benefits of this program and why they are an important piece.
Anyone who could or would have a direct response with some type of challenge that may come up and affect your external publics should be at the table. Then, you simply begin by establishing a set of protocols and criteria for exactly how you would respond in the event of a crisis.
Who is authorized to speak to the media? How do the communications channels work? Do we have a “dark site” set up? What are we trying to accomplish during a crisis?
Leadership must agree to all of this beforehand, protocols should be established companywide and they should be part of your master document. Clearly, these policies and protocols should be shared with all employees. And, this should be practiced, at least every six months, with mock drills.
Remember, this is only step one. How you communicate to the internal publics both in setting up and creating the plan, then reinforcing the protocols is critical to the success.
If there is no policy or protocol, don’t be angry when a low-level employee goes spouting off to the news media or offering up quotes and responses.
Rodger Roeser is owner, president and CEO of The Eisen Agency. He is also the national chairman of The Public Relations Agency Owners Association and works with other PR firms across the country to assist in their operations and profitability. He can be reached at RRoeser@TheEisenAgency.com
Say the word “innovation,” and immediately you think about business legends like Steve Jobs and Jeff Bezos, as well as the companies they created – Apple and Amazon. Too often, however, we focus on the people who have been tabbed as innovators and the companies that develop those breakthrough products, services and solutions, such as Apple’s iPod and iTunes, or Amazon’s marketplace and unique ecosystem.
True innovation goes much deeper than a single leader’s vision. It is an all-encompassing philosophy that permeates an organization and defines its purpose for being. For me, at least, I prefer to think about innovation in its broadest terms, extending its definition to include corporate cultures and innovative management styles. Think about how Facebook and Microsoft are run, and how at both organizations employees are a key factor in the idea creation, or ideation, process.
Now, think about the breakthrough products that eventually went bust. Hopefully, you don’t have a basement full of Beanie Babies, boxes of Silly Bandz, or a home library filled with laser discs. It is more common to land on a singular breakthrough product that temporarily revolutionizes your industry rather than develop a product through a process that’s repeatable or scalable. And, just as true, no matter how innovative and creative your management team’s style may be, without the proper processes in place to push ideas through a system that takes them from mind to market, you’ll eventually have trouble keeping the lights on.
It all comes down to developing a culture imbued with innovation at its core. But this also requires having a servant culture in place where every person who works for the organization thinks about the customer first.
Consider San Francisco-based Kimpton Hotels, where employees strive to create “Kimpton Moments” by going above and beyond with guests and delivering memorable experiences.
Kimpton overcomes the inherent limitations for creating new innovative products that being a boutique hotel chain includes by approaching innovation through its employee interaction – and then rewarding employees for their creativity. For example, when team members put in the extra hours to ensure world-class service delivery, the hotel chain has sent flowers and gift baskets to their loved ones. And when they create an innovative service experience, the company rewards staff members with such things as spa days, extra paid time off and other goodies.
And then there’s the Boston Consulting Group, a management consulting firm that’s known for developing innovative business processes and systems for its high-end clientele. Part of BCG’s internal process is a focus on team members maintaining a healthy work-life balance. When individuals are caught working too many long weeks, the company’s management team issues a “red zone report” to flag the overwork.
Talk about innovation! And no product, service or solution was developed, marketed or sold.
And finally, few organizations are more innovative than DreamWorks Animation. But beyond plugging out groundbreaking animated movies, the studio’s culture embraces empowerment and innovation. Employees are given stipends to personalize their workstations so that they create whatever inspirational atmosphere they need to succeed. And, as the story goes, after completing Madagascar 3, the crew presented a Banana Splats party, where artists showed the outtakes.
Not only are these three companies known for being innovative in their respective industry spaces, they also share the honor of being members of Fortune’s 2013 “Great Places to Work” list.
So how do you take the first steps toward transformation or put those initial building blocks in place to begin the journey? There’s no magic formula, but there are some common traits – and they revolve around empowerment and establishing a culture that cares.
- Are open-minded and ask “What if?”
- Teach team members how to see what is not there and identify opportunities in the marketplace to take advantage of those gaps.
- Develop cultures where innovation thrives through open and honest communication.
- Flatten the organizational structure and recognize that innovation can come from anyone and anywhere.
- Make innovation, itself, a cyclical and continuous process.
Stop and take an internal assessment of your organization, your team and of yourself. If you can’t check a box next to each of these five traits, stop and ask yourself why. Then begin your own journey to greatness.
