Alan Jaffa has always stayed true to his company’s philosophy that customer service equals resolution. In the 16 years that he has been with Safeguard Properties and the more than 18 months he has been CEO, a continued focus on customer service has driven the company to success.
Safeguard Properties is the largest privately held mortgage field services company in the country. It inspects and maintains defaulted and foreclosed properties for a wide range of clients in the mortgage industry.
“We are the property preservation company that will maintain grass, board windows and maintain the property once the banks have taken possession and are actively trying to sell the property,” Jaffa says. “We do this nationwide. There isn’t a ZIP code we haven’t been to in the United States.”
Safeguard’s national reach and it’s commitment to quality service have allowed the company to experience growth since the company’s founding 21 years ago.
“We have been able to grow, because we market our services just by doing what we do day-in and day-out for our clients,” Jaffa says. “Our growth has always been year-over-year for 21 years and counting by continuing to pick up market share and continuing to build relationships with existing clients.”
Big contributors to Safeguard’s growth are those business relationships and the company’s ability to listen to its customers.
“Over the years, we have grown and grown by listening to our clients, hearing their needs, understanding their pain points and building on that with additional services,” Jaffa says. “Within the last year, we started providing utility services where we are handling a service that our clients always used to handle. We’ve been able to come up with processes and automate it and take that burden from our clients, which has helped us increase our visibility.”
Safeguard and Jaffa have no plans to alter the business strategy anytime soon.
“My main goal is to continue to stay true to who we are and what we’re doing out there with our clients and not lose what we built this company on,” Jaffa says. “I’m not saying it gets more difficult as we get bigger to do that, but it does get more difficult to stay focused on that with so many things going on.”
HOW TO REACH: Safeguard Properties, (800) 852-8306 or www.safeguardproperties.com
When small companies begin to see fast-paced growth, it adds additional challenges to doing business. That is exactly the position Hank Newman finds himself in at Recon Logistics, a transportation management solutions provider for small and medium-sized manufacturers.
Newman is president of Recon, and in just six years of business, his company has grown to heights that he never anticipated to be possible. His challenge now is figuring out how he wants to continue growing the company.
“The biggest challenge is whether to just put the gas pedal down or to sit back and grow the same way that we have been growing now, which is more organic,” Newman says. “We have a huge opportunity now if we wanted to really ramp things up and bring on some salespeople and invest more heavily in technology to really push the sales and marketing growth. It’s right there in front of us. We’re very regional, even though we have customers all over the country. We could take that very regional approach and go all over the country in midmarket cities.”
Newman got his company to this position through an often under-appreciated approach of open and honest business with his company’s customers.
“We tend to price in a way that’s from the bottom up, which lends an awful lot of credibility to our customers that we’re going to make a fair dollar for what we do,” Newman says. “I’ve worked for a lot of big (third-party logistics providers) and they tend to price in a way to maximize profit. If they can save a customer 20 or 30 percent on their transportation costs, they might tell them they can save 5 percent and the customer is like, ‘Great, I can save 5 percent.’ We really turn it upside down.”
Newman’s approach has saved customers an average of 30 percent on transportation costs, has allowed Recon to never lose a customer to date and has led the company to its 24th consecutive quarter of growth.
“To me, it’s being open and objective on everything,” Newman says. “The industry that we’re in is rampant with people stretching the truth; for example, people saying the truck is going to be here in an hour, when it’s not. We find being truthful and honest with everything right away, whether it’s cost or service failure or a better way of doing things. Even if it rubs the customer the wrong way … they appreciate that viewpoint, which causes us to get recommended to other customers.”
HOW TO REACH: Recon Logistics, (440) 708-2306 or www.reconlogistics.com
When Steve Tsengas comes into work every morning, he is greeted at the door by his administrative assistant’s French poodle and his receptionist’s mixed breed dog. At OurPets Co., a producer of food, treats, supplements, grooming products, toys and other supplies for the pet industry, almost every employee is or has been a pet owner.
That love for pets is what drives the company’s innovation and industry-leading product development forward. Tsengas, chairman and CEO of OurPets Co., started the company in 1995 with just one product: a big dog feeder to help with the health and posture of bigger dogs. The product was an immediate success, and now the company has hundreds of pet products.
“Over the last 16 years, we’ve grown to approximately $20 million a year, and we have about 600 individual products,” Tsengas says. “We market our products worldwide in Canada, Hong Kong, China, Australia, Japan and Europe and are beginning to move quite aggressively in South and Central America.”
The company has grown at a double-digit pace, and Tsengas credits four areas for the business’ success.
“We’re committed to innovation and there are two types of innovation,” he says. “Evolutionary, which is brand expansion, and revolutionary, where we come up with products that really set the trend in the pet industry. We also identify new segments like obesity, senior pets, senior owners, health and wellness trends, and that is part of the innovation.”
It’s more than just the portfolio of intellectual property that has allowed for the company’s growth.
“No. 2 is a world-class supply chain operation, and we’ve been beefing it up significantly over the past few years,” Tsengas says. “As part of the world-class supply chain operations, we developed a fulfillment center that is growing even faster than the overall rate of the company. We provide fulfillment centers for Walmart, Amazon, QVC and Sam’s Club.”
