Friday, 19 July 2002 05:04

Take two

The bulk of our professional lives consists of the proverbial climb up the corporate ladder.

It takes considerable time and effort to reach the top, often requiring those who attempt it to forgo family vacations, children's Little League games and that all-too-precious commodity, sleep.

And what awaits those who reach the summit?

Often, it's prestige, compensation and stability. For most, this is enough. After several years at the top, it's on to retirement and enjoying the fruits of one's labors. But there are always those who buck the trend.

Call it an entrepreneurial spirit. Label it tenacity. Simply put, there are some business leaders who are not satisfied with standing still or even running in the same direction. For them, there is no greater challenge than starting over.

"If you're a born entrepreneurial spirit, you are in a hurry," explains Don Heestand, senior managing partner and chairman of E-merging Technologies Group. "You have to get it done. You have to get it out there before someone else does. It is a race and it's a rush."

Even so, why leave the prestige and stability associated with leading a large, successful business? For some, it's as simple as a much-needed change. For others, it's as important as a revolution.

New ventures are fraught with unexpected challenges and, of course, risks. Those who choose to take the gamble and start anew welcome the challenges and view the risks as extremely personal.

SBN sought out four entrepreneurs who made it to the top, then left their perches to sow the seeds of business again. We posed one simple question to each: "Why?"

Bureaucratic cholesterol

Don Heestand was one of the founding partners and CTO of Realogic, a Cleveland-based computer software company that was sold to Computer Associates in 1996. He can talk for hours about numbers-driven businesses that grow too fast and develop what he calls "bureaucratic cholesterol."

"(Realogic) just grew so fast," he says. "I became disenchanted when I took an elevator to the 23rd floor and there were two strangers that got off (the elevator). One was a Realogic employee and was interviewing the second person. I didn't know either one of them."

Given the opportunity to chat with the energetic Heestand, it becomes vividly clear why bureaucratic cholesterol -- or any amount of slowing down -- would be unacceptable. His new venture, E-merging Technologies Group, is a professional services firm that specializes in advanced and emerging technology development and deployment. He is involved with everything from computers to welfare recipients to stage-three cancer treatment.

With capital in hand and notebooks filled with ideas, Heestand is a modern day Don Quixote. But instead of windmills, he tilts at conventional corporate structure. Heestand has tackled every issue of the traditional service structure with generous compensation packages, shares in the company and liberal time-off policies. The partners, or punks as he affectionately refers to them, are paid what they are contracted out for and return a percentage in the form of administrative costs or, if they choose, stock options.

What drove Heestand to start over and reinvent the wheel is a love of what he calls "bleeding edge technology." It is the fast and ever-changing world of technology that he could not always pursue at Realogic.

"At Realogic, we called them fastballs. You would chase so many fastballs, and after a while, you would realize that they weren't going to generate any revenue," he recalls. "What I'm allowed to do and what we do here is chase fastballs."

And Heestand chases fastballs with all the passion and urgency of a slugger looking to knock one out of the park.

Smaller is not always easier

Monotony can be mind-numbing, and sometimes it is just time for a change.

"I figured that I had had enough five years ago," explains Jack Bares, founder and CEO of Meritool. "It was getting very repetitive, and I thought it would be smart to have someone running the company that had a lot more energy than I did."

Back then, Bares was CEO of Milbar, a hand-tool manufacturer he founded in 1945. By the time he decided to sell the company, he had been manufacturing tools for companies around the world for half a century. One of the pioneers of successful succession planning, Bares eventually sold his company to one of his four children. The plan was simple and succinct: The company was for sale to any of his children who could buy it from him and the other three.

With his business sold and Bares "well past the age of retirement," as he puts it, the situation was perfect for spending a lot of time on his golf game. But, as he soon found out, people who are high energy and entrepreneurial have a difficult time standing still.

"I don't know how to retire," he says.

Bares immediately founded a smaller hand-tool manufacturer, Meritool, which didn't compete with Milbar. Meritool, he says, was just "something to keep him busy."

His plan was to produce a few simple hand tools that met the specific needs of some former clients. Bares says he thought that by making a product similar to what he was familiar with that running the company would be easy.

"I thought smaller meant simpler," he says. "It turned out to be the opposite."

Simplicity went out the door when a former client requested he work on a power tool that other manufacturers claimed could not be made.

"I didn't know it couldn't be made," Bares says, "so I made it."

Soon he found his small company staffed mostly with former Milbar employees, churning out complex tools for Fortune 500 clients. And, for one of the first times in years, he found himself losing sleep and money.

To boldly go where no one has gone before

Business can be exciting. But there are those who seek change because they find they have an overwhelming desire to do things right.

John Gorman was the program director for WMMS and the station's all-around visionary when the Buzzard was Rolling Stone's sweetheart and Cleveland was playing and bringing to town some of the biggest names in rock 'n' roll -- even before they were the biggest names. Gorman arrived at WMMS when the FM in radio stood for "find me."

But even as one of its foremost innovators, Gorman talks about the day when the FM he worked so hard to build may become obsolete or will at least have to share its now consolidated and commercial market with the up-and-coming -- and more independent -- Internet radio format. And like he was years before, Gorman will be there to help shape the industry. This time, however, it's with his own company, Radio Crow, an Internet radio portal.

By the 1980s, WMMS was the top-billing station in the market. But it wasn't easy. When he took over programming, Gorman had five months to turn the station around. And he had no budget to do so.

"You had to go to the 16th largest market to find a radio station that was billing more than we were (Cleveland was the 21st largest market)," Gorman says. "We were overachieving (in comparison to) our market size."