Sir Tim Berners-Lee recalls a time when computer users around the world were quite nervous about the power of Netscape.
“A lot of people thought, ‘Oh, wow, a clingy and controlling Web company. What do we do about it?’” says Berners-Lee, director of the World Wide Web Consortium (W3C) and inventor of the World Wide Web. “Then they weren’t worried about Netscape anymore. They were worried about Microsoft, and they worried about Microsoft for a long time. Then they woke up one day and said, ‘Wait, the browser is not the issue. It’s the search engines.’”
Today, it’s the social network that has people worried, says Berners-Lee. But whichever medium is in society’s crosshairs, he says the fear is very similar in each case.
“When you have a monopoly, it slows innovation,” Berners-Lee says. “It reduces competition, and it’s generally not good for the market. One of the most important things about the Web is it being an open platform. The ’Net is a neutral medium. I can connect and you can connect, and we can talk. That is really important to an open market and democracy.”
One of Berners-Lee’s primary missions with the W3C is to ensure the Web is being used to its full potential. But it is also to make sure it remains an independent entity so that everyone who wants to has the opportunity to tap into that potential.
“If you can start tweaking what people say or you can start intercepting their communications, it’s very powerful,” Berners-Lee says. “It’s the sort of power that if you give it to a corrupt government, you can give them the ability to stay in power forever. It’s healthy for us to not put the Internet directly under the control of the government, but to have a set of multi-secular organizations at arm’s length from government acting responsibly and taking many views.”
Still plenty of room to grow
Berners-Lee helped launch the World Wide Web Foundation in 2009 to bring the power of the Web to more people.
“Maybe now 25 or 30 percent of the world uses the Web,” Berners-Lee says. “That’s still a massive gap and a massive number of languages where there still isn’t a lot on the Web. There’s a lot of culture that isn’t represented and a lot of countries where they haven’t the backbone for a good Internet base.”
The foundation has designed and produced the Web Index, the world’s first multi-dimensional measure of the world’s growth, utility and impact on people and nations. It covers 61 developed and developing countries, incorporating indicators that assess the political, economic and social impact of the Web in that country.
“The higher level of the Web Index is looking at impact,” Berners-Lee says. “Is it really affecting the way people do politics? Is it really affecting the way you do education? Is it affecting health?”
The recent turmoil in Egypt was a wake-up call to many who are connected to the Internet, but have started to take its power for granted.
“They thought the Internet was like the air, that it would always be there,” Berners-Lee says. “And people started asking the question, ‘Who could turn off my Internet?’”
Fortunately, there are countless efforts underway from those in the technology industry not to restrict access, but to take the Web to even greater heights.
“The art is designing it to work with all kinds of devices because different customer segments are going to use different devices in different countries,” Berners-Lee says. “If you’re designing something new on the Web, you need to make sure it works on all devices.”
How to reach: World Wide Web Consortium, www.w3.org
The greatest challenge of opportunity is said to be the ability to take the next step and understand what it will take to maximize that opportunity and achieve growth. Amy Rosen knows the importance of that comprehension.
“The skill set of an entrepreneur involves understanding how to create a business,” says Rosen, president and CEO for the Network for Teaching Entrepreneurship (NFTE).
Andres Cardona, who grew up in a rough neighborhood in Miami, is one of the best examples of this entrepreneurial spirit.
“He was on the verge of dropping out of school because his mom had lost her job, and he had to help contribute to the household,” Rosen says.
Fortunately, Cardona had become involved with NFTE. His natural leadership skills, along with the knowledge he was gaining from NFTE, empowered him to do something that would not only help his family, but also other youngsters in Miami.
Cardona founded the Elite Basketball Academy, an organization that would help kids hone both their basketball and leadership skills. He began with one kid and was making 70 cents an hour. Now, he’s a CEO with more than 150 kids, a staff of employees and he’s making money. He’s enrolled at Florida International University studying finance while he runs his business and supports his mom.
“I’m sure it will be the first of many businesses he runs,” Rosen says. “This is just a kid who needed to have his eyes opened to opportunity and learn some basics about business.”
A great place to start
The mission of NFTE is to work with young people from low-income communities, such as Cardona, and engage them in a different vision of opportunity and success.