The third and fourth areas helping the company are innovative, aggressive marketing and strategic acquisitions. The company is always looking for the next new thing.
“We have these categories of brands, so part of the effort is to continuously push for more products to support those brands. If you look at it like a matrix … and flowing downward are the needs and then going horizontal are the capabilities and where these intersect are how we keep coming up with products.”
HOW TO REACH: OurPets Co., (440) 354-6500 or www.ourpets.com
If you told Mike Hajec that his company would be one of the country’s top distributors of pool covers three years ago, he wouldn’t believe you. His disbelief wouldn’t be from lack of confidence in his company, but because pool covers are so far removed from the core products of the company.
Hajec is the director of operations and development at MFS Supply, a security hardware distribution center that sells locks, pad locks and lockboxes to contractors, real estate agents and property managers. Today, the company offers more than 500 different products related to the security hardware industry, because customers keep asking for more.
“That’s how we started, and within the last five years, we’ve grown to about 500 different products that all correlate within that industry and those security products,” Hajec says. “[Realtors] start because they need a lockbox and then there’s 10, 12, 15, 25 items that they may need eventually from signs to measuring devices. It’s the same thing for property managers. They come to us for locks and the next thing you know we’re selling them appliances.”
It has been the company’s ability to be agile and adaptable to the changes in its market and in customer needs that has driven its recent growth.
“We’ve done everything we can and still do to make it a one-stop shop,” Hajec says. “Anything that the customer asks us for, we pretty much look into carrying. That’s been a big part of our growth is starting from literally five to 10 products five years ago to 500 products today.”
MFS Supply operates in a pretty niche market, but it has been the company’s ability to expand that niche and appeal to customers needs that has allowed the business to blossom.
“A lot has to do with the customer,” Hajec says. “We value our customers like everyone does. However, we take it a step further and we become almost like friends to our customers. That has helped our customers come to us and tell us, ‘Hey, we’re having trouble finding this type of sump pump. Can you find it for us? Or we need this type of dehumidifier or these style tarps.’ That has really helped us grow our product line.”
Hajec credits the company’s success to its ability to focus on the customer.
“We can adapt to any customer preference,” he says. “Where the customers going we’re going with them and we’re leading the way in making sure we have what they need to do that.”
HOW TO REACH: MFS Supply, (440) 248-5300 or www.mfssupply.com
In the past couple of years, Tony Mazzella has seen his company grow in size, geography and offerings. It is the continuous improvement of these areas of the business that keep his company at the top of its industry.
Mazzella is president and CEO of Mazzella Holding Co., which operates as Mazzella Lifting Technologies, a manufacturer, fabricator and distributor of overhead lifting products. The business has undergone a big acquisition and put a stronger focus on its market segments to keep the company growing.
“The acquisition that we just made was a very good fit, because we didn’t have any locations where they did, but we were starting to be on the fringes,” Mazzella says. “So we’ll be able to take the same philosophy and just expand it into the geography that they have. We have places now that we didn’t have before in Alabama, Tennessee, Virginia and Maryland. The new business also gives us some segments that we didn’t have before, particularly some mining and navy shipyard-type work.”
The company has been transforming itself over the years, developing new offerings and market segments.
“We were primarily a company that through our 57-year history, until the last 10 years, manufactured mostly the items that were on the hook (of the crane), and in the last 10 years, we’ve become a pretty prominent crane manufacturer in this part of the country,” Mazzella says.
With added market segments and more geography to cover, Mazzella decided to put an increased focus on the company’s market segments.
“We’ve started focusing our business on market segments like steel, construction and automotive, and we put market managers in charge and that’s been a big help when it comes to focusing and getting to know our customer better,” Mazzella says.
The increased focus has led the company to more growth and better results in each of its market segments.
“The biggest single thing has been the ability to focus on very specific markets and what their needs are,” Mazzella says. “A number of years back we had done that with the steel segment, and it was very, very successful, but we had never done it to that degree with any of our other segments. We’re just really taking the concept that worked with steel and transforming it into the other segments to try and become dominant in those segments too.”
HOW TO REACH: Mazzella Holding Co., (440) 239-7000 or www.mazzellalifting.com
Ralf Drews doesn’t fit the profile of your typical company president or CEO. He doesn’t have a background in marketing or finance or sales or operations. He is an engineer and has spent many years working hands on developing new products. A day on the job for Drews doesn’t involve looking over spreadsheets or contemplating sales figures; it involves being out in the field at an oil pipeline or under the street in a sewage canal because that is where his customers work.
While Drews may not be concerned with sales figures and operating numbers, he does know product development and innovation, which is what drives his company forward. Drews is president and CEO of Draeger Safety Inc., a $1 billion manufacturer of gas detection equipment, air quality monitors, masks, and other safety and emergency products, and employs 400 people here in the U.S. and 3,800 worldwide.
Since joining Draeger more than 20 years ago, Drews’ product development leadership and innovative outlook has been responsible for 90 percent of the company’s product portfolio today.
