Kristen Hampshire

Tuesday, 29 November 2005 09:51

The Provenzano file

Born: Detroit

Education: Wayne State College

First job: A snack food company after high school before starting at the ground level of a national marketing company in 1984

What has been your biggest business challenge?
It can be difficult to maintain a sense of normalcy and balance between your professional and family lives. As we all know, everyone juggles.

When you have a wife and children and a business and thousands of representatives and employees, and you have everyone that depends on you to make the right moves and decisions, you become a master juggler. One of my greatest challenges has been to prioritize my time.

ACN is very important to me, but it is not the most important thing. Because I can maintain a sense of balance between my family and ACN, nothing has gotten out of whack.

What is the most important business lesson you have learned?
Surround yourself with the right kind of people who are experts in their own fields who will come together for the good of the team. You also need to have the ability to attract better people than yourself without feeling threatened.

Whom do you admire most in business, past or present and why?
I’ve had many mentors, but one was a gentleman who formulated my thinking in business and life: Art Williams who headed up AL Williams, which is where I cut my network marketing teeth.

He truly stood for something and did phenomenally well personally and brought a lot of people with him.

Describe your leadership style.
When you have a volunteer army, it is a must to treat people like you want to be treated. Build strong relationships with as many people as possible.

Wednesday, 02 November 2005 05:57

The Ill File

Born: Newark, N.J.

Education: Lafayette College, Drexel University and Stanford Executive Program

First Job: Second lieutenant, U.S. Army

Whom do you admire most in business and why?
My father-in-law, who was an executive in the chemical business. His advice was to work hard and be humble. I also admire CEOs that do not make themselves bigger than the companies they run.

What is the most important business lesson you’ve learned?
You need people who are willing to grow with the company and who will be loyal to you. And, you have to be flexible with people — everyone grows differently.

What has been your toughest business challenge?
Finding the right people, managing the technology available today and managing the supply chain, in regard to us moving up the integrated solutions food chain.

Describe your leadership style.
Collaborative, candid, loyal, honest and direct.

Tuesday, 27 September 2005 13:14

Acing acquisitions

Randy Thurman isn’t willing to court just any company when considering acquisition prospects. He isn’t interested in businesses that just have fancy products, and service alone won’t impress him enough to make a purchase.

“The single biggest mistake business owners make is focusing on the product and not the people,” says Thurman, chairman and CEO of Viasys, a $600-million medical technology company that has sealed six deals in the last few years, three of them in January 2005.

This acquisitions spree is hardly spontaneous. Thurman’s eyes are fixed on Viasys’ three-year strategic goals — to identify new business opportunities, invest in product research and development, and achieve greater growth.

Already, the chosen few are producing numbers that fall in line with Thurman’s expectations. Viasys holds top positions in each market of the medical technology industry that it serves —respiratory care, neuro care, medical systems and orthopedics. In the last three years, Viasys has invested more than $90 million in product development to achieve “best in class” status in the major products for each business. Through the first half of 2005, revenue has increased 19 percent over last year, operating income jumped 56 percent and its stock price has jumped 60 percent in the last year.

Thurman’s expansion strategy is paying off, and he attributes some of the company’s success to its entrepreneurial management structure.

“Viasys is really a company of companies,” Thurman says.

In position to purchase
A strong balance sheet and ample cash flow position Thurman to consider expansion through acquisition, but Viasys wasn’t always this financially comfortable. Like most start-ups, Viasys was cash poor and deep in debt when it was spun off of financial holding company Thermo Electron in 2001. Thurman was recruited to lead the launch.

“The first two years, our primary goals were to eliminate the debt and improve the cash flow from the business operations,” Thurman says.

Viasys introduced new technology to the marketplace, building off of its first major product, the VMAX system for respiratory diagnostics and, immediately following, the AVEA ventilator. But products weren’t enough to generate the cash flow necessary to expand. So to further strengthen the company’s profile, Thurman consolidated facilities and simplified management structures, keeping a discriminating eye on cash flow and eliminating excessive operations costs.

“Every aspect of running a more profitable company, whether it was better products, reducing our costs or paying attention to the balance sheet, we did it all,” he says.

By 2004, Viasys was primed for expansion through acquisition. The company had chipped away all of its debt, accumulated more than $100 million in savings and generated annual operating cash flow of $50 million.

“This [financial picture] provided us with a competitive advantage in that we can move quickly to acquire companies that meet our strategic objectives,” Thurman says.

That’s the tricky part — finding businesses that fit Viasys' profile and Thurman’s standards.

“The challenge is finding high-quality companies and not just acquiring anything that comes along,” Thurman says.

Thurman estimates he evaluates 10 times the number of companies he actually pursues. This year, three made the cut — Micro Medical Ltd., Oxford Instruments and Pulmonetic Systems Inc. Each transaction rounded out Viasys’ product and distribution portfolio in its respiratory diagnostics, critical care and neuro diagnostics businesses.

Thurman believes each acquisition will drive earnings in 2006 and beyond.

“Strategically, these businesses moved us into higher growth segments and moved us into new channels of distribution, such as home care and the physician’s office,” he says. “Our acquisitions have allowed us to accelerate our overall growth and position us for outstanding long-term success.”

The significant six
When Thurman whittles down prospective acquisition potentials to candidates that suit Viasys’ mission and market objectives, he refers to six principles. First, the company must align strategically with Viasys’ core business segments.

Next, prospective companies must introduce new market opportunities or growth opportunities in existing segments. And financial criteria are critical. Thurman want to realize a 20 percent rate of return on acquisitions, and he prefers that companies’ earnings are accretive to Viasys’ overall earnings within the first full year following acquisition.

Then, he looks for companies with products that can be quickly introduced in Viasys’ vast international distribution structure.

Finally, Thurman looks for strong leadership — managers who will thrive in Viasys’ entrepreneurial structure and play an important role in the company’s future. This human element, Thurman says, is the deciding factor. He recalls one of Viasys’ first acquisitions, when the personnel part of the equation was neglected.

“We focused solely on the value of the products they were bringing and we overlooked some important human resources issues,” Thurman says. “We ended up not retaining many of their key people because of that.”

Since then, Thurman tunes into the human assets a company can bring to the table, not just how the tangibles will benefit Viasys. This experience confirmed a lesson he learned in 1990 when he led the integration of U.S.-based Rorer and the French company Rhone-Poulenc. Marrying two corporations with sharp contrasts in management structure and communication style was difficult.

“It was like combining capitalism with socialism,” he says. “The Rorer company was more entrepreneurial — we were less bureaucratic than the French business culture. In the U.S. business culture, we give more responsibility to individuals to make decisions, where in the French business culture, decisions tend to go through multiple layers of management and committees.”

The French called Thurman “Rambo.”

“They saw me as quick to make decisions, quick to take action — they just weren’t used to that,” he says. “The decisions we used to make in an American company based on two businessmen talking in the hall would take a month to move through the levels of bureaucracy on the French side. It was culturally a very difficult integration to accomplish.”

Thurman refers to this experience today when considering which companies will adjust and thrive in Viasys’ environment. Earlier this year, Viasys was considering the purchase of Pulmonetics Systems or a French company. But he didn’t envision a cultural match between Viasys and the French company.

“One of the factors that really became important was that we felt that the cultural dynamics of Pulmonetics was more in line with the culture of Viasys,” Thurman says. “That was the key aspect that led us to acquire Pulmonetics and not [the other company.]”

Meshing cultures “In both of these acquisitions, the companies brought to us expertise in specific channels of distribution that we did not have,” Thurman says. “They are running independently and they may, over time, assume some of the Viasys product responsibilities that go to the physician or home care markets.”

Thurman facilitates a meaningful initiation process regardless of whether an acquired company operates independently or integrates. First, he shares with its employees his six acquisition criteria and identifies why each person is important to Viasys’ success.

“We certainly articulate how important they are to our future,” Thurman says.

Thurman spends time walking the halls of newly acquired businesses so he can introduce himself to employees. He wants them to be able to put a face to the Viasys name.

“For an acquisition to be successful immediately, the people who are running that company have to feel like they are part of Viasys and an important part of our future, and they have to be integrated into the culture of our company,” Thurman says. “We spend the time and energy to do that.”

New personnel are enrolled right away in Viasys’ incentive programs — all employees can participate in a stock ownership plan. And if Thurman thinks Viasys needs to “put our money where our mouth is,” he initiates retention programs to show employees he is serious about keeping them on board.

Still, each acquired business maintains a certain level of autonomy, something Thurman says executives appreciate.

“Generally speaking, I think employees find the cultural transition to a company like Viasys to be much less of a change than they expect,” he says.

