Mahaffey, president and CEO of Ply Mart Inc., called a technology-savvy friend and asked if him to create a Web site for his company. For that job, he paid $10,000.
“That was to make a statement,” Mahaffey says. “We’ve always been an innovative company.”
Although it was expensive statement, it was the start of the building supplies dealer’s move toward the 21st century.
Mahaffey knows his company has come a long way, but he is not satisfied with his success. He plans to continue adding services and products to please clients and increase Ply Mart’s revenue, specifically from online orders, which have increased between 37 percent and 54 percent each year since 2002.
Smart Business spoke with Mahaffey about how he used technology his company in order to move ahead of the competition.
How did you recognize it was time to add technology to your company?
I was, and am, personally, very weak technologywise, and by hearing all the conversation and all the talk, I began to realize that as president of the company, I had an obligation to get us to the forefront. We were either going to take advantage of the opportunities out there or one of our competitors would, and we have moved ahead.
How did you start the process?
We began to put a big emphasis on technology six years ago, and we established a technology team of employees who showed an interest in technology.
We have two people who write code on our payroll. That’s a huge step.
We don’t feel like we’re in the stratosphere yet. We have a lot to do. We’re glad we’re here, but we wish we were further on down the road than where we are. There are a lot more opportunities out there that we need to take advantage of.
What challenges did you face in implementing technology?
Those meetings, by the time they ended, the people were ready to scratch each other’s eyes out. They were the most contested meetings because of such variation in the level of knowledge that people had about the technology.
There was always an argument. They might look at me and say, ‘You’re the president of the company. This is your idea, but you won’t allocate enough funds to do what we need to do.’ I don’t know how many times I heard that. Certainly, in our industry, you don’t give anyone a blank check for anything. It had to be justified when you take those first two, three or four steps before you make the big leap.
They were tough meetings, and I am so proud of the head of our IT department. It was a difficult grind, and there were plenty of reasons to be discouraged because some of the things that we did right off the bat just didn’t work. But I guess I’m telling you the negatives because I’m so proud of how the people persisted through them and embraced technology as a strategy.
How has technology improved the company?
In one division, we have a product called TurboTicket. Our salesmen use the notebook computers. They enter the orders in the field, and the orders are transmitted back. Some of the more proficient salespeople are incredibly productive.
One of our highest producers said, ‘At 5:30 in the afternoon, I turn that computer off, and my attention is toward my family.’ He’s got four kids, and that’s a homerun there because that computer is not going to have the communication errors that orders that are called in are going to have or hand-written or faxed in.
All of these things are to drive productivity and drive down operating costs.
I will say this: We are not getting, yet, the payback I expected out of technology. We’re getting some, and I’m very optimistic that we’re going to get what I expected at some point in time, but it’s just been slower to get where we wanted to go. It’s like a lot of stuff; you just don’t get instant results.
How has technology helped your customers?
We have our express programs, ExpressPay and ExpressBooks. You don’t have to mess with paper, don’t have to mess with envelopes, don’t have to file it. It is extremely convenient.
Our ExpressBooks program allows our customers to automatically do their cost accounting. We had one customer the other day who said, ‘I think you all have saved me a carpel tunnel claim.’ They don’t have to enter those invoices in there. That’s technology we’ve developed ourselves.
What obstacles have you overcome while growing the company?
Getting people to change is the biggest obstacle you have associated with technology, and getting people to believe that these products and services that we have developed are good for our customers and good for our company. That’s difficult to get them to buy into.
Getting the change in attitudes and change in habits sometimes can be hard. Getting customers to change their habits is difficult, but unless we show them some extraordinary value, then why should they change? That’s our job, to show them a better mousetrap.
How do you do that?
It’s like a lot of things it’s a persistent effort. This is going to save us time, save us money. It’s going to be more accurate. It’s continuing to go back to those things, and once you get somebody who’s doing something well using the technology well then you go use that story.
‘Hey, did you hear about Bill? How many tickets he’s done? Yeah, he turns that thing off at 5:30. Then he spends his time with his family.’ You tell the success stories over and over, and people have an innate, not jealousy, but they want to have what other people have they perceive it to be better. Then you play off of that.
How do you provide value to your customers?
Driving productivity and providing extraordinary value to our customer if we’re not satisfying one of those two objectives, then we need to say, ‘What in the heck are we doing?’ We don’t need technology just to do cute stuff.
I think strategically, and I think in terms of value. What can we develop that will give us the biggest bang to the buck? How can we leverage what we have?
I want to see what we can do that’s difficult for somebody for our competitor to replicate that will give our customer extraordinary value. We never had a customer that said, ‘Develop this ... give me a program where I can pay online or develop me a program that will help me with my accounting.’
I heard a great speaker, Peter Schutz [retired CEO of Porsche AG Worldwide]. He talked about how you have to think beyond even where your customer is thinking, try to determine what the needs are, and give them something they’ve never thought about.
That’s a pretty challenging statement to even think beyond where they are, but I think we did that to an extent. I think, as we go forward, that will be the challenge. I don’t know what the next program is that we’ll do. There will be something, and we’ll try to capture more of the market share.
Make ’em so happy they can’t leave you.
How to reach: Ply Mart Inc., www.plymart.com
But along the way, his vision of how the company could succeed evolved.
Shermyen saw the health care industry was changing. And instead of waiting to react, he jumped in, forging a new direction and helping create those changes he predicted would occur.
LogistiCare transformed itself from a company that created software for the health care industry into a company that works with governments and health organizations to handle all operations of health care transportation. Its 700 employees oversee the entire process, from taking the initial calls for service to arranging pickups and ambulance runs to billing.
It’s a far cry from where he started, but Shermyen, president and CEO of LogistiCare took chances that have paid off.
Smart Business spoke with Shermyen about how he transitioned the focus of his business using future possibilities to guide his decisions instead of past reports, numbers and activities.
How do you predict changes in your industry so you can change before the industry does? Two things sort of drove our thinking on a strategic level. One is a theme we call the graying of America — this whole issue of what kinds of services and how they are going to be delivered to the graying and baby boom population in light of the fact that the health care delivery system is very fractured.
The other part of what was driving our business was growth in both the Medicaid and Medicare population. With double-digit increases in health care spending every year, we thought there was no way the government could continue to do business as usual, and one way that the government can get control of cost is to move to our model.
We thought that was a trend incoming and changed all our business practices to allow us to compete in a more financially difficult environment. We took a bet and I rolled the dice that that was how governments would increasingly look to become more efficient to handle their health care costs. We’ve been right so far.
Because predictions guide your decisions, how do you make choices without worrying about the industry’s actual future?
One is to make a decision every day. The worst thing an entrepreneur can do is sit back and wait for other things to make up one’s mind or to push you in one direction or another.
It’s always easy to change course and correct your mistake tomorrow, but this goes back to my philosophy that you have to act like you have a burn rate. I think it’s a lot easier to make minor adjustments to your path than to sit and wait and have to make major disruptions.
I think making decisions every day and correcting them tomorrow if you’re wrong today is a great way to go about it.
Then assume everything will change and there’s not a single element of what you do that will not be subject to change. If you’re afraid of change, I think you begin to lose as soon as you change your focus from growing the business, improving it and looking for new opportunities, to a fortress mentality — things were going great, and you just want to manage what you have, and you want to be careful. I think you end up losing the spark that keeps everything growing, and that’s when a company begins to die.
