By Roy Lipski
No matter how large or small, no matter its business focus, sooner or later every company is going to need to raise funds. The Oxford Catalysts Group — a science and technology-based company formed by the 2008 merger of the U.K.-based catalyst development company Oxford Catalysts Ltd. and Velocys Inc., a company based in Plain City, Ohio, that specializes in microchannel reactors — is no exception.
With a successful $45.5 million fundraising campaign to support further development and commercialization of smaller-scale gas-to-liquids plants completed, the experience has taught us a lot about how to capture the interest and attention of potential investors.
But although technology is the name of our game, whatever your business focus and funding needs, there are lessons you can learn from such an experience. After all, the process of raising fund is as much a science as an art.
Here are my top tips:
Before you start: consider what you want to aim for and whom you want to attract
You need to develop a good portfolio of investors. Aim for a mix of large and small investors. You also need to think about the types of investors you are seeking. There are two main kinds.
Financial investors are the ones looking for a financial investment. Strategic investors generally have a financial reason and a business reason for wanting your company to succeed. They may be, for example, your customers or potential customers.
And before you start any fundraising program, you need to consider how much money you will aim to raise. There’s a fine line between enough and too much. In my experience the right amount of money is always a little bit more than you think you needed.
Making the pitch: know your audience
Before you make your pitch carefully consider:
■ The background of the people to whom you are talking. Do they have expertise in your sector? Or are they generalists looking to make a good investment?
■ How much time have they got.
Then design your presentation accordingly.
When making your pitch, pay attention to your audience members and observe their reactions. Are they taking in your points? Or do they seem to find them boring or uninteresting? To make the best impression you need to be able to judge what goes down best for each audience on the fly — and be prepared to change your presentation style and content as you go along.
I always go into a presentation with a huge range of different PowerPoint slides and presentation styles to call on so I can adjust my presentation to best interest a particular audience.
After effects: the waiting game
It generally takes time for investors to consider your propositions and decide whether to invest. But sitting back and doing nothing while waiting for investment decisions to be made is never a good idea.
After you’ve made your pitch, be open and welcoming to potential investors who come back for more information, and invite them to ask further questions. Make sure your potential investors understand your vision and strategy, as well as your delivery program and expectations.
Also, work to nurture both existing and potential investors. Set up a communications program in order to build up trust and credibility, and to keep everyone informed about the company’s activities.
And finally, never raise money when you need it — always do it before.
Roy Lipski is CEO of Oxford Catalysts Group who helped found Oxford Catalysts Ltd in 2005, led it through an IPO and subsequent acquisition of Oxford Catalysts Group’s sister company, Velocys Inc., and raised more than $130 million from institutional investors. For more information, visit www.velocys.com.
Ameet Patel bet big on simplicity and transparency at Hollywood Casino Columbus, and the gamble is paying offWritten by Dennis Seeds
When the Hollywood Casino Columbus beckoned Ameet Patel a year ago, he knew there was something different about the opportunity.
After 23 years in the casino business, Patel was looking for a personal challenge. An accounting and auditing major in college, he earned his master’s degree from what is now Philadelphia University and started as an accountant at the Sands Hotel and Casino in Atlantic City right after graduation. Next came stints at casinos all over the country, but it was the Columbus venue that piqued his interest.
“It was to not only create and open another casino, which is what I have done before, but I finally had a chance to say, ‘Now is my chance to establish a legacy and a legacy that stays.’”
Patel had a vision of a casino operating on core values that he defined, that were grown organically, locally and uniquely within central Ohio, along with the employee base.
“What should our core values be in central Ohio?” he says. “That to me was the most interesting and intriguing but also the most challenging part. We were just not building a brick-and-mortar site. It was literally what should be our hiring practices, what should be our culture, and as a result, what should our core values be, and how do we make sure that everybody embraces that.”
Since opening last October, Hollywood Casino Columbus, one of Penn National Gaming Inc.’s 21 casinos and the city’s first, has worked hard at being the new kid on the block who wants to make friends with the neighbors. While it’s been in heated competition with Scioto Downs for market share, the casino, through July, has seen a respectable $190 million since opening.
Here’s how Patel has drawn up core values, put them into practice and built a fresh culture at Hollywood Casino Columbus.