Within Viasys’ core business units, each segment has its own division president, and each president has substantial autonomy and significant investment backing for product development, marketing and distribution.

“In many instances, the companies we acquire are still run by the original founder or scientist that invented their technology,” Thurman says. “Even though we have become a large company, we pride ourselves on the fact that we maintain aspects of a young, entrepreneurial company.

“Running a company within Viasys is much more akin to running your own business than it is being a part of a bigger company. That culture is very important to our future.”

Best in class
Research and development is also critical to sustaining growth and market share in the medical technology industry.

“In order to compete globally, you must be committed to innovation,” Thurman says. Viasys has confirmed its dedication to delivering new products to all of its markets with a $90 million investment to ensure its systems and services are best in class. The slogan refers to an initiative to fine-tune every part of the Viasys machine, from the way products are developed to how they reach customers and the support that follows every sale.

Heightening standards and constantly reaching for the next level defines Thurman’s acquisition practices and his commitment to sustaining Viasys’ healthy balance sheet. Just as in the early days, when Thurman notices a weak link, he considers what resources are necessary to rebuild. The Neuro Care business was one of those weak links. Some products were out-of-date, and new competition threatened Viasys’ position. But in the last couple of years, the division has undergone a complete overhaul.

“We started with new leadership to run Viasys Neuro Care and we redeveloped our core products, which the team did in two years,” Thurman says. “We had to rebuild customer relationships that had been allowed to deteriorate.”

In the second quarter of 2005, the Neuro Care division achieved 75 percent growth over 2004. It now boasts talented management, a new product portfolio and strong sales.

Neuro Care accounts for 25 percent of Viasys’ overall business; Respiratory Care accounts for half of total revenue, and the remaining 25 percent is divided between Medical Systems and Orthopedics.

In each business, Thurman challenges leaders to identify growth opportunities and the ways their respective markets can maintain best in class status. Many times, these assessments result in acquisitions to broaden market reach or extend the family of products.

“Traditionally, we’ve been the strongest competitor worldwide in the respiratory diagnostics side of the business,” Thurman says. “So, we challenge them to [determine] what products or business segments we could move into to increase our growth. As a result, we started a business in clinical services.”

When Viasys acquired Micro Medical this year, it gained access to promising distribution opportunities in physicians’ offices and home care markets. While certain subsegments of Viasys’ critical care business were strong, such pediatric ventilation, other segments were untouched.

“In that case, we developed products in our R&D labs to address some of those markets and we acquired a couple of companies to address other higher growth markets,” Thurman says. “Our balance sheet will allow us to continue to be opportunistic. In the next three years, customers can expect to see new products and services developed internally and a reasonable number of acquisitions that will help us meet our strategic goals. The combined result of that will continue to generate higher overall growth than the industry average.”

Although Thurman’s children are the only ones who still occasionally refer to him by his action-figure moniker, he uses that no-nonsense approach to leadership and view on expansion and success.

“Lead, follow or move aside,” he says.

And integrity is an absolute.

“A lot of times when you acquire companies, they come from a box mentality,” Thurman says.

“And many people think product companies just build boxes.

”We don’t build boxes. The systems that we develop and manufacture change people’s lives —literally save people’s lives. We are in the business of improving the quality of human life. When companies [we acquire] learn our mission, right away they find it inspiring.”

How to reach: (610) 862-0800 or http://www.viasyshc.com

Friday, 29 July 2005 07:11

The Baldino file

Born: 1953

Education: Ph.D., pharmacology, Temple University; postdoctoral studies, University of Pennsylvania and Rutgers University

First job: Research assistant, department of physiology, A.I. Du Pont Institute, Wilmington, Del.

Involvement: Co-chair of BIO 2005; chairman of the BioAdvance Biotechnology Greenhouse Corp.; executive council of the Harvard Division of Sleep Medicine; board of trustees at Temple University and The Franklin Institute; board of directors for the Greater Philadelphia Chamber of Commerce, Eastern Technology Council, NicOx, ViroPharma Inc., Biotechnology Industry Association, Pharmacopeia Drug Discovery Inc., Quaker BioVentures, Pennsylvania Biotechnology Association and Acusphere

Whom do you admire most in business and why?

Early mentors were scientists in post-doctoral programs and in graduate education. In business, you look toward people who have done tremendous things. Bob Swanson, founder of Genentech, led the premiere company in our space, surrounded himself with state-of-the-art scientists and changed the world from a genetic perspective.

What is the most important business lesson you’ve learned?

When you are 33, every day is a lesson. But the best thing to do for your business is to surround yourself with the best people. It’s more about people and less about technology.

What has been your toughest business challenge?

Drugs can fail — our first drug didn’t receive approval from the FDA. We had been developing it for eight years, moving along with just enough resources and scrambling to build a successful business. Now, it’s nice to look back and see how we survived that.

Tuesday, 28 June 2005 05:47

Breaking ground

When Mike Rorie laid the groundwork for GroundMasters Inc., he was burned out and bored with his first job in sales at an air cleaning company.

Self-employment appealed to the 19-year-old, who wanted freedom and flexibility. His grassroots start-up consisted of a single pickup truck and a slew of odd jobs, from mowing to raking leaves to plowing snow.

"It was my chance to be in charge and accountable for my own direction," says Rorie, president of GroundMasters. "I started mowing lawns individually."

The landscape is different now at GroundMasters' since Rorie reversed the "be your own boss" mentality that initially attracted him to the business. Rather than steering a one-truck start-up, Rorie drives a corporate caravan, a full-service commercial lawn maintenance and design/build firm with branches in Cincinnati, Florence, Louisville, Dayton, Columbus, Lebanon, Loveland, Springdale and, soon, Indianapolis.

GroundMaster's growth was inspired by Rorie's realization that he needed to get his company in order before he started short-changing his customers.

"In the service business, owners get inebriated with doing the work," says Rorie. "We immediately get caught up in the fact that we made a commitment, the customer wants it and we have to deliver it. You are consumed all the time."

This, Rorie says, is why many small businesses stay small, and he had much bigger ambitions. To achieve them, he needed a model he could manage and successfully expand so he could fabricate "clones" with identical systems, measures and service expectations.

"We've been busy," Rorie says, reflecting on the three branches GroundMasters has set up since 2003 -- steps toward a regionalization plan that he expects will double his company's revenue in five years.

Systems check

Piecemeal projects fed GroundMasters' first days, but Rorie wasn't satisfied was that. Soon, corner lots multiplied into subdivisions, a business partner and, then, commercial work -- corporate campuses, home owners associations, retail properties and the like. Before long, Rorie had clocked 10 years as sales director, operations manager, administrative guru and front man.

Then, Rorie turned 30.

"Ten years went by, and we were working just as hard as when we started and nothing was getting easier by economy of scale," he says.

Rorie says this epiphany sparked assessment, planning and, ultimately, a set of systems that he reproduced in five regions. GroundMasters had customers and a solid reputation, quality services and market share, but he had not documented the operations process. That made it difficult for him to remove himself from the day-to-day work, because without his oversight, the business was not sustainable.

He knew he needed to figure out his goals, then work up an operations plan with the process needed to get there so employees understood how to get to the finish line.

"The biggest barrier for small business owners is understanding that rather than being personal and customized, you need systems, standards and a replicable [model] that your employees can understand," Rorie says. "Most people who start small businesses build them on their own backs and knowledge base, and they don't realize that if they spend that energy on developing systems and hiring competent employees, everyone is accountable and the model is growable."

The franchise industry does it best, Rorie says. Consider fast food, grocery stores or retail outlets. Quantities are measured. Products are predictable. Employees are trained, evaluated and promoted in a systematic way. A regional headquarters supplies franchises with marketing, products and other resources.

"The stores simply deliver the goods to an identified customer base," he says.

Owners in the trades adopt a different mindset, and Rorie says his method was no different than most.

"Information is controlled, not discussed," he says.

That's why Rorie says franchise companies are valuable training grounds for future business owners.

"You learn how a business works; you learn a system," he says. "Though you might not want to remain a manager there forever, you at least will understand the flow of business."

Business is personal for owner/operators, but when managers can share, delegate and invite their employees to participate in growing the business, significant expansion becomes possible.

"You don't grow a General Electric or a Procter & Gamble without having systems and competent employees," Rorie says.

When GroundMasters invited consultants and industry peers to help evaluate and rebuild its infrastructure, Rorie discovered that employees don't assume you want their loyalty and ideas until a manager tells them so. And until this conversation takes place, an owner will play on a one-man team no matter how big the employee roster.

"We had to share," he says. "We had to say, 'We would like you to do this.' And then, there was a separation again -- people who don't want to do that vs. those who want to do that."

