Deciding when or how to transform a small company into a global company can be a tough task, but James Tallman took the reins of Datacert Inc. at the height of the economic downturn in 2008 and made a tough task a reality.
As president and CEO, Tallman took the company from a modest provider of software and services for the legal industry that had 2007 revenue of $21.5 million to a global company with 2009 revenue of $33.7 million.
“Datacert was an entrepreneurial company, 10 years old, and they needed someone to come in and bring the company to the next level,” Tallman says. “The company had done well, but it had reached the point where we needed to take a different approach to the marketplace, and we needed to do things in a more scalable fashion.”
Smart Business spoke with Tallman about how he grew a small company into a global success during one of the toughest economies since the 1930s.
Reassure employees. My first challenge had nothing to do with the company, it really had to do with the people and the economy, and it was getting my team to understand that a downturn in the economy could actually be the greatest opportunity for a company. I was really blessed because over the past two years, I’ve had a really outstanding board and I’m surrounded by an outstanding management team. We really had to rally the troops who, for a lot of them, were going through personal strife, where their husbands and wives were losing jobs in the marketplace. My challenge as a leader was to get them to understand that a downturn in the economy, when other companies and your competitors are struggling, winds up being a tremendous opportunity for you to take the market and grow.
When you transform from an entrepreneurial-based company to a professionally managed company, the key challenge was spending time with the employees and spending time helping to develop the skill sets that they needed to get the company to the next level.
Plan for the long term. Do what you say and say what you do. As you lay out a clear plan and you tell people this is what we’re all going to do, make sure you stay the course. During bad economic times, your tendency sometimes can be to react to a short-term market force and not stay with the long-term strategy. I made a commitment to the employees that I was going to invest in them and I was going to reinvest 30 percent of our revenues, and yes, I didn’t know what the economy was going to do, but we were going to stay the course. If I invested in them and we invested in the new technologies and where we were going, the benefits would come.
As the sales and the revenue of the company started to grow and [employees] saw the reaction from the customers, at first, they were open to the plans that we had, but they were also skeptical. As they started to see the results, they became believers. The reactions I started to get were people coming by my office and thanking me and saying, ‘Everything we said we were going to do, we’re doing and we’re winning and we’re dominating the market now.’
Develop growth. Make sure that the company isn’t entirely dependent upon you. Put your ego in check and recognize that to grow a great company, you need a great team around you. Any company that’s driven by one person or just a couple of people, although you can exhibit short-term growth, you’re never going to achieve a long-term sustainable growth strategy if you don’t surround yourself with people who are better than you are.
As a CEO, the first thing you have to do is look in the mirror and ask yourself, ‘What am I really good at and what am I not good at?’ I have a small company and I want to make it a global company. I need to ask myself, ‘Do I really understand what it takes to go to the next level, do I have the talents within myself, and what kind of people do I need to surround myself with that have talents that I don’t have to be able to do that?’ It’s one of the biggest failings that I’ve seen of CEOs that I’ve worked for. The CEOs who truly understand that they don’t have the answers and they need to hire people who are better than them in a lot of different aspects of the business is a critical thing for a CEO who is trying to transition from a small company to a large company.
Growing up in Pittsburgh, Mark Cuban’s parents wanted him to learn a trade so he’d have something to fall back on. So the guy — who is now worth $2.5 billion — got a job working for a carpenter laying carpet and quickly learned he was absolutely horrible at it.
He was so terrible at his next endeavor as a short-order cook that he couldn’t tell if the food was done right unless he tried it, so he always cut off tiny pieces to sample.
And then there was the time that he was a waiter in a nice restaurant and could never open the wine bottles without getting cork in the wine.
“It was just horrible,” he says. “I was like, ‘Why aren’t you scheduling me more hours?’ [They said], ‘You can’t do this worth a damn, Mark.’”
But through all of these early experiences, he learned that it’s OK to not be good at everything.
“I’ve learned that it doesn’t matter how many times you failed,” Cuban says. “You only have to be right once. I tried to sell powdered milk. I was an idiot lots of times, and I learned from them all.”
He applied lessons learned in his failures as he started Broadcast.com, an audio and video portal, which he later sold to Yahoo for $5.7 billion in stock. His failures also helped him succeed when he bought and turned around the Dallas Mavericks NBA franchise and co-founded HDNet, an all high-definition television network. And these are just a few of his successful ventures that have landed him at No. 144 on the Forbes 400 Richest Americans and No. 400 on the World Billionaires lists as well as a guest venture capitalist “shark” on ABC’s “Shark Tank” reality TV show.
“I don’t care if you’re working a counter at McDonald’s or as a bartender like I did or as a doorman like I did, when it fails, whatever it may be, you’re going to learn,” he says. “You’ve got to take that positive orientation to it and develop your skills.”
Cuban has refined many skills over the years as he’s built his businesses, and he’s learned a lot. But in particular, he’s learned how to look at opportunities, how to know himself and how to be ruthlessly focused.
Look at opportunities
If someone wants to pitch Cuban an idea, he’s open to it, but he’s not going to take a meeting for it. Instead, he wants to keep the details short, sweet and to the point.
“What I tell people is, ‘Anything you’re going to tell me in a meeting or a sales pitch, put it in an e-mail, and I’ll read it, and you know, give me as much technical information or business details as you can,’ because that takes all the personality out of it,” he says. “It lets me deal with just the facts or the details, and once I have a feel for the details, then we can deal with the personalities and the people involved.”
Cuban can quickly — often within seconds — recognize if a pitch is something he’s interested in or not. He starts with whether it’s an industry he wants to be in. He knows he wants to steer clear of websites driven by advertising, he’s not interested in being part of the next cool fashion trend, and it’s safe to say that his early experiences in the restaurant industry are just one reason he doesn’t want to open a restaurant of his own. Instead, he tends to stick to technology and play to his own strengths.
He says that just looking at the industry is about 90 percent of it. Beyond that, he looks for any red flags.
