Dustin S. Klein
(Downs) to everyone involved in the Enron mess. In what may turn out to be the biggest business blunder of the last half-century, this fiasco could tarnish accounting giant Andersen's reputation as well as become the Bush Administration's scandal to remember. As it unfolds it will become the story of 2002.
(Ups) to Royal Appliance. CEO Mike Merriman's formation of LaunchPad Partners provides a new vehicle for investors and start-up consumer product ventures. Another success like the TeleZapper would give Northeast Ohio something to cheer about.
(Downs) to Ford Motor Co. employees. We understand the need to rein in hard costs, so it's hard to fault the auto giant for trimming 35,000 jobs. What we find strange, however, is how Ford's board of directors let ex-CEO Jacques Nassar lead the company into such troubling, debt-filled waters. Let's just hope those employees who lose their jobs don't find themselves in Enron's ex-employees' boats, crying for help.
Odds are, investment in technology wasn't high on your priority list.
But while the technology sector certainly reflected the corporate community's purchasing slowdown, the lack of sales failed to stop the industry from lurching forward in the name of progress. Chip speeds surged ahead from megahertz to gigahertz, the breadth of applications increased, network capabilities improved as bandwidth issues were better resolved and, along the way, the world seemingly became a little smaller.
So what does the future hold for technology in business across Northeast Ohio and nationwide?
The region may be behind the national curve a bit, but no matter whom you speak with the prognostications are similar. Technology is expected to continue helping business owners become more efficient in their operations, which, in return, will significantly impact the corporate bottom line.
Traditional manufacturers that haven't yet begun massive technology transfer are beginning to make investments and those driving change are starting to see returns on their investments.
Over the last few months, SBN hit the streets of Northeast Ohio to determine how the region's experts saw the impact technology will play in business in 2002 and beyond.
"It's a lot less futuristic than people may think," says Jim Cookinham, executive director of NEOSA. "You'd be surprised how many executives aren't even using e-mail yet."
Add in the results of a recent technology study that revealed a whopping 50 percent of Ohio-based firms aren't even linked into the Internet and findings from the Cleveland Growth Association that say there will be more than 7,000 technology-related jobs available next year – most in non-technology-related companies – and it's obvious there's a lot of room for growth.
In the following pages you'll read about:
* Expected growth of Linux use among businesses as a network platform
* Greater use of online recruiting as a tool for employee attraction
* Increased automation in the manufacturing process as traditional manufacturers get leaner and more efficient
* The emergence of the region's biotechnology sector to capitalize on Northeast Ohio's healthcare and technological strengths
* Telecommunications improvements in the areas of delivery, bundling and flat-rate pricing
* Wider bandwidth for networking
* Better clarity in Internet legal issues such as intellectual property
* What the landscape of Internet taxes will look like beyond 2002
While we may not have all the answers, hopefully, this special report will lay the groundwork for another full year of coverage in how technology will impact your business.
"The depth of this pessimism is rather surprising, considering that 12 months ago the public market had already declined, technology stocks had plummeted, dot-com failures were rampant and IPOs were nearly non-existent," says Dee Power, co-founder of Profit Dynamics Inc., and head of a team that conducted a nationwide survey of more than 80 venture capital firms.
The survey revealed that an overwhelming 81 percent of VCs rate the current environment as worse or much worse than the previous 12 months. Only 11 percent of those polled believe the environment is about the same, and a scant 8 percent say they see the landscape as improved.
Power says there are several reasons for why VCs take this negative viewpoint beyond the grim fact that their portfolios are bleeding from unwise dot-com investments. Among those cited:
* They are focused on their current portfolio of companies and don't have the time or resources to investigate new companies;
* The economy has had a dampening effect on any new investments; and
* There are little or no exit strategies available for current investments.
Overall, it's a dark picture for the finance industry these days, unless of course you're involved with mergers and acquisitions in the distressed business market. According to Mark Heesen, president of the National Venture Capital Association, the bulk of investment liquidity is coming from the mergers and acquisitions market. And for firms such as McDonald Investments and Brown, Gibbons, Lang & Co. L.P., business is actually pretty good. Both companies have been busy lately in the M&A market with distressed firms.
But all's not rosy for those business owners looking for cash infusions rather than buyers. As proof you need look no further than the third quarter of 2001, where nine Ohio companies raised a paltry $39 million from venture capitalists. Nationwide, there was a total of $8 billion invested during the third quarter.
It's a far cry from the previous year, when during the third quarter of 2000, 19 deals totaling nearly $300 million were financed. Ironically, last year seems like the distant past.