Rorie retained the dedicated, strong players and invested in training them to execute on decisions so he could continue to work on the company's internal organs -- a process that took several years.

"What we know now that we didn't know then was, develop the answers to the test, set up training and then, you determine whether you have the right people and if you can hold them accountable," he says.

Though GroundMasters was a multimillion-dollar business, its core needed nurturing.

"The fact is, you don't have [your infrastructure] outlined because you are still trying to survive running your business day-to-day while you learn, develop and implement this new knowledge in a new way," Rorie says. "That is a feat."

Branch building

Rorie envisioned a growth land-plan dotted with variations on his original theme. Branch operations would unlock market barriers and ensure GroundMasters maintained high-level customer service. In 1998, Rorie replicated his $4.5-million business model and set up a satellite office, a $500,000 branch in Northern Kentucky.

"Because this office was only 10 percent of our business, I could keep the 90 percent on track while we learned what it was like to separate and duplicate the second business," Rorie says.

Three months later, the company launched another service center in Dayton, covering markets 40 miles north and south of headquarters. Proximity to the headquarters is paramount when entering a new market, Rorie says, "because of the need to control, manage and have quick access at first. I had to be able to trouble-shoot and solve problems."

Market research is equally critical to the success of a satellite office. GroundMasters' typical client is a commercial customer in a high-end community, and nailing that down allows GroundMasters to tailor its marketing strategies and sell smart.

Most of all, branching out requires decentralizing the operation.

"When you own one business, you are centralized," Rorie says. "Everyone is in one place. When you replicate, you decentralize. Whether it's the copy machine or paper supplies, those items have to be replicated. Then you must ask, 'Do we need two copiers? Do we need another salesperson or another manager?'"

These questions roll into long-term plans. Can the branch wait before GroundMasters hires another manager, or is this a critical first step? Can administrative functions take place at headquarters, or will centralized invoicing, accounts receivable and even copy machines hamper operations? What does the business need now -- and what can wait?

"One of the biggest mistakes in building branches is lack of planning -- everyone is guilty of that," Rorie says. "And once you have a plan, you have to roll it out, implement it."

Without execution, strategies are simply words stuck on paper. Without measures, owners cannot benchmark to determine their success. And replicating without a recipe is not branching out but starting from scratch.

"How will you know when you need more people or equipment o r another mechanic or building without benchmarking?" Rorie says. "How do you know you need to put more proposals on the street to reach your sales goal? To duplicate the business, you must study how it operates and develop a package that you can implement."

Rorie learned this the hard way before he discovered the branch office revenue sweet spot -- $4 million. When a branch manager of a $6 million location repeatedly called headquarters for assistance, Rorie wondered why he didn't field concerns from his $3 million location.

He discovered that when revenue increases, so must manpower and resources.

"If you are too small, revenue is a concern; if you are too large, control is a factor," Rorie says. "Running a $3 million business is twice as easy as running a $6 million company. Four million dollars is the sweet spot because there is enough revenue to support the overhead structure you need -- buildings, people and resources -- and to cover those costs comfortably and still produce a solid bottom line."

Hamburger chain McDonald's figures its sales capacity this way, as do most franchises, Rorie points out.

"McDonald's says, 'Our stores will do X dollars per year,'" he says. "Once they hit that, statistically, they know the store is at capacity. Instead of expanding that location, McDonald's moves up the highway three exits and starts another restaurant and does another X dollars in revenue."

When Rorie considers his $4 million replication model and the markets GroundMasters serves, the numbers register more zeros -- exponential growth. Among the Columbus, Indianapolis, Dayton, Cincinnati and Louisville metropolises, he calculates revenue potential nearing $40 million, double today's books.

"It's simple once you decentralize your business," he says, returning to the importance of having systems to model building and revenue growth. "We know the answers to the test. Now, the company is infinitely replicable."

Select servings

The consistency a companies that can carbon-copy its formulas keeps commercial clients. Professional audiences turn up their noses at half-baked performance, and property managers are more squeamish today.

"We work very hard now to build relationships that used to come easy 20 years ago," Rorie says. "The U.S. business world is much different. At its best, everyone wants faster, cheaper, better."

What's more, the decision-makers no longer carry budgets with wide, open space for landscape services. Today's point of contact is a woman with high standards who arranges service agreements during a formal meeting.

"You fight hard to get the audience, and it's very much a purchase/vendor relationship initially," Rorie says.

To meet the changing needs of the market, GroundMasters has remastered its sales approach and customer promise.

"We adjusted to meet different value systems," Rorie says. "It's harder to reach our customers because the environment is more formal; therefore, marketing has to be different."

Dressed-up clients want professional service providers, and most of them want the best price. Rorie chooses to cater to service-minded customers.

"Our best clients understand they are seeking a relationship from a professional they know is proven and competent, and they dial in their needs and negotiate the best price with those things in mind," he says.

As part of that service, when clients call, GroundMasters' account managers can respond immediately because service centers are no more than 15 miles away. That convenience sells well in a time-crunched corporate environment, Rorie says.

"Above all, customer service will save us, not quality, product or price," Rorie says. "We know people won't fire us over price or a mistake. They will fire us over poor service. When they want something, they want it, and they know we can deliver superior service to the markets we serve."

And while Rorie fills in regional gaps with the GroundMasters service model, internally, he watches the calendar for cash-flow leaks and caulks these holes with lucrative, add-on services. His business is no more seasonal than the garment industry or hotels and resorts, he figures.

"When you are in a seasonal business, your challenge is to fill in the blanks -- deseasonalize it," he says. "Look at winter coats. When do you sell them? When do you sell sandals and swimsuits? Clothing companies sell items all year long. You can't just be a swimsuit maker, you need a winter coat line, a spring line, sweaters and T-shirts."

Similarly, GroundMasters offers winter services such snow removal and early-spring products including flowers and mulch. Giving clients a reason to call GroundMasters year-round also solidifies relationships, Rorie says.

"[Commercial customers] won't replace us with a snow-only vendor or a competitor because they know we will give them priority status, we are competent and we can deliver the service," he says.

"You can continue to grow and expand if you have the passion and courage to do it -- and it takes both," he says. "You can say, 'I've done enough and I don't have that energy,' or, 'I don't want to take more chances,' or you can turn that around and say, 'This is fun. Why quit now?'"

How to reach: GroundMasters, www.groundmasters.com

Tuesday, 24 May 2005 07:45

Direct effect

When a Silkies "target" checks her mailbox and sifts through the bills and advertisements, Pat Corpora hopes she sets eyes on his tempting offer first.

"You qualify for an instantly slimming, beautifully shaping, supremely comfortable free pair of panty hose," a Mylar mailer announces.

Who could resist?

"It's a great promise," says Corpora, chairman, president and CEO of HCI Direct Inc., a direct marketing company that has served the women's market with products including Silkies panty hose for 30 years.

"The most beautiful legs in the world wear Silkies," announces an all-caps tagline situated under Silkies' curvaceous logo.

Direct marketing is an intimate, effective way to reach potential customers and deliver quality service to repeat clients, Corpora says. And with 2 million customers enrolled in Silkies home-delivery service and a 5 percent response rate -- double the national average for catalogue sales -- Silkies has a leg up on the hosiery market as the largest direct-mail brand.

"People often think of direct-response marketing as a shot-gun approach," says Corpora. "But the approach we take is very laser-like."

The 7,000 women who sent back their response cards in January to try out Silkies' luxury threads are evidence that when the right message lands at the right address, revenue returns to the sender. HCI Direct brings in $245 million each year for its efforts.

Information central

Corpora is practiced at executing the direct effect. He joined HCI Direct two years ago after leaving a position as senior vice president of marketing for America Online. His short tenure at the technology giant capped a 20-year career at Rodale Inc., a publishing company recognized for its health and fitness titles.

Corpora joined Rodale in 1980 as a project accountant, rising to president of its book division, where he grew the $30 million department with a "checkered past" into a revenue and profit leader that broke $250 million before he left in 2000.

"In direct marketing, you can adapt quickly to selling different products," Corpora says, adding that panty hose, magazines and Internet service aren't all that different -- really. "It's a different audience and message, but the process, list selection, [demographic] segmentation and the way people buy is pretty consistent."

A veteran of Rodale's circulation circuit, Corpora's learned lessons from hit-and-misses that have helped him understand the critical success factors for direct marketing. Sales pitches are different, methodology is the same.

First, a winning direct-response campaign marries statistics and style -- numbers and words. Interpreting information into a selling proposition is much different than adding up numbers and regurgitating economic data. The process requires creative and analytical mindsets.