“What innovation needs is people who can challenge each other,” Drews says. “Conflict must be wanted. New things must be wanted. Change must be seen as something positive, and if you generally have a good change DNA or change culture within your company, innovation is not an enemy but will support that.”
Drews’ drive and attention to innovation has helped create an environment that makes Draeger Safety’s products category leaders.
“The question always is when you come up with innovations, will there be customers who appreciate what you invented and come up with?” Drews says.
Here’s how Drews utilizes best practices for high-level innovation to ensure customers want and need Draeger’s products.
Understand your arena
In the 20 years that Drews has been developing products at Draeger, the one thing he has come to find is that innovation doesn’t just happen. You have to understand who you want to innovate for.
“What I have learned in my time as R&D manager is … many people thought that ideas are just coming out of the blue,” Drews says. “You just need to watch and observe and all of a sudden you get a sign from the universe and a new idea or new invention is born. This may happen in smaller businesses … but I believe in more mature organizations you need more structure around innovation and how to create innovation, because I think innovation does not happen by accident. Process, people and culture are the three elements that have to be designed in a way that they come together and then innovation can happen.”
If innovation is a key component of your business and you want to build your company around it, you need to have a focus for it.
“What you need to understand first of all is your market,” he says. “The blue ocean approach is one approach (that) clearly supports the logic to understand which arena you want to play. What’s your customer and what’s not your customer? You really need to draw the line. The first and most important step, and for most companies the most difficult step, is clearly focus where you want to go.
“That’s probably one of the most difficult things to do for people, because if you do that you also automatically exclude other applications. But what that gives you is a very clear focus and by having that focus you have a very good chance and a high likelihood that you can come up with something great. Whenever you want to do everything with one product the likelihood is very, very high that you come up with an average product or even with a loser product because that’s simply impossible.”
As soon as you determine who you want to serve, you can start to truly understand the customer’s needs — even the ones they don’t know about.
“A truly powerful innovation approach is to find out what are the articulated, but even more importantly, the unarticulated needs from a customer standpoint,” he says. “There are articulated needs — every customer knows this is a problem, it has been a problem that’s not been solved. There are also unarticulated needs. That’s where the problems would potentially lead to the biggest wow factor or to the biggest innovation.”
The key question is how much more value does a solved problem provide for your customer if it were solved.
“Does it enhance productivity?” Drews says. “Does it reduce costs and how much cost would there be? How does it impact the cost of ownership? What is the concrete value? We always try to attach a dollar tag to it. The second aspect is how expensive would it be for you to solve this problem? What we look at is actually the value from the customer perspective and how much R&D money we have to apply to solve the problem. Those are the two key questions.”
In Draeger’s case, the product is the spearhead, so it’s important for the company to understand how to innovate products.
“The market has to be very structured, very clear, and then basically, we send out people who observe and interview customers to really find out what are the needs and what are the demands,” he says. “Hopefully, they are able to find some unarticulated demands and needs, which could potentially lead to innovation.”
Create a voice of the customer
To find those unarticulated needs of the customer you have to get out in the field and see firsthand how customers work and how they use your products. That is exactly how Drews developed his latest innovation, the X-zone 5000 gas detector.
“I went out into the field and watched some practices in oil and gas and also in sewage,” Drews says. “Instead of talking to people, drinking a cup of coffee and eating some cookies, you really get into the dirt. You really want to understand how the people are dealing with your equipment. I went into the pipelines and into parts of the Hamburg sewage canals and I talked to the workers; the people who spend 80 percent, 90 percent of their work life underneath the street. They don’t really know what they don’t know, but by observing them and by looking at them and asking very specific questions you will find out whether there is something to improve with your product.”
Drews interviewed the person responsible for monitoring a manhole while people were working in the sewage canal pipes. This guy had to constantly draw samples of air from the canal because it can be toxic or have combustible gases.
“This guy used a small gas detector, and I was asking him what could be improved with this product,” Drews says. “He said, ‘Oh, this product is perfectly fine; there’s nothing that you could improve.’ I asked, ‘Why do you have this cable drum?’ He said, ‘The reason is very simple. It has happened in the past that the gas detector gets kicked into the canal because people walking by didn’t see it. What we do now is we connect the gas detector to this small cable drum so people can see it.’ I also asked him what he does when it’s raining because he is just standing there next to the manhole. He said, ‘Yeah, that’s a problem. Whenever it’s raining, I cannot get into my truck because the visual alarm is not bright enough and the audible alarm is not loud enough.’”
By asking a few key questions and watching what this guy had to do, Drews realized there were several ways to greatly improve the gas detector by making alarms brighter and louder and the unit more visible.
“Some of those questions we asked did lead to the X-zone, so we were basically discovering a problem, which he could not really articulate, but he was aware of,” he says.
In addition to research in the field, it is beneficial to create a voice-of-the-customer group to look at customer touch points, needs, and ways you can innovate and create more value.