So how can your business weather the rocky waters and find capital for an expansion or new product?
It's rough, but if you play your cards right money is available. Make sure your proposal includes the following:
High growth rate With today's economic conditions, venture capital groups look for projected annual sales growth of 25 percent or more if your company is either launching a new product line or expanding into a new marketplace.
Clear strategy for commercialization Just because your business currently is successful with its sales and marketing approach doesn't mean you can simply duplicate the formula. However, if your market research backs up the contention that you can, show it. If not, develop a strong strategic plan.
Barriers to entry Be sure to show potential capital sources that your company can discourage competition in the new market you're entering. It can be as simple as being several year ahead of any competitors or as complicated as a trade secret, patented product or proprietary process.
And, if all else fails, look to your traditional banker.
We planned to do it by leveraging our resources to underscore the importance of philanthropy and volunteerism in and around Northeast Ohio and ensure that no one in business forgets the impact that even one small donation can make.
Our efforts seem to be working. Since 1998, more than 40 area businesses have been honored, including 11 this year. The program, which has received local acclaim and continues to gain momentum, has a four-pronged mission.
1. To publicize the issue of community service as it applies to the realities of today's competitive business world. If you read SBN every month, you'll see that we take philanthropy seriously. Beyond traditional feature stories and how-to pieces, SBN has continually dedicated pages to showcase best practices in philanthropy and will continue to do so.
2. To share creative ideas about how companies of all sizes are having a positive impact in their communities. This year's honorees -- as well as their predecessors -- have developed and implemented smart ideas for community giving. As you read their stories, you'll find that each gives back in its own unique way.
3. To honor companies that go well beyond the minimum expectation of community service. On Dec. 6, 2001, SBN and Medical Mutual will hold the annual Pillar Award for Community Service banquet, at which we'll showcase the best of this year's more than 40 entrants and also raise money for charity.
4. To create a sustaining fund to be administered by the Cleveland Foundation to aid local nonprofit organizations in their mission to serve the people of Northeast Ohio. Including this year's donation, the Pillar Fund contains more than $40,000. We recently converted it to a donor-directed fund, which means that beginning in early 2002, we'll begin dispersing money to local organizations in need.
SBN and Medical Mutual are dedicated to the ideals of the program we've developed. We congratulate this year's Pillar Award for Community Service honorees and take great honor in presenting their stories. We hope you'll congratulate them, too. Dustin Klein (firstname.lastname@example.org) is editor of SBN Magazine.
At first, she was startled. The man had appeared suddenly and obviously hadn't showered in a while. Further, my wife -- all five-foot-nothing of her -- was alone.
But the man looked gaunt and seemed harmless. So Laura, who spent more than a decade working in the nonprofit sector, decided to help. She knew a quarter wouldn't buy very much and asked the gentleman how much money he really needed and for what.
The man hesitated, surely wondering if Laura planned to castigate him about his appearance or the fact that he was begging for spare change. He then sheepishly explained that he had no money and needed bus fare so he could get downtown. Without hesitation, Laura pulled out $1.50 and with a smile gave it to him.
That evening, she told me the story as an afterthought. When I pressed for details, she explained that the gentleman was so grateful that he smiled from ear to ear and thanked her several times. Then, she recalled, he suddenly carried himself with much more authority than he had arrived with and rushed off to the bus stop -- about 100 yards from the gas station -- to climb aboard the bus that had just pulled up.
Like many households, mine isn't currently in the most desirable financial shape. We racked up a lot of consumer debt during the go-go late '90s and early 2000, and when the economy tanked, we watched our investments -- and financial security -- shrink with it.
But our bank balance was the last thing on Laura's mind when she reached into her purse and handed the gentleman bus fare. And although the amount of money was paltry in the big scheme of things, the result would have been the same had the gentleman said he needed $5 or $10 for a hot meal.
I read a report recently that said corporations are giving less this year because of the shaky economy. Philanthropy from corporate leaders and other business executives is down even more.
It's easy to be philanthropic when times are good, your stock portfolio is through the roof, business is booming and cash flow isn't an issue. But it's when times aren't so good that the importance of philanthropy and volunteerism is at its greatest.
People in need don't suddenly disappear when your bankbook isn't as fat as it used to be. And people in need don't suddenly find themselves warm and less hungry while you're strategizing about how to keep profits from decreasing.
So this winter, when you're thinking about all those things you'll be cutting back on to maintain the status quo and keep your company alive, don't forget there are always those who are always less fortunate -- whether times are good, bad or somewhere in between.
And remember, it doesn't take much to make a difference.