"You have to have the right and left brains working," Corpora says. "If you are just math, you will not be successful because you need compelling copy to get people to respond. On the other hand, if you can't interpret the numbers, your ideas economically won't work for you."

Then, Corpora picked up pointers on the power of personalization.

"I learned that by testing different headlines and different formats, you could greatly increase your response rate," he says. "The beauty of direct marketing is you can have multiple messages going to multiple people."

He watched response rates climb when he experimented with snappy come-ons while working as a marketing manager at Rodale.

Corpora applies these philosophies to HCI Direct's campaigns, which explains the Mylar mailer that generated a 50 percent increase in response rate when the company introduced it five years ago.

Meanwhile, to craft messages that stick, HCI Direct mines its databases. Details matter -- even size matters. For example, women who slide into petites look for style; ladies who order extra-large sizes want comfort. These two groups will read different literature from Silkies with compelling statements that speak to their needs.

By scrutinizing demographic data, digging through customer list statistics for clues to buying preferences and identifying potential clients based on geography, age, occupation, interests and particulars such as leisure reading preferences, Corpora can narrow a mammoth circulation list to a digestible group of likely Silkies shoppers.

These women are generally middle-aged traditionalists with formal social obligations and conservative professional dress codes -- "Women from the Carolinas as opposed to women from California," Corpora says.

In fact, 300,000 such women have purchased 20 or more items from Silkies; 50,000 have received more than 100 hosiery shipments. And once women send in for their free Silkies sample, HCI Direct converts 25 percent of them into repeat customers, Corpora says.

HCI Direct pursues three types of customers in three different ways: it coddles its current shoppers, it asks former buyers if they will invite Silkies back and it prospects noncustomers who fit its specific demographic target.

"We use a sophisticated modeling system," Corpora says. "We build progression models and have access to statisticians."

Here, too, Silkies tweaks its inserts and customizes its benefits depending on where a shopper falls on the loyalty scale. It asks those who purchase four items per month if they are interested in increasing their shipment frequency. It bolsters veteran customers' buying power through rewards programs. And customer service staff fields queries and calls on cancelled accounts to see if the service was unsatisfactory.

Most retailers don't dig this deep.

"I like our position," Corpora says. "We don't position ourselves against the discounters, like Target or Wal-Mart, because we're not going to win on price. We position ourselves against department stores. That is where we compete very well on price, quality and, of course, selection."

As hosiery departments in these stores have evaporated into scant displays with fewer choices, Silkies captures shoppers who regularly purchase panty hose, seek different colors and styles, and appreciate the regular shipment so they can avoid rummaging through stock and the risk of returning home empty-handed.

Corpora's main concern is winning the mailbox competition.

"We just need to stand out among all the other mail in there," he says. "If they pick up their cable bill instead of our package, we might lose an opportunity."

Corpora likes to reach customers with words rather than dinner-time phone calls, radio announcements or department store displays. He prefers to know exactly who will find Silkies' promotions in their mailboxes.

"We have the luxury of having a lot of information on our customers," he says. "Silkies has always been recognized as a quality, valuable brand. And since we are in direct marketing, brand is more about the service and relationship people have with our company."

Mail appeal

Six months after joining HCI Direct, Corpora knew he had encountered the most complex marketing obstacle of his career so far.

Hosiery is as hip as a petticoat in some markets, making it a challenging product to market. Today's lax dress codes and jeans-attire social functions force companies like Silkies to churn out new products that fit modern tastes -- vibrant colors, opaque and cable varieties, and even hose with rose tattoos.

"I realized after working here for a while that this job is really hard," he says.

For years, Corpora had mastered marketing strategies for products that people demanded.

"At Rodale, we were in health and fitness, and AOL was Internet service," he says. "These are two industries that have the wind to their backs -- people are interested in health and are jumping on the Internet. It was easy to sell."

Panty hose are a different story.

"We work in an industry where there is a declining market and we are trying to reinvent a selling model where the customer has more flexibility," he says.

While Corpora stimulates his team to inv ent strategies to catch the attention of customers, he also must convince employees that they can and should participate in driving the company forward and sending Silkies' message to customers.

"We have to make a compelling statement that our selection, flexibility and value is better than what customers can get anywhere else," Corpora says.

Realizing the task at hand, Corpora mentally pages through lessons learned that have helped him sculpt HCI Direct's corporate culture. From AOL: Approach projects with a sense of urgency. "If things aren't selling, how can we make it happen?" he says.

Question everything -- and then ask more questions.

From Rodale: Value your products, value your people.

"If you don't have a great product, you can trick people for a short time," he says. "But you will eventually lose your audience. Put the product first. Also, I think it's valuable and important to create an organization that cares about its people."

Finally, think long-term and develop a game plan with strategy that reaches beyond the next couple of quarters.

Cultural fabric

Corpora describes HCI Direct as a participatory, goal-driven workplace. Employees speak up, and are held accountable. They are encouraged to innovate and perform, then celebrate the company's progress and success.

But it wasn't always that way.

"The culture has evolved greatly over the past two years," Corpora says, calling the company "somewhat autocratic" when he joined.

"That's not good or bad," he says, "but it gives you a certain type of culture," one that can settle into complacency.

"It wasn't that employees didn't try, but the message from management was, 'We'll tell you what to do,'" Corpora says.

And when he asked workers why they did a task a particular way or why they carried out a project just so, they replied matter-of-factly, "Because that's the way it was always done."

Enough said for Corpora. The key to winning the mailbox competition, enticing new customers and delivering dependable service is developing a seamless operation behind the scenes, he says, so he developed a three-year plan he presented to the board before he took over as CEO.

He examined the company's inner workings and found that nearly every service was done in-house. That included manufacturing, which left HCI Direct as one of the few thriving textile houses in the United States. Three facilities in the Carolinas employ 400 workers, who buy yarn, knit, sew, package and ship Silkies to customers.

When HCI Direct occasionally outsources work, the defect rate is 25 percent; when it's done in-house, 5 percent of hosiery is defective. It's just not worth it to send sewing overseas, he says.

"I first thought, 'I can't believe we are competing by making our own panty hose,'" Corpora says.

Shareholders asked the same question when Corpora reviewed with them the company infrastructure.

"Does that make sense?" they wondered.

"I can prove to them that it does, and it's an advantage," Corpora says. "The people who run our plants in the South are very determined to keep that business (and 400 jobs), and labor is only 30 percent of the overall cost."

At the same time, Corpora carefully reviewed the responsibilities of the managers.

"We set up more formal review processes where managers and employees are accountable and responsible for evaluations," he says. "We set up incentive plans."

He also launched management training that includes personality tests to ensure team members understand how to communicate with one another.

Because the organization's in-house staff encompasses departments that include postage and shipping, accounting and finance, marketing and creative, and IT and statisticians, facilitating uncluttered information flow is essential. Designing goals and pinpointing expectations helps HCI Direct run as a cohesive entity rather than as a compartmentalized, function-driven company.

"There is a very nice buzz in the organization," Corpora says. "Everyone knows their job is to serve the customer, and it keeps us all very focused."

What's in store

Corpora's efforts have focused on HCI Direct's core Silkies line, but the ambitious CEO envisions an online storefront with other offerings. Eventually, the company's direct-response approach will test items besides textiles, he says.

"My goal is to transfer HCI from being a hosiery company to being a direct-marketing company that serves the women's market," Corpora says.

He says the Silkies brand is strong but not fast-growing, and to grow, HCI Direct must leverages its best-selling brand and offer different products.

"We have 10 (million) to 15 million customers who have bought from us in the last five years, and we will still have a relationship with those people in some way," he says.

Already, HCI Direct's Web site introduces customers to accessories, bath and body products, jewelry and sleepwear. This, Corpora figures, is just the beginning. Potential shoppers are tapped, databases are built and information is plentiful.

And while Corpora concentrates on maintaining a strong, competitive hosiery business he hopes fresh endeavors will provide aggressive profit and revenue growth to the $245 million organization.

And in a business where information is central, HCI Direct is in the know.

"There is one thing about Silkies," Corpora says. "We know everyone's size."

How to reach: HCI Direct, (215) 244-1777 or www.silkies.com

Monday, 23 May 2005 12:15

World smart

In a global market, barriers to entry are often more basic than building a supply chain or cultivating a customer base. A language mix-up can make or break a deal in the worldwide game of business; even plain English can stump high-level executives who deal in international board rooms, says Gary Heiman, president and CEO of Standard Textile.

"In Israel, 'he' means she, and 'who' means he," Heiman says.

And crossing your legs or showing the soles of your shoes is an insult in some cultures, he adds.

Sometimes, "yes" means maybe, or yes for now, until later negotiations. Other times, "maybe" means no --because "no" can come across as rude, says Heiman, who speaks four languages.