It was in 1986, when radio was being taken over by large corporations and multimergers. Like any good visionary who sees the end of an era, Gorman took his leave.

But while he was with WMMS, there wasn't an alliance that Gorman didn't make nor an opportunity he didn't take advantage of, and that is what made the station successful.

"It was always struggling," he recalls. "I thought that one of the keys to success was the fact that we had a young staff. For most of them, it was their first job in radio. We all had something to prove."

To Gorman, business, like music, should be progressive, always changing and ever evolving. That's why he took on FM in 1973, when you could only get AM in your car or on a transistor radio, and that's why he decided to leave radio as we know it and jump ship to the Internet.

Quality control

It has been more than 10 years since Jim Biggar was the CEO of Stouffer's-Nestle, and he can still recite the ingredients and thought process that went into Stouffer's macaroni and cheese.

"The secret to mac and cheese is that the cheese we used was between 11 and 13 months aged," he says. "You don't get the full flavor before (that) and too much after. We specified the inside and the outside diameter of the macaroni, its length, the wheat germ that it was made from, and even the percentage of broken pieces."

Biggar retired from Stouffer's after 20 years of overseeing the quality of everything from macaroni and cheese to chocolate. Today, he is the founder and president of Glencairn Development, a small company taking on the rather large task of developing 390 acres of land bordering the Cuyahoga Valley. His development combines retail and residential homes marketed to empty nesters or anyone interested in smaller homes with a lot of detail.

One could argue there is a big difference between making French bread pizzas and developing 390 acres, but for Biggar -- who earned an engineering degree from Case Western Reserve University before taking a marketing job at Stouffer's -- it is all about the product.

"To be successful, I have to have a high quality product," he says. "I've changed businesses, but that fact hasn't changed. I'm a builder and I like to build things."

One walk through the Renaissance Hotel downtown and you begin to experience some of what Stouffer's, under the leadership of Biggar, did for a city that, at the time, was more interested in parking lots than renovation.

But what about the prestige of working for a large well-known company -- sitting on prestigious boards, flying aboard private planes, and knowing that every person you meet knows who you are and where you work?

"There is more imagined prestige than there is prestige," explains Biggar. "And if you think it is there, it really isn't."

In fact, he says, there is often a downside.

"If I would go to dinner in a Stouffer's hotel, the waitress would suddenly know that she was serving the CEO and she is more likely to spill soup on you than any other person," Biggar recalls.

Beyond that, success often carries a price. In Gorman's case, his once scrappy little station that catered to the baby boomers' demand for new music began dominating one of the most advantageous demographics. Because of that, the station was slowly becoming exactly what it was designed to compete with.

"The turning point was 1978," he says. "It was rapidly turning into a big business, with more responsibilities and more employees ... and it became a very different station. We were becoming all things to all people. Looking at it from a business perspective, we were too big. I told them (station executives) we were going to collapse under our own weight."

But while leaving a large and stable company may be cathartic and challenging, it is also fraught with risk, especially when the new venture involves the business owner and the business owner's family savings. One big loss during the start-up phase can be a devastating blow to the company and its owner.

"You do that one more check to make sure," says Bigger. "When you are 60 or older, you can't afford to make a big mistake in your career and recover from it."

Indeed, those chasing after a second career later in life often find themselves taking bigger risks with less of a margin for error. In most cases, these businesspeople aren't risking company money but rather family money. And when you are 30 or 40 years old, it's possible to absorb big mistakes. One simply changes jobs, suffers through a few lean years, then spends the next 20 to 30 years earning the money back.

"I have a much greater appreciation as to what is coming into today's mail," admits Heestand. "A greater appreciation of the collections process and the client management process. If people are unhappy, they don't send the checks,"

Such matters constituted a process of adjustment for Bares, who hasn't taken out a loan since the 1950s and for the first time experienced what it was like for a company to actually lose money.

"It wasn't fun, I can tell you that," he says.

In Biggar's mind, the risk was more substantial at his previous company because losses affected all 30,000 of his employees. He says that in a larger company, one false move or premature expansion can spell the end of thousands of jobs.

"Now, if you make (a mistake), then it's our family that feels it, and that's it."

One staggering difference between large, established firms and start-ups is the abundance of late hours and a lack of infrastructure.

"If something comes up, you are used to saying, 'Hey Joe, fix it.' Well, Joe is not there (in a small start-up)," Biggar says. "In fact, there is no Joe."

Bares says nearly every part of the business that he thought would be less hectic became more complicated with Meritool. But he likes that challenge.

"It refreshed my mind to see the tremendous amount of different things that happen in a company when it is very small," Bares says. "They all get up to the chairman. I find myself dealing with problems that I always had others take care of."

Still, it requires a lot of time to take care of the details, and Bares jokes with his friends that he will one day pare down to a 50-hour work week.

The reality of financial accountability can also be a real eye opener. For some, there is a whole new world of 401(k)s, profit sharing and accounts receivable that "Joe" is not around to deal with. As CTO of Realogic, Heestand didn't even know the company was $16 million in debt when negotiations with Computer Associates were underway.

"The big difference is that I actually understand the numbers," he says. "I'm actually very close to the checkbook, even though I'm not the CFO. But I'm very close ... and it is really exciting."

Then there is the learning curve.

"It is a different business, and obviously I had to learn the business from the bottom up again," Biggar admits. "I felt like a dummy in the beginning. But I've been a dummy before. Your ego gets shot regularly -- I have kids who can do that."

So why do it? Why climb to the top, then leap voluntarily to the bottom to start again?

"It is suddenly like I'm 23 all over again," Gorman says. "Everything that I'm doing today makes me feel like I'm reliving my early 20s."