Dustin Klein (email@example.com) is editor of SBN Magazine.
But tragedy has a strange way of creating an eerie unpredictability, and finding the right words during this one has become a struggle.
Without question, the impact of last month's terrorist attacks will be felt for a long time. The recovery process will also take a long time as our nation and its people band together to resume daily activities and get back to business as usual.
One of the most unique traits of Americans is our unbreakable spirit. It is why, in time, we will recover from this massive blow. Our economy -- suddenly thrust back into a downward spiral -- will rebound as well, although that may be a more difficult task.
So many brilliant business minds were lost in New York. So many businesses were affected directly and indirectly. So much about the economy remains uncertain, and Wall Street does not look favorably upon uncertainty.
The airline industry and its employees may be among the most significant nonfatal casualties of this attack. Air travel was suspended for several days. By the time it resumed, the damage was done.
More than 100,000 people in the airline industry are expected to lose their jobs. Even more could follow. And that does not include the layoffs that will surely come from the industry's vendors and suppliers, as well as those in the travel and hospitality industries.
And let's not forget the terrible beating the stock market took and how that affects consumer confidence.
All of this is evidence that in addition to the thousands of lives lost in New York, Pennsylvania and Washington, D.C., the terrorists have succeeded in adversely affecting an already weakened U.S. economy.
In his first comments one week after the attack, Alan Greenspan, chairman of the Federal Reserve, predicted the economy faced a litany of short-term problems. But he was bullish as well -- he also asserted that the long-term prospects are much brighter than many expect.
It's tough to look that far ahead, especially considering the numbness that lingers. Nearly every American closes his or her eyes and sees the images of planes slamming into the World Trade Center, dozens of people falling to their deaths in a mist of smoke and metal, and the buildings crumbling to the ground. Those are strong images that won't simply fade away.
But time is a precious and powerful commodity. As life goes on, getting back to business as usual will become easier and easier. For now, though, business is anything but usual. All of us have gained a far better understanding of how violent the world truly is and have put much of our daily activities and interests into a clearer perspective.
As journalists, we are taught to be objective and unemotional when covering events. It's not always that simple when you must write about a subject of which you care. And when you consider the scale of this tragedy, and all the lives around the world that it impacts, being objective becomes that much more of difficult.
After all, we journalists are only human. And while we may be people of words, those words don't always come easy. No matter how seamless it looks to our readers.
Dustin Klein is editor of SBN Magazine.
There is little question that success in business is built on smart ideas, those brainstorms in the middle of the night that become great new products and services.
That's the reason SBN Magazine and Anthem Blue Cross and Blue Shield created the Innovation in Business Conference.
This year's event, also sponsored by Andersen, Nextel, LaSalle Bank, Divine and Hughie's Audio Visual, honors 12 individuals -- four Master Innovators, five Visionaries and three Rising Stars -- for their smart ideas.
Picked by a panel of judges that includes Dr. Stephen Gage, president of CAMP Inc., Dorothy Baunach, director of NorTech and Cleveland Tomorrow, Jeffrey Dollinger, executive director of business development for the National Inventors' Hall of Fame, and Don Philabaum, president of the Internet Association Corp., this year's honorees represent a wide berth of innovative strategies, products and services.
In addition to the 12 honorees, whose stories you'll read on the following pages, this year we have designated 14 others as Finalists. Our judging panel found their stories enlightening and deserving of mention for their innovative ideas:
Dennis Barba Jr., e2Grow. Combines local content and online enabling services for small businesses to develop revenue-generating Web presences.
Ernie Hawk and Marcia Harris, KraftMaid Cabinetry. Designed a unique multimedia training program to educate resellers of built-to-order cabinetry.
Nancy Diller-Shively, Cambridge Home Health Care. Home health care provider that employs a philosophy of "happy staff = happy clients."
Dr. Frank Seidelman and Daniel H. Quigg, RIS Logic. Radiology information system software developers.
Doug Weintraub, Centerprise Information Solutions. Provides back office accounting and front office technology solutions with effective implementation and training.
Philip Wenk, Creative Playrooms. Child care centers that provide parents with service rivaled only by mom.
Deb Janik, Village Capital Corp. Since 1998, Janik has helped commit more than $14 million in loan and grant financing to inner city projects.
William Ryan, Master Consulting Group. The impetus behind the creation of the Northeast Ohio Area Chambers of Commerce by providing employee benefits and human resources expertise.
Rachel Torchia, Gateway Title Agency. Developed a proprietary service that helps people who sell their house "by owner."