"We deal with people who often have different histories and experiences than ours," Heiman says, pointing to Standard Textile's 22 manufacturing plants in 12 countries, with thousands of associates in 49 countries who produce and sell health care, hospital and work-wear products for the half-billion-dollar business. "Countries in which we do business often have different religions, belief systems and codes of honor that we have to respect.

"We like to think that we are 'world smart,'" he says, emphasizing Standard Textile's tagline. "That means being in the right place at the right time with the right resources. Our business model encompasses developing innovative products, and marketing and selling them everywhere in the world."

It would be easy to get lost in translation without a "world smart" attitude, but the culture Heiman has built at Standard Textile is rooted in a commitment to reaching for international resources, tapping into talent around the world and relying on sure-fire systems and a detailed reporting method to ensure the global business revolves smoothly.

We are the world

Heiman's introduction to global markets began miles away from business school. Contrary to the experience of most managers, he broadened his knowledge overseas first.

"It's the flip of most people's background, where they start in the United States and transfer somewhere outside of the country for a number of years," he says.

Heiman was a college graduate fulfilling his wanderlust when he moved to Israel in 1973. Now a dual citizen, he spent 17 years there and served a tour of duty in the Israeli military before joining Standard Textile in 1975, when he launched the company's first vertically integrated manufacturing facility.

In the military, Heiman discovered the importance of systems, infrastructure and reporting strategies.

"I decided that the real key for any country, or company, to grow or prosper and be vibrant and secure is to have a strong, individual infrastructure," he says.

At that time, Standard Textile's operations were based solely in the United States, and functions were limited to distribution, unlike today's comprehensive supply chain model.

"We did not design, develop, research and manufacture our own products," he says.

Today, Standard Textile's scope touches every process, from product development to engineering to yarn and fabric production to sales and marketing. The work force has diversified over the past 30 years, as well. Payroll is comprised of associates from around the world. Training them to communicate and conduct business in foreign environments is critical to the company's success, Heiman says.

"One thing I have learned and built over the years is a well-trained, well-disciplined team that is efficient and has boldness and bearings," he says. "They have a need to take on big challenges in faraway places, almost all the time under adverse conditions. They must accomplish their tasks on time and train a local team and have systems in place before they leave."

In turn, Standard Textile offers employees the opportunity to make an imprint on the global economy.

"Our associates thrive on the possibility of doing things that others have not done," Heiman says.

For Heiman, that means whipping up a manufacturing operation from scratch and following a growth model, gathering information, testing products and building slowly and conscientiously before preparing to produce on a larger scale.

As an example, take China, the most recent addition to the Standard Textile global network.

"We are not going to hire a 25-person marketing and sales staff tomorrow," Heiman says. "We will hire a handful of people who researched and understand the market and its needs, hurdles and opportunities, and then we will approach it in a very well-defined, controlled and disciplined way."

This methodology makes sense to Heiman, who quoted Sun Soo's "Art of War" during a speech in March to honor the opening of Standard Textile's China operation. "Unhappy is a fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise, for the result is waste of time and general stagnation."

The Chinese host was surprised at Heiman's selection, although he later discovered Heiman, a practicing engineer, was a Chinese history major in college.

"At the end of the day, you don't achieve anything through war and battles," Heiman says, explaining in a broader sense the importance of cultivating a work environment where associates cooperate despite political and societal differences. "Cross-cultural training is a significant part of our overall corporate training program. Not only are people spending time in other countries, but we also have people from those countries visit Cincinnati.

"We might ask our employees to be a part of a meeting, and they need to understand the dos and don'ts of dealing with a particular country."

Workshops provide cultural overviews for employees, but most valuable are shared experiences from colleagues who present realistic scenarios and coach associates on how to better handle challenging cultural encounters.

For example, discussing the war in Iraq with a Frenchman is bad idea, Heiman says.

"We bring in associates from France to talk to employees about what they should do to fit into the local environment," Heiman says.

He refers back to Sun Soo, applying his words to 21st century business.

"If you don't follow up by building enterprise, infrastructure and economy, and by giving people a better future, it's all for naught."

Managing across borders

Book smarts and lectures provide valuable lessons, but nothing replaces the real thing. In managing a global business, the sticky situations -- the uncomfortable, uncommon and sometimes downright frustrating times -- mold a hands-on management boot camp for international associates.

Heiman describes a difficult management changeover in a European country that ultimately led to a structural reorganization. Norms in the United States aren't necessarily the same in other countries, and business unusual is business as usual in some cultures, he learned.

"In some countries, a company's success is measured by how big you are, what type of machinery you have and your revenues and sales," Heiman says. "It was shocking to us how little emphasis [the workers] put on the bottom line. We had to teach the associates there that anyone can have volume and compete on generic products and low prices, but at the end of the day, there is no end to the lowest price.

"Someone will come in lower, and you can only compete by developing innovative, exciting new products that better meet customers' needs. And you need to earn a reasonable margin."

After meetings, discussions and attempts to shift mindsets, this bottom-line-focused mentality still didn't register with employees until Heiman appointed a manager who had worked at other international operations and understood the concept.

"We told workers that the former owners didn't sell us the company because they were happy with its results and business was great," Heiman says. "As a matter of fact, they sold it under duress because they weren't producing a bottom line. We had to communicate that the only way there was a future for them was to create a respectable top line, and, as importantly, a respectable bottom line that will fuel development and growth."

That sounds simple, but the lesson taught Heiman that strong infrastructure and an impeccable reporting system are essential for conducting business without running into communication blocks.

In effect, country managers report to the corporate executive committee, which is comprised of senior vice presidents in every functional area. Additionally, companywide goals fueled by incentives gel together departments so that each part works toward the success of the whole.

"We have corporately aligned incentives on a global basis," Heiman says. "For example, we focus on product development by setting the goal that 15 percent of the products we sell in any given year will be new products that were developed and introduced during that year. This means that every six or seven years, we have totally new or re-engineered products across the board. Everyone across every functional area in every country is tied to this goal."

Marketing and sales departments gather field intelligence so they can offer insight to the product development team. The product development team designs new introductions for various markets. Manufacturing personnel focus on ways to weave and produce different products rather than on how to push items off the line as quickly as possible.

The same defined structures apply to the supply chain, which must function 24/7/365, Heiman says.

"When you are involved in a global market, the supply chain is a dynamic process," he says. "You have to react quickly. You can't just say, 'We'll get to it when it's on our clock or when we don't have a holiday or vacation over here.'"

The supply chain operates as like a well-oiled machine, fueled by Standard Textile's research and development teams.

"We tie together every area of the business to innovation," Heiman says. "And we look at waste in every part of the supply chain so the operation is efficient and effective."

Finally, quality control dictates the success of the products, so a global quality control team travels around the clock, visiting company facilities and suppliers.

"Quality, consistency and overall efficiency of operations are addressed here day in and day out," Heiman says. "Quality control is wired into the DNA of all of our associates -- it's second nature to them."

Made to order

Customers demand innovation and functionality at the lowest cost per serving, Heiman says. Towels are simple; incontinence pads for hospital beds are basic. So to meet these orders, Standard Textile designs fibers that withstand industrial use, provide comfort for patients and guests, and are easy to use.

"Customers want greater longevity so their cost per use will go down dramatically," Heiman says.

Because cost cuts must come from somewhere, Standard Textile relies on its supply chain to usher products to the marketplace with as little waste -- travel time -- as possible.

Then, the company turns to field intelligence to identify ways to reduce costs and provide the best products possible to customers -- items the market really wants.

"Being a person with a past in the military, I have a great respect for field intelligence," Heiman says. "That means not just hiring a consulting firm or getting market information, taking that as gospel and turning that into products. We gather field intelligence from our marketing and sales people. We find real opportunities and what our potential customers need."

From there, Heiman and his team highlight promising growth sectors. Hospitality is offering substantial growth, and Heiman hopes that sales from products in this department increases 50 percent this year. The company recently re-entered the U.S. hospitality market after a nearly 30-year hiatus.

And institutions are willing to spend on textiles that provide guests with a luxurious experience.

"That falls right into our lap," Heiman says. "When [hospitality] customers look for new, exciting products that their guests will be happier with, that is exactly our strength."

Growth is calculated and conservative, but still a little risky, Heiman says. Following consumer trends carefully allows Standard Textile to prepare and produce products before competitors introduce options, he adds, comparing the tactic to a hockey game.

"If you are a good hockey player, you get to the puck just in time," he relates. "If you are an excellent hockey player, you anticipate where the puck will be, you get there ahead of time and you wait for it."