“I recommend that companies create and build their own dedicated voice-of-the-customer groups within their companies because this is something completely different to a regular product management job,” Drews says. “If you want to be a good voice-of-the-customer marketing person, you really need to have some psychological skills, you need the ability to look behind the scenes, you really need to have the passion for interviewing people, and you have to have a passion for going into the real life environment.”
A critical part of the VOC process is assessing your competitors.
“What’s a target competitor in that specific region, vertical and application?” he says. “What’s the strongest competitor? Where does the competitor’s product really excel? And how do you want to compete against that? You have to make a conscious decision to focus on the strongest competitor in your target arena.”
Once you have found the needs of your customer and areas that your competitors overlooked, you have to find out if customers like the product concept.
“What you do at the end of this voice-of-the-customer study is you pre-sell your product,” he says. “At this point in time you have not even created a product development team, you don’t even know whether you want to develop that product. What you can do with all the things you found out in the voice-of-the-customer process is prepare a sales pitch like you have that product already. You present the features and the benefits your product has in a very nice way. Then you look into the eyes of the customer and if you don’t see the sparkles in their eyes and if they don’t ask, ‘When can I have it?’ You might not have a winner.”
Have an innovative environment
When Drews presented his concept for the X-zone, customers lit up and saw the value in owning the product. The success of this whole process is due in large part to Draeger Safety’s innovative environment.
“I don’t believe you just put people in a room and make sure they have a lot of fun and then finally they come up with an idea,” he says. “They might come up with an idea, but not necessarily addressing the problem you want to solve.”
To produce innovation in a very structured way people have to be focused and work together as a team.
“They have to be smart,” he says. “They have to know their stuff and they should be coming from different cross-functional areas. They should be very open-minded in their discussions. You have to have quick thinkers and problem solvers.”
These sessions should not be one day or two days long. They should be short one- to three-hour sessions.
“Don’t give them too much time,” he says. “They have to be efficient because ideas come up fast or they don’t come up. You’d rather repeat that. After you have pulled the people together and you have not come to a solution, do it again the next day or later that same day, but don’t give people too much time to come up with high-level innovation.”
High-level innovation starts with the culture. An innovative culture needs a lot of contradiction and people who can challenge each other but who can also admit when others have a better idea.
“What it needs is a culture of conflict, which means I must try to disagree with someone as long as it is for the right reason, which is to fault this product or problem,” Drews says. “One of the sayings I’ve heard a long time ago is, ‘Conflict is a lever for innovation.’ I really truly believe in that because if you have a challenge coming from the production side and that contradicts with purchasing and that contradicts with what marketing wants or that contradicts with what R&D is able to do and there’s people in the room who can discuss that and can accept each other and are open for dialogue and they really truly respect the other people’s opinions, perspectives and needs, then as soon as you put all of that together with people who are problem solvers, who are open-minded, who are quick thinkers and are smart and really know their stuff … you really get things going within an hour or a few hours.”
To keep an innovative environment and process flowing smoothly and successfully, it has to be supported by the entire organization.
“Whenever you have the people in one room I just described, that is really, really powerful. That’s something I would describe as culture and of course that goes all the way up, not just on an engineering level, marketing or product management level, but this has to be supported by the top management because culture is really driven from the top down.”
Once you have all these innovation processes working together all that is left is getting customers to see the value in your product.
“All the things which we have come up with from the VOC approach before we started the product development are basically reflected in what the customer feedback is and that’s pretty cool,” Drews says. “That tells you that you have a very robust innovation process and no longer is the result of your R&D process the result of hope and no longer do you rely on very talented or genius product managers, but you can make it a very structured approach to innovation and this process is sustainable and reproducible. It really works if you do it well.”
HOW TO REACH: Draeger Safety Inc., (800) 858-1737 or www.draeger.com/US/en_US/
- Understand who and where you want to focus your innovation strategy towards
- Get into the field and observe and ask questions of your target customer
- Create a structured, creative and contradictive environment
The Drews File
President and CEO
Draeger Safety Inc.
Born: Hamburg, Germany
Education: Engineering degree from the University of Luebeck
What was your first job and what did you learn from that experience?
My very first job was when I joined Draeger in 1991. I became a mechanical engineer, and what that job taught me was that I gravitated pretty fast to a leadership role. I was promoted just eight months after I joined Draeger. I also learned that my passion was not to design all the details but actually create ideas.
Who is somebody that you admire in business?
One guy I think very highly of is Steve Jobs. What he brings to the table is an outstanding empathy for customers. His understanding of customers is very good and that together with a very good understanding of complexity management and an ability to bring great talent to his company makes him strong.
What is your favorite business book?
‘Good to Great,’ that’s the only management book that has been a role model for me or has given me great guidance.
What Draeger Safety innovation are you most proud of?
The X-zone, definitely. A lot of that product goes back to my personal ideas and one of the most important patents is owned by me. Also, it’s a product that was relatively strictly developed in accordance with our VOC approach. This is not something that was an accident. It is something which was thought through very thoroughly and validated at each stage.
Retained surgical sponges in patients are one of the most frequent and most costly surgical errors among hospitals, as well as the most commonly reported.