“The more people try to sell you on the size of a market, that’s usually a first red flag,” Cuban says. “If someone says, ‘This is a billion-dollar market, and all we’ve got to do is get one-half of 1 percent, and we’ll be making X, Y, Z,’ that’s someone usually selling themselves.”
Another red flag is if someone also says that the company is going to be better than an established player — like someone saying the company is going to be a better Facebook than Facebook. Also, he looks at how people react when he brings up competitors. If they start saying what those folks can’t do instead of talking about what gives this opportunity a unique competitive advantage, that’s a good indicator to him, as well.
“What people fail to grasp is once you introduce something, whoever the competitors are, they’re going to introduce the exact same thing,” he says. “It’s pretty much impossible to protect ideas like that when you’re already in an industry, so just trying to be faster, better, cheaper, just one-upping somebody, that’s also a red flag. When I see someone trying to be a one-upper, I’m usually turning away.”
The last element he looks at is whether there is a product or a feature.
“You look at things like location-based services — Gowalla, Foursquare and the like — and then you look at Facebook adding places or Google adding places, and you have to ask yourself, ‘Even though Foursquare and Gowalla pretty much wrote that business, are they features of somebody else’s products like a Facebook, or can they operate as a stand-alone business?’” he says. “That’s also a decision point you have to make.”
Cuban says you have to be patient and recognize that timing is part of an opportunity, as well. That’s what he’s done with the model he has now — releasing movies simultaneously for home viewing and in theaters and sometimes even prior to theatrical release — with Landmark Theatres, HDNet and Magnolia Pictures. He had to own all of those different elements, and people had to be open to it if he was to succeed, and it’s catching on now that the market is ripe for it.
“You can’t just automatically walk in and start a business every year or always have the right idea at the right time,” he says. “But you have to recognize when you have a unique opportunity and be able to pounce on it. There’s not always going to be an idea. There’s not always something. You just have to be willing to say, ‘OK, this is the lull period, but I keep on working, and I keep on learning, and if things change, there will be a unique opportunity, and when it comes, I’ll pounce on it.’”
Before Cuban ever made any money, he says he had so much “piss and vinegar” in him that he’d do anything necessary to win, but as his businesses have changed over the years, he realizes that this once-prevalent personality trait isn’t one of his strong suits anymore.
“It used to be picking up the check and closing the deal was the ultimate, and now one, ‘I love you, Daddy; can we go get some ice cream?’ conquers all,” he says.
And it’s not necessarily a bad thing, but it would be if he didn’t recognize it.
“I always thought, ‘I’ll just dive in,’” he says. “It’s like working out. There’s multiple kinds of workouts. Sometimes you tell yourself you’re going to go to the gym and get a great workout, and then you realize that you remember why you need a trainer — you need someone to push you. When you have the piss and vinegar, you don’t need anyone to push you. You just dive in, and you get the best possible business workout.”
He now looks for people with that piss and vinegar in them or in their company so he can complement them. Additionally, Cuban has always been a “big-picture geek” that understood sales, marketing and technology, but when it comes to the administrative side of making all the little things work, that’s where he’s had to find people to help him. He says it’s critical to make sure you’re grounded in reality about your abilities.
“You have to be brutally honest with yourself,” he says. “You (can’t) lie to yourself. You have to know what you’re good at and what you’re bad at. You can’t all of a sudden be a home-run hitter. You can’t be a dunker if you can’t dunk, right? It’s that simple. …You better figure out what you’re good at and be great at it.”
One easy way to tell if you’re being honest with yourself is your success record.
“[It’s] just wanting to win,” he says. “It’s not an ego thing. It’s very binary. Is there money in the bank or not? Are you successful or are you not? It’s very simple. The people who lie to themselves typically end up with more problems.”
If you can recognize your strongest skills and those of the people around you, then you can win in business.
“It’s about winning,” Cuban says. “Your ego gets rewarded a whole lot more by winning in terms of your business success and the success of your company than you do by winning an argument or a battle or just trying to prove to people that you’re good at everything. When someone tries to tell me they’re good at everything, I know they’re lying.”
Have a ruthless focus
When Cuban became the Dallas Mavericks’ owner, he walked into a losing franchise that struggled to fill seats, and he didn’t say, “I’m the new owner; do what I say.” Instead, he put his desk in the middle of the sales bullpen, put a copy of the phone book and old sales leads on his desk, and he started calling people along with everyone else.
“I said, ‘Look, we’re speeding up, and either you’re on the train or off the train,’” he says. “‘If you keep up, you stay on. If you don’t, we’ll still be friends, but you know, you’re going to fall off the train, and we’re going to figure out how to move forward without you.’”
To succeed, you have to be completely focused on what it is you want to do.
“You have to go in and be very specific about what your goals are, what you’re willing to accept and what you won’t accept,” he says.
The first thing he clarified to his employees was that they were not in the basketball business — they were in the entertainment business.
“We were going to be more like a great wedding than a good high school basketball game,” Cuban says. “A great wedding, you remember Aunt Susie getting drunk and dancing with Cousin Billy, who you hated, but it was fun to watch. What makes a good wedding fun is everyone getting together and yelling and screaming and having fun.
“When you remember the first sporting event you went to, you don’t remember the score or the date. You remember who you were with and what you did with that person.”
He then had to be clear regarding what they needed to achieve. The old arena had 17,700 seats, and there were 41 home games plus playoffs, so he put up signs saying “17,700 times 41 — that’s our goal. That’s how many we have to sell.” He asked them how they were going to get there and said nothing else mattered. He promised the team and coaches that he’d do everything in his power to give them the resources they needed to get the losing franchise winning.
As a result, games became electric with entertainment, which brought people in, and he hired new coaches to help the team win.
“I made it quite clear what we were trying to accomplish,” he says. “There was no ambiguity at all.”
In these situations, he says it’s important for you as the leader to set those goals and not rely on a group of people to do that.
“You have to know exactly what your goal is, and you have to know how you’re going to get there,” he says. “Where companies fail miserably is they try to create goals by committee. You can’t have committee leadership. If you don’t know, you’re preparing yourself to fail.”