On the world clock, the game is always on for Standard Textile. This urgency translates in all cultures in which the company operates, and Heiman takes his commitment as ambassador to its success quite seriously.

"We have to bring the world to Cincinnati, and we have to bring Cincinnati to the world," Heiman says. "It works in both directions."

How to reach: Standard Textile, (800) 999-0400 or www.standardtextile.com

Wednesday, 23 March 2005 09:30

Working smart

Jim Smart answers questions and provides practical advice for clients -- part of his clever consulting approach. Timing couldn't be better for Smart and Associates LLP, a business advisory and accounting firm that has been named one of the fastest-growing businesses in Philadelphia.

"The business is evolving and changing -- the dust really has not settled, in my opinion, even though three years have passed since Enron went down," says Smart, founding partner. "The CPA industry is in the midst of tumultuous change. We are simply the beneficiary of these changes."

While people wash out the sour aftertaste from ethical upsets such as Enron, progressive firms such as Smart's prosper. His company focuses on nurturing client relationships, serving up consulting services and recruiting talent to drive new business.

Arthur Andersen's expiration sweetened the talent pool. Smart "drafted the best players when the draft was open," recruiting Andersen professionals, executives and partners to bolster his technology consulting practice. Fall-outs, mergers and legislation continue to open up market share that feeds the firm's growth.

And Smart is picking up plenty of business from compliance consulting. Tagging the Sarbanes-Oxley Act of 2002 "the most important piece of legislature since the FCC Act of 1934," he attributes the firm's growth in business advisory services to its provisions. Under the act, clients that hire "The Big Four" for auditing services no longer can enlist the consulting services of these firms.

"All of a sudden, these executives have to look for other service providers," Smart says.

With its headquarters in Devon, and offices in Atlanta, Chicago, Baltimore/Washington, D.C., and New York City, the firm reaches global clients. Meanwhile, Smart and his partners knit relationships with executives and earn business -- part of an aggressive yet calculated and careful growth strategy.

"Change is good," Smart says.

Smart Business spoke with Smart to discuss the challenges of these strategies and how he plans to keep the growth going.

How did you tap into growth opportunities?

We follow industry changes very closely and we chase opportunities that are presented to us. The biggest part of our growth in 2004 was primarily providing assistance to companies that were implementing the Sarbanes-Oxley Act.

There were provisions that all auditors had to comply with, and the deadline was the end of 2004.

How does your strategy work?

Our strategy from earlier days was to fill what we've always believed has been a huge gap between international and local firms. When we first started the firm, it was The Big Eight, and that gap, by way of market share, seemed huge. The Big Eight consolidated into The Big Four, or Final Four as it is today.

The merger activity in itself has created opportunity.

Layer in the changes that occurred as a result of the Sarbanes-Oxley Act, and you have a recipe and invitation for other firms to step up and compete. That is why I view the Sarbanes-Oxley Act as our invitation to compete with international firms, and compete in a credible way.

Clients are forced to look for other service providers. In the old days, the notion was always that you select an auditor, and once you do that, that firm is your adviser for taxes and consulting. The way of the world was that everyone went back to the auditor for consulting services.

After the Sarbanes-Oxley Act, auditors are truly watchdogs, and that is the only service they can offer clients.

How much of your growth came from the passing of this act?

We were growing rapidly before the act - the act just forced companies to change. We were making inroads to developing relationships with large corporate clients anyway, and we were having some success without the rule change.

The rule change certainly fed our growth -- we've done $8 (million) to $9 million revenue in Sarbanes-Oxley compliance work. It's hard to put a finger on the percentage or what growth would have been if Sarbanes-Oxley did not occur.

I'd like to think we would have continued to grow at the pace we are on, but I have to admit that the marketplace might not have permitted it.

Which areas of your business show promise -- which services are most lucrative?

Our business advisory services department is the area that includes the Sarbanes-Oxley consulting work, which has been the No.1 driver of growth in our firm. But a close second is the technology practice. We started this in July 2002 with 13 people -- a fledgling group.

In July 2004, we had 64 people in that group, and they went from doing $1.5 million to more than $15 million in 2004. The budget for 2005 is $18 (million) or $19 million. More than 70 percent of our revenue comes from consulting services, and I estimate that the business consulting part of the practices did about $22 million in 2004.

Was your revenue always so strong in advisory services?

I've always enjoyed advising our clients beyond handling year-end filings that were required for Uncle Sam and bank audits. Inconsistent with other firms, helping clients with mergers and acquisitions has always been a big part of our practice.

Even in the early days -- 1990 and 1991 -- almost half of our revenues were from consulting. That has grown, and that is where the growth will continue to be.

As you continue to thrive in the consulting sphere, how do you manage this rapid growth?

Pepto Bismol. (laughs)

Does the pink stuff always work?

Here's how you know you are a partner: I really don't have a client load any more. From time to time, I work with a few clients, but I delegated my client relationships to my partners several years ago.

Somewhere along the line, someone offered me the best advice I ever received: Are you working in the business or on the business?

If you are going to grow in a service business like ours, you have to manage it and step back from the day-to-day fray. So I delegated the vast majority of my client relationships to other people five years ago to build a management structure that is more corporate than the traditional partnership model. I have a COO and CFO now, and we spend the time to manage the business.

It's the only way to do it. I can't possibly grow this business if I am also working day-to-day.

It's a big leap, and a leap that a lot of firms don't make. It's against your nature to pass on your clients because you spend time building relationships with them, and then to transition and hand off these relationship to your partners because you don't have time to manage them can make you pause and think.

Accountants hold on to relationships -- that is our security blanket. If all else fails, you always have your clients.

What is rewarding about working on the business rather than in it?

The growth, the challenge of growth and enjoying the success. We are building an environment that allows people to grow and progress through the firm to partner.

It is exciting to see people who have been with us for seven or eight years grow into partners. And it is satisfying to mentor other people -- and that is a big part of my job.

How do you target the right people for hiring?

The key is to hire the best players in the draft when the draft is open. I hire good people, and work follows good people. We don't hire because we have a backlog -- we hire talent.

Our business is a service business -- the only asset that matters is our people. We provide vibrant career paths with opportunities for growth and development.

Where do you expect your company to be next year at this time?

We always have this discussion, and I said to our executive board at our retreat: We can't expect to grow at the pace we have in the past. All of a sudden, the green eyes come out and we all get conservative and say we'll grow by 20 percent.

Then, I say: We haven't grown only by 20 percent in eight years. I challenge the conservative nature of my partners and push them to suggest that we will grow more than that.

Realistically, I will be disappointed if we don't bill at least $80 million in revenues in 2005. We didn't do many mergers in 2004, and I have some optimism that that could change in 2005, and we could bring on some new players that will feed the growth engine beyond what you can budget.

How do you maintain perspective when considering the avenues your business could tap into in the coming year?

The key for us is that we have focus. For reasons beyond our control, we find ourselves in an industry with extraordinary opportunity. When opportunity knocks, you have to take advantage and open the door. We are doing that with gusto.

But, it takes time to grow, and you need to take the time to manage your growth. You cannot work in the business and grow at a pace that resembles ours. It is physically impossible.

If you hire great people, you will not be afraid to delegate responsibilities. That is the key.

How to reach: Smart and Associates, (610) 254-0700. www.smartassociates.com

Thursday, 24 February 2005 08:42

Writing the rules

There are two types of readers, Thomas Nies says, dividing those who start and finish one book -- reading from cover to cover, beginning to end -- and those who start one selection, only to be tempted by another title, another author, another topic.

Some read just one book. Others digest several simultaneously.

There are single-serving thinkers and multicourse minds.

As president and CEO of Cincom, a Cincinnati-based $100-million commercial software conglomerate, Nies likes to digest many books at once so the information from all of them can mingle in his brain.

"I am a voracious reader," says the 40-year technology veteran, rattling off titles of three books in progress: "The World of Nations" and "The Narcissist," by Christopher Lasch, and "The Seekers: The Story of a Man's Continuing Quest to Understand His World," by Daniel Boorstin. "I like to read several books concurrently so I can assimilate ideas."

Nies adopts a similar strategy when commanding Cincom, which, despite a series of software market misfortunes, has posted record calendar years since 2001. Even in hard times, the company grew in size by 50 percent and marked 20 percent revenue increases each year. And after 19 years of more than $100 million in revenue, Nies' company, which builds, sells and supports software for commercial giants including BMW and Citibank, is positioned to expand even more, five years after the technology boom and bust.

"I constantly read and study because the demands are great today," Nies says.

He also designs operations decisions based on his archive of software knowledge. Nies' customer-driven product approach is no mistake; for mid-sized software firms that focus on the "soft side" of software -- customer demands, product value, ease in implementation and return on investment -- the pot is generous.