“It’s basically an entrepreneurship class where they actually go through the whole business-creation process,” Rosen says. “At the end, which really gets to our mission, we want kids to actually connect school with opportunity so they stay in school. Kids start learning how to multiply fractions because they are figuring out their personal return on investments in their new company. We want them to start much earlier thinking about their future.”
Rosen points to Cardona as an example of a youngster with a great gift. But in too many cases, with too many young people, those gifts go unrealized and the child becomes an adult with nowhere to go.
“We want them to have a vision of success and whether they become entrepreneurs and create their own businesses or bring to their jobs and their employers an entrepreneurial mindset. That’s going to give them a much better chance at success,” Rosen says.
The work being done by NFTE fits like a glove with EY’s mission to drive entrepreneurialism in the business sector.
“Our cultures are so aligned around entrepreneurialism in general and we are all running competitions and promoting the notion that we need more entrepreneurs to solve problems,” Rosen says. “Now we have partners on every single one of our boards worldwide. They don’t have to be asked to do it. They really like doing it.”
Cardona was featured at the recent EY World Entrepreneur of the Year Award program in Monte Carlo. Other budding young leaders who have risen through NFTE also have been honored by EY.
“In every city where we have an operation, they feature our winning entrepreneurs,” Rosen says. “So the kids get an opportunity to network and see what success looks like and to go to the kinds of places they’ve never been and participate that way. And they get a sense of recognition for their work.”
Rosen says there’s nothing better than working with young people to prepare them for what lies ahead.
“If you’re going to give back, why not work with kids who need it the most and actually teach them and help them to be entrepreneurs,” Rosen says. “That’s what is going to grow our economy and create stability.”
How to reach: Network for Teaching Entrepreneurship, (212) 232-3333 or www.nfte.com
Although manufacturers can expect modest 2 percent growth through the remainder of 2013, the brief lull gives opportunistic executives a chance to prepare for an uptick in business next year.
Gus Faucher, senior economist for The PNC Financial Services Group, attributes his optimistic forecast to a rise in business investments, fueled by the resolution of murky tax and sequestration issues, and the continuation of record-low interest rates.
“I think the U.S. will maintain an edge in high value-add manufacturing because we have highly skilled, productive labor,” Faucher says. “Maintaining our competitive advantage requires ongoing development of our manufacturing workforce.”
As the economic recovery proceeds, in what areas will spending accelerate most? Manufacturers of home building products and materials, furnishings, appliances and so forth should have a strong 2014, thanks to the rebound in the residential real estate market. In turn, those manufacturers will purchase more production equipment, raw materials, parts and other items. The wealth effect in real estate will stimulate growth throughout the supply chain.
Will rising global demand for U.S. made products including semiconductors, medical devices and specialized materials manufacturing propel employment gains over the next few years? Post-recession hiring will wane next year as manufacturers look for productivity gains from workers added since employment levels bottomed out in early 2010. Although manufacturing is back up to 12 million workers, that’s still well below the 2006 peak of 14.2 million. The mantra continues to be: Do more with less.
How could the expansion of the shale oil industry affect manufacturing? Shale oil exploration and extraction will be a boon to ancillary industries and all U.S. manufacturers that rely on natural gas for production, since it will lower energy costs over the long-term. Moreover, it will give America a much-needed competitive advantage in today’s spirited global marketplace.
Augustine (Gus) Faucher is a senior economist for The PNC Financial Services Group. He is responsible for contributing to the preparation of PNC’s U.S. economic forecast and alternative economic scenarios.
The Rainforest: The Secret to Building the Next Silicon Valley
Victor W. Hwang and Greg Horowitt
Regenwald, 304 pages
What makes places like Silicon Valley tick? Can we replicate that magic in other places? How do you foster innovation in your own networks? Victor W. Hwang and Greg Horowitt propose a radical new theory to explain the nature of innovation ecosystems: human networks that generate extraordinary creativity and output. They argue that free market thinking fails to consider the impact of human nature on the innovation process.
These ecosystems, or Rainforests, can only thrive when certain cultural behaviors unlock human potential. The authors provide practical tools for readers to design, build and sustain new innovation ecosystems. The Rainforest challenges the basic assumptions that economists have held for over a century and will transform the way you think about technology, business and leadership.
The Coming Jobs War
Gallup Press, 220 pages
Drawing on 75 years of Gallup studies and his own perspective as the company’s chairman and CEO, Jim Clifton explains why jobs are the new global currency for leaders. To win, leaders need to compete. The business community needs to double the psychological engagement of workers so that it can compete with cheaper labor. Perhaps most importantly, leaders need to recognize universities, mentors and especially cities as a supercollider for job creation. There’s not a moment to waste: the war has already begun.
Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back
Free Press, 320 pages
John Kao first offers a stunning, troubling portrait of the recent erosion of U.S. competitiveness in innovation, then he takes readers on a fascinating tour of the leading innovation centers, such as those in Singapore, Denmark and Finland, which are trumping us in their more focused and creative approaches to fueling innovation. He then lays out a groundbreaking plan for a national innovation strategy that would empower the U.S. to marshal its vast resources of talent and infrastructure in ways that will produce transformative results.
While government regulations and prices for energy and raw materials influence manufacturing competitiveness, having a talented, innovative workforce was deemed the most critical factor in a country’s ability to compete in manufacturing, according to the 2013 Global Manufacturing Competitiveness Index by Deloitte.
Unfortunately, the U.S. is lagging behind other high-wage nations such as Germany and Japan when it comes to innovation in its manufacturing sector. And we’ll continue to lose ground if executives wait for colleges to churn out science, technology, engineering and mathematics graduates.
“We can’t wait for someone else to fix it. The talent issue needs to be addressed today,” says Jennifer McNelly, president of The Manufacturing Institute, a non-profit affiliate of the National Association of Manufacturers.
Experts may not agree about the existence of the so-called skills gap, but they unilaterally concur that manufacturing executives can jump-start innovation without breaking the bank by tapping into widely available brain trusts.
Collaboration is the secret sauce of innovation, John Zegers says. The director of the Georgia Center of Innovation for Manufacturing, Georgia Department of Economic Development, says creativity doesn’t evolve from one person — it comes from inviting different perspectives.
“Whether you’re trying to solve a problem on the manufacturing floor or develop a new product, it’s critically important to garner feedback from everyone who touches the product,” he says.
Historically, manufacturers have expected engineers to be their innovative spark plugs, but the notion of the lone innovator is fading amid the shortage of engineering talent. Today, 90 percent of managers view the manufacturing workforce as full partners in solving problems, improving processes and satisfying customers, according to the 2012 Manpower Manufacturing Workforce Survey.
Moreover, cross-functional teams comprised of accountants to shipping clerks are using their detail orientation and intimate knowledge of supply chain processes to streamline procedures and create new efficiencies.
“Involvement creates ownership and ownership inspires creativity since employees feel empowered to make changes,” Zegers says. “Plus, the cost of marshaling existing resources toward a problem is negligible.”
At the same time, garnering input from people in dissimilar roles broadens a team’s perspective and buoys critical thinking by injecting a dose of cultural and ethnic diversity. Of 321 companies surveyed by Forbes, 85 percent agreed or strongly agreed that diversity is key to driving innovation in the workplace.
While many organizations want the benefits of high-stakes innovation, their culture won’t support it. Executives who resist outside-the-box ideas or penalize failure may unconsciously stifle creativity. If you champion the efforts of cross-functional teams by removing the barriers to innovation and sponsoring a culture that shuns the status quo and rewards risk-taking, the seeds of creativity will sprout and bloom, but only under the right conditions.
Close skill gaps through training and education
Manufacturing executives frequently bemoan the dearth of workers capable of mastering today’s increasingly hi-tech, team-based roles, yet the answer to the problem could be right under their noses.
About 20 percent of all American jobs are now in the STEM fields, with half of those open to workers who don’t have a four-year college degree, according to a new analysis by the Brookings Institution, who refers to these workers as the second STEM economy. Second STEM workers come from high schools, community colleges and vocational schools and are critical to the implementation of new ideas since they advise researchers on feasibility of design options, cost estimates and other practical aspects of technological development.
Manufacturers bear some responsibility for their predicament according to Manpower, since most companies are not recruiting for manufacturing talent as if they were knowledge workers and are not managing them as a knowledge workforce either.
Specifically, they’re neither developing their current employees nor building a pipeline of technically proficient talent to meet near-term hiring needs.
“There are plenty of 40-year-olds working in the industry who were trained in a different way,” says Rick Jarman, president and CEO of The National Center for Manufacturing Sciences. “The talent is there, they just need retraining and development.”
Investing in daylong seminars that use simulation to teach lean manufacturing concepts, kaizen events, overall equipment effectiveness, value stream mapping and so forth can yield big dividends, Jarman says. Workers who understand modern manufacturing concepts may enhance a company’s penchant for innovation.