Each year hospital infections add an estimated $30.5 billion to the nation’s hospital costs, according to the Committee to Reduce Infection Deaths. More than 100,000 deaths occur each year from preventable hospital infections, according to The Institute of Medicine. That number is more than the yearly deaths from AIDS, breast cancer and auto accidents combined.
David Palmer, president and CEO of Pittsburgh-based ClearCount Medical Solutions Inc., a medical device company focused on patient safety solutions, has developed technology called the SmartSponge System to track surgical sponges, making hospital surgeries more efficient and reducing extra costs.
Smart Business spoke to Palmer about how this technology can benefit hospitals nationwide.
Where did this idea come from?
The original idea wasn’t from us, it was actually an operating room nurse who back in the mid-’90s had seen this reconciliation angst on a recurring basis and thought there had to be a better way to do this. Along with her husband, they came up with the idea that radio frequency identification technologies would be a great tool to help solve the problem. In 2004, ClearCount came about.
What are the inefficiencies your product is addressing?
There is a study published that one in 1,500 intra-abdominal surgeries results in a retained object. That gives you the magnitude of the problem that we’re addressing. Currently today, there is a manual reconciliation process that is performed in every surgical procedure. The purpose of that reconciliation is to make sure that they account for the number of things at the beginning of the surgical case, throughout the case, but most importantly, at the end of the case, to prevent that one in 1,500 intra-abdominal surgery event from occurring.
What happens is, whenever there is a miscount that occurs, there is quite a bit of time spent in the operating room trying to correct that situation. They’re trying to find that missing sponge by maybe digging through the garbage or recounting to make sure they didn’t make an error. There are a lot of things that are happening that impact the efficiencies when the count is off. That’s what we really prevent. We automate what is now an error-prone manual process in the operating room. We address both the patient-safety side of it, and through our automation and accuracy, we add efficiency to the operating room.
How does it work?
There is a radio frequency identification chip which is comparable to a tic-tac and that is sewn into the surgical sponges when they are manufactured. Each sponge has a tag which contains a unique identifier on it that allows that sponge to be counted. Before a case begins, the sponges are quickly scanned into the counting process and all those tags are read and they establish an in-count and then during and after the case, the sponges are discarded and that’s where they are counted out and there’s a display screen that shows the ins and outs and how many are missing. It tells you not only how many sponges, but the type of sponge. Then there is a wand attached to the device which allows the nurse or the physician to scan the patient or use it in the room to find a sponge as well.
Are hospitals looking to use this technology?
It’s a very immature market right now. I think the level of awareness clearly increased over the past 12 to 18 months. That’s the awareness that technologies are available to help the problem. The problem has been well known and documented. The solutions have been less well known, and that’s the reason for the relatively underpenetrated market. What we’re noticing now is that many hospitals are actually proactively looking for technologies to help with this problem.
What are the advantages for hospitals to adopt this technology?
First off, we offer to our customers an additional financial backing and we have a special policy that stands behind our products in the event that a hospital would incur an incident while using our technology.
There is also the advantage of the efficiency in the operating room. Because our product is so easy to use and not only includes the ability for the nurses to get an accurate count, but in the event that there is a missing sponge, we have the ability to find it as well. We are the only technology that can both count sponges and detect them.
HOW TO REACH: ClearCount Medical Solutions Inc., (412) 931-7233 or www.clearcount.com
ClearCount Medical Solutions Quick Facts:
Founders: David Palmer and Steven Fleck.
Goal: Uses RFID technology to prevent medical errors and make hospitals more efficient.
Sean McDonald has been at the helm of one of the fastest growing companies in Pittsburgh over the past few years and that growth continues to be his focus. McDonald, president and CEO of Precision Therapeutics Inc., a 280 employee life science company dedicated to personal cancer research and care, has had the task of keeping up with the company’s rapid expansion.
“We’re very focused on understanding where the dynamics of this market are going, what technologies are going to come to the forefront in personalizing medicine and also what regulatory and reimbursement infrastructure is going to be in this industry in the future,” he says.
The organization’s growth has carried changes along with it as the company has brought in some new technologies and new products, as well as undergone modification in the direction and strategy.
Smart Business spoke to McDonald about how he manages the challenges of growth and change.
What are some ways you are overcoming the company’s challenges?
The most important thing is to communicate as much as possible to the team about what the strategic objectives are; the thinking behind why they are the strategic directives and just make sure that everybody understands and really buys in to the strategy. That obviously takes more than one communication to do effectively.
You have to be able to clearly articulate the direction that you’re going in and I think you can always underestimate how hard it is to communicate changes and the thinking behind it. You have to be willing to take the time to do those communications and have the patience to do it.
What has changed in your strategic direction?
We’ve brought in a number of products this year so I think that those involve new technologies that have come into the business. It’s increased the opportunities for the business, but it’s also a substantial change for people. People have to get used to moving from a single-product company to a multiple-product company and all that that entails in terms of the priorities of their activities and things like that, but most importantly to understand what people are trying to accomplish.
How have you gotten buy-in for these new changes?