The perceived challenge is even greater, Gorman says, as he tackles a new and untested industry.

"It is a wing and a prayer," he admits. "I'm also older and there is no guarantee of success. But there is a greater guarantee if you hire the right people and surround yourself with the right people and talent."

"I think the real difference between now and then is that I control my calendar," Biggar explains. "Before, somebody else controlled it. Now, I really do. It doesn't matter as much if I do it on Tuesday or Wednesday."

All four men agree on one issue -- the same traditional business practices they used to make them successful once still work today.

Granted, not all the aches and pains of a new company can be overcome with experience, but as Bares puts it, "a person who has been in business 50 years sees a company completely different. Those starting one for the first time don't know all the problems involved with raising money and financing the company, as well as being able to hire the proper people in the areas that they are not as talented in.

"If you've been in the business world, you came with all that knowledge."

Some of it may be the inherent optimism of knowing you're able to overcome any challenge -- you made it work before so you'll do it again.

"When you first become an entrepreneur, you expect all of the challenges and you know that it is going to be tough," Bares says. "But when you have done it for a while, it is not quite as difficult. You normally take on bigger challenges."

Then there is control. The larger a company, the less you control it. In reality, its infrastructure takes over. Smaller companies allow for a level of creativity and informality that largers ones don't.

"We take pride in the fact that our company has no policies, except for being honest," Biggar says. "Other than that, if we want to have a holiday, we have a holiday."

Biggar agrees and says he doesn't miss the policies and formality that go along with a large corporation.

"I would go stark raving mad if I had to write a manual," he says.

And with innovation comes creation. Gorman and Heestand are drawn to that.

"I'm stimulated by this and it reminds me so much of those old days -- the creative juices are constantly flowing," Gorman says.

The same lack of infrastructure provides Heestand with a sense of control.

"I fly the kite and actually feel the kite," he says. "That is exciting. Maybe the others at Realogic had that feeling, but I never had that feeling that I was actually flying the kite. I'm flying the kite now. It goes up and it goes down, and you have to put more tail on it. But I enjoy it."

In the end, it comes down to a specific type of personality that's needed to launch successful career after successful career. For those people, the game never stops.

"I think it is very important to have things to do to keep using your mind and have a reason to get up each morning," Biggar says. "I'm not patient enough for fishing and my golf is not that good. So I keep working."

Heestand admits he's never been a destination sort of person.

"I've always been a journey guy," he says. "The journey is what I cherish -- the excitement and the game itself."

For Heestand, the big issue is the pace of technology. And while he readily admits he is more driven at ETG than he was at Realogic, he realizes the clock is, indeed, ticking.

For Gorman, the question isn't why stay with what you know but why not find what's going to be in the future.

"If someone would ask me who would I want to align myself with -- the blacksmith or the combustible engine, even though there were a lot more horses back then, I'm going to say combustible engine. Ten years from now it may be a lot different."

Bares still wakes up thinking of business challenges and Biggar still sits on a few boards around the city, although not as many as he used to.

"As you get older, you get away from the strongest heartbeats of the city," he says.

But he has no regrets.

"Now, I don't get the soup spilled on me." Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Published in Cleveland
Friday, 28 June 2002 06:48

Out of print

Step into a Verizon Wireless store and you'll see posters, window stickers, countertop displays and packaging bearing colorful photos and graphics designed to catch your eye.

Verizon doesn't print those -- it's in the wireless phone business. Westlake-based Shamrock Cos. Inc. takes care of that.

But Shamrock doesn't only design and print marketing materials. Its CEO, Robert Troop, has found in the 31 years he's been in the printing business that you have to diversify if you want to keep growing.

"I'm a good listener," Troop says. "The greatest source of information of how you develop your company comes from the client and your employees."

When Troop purchased Shamrock in 1989, office PC software and laser printers were rapidly destroying the need for its business form printing services. Troop responded by adding products like brochures and magazines, trade show display panels and consumer market packaging.

"I wanted to keep selling the business forms, but we needed to expand on that," Troop says.

To reflect the shift, Troop changed the company name in 1991 from Shamrock Forms Inc. to Shamrock Graphics Inc. Meanwhile, he acquired a small graphic services company to reinforce the change in strategic direction. That division was incorporated separately under the name Shamrock Creative Services Inc.

In 1997, Troop launched Popular Products Midwest Corp., a specialty advertising company that prints company logos on pens, coffee mugs, apparel and customer gifts and promotions.

"We wanted to eliminate multiple vendors for our large accounts and become a one-stop shop," Troop says. "That way we could create more programs for them at a higher level and really bring value to the table."

On top of the printing services, Shamrock warehouses and distributes its clients' marketing materials or promotional gifts. Although seemingly unrelated to its core printing and design services, warehousing and order fulfillment are in high demand.

"That is our single largest area of growth," Troop says. "There's a greater sense of urgency for us, so we do a better job at it than if was outsourced."

Troop combined the three divisions in 2000 under the name The Shamrock Cos. Inc. Sales have increased more than 200 percent in the last five years and Troop's added 22 employees in the last three years for a total of 103. How to reach: The Shamrock Cos. Inc., (440) 899-9510

Published in Cleveland
Friday, 28 June 2002 06:32

Film buff

David Frecka is president and CEO of Next Generation Films, and even though it sounds like a company out of Hollywood, it's not what you think.

Of course Frecka will lead you to believe he's a movie-making bigwig if it gets him out of a speeding ticket.

"I was stopped by a cop for speeding and he asked me what I did for a living," say Frecka. "I told him and he let me go."