"Software is right at the heart of all advanced societies," Nies says.

Slimming down, getting smart

Customers didn't flinch when their technology tabs skyrocketed before Y2K. Implementation fees for millennium compliance cost companies up to 12 times the price of initial software license fees but people spent with frantic enthusiasm, Nies says.

"Tens of billions of dollars of additional capital was floating in the industry during that euphoric period that Alan Greenspan called irrational exuberance," Nies says..

But when the bubble popped, Y2K passed and companies were rewired with updated systems, price tolerance dropped.

"Customers are not willing to throw away money anymore," Nies says. "They are more demanding of buying rationally and, in addition to that, they also recognize that there is significant excess supply in the software industry and that supply is far greater than demand."

This realization shook the pricing baton from the hands of software companies and passed the power to customers.

"Customers no longer allow vendors to control the buying cycle," Nies says, revealing the crux of Cincom's value proposition -- its secret growth weapon. "They demand better deals, so to speak. They want more for less."

This meant skimming fat from the operation - identifying areas in which customers were compensating in cost for inefficient or unnecessary processes. Essentially, the scale-down effort resulted in removing implementation costs -- fees customers pay when they must adapt software to meet their specific business requirements. Most software packages are standard. Once purchased, the provider tweaks the program to run according to the customer's corporate setup; those implementation costs can increase software package prices tenfold.

"Our goal was to slash the waste out of customer implementation and support, and we have done that," Nies says. "That now gives us a value proposition radically different and better than our competitors."

In other words, Cincom "got smart" and introduced a software product that listens to customers. Smart Software is standard, yet personalized; customers elect software requirements, and Cincom delivers a product modeled from its package.

"The software takes the intelligence customers provide -- their wants and needs -- and we deliver to them something very close to their specific requirements without massive implementation costs to modify the software," Nies says. "Cincom offers value to customers by subtracting the human capital required for software implementation and eliminating the need for companies to alter their business models to accommodate software setup."

Risky business

Nies wasn't completely confident that his model would rake in revenue, but trusting his instincts about consumer trends toward value and price-driven buying, he learned that doing the right thing for customers can pay off handsomely.

"With any plan, there is a vision," he says. "You hope it is good and correct, and you have to make sure you aren't falling in love with your own ideas."

Substantial risk accompanied Nies' decision to cut out implementation costs and trade that revenue for a customer value proposition that he hoped companies would embrace.

"We saw attraction from customers, and our investment in new ideas is behind us," he says.

The company's lean operations approach and subsequent software introduction, which mimics the idea of "more for less," is paying off. Customers like the price -- several times lower than competitors' packages -- and once they're hooked, they stay loyal, Nies says. Trust and technology have resulted in repeat customers and initiated word-of-mouth sales.

The company he launched in 1968 with a card table and a dream has turned over its share of wild cards, generating over its lifetime more than $3 billion in revenue -- $5 million for every dollar invested. And the game's not over; Cincom will add 100 employees this year.

"We have a system and a value proposition that customers like, and now we have to find ways to link that to as many people as we can, and that takes more staff," Nies says. "No company adds an extra cost today unless it is well justified, and we are not unlike any other company. We only add costs if we need to support a significant demand."

That said, Nies presents a financial snapshot of Cincom's earnings per share, which have increased tenfold since 2001.

"We probably have the highest rate of return on investment capital in the industry of any of the top 10-percent companies," Nies says, adding that while Cincom averages more than 80 percent ROI, the largest competitors average less than 10 percent, and very few software companies earn more than 20 percent ROI.

But Nies isn't concerned about the others.

"If we continue to give customers more of what they want at a lesser cost, we don't have to worry about the competition," he says. "There are enough customers out there who want this value proposition that we won't have to worry about competition for a long time."

CinCommunity

Acquisitions force Darwinism on the industry, not a bad proposition when shaving 40 percent to 50 percent capacity from large companies leaves more room for mid-sized firms such as Cincom.. But Nies is leaving this type of expansion to conglomerates. Rather than buying revenue to grow, he prefers to invest in technology.

"The best way for some companies to grow is to buy revenues, so they purchase other companies," Nies says, referring to the boom years. "Now they have to justify the economic cost, so they will cut large numbers of staff to rationalize the excessive price they paid to buy the revenues."

Nies' approach focuses on nurturing Cincom's core - its staff and technology -- and growing organically. "That is not to say there won't be an acquisition here or there," he says. "We are always looking for additional technology, but we are not trying to buy revenue growth. We buy technology and use technology to grow our company organically."

This means investing in employees.

"I have spent almost 40 years trying to help people learn how to be more productive, capable and able so they can better serve Cincom," Nies says. "But as they become more productive, they not only serve Cincom but they become economically more valuable to us and can earn higher compensation levels."

Rewarding employees with earnings hikes is just one example of "Giving Forward" -- a central component of Cincom's culture. Nies' tags the concept CinCommunity, accenting unity.

"People want more enjoyment, more opportunity, more compensation, a better life," he explains. "Our objective is to help people receive more by helping others get more."

This philosophy returns to customers. Offering companies the best software packages eventually will turn profit for Cincom, earnings for employees and satisfaction for all.

"We share the wealth we create with our people," Nies says.

Besides, sharing the pot keeps employees planted at Cincom. High retention marks are proof that people-minded policies matter to workers. Nearly 25 percent of the company's staff members are 15-year-plus veterans, contradicting the high-turnover industry norm, Nies says.

"Retaining people is a very large part of the value equation," he says. "It makes very little sense to help people learn and develop their capabilities, only to see them leave your organization."

Meanwhile, as Cincom bolsters its human core to handle increasing demands, Nies considers ways to preserve his nest egg. Now that the company is stretching beyond its modest capacity and reaching for greater returns, how will he avoid producing a "watered down version of what we are," Nies wonders?

Teaching, training, developing and investing in employees will feed a recurring cycle that breeds enriched, loyal employees, he hopes.

"We reinforce our ideas and goals, and we quickly try to give people as much responsibility as they can cope with," Nies says. "We actually give them more so they grow up to the responsibility.

"I've spent 40 years trying to help people learn," he adds, peeling off his president layer to reveal the professor - the avid reader, the curious student. "I don't know if I ever taught anyone anything, but I try to create an environment where employees can learn and succeed."

Nies listens to employees -- and they help him tremendously. He listens to customers, who signal to him their demands for software and service. He listens to peers, and he watches their successes and challenges. Then, he acts on his instincts.

"I think everyone in every pursuit has to begin with the end in mind," he says. "What is the end we want to accomplish? We must keep ourselves fixed on that end and not deviate from that.

"I think one has to make sure those ends are worthwhile, and that they will stimulate what is best in people, and that people believe in these ends and strive for them. It is important to set these goals and include every stakeholder in the endeavor."

Success is measurable for Nies, who says efficiency and effectiveness weed out software companies that surge forward and those that disappear.

"We help our customers grow their businesses faster and more profitably with far less upfront investment, much less risk and much greater and quicker ROI," he says. "Simple rule. But it has worked so well for 36 years, why change now?"

How to reach: Cincom, (800) 2CINCOM or www.cincom.com

Tuesday, 25 January 2005 19:00

Smooth operator

When Jon Boscia learned that he was hand-picked by the board to assume leadership of Lincoln Financial Group, he made a few phone calls.

First, to Bill Gates. Then, George Fisher, former CEO of Kodak. He contacted John Chambers at Cisco, Andy Grove at Intel and stock investor giant Warren Buffet.

And he didn't leave his mentor -- Peter Drucker, renowned business economics writer -- off the list.

"I called them up and told them, 'You never met me. I'm going to be starting as CEO of a Fortune 500 company, and I'd sure love the opportunity to get your thoughts,'" Boscia says, reciting his casual prompt without a hiccup or stammer.

His smooth talk sounds like he simply dialed up his old college cronies. No big deal.

"I had several years of stints in sales, and I was used to calling people and having them hang up," says Boscia, who has spent the last seven years as Lincoln Financial's CEO and the last four as chairman of its board. "What was remarkable was not a single one of them said, 'No.'"

Boscia is not afraid to ask questions, analyze feedback and even stare at the ceiling from 2 a.m. until daybreak, allowing his mind to exercise the possibilities. After six months dedicated to travel, more than three dozen face-to-face conversations with business executives and countless tours through company departments from human relations to marketing and sales, Boscia had plenty to think about and a marathon ahead of him.

That's to be expected when the company you run -- a leading provider of wealth accumulation and protection products -- has $110 billion in consolidated assets, annual consolidated revenue of $5.3 billion and more than 5,600 employees. But Boscia leads the way undaunted by the task.