Communication also plays a key role in setting goals and staying focused on them.
“Good leadership is being able to explain how you’re going to kick your competition’s ass and being able to explain to everybody how they’re going to participate in doing that,” he says. “Otherwise, what are you doing there?”
He says you also have to adjust your communication depending on the type of people you have in your organization.
“Are you dealing with 18-year-olds, 25-year-olds, 40-year-olds?” he asks. “Are you in a very competitive business that moves quickly? You have to match the circumstances and the context and adjust accordingly. If my business is where I trust people and things are going well, then all I need is a weekly report via e-mail. That’s it. Just tell me what’s going on — bad news first — and then we’ll deal with it. If I’m in a situation where things aren’t going well, then I’m going to be up your ass. It just depends. It’s when you try to do it the same way every time, that’s when you run into problems.”
His intense focus paid off — the Mavericks have become a winning franchise and reached the playoffs now in each of the full seasons since he bought them, and fans are packing the arena to wildly cheer alongside the animated Cuban.
“Ideas are the easy part,” he says. “It’s the execution of the idea that becomes the difficult part.”
How to reach: Dallas Mavericks, (214) 747-6287 or
www.mavs.com; HDNet, (214) 672-1740 or www.hd.net
Cuban on titles:
It’s OK to allow people to raise their voice to you. I want people with strong opinions that they get passionate about. I don’t care if someone is yelling and raising their voice in my direction. It’s not a sign of disrespect. Hell, it’s a sign of passion. … If someone is passionate about something, share the passion. And if I don’t agree with you, I’ll tell you, but at least I’m going to appreciate the passion. That means you care.
A lot of CEOs say, ‘Don’t disrespect me,’ or, ‘I’m the CEO.’ I just hate that, when people hide behind a title. I’ve never been CEO of one of my companies until this year when I had to do it, and the reason I wasn’t was because, A, I didn’t care about titles and, B, I was superstitious — I’d been the president of every company that had been successful. To me, titles never matter. I try to keep all our organizations very flat. I never wanted managers reporting to managers. There was everybody, there was the level of management, and there was me. If I had to have somebody in between me and the managers, I minimized it as much as possible.
It’s not as much setting the ego aside; it’s setting formality aside. It’s ego, but if you’re a good CEO and you’re in a successful environment, there’s 1,001 ways to get ego gratification, and it should be in winning as opposed to driven by title. If anybody ever makes you feel like you’re a lowly anything, the problem is not yours, it’s theirs.
Cuban on control:
It’s not that the glass is half full or the glass is half empty, it’s who’s pouring the water that matters. And that’s the way it should be. Everyone’s, ‘Oh, you have to look at it positively.’ You have to take control of the situation.
Sometimes you can’t — then you have to figure out who’s in control. When you think about it, if someone says, ‘Is the glass half empty or is the glass half full?’ that already means you’re at a disadvantage, because you’re stuck. You’re making an adjustment about what’s already done as opposed to figuring out if I want to pull to the top, pull halfway or pull down. It’s not about taking a positive or negative attitude. It’s about taking control.
That’s part of the job. If you’re trying to kick everybody’s ass and you realize you’re getting your ass kicked, you better re-evaluate. It happens. You get your ass kicked from time to time. If you’re playing the game, you’re going to lose some games, and you have to go and figure out who’s beating you and why.
Sometimes you can’t. MySpace isn’t going to know why Facebook beat them, but they did. Yahoo doesn’t have an immediate response or an immediate solution [to Google]. If they said, ‘Mark, you go run Yahoo,’ I wouldn’t have an immediate solution for how to beat Google. Sometimes you do, and sometimes you don’t.”
Cuban on the role of the CEO:
The show ‘Undercover Boss’ is a good learning model. You’ve got to get out there and watch. You’ve got to get out there and experience. And you’ve got to be out there. I’ve always had the attitude that there’s no job in my company that I shouldn’t be willing to do. I can’t ask someone to do a job I’m not willing to do myself. If I see paper in the parking lot, I’ll stop and I’ll pick it up. I won’t call someone to do it.
I don’t have a PR agent. I’m probably the easiest CEO in America to find and e-mail and to get ahold of. It’s more efficient and takes less time to deal with things directly via e-mail than it does for someone to go through your e-mails and go through this and not know what you’re missing and then have to have them communicate to you and you communicate back to them. The time it takes for you to answer an e-mail or hit the delete key, if it’s not worth responding to, is probably about 20 percent of the time it takes to go through one, two, three assistants. I go into Hollywood and I see four assistants sitting outside somebody’s door, and I’m like are you [expletive] kidding me? It takes more time to deal with them than it does to do it yourself. Sometimes CEOs get caught up with what they think CEOs are supposed to do. Rather than working in a way that you think CEOs are supposed to work, just do what you know is the right thing to do. Do the most expedient thing; do the most efficient thing. That sets a better precedent and a better example than doing things the way you think a CEO should do them.
Whatever you think is the standup of your culture, you have to do it yourself. If it’s selling, you have to be a salesperson. If it’s programming, you have to understand programming and engineering. If it’s design, you have to understand design. If people don’t think you know your business, how are they going to respect you and follow you?
Cuban on learning:
When I get into a business, I try to know it better than anybody else. It doesn’t matter how much I have to read or how many people I have to visit or what I have to do — I’m going to do it. There’s always someone out there trying to kick your ass. If you’re not out working, they are going to kick your ass. Regardless of what it is, I want to know more than anybody about what we’re doing. …
It’s an ongoing, nonstop process. That’s my job. My job is not to shake hands and glad hand and say, ‘Hey, how are you?’ My job is to get into a business and learn it better than anybody else and try to come up with angles and ideas that they haven’t.