But the "Film" in the name of his company refers to flexible polymer-based film for packaging.

Frecka purchased Next Generation in 1985. It's been a bumpy ride at times, but the company has seen profits and growth for the last five years. He spent a lot on technology and state-of-the-art equipment and considers that investment a reason for his success.

But it's a tough business.

"The plastic industry is so volatile that it's easy to lose money," says Frecka. "Resin can go up and down 100 percent in six to seven months. It's all demand-based and sometimes it's a scary place to be."

It became even tougher when a series of health issues forced Frecka to take time off.

"I hired some 'professional managers,' some industry guys, and in a year, they almost had me out of business," he says. "They didn't understand cash flow ... we had big inventories and the company was going out of business."

Frecka returned to work early and "I got some great people and I paid them a lot of money ... I got a good accounting firm ... I told (my suppliers) I knew how bad things were and gave them all weekly updates. That gave them the foundation to wait."

The company is now prospering, but for Frecka, both failure and success are a part of business.

"They don't kill you when you fail," he says. "My success is built more on failures than success -- you can't shoot 100 percent all the time. You try to gain more than you lose." How to reach: Next Generation Films, (800) 88 -8150 or www.nextgenfilms.com

Published in Cleveland
Friday, 28 June 2002 05:59

Financial independence

As the the consolidation wave washed over the financial services industry, Brown Gibbons Lang & Co. held fast to its status as an independent investment banking firm and continues to grow.

In 1989, then-35-year-old co-founder Michael Gibbons left behind a successful career as president and CEO of a Houston-based investment firm to return home to Cleveland and launch an investment house. With a close business associate, Kevin Brown, he formed Brown, Gibbons & Co.

The two were just setting up shop when Brown suddenly passed away. But Gibbons carried on, focused on what he knew best -- middle market investment banking.

Early success helped Gibbons expand both the firm and its client roster. He attributes that success in part to keeping the firm focused on investment banking.

"We're doing only one thing for our clients," Gibbons says. "We're representing them in a financial advisory position without regard to any other products or issues."

Scott Lang arrived in 1996 from a large Chicago capital investment firm, where he was executive vice president and managing director of investment banking. Today, he oversees BGL's Chicago office.

Gibbons and Lang both believe that investment banking firms and corporate financial institutions do not mix. That's why BGL remains independent, resisting numerous buyout offers from larger organizations.

The pair also credits the firm's success to the loyalty of its 40-plus investment bankers.

"It's a difficult process to keep people," says Gibbons. How to reach: Brown, Gibbons, Lang & Co., (216) 241-2800

Published in Cleveland
Monday, 29 April 2002 18:52

Thinking big

The last few years have not been kind to the retail industry.

Ames Department Stores Inc. filed for Chapter 11 in August 2001. In January 2002, Service Merchandise announced it will cease operations after operating in bankruptcy for nearly three years. Kmart filed for Chapter 11 protection in January 2002 and closed nearly 300 stores.

With so many retail and discount stores closing or struggling to stay in business, it may seem the companies that remain competitive just need to dig in and ride out the recession. But that's not what Big Lots is doing.

Instead, the Columbus-based company has chosen to reinvent itself in an effort to focus its branding message on a national level.

The company was founded in 1967 by Sol Shenk, who had a background in auto parts manufacturing. Shenk chose to stick with what he knew, and opened an auto parts store under the Big Lots name in Ohio. In 1970, the company began operating as Consolidated Stores; by 1982, annual revenue grew to $24 million.

That same year, the company launched the Odd Lots/Big Lots closeout retail chain, locating the first Odd Lots in Columbus. These were among the first broadline, closeout stores in the country. It works this way: When Heinz makes too much ketchup, you can find the overrun at Big Lots and buy a bottle at substantial savings. Closeout retailers also take merchandise that has been discontinued, undergone package changes or that are test market products.

By 2000, the company had several years of acquisitions, growth and changes in leadership under its belt, and Michael Potter stepped in as chairman and CEO of the $3.2 billion company with nearly 1,300 stores. Consolidated had five chains at that time: Mac Frugals, Odd Lots, Big Lots, Pic 'N' Save and K*B Toys; each with its own marketing and advertising needs.

Quarterly comparable sales numbers boasted some very modest increases, but also some decreases, and with stock prices dropping, it appeared this hodge podge of regionally branded stores needed unity to gather momentum.

A "new" company is born

Potter announced major restructuring changes in March 2001, included divesting the company of K*B Toys, changing the names of all its stores -- as well as that of the company -- to Big Lots, and placing a new focus on the customer.

That meant cleaning up less than spotless stores, refurbishing them with better lighting and equipment, revamping the merchandising supply system and improving customer service.

More than a year later, many of the changes are complete; others are still in the works.

"We have about 240 stores left to convert (to the Big Lots name) by this Christmas," says Potter, who is excited by the marketing prospects of one national identity. "It is easier to be known nationally, and we can leverage our advertising, especially television."

Potter says the company has been doing its marketing homework and determined there are more long-term benefits in television advertising than in its current means of advertising, store circulars.

"Studies show that television creates a brand more efficiently," he says. "Especially three, four years down the road."

Potter says only about 15 percent of the nation recognizes the Big Lots name, compared to a 90 percent recognition rate for Wal-Mart. That is why the company is turning to more television advertising with its spokesperson, Jerry Van Dyke.

"We want to increase brand awareness," says Potter. "We've had very good response from the television ads we've already done, so we'll continue to move in that direction."

Give them what they want To make the stores more attractive to current and prospective customers, the company asked people why they shopped there -- or, more important, why they didn't.