Plus, ingenuity is a teachable skill. Employees can learn the fundamentals of the innovation process and start generating money-saving, useful ideas after attending a short, four-hour training course. Plus, upgrading your current staff is less risky and time-consuming than developing novices.
Since manufacturing will see a 50 percent increase in the number of mature workers over the next decade, companies should consider this workforce segment as they assess their near-to-medium-term talent acquisition strategies. Innovative organizations are pairing mature workers with technically savvy new hires to facilitate knowledge transfer and mentoring.
Indeed, some industry veterans have the ability and desire to learn advanced technical skills like computer numerical control, machine tools, computer-aided design and manufacturing programs or even robotics, if given the chance. High-potentials are being offered tuition assistance because having a technically competent workforce is critical to innovation.
“Manufacturers can’t capitalize on groundbreaking technology or invest in computer-aided machinery if they don’t have someone to operate it,” McNelly says. “This is just one example of how the skills gap can impact innovation throughout an entire industry.”
Employers can close debilitating talent shortages in as little as three to six months by raising their expectations and requesting certified workers from local community colleges. McNelly cites a pilot program in Northeast Ohio as an example of successful educational alliance. Community colleges provide NAM-Endorsed certified training to students to prepare them for advanced manufacturing careers.
“Just showing up is no longer enough,” McNelly says. “Employers need certified employees to thrive in a manufacturing environment that’s grounded in teamwork.”
Enticing high school students is a long-term solution to looming talent shortages in manufacturing. To succeed, executives need to change students’ perception of the industry.
Offer them apprenticeships and invite students to tour plants so they can see that there’s more to a manufacturing career than standing on your feet all day, says McNelly.
“Show them a distinct career path and the technical aspects of the job, or else bright students with a flair for innovation will pursue opportunities in other industries,” she says.
Cross boundaries to expand your brain trust
Augmenting the creative efforts of a modest staff by crowdsourcing ideas and suggestions from customers and stakeholders is a new approach gaining attention. According to Newsweek, Unilever established an open innovation unit to work with outside partners in 2009, which increased the share of external ideas that are adopted by the company’s business units from 25 percent to 60 percent. Even Starbucks is asking stakeholders to help develop ideas to reduce waste.
While it’s possible to solicit ideas via social media and traditional focus groups, many companies are using online discussion boards to engage outsiders in stimulating conversations with executives and engineers. The back-and-forth banter encourages participation and helps flesh-out creative ideas in real time.
If a shortage of engineering expertise and technical know-how is stifling R&D, one technique is to borrow the requisite expertise by tapping the brain trust at your local college or university.
“Many colleges and universities will gladly provide research, access to labs, professors and engineering students to local manufacturers,” Zegers says. “They can help you develop cutting edge technology or solve problems without adding to staff. They can even help defray development costs by connecting manufacturers with grants or matching funds from state and local governments.”
Collaborative R&D is another way to leverage external expertise and technology in the quest to develop cutting edge products and efficient manufacturing processes.
“Manufacturers can reach the end game faster by pooling intellectual capital and sharing the investment and the return with partners who have complementary talents,” Jarman says.
If you don’t have the wherewithal to source partners and manage large-scale projects, you can still enjoy the benefits of collaborative R&D, by engaging an intermediary.
The National Center for Manufacturing Sciences provides neutral, third-party collaborative project oversight. Or, seek out industry programs that form strong multi-disciplinary teams by matching willing partners with experts from universities, government labs and external funding sources. Collaborating with engineers from the U.S. Department of Commerce’s Manufacturing Extension Partnership or other public/private partnerships is yet another option.
The opportunities to innovate are endless, even for small manufacturers, if executives go out of their way to broaden their talent circles.
“There are more than 300,000 manufacturers in the U.S. and endless opportunities to collaborate,” Jarman says. “Some of the most creative ideas are coming from small and mid-size manufacturers who have crossed boundaries and barriers to pursue talent-driven innovation.”
How to reach: National Association of Manufacturers, www.nam.org; The National Center for Manufacturing Sciences, www.ncms.org; The Georgia Center of Innovation for Manufacturing, manufacturing.georgiainnovation.org
Back in 2005, Hamdi Ulukaya stumbled upon a classified ad for a yogurt plant recently closed down by Kraft. After initially ignoring the ad, Ulukaya had a gut feeling that he should at least visit the plant.