I think it would be very, very difficult for an entrepreneur or any CEO to run a company that was happy with the status quo.
How did you transition your business from software to transportation?
That transition happened over an 18-month period. The model really grew into its own in late 1997, and since then, we’ve grown. One business went from being 100 percent of our focus down to 15 (percent) to 20 percent of our focus, in terms of our total revenue in the company.
We maintained our software development efforts and the sale of our software. We’ve continued to manage and maintain our Business Process Outsource (BPO) model with our small transportation companies, but we chose to not expand that business as we transitioned into our new managed-transportation model.
Because we have continued to supply and support those small companies in our BPO model, we’ve stayed in touch with the demands and challenges of providing the transportation service, which then helps us in managing our network in other parts of the country. So it’s been a very symbiotic relationship.
How do you develop software to fit your current and future needs?
This software was designed with place holders for each of those modules or elements because we predicted that, in the future, many of our clients may want to access our service over a Web-based appliance or from a hand-held device.
Even though we laid this original infrastructure in 1995, we basically reserved spaces for those new technologies as they developed and we’ve been lucky. We bet right on some of those elements.
How do you implement drastic changes?
We had to change the behavior of the of the existing transportation provider community. We essentially stepped between a cab driver, a taxi company or a wheelchair operation and his client. At the end of the day, it’s a positive change, but obviously it’s very scary to a small business to have a new business come in and take your business away, so that was huge.
Much of that is done through our software, through the support we provide to our credential network. The things we do for them, like driver training, vehicle inspection, checking their insurance and, in some cases, providing their insurance, all those things help them be successful in terms of risk management and routing efficiency.
Next [was] going to the managed care organizations, going to the states and telling them, ‘It’s much better for you to get out of purchasing services from a whole bunch of little companies and instead give me that responsibility and give me a fixed budget and leave me to focus on getting people to the doctor.’ So our second big challenge was to get our payers to focus on what their core mission was and to let us take on that logistics challenge.
Pitching to our third-party payers is a job that I do with a business development team, and sometimes it’s a five-year sales cycle. It may require a budget crisis in a particular state, or a state to refocus on how or why they spend money in a particular fashion.
It may require a change in a managed care organization that picks up a new book of business and doesn’t understand how to deal with this, for them to come to us and give us an opportunity to make a change in the way they deliver services.
The third was internally getting people to ignore the dollars and cents in all but one or two positions in our whole company and focus just on service delivery, picking people up and getting them to the doctor in a high-quality fashion. It’s very easy to say, ‘Hey, the vehicle broke down. The snow was flying. It’s a holiday. It’s after hours. I’m real sorry. We don’t need to take you.’
When we take on a contract, we take responsibility 7 by 24 to provide whatever kind of service to a client, to go the extra mile. It’s always easy to come up with an excuse to not provide service, so that’s our challenge within the company is to get everyone focused on that client.
For my employees, it’s a constant reminder to get them to be empathetic employees, to put themselves in the client’s shoes. We spend a lot of time trying to keep that in the forefront of our customer service representatives’ minds. It’s important to maintain that focus on the fundamentals of why we do business.
There are two things we always tell them: Totally focus on the client, but also when people feel overwhelmed, I remind them if this was easy, we wouldn’t have jobs.
How do you manage all the elements of a company when it’s expanding so rapidly?
Every call center I walk into has the same software. Everybody’s been trained the same way.
We’ve gone to a very comprehensive, Web-based training to make sure everyone gets the same training. We can actually prove that they scored a particular score on each of the elements of their training.
We have one, and only one, version of our software. Every single call, every single transaction is touch-tracked, so we know anybody and everybody that touched any element of a transaction, from the time the phone rang through it being dispatched, routed and run by a van.
We’ve standardized on a single set of telephony equipment. If any of our network operations centers have any problems — if a hurricane goes off or anything happens — any and all of that work can be automatically rolled to another call center. And if you have every single one of your employees using the same tool set across all books of business, it makes your management a heck of a lot easier.
HOW TO REACH: LogistiCare, (800) 486-7647, www.logisticare.com
Brown wants to get Ohioans in college, succeeding in school and accepting great jobs in Ohio upon graduation. She contributes toward improving this quality of life by working with many organizations including Cleveland Scholarship Programs Inc., dedicated to providing career guidance and assistance for students from elementary school through college graduation.
Brown is immediate past chair of the group and has worked on the board for 13 years to educate and encourage Cleveland-area students to pursue college degrees. She also encourages women and minorities to enter careers in science.
Brown, a Cleveland native, earned her bachelor of science degree in chemistry from Ohio University and her master of science degree from Case Western Reserve University. She also received honorary degrees from Ohio University, Case Western Reserve University and Michigan Technological University. In addition, she completed the Executive Management School at the University of California, Berkeley.
Brown worked in industrial research for 38 years and retired in 1989 as director of corporate research for BP America (formerly The Standard Oil Co.). She has one patent, 80 publications and nine books in the field of vibrational spectroscop. She has lectured at more than 100 universities around the world and given more than 600 talks to civic groups and laboratories.
According to CSP, only 25 percent of Ohioans hold a bachelor’s degree, a statistic that Brown is aggressively working with CSP to improve. And their efforts are paying off.
During the 2003-2004 academic year, CSP awarded $2.8 million in postsecondary scholarships to almost 2,000 individuals. It also provided counseling and advising beginning as early as elementary school and through the completion of postsecondary education to nearly 5,800 students in 65 schools during 31,700 sessions. And its adult lerner program assists students ages 19 and above in returning to school.
Brown was instrumental in increasing the number of scholarships CSP awards and in expanding the services it provides to students. She also increased awareness about the program in the Cleveland community and inspired students, staff and board members.
As a result of Brown’s efforts and a CSP networking program, 82 percent of CSP students remain in Northeast Ohio after graduation to use their educations to better their local communities.
HOW TO REACH: Cleveland Scholarship Programs Inc., (216) 241-5587, www.cspohio.org
The people at TravelCenters of America LLC believe in being resilient, in the ability to survive many pitfalls in the business world and in living to fight another day.
But they can’t survive poor customer service. Which is why it’s a top priority for the company to deliver an excellent customer service experience every day, to every customer.
Existing in a commodity-driven marketplace, with competitors offering many of the same products and services, TravelCenters — led by Managing Director, President and CEO Thomas O’Brien — has recognized that customer service must be its market differentiator.
The company keeps its repeat customers coming back through its loyalty program, UltraOne, which began a major upgrade last year. VIP members receive benefits such as upgraded shower credits that don’t expire, free dinners on their birthdays and free parking at sites that normally charge a fee.
TravelCenters also focuses on customer service through efficient processes. When a customer comes into a service site for a repair, a swipe of his loyalty card will bring up all pertinent information about his company and his truck, meaning that the driver is easily recognized at any TravelCenters location throughout the country.
The system also allows site employees to look up the details of the customer’s last three visits to a TravelCenters site. Staff members can use the information to make each customer’s visit more personal. Employees are able to inquire about tires a customer purchased on a previous visit and offer a free tire pressure measurement and inflation service.
Employee training goes hand in hand with better systems and technology. With that in mind, TravelCenters has created a career path for each employee, with training completion monitored and reported on electronically. The training program, called Q-Force, is taught in four-hour sessions, 10 times a year to the company’s work force of truck service advisers, who are generally the first employees to greet and service a customer.