The trap people fall into is they think they have to communicate once or twice. You have to be very consistent and spend the time and work with them and they will get on board assuming everybody wants the same thing. Everybody wants the organization to go in the right direction. They’re differently affected by different things so you have to be sensitive to that, but in reality you just have to take the time to communicate. Some people will require more explanation and more commitment of time than others.
How do you evaluate your employees as the company continues to grow?
I think we have a very good group of committed employees and I think I have a lot of faith that they’ll be able to hang up with the modifications that we’re doing as an organization. It’s something that you have to watch very much and you have to have a relationship with people such that you can be open with them and also coach them through the changes that they have to go through in a very, very dynamic environment.
Certain people are great in their jobs for a certain stage in the organization and it’s a question of whether they’ll be able to acquire the skills to grow in a position sufficiently quickly. With growth comes real questions about whether the right people are able to take the step up and able to manage at a higher level.
What helps a company reach a higher level?
Hopefully, you have the right leaders who can understand the overall strategic direction of the company and it’s really a leader’s job to explain why certain directions or certain decisions that they are making will serve the overall business. If you have managers who understand where the business is going and why decisions are made, they will make good decisions themselves in support of that mission and that’s what’s so critical.
What makes your company adaptable to change?
We try to stay very much on top of what those changes are. It’s too easy to seduce yourself into thinking that you’re unaffected by things in your market.
We’re very tuned in. We talk to a lot of people in the market. We talk to a lot of people who are involved in this market in other companies. We watch what the various regulatory agencies are doing very closely. And we network very effectively in our industry and learn from the experiences others are going through as well.
Talk to other people in the industry, be open with them and have the kind of personality that people will be open to talk to you. That will set you up very well to get the information that you need to understand where the various market directions are going.
HOW TO REACH: Precision Therapeutics Inc., (800) 547-6165 or www.precisiontherapeutics.com
Gregory Ebel has operated in a business environment of uncertainty and constant change for too long. He has worked hard to be at the forefront of his industry, helping people understand the important factors and circumstances in his business.
Ebel, president and CEO of Spectra Energy Corp., a Fortune 500 natural gas infrastructure company, operates in a regulated industry where things might not always go his way. Ebel makes numerous trips to Washington D.C. to be face to face with the legislators who set regulations and helps them understand how Spectra and other energy companies do business to allow for regulations that are fair and sensible for all involved.
“In a regulated business, obviously, what’s going on in Washington D.C. and in lots of states from regulatory overreach is our biggest challenge as a business and the uncertainty that that creates for our ability to invest,” Ebel says. “The pipeline business is a business that invests for 15, 20, 25, 30 years at a time. When you’ve got regulatory uncertainty and you’re trying to determine how good of an investment it’s going to be over time, that makes it very difficult.”
Spectra Energy employs 5,500 people, had operating revenue of $4.94 billion in 2010 and has $26.7 billion in assets, so it is critical that Ebel and the other Spectra executives fight the regulations that unnecessarily harm the business.
Here’s how Ebel communicates and educates his employees, legislators and others in the industry to help improve the uncertain environment.
Engage people in your business
Spectra is currently building a pipeline into New Jersey and New York that is critical to reduce the cost of energy for the people in that region and bring in new gas sources.
“It is only 15 miles long, and it will, from the time we sign the contract with the customers to the time we put it into service, take four years and cost $1 billion,” Ebel says. “If it was allowed to start and we’re two years into this, it could produce more than 5,000 jobs today without government support. Yet it is very difficult. In a country that needs a lot of jobs, in a country that needs cheap energy, in a country that is looking for clean energy, it’s amazing to me and I think a lot of people in different industries, how long it takes to get approvals.”
While there is no desire to get away from following good procedures and good regulation, the issue is the cost of regulation is far outstripping the benefit.
“That’s the big concern and the fight we have to have with the regulators and try to do it in as positive a manner as possible,” he says. “The natural gas industry in North America is undergoing extraordinary growth thanks to technological developments that have given the country a 100-year supply of natural gas at a time that it needs domestic energy, at a time that it needs domestic jobs, at a time that it needs cleaner energy, and that is a huge, huge game changer for the industry. Being able to manage within that is what it’s all about right now.”
In order to overcome the challenges of regulations facing certain industries, companies and CEOs need to be willing to speak to people about their businesses and talk about the issues they are facing and ways to make things better.
“I would say we do three things: engage, engage, engage,” Ebel says. “There are three elements to that. We engage with our employees. We’ve spent a lot more time in Washington D.C. making sure that legislators understand our business and the third area of engagement is our industry groups. We belong to things like the Interstate Natural Gas Association or the American Gas Association. We make sure that either I directly or other executives in the company are trying to muster the forces within our industry groups to make sure we are delivering a consistent message from the industry to government to prevent this regulatory overreach.”
It is that constant education of what’s going on inside Spectra, around the country, and in the energy industry that helps how government handles regulation and how an entire industry can work more efficiently.
“That’s been really critical,” Ebel says. “Generally, CEOs do not like spending time in Washington or state capitals, but it’s critical now. You have to engage with politicians who frankly, don’t seem to have a lot of foresight when it comes to creating regulation or understanding what’s truly going on in the economy.”