Avid for advice

Boscia's presidential training breached traditional succession practices. Rather than shadowing his predecessor, Ian Rolland, Boscia clocked miles on the road and studied other companies' systems.

"Ian said to me, 'Jon, the typical transition would be for me to move into the chairman and CEO role only, and you would become president and COO,'" Boscia recalls of his conversation with Rolland, whose tenure exceeded 20 years.

This was 1998, when Lincoln Financial was based in Fort Wayne, Ind.

"He told me if we did it that way, I would spend seven days a week tied up with the most detailed decisions,'" he says.

Rolland warned Boscia that employees would ask him, "What are your plans?" Putting out fires consumes time that is necessary for concentrated business decisions, Rolland told him.

So Boscia selected executives to work on his team and spent the six-month transition period traveling and learning the following business lessons that steer the Lincoln Financial's success today.

* Tap technological talent.

Lincoln Financial Group is not a technology company, but smart systems are crucial to delivering products, serving customers and efficiently doing business in a competitive market. Boscia wondered, should we hire tech wizards or outsource?

He asked Bill Gates.

"Imagine you are at MIT," Gates told Boscia. "You've got Microsoft recruiting tech people, you have Intel recruiting tech people and you are recruiting tech people. Where do you think the best will line up to go to work?"

Boscia won't outsource everything -- "You have to be selective in how you utilize outsourcing in technology," he says. But he reconsidered his stance on hiring outside firms to handle technology projects, and today he depends on outside resources for a significant portion of technology development.

* Think big picture.

Business issues cross industries, Boscia learned. This insight prompted him to drop his perception that the best corporate advice for finance companies comes from peers in the industry.

"Best practices exist in almost any company, and they are transferable to your company and industry," he says. "You need to have a broad view of business."

* People power success.

Quality counts when hiring workers to drive a company toward growth goals. Boscia always placed priority on people, but during his conversations with other executives, he confirmed the importance of recruiting the best in class and keeping them professionally challenged and personally fulfilled.

"Employees really are the only major sustainable source of competitive advantage a business has," he says.

This reality resulted in many all-night cram sessions for Boscia. He thought about some of Michael Porter's economic studies. The author of "Competitive Strategy: Techniques for Analyzing Industries and Competitors" presents a competitive analysis of nations and sparked a serious question: Should Boscia move Lincoln Financial headquarters from Fort Wayne to a region with a financial services hub and a greater chance of finding the best and brightest?

"Innovation occurs when people can leave one company and go to another without hardship," Boscia says, referencing Porter's work. "A constant stream of going from one company to the next gives employees fresh perspective."

* Tackle tough decisions first.

At the time, Boscia didn't realize the value of Dick Fisher's commentary on dealing with demanding issues. The former CEO of Kodak asked him, "Are there any emotional issues that you are grappling with or any hard decisions you have to make?"

Boscia thought about the potential move.

"I said, 'Yes,'" he says. "Fisher said his advice was to make them as soon as you take on the leading role. Get it behind you and move on."

The financial services cluster is bracketed by Boston and Washington D.C., with Philadelphia resting right in the middle, Boscia says, explaining how he narrowed his search for headquarters locations.

"There was a lot of emotion with moving the company out of its birth place, and I was right on the fence as to whether or not to make that move," he says. "But after I talked with Dick, it became clear to me that if I didn't move the company right away, it would be almost impossible to do it later."

Boscia became CEO in July 1998 and announced the move the following November. Thirty people moved with Lincoln Financial -- there were 60 at the Fort Wayne headquarters at the time. Today, Lincoln's four companies employ 1,300 workers in Philadelphia.

Rearranging the house

While moving the business challenged Boscia emotionally, reorganizing Lincoln Financial's corporate structure was by far the most trying task, he says. He paints a snapshot of most companies' back-stage operations, a model Lincoln mirrors, as well.

Sales, marketing, product development and research are silos in this vertical structure.

"They are totally independent business lines with complete vertical integration," he says.

Boscia drew some lines. He separated sales from manufacturing so each could concentrate on delivering 100-percent performance.

"We centralized sales, so rather than being a product vendor, we could bring a wider solution set to the organizations and people we deal with," he says.

Business lines dedicate efforts to ensuring products are competitive and customers are cared for after the sale. Sales focuses on customer needs and on differentiating Lincoln Financial's products in the marketplace.

Manufacturing doesn't sell or cold call. The department concentrates on producing quality investment products.

"Last year, Barron's named us the No. 4 family of mutual funds," Boscia says proudly. "Five years ago, Delaware Investments was literally named one of the 10 most dysfunctional fund families in the marketplace. In five years, we went from 10 most dysfunctional to one of the four best."

Boscia attributes this to a focused company structure, although he didn't reassemble the corporate clockwork without careful consideration.

"If I had been wrong ... " he muses, weighing the potential consequ ences.

No one had advice for Boscia when he shook up operations.

"There was no other visible business model at that time to support the decision," he says. "So, it was a combination of business judgment and intuition."

And plenty more late nights, he adds. Boscia knows his ceiling quite well.

Three-pronged plan

Boscia is particularly light on his feet after flipping through a copy of National Underwriter magazine on the train ride to his office. An article posted year-to-date results for variable annuity sales.

"Lincoln Financial is a pretty big variable annuity company," he says, noting that the industry average was 6.5 percent. Lincoln was up 83.7 percent. "I note that not to highlight variable annuities, per se, but we have gained market share in all of our primary product categories, whether mutual funds, insurance products or 401(k) products."

Strong business results are due to a three-tiered success model Boscia relies on to drive growth. The lucky charms are quality products, broad and deep distribution, and a strong brand.

"If you don't do any of these three well, you will not be successful," he says. "If you do one of the three well, you will continue to exist, and if you do two well, you will be very successful. If you are fortunate enough to excel in all three, you will be tremendously successful."

The model works. Lincoln Financial posted $511 million in net income in 2003 and reported $317.6 million for the first three quarters of 2004, compared to $317.2 million the first three quarters of 2003.

"The sales success in variable annuities is coming on the heels of some exciting product innovation we introduced in mid-2003 through 2004," Boscia says, pointing to the first tier in his success model. "We have competitive products that are well-positioned."

Boscia expects 401(k) products and mutual funds to take off in the next five years as baby boomers retire. He says many will seek out investment options that allow them to draw regular paychecks, and creative insurance products will allow clients to do just that,.

The trick is to deliver these products to the market. So the company launched Lincoln Financial Distribution four years ago to identify attractive relationships in the stock, bank and independent financial planner channels. A team of 400 wholesalers targets these customer groups.

"Their job is to get in touch with the stockbroker sitting inside an AG Edwards & Sons office or the personal trust banker at Wachovia or the independent financial planner," he says.

But if customers don't recognize the brand, they are not likely to buy its products, Boscia points out. He considers advice from his mentor, Peter Drucker.

"He said to me that there are two things you should never reduce your budgets for, and they are the first two things that virtually everyone on your staff will tell you to reduce spending on," he says. "One of them is training dollars for your employees, and the other one is advertising. It's like heroin, where you get addicted to saying, 'I don't have to spend because my results didn't go down.' That's a very slippery slope to step on."

Boscia remembers watching Lincoln commercials on television in the 1950s, but since then, the company had invested little in advertising. Today, the picture is quite different -- Technicolor, actually. Lincoln Financial is the naming rights sponsor for the state-of-the-art stadium that houses the Philadelphia Eagles football team, a $139.6 million investment over 20 years that pays off generously in name recognition.

"It's important for financial intermediaries to know who we are," Boscia says.

Lincoln representatives don't have to do a lot of explaining these days. An annual familiarity and awareness survey showed that 95 percent of financial intermediaries know Lincoln, compared to less than 50 percent a few years ago, Boscia says. The company spends $30 million each year on advertising; $7 million of this goes toward the stadium sponsorship and a majority of the rest goes toward TV advertising.

Tending to these three tiers will continue to drive the company forward as it deals with industry challenges -- an economy that is out of any CEO's control, rising interest rates and unpredictable consumer confidence.

Even CEOs aren't immune to worrying over uncontrollable variables.

"You have images that executives are 100-percent confident and certain in what they do," he says, reflecting on his numerous conversations seven years ago. "The reality is, they are human beings struggling with the same decisions and issues as anyone else. When you realize that, you have increased confidence.

"You don't have this insecurity blanket wrapped around you -- you can show your humane side and make mistakes and errors, as long as you learn from them."

And if Boscia gets stumped, he'll just pick up the phone.

How to reach: Lincoln Financial Group, (877) 533-0003 or www.lfg.com