It’s a good thing he listened to his gut. Otherwise the story of his company, Chobani Inc., may be very different today. After seeing the plant Kraft had for sale, Ulukaya bought it on the spot and went to work perfecting the recipe for Chobani Greek yogurt based on his belief that everyone, regardless of income or location, deserved access to delicious, high-quality yogurt.
“I grew up with yogurt,” says Ulukaya, who is founder and CEO of the New Berlin, N.Y.-based company. “Being from Turkey, a big part of our diet was yogurt.”
It wasn’t just a gut feeling that made Ulukaya visit the plant, but it was also a gut feeling that Chobani would make it in the world of yogurt in retail.
“I didn’t analyze it too much,” he says. “It was nothing but a gut feeling. Everyone I knew that had a knowledge of business were looking at the category and at who was closing a plant, which was Kraft. Everyone who looked at the idea was against it.
“I would be convinced for a day by the people I talked to and then the next day I’d change my mind. The only thing I knew was there was a big opportunity in yogurt.”
Here’s how Ulukaya built a yogurt empire that has gone head-to-head with category veterans Dannon and Yoplait.
Keep the faith
Chobani began with the hiring of five employees. However, the initial employees, including Ulukaya himself, lacked the experience in launching a yogurt company.
“I built the company based on people, not with experience from before, but willing to learn and try anything,” he says. “We had a bunch of people that had never done this before. None of us had run companies. None of us had worked in high levels of companies. None of us were from Fortune 500s.
“Whatever you look for in people to bring them into a company — none of us had it. Most of the people came in from an entry-level position and now they’re leading departments. Chobani not only became a business that grew, but Chobani was like a school to us, including myself.”
With that mentality Chobani’s first yogurt hit shelves 18 months after Ulukaya bought the Kraft plant, and has since grown to become America’s No. 1 yogurt.
“It was not easy, but what we found out was what is seen and what is reality are two different things,” Ulukaya says. “The category was owned by two major companies. Dannon and Yopliat owned about 70 percent of the market, and they had been there for years. As a startup, you go to the specialty stores first. That’s how you start and you grow and once you reach a certain level then you go to the big retailers.”
Ulukaya didn’t want to do that. He wanted to go to the big retailers first and be in the regular dairy isle.
“That was a crazy idea and nobody thought that would go, but at least we tried,” he says.
“When we tried, we convinced one retailer in New York, ShopRite. The result from that was we were able to expand to a couple of other retailers. After the second or third customer that we had success with for our yogurt I knew it wasn’t going to be about selling — it was about making enough. So from that moment on I lived in the plant.”
Chobani has grown from five employees to almost 2,000 today. The company started out with one truckload of milk a day and now uses more than 4 million pounds daily. Its products are now available nationwide as well as in Australia, the UK and Canada.
Build a culture that breeds passion
Chobani’s success has been driven by Ulukaya’s passion, which earned him the title of EY Entrepreneur Of The Year 2012 U.S., and subsequently, the 2013 World Entrepreneur Of The Year. That success has also been a result of Chobani’s culture of delivering the highest quality.
“We have a reason for doing what we are doing,” Ulukaya says. “We want to make an awesome product for everybody. We want to make it nutritious, delicious and accessible. While we are making it, we want to build things around it. We want to be a part of the community. We want to be places where we can make a difference. That gives people reasons to get together and do something awesome.”
As Chobani has expanded and its core team has grown-up, it’s been important to transfer that culture and belief to everyone else.
“That passion was so strong, and I think we are so connected to our business. I am personally so involved in the business, especially in the plants, that having those one-on-one conversations and being an example, not just preaching and putting things on the wall, but by living it and putting in hard work, affects us more,” he says. “We built Chobani on those qualities.”
Chobani has gone from nothing to $1 billion in five years. That kind of growth can be stressful, but Ulukaya enjoys what he does and that’s what pushes him forward.
“It has its highs and lows, because let’s face it, it’s not easy,” he says. “They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life. I personally don’t separate my personal life from my business, because I’m doing something that I love.”
Ulukaya calls that passion “The Chobani Way.” He doesn’t expect any of his employees to have to pretend they enjoy what they’re doing or act differently than who they are.
“I have never become different depending on whether I was involved in business or in my personal life,” he says. “You don’t have to pretend to smile. You come as you are and you just try to learn it. That became ‘The Chobani Way.’”
How to reach: Chobani Inc., (877) 847-6181 or www.chobani.com