You’ve got to love learning. The hardest thing, particularly once you’ve reached a level of success, is people have an inclination — myself included, and I’ve kind of learned the hard way — to say, ‘OK, I’m smart. I know this stuff.’ You’ve got to always say, ‘There probably is somebody out-working me; there’s some 18-year-old kid, somewhere, who’s trying to know this stuff better than I do.’ … Either the kid wins or you’re going to put in the same amount of work and have the same understanding or better of that 18-year-old or whoever it is. I don’t think most leaders are willing to do that. I think most leaders say, ‘I’ll just go out and hire the right people, I’ll package the right people, I’ll take some basic understanding,’ and that’s how they get outdated very quickly. The world changes very quickly. You have got to love to learn because the world always changes.
Al Bell saw the future for Moochie & Co,. and it looked quite promising. It was 2008 and the pet supply retailer was about to close a transaction with a private equity firm that would have made available significant growth capital.
And then suddenly, the opportunity was gone.
“Due to the stock market and economic conditions, they walked away,” says Bell, the 102-employee company’s CEO. “They put us in a difficult situation with our lender.”
At the time, Bell was part-owner of the business. He owned 35 percent, a partner owned 35 percent and seven other investors owned the remaining 30 percent. Bell knew his business had growth potential, so he made a bold move to basically go it alone. He felt it was the best path to realize the potential he saw.
“I’m a strong believer in the company and our niche in retail and the growth of the pet industry,” Bell says. “That led me to essentially acquire full ownership of the company, renegotiate our store leases and really focus on cutting expenses.”
Expense reduction was critical. Bell wanted to take things back to square one and be a whole lot more careful about how money was being spent.
“Instead of accepting the historical expense model as a given, we built our expense structure from the ground up and really challenged and explored every expense,” Bell says. “We also asked the entire organization to accept the challenge and bring forward their best ideas, and we acted upon the better ones.”
When looking at expenses, you need to separate fixed costs from variable costs.
“We looked at every variable expense and we said, ‘Is there a way to control that?’” Bell says. “In our case, we’re looking at the percentage of revenue spent on a given expense at a particular store. So if utilities were excessive at a given store, you went in and tried to discover why that was and if there were opportunities to reduce it.”
You also need to get your employees involved to make any initiative effective.
“I very clearly set out specific objectives for the company, one of which was expense reduction,” Bell says. “It was a detailed review of the full-year profit and loss statement on a unit-by-unit basis and then a line-by-line basis. You begin to decide what are truly variable expenses that can be attacked as compared to fixed expenses that you have to accept.”
Bell did not hold back when explaining the importance of this investigation into expenses.
“One of the rallying cries I shared with the group is, ‘You may have bigger jobs at some point in your life, but you’ll never have a more important job than you have right now. We’re talking about the survival and potential success of a small company of which you are an integral part,’” Bell says. “I believe the team really embraced the opportunity to play a vital role.”
The result of Bell’s effort was a new business model that everyone at Moochie & Co. strongly believed in.
“We started with very modest revenue increase expectations and then examined every expense line carefully,” Bell says. “As the leader of the business, it fell to me to make the difficult decisions.”
The tough choice was two stores in Detroit had unacceptable occupancy costs and needed to be closed. But that proved to be only a bump in the road as the company soon was in a position to begin growing again as the economy began to recover.
The company had gone from 10 stores to eight, but it now has 12 stores and 20 Mini-Moochies at pet boarding resorts and veterinary clinics.
“Our major expenses have been brought down to affordable levels, and we have a culture within the company of challenging every expense and trying to reduce every dollar spent,” Bell says.
How to reach: Moochie & Co., (877) 666-2443 or www.moochieandco.com
Find your leaders
Al Bell wanted to reduce expenses at Moochie & Co., so he needed to find out who was ready to march with him on his quest.
“I’ve always believed in management that you need to articulate the goals, share as much information as is reasonably possible and then listen and be receptive to suggestions,” says Bell, CEO at the pet supply retailer. “It is a process that allows you to really learn who is with you and who is not.”
When you are open about a plan and forthcoming with details, you’ll be able to see who is buying in to the plan and who isn’t interested.
“Be brief, be clear and be consistent,” Bell says of your communication strategy. “You ask a lot of questions and give encouraging responses when people contribute.”
When you’re having a meeting, give people a clear sense about what it’s going to be about.
“We actually prepared and promoted the meeting for two months prior and gave people topics and an agenda and really tried to set the tone that it was going to be participatory and not a monologue,” Bell says.
If there’s one word that describes the manufacturing sector moving forward, this is it.
“There’s macroeconomic uncertainty, public policy uncertainty, uncertainty in terms of the value of Chinese currency, and that is going to make the business sector — particularly in manufacturing — very cautious when it comes to capital investment,” says Edward Hill, dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University.
There are signs of better days ahead, with more orders coming in and North American factories running at higher capacity than in the past few years.
“A big barometer for manufacturing is auto sales, and auto sales just took a dive the last couple of years, but it’s picking back up and demand is back up,” says Eric Burkland, president of The Ohio Manufacturers’ Association. “The good news is, the economy has clearly turned and demand is picking back up, but the cost pressures globally remain just incredible, so that dampens the hiring.”
Chuck Hadden, president and CEO of the Michigan Manufacturers’ Association, says that things are slowly turning around.
“We’re one of the sectors that are doing a little bit more hiring out there — not a lot, but we’re starting to get some hiring,” Hadden says. “There was a lot of uncertainty toward the end of the year — what was going to happen with federal taxes, elections, and that uncertainty is now gone. We know what’s going to happen with those things, and now people can start moving forward, and I’m optimistic at the direction we’re going.”
While no one can say for sure what the next 12 months will bring for manufacturing, there are two things that the experts agree on: Success in the sector will be driven by diversification and innovation, something Jim Nicholson, vice president of chemical maker PVS Chemicals Inc., will attest to.
“This year, we are really working on continuing to expand our customer base — we’re looking for new markets that we traditionally have not served and adding those markets to our customer base, and we’re making investments in new kinds of people, with different kinds of experience, specifically related to market and marketing,” Nicholson says. “We think this is going to be a pretty good year for manufacturing.”
Diversification has been critical the past few years and will continue to play an integral role this year.
“If you’ve made it through, you’ve probably figured out a way to diversify your company from one product to another product so you’re not reliant on one business sector,” Hadden says.