How to reach: TravelCenters of America LLC, (440) 808-9100 or www.tatravelcenters.com
Monson was supposed to start in January 2009 to help lead the company through an economy that had battered the worldwide sign and graphics franchise system. When she was finally able to make it into the office in February, sales were down and layoffs were inevitable. The challenge was how to rally the remaining employees while finding a way for the company to grow when the only signs a lot of customers were interested in read: “Going out of business sale.”
Compounding her difficulties was the fact that she was replacing the founder of the company.
“My concern was, is the outgoing founder and CEO going to truly step back and give me the reins? How will the franchisees and corporate employees respond, and then layer on the extra complication of a comparable store sales decline in a very tough economic climate and (there being) a lot of angst and concern on the part of the franchisees because of that,” Monson says. “Even if I was not a new CEO, that would have been a challenging time.”
Address the immediate concerns
From the start, Monson wasn’t the fan favorite because she had to eliminate positions.
She communicated to those individuals that their position had been eliminated, and immediately following those conversations, she had a company meeting that same afternoon.
“I talked about the changes, the reasons for the changes, that I could not promise that there would be no additional changes, but that I was going to be working very hard to get the business turned around,” she says.
She provided monthly updates after that, addressing what was happening with same-center sales, revenue, what the company was doing and how people could make a difference.
Whenever you’re facing tough times like this, she says you absolutely have to communicate with your employees about what’s going on internally.
“Given an information vacuum, people will always assume the worst,” she says. “If we don’t share what’s going on, our employees are listening to the news, they’re watching the headlines, they’re picking up a newspaper, they’re talking to their friends who have been, perhaps, laid off, and in the vacuum of honest information and direct information, they’ll just assume the worst.”
Despite her best efforts, the problem wouldn’t go away. Anytime her door was closed for prolonged periods of time, layoff rumors started to fly. She knew there was lost productivity because of worry, but she understood their concerns. Instead of focusing on the productivity loss, she tried to be positive but honest.
“People want leaders, need leaders, who are positive,” she says. “You can be positive realistic. Positive doesn’t mean Polyanna and not seeing the reality, but your people need to believe that you see a way to get to the end result, and you have to portray that in a positive way.”
In early summer, she had more bad news but again was honest with employees. In lieu of more layoffs, she decided to have a pay freeze and eliminate the 401(k) match, profit-sharing, and Christmas and executive bonuses. She explained what kind of savings those choices would bring to the company and why that made more sense than a further head count reduction.
“There will be tough times, but you can still be very open and honest, and you can talk about the realities, but do it in a way that it’s not negative — ‘We’re doing this for the betterment of the company. We’re doing this to support our franchisees. We’re doing this to get through these tough times. I believe in this company; I believe in this industry,’” Monson says.
In addition to addressing the concerns that employees had about layoffs and the benefits cuts, Monson also started working to build a strong rapport with her 100 corporate employees and the approximately 1,800 people across more than 450 franchise locations.
She set out on a 28-city town-hall tour where every Tuesday, Wednesday and Thursday she was at a different franchise location trying to get in front of as many of her franchisees as possible. During those tours, she did a seminar to show them how to increase sales and how to decrease expenses and improve cash flow.
Internally, she worked to educate employees about costs and the revenue structure. So instead of simply saying things like, “Take the paperclips off before you throw pages away,” or, “Turn the lights off when you leave instead of waiting until the cleaning crew comes in at 11 p.m. and does it,” she explained why.
“Unless you educate employees about the financial structure of your company, they assume that 98 percent of revenue flows down to the bottom and is profit,” Monson says. “It’s important to educate them about what are the cost of goods — what’s our overhead, what does it cost to turn on the lights here.”
She also met with both groups individually to ask them questions and to learn more and better understand the business and them as individuals.
“If it’s franchisees, I’m asking them, what are their biggest challenges in the business, what keeps them up at night, what can we do to assist them?” Monson says. “If it’s staff, it’s going to be, ‘Tell me about yourself, what are your dreams, what would you like to be doing five years from now, tell me about your family, how do you spend time on the weekends?’ In addition to that, it’s things like, ‘What do you like best about working here, what are the things that drive you crazy about working here, what are the two things that we could do that would give you the tools or the time or the ability to be more productive, and if you could change one or two things about the company, what would it be?’”
From there, she implemented things that could easily be changed to show she listened. For example, common complaints from staff members were that they didn’t like having to punch in a series of codes every time they wanted to use the copy machine or make a long-distance phone call. So she eliminated the codes so that people can walk up to the copier and just hit copy or pick up the phone and dial.
“Are some people making personal calls they shouldn’t? Maybe they are, but I’d rather take away those barriers to productivity,” she says. … “They might seem like little things, but to the employees, they were big things.”
In addition to listening and implementing easy changes, she also took notes on employees and franchises so she could relate to them on a personal level. So if, for example, Oren loved golf and Jason was a big hunter and Jimmy is a huge Cowboys fan, she made those notes. Then, as she interacted with those people, she had something aside from business to talk to them about. She also sent birthday cards and company anniversary cards home to the employees, complimenting them, thanking them and adding a personal reference from her interactions with them when possible.
“It’s important for the CEO to keep in touch with the personal side in addition to the business side,” she says. “It’s very easy as a leader to get very busy during the days and focused on business issues and challenges and perhaps not spend as much focus on the person side, so I try to make sure that I do that.”
Create a plan
Around the same time as her town-hall tour, Monson also rallied her corporate employees together to create Operation Fast Forward to focus on helping the franchisees increase their profitable sales, decrease their expenses and assist them with restructuring debts.
She invited anyone who wanted to help to come out and brainstorm ideas. They also did a SWOT analysis — strengths, weaknesses, opportunities and threats.
“We said, if business went the way we wanted it to, what would it look like at the end of 2010,” she says. “From there, fill out some key objectives. We said, ‘Who wants to work on what team to put the meat on the bones for each of these objectives?’”
She says that getting employee involvement is especially important to have a plan be successful.
“Whenever you involve the team in creating a business plan, it becomes their plan,” Monson says. “The worst thing that leaders can do is go create their business plan and create their goals without any input because then when you say to them, ‘OK, here’s where we’re going,’ they’re thinking, ‘What do you know? You’re up there in the ivory tower. You don’t live the challenges we live every single day.’
Now once they had these sessions and came up with ideas, she then had to move forward. That can be a difficult challenge, especially when your team generates many ideas. She says to evaluate each on its cost and benefit.
“You have to make sure that all of our stakeholders benefit from our operation,” she says. “It’s using some wisdom and judgment from where to put the resources based on what you think they’re going to give you as far as the payoff. Sometimes you have to guess because you don’t know directly.
“You do as much research as you can and then you make a decision. Part of leadership is being willing to make a decision without having all the answers because you never can have all the answers. If you have to wait until you have all the answers, you’re just going to have analysis paralysis. Part of it is taking educated risks.”
When you look at each idea from these perspectives, it will help you make those crucial decisions, but at the same time, it helps employees understand why certain things were selected versus others.
“They feel engaged and they feel the plan is their plan, and they understood that we didn’t have unlimited resources, so we couldn’t do everything,” Monson says. “We had to invest the resources where we felt they’d get the highest return.”
One of the major initiatives she implemented was moving the business consultants, who go out to the franchise locations and help them implement new programs that will help their businesses, to the regions they oversaw. In 2009, they averaged 33 consultant visits a month with franchisees, but last year, they were averaging about 113 a month. As a result, sales have increased since implementation.