"We did a multiyear analysis based on detailed customer studies," says Potter. "We asked what they liked and what they didn't. Our noncustomers said there were too many barriers in place."

Customers felt many of their expectations would not be met -- expectations for customer service, product inventory and physical store standards -- which the company is working feverishly to change. When it comes to inventory, Potter says consumers cannot expect the range of products offered by Target or Wal-Mart; that is simply not its mode of business or its target market.

"We are not ever going to offer as broad an assortment (as retail discount chains like Wal-Mart) from a selection standpoint," he says.

However, the company has put together a list of more than 500 items guaranteed to stay in stock.

"Customers expect to find items like bathroom tissue, light bulbs, diapers and cleaning supplies," he says.

By working with suppliers, the company has found a way to meet that expectation, although the brands may not always be the same.

"We wanted to find a way to satisfy our customers," he says.

That's not all Big Lots has done to improve its merchandise flow.

"Day after day we are relevant in our product offering mix," says Potter. "Our flow is more consistent, and our front-end buying and distribution improvements have had the most important impact on our sales."

And converted stores that were below the new, higher standards of cleanliness and service have undergone a substantial facelift. The result, says Potter, is not just happier customers, but happier employees, since employee break rooms were part of the redo.

"We have begun customer service initiatives, and our customers are noticing a significant difference in service," he says. "And we are producing a wonderful environment to work in. The stores are cleaner, brighter and safer, and our associates are doing a better job."

So what about the bottom line? The "after" Big Lots definitely appears better than the "before." But have these changes had the desired impact on the bottom line? If comparable store sales are an indication, the answer is a definite "yes."

For the first time in nearly two years, the company experienced a sales increase in the double digits, reporting an increase of 14 percent for February. And Potter says new sales figures indicate the double-digit trend will continue.

Brad McGill, a financial analyst with Banc of America Securities in New York City, agrees the company's restructuring initiatives appear to be paying off.

"We are beginning to see some signs of traction," he says. "Comparable store sales are impressive, and fourth quarter numbers are in line with expectations. It appears they are heading in the right direction."

But the company does not plan to rest on its laurels or remain satisfied with the status quo. Potter says it's full steam ahead when it comes to expansion and growth.

"We are adding 90 stores this year, and will add a similar number every year for the next 10 years," he says. "We plan to have a total of 2,500 stores at the end of 10 years." How to reach: Big Lots Inc., (614) 278-6800 or www.biglots.com