But he says it’s time to take it a step further in 2011.
“Let’s diversify your customer base so you’re not totally reliant on one customer in that business sector,” Hadden says. “Find ways to expand your business that way, still doing what you ... do best but find more customers. It’s a big world out there, and there’s no reason why we can’t be competing in a lot of markets out there.”
He says one of the keys to effectively doing this is to look beyond America’s shores.
“Our biggest growth opportunity for us as manufacturers that we haven’t taken advantage of is finding customers in other countries that we can help supply,” Hadden says. “I think that’s the biggest tone that we’re going to try to set this year. We all know we can’t rely on one or two customers anymore. … If you’re making a part here for an auto company, why can’t you be making it for someone in Germany or Japan or India?”
Hill agrees that diversification overseas is important because of the growing demand that will come from those markets.
“There is a lot of opportunity out there, but the opportunity is going to be based first on international markets, particularly in growing, developing economies,” Hill says. “It is really important for American manufacturers to really pay attention to international markets.”
For example, one of the biggest markets that American manufacturers need to be involved with is China, but it’s not because of cheap, offshore manufacturing.
“They should be looking seriously at China, because it’s an incredibly growing demand and middle class that’s going to drive global sales for years,” Hill says.
Diversification also means that you have to look at other ways to position your expertise and capabilities in the market.
“Companies are continuing to look for new markets and new ways to use their knowledge and their capital for new products,” Burkland says.
But when you look at the global economy and look at your industry and look at your business, you could get dizzy from seeing everything that could potentially happen. That’s when you have to choose a few things to focus on in your diversification efforts.
“Survey, and then pick a couple that are likely winners,” Nicholson says. “Trying to do everything is logistically impossible.”
The way Nicholson and his company decided was by looking at the products they know really well and then looking at applications where they felt their products weren’t well represented. Finally, they looked to see if they could move into those markets with their products.
“Again, [it’s] trying to leverage what you know into a new market. It’s very hard to get into a new market where you know nothing about the product and where you know nothing about the market,” Nicholson says. “You have to choose to either serve a market where you know something about the product or serve a market where you know something about the market and need to develop the product. There’s too much risk and investment to try to solve both those problems at once.”
One of the other keys for manufacturers to find success this year is to focus on innovation.
“That’s the trick today — cut costs but don’t cut innovation because innovation is the path toward future profitability,” Burkland says.
Giorgio Rizzoni can explain why innovation is so critical. Rizzoni is the Ford Motor Co. chair in electromechancial systems, as well as a professor of mechanical and electrical engineering and director and senior fellow for the Center for Automotive Research at The Ohio State University. He says that if you and a friend have the same laptop, in theory, you both have the same battery in that laptop, even though you could each get a different capacity out of that battery.
“You sort of adapt to whatever you have,” Rizzoni says. “It doesn’t matter, from a consumer perspective, that that one battery in your computer or cell phone has whatever performance it has, and if the variability is plus or minus 10 percent, who’s going to tell, right?”
While it may not matter in electronics like your laptop or your cell phone, it does make a big difference in larger items where batteries are needed, such as electric cars. In one of those, you have hundreds or thousands of battery cells.
“Some of them can range up to $15,000 a pack,” says Suresh Babu, associate professor for materials science and engineering and director of the NSF Center for Integrative Materials Joining Science for Energy Applications at The Ohio State University. “A pack means many batteries in it. That means you have to make sure these batteries last longer.”
And that’s where innovation is critical. If you have that 10 percent variability in those batteries, it makes a huge difference and is a serious liability to the car and its cost of maintenance.
“There’s an old adage that a chain is only as strong as its weakest link,” Rizzoni says. … “There’s an analogy there — if you have weaker cells, they will bring down the body of the entire battery pack so the ability to manufacture cells with a high degree of repeatability and quality is a very important thing.”
Improvements to these batteries aren’t happening on an annual basis either — they’re changing monthly. And the saying is that as the automobile industry goes, so does the rest of manufacturing go, and the auto industry is innovating at a rapid pace, so by rule, the rest of manufacturers will be, as well.
But innovation in the automobile industry will go beyond making better batteries. As it strives to reduce the mass of its vehicles, it’s looking for lighter-weight materials to help, and finding lighter materials will also help other manufacturers.
“The more you’re able to find new ways, lighter ways, more resilient ways, more flexible ways, more whatever the characteristics of the materials, that leads to opportunities in product innovation,” Burkland says.
Rizzoni says some of the new materials that are getting implemented in automobile manufacturing are plastics, aluminum, magnesium and high-strength steel. But new materials also mean more changes in the industry.
“One of the challenges that has surfaced when you start working with similar materials is that now you’re trying to join a piece of plastic to a piece of steel, for example, so joining techniques become, possibly, a real challenge,” Rizzoni says.
This is where you have to look at what you traditionally do and throw it out the window. Kevin Arnold is the business development manager for advanced energy for the EWI Energy Center, which helps manufacturers in the energy sector and other industries improve their productivity, time to market and profitability through new, innovative technologies. He says, for example, that if GM built every battery for its electric vehicles to Six Sigma standards, which for years was the gold standard of quality, none of the cars would run, because they would all have bad welds in them.
“You’ve got to get so many decimal places out of quality,” Arnold says. “This is a challenge. That’s part of the growing pains we’re seeing now is that what was considered good enough for many years is now not quite good enough, so it’s looking at the fundamentals, understanding and controlling them and ongoing monitoring to ensure that you’re within limits.”
Look at the processes in your organization and find ways to make them better — even if it’s something that’s been the same way for decades.
“What manufacturers have to be open to is don’t take processes that seem simple, like welding, for granted,” Arnold says. “Welding is a fundamental manufacturing process that’s been around for 100 years, but it’s often one of the least understood processes and one of the first that could go out of control and cause problems. Ensuring that they have the right expertise on staff to look at their processes, understand the variables and understand that what they’re doing is with increasing levels of scrutiny.”