As these sales have increased as a result of her plan, Monson made good on her promise to reinstate the benefits she had eliminated. In June, about a year after the pay freeze, she gave raises. She also laid out plans to add back some sort of bonus toward the end of the year and was hoping to reinstate the 401(k) match early this year.
Overall, Monson is pleased with the progress she’s seen at Fastsigns, and now she feels that she’s garnered the trust of her employees and franchisees.
She says, “I’d say we’ve gone from the franchise group that had some concern of, ‘Who’s this new person we don’t know coming in as CEO?’ to, ‘Wow, she really cares about us, and she’s smart and she understands the business,’ so that certainly has changed.”
How to reach: Fastsigns International Inc., (800) 827-7451 or www.fastsigns.com
Did you know that Euclid Avenue used to be called Buffalo Road, which was a shuttling ground for the Underground Railroad? Most Clevelanders tend not to know the interesting factoids behind the city’s history, but that’s something that Chris Ronayne is trying to change. He is the president of University Circle Inc., the development, service and advocacy organization that’s responsible for the growth of University Circle as a premier urban district and world-class center of innovation in health care, education, arts and culture.
Ronayne spoke at the Smart Business Live luncheon Oct. 19 about how UCI is driving economic development by educating people about the region and attracting them to the University Circle area, but he also spoke about the leadership that’s required to take Northeast Ohio to that new level of excellence.
“Start with a plan,” he says. “Do we have a plan for our city? What’s our coordinated economic plan for Cleveland and Northeast Ohio? Once we get that plan, work that plan.”
The plan for University Circle was initially outlined 150 years ago, and the groundwork for UCI was laid 50 years ago, so Ronayne is simply building on a strong history that already recognized health care, education and the arts as vital to the region.
“It’s about leveraging anchor organizations to develop a true new economy,” he says.
That requires bringing together local leaders to work collaboratively.
“You have to find public, private and nonprofit leaders willing to work together,” Ronayne says.
Then it’s about coming up with ideas. Ronayne says UCI tackles all of its new initiatives just as if they were campaigns, and he says you have to make sure you target the areas that have true potential.
“Target your growth initiatives,” he says. “Target your projects, and target your precious resources to places that are working.”
And he says it’s important to look at what’s going to be successful and last in that urban area, and that requires going beyond the obvious. For example, bringing grocery retailers to the University Circle or downtown areas doesn’t mean going out and getting the big-box retailers. Instead, it means looking for local players, such as Constantino’s Market, which is already operating on West Ninth Street, to move into the University Circle area.
“Sustainability is not just an environmental word,” Ronayne says. “It’s a business word, a financial word.”
How to reach: University Circle Inc., (216) 791-3900 or www.universitycircle.org
“The hard drive business had been sold, and we had a number of businesses under a tremendous amount of pressure from the dynamics of technology,” he says. “That was the challenge — where were we going to take the company to make us be successful?”
He decided fairly quickly that the company had to transition from a device-focused OEM company to a storage systems company focused on backup recovery and archive segments of the storage industry.
“Part of your job as a leader, which is especially true in technology, is getting on the right side of gravity,” the chairman and CEO says. “There are certain things you do that just seem to work. Forces around you are helping you succeed, and the opposite is also true — when you’re pursuing something that’s just an uphill battle. Part of driving your strategy is making sure you get into a position where you’re not working against gravity — the gravity is working for you.”
That’s the biggest challenge he had to tackle as a result of Quantum’s position in product segments that were going against gravity.
“We can fight all day long to try and stop it, and no matter how good we were, that working against gravity was really a problem,” Belluzzo says. “We spent a lot of time getting ourselves in an opposite position where we’re in markets that are growing, we’re in technologies we know how to do, there are a number of things that are working for us, and we talk about that a lot. I often ask when we’re facing a business problem, ‘How much of this is gravity working for us or against us, versus we’re just not performing well?’
“No matter how good you are and how experienced you are, if you’re working in a situation that is against the laws of physics, as a leader, you’re responsible to not just fight that, but you’re also responsible to get your business and your team working so the gravity is working for you instead of against you.”
He led the company through a number of changes, and by 2006, Quantum was still under tremendous pressure. But that didn’t stop Belluzzo from borrowing $500 million to complete an acquisition.
“That really was the watershed moment in terms of getting us to where we are today,” he says. “We were struggling up to that point, and we had to do something big. This was it.”
Here’s how he used the acquisition to move Quantum forward.
Get your people in place
Acquisitions are always huge undertakings, and the key to Quantum coming out of this successfully was to integrate properly, which started with getting the people aspect in place.
“We took on a strategy that was harder to do — [take the] best of class in both companies to build a new company,” Belluzzo says. “Textbooks tell you that you acquire someone, you integrate deeply and go forward. We didn’t have all the right ingredients at Quantum to pursue our strategy, so we had to acquire and integrate in such a way that we had the best of both worlds.”
That meant that both the executive and the general employee base would be chosen from both companies.
“We took an unconventional approach to doing this,” he says. “That was essential for us to have the skill set and background that we needed to move in this new direction.”
But there are certain things you have to look at to make these decisions — it can’t just be a random selection or who you like best. Belluzzo looked at two things, the first being strength of capabilities in every area — manufacturing, sales, R&D and so on.
“I had to make the decision, ‘Which company was better at that?’” he says.
Then the second part was looking at which leader was better.
“Often, those are the same things, but other times, there was a bit of a mix,” Belluzzo says.
While he worked to pick the best from both companies, he also had to look outside both organizations at times and make hires in addition to the moves and the downsizing.
“We had to, pretty quickly, change the skill base that we had as a company,” he says. “A lot of companies that go through this fail, and I would argue that most of them fail, and part of it is because what they need to do to be successful going forward is very different than what they know how to do. That’s a very hard path to cross, and we had to be aggressive about that.”
Where he had gaps in skill sets, he looked to bring in people to fill those talent voids.
“You start by bringing on a few people who are the real experts in the field,” he says. “They help you define what else you need and how you want to get them. At Microsoft, this was a technique used often that if they were going to go into a new field, they would hire one or two key people and build around them, and we did a lot of that also.”
This comes down to a lot of personal recruiting on your behalf and talking them through your vision.
“There’s not a formula for how to do that,” Belluzzo says. “That’s what part of leadership is — to be connected with people and to recruit and to make sure you know what you want to build around.”
Ultimately, he was largely successful, but he says it’s important to recognize that you won’t get every move right.
“I feel like 80 percent of what we did initially we did right, and we had to adjust to the 20 percent that we may have done wrong in that process, because you never get it fully perfect,” he says.
That’s a key in integrating acquisitions — not getting bogged down in the decision-making process and instead forging ahead.
“We were decisive,” he says. “We were decisive, and we didn’t let things float, because we didn’t have time to let things develop. We had to be clear about what we were going to do and move forward with conviction.”
His decisions weren’t always popular though, and you have to be prepared to handle that.
“Frankly, a lot of people were dismayed at how I went through this process, because they thought I should pick people I was closest to,” he says. “I spent a lot of time with people one on one. I had a lot of input to make those decisions. I knew it was a matter of survival. I put my neck on the line to borrow this money and make this move, and I was not going to make decisions based on anything other than what would drive us to success.”