Make your foundation
When Patel first arrived in Columbus, the casino was in its infancy — and he quickly realized he had to draw from his experience and craft a new culture, one that he had always wanted to build. The task would be to initiate the steps along the way and keep to his script to ensure the casino would develop optimally.
It was Business 101 — make your business plan carefully and then execute it accordingly. And Patel believed that if you supported the ideals of simplicity and transparency, the odds would be in your favor.
Patel decided to take the simplicity route in sculpting his model employee, of which he would hire 1,400. He knew that many prospective employees would be unfamiliar with the operation of a casino. But as long as they could offer the correct answers to a few questions, it didn’t matter.
“Do you have customer service orientation?” Patel says. “Can you handle 10,000 people a day walking through the doors? Can you function under that environment? If you can bring that, don’t worry about the unknowns because we can teach you the unknowns.”
Patel knew the core values he wanted and he posed them in the form of questions.
“Can you have fun?” he says. “Can you be a good host? Can you be a good neighbor in the community? Can you always be capable of doing the right thing when given choices?
And can you always see ways to improve, particularly financially?
“If you can say yes to these five things — perfect,” Patel says. “That’s what we are looking for at all levels of the organization.”
When those commitments come naturally, you are primed to experience the benefits of a great company culture.
“We have thousands of people working here who go back to their host communities and talk about what a fun culture it is to be here,” he says.
“The most repeated comment I hear from visitors is there is something unique about this property where people are just so warm and friendly.
“Well, that didn’t happen overnight, and it didn’t happen by accident,” Patel says. “It starts from establishing core values, then recruiting for those core values and then executing on those core values. And that is the end result, where people say, ‘Well, this is really unique,’ because when being a good host is part of your core culture and core values, by gosh, the delivery is a lot more than people saying, ‘Oh, just come on. We’ll be nice to you.”
Patel also stresses that core values could drive even your bottom line in ways you had not considered.
“Put it in simplistic words — can you see ways to improve everything that you do? Today you are coming here just washing dishes. But if you have a suggestion on how we can expedite this and make the dishes cleaner, or reduce the workload, now you have contributed to the bottom line already.”
Simplify, and reap your rewards
Using simplistic principles to guide you when you are searching for highly suitable employees will most often bring dividends, but what it may bring to your management team can be another feather in your cap.
“Over the years, I found the best way to simplify things for management teams was to always ask people when they give a complex report to ask for a CliffsNotes version,” Patel says. “When they come back with a 10-page report on numerics, I would ask, ‘What would be a one-page summary?’
“When you force that kind of thought process throughout the organization, people start saying, ‘OK, before I talk to my leader, I know the question is going to come up — What does this mean in one page? What does this mean in two sentences?’”
Common wisdom holds that it takes more time to write a short composition than a long one, and people may shy away from wanting to do a short summary.
“That is always the first reaction that I receive from everybody I have asked summaries from,” Patel says. “And over time, I know a lot of the leaders developed in our company have told me otherwise. That is, the biggest benefit of them being pushed to write summaries or give a one-page or two-sentence viewpoint was that it allows them to think about what they are doing.
“If I asked for a report, and I say, ‘Give me an income statement,’ that is great, people would spend time developing that income statement, and, ‘OK, here’s everything. Now the problem is yours.’ The critical thinking stops there.”
But if you continue to regularly write summaries, it keeps your critical thinking in top form.
“Before you go there you know you will be answering what this all means in one sentence,” he says. “Is the income statement good or bad? Why or why not? And if it is good, do you understand where it is coming from?
“So critical thinking develops for the long run, which I think is a real, real key to success when you get into leadership positions.”
Create a transparent operation
Another important tool is to establish transparency as a priority.
“The more transparent we were — I think that has paid off huge dividends,” Patel says. “There was a tremendous amount of community involvement with tours taken by people, social groups and charitable organizations, to let them know before construction, during construction and post-construction that this is one of the real, real unique success stories in almost the entire country.”
Patel had to defuse the perception naysayers held that a glitzy Las Vegas was coming to Columbus, since that was not the case.
“We are very, very mindful of the host community in which we operate,” he says. He found it useful in his effort to be transparent to remind people how a casino has parallels to other businesses.