The experts recognize that the money is likely not there in your organization for you to throw out your assembly line and start with something newer and better though, so that’s why they’re working to help manufacturers find ways to cost-effectively innovate.
“All of [the processes] have to be mature,” Babu says. “Mature means not only from the science aspect but also from the industry aspect — how can we implement them in an existing manufacturing line. That’s the biggest challenge.”
But it’s a challenge worth exploring because the way to succeed this year is to push your product and process innovation efforts to the limits.
Resources: Center for Automotive Research — The Ohio State University, (614) 688-3856 or car.osu.edu; EWI Energy Center, (614) 688-5000 or ewienergycenter.com; The Maxine Goodman Levin College of Urban Affairs at Cleveland State University, (216) 687-2000 or urban.csuohio.edu; Michigan Manufacturers’ Association, (800) 253-9039 or www.mma-net.org; NSF Center for Integrative Materials Joining Science for Energy Applications — The Ohio State University, (614) 247-0001 or www.matsceng.ohio-state.edu/faculty/babu; The Ohio Manufacturers’ Association, (800) 662-4463 or www.ohiomfg.com; PVS Chemicals Inc., (313) 921-1200 or www.pvschemicals.com
Manufacturing has led the economic comeback, but will it last?
When you look at the brightening economic picture, manufacturing has played a major role in the comeback. The biggest question facing the sector is simple: Will the good times last?
Robert Dye, vice president and senior economist for PNC Bank, says the odds are in favor of manufacturers, but there are still risks.
“It is my expectation that we continue to see strong growth but not as strong in the last year or so,” Dye says.
The overall recovery in the U.S. will eventually reach across all economic sectors, including service and construction.
“When I look at price conditions for manufacturers, I’m concerned about a profit squeeze as energy and higher commodity prices drive producer prices up,” he says. “Those prices will not be able to be passed through to the consumer at this point. Even though there are currently strong profits, there is potential for profit erosion down the road.”
Companies that make consumer goods should also see better times ahead.
“I do expect the consumer sector to show ongoing improvement through 2011, as we saw consumers bounce back in 2010, with strong retail sales and a strong holiday shopping season after three disappointing seasons in a row,” Dye says. “Measures of consumer confidence are improving and job creation should improve through 2011. Manufacturing sectors that will be able to take advantage of that will be the consumer-focused sector.”
There are also potential risks in the consumer sector, as well: Foreign debt woes could increase the value of the dollar, hurting exporters, unemployment is still high, and the housing market is still weak.
“We are still in uncertain times, and manufacturers will face cross currents in the year ahead, but most of the wind will be at their backs,” Dye says. “But the lingering risks are still with us.”
How to hire in 2011
While most manufacturers are seeing things on the upward swing, hiring can still be a difficult decision as you continue lean operations. Likely, you’re down to a core group of people who you trust and can rely on to do a good job, so if you have a good core and you want to hire, you have to take an approach that most manufacturers have never taken.
“If they do have to hire, it will be slowly — one or two at a time — and they’re not looking at the skill base they have, but how do they fit in with the rest of the people,” says Chuck Hadden, president and CEO of the Michigan Manufacturers’ Association. “Can they work as a team? Is it someone everyone else will get along with? Those are all crucial things they’re thinking about beyond can the guy or the woman do the job.”
Hadden says you have to take more time in your hiring now if you want to be successful.
“Your HR person does the interviewing, but maybe you include a couple people from the floor, and they sit in on a couple [interviews] and listen to them,” Hadden says. “It used to be, when I was growing up, somebody’s grandfather or uncle would get them a job in the place and they’d take off. It doesn’t work that way anymore.”
He says to make sure you look for people who are willing to learn and want to continue to learn through technical school, additional training or whatever the company may call for.
Jim Nicholson, vice president of chemical manufacturer PVS Chemicals Inc., says you also have to trust your managers to make good hires.
“The key on the hiring process is to have confidence that your managers can hire well,” Nicholson says. “Spend time and effort training your managers on how to hire well, and make sure your managers spend enough time on the process and have choices and present choices, so that they can get input from their fellow managers and hire the best person for that role.”
Doing these things will help you as you look to add bodies in 2011 and the years to come.
It’s happened to all of us. One night you go to sleep without a thought in your head, and inexplicably, you awaken at 3 a.m. and find yourself sitting straight up in bed with an idea in your head that you think could change the world and make you a legend in your own time. You may have no clue where the idea came from, but at that moment, you are energized with the possibility of fame and fortune. In a panic, you scribble your thoughts on a bedside pad of paper in fear of losing them. You then pause for a few minutes before your somniferous state overcomes you, and you fall back into la-la land.
Fast-forward about three hours and you get up feeling a little restless, not totally recalling the epiphany you experienced earlier. Then it comes back to you as you find your notes. You begin to sort out the elements of your Holy Grail discovery and begin to apply logic to your revolutionary concept. Then it hits you. Perhaps, what you thought was an earth-changing breakthrough might just be more of a jumble of fragmented elements that no longer pass the smell test. You just experienced the inevitable second thoughts.
This reconsideration is completely normal, very necessary and a part of the discovery process. Second thoughts are critical and invariably occur with just about everything we do in business, but it all comes down to the sequence and timing. Second thoughts are good most times, except in situations where you’ve already made a commitment, made your idea public or, worse, promised to do something. They are particularly bad after the wedding vows conclude with the obligatory “I do’s” or after you decide that you can beat that train at the crossing and then change your mind as you hear the “thump, thump” of your tires rolling over the railroad ties as the freight train’s bright light shines in your eyes.
In business, second thoughts should be your standard modus operandi when you or one of your charges come up with that possible big idea. It’s important to use that time between an idea’s inception and the launch of implementation using a simple discipline that can help ensure you’re not off on a wild goose chase.
When you have your next revelation, begin the process of evaluation, knowing full well that you may have second thoughts, and either bag your little gem completely or fine-tune it further after it has been time and stress tested.