Whenever you’ve got so many major changes going on in an organization, it’s critical that you keep all the affected parties in the loop about what’s happening.
“You spend a lot of time developing a clear communication strategy, and make it clear and as direct as you can in what we are going to do,” Belluzzo says.
He spent a lot of his time visiting his teams all over the world during this process to make sure he was telling them what his plan was and what the decisions were.
“We used the traditional broad communication around employee meetings, but in addition to that, [there was] a lot of face time in front of groups. I know shortly after the launch, I flew around the world and visited almost every site to tell them what we were going to do, what the implications were, to stay very close with people through that process,” he says.
One of the challenges in communicating such a large-scale plan to such a large group of people is ensuring that what you say doesn’t get ignored.
“I don’t know if you know that immediately, but you keep following through and reinforcing the message and expect people to come on board,” Belluzzo says. “We try to make it clear that this is where we’re going, and we need you to be with us, and you can take some time to sort it out, but ultimately you have to get on board.”
You have to make the judgment call as to when people need to get on board.
“There’s no formula for that,” he says. “It depends on the person and the areas they’re in and how critical they are, but you can’t give it very much time.”
Some people self-selected out by saying that the new direction wasn’t what they wanted to do, and he was OK with that.
“You ask, ‘What are some of the success factors?’ and it’s to get a team that has the skills and believes in the future and can work together collectively to take on the challenges that are ahead,” he says.
Between what you’ve created and who’s stayed, you should be on the right path.
“You get it mostly right, but there’s subsequent changes that you inevitably need to make because it doesn’t quite work,” he says. “It is a challenge, because when you go through transformation like this, especially for us, we were de-emphasizing certain skills in the company, certain technical skills in the company, and we were embracing new things, and there are a lot of people who feel threatened by all of that. They used to do a particular thing well, and we just said, ‘We’re not going to do that anymore.’ That’s hard.”
Move ahead with your plan
As he moved forward after the acquisition, he needed to make sure that the new Quantum was on the right track, so he created a scorecard to ensure that happened.
“It would be based on a set of objectives of what we think the most important priority is,” he says. “Virtually at any point in time, I’ve got a very short list of the things I think we need to get done, and so I will communicate those. We will have metrics around them.”
Some of those are a year in duration and others will have more intermediate check-in points. He shares these across the company and they grade themselves on meeting them. Having check-ins helps ensure they’re on the right path.
“I like to lock things down and run hard for six months,” he says. “Then you kind of reflect on what’s gone well and what’s not working and what’s changed, and then you alter it and go put your heads down and run for another six months. That’s about the rhythm that we were on. We’ve not changed the goal, but we do change how we get there.”
In addition to the data, Belluzzo was also careful to pay attention to his instincts.
“There’s data and it’s intuitive,” he says. “You have to follow your intuition about it. For me, the way I know to make a change is if I’m going down a path, and I get really uncomfortable and I start challenging myself, I have a lot of internal turmoil over something, and I reach a point where I say, ‘OK, this turmoil has been here too long, and I need to find a different path.’ The faster you go through that process, the better off you are.”
When you combine your numbers and your intuition, you should know if you’re on the right side of gravity again.
“You can look at your scorecard and look at your results and say, ‘Are we improving in this area as fast as we need to?’” he says. “I would say that if my intuition feels right and the numbers and the progress look right, we keep going. The difference being you spend time looking at the future — you’re always trying to assess whether you’re moving in a direction that’s ultimately going to be successful.”
Now, more than four years after the acquisition, Quantum has reached $681.4 million in total revenue in fiscal 2010. The business has successfully transformed and is profitable.
“Borrowing money was a pretty controversial move,” Belluzzo says. “Yet that’s how we were able to put together enough of the strength that we needed to get to the point where we are today, which is a very profitable tape business and a growing disk and software business.”
How to reach: Quantum Corp., (408) 944-4000 or www.quantum.com
When John A. Eisenlau was a child, he used to love building tree forts in his backyard. He was constantly creating something. His love of creating led him to attend design school, and that love has never left him.
And while it’s something that he’s passionate about, Eisenlau will also argue that good design is everywhere you look and critically important to success these days.
“Good design sells,” he says. “I think there are good examples of design selling in the world right now. Look at iPods and things of that nature — Apple has their hands wrapped around it nicely. The car industry has been doing it for years. There’s no question that good design sells. People want good design. They want sustainable design. They want timeless design. So my vision begins with design.”
His vision for HOK, the $496 million international architectural design firm of which he co-leads the justice business unit and serves as management principal of the Atlanta office, tries to address how design is constantly evolving and how it can enrich not only his clients’ lives but also the lives of his employees.
“They need to be motivated and captivated,” Eisenlau says. “They need to be challenged on a daily basis, so we spend a lot of time talking about design and where the design world is going. Americans have a greater appreciation for it, whether it’s fashion or automobiles or your home or the world of electronics. There are certainly great examples of where design sells. Our vision begins with that — being good designers and being good thought leaders.”
In order to effectively do that, Eisenlau has to make sure he creates the best environment possible for employees, and he does that by offering training, building trust with them and providing a nice physical environment.
Eisenlau is well experienced in the industry and isn’t interested in participating in long hours of additional training, but just because it’s not something he’s passionate about for himself doesn’t mean he doesn’t see excitement in others about it — particularly the younger generation of his work force.
“They’re much more motivated to learn more, to expand their skills and to reach out to any new opportunities,” he says. “It’s very interesting.”
And that’s consistent across all of the HOK offices globally. Staff members are asked to complete 40 hours of additional training in a calendar year, and those young people are eating it up.
“You have a lot of people motivated by something different than I am, and they’re not necessarily motivated by money — they’re motivated by thought, by creativity, by new challenges every day and by not being told when to come and go,” he says. “It’s a very unique mindset to manage and to stimulate.”
The additional training opportunities through HOK University offers a way to stimulate them. For example, someone may be interested in the design of one particular type of facility, such as hospitals or airports, and if that’s what the person is interested in but not necessarily working on, it gives the employee a chance to learn about that area where his or her interest lies.
“The sort of bandwidth of your employees is much broader, and the fact that it’s wrapped into a normal work year — this is not something we expect somebody to go out on a Saturday and sit around and study this information,” he says. “We expect it to be done within the normal course of the business year.”
Employees are compensated for the time they spend in training, as well.
“So you don’t have people saying, ‘I don’t have time after hours to visit my kids or my significant other or I don’t want to burn up my Saturday doing this,” he says.
If you’re not sure where to start with putting together a training program, Eisenlau suggests beginning with the basics. First, define what the skills for each position are.
“Once you define very clearly what everybody’s roles and responsibilities are, then you can offer them the proper guidance and then you can offer them the proper training modules within your organization,” he says.
Then look at what are the basic skills needed to execute on those responsibilities.
“I would probably start with getting a firm understanding of what the proper skills are to sort of execute the product that that particular business leader was producing and make sure that the skill sets were properly addressed,” he says.
For example, for him, that could be basic things, such as defining what the roles of certain positions are or going over basic safety-code issues. Then from there, you can take it up a notch.
“Develop a varied training model that addresses everything from immediate skill sets to the creative side of your business, as well, and develop those training modules,” Eisenlau says.
Once you develop training programs, then you can gauge whether or not they’re effective by how employees apply what they learn to their work.