“I just reference that this is exactly the same regulation that a bank goes through in monetary terms and action — then people relate to that,” he says.
“I am a firm believer in providing known industry references to simplify your message to the public.”
Beyond the glitz and glamour, it really comes down to a normal business. For example, investors put up their money and expect a rate of return.
“To that return, you just have to develop a business model that is a socially responsible business model. If you keep your shareholders happy, keep your employee base happy, keep your community involvement transparent and abide by the regulations, now you are creating a business model that is sustainable over decades,” Patel says.
“We spent a tremendous amount of time educating everyone including a number of employees here. When you hire 90 percent of the employees from the local community, your employees don’t know what it means to work for a casino which is a large corporation and a public entity.”
How to reach: Hollywood Casino Columbus,
(614) 308-3333 or
Set your foundation first — obviously.
Simplify, and reap your rewards.
Focus on transparency in all area.
The Patel File:
Name: Ameet Patel
Company: Hollywood Casino Columbus
Title: Vice president and general manager
Born: Tanzania, Africa
Education: I got my first college degree in accounting and auditing in India. I came to the U.S. in 1987 and received a master’s degree from the Philadelphia College of Textiles and Science, now Philadelphia University.
What was your first job? My first job getting a paycheck was at the Philadelphia College of Textiles and Science. I started tutoring undergraduate students in statistics and economics. They were my two major areas in business, and it was a real rough road because I was new, I had a heavy accent, and students more often went with somebody who had gone to Temple University, or had graduated from a local high school.
When you say you are a tutor from Tanzania, who speaks Swahili, and can tutor you in economics not too many students were willing to sign up. So my first paycheck was literally $8 after working 2½ hours at a time. To this day, I saved that pay stub; it has been one of my biggest motivators because that taught me what I had to do, not necessarily what the world had to do but what I had to do in order to succeed in life; that is, to work harder than an average American.
Who do you admire most in business? Warren Buffett. By far. One of my biggest motivators has been him. I’ve learned a lot about him by just observing him, reading about him and watching him on YouTube videos. When he does any public speaking, I learn so much about simplicity and making people understand what we do. He is someone I have admired and closely followed literally my entire career.
What is the best business advice you ever received? Always simplify things so you understand and so everyone around you understands. When you do that, it's incredible how many people become not only supporters but also followers of what you do because people have some real complex perceptions of what you do. Sometimes people see you are a general manager, so you must be busy, you do so many complex things, it is a $400 million operation, and I would say it is really not. This is really exactly what we do. That is the best business advice I have ever received. It is very easy to make things complicated. Nine out of 10 times people go out of the way to make things complicated.
What is your definition of business success? To make sure that you are running a socially responsible business model that is sustainable for decades because it creates an employment base. It is really when you relate the human life element to a business — that to me is your ultimate business success. Can you provide a sustainable living to people who are working with you — vendors, people in business who are contracting with you as well — can you provide a long-term sustainable source of living and income? That to me is the biggest part of what I call business success. A lot of businesses become reckless. They go in and out, and it becomes a flash in the pan. A lot of people depend on you. So when you look at thousands of lives depending on a business model, you have to take that as the very core by which you define business success.
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
If you are an entrepreneur, and you see what you think is a growth opportunity, you may be tempted to take the advice that’s been offered many times: risk all you can and jump in head first.
But if you catch your breath, the proper decision at that time is not really what to do. Your analysis lies more with if you think the opportunity is one for growth.
With that in mind, Smart Business interviewed some of the world’s greatest entrepreneurs and the leadership at EY about growth opportunities. These business leaders come from the more than 60 countries at the recent EY World Entrepreneur Of The Year conference in Monte Carlo.
“We’re looking at China and other Asian countries. The key to that market is to have big internationals that are creating value for their communities where we can sell our products. These are the kind of countries, those that can generate big internationals, that we are looking at.”
Martin Migoya, CEO, Globant
Entrepreneur Of The Year 2012 Argentina
“I have been tracking where I see money going. Where is the most foreign direct investment happening? Africa is clearly one. In South America, Colombia has been coming much more into its own, as have Indonesia and parts of Southeast Asia. Those are some of the markets you’ll start to see. Mexico is another one you have to watch because it’s close to the U.S. and its leaders have had change in their political landscape to be more pro-business.”