Published in Columbus
Thursday, 28 March 2002 10:53

Size matters

A middle-aged couple enters the showroom at #1 Cochran in Monroeville and asks the receptionist if the dealership sells Nissans. No, the receptionist replies politely, but suggests there may be some Nissan products on the used vehicle lot and mentions some of the makes the dealer does represent.It's an easy mistake to make. #1 Cochran sells 11 brands of vehicles at two locations, and like at a few other megadealers in town, offers a dizzying roster of domestic and import brands. The couple takes a stroll through the cavernous indoor showroom, then leaves the building a short time later.The couple didn't know if the make of car that was top-of-mind with them could be found at the dealership, but there's a good chance that #1 Cochran's brand recognition was strong enough in their minds that they thought it at least worth the inquiry.That's the kind of brand awareness #1 Cochran has built over the past 15 years. Rob Cochran, the company's president and son of its late founder, thinks there remains a lot more mileage to be derived from the name."The way I look at it, in this region, we have an opportunity to leverage our name and our brand equity more," says Cochran.Cochran and his team are planning to maximize that opportunity by building new showroom facilities to house #1 Cochran's multiple brands just a stone's throw east of its current location, near the busy intersection of William Penn Highway and Mosside Boulevard in Monroeville. As serviceable as its current location -- a former Kaufmann's department store -- has been, Cochran sees the dealership of the future in a larger complex more customized to its needs and shaped to create an image customers will associate more readily with its name -- and that can be duplicated in other facilities.If plans go as Cochran expects -- and there's little reason to believe they won't, given Monroeville's hospitable disposition toward commercial development -- his company will be selling and servicing cars out of buildings on both sides of heavily traveled William Penn Highway by the middle of next year. The Kaufmann's location has been secured by Lowe's, which plans to build a 122,000-square-foot store on the parcel.Size brings complexity but also advantages. Cochran points out that his company has a human resources staff, an asset that makes training, development and recruitment more effective. The auto industry is laboring under a shortage of skilled technicians as more skill is required to diagnose and repair automobile systems. Automotive Retailing Today, an industry group comprising major automobile manufacturers and dealer organizations, estimates 35,000 new trained technicians and tens of thousands of additional sales, finance and other personnel will be needed to staff dealerships this decade alone.Cochran spends a lot of his time these days smoothing out the details in preparation for the new location. There are permit issues, compliance matters to satisfy manufacturers and, from time to time, other opportunities that spring up as the process moves ahead."The more that you do, the more opportunities are created. It's kind of an exponential thing," says Cochran. "That can be administratively burdensome; it's exciting, it just takes a lot of time."A built-to-suit facility will be a first for the company."It'll be our first opportunity to build from the ground up," says Cochran.Before moving to the former Kaufmann's store, the dealership had made its home in a former Kelly & Cohen appliance store in Monroeville since the late 1960s. In 1965, Cochran's father put up a Pontiac shingle in a North Braddock storefront when that brand was catching fire and mounting a serious challenge to its General Motors cousin, Chevrolet, for first place honors as the sales leader.Today, #1 Cochran employs 390 and posts annual sales of about $250 million.The auto retailing business has changed substantially since Cochran's father started selling Bonnevilles and GTOs. The rise in the number of imports has altered the market balance; Honda, Toyota, Nissan and Subaru all have manufacturing operations in the United States.Ownership patterns have changed; Ford owns Volvo, Jaguar and a chunk of Mazda. The Big Three are now the Big Two, with the third member of the mighty domestic triumvirate that once dominated the U.S. market, Chrysler, now in the hands of German giant DaimlerChrysler AG.Other changes in the industry are some of the reasons Cochran decided, against early predispositions to the contrary, to stay in a business he says he never much cared for when he was younger. Big dealers are swallowing up smaller ones, and in some cases, publicly held companies doing business in multiple markets own large numbers of dealerships and franchises."I didn't want to do this to save my life," Cochran says.His father, driven to succeed and consumed by the business of selling cars, wasn't around much when Rob was growing up."He was the greatest salesperson I've ever seen," says Cochran of his father. "He was always selling."Nonetheless, Cochran wasn't thrilled with the industry's image. And he liked mathematics, enough to major in applied mathematics and industrial management at Carnegie Mellon University in the 1980s. He found that he also liked the management and leadership classes he took there.Later, Cochran went to work at the dealership summers while he was in college and discovered he liked selling cars. Just about that time, his father was building a multibrand strategy for the dealership. He acquired a Cadillac franchise to complement the Pontiac and GMC truck lines and swung a deal to move into the Kaufmann's store after the department store operator moved into Monroeville Mall.Shortly after the move, the company's vice president, Cochran's father's right-hand man, retired and Cochran's father became ill.Things were happening quickly, and by this time, Cochran had changed his mind about the business."It all kind of just fell on me, and it was exciting, it was a growth experience that made me better, just to get my hands around everything at that point," says Cochran.And he realized the business was changing in fundamental ways."I understood the opportunities that existed in our business and the industry," says Cochran.Auto manufacturers were loosening their restrictions on multibrand dealers, allowing retailers to represent additional nameplates. In Cochran's case, the dealership now has Pontiac, Buick, Cadillac, GMC and Oldsmobile and Saturn franchises, all General Motors brands. As Japanese companies like Toyota, Honda and Nissan have moved into the mainstream, upstarts from Korea and elsewhere are trying to squeeze in and grab a share of the market.The newcomers give dealers an opportunity to buy into a brand early with little investment because manufacturers are eager to get their nameplates into the showrooms of dealers with brand equity of their own."It's really no different than what's happened in other retail industries," says Cochran, citing examples like appliance and electronics chains that sell a wide variety of brands under a single roof."In a lot of cases, our business is like portfolio management, getting brands when they're low and riding them high," says Cochran.He throws out Hyundai as an example. While the Korean automaker has been in the U.S. market since 1989, #1 Cochran picked up the line when a reshuffling of brand ownership in Monroeville four years ago left it orphaned. With a modest investment in space and inventory, #1 Cochran has leveraged its name to make the Hyundai franchise pay off."Now we've got a franchise that has a pretty significant value," says Cochran.That kind of strategy can apply to other brands as well."If we do a good job under the Cochran name selling Pontiacs, GMCs, then we can take what's been built up under the reputation, under the Cochran name and apply it to Hyundai and get an immediate advantage over most of the competition selling Hyundais," says Cochran.#1 Cochran has Korean maker Daewoo in its stable as well, a brand that's a bit speculative to hold onto. Daewoo hasn't done well in the United States and GM is currently in due diligence in anticipation of a purchase of Daewoo. GM's ultimate disposition of Daewoo will depend on its own global strategy, Cochran says.If it decides to put some money and muscle behind a U.S. marketing effort, it could turn out to be a bonus for U.S. dealers, and Cochran says it could be a bonus for his company. On the other hand, GM could decide to pull the brand out of the U.S. market and target it for developing nations' markets.On the other end of the spectrum, #1 Cochran has the only Infiniti dealership in the area, and it retains the blue chip Cadillac franchise. And the Saturn brand gives it a make that usually ends up being a plus sale for GM, sold to a customer who might have had an interest in a Honda or Nissan, for instance.The new car business remains "the engine that drives the business," Cochran says, but the trick to success in his industry, he maintains, is to not be overly dependent on new car sales.Besides the new car lines, there are other holdings in the portfolio that can be managed for profitability in changing economic conditions. Used car sales generally improve as the economy slows, as do parts and service, and used cars produce more profit for new car dealers as well.#1 Cochran maintains a busy service and parts department and a high volume body shop that does work on all makes of cars. The company has its own upholstery trim and repair shop, a function most other dealers farm out to vendors. It also installs burglar alarms, auto sound systems and remote starters."Not passionate about cars" A woman with three pre-teens circles the #1 Cochran showroom. She herds the kids back to the reception desk and asks about a model that caught her eye on the floor. The receptionist summons a salesperson and introduces him to the woman."I'm interested in the Envoy," the woman tells the salesman, adding that she's "just started looking." Not surprisingly, she's seems to be in the market for a vehicle in the popular sport-utility category. Lots of consumers, it seems, still have a love affair with the automobile, an affection and infatuation with one of the most magnetic symbols of status in our culture, a predilection that sustains the industry in which Cochran and so many others build a business and earn a living.Cochran, oddly enough, isn't taken with cars. More than cars, he's hooked on the car business.Says Cochran: "It's not the cars that excite me; I'm not really passionate about cars. I'm passionate about building our brand and building our relationships with people, being credible and being competent, trustworthy, and being a good community partner."And, perhaps, being No. 1.

Auto Retailing Today

Published in Pittsburgh
Thursday, 28 March 2002 09:16

Changes at the top ...