James Fisher, IdeaStar. Designed two proprietary products -- GalaxyBuilder and CorpMeetings -- to solve clients' back-end needs for front-end problems.
Packy Hyland Jr., Hyland Software. Hyland's OnBase enterprise software integrates document management capabilities in a single Web-based application.
Dr. Ronald Copeland, Dr. Allan Khoury, Kaiser Permanente. Electronically linked its 10,000 physicians and other care providers in 19 states through a proprietary Medical Automated Record System (MARS).
Ed Hollinshead, Websprocket. Designed "smart packet" technology that paves the way for second generation computer architectures and smart networks.
Barbara Brown and Margaret Flynn, BrownFlynn Communications. Full-service strategic communications company that specializes in community education and outreach.
By 8 a.m., he's already completed an extensive exercise routine and strolled the floors of the company to make sure things are ship-shape, and is eagerly awaiting his regular morning executive staff meeting.
Gaede is general manager of the Renaissance Cleveland Hotel, a post he's held since last October. With 491 rooms, more than 600 employees and events scheduled year-round, he isn't your average business leader.
Gaede's world is in constant motion. His product is the hotel and its services. The market is every man, woman or child who walks through the door. But that's just the way he likes it. Gaede, who came to Cleveland from Atlanta's Renaissance Waverly Hotel, sat down with SBN at the Renaissance's Sans Souci to discuss how managing a hotel is akin to running a large division of a multinational company -- in this case, Marriott Corp.
The Renaissance seems to be a hotel in great financial shape. How do you plan to improve upon it?
There's a strong foundation, so we're looking at a soft goods renovation. Marriott has committed $5 million for this year and between $2 million and $4 million for next year. We're going to upgrade carpeting, wallpaper, drapes and mattresses in the guest rooms and do some facelifts in the bathrooms.
Basically, we're just going to put a dress on it because you've got to keep an eye on what this hotel is all about. We don't want to do anything drastic.
How is the job of a hotel general manager similar to that of a division manager?
The GM is responsible for the overall operation of the hotel. I have to make sure the guests and associates are satisfied and keep the product in the best possible shape. I also get involved with the public -- currently I serve on the board of directors of the Conventions and Visitors Bureau -- and work with charitable organizations within the community.
GMs oversee purchasing, the menus, room changes and sales and marketing. I also have to make sure the numbers match. You have to roll up your sleeves in this job. I've loaded meals on the banquet assembly line, made beds and bartended. It allows you to understand the challenges your employees have and you can lend your expertise when they need it.
How does the Cleveland Renaissance's 491 rooms compare with other hotels in the chain as well as with local competitors?
Many in the chain are actually smaller because the Renaissance as a brand is a more boutiquish hotel. Each has its individual character -- Cleveland's is part of the historic hotel register. The only common factor among them is service.
Our closest competitor is the Sheraton. As far as the combination of hotel and meeting space, no one is close. Our ballroom used to be the biggest between New York and Chicago. It still could be. We also have a large staff, about 620 employees, and all but 75 are full time.
Explain the importance of occupancy rates and average room rate revenue.
The rates in Cleveland are in the $140-plus range as an average per room. Year-round, we have a 72 to 78 percent occupancy rate. This year, we're approaching $149 per room for a year-round average. And if the demand continues, we can drive that number up. It all depends on the future expansion of the convention center.
We're running above average in terms of the industry. Nationally, we run well in our segment in the luxury tier. To keep this up, you have to be aggressive in marketing efforts. Right now, 70 to 72 percent of the hotel occupancy is group hotel sales; the rest are transient.
Group business is made up of large groups that come into town and fill 300 to 350 rooms for several nights. Transient sales are typical business travelers that come in for a night or two. You have to balance them evenly -- 70/30 is a good balance for us.
How is your success judged?
Sales and profit. We also run associate opinion surveys once each year and internal meeting planning surveys. Anyone who has a meeting here is sent a survey by Marriott to judge the experience.
There is also a guest satisfaction survey that's randomly sent out to 800 guests each month, 13 periods a year, every 28 days. It's a great barometer to see how you're doing.
Describe a typical workday.
I get up at 4 a.m. and work out in my room -- I live in the hotel. Then, I go down to the exercise room and run five miles on the treadmill and lift weights. I get into the office around 6:30 a.m. and routinely walk around the hotel early in the morning to see what's going on.
At 8 a.m. we have a business review -- I sit down with sales managers and talk about the business they're working on. We talk about how to make the numbers work. Then there's a half-hour meeting with the executive committee where we review the previous day. The rest of the morning I spend on phone calls, in smaller meetings and at lunches.