Spectra has been spending a lot of time educating not only politicians but its own employees, as well.
“We have what we call an ambassador program so that we can ensure that our employees have the best facts and the best information about the natural gas business and the really exciting changes and the jobs that we produce in the country, and we run a lot of employees through that,” he says. “So whether they’re at a cocktail party or rotary club or women’s auxiliary, they can speak about the company and the industry.”
No matter how you educate your employees or politicians about your industry, one thing has to remain the same: your message.
“You have to be consistent with your message to employees and be consistent with your message to government,” he says. “You need to constantly repeat that message and you have to engage. CEOs don’t like spending a lot of time dealing with government because it doesn’t generate revenue, but it really can generate speed to market. Speed to market for us means building projects faster, on time and on budget to serve our customers and that can be grossly restricted by regulations. So there is value in it, although it’s hard to see. More and more CEOs and C-suite executives need to spend time with our politicians to tell their story. We all like to stay below the radar and deal with our businesses, but when government is so much in your face and has so much regulation, it becomes a real necessity to be successful.”
You don’t have to fight regulations on your own. It is a huge advantage to join industry associations that have similar goals.
“Other than a few companies like GE, Ford, Dow, Microsoft or Berkshire Hathaway, if those companies say something, it might get picked up, but most companies, of which there are thousands and thousands, need the bulk of similar type companies coming together,” Ebel says. “For us, the biggest one we’re involved with is the Interstate Natural Gas Association, which is a group of companies with similar interests in a similar industry that come together. Because of that heft and the number of employees you represent, the amount of gas pipelines you represent, and the energy sources that you represent, you can have a bigger impact by speaking with one voice and one consistent message.”
Ebel became chairman of the INGAA this past October. It’s these types of connections that can make a big difference when you need it.
“We need more and more CEOs to be involved in those industry associations if they’re going to be effective in Washington. If you show your 80 percent of the industry a position on a policy or regulation, that has real resonance whether it’s with the White House or Congress; that’s why those associations are important. That’s why we put time into them and money and I think more CEO’s need to use their industry groups to mobilize an entire industry to get positive change.”
When it comes to getting people and, most importantly, employees to understand anything that is going on in your business, it is critical that you communicate and communicate often.
“The biggest thing is our ambassador program, which is educating our employees on what our business does,” Ebel says. “It’s amazing when you have thousands of employees, how many, through no fault of their own, don’t know exactly what you do. Everybody’s got a job inside the company and it’s good that they stay focused on that, but giving them a whole picture of what you do, they can become very valuable and powerful advocates for you.”
To get your employees more involved in your company you can’t make things complicated or they will lose interest. You have to make things simple and straightforward.
“We have a phrase here called the KISS method — keep it simple, stupid,” Ebel says. “We say, ‘Keep it simple, Spectra.’ We try to communicate very short and specific goals and messages for the employees. Most employees would know that we are trying to lead in three areas: safety and reliability, customer responsiveness, and profitability. By the end of 2012, we want to be leading our industry. That has been incredible in terms of focusing employees both in the field and in office positions. I think most CEOs know this, but we sometimes forget. Keep things very simple and have three to five messages and goals that the employees across the entire company can pursue and connect with. That’s a pretty valuable tool.”
Getting your message out to your employees is critical, but that message has to also go out to legislators who regulate your industry in order to create change.
“Most CEOs, no matter what industry you’re in, there is some form of federal government regulation,” Ebel says. “If you’re a public company, it’s the SEC. If you’re a company like Spectra, it’s the Federal Energy Regulatory Commission, which determines how quick your projects get approved, which determines how quick you build them, which determines how quick you take capital and turn it into revenue and serve customers. That’s a huge issue for us.
“Safety is our key license to operate. Particularly in this environment post-BP and oil pipeline spills, all of those often lead to knee-jerk reactions by government. So make sure that you are telling government your story and your safety standard is critical in terms of avoiding unnecessary regulation and there again meeting those goals of safety reliability, customer responsiveness, and profitability.”
Spectra doesn’t just express opinions every so often to legislators, the company has people full-time in Washington D.C. to really make its presence felt.
“We have an office in Washington,” Ebel says. “We have various consultants in Washington and many of us spend time in Washington, not just with politicians, but regulatory bodies too making sure they’re informed about what we do and being an adviser of choice to the government so when they’re thinking about issues they pick up the phone and ask Spectra, ‘What do you think about this?’ And they know they’re going to get relatively unbiased opinions, that they’re going to get constructive views and they’re going to get information that will be helpful for them to make policies. The worst thing is when government makes policies without having all the facts.”
It’s not enough to make a phone call to a politician or write a letter. You have to meet with legislators face to face and treat them like they are another customer.
“You have to go see them,” Ebel says. “You have to spend time with them. You’ve got to try and understand where they are coming from. What political pressures are they under? What public pressures are they under? Regulators are just another form of customer. What are their needs? What are they trying to achieve? How do you help them achieve their goal while at the same time making sure you achieve your goal? Treat the regulators like you treat your customers and try to get win-win solutions. That doesn’t mean you don’t have disagreements, because you have disagreements with customers every once in a while, but making sure you understand what their view point is gets you a lot further down the trail.”