“A simple example to illustrate would be, let’s say someone takes an HOK-U learning module on handicapped accessibility within the building, and they learn a number of features in a learning module,” he says. “Well, when the actual project that they’re working on would have a code evaluation, there would be clues as to whether or not the training module was effective for that particular individual.”
Build trust in a team
You can probably think back to a time in your career when somebody questioned the quality of work you produced or some other aspect of how you performed your job, and while it may have been frustrating to experience that, how your boss responded probably made it better or made you feel worse about the situation.
As a leader, it’s important to make sure you’re supporting your team members, which is one way to build trust with them and build a good place to work.
“I go to bat for my team first of all,” Eisenlau says. “If their performance is challenged or the profitability is challenged or somebody wants to pull somebody off of one of our projects and move them on to one of our [other] projects, you need to look after your people.”
It’s important to seek out truth in those situations and back your people. It also helps to get to know your people.
“As a leader of your team, you have to stay very close to your people,” he says. “You have to sit with them, you have to be with them, you have to laugh with them, you have to go out and have a drink every once in a while. It’s very important to get to know them.”
Eisenlau is baffled by people who work remotely, because it’s too hard to do this very thing.
“Being with your team and being connected to your team yields the best success,” he says.
If you’re not sure how to start building relationships with people, start with a basic question.
“I’ll often start with what they’re working on,” he says. “Are you comfortable doing what you’re doing? Are you heading in a direction with your career that you want to go in?”
These kinds of career questions can lead to learning if they’re satisfied or not in their current role, but they also open the door for more personal questions as you build that trust.
“I don’t think you should, as leaders, ever underestimate the importance of the environment that you work in,” he says. “Recognize people. Be kind to people and recognize them and talk to them. Make them feel like they’re part of the whole. People get disenfranchised really easily when they just don’t feel like they’re part of the team.”
Beyond that, the last part of building trust is to make sure you’re sharing information with your employees.
“You need to reveal information — that’s one thing I’m learning as a leader,” he says. “Transparency of thoughts and ideas is very important. People want to know. People want information. This is an information-based world. You will not get people to trust you if you are hoarding information and not being honest about the information. I don’t care if it’s good news or bad news — put it out there.”
It’s also important to put it out there in a timely manner and not after the rumor mills have already begun to spin.
“Put it out there quickly and make sure you have your facts straight,” Eisenlau says. “People admire you for that, and they trust you for that as long as you’re clear and honest. It’s the people who hold information at bay and don’t disclose it — that’s where the trust, certainly in a creative environment, really starts to break down.”
This is particularly important if your work force is composed of younger people, as the new generation of workers wants to know information.
“People want information, and they want to know what’s going on,” he says. “They want it accurate, and they want it quickly, so if you’re running around hoarding information or you don’t have all your facts straight or you’re too fearful to put that information out there, that’s not a good success story.”
Create good physical spaces
Eisenlau is the kind of guy whose friends have stopped inviting him over for get-togethers and parties.
“It always intrigues me how people live or how they want to live or they aspire to live,” he says. “Friends don’t invite me over anymore, because I’m a little outspoken usually about their homes. I’m the kind of guy that takes my physical environment pretty seriously and my work environment and so forth, but I think it really shapes you.”
He says it’s important as a leader to provide a good physical work space for your employees.
“The place is important and needs to be aligned with the goals of the company,” he says.
For example, as a design firm, employees should be connected to the community, and his employees don’t want to work in the suburbs, so it makes sense for their office to be in an urban location instead of on the outskirts.
You also need to look at the way your office is set up and arranged.
“Your conference rooms, your lobby, your work spaces, it needs to be fun, and it needs to be light-filled — there’s no question about it,” Eisenlau says. “People just respond better.”
Look carefully at your break area. Does it promote socialization or does it discourage such activity?
“I’m not talking about the old, dank coffee area,” he says. “It needs to be glass, with a nice view, possibly with a nice library with a lot of current periodicals nearby. Make it a stimulating space. And your lobby needs to be a reflection of what you do, too.”
HOK’s is slick, modern and has a very contemporary feel — all of which reflects the company’s vision of being on the forefront of design.
“When people come to the office, it leaves them with an impression, and it should be a reflection of your office — kind of like someone walking into your living room at home,” he says.
What you don’t want is disparity between who your company is and how you present yourself to others. For example, perhaps someone you work with is extremely traditional in their actions, their work approach and even in how they dress, but then you go to their home and it’s very modern and sleek — there’s a clear disconnect between who you thought they were and how they live.
“It just amazes me when you see someone’s physical environment that may be spot on to the way they behave or it could be completely different from what you would have expected,” Eisenlau says.
Don’t let anyone coming to your office be blown away by how you present yourself versus how you actually conduct yourself.
“Your physical environment is very important,” he says. “It says a lot about your company. It will contribute or it will negatively affect the productivity and the creativity of your team.”
How to reach: HOK Atlanta, (404) 439-9000 or www.hok.com
When Juvenal Chavez Sr. and his wife went grocery shopping in the United States after emigrating from Mexico, they soon realized how different the process was here than it was in their home country.
There, it had been more personal and people seemed to care about you, but here, they felt lost in the masses.
“Businesses feed you as a statistic,” he says. “They feed you as one more number. They see you as the economic value that you represent to them.”
He also recognized that many stores tried to understand the Hispanic population and spent good money trying to do so.
“They hire consultants, and they hire people with the knowledge in the area in order to understand the most about these customers,” Chavez says. “I realized that, and I understood that that would be my competitive advantage against them in that area by knowing my customer, by knowing the wishes and desires and tastes for food, the different ingredients. I know the traditions and the language and culture. I can relate not only in the basic needs while in the store but also I relate to them in its totality as a whole experience.”
So Chavez, who had been a high school teacher in Mexico, decided to go into the retail industry. He started with just one small butcher shop about 20 years ago, and from there, he’s grown it into Mi Pueblo Foods, a $300 million grocery retail chain with 17 locations and plans to add three more by next year. The founder and CEO says that focusing on “el cariño y el respecto” care and respect when it comes to both employees and customers has been the key to his success and growth.
He says, “I’m in the people business not the grocery business.”Focus on your customers
Chavez asks his employees to make eye contact each time they interact with a customer, so they don’t miss his or her face.
“I encourage my people to do that honestly, sincerely and naturally,” he says. “It’s been working since day one, and it’s working today.”
It’s a small request, but it’s huge in that it gets employees out of their own world and forces them to focus on the customer, which is one of the keys to Mi Pueblo’s growth over the years.
Chavez says that the first step to focusing on your customers begins with recognizing the extent of your knowledge. While he understood his customers’ needs better than the competition, he still needed to get to know them as individuals to make sure he really understood them on a deeper level.
“I began with the premise that I don’t know the information that I need to know in order to go out there and do business,” he says.
You have to realize you don’t know everything about your customers, and the only way to learn is to ask.
“How are you going to do that by listening and observing and asking them a lot of questions and telling them, ‘I’m here to fulfill a need for you. I’m here to serve you. How can I serve you better? Everyone began with the same piece of meat. How can I put this piece of meat in your hand, onto your table in such a way that represents more value to you?’”
He also makes sure that when he goes to his office or leaves the stores that he walks through the main sales floor so he can see what’s going on and talk to customers.
“The best place to be is where the action is taking place on the sales floor,” he says. “The worst place to be is sitting in the chair, behind the desk.”