Pardon the dust. After months of strategizing, a restructured Huntington Bank is emerging, and planning to make the most of its Midwest markets.

The demolition of the "old" Huntington began more than a year ago, when Frank Wobst handed over the reins of leadership to Bank One veteran Thomas Hoaglin. While at Bank One, Hoaglin experienced the success of working for the hometown favorite bank, and saw the opportunity to achieve the same results at Huntington.

Within months of taking over, Hoaglin announced his restructuring plan: Sell the Florida operations, close more than 40 branches in the Midwest, cut dividends by 20 percent and create a new corporate culture. And the underlying strategy behind the plan was to leverage Huntington's hometown team advantage.

So where do things stand as the dust settles?

"We completed the sale of the Florida franchise, reduced dividends and consolidated offices predominantly in Ohio and Michigan," says Hoaglin. "Other changes that address how we position ourselves and operate going forward -- those are a work in progress."

You can't change the corporate culture for more than 4,000 employees overnight. But Hoaglin's vision is clear.

"We decided to become the local bank with national -- or more sophisticated -- resources," Hoaglin says.

Part of this cultural change is a renewed dedication to customers.

"We have to dedicate ourselves to our customers' needs and be responsive and flexible," says Hoaglin.

To provide that flexibility, Hoaglin is giving managers more autonomy -- and accountability.

"Being close to the customer requires you to give decision-making authority to local management," Hoaglin says." And with that authority comes accountability. We want managers to apply their skills, run their businesses, but be held accountable to the results."

This decentralization led Hoaglin to re-examine his leadership team. As a result, the only regional president who wasn't replaced was Central Region President James Kunk.

Regional responsibility

Kunk, whose authority and accountability include Central Ohio and West Virginia, says his biggest challenge in the months ahead is to make good on the bank's new focus.

"We want to make sure all our people deliver and do what we say we're going to do," says Kunk. "That means making decisions at the local level and not passing the buck."

Kunk wants associates to take ownership and feel connected to the customers they serve.

"We want customers -- whether they are retail or commercial -- to have a personal relationship with our associates," says Kunk.

This relationship starts with the associate.

"In my experience, happy employees make happy customers," he says. "Associates are enjoying the new Huntington and their work. They can share ideas in a less formal way. There's a real esprit de corp, and it's not about winning. It's about being a team. And that is reflected back to the customer."

Kunk cites Hoaglin's vision as the goal for his region: To make customers feel their branch is the local community bank.

"We are the local bank, and that's something that we're proud of and I want to accentuate," says Kunk.

While there are 43 fewer community branches after the recent closures, Kunk says the customer retention rate has been higher than forecast.

"Initially there was some concern over the closings," he says. "But I feel good about the customers we've retained."

From the shareholder's perspective

Huntington's changes have made associates and shareholders alike happy. Pre-change stock prices (more than a year ago) were around $15.30 a share. The stock was priced at $19.74 as of March 8. Confidence in the leadership team and its initiatives is also on the rise.

"A year ago we had quite a few unhappy shareholders," says Hoaglin. "I have spent the last year communicating with shareholders, keeping them apprised of our progress. The response has been very positive."

Hoaglin says that overall, shareholders feel the company is heading in the right direction and look forward to seeing results this year.

"Shareholders are expecting us to deliver results in 2002," Hoaglin says. "And we are confident we can meet that expectation," despite the current economic environment.

Hoaglin says while there is no doubt the recession has had a negative impact on the bank's markets with a weaker loan demand, it is also experiencing stronger deposit growth.

"We'll do just fine," Hoaglin says. "The economy is not causing any major concerns."

And with the changes that have taken place, there won't be any more any time soon.

"We have our game plan and we'll be working hard on it. I don't anticipate any major changes of direction," he says. "We have the talent and the capability of achieving our goals."

Huntington doesn't plan to expand outside its Midwest markets anytime soon. Hoaglin feels strongly that the bank's success lies in its own backyard.

"I think we'll do best to keep our focus on the Midwest," he says. "There may be some expansion opportunities within the Midwest but we will not be expanding outside that footprint."

Pressing the hometown advantage

To emphasize Huntington's commitment to its community, the company is partnering with Mayor Michael Coleman to revitalize the city. Huntington is establishing a goal of $275 million for lending and investments over the next five years in low- and moderate-income neighborhoods.

While the majority of loans will be for home purchases and improvements, it will also be used for some small business lending programs.

"It is our intention to be more and more visible in strengthening our community," says Hoaglin. "We expect to see the mayor focusing in developing the downtown and we will play a leadership role in that initiative. There will be a lot of participants from both the public and private sectors, but we expect to be a visible player in that plan."

It seems Columbus stands to gain a great deal from the "new" Huntington Bank's commitment to community. How to reach: Huntington Bank, (614) 480-8300 or www.huntington.com

Published in Columbus
Tuesday, 26 February 2002 12:23

Toy story

Sandy Rickard remembers the old days -- way back in 1991.

As claims processing supervisor for Little Tikes Co., a toy manufacturer in Hudson, she had to sort through stacks of files looking for invoice documents to settle a claim from a customer. Even though the Little Tikes headquarters was organized, it took a while to look through all those papers.

"I used to spend hours and hours and hours looking for this stuff," says Rickard. "Imaging finds it in a heartbeat."

Little Tikes' document imaging system has streamlined its customer claims processing. All order, shipment and invoice-related documents are scanned and sorted on magnetic and optical disks for quick display and retrieval. Shipping and billing disputes between the company and its hundreds of retailers are resolved in seconds instead of hours or even days.