First, flesh out your original notes and prepare a basic outline of what it is you may attempt, what it will do, and how and why it could pay off. Don’t waste time on form; just drill down to substance. Secondly, sleep on it, either literally or figuratively. Think about the idea for a night or two before you drift off to dreamland. Alternatively, put your narrative in your top drawer for a day or so. After this mandatory timeout, pull out your notes, read them thoroughly, thinking of the ramifications and nuances, and then, if it all still makes sense, take your thoughts to the next step, which can include discussing the idea with a colleague, friend or significant other.
This simple respite in your race for success can give you the opportunity to bag the idea and move on, concluding your concept was nothing more than the result of a little too much indulgence of food or drink before you hit the pillow on that fateful night. However, if you make the decision to continue to proceed, the rest will come naturally as you more fully flesh out the concept during the ongoing discovery, fine-tuning and testing stages.
New ideas are almost always an iterative process, often with the finished product emerging dramatically different from the initial idea when lightning first struck. Creation is one of the most exciting, yet challenging, aspects of building a business, but without following the vetting process, it’s almost guaranteed that inertia will set in and your concept will drift into oblivion.
Second thoughts are an integral safety valve for success. Taking an idea from mind to market is all a matter of sequence and timing, and when done right, it can be satisfying and very lucrative.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, will be published by John Wiley & Sons in late spring 2011. Reach him with comments at firstname.lastname@example.org.
Things could have turned out much different for Ali Brown had she not taken control of her life.
“Ten years ago, I was working as an employee in a tiny company in New York,” says Brown, founder and CEO of Ali International, a multimedia company that provides online marketing tools and strategies, coaching, seminars and instructional literature for more than 50,000 women entrepreneurs worldwide. “I was continually frustrated in all the jobs I had, which made me realize I was unemployable.”
Brown saw only two viable options: “I could be unemployed or self-employed, so I started a little freelance writing business, marketing myself online with an e-mail newsletter.”
That newsletter began to grow and Brown started to gain a following online.
“People started asking all kinds of questions about marketing and how I was growing my little business and asking for all this small business advice,” Brown explains. “So I started writing e-books and selling them to the people who were asking the questions.”
Today, that little business has become a multimillion-dollar operation and an Inc. 500 company. Brown publishes a high-end magazine, is regularly featured on TV and radio talk shows, and last year, she was named one of Ernst & Young’s Entrepreneurial Winning Women.
Smart Business sat down with Brown to discuss her passion for helping other women entrepreneurs reach their own goals.
What drives you?
The best part is my job is helping other women succeed through starting their own businesses. I offer products, resources, coaching programs and a community that’s dedicated to helping women entrepreneurs. These range from online marketing basics to one called Business Building Blocks.
When people go to start a business, they don’t often know what they should be thinking about in the legal department, marketing department or financial department. So this is Business 101 in a box. You start thinking differently when you’re an entrepreneur, and if you want to be wealthy, you have to learn how to take risks and do it in a smart way.
What makes Ali International’s value proposition unique?
My clients and customers say they love following me because they get business advice in a fun, real way. I talk with women who may be running a business from their kitchen table. They’ve got kids running around and they’re juggling their lives. Unfortunately, there are very few role models out there, so I’m able to fill a need in the marketplace.
Speaking of role models, what’s the best advice you’ve ever received?
It came from one of my mentors: Aim for the top because there’s more room. There’s actually less competition at the top, so I’ve not looked at the people around me in my industry but at the people who are at the top of the industry.Then, I ask how I can get there and position myself to stay there.
As you’ve worked with women entrepreneurs, what are some of the different challenges you’ve found they face?
There are two that stand out. One is the often-talked about family and work balance. For women who may traditionally be in the home, they feel pulled in different directions. But on a more personal and human level the other challenge is learning how to take risks and believe in themselves. Women are often programmed for safety. It’s in our DNA. We want to be safe and secure, and it’s really scary for women to put themselves out there. They’re often thinking, ‘What will people think of me? Can I really do this?’
So for many women, I see the personal journey even more rewarding than the financial journey because the person they become in the process is priceless. They become this incredible role model for their family and for the women around them. It’s a ripple effect, and it’s really going to change the world.
What’s the first step toward learning how to take risks?
Surround yourself with risk takers. You’ll begin to realize that in order to become successful, you have to become comfortable at being uncomfortable. You are often the average of the people who you are around the most, so seek out a network, come to a conference or join a coaching group where people come together and exchange ideas. Figure out the level that you want to be at, and seek out people who are already there.
Where do you find opportunities for your own growth?
One key to growing any business is listening to your customers and clients, but you also need to keep a long-term vision of what you want. I have my path, which is helping women entrepreneurs. But at the same time, I keep an ear to the ground and listen to the topics that they’re interested in and the needs they have. That’s where the coaching came from. I was publishing courses and books, and women still said, ‘I want to talk to you. Can you coach me one on one?’
My events started because they wanted to get together in person. Now, I have a conference every year called SHINE, which has become the premier conference for women entrepreneurs. This past year, it was in Las Vegas. In 2011, it will be in Dallas. It’s a three-day event, and we bring together hundreds of women entrepreneurs.
Even my magazine is about business, life and style for women entrepreneurs. I heard the things they were talking about and created something around it. That’s something you need to keep in mind when you’re looking for ways to grow a company: When you hear ideas, respond to them, but you also have to figure out a way that those ideas will make money.
It’s a constant journey of evolving your business model. Match the path you want and the passion you want to get out to the world with what they will be willing to take out their wallets and pay for. You also must figure out how to provide value.
What advice would you offer a woman who is unhappy with her current situation and looking for a change?
The first step for any woman who has an idea for a business or any woman who just wants to start a business is to start paying attention. Start paying attention to ideas that you have and write them down. Listen to ideas that people are talking about, then get out immediately to start networking to make it happen because that’s going to change your life.
So what does the future hold for Ali Brown and Ali International?
In the next few years, you’ll see me doing a lot more media and television, expanding internationally and having more events, reaching women in developing countries and helping them develop how entrepreneurship can help them.