He’s gotten great feedback by doing this. One woman pulled him aside and explained that the employees at the meat counter were throwing the meat to each other and flopping it on the counter for her, and it was disrespectful. She went on to tell him that this is the meat she will be preparing for her table at home, and she would like it handled with more respect. Chavez agreed.
“I tell my employees, ‘Imagine that this meat is a gift, and the only thing that is missing is the [tag] that says this gift is coming from me to yourself,’” he says.
It may just be one complaint from one woman, but you never know how many customers have felt the same way and not spoken up. And it’s a simple change.
“You have to use your judgment; you have to use your common sense,” Chavez says. … “You don’t have to invent anything. Everything’s already created. You don’t have to invent the wheel. There are so many processes and behaviors out there in use today by others and used in the past by others. You have to grab them and put them in practice.”
And you have to communicate to your customers about the things that you change on their behalf.
“Bring them and make them part of the change,” he says “You have to create trust and respect and you have to tell them that everything you’re doing here is with the intention to provide that environment to them. In that process, they will tell you what they want, what they don’t like or could be offensive to them.”
And even when customers don’t have complaints and instead offer compliments, he still remembers to focus on them.
“Usually, the biggest compliment you hear is when customers tell you, ‘Thank you thank you for what you’re doing for me,’” he says. “And I will tell them, ‘On the contrary, you’re the one who’s making this business successful and the reason for our existence is you, and you’re the one that keeps Mi Pueblo growing it’s not me.
“Seeing it that way and approaching it that way, and then being accessible to your customers, that’s where the customer continues to see you as the same human being you want to be seen as. No difference.”Focus on your employees
When a new store is opening, Chavez spends an entire week of his time working with the new employees. He talks to them about the vision of Mi Pueblo and about personal development, leadership, how they, too, can become leaders and how he wants to help them in life.
“The first reaction that these people express is how come this guy the founder of Mi Pueblo who doesn’t have the need to do this, is making this personal investment in us,” he says. “I can see people crying, and I can see people asking me very, very personal questions. I can see people totally committed by the second day.”
He gets that commitment from people because he takes the time to come down to their level.
“If you allow your own position to trap you, you can lose the sense of yourself,” he says. “You can lose the essence of what brought you to where you are today. … You have to realize that you are not perfect and that you are vulnerable and that you need others for you to succeed. Tell them that.”
He also takes this approach because he sees himself as more than just a CEO he’s trying to build character into each employee and improve their lives.
“The basic values and the basic vision and philosophy of the company is not changing,” he says. “It’s what’s making us successful in the past, and it’s what’s making us successful today, and the same values will make us successful in the future, so we have to make sure we are teaching most of the people.”
The key is to take the servant leadership approach.
“We’re here to serve others,” he says. “We’re not here to direct. We’re not here with a position of power or a title. We’re here with a position of responsibility of leadership to help others achieve great things in life.”
Because of this respect and care for employees, word spreads fast, and jobs are in high demand when the next store opens.
“We go through anywhere from 3,500 to 5,000 applicants to hire a couple hundred employees,” he says. “Really, in that process, you are hand-picking your people.”
It’s nice to have that many people wanting to work for you, and it allows him to pick people who will buy in to Mi Pueblo’s values and be receptive to his message and leadership approach.
Employees walk through three or four screenings so he and his team can identify if there’s a values match, and Chavez himself asks many questions of potential employees.
“‘Tell me about you. I want to know you. My intention here is to know about you,’” he says. “That’s one of the questions I ask.”
But then he goes deeper. He asks the person, “If I were to talk to your mother, husband, wife or other close relation, how would they describe you? What three or four attributes would they say embody who you are?” Then he asks the converse “What one or two things about you would that same person want to see changed in you?”
He also strives to understand what makes them tick.
“What gives you the passion, the hope, the joy?” he says. “You lose your mood, you lose your temperament, you lose your posture what do you do in order to recover yourself?”
He also asks how they got to where they are now in life and what makes them a successful person today.
“What values?” he says. “What practices? What disciplines? What education? Also, I ask them, ‘Why should I hire you? If you were me, interviewing you, why should I hire you? Tell me about it.’
“Those are most certainly simplistic questions, but they are very tough questions, and I always allow room for them to ask me any questions. I usually tell them, ‘I’ve been asking a lot of questions, and my intention was to get to know you do you have any question for me?’ I always leave room for that.”
And if they ever doubt their worth, Chavez is quick to reassure them as part of his corporate family.
“I tell them, ‘Do you have any doubts about why you’re here? Forget them. We hand-picked you. You’re here because you’re a successful person. You are here because you are part of something big in here. You may not have the skills in your hands today, and you may not have all the solutions to the situations you are dealing with today, but in a few weeks, you will have confidence and the skills in your hand, and you are the one producing the results we look to you to produce, but the values are more important to us.’”
As employees start in their actual day-to-day jobs, he continues encouraging them to stretch beyond what they see on the surface. For example, if a customer asks them something and if Chavez asks why they responded the way they did or why they weren’t able to help them, they often tell him it’s because they’re new.
“I tell them, ‘Think for a moment. No one asks if you’re new, and nobody knows you’re new. Smile. Be yourself. Be present. Be in here ready to open. Don’t let the customer know you’re new in that way. Try to impress the customer in a different positive way so you can give that positive impression,’” he says.
Those encouraging words can go a long way.
“It’s about giving counsel, trust and providing an environment to get ordinary people to be themselves,” Chavez says. “Once you give them the space and once you provide the environment and believe in them, they grow miles trying to fulfill and even, perhaps, exceed your own expectations.”
How to reach: Mi Pueblo Foods, (888) 997-7717 or www.mipueblofoods.com
“We really have to, when we develop products, develop products that we know are going to resonate very strongly with consumers,” he says.
As co-CEO and chief science officer of Mannatech Inc., he’s charged with creating new products for the $289 million global wellness solutions provider. From nutritional supplements to skin care products, he has to develop what’s going to be most effective and well received by customers.
“The biggest leadership challenge is really finding products and marketing angles that resonate very strongly and emotionally with consumers, because they need that ammunition when they go out and talk about our products and basically introduce other people to Mannatech,” Sinnott says.
He’s also doing it in an industry that typically isn’t known for creativity.
“The industry as a whole isn’t really known for tremendous innovation, but what I’ve done in my tenure as CSO here is I’ve brought in some of the innovative pathways that have been used in more innovative industries, like software and computer hardware, where it moves a lot faster and it’s a lot more competitive and taken those practices and applied them to the dietary industry,” Sinnott says. “Not to brag on it, but that’s why our product development process and products runs way ahead of our competition.”
By creating a solid idea-generation process, evaluating the best ones, and then developing a product road map, Sinnott has worked to make sure that Mannatech puts out the most relative products for its customers.
Create an idea-generation process
Sinnott was taking a class in product development at The Wharton School of Business when inspiration struck.
The class was using software that the school had developed to run academic tournaments, but Sinnott saw that it was just what he had been looking for in his business.
“People always bring me new product ideas — slips of paper or articles from a magazine — and I end up with these huge binders of information of stuff that’s not aggregated or organized, and it’s almost too much information to go through, so I’m always looking for a way to sift through these ideas efficiently,” he says.
He recognized that this software could help him do that better by pitting products against each other for evaluation much like the academic tournaments in the class.
He approached the school and got exclusive licensure to use the software, and his new product development plan began.