Manufacturing still relies on a lot of paper documentation for transactions. Often the bill of lading number doesn't match the invoice number or purchase order number. With imaging, Rickard can search for the order in question using 20 fields archived to 1992.

The archive is useful because a customer can make a claim on a shipping or pricing error up to four years after it received the toys. In the past, customers wouldn't realize they had already filed a claim on the order years ago and ended up getting double compensation for the error.

That doesn't happen anymore.

"It's important in claims that whoever has the best documentation is going to win a claim," Rickard says. "If you don't have the proper documentation, you lose. That just means you're losing money."

Little Tikes' move to document imaging started in 1991, when it computerized invoices and bills of lading. The next year, the claims process was automated.

"I discovered that of my four people, all four of us spent one half of our day looking for documents," Rickard says. "That alone more than paid just for that part of the project because of the lost time and energy looking for paper."

The system rapidly improved productivity among Rickard's staff. The number of claims was reduced from 8,000 in 1995 to 400 in 2001.

That reduction is primarily due to improved reporting. Based on the claims information, Little Tikes department chiefs can use reports to find process holes in order fulfillment and shipment.

"There are a lot of claims we pay where we don't lose money, it's just a return," Rickard says. "But there were claims that show us we lost money through error on somebody's part internally here. And it has meant hundreds of thousands of dollars in lost revenue that we have recaptured."

Little Tikes' ability to improve order fulfillment and reduce errors through its document management system has earned it an eVolution in Manufacturing Award.

In the future, Little Tikes will convert to electronic bills of lading to further eliminate paper, says Linda Bowman, Little Tikes' manager of information systems.

When a truck driver picks up a shipment in the warehouse, he or she will use a digital signature pad to sign for the paperwork. That signature will be printed onto the paperwork for the driver and e-mailed into the imaging system so Rickard will have immediate access to that shipment.

Time-consuming document scanning will be cut anywhere from 50 to 75 percent. How to reach: Little Tikes Co. (330) 650-3000 or www.littletikes.com

Published in Cleveland
Tuesday, 26 February 2002 12:19

Leveraging technology

When the executives and key decision-makers in the Information Systems department of Cleveland-based Danly IEM evaluated the company's Web site in mid-2000 for e-business opportunities, they realized some areas needed upgrading.

Officials at Danly, a multimillion dollar die manufacturer, recognized three key areas of opportunity:

* Utilize e-commerce to expand the reach of Danly's products and market over the Internet.

* Make it easier for customers to do business with the company.

* Reduce the transaction cost of processing an order.

"The end solution was a business-to-business e-commerce site that is completely integrated into our back office," says Sarp Uzkan, director of information systems at Danly. "The customer doesn't need a catalog or to even talk to a salesperson. They can go find the product they need on the Internet and place an order."

Today, the site, www.danly.com, lists 95 percent of the 8,000 parts the company sells, and that number continues to grow. Five percent of orders originate through the Web.

Uzkan says that early last year, after the site relaunched, it received more sales than anyone had imagined.

"It's given us the opportunity to take orders from countries where we have no sales reps," says Uzkan. "We've gotten leads from new customers in areas we hadn't tapped into."

Information taken from the Web site is sent to the sales department for follow-up. As the economy worsened, these leads became more valuable, and selling online has opened up new geographic areas and industries for the company.

Danly also added tools to the site to provide customers with as much information as possible, making it easier to do business with the company. A study in 1999 showed that 30 percent of all calls to the company concerned order status and tracking numbers. As a result, it made this information available online, along with product pricing, availability and CAD drawings.

"We know the way our customers buy products," says Uzkan. "Many of them like to shop around and find the right price. This fits those customers' needs because all the information they need is online."

The e-commerce applications have also minimized costs. Orders generated from the Web are transmitted directly into the company's back office system without human intervention. The product is taken off the shelf and shipped immediately.

Danly also got more value out of its EDI technology by applying the same processes to the e-commerce platform.

"We're not adding value to our customers while we are transacting or processing their orders," says Uzkan. "The more we can automate, the more we can take out costs or waste in the chain."

When a manufacturer emphasize direct sales, distributors typically start to worry, seeing it as a threat to their income. But Danly, which makes about one-third of its sales through its distributors, has invited them to join the e-commerce party.

"We have created a Web site for our distributors to sell our products or any others over the Web without going through a lengthy implementation," says Uzkan. "We are actually hosting some of our distributors' sites and making a little money on it."

As a result, distributors can quickly set up a site to sell their products over a system that's ready to go without investing in hardware, software or consulting. Better yet, Danly helps them sell more of their products. How to reach: Danley IEM, (440) 239-7600

Published in Cleveland
Monday, 18 February 2002 05:33

Milestones

Jay Apt has had a rich and varied career as a scientist, academic, astronaut, museum administrator and, now, as a venture investor. Here are some key events in that career.

  • 1976 -- Earned doctorate in physics and appointed post-doctoral fellow in laser spectroscopy at Massachusetts Institute of Technology

  • 1976-1980 -- Staff member of the Center for Earth & Planetary Physics, Harvard University

  • 1980 -- Joined the Earth and Space Sciences Division of NASA's Jet Propulsion Laboratory

  • 1982-1985 -- Flight controller responsible for space shuttle payload operations at NASA's Johnson Space Center

  • 1985 -- Selected as an astronaut candidate

  • 1986 -- Qualified as an astronaut

  • 1991-1996 -- Completed four NASA space shuttle missions

  • 1997 -- Appointed director of Carnegie Museum of Natural History

  • 2000 -- Joined iNetworks LLC as chief technology officer

Source: www.orbitexperience.com

Published in Pittsburgh