HOW TO REACH: Spectra Energy Corp., (713) 627-5400 or www.spectraenergy.com
- Engage people in your business
- Join associations and groups that have similar interests
- Communicate your company’s message in order to create change
The Ebel File
President and CEO
Spectra Energy Corp.
Born: Ottawa, Canada
Education: He received a BA from York University in Toronto, Canada, and is a graduate of the Advanced Management Program at the Harvard Business School.
What was your very first job, and what did that experience teach you?
My first job as a kid was a paper route. It taught me how to market and how to expand and how to make sure you bring in more revenue. That marketing to customers was a huge part of it.
Who is somebody you admire in business?
I’m fortunate to have an entire board of former CEOs. They have consistently over years provided great advice and between them, they have launched at least 20 CEOs.
What is your definition of success?
From a professional perspective, it’s seeing the families that work for Spectra continue to grow as individuals and be able to achieve their dreams for their families. If we can do that at Spectra safely, consistently and profitably, that’s success.
What is your favorite thing about the energy industry?
It’s constantly changing. I like that and the fact that it serves people quietly and consistently year in and year out.
What’s something that you are excited about for the future of energy?
I’m excited by the fact that North America has an opportunity now to achieve energy independence with a clean abundant fuel that just a few years ago we weren’t sure would be around as a foundational fuel.
Business for Stephen Webster was going well, but not well enough. The president and CEO of IT consulting and data center services firm, StratITsphere, needed something extra to give his company more business.
The company, which has more than 50-employees, had strictly been a consulting company since it started and was explicitly focused on the Fortune 500 market.
“Our focus was kind of providing technology, strategy, architecture design and security assistance for those clientele,” Webster says. “Although the consulting business is a good business with high margins, it comes in waves or cycles. We looked hard over a year and decided we had to do something to diversify ourselves.”
Webster and his team decided to enter into the data center services market. The big driver for diversifying the company’s offerings was to get some business that had monthly recurring value.
Smart Business spoke to Webster about how he made the leap from IT consulting to data center services to help diversify StratITsphere.
Diversify to your strengths. We did not enter into this business lightly. We did a lot of research and a lot of market research. We looked at what market segment we wanted to address and the pros and cons and the risks of entering this business very closely. It was probably an 18-month process for us to decide to do this. Make sure you do all of your homework.
Anybody who is going to diversify has to look at what you’re doing in your business today and make sure if you’re going to diversify, you’re going to diversify into a business that you have competencies in and are complementary to your core business. This data center managed services business is very complementary to what we were doing already. We had lots of experience in the business, so it was a very good fit. I’m a firm believer of you can’t be all things to all people. You need to have a business that’s got a strong focus — both a market focus and a product focus if you’re going to be successful. We’ve seen some companies out there that want to diversify or want to do something different and they enter into a business that they really don’t have a lot of experience with, it’s not complementary to their core business and it becomes an albatross quickly.
Avoid mistakes. In our technology business, cloud computing is all the rage. Everybody wants to be a cloud provider. We want to be a cloud provider, but that business is a very new business and people are just trying to understand it. The market is very immature and product sets are very immature. Too many other businesses jump in when they see the hype and they see the promise of additional revenue and they jump in without understanding what all the real market dynamics are, what the drivers are, what the real potential for opportunity is.
You look at the hype in the cloud computing market; it’s supposed to be a $150 billion business by 2015. You can easily get wooed into thinking, ‘Wow, I’ve got to get some of that right now.’ It’s a hard trap to avoid. Being an early entrant into that market space isn’t necessarily the right thing to do.
That’s the strategy we’ve taken, which is a much more conservative strategy. Let some other people rush in and let’s see how the market is shaping up and we’ll learn from their mistakes and get in afterwards. Too many folks get tempted into jumping into something that looks like it’s going to really impact their business.
Understand what you want to accomplish. Everybody has to look at their business and decide, ‘What’s the real problem we’re trying to solve? Is it part of our business strategy that we want to diversify into a different business? Is our core business just not operating properly?’ Maybe you’re better off trying to re-engineer your core business?
Make sure you’ve taken a very hard look at your core business and you know your numbers inside and out. That will help lead you to what are we trying to do. The second thing to do is go to your customers. That was part of what drove us to our expansion into this business. We talked to our customers and we asked them, ‘If we went into this line of business, is that something you’d be interested in?’ Your customers are your most powerful tool. You need to be close to your customers and you need to understand what they’re looking for and what they want.
It’s a CEO’s job to be as close to your customers as you can. Talk to your peers. Talk to your mentors. Talk to other people in the industry to get a sense for what they’re doing. Don’t try and do it in a vacuum. I think too many CEOs these days are out there and think they have to make this decision on their own or else they’re not an effective CEO. Nothing could be further from the truth.
HOW TO REACH: StratITsphere, (888) 316-4191 or www.stratitsphere.com