All of his independent distributors — about 500,000 of them around the world — have the opportunity to participate in the product development process. Each creates a unique user ID and can submit ideas into the system, but it’s limited to one idea per session so the system doesn’t get overwhelmed.
“Generally, the research shows that people tend to have one good idea at a time — and they can come on every single day if they wanted to and put a different idea in if they’re so inclined, but we didn’t want the ability for people to come in and flood the system with 100 of the same idea and cause chaos to the system,” he says.
Once someone submits their idea, then other users begin reviewing it. Simultaneously, the person is asked to review as many as 10 to 12 other ideas. Users rank them on a scale of 1 to 10 — 10 being they like the idea and it has economic potential.
“This software will actually normalize all the ratings,” he says. “Some people don’t like anything, so they rate everything a 2, and some people like everything, and they’ll rate everything an 8, and some people are more in the middle, but this software is smart, and it will understand where these people are coming from, and it normalizes the ratings.”
As people go through these idea round-robins, Sinnott gets the feedback he needs to know how to move forward. Products are typically reviewed a few thousand times before they start to stand out.
“Statistically, the best ideas will rise to the top, and we’ll just skim them up off the system and develop them into new products,” he says.
Initially, he rolled this system out at a major company event to maximize exposure to it, and it took about six months to build up the kind of data to know whether an idea was good, but now it takes only about two months.
“It’s just something that gradually developed,” he says. “Statistically you need thousands to really power this. We’re in that range now where it’s operating really well.”
The system helps ensure Mannatech is getting what would be best for customers because the direct sales associates are out on the front lines every day — much more so than Sinnott and his 400 full-time employees.
“This whole concept is based on open innovation, where regardless of how many brilliant people you have inside your building, you have a lot more brilliant people outside your building. What we’re trying to tap in to is not so much what the employees think because we know what they think — we ask them all the time — but to really find out what the consumer, the people that are buying our products on a regular basis, what are they wanting, what are they asking for?” he says.
“That’s one way to stack the deck in your favor and pick winners as opposed to just randomly going out and sorting through technologies that are out there and hoping you have a winner.”
Evaluate your best ideas
Once the best ideas are identified, then Sinnott has to figure out which ones he’s actually going to implement.
“The best thing is to have a really good process laid out,” he says. “Have a formula that works, and it has to be adapted to your particular culture because every company is different.”
He starts by meeting with his technical and marketing folks to figure out which ideas are most feasible and then prioritizing each on the company’s to-do list.
They first look at technical feasibility. The technical team is consistently surveying what kind of technology is available in the marketplace by attending trade shows, scientific conferences and academic meetings, so they see what’s hot, what’s coming out in the nutritional technology realm, and they keep a file on that information.
“We (get) out and we find out what’s available — what’s potentially doable technology-wise — and then this ideation process matches up, ‘OK, now we know what’s doable, now which of this set of doable actually matches up with what the consumer wants?’” Sinnott says. “What we’ll do is we’ll figure out what the consumer is asking for in general concepts.”
For example, consumers may want some sort of anti-aging product, but they don’t know anything about ingredients and scientific technology, so they’re not sure what to specifically ask for. Sinnott’s team may see something that’s rated high in the system and see a new technology that can be used to create it, so they’ll match those up and go out to model it and see what consumers think.
“The iPhone is a perfect example,” he says. “The consumer could never have told you in advance or described to you what the iPhone was. They imagined a phone that was easy to use, intuitive, very easy software, that kind of thing. But it took somebody like Steve Jobs to match up the technology plus what the consumer is asking for, but when you handed the consumer the iPhone, the immediate reaction is, ‘This is exactly what I was looking for.’”
He also looks at financials.
“When you sit down and put pencil to paper, you can cut through a lot of ambiguity really fast, and certainly your financial models are right,” he says.
“You’ve got to find something that fits your culture, and there’s so many ways of doing financial modeling. The whole financial modeling, particularly of a launch of an innovative product, is terribly difficult because you have no history to draw upon, but we’ve found ways of drawing analogies between not only similar products we’ve launched in the past but also perhaps disruptive technologies that have been launched in other industries.”
He also considers regulatory issues surrounding the product. For example, in the U.S., his products are regulated as dietary supplements, but in other countries, they’re regulated as medicines or drugs, so that affects a rollout timeline and how quickly a product will be profitable or can be rolled out in multiple locations.
“What kind of regulatory issues do you have to face and knock down to get these products into other countries?” Sinnott says. “That’s one way we prioritize — which countries will be first on the list will be the ones that have the simplest regulatory framework, and then the ones that have very complicated framework, like Canada, that tends to be later in our global rollouts because it’s so complicated.”
Create a rollout plan
Once he knows which ideas he’s going to implement, then Sinnott works with his teams to create a product road map. All of the information gathered in the idea evaluation process helps with that task.
“When you lay all these criteria out, the road map almost builds itself,” Sinnott says.
His road map looks out three years and shows what Mannatech will launch, at what times and in what countries.
“You need to know what you’re shooting for years in advance,” Sinnott says.
Typically, Sinnott and his team launch 65 to 70 products a year; however, they serve 16 countries, so divide that across all of those locations, and it typically works out to just a few launches per year in each country.
“You want to space them out so you have good development time and you’ve also got not too many products coming out at once,” he says. “It takes a lot of analysis, so behind that simple piece of paper is actually thousands of pages of documents where we’re analyzing and figuring out the right time to launch these, and we’re allocating resources and budgets.”
When he’s launching a blockbuster product, he does so at a major event, such as a national convention. Minor products get less fanfare.
“You have to always keep it fresh, and then at the same time, remember that the consumer can only digest so much at one time, so really, if you dumped out too many products at one particular time, you diminish the impact,” Sinnott says. “It’s better to deliver fewer than a lot.”
While you have to keep people excited by rolling out new products, you can’t move too fast. Sinnott typically spends about 18 months developing any given product before it’s launched.
“That’s the balancing act,” he says. “You can’t take forever because people’s preferences change pretty rapidly, but also, you can’t take shortcuts or else you’ll end up with a defective product, as Toyota found out.”
Don’t be afraid to adjust your product development process. Mannatech is currently on its fourth version.
“They call this the product development pipeline because ideas go in one end and they get processed, and products come out the other end. It’s just building it just like if you’re building an oil pipeline,” he says. “What you do is you design the segments, and you kind of weld them together, and then you pressure test it. What you do is you run a few products through and you find out where the leaks are. Where did you run into development issues? Where was the actual timeline not matching theory? And then you fix the spots where it’s broken, and the more you run it, the next time it leaks less, and then the next time you run it, it doesn’t leak at all, and then the next time you run it, you realize, ‘Hey, you know what? We need a bigger pipe, so you expand it.”
It all comes down to taking the time to create the process.
“My grandmother gave me a lot of advice, but one piece that really stuck in my head that I’ve followed ever since is it takes less time to do something right than to explain why you didn’t,” he says.
Taking this approach has helped Mannatech launch products more efficiently and successfully and has positioned the company for future success.
“If you’re in touch with your consumers and you truly know them and you’re communicating with them and you know what it is they want, then it’s simple,” Sinnott says. “You just need to find out what they want and make a good quality product, and then you can’t fail. When we do that, when we apply that simple two-step formula of finding out what they want and building it with the highest quality, those products have been a success.”
HOW TO REACH: Mannatech Inc., (972) 471-7400 or www.mannatech.com