Herb Engert, Americas Strategic Growth Markets Leader, EY
“One of the ways that we encourage innovation is we partner with a lot of technology startup companies. We look for alliances and what’s next in technology that can drive improvements and enhancements in our industry.
When we see a technology that’s promising we’ll start working with them and provide them with real-world market feedback. That gives us the data and confidence to help them get to commercial deployment.
Our people are always looking for innovative ways to do things with the discipline of knowing that at Chevron we have to represent our brand and stand behind everything that we do and our customers expect us to keep them on that proven level of technology.”
Jim Davis, President, Chevron Energy Solutions
“I am in one of the newest economic blocs to emerge from Latin America, the Pacific Alliance, which seeks to create a Latin American gateway to Asian markets. Chile, Colombia, Mexico and Peru are members. The bloc hopes to make the commercial, economic and political forces among the members work more closely together.
The entrepreneurs representing Colombia chose me to be in that alliance two years after it was founded. What it is going to do is to join the market of those five countries — it is one market for everyone.”
Mario Hernandez, founder and president, Marroquinera
Entrepreneur Of The Year 2012 Colombia
“There continue to be tremendous opportunities in Brazil; it’s a big country, a big market. It will be back on the world stage even more with the 2014 World Cup and ultimately the Summer Olympics in 2016.
But when you look at Spanish-speaking countries, certainly Mexico is attracting a lot of direct foreign investment. The new administration, the federal government there, has definitely got a strong commitment to entrepreneurship.
We are seeing that as being important to them, and we are working with them on a number of different initiatives as the U.S. State Department and others try to help foster more entrepreneurial startups and more entrepreneurial growth in Mexico, both big and small.”
Bryan Pearce, Americas Director, Entrepreneur Of The Year and Venture Capital Advisory Group, EY
“There are always things you can do to improve and grow your business. You should be rethinking and retooling it every chance you get. The key thing is making sure everybody in the organization understands the story, where you’re going, are you going to get there in the belief that you are doing the right thing. People want to know their purpose, so that’s for me the biggest area to keep the energy going — keep a sense of purpose very strong.”
Dr. Alan Ulsifer, CEO, president and chair, FYidoctors
Entrepreneur Of The Year 2012 Canada
“Always be seeking new opportunity. Always be looking for new technologies, innovation and creativity within your people. The best ideas within our business have come from the people inside our company. You have to give opportunity to your people. Tell them it’s OK to be wrong and make mistakes. That’s important so people will learn from those mistakes and come up with better ideas.”
Lorenzo Barrera Segovia, founder and CEO, Banco BASE
Entrepreneur Of The Year 2012 Mexico
“The growth driver in the world is coming from entrepreneurs. They are the ones driving economic growth and driving job growth. If you look at leading indices of companies, they churn much more rapidly than they ever did before.
“It used to take 20 years to have a half of a churn in some of these indices. Now it takes four or five years. It’s because the entrepreneurs are building businesses so quickly. We have to keep investing and keep recognizing their strengths.”
Jim Turley, retired global chairman and CEO, EY
“It’s important to understand where the trends are going. So communication and information is important. I fully support the free market system. It’s a great way to understand where the best new ideas are coming from and where the value lies. We keep an eye on our competitors on technology and on alternative learning aspects. So to the extent that the web provides a better way to educate more students more efficiently, we’ll be using that.”
J.C. Huizenga, founder, National Heritage Academies
“I built the company based on people, not with experience from before, but willing to learn and try anything. 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.”
Hamdi Ulukaya, founder, president and CEO, Chobani Inc.
Entrepreneur Of The Year 2012 United States and 2013 World Entrepreneur Of The Year
“Companies attracted by the Latin American market have to decide where to establish the operations in Latin America. They have many opportunities: Sao Paulo; Buenos Aires; Santiago, Chile; or maybe in Peru. But in Uruguay, there is a very small market. You have to operate with a different concept, much like an offshore company, to operate in Latin America.”
Orlando Dovat, founder and CEO, Zonamerica
Entrepreneur Of The Year 2012 Uruguay