In the afternoon, I run various staff meetings and business meetings. By late afternoon, I hope to answer the 20 to 30 e-mails I get each day.
What's the most enjoyable part of the job?
Riding down the elevator with a guest. You ask them about their stay and they tell you how great it was. I make it a habit to ride the elevator several times each day. They love the fact that ''the guy'' comes around and says hi to them.
What about attraction and retention? Isn't hospitality a high-turnover industry?
The brand attracts retention. There are over 2,000 Marriott properties and more than 100 Renaissance hotels. As a brand, retention level is high among management. As for associates, it's harder at the lower levels. You treat them with respect and give good benefits packages with fair wages.
We do an extensive two-day orientation to go over benefits -- 401(k) and profit sharing -- along with the details of the hotel, business and worldwide operations. That really helps in retention.
How to reach: Renaissance Hotel, (216) 902-4001
(Ups) to Fifth Third Bank, which donated $50,000 to Lorain County's Humility of Mary Housing Inc. The grant will enable the organization to construct FAITH House (Families in Transitional Housing), a multi-unit housing facility designed to accommodate eight families in need.
(Ups) to NineSigma Inc. The Beachwood-based Web portal launched a matchmaking product aptly named ProposalNet, which is designed to link up research institutions with buyers and sellers for their research and development projects. With the Great Shakeout still in effect, it's good to see local companies finding unique ways to utilize the efficiencies of the Net.
(Ups) to Medical Mutual CEO Kent Clapp, who returned a $120,000 bonus after auditors determined Medical Mutual underestimated its books by $10 million. With employees nationwide questioning their bosses' compensation in a tight economy, it's the type of move that inspires confidence.
(Downs) to LTV. The loss of annual orders of 500,000 tons of steel from General Motors pours salt on the festering wound that is LTV's struggle to survive. Forget about the deal reached between management and workers in early July; even if the company continues through 2001, without GM's business, LTV has bigger trouble on the horizon in 2002.
Correction: A story in the July issue of SBN incorrectly identified IMG. The company's initials stand for International Management Group. We apologize for the error.
There are few things better when you're feeling down than having something small go right and brighten up your day.
It could be a phone call from a friend you haven't heard from in a long time or unsolicited praise from a spouse or colleague. Anything that lifts you up can be the spark needed to get you back on the right track.
The U.S. economy is no different.
Recently, I've seen positive signals from a variety of businesses, indicating that perhaps we're finally turning the corner and emerging from The Great Shakeout. Admittedly, I'm no economist, but I am a firm believer that when you string together enough events, it's hard to discount the power of anecdotal evidence.
Last month, a report by Webmergers.com revealed that 32 Internet-sector companies, including the ill-fated Webvan Group Inc., closed its doors in July. While that number may sound high, consider that in June, 58 similar companies went out of business. Thirty-two is the lowest number of closures since September 2000, not long after the first wave of dot-bombs began dragging the economy down with them.
Also in August, Priceline.com reported better than expected second quarter results, including its first profitable quarter to date. The name-your-own-price Internet commerce firm's shares were trading around $9, a dramatic increase from its January 2001 low of around $1. Industry watchers believe Priceline has right-sized the business and hit upon a formula of how to make money on the Internet.
Closer to home, Mentor-based Ladies & Gentlemen Salon and Day Spa (a 2000 Pillar Award for Community Service winner) recently opened the doors to its new, expanded Brown Institute -- a $1.2 million facility. Ed and Nancy Brown's new 10,000 square-foot school allows the 25-year-old business to offer more students training in the area of salon education.
And finally, a friend who runs an emerging Web-based company in late July landed her first client. It was validation of the firm's business model that uses technology to solve traditional bricks-and-mortar problems.
Though none of these examples proves the economy is definitely on the upswing, they certainly indicate that for some, the bad times are in the rear view mirror. And, they show the power of innovation and how dedication to a continued search for new smart ideas will lead to success no matter what the market conditions.
Later this month, SBN Magazine will honor 12 business leaders at the 2001 Innovation in Business Conference, sponsored by Anthem Blue Cross and Blue Shield, Andersen, Nextel, Divine, LaSalle Bank and Hughie's Audio Visual. These honorees represent some of the most dynamic ideas in Northeast Ohio, and they are shaping the very way we do business --today and in the future.
You can read the stories of these honorees in a special pull-out section that begins on page S1. And, as the economy continues its slow march forward, perhaps next year, your business will join them.
Dustin Klein (firstname.lastname@example.org) is editor of SBN Magazine.