How to reach: Ali International, www.alibrown.com
This is a cautionary tale about the danger of going to market with a product before you’re truly ready to handle the crush of consumer demand. It may sound like a dream come true in these tough economic times, but it was nearly too much for Ron Vigdor and his 70 employees.
It all began about four years ago when concern was growing about Bisphenol A, also known as BPA. The presence of this substance in plastics was creating concern among young parents who worried that their babies may be exposed to it. So Vigdor developed a line of products that were guaranteed not to contain any BPA.
The response was overwhelming.
“We saw a tremendous spike and upsurge in demand for our product,” says Vigdor, founder, president and CEO of BornFree Inc. “So much so, that we probably had to work 13 to 15 hours a day literally manufacturing the product and flying it internationally to the United States for next-day delivery.”
When you have a product that everybody wants, you have a choice to make: Spend what you need to in order to meet the demand or wait until you’re sure you’re ready to handle it. The problem, of course, is the demand may not be there anymore if you decide to wait.
“You have to do more or less a cost analysis of what it’s going to cost you versus what kind of market share or gain you’re going to receive,” Vigdor says. “We spent millions of dollars getting the product to the shelves.”
Vigdor was confident that revenue would make up for the costs incurred in the beginning.
“Our manufacturing capability was roughly 1/10 of our current manufacturing capability,” Vigdor says. “Everything was exponentially anywhere from two times to 10 times the demand or needs we originally envisioned in our business plan. At the end of the day, it was a smart decision. Financially, I don’t know if it was the smartest decision, because we had to spend so much money.”
The decision to try to meet the demand created a high level of stress for Vigdor and his employees for a period of about six to eight months.
“We had to make sure we could try to please as many retailers as possible,” Vigdor says. “And try to gain as much market share. When you don’t have enough supply and great demand, that’s probably the most amount of stress anyone could have trying to combat that.”
Vigdor was able to work through the stress and meet demand, but there were risks involved. And that’s the choice you have to make when faced with the same situation.
“Do you come out and release a product when you have 50 but demand is 250?” Vigdor says. “Or, I can manufacture 250, but the product is 95 percent great and not 100 percent great. Do you go to market with that? You should always go to market when your product is 110 percent. You always want to be on top of it, and you always want to make sure you have the best product available.”
Vigdor’s advice, despite his success, is to take the patient approach.
“Don’t come out to market before you’re ready,” Vigdor says. “You’ll just end up with egg on your face. If you’re not ready, it won’t do as well as you want. If you have a great product but your manufacturing is not able to ramp up to scale, you’re going to upset some customers because you can only deliver to a handful of customers.”
How to reach: BornFree Inc., (877) 999-2676 or www.newbornfree.com
Keep your cool
Ron Vigdor thought he deserved one deal and his buyer did not feel that way. At one of the most stressful times of Vigdor’s life, the result was not good.
“I exploded,” says Vigdor, founder, president and CEO at BornFree Inc. “I stuck my foot in my mouth. I said, ‘You’re only the stepping stool for me getting bigger and better.’ That did not go well with the buyer.”
You need to recognize those times when your patience is thin and you’re prone to losing your cool, says the leader of the 70-employee company.
“If you are in a position in which you believe you are going to be confrontational, even if you think the customer is wrong, the best thing to do is step away from the actual problem,” Vigdor says. “Give it some time and rethink it.”
If you do lose your temper in front of your people, use it as a lesson to show them that you’re not perfect either.
“Teaching humility shows all people that you are human other than just being a tough CEO who says it’s my way or the highway,” Vigdor says. “It allows you to have a more personable connection with your employees as well as your vendors and manufacturers.”
The global economy is undergoing a sea change. While American markets languish and deficits snowball, the global market has continued to grow in size and importance. Whether it is for technology or consumer products, the global market is now the best place to grow sales and profits. To fully realize the potential of these opportunities, executives must undergo a paradigm shift, strategically analyze data and build alliances before the first dollar changes hands.
“The $500 billion current account deficit and the trillion-dollar-plus U.S. budget gap are not sustainable and can’t be financed much longer,” says Dr. Glen Taylor, director of MBA Programs for Global Innovation at California State University, East Bay. “If we keep printing money to cover our debts, it will lead to inflation, devaluation of the dollar and diminished purchasing power, so our future depends on global expansion.”
“To sustain growth and allow the next generation of Americans to have a better life, we have to rethink globalization, identify opportunities and be contributors to the global economy, rather than consumers,” says Dr. Yi Jiang, associate director of MBA Programs for Global Innovation at California State University, East Bay.
Smart Business spoke with Jiang and Taylor about the process of identifying and making the most of ripe opportunities in the global marketplace.
What prevents U.S. executives from capitalizing on the best global opportunities?
Taylor: U.S. executives need a changed mindset and a different approach to analyze and select global opportunities, because our country is no longer the dominant market in the world. Our loss of supremacy means that we need to learn how to do business in other countries that don’t always comply with our culture and business practices. We must put ourselves in their shoes and see things from their perspective in order to identify and capitalize on the best opportunities.
Jiang: We’ve had a tendency to view globalization in simplified terms and think of other countries as a resource for outsourced services and cheap labor. But when executives apply a different perspective to the analysis process and develop innovative products and solutions, they stand the best chance of succeeding outside the U.S. For example, PepsiCo recognized an unmet need in India, and capitalized by identifying itself as a provider of well-being services, rather than a supplier of food and beverages. The CEO’s paradigm shift and innovative marketing approach has led to greater success than simply transferring the U.S. strategy to another culture.
What’s the first step in the identification process?
Taylor: The first step is demographic analysis, but unless executives take a deep dive into the data, they may overlook emerging trends and actually target the wrong customers. For example, a superficial analysis of Chinese demographics reveals no net population growth, but an in-depth study shows that social change is underway and people are urbanizing at the fastest rate in the world, adding tens of millions of new global consumers each year. This creates unprecedented demand growth for all kinds of products and services. The country’s rising affluence has made the Chinese auto market the largest in the world, the largest market for mobile communications technology, and the largest market for consumer products and services of all kinds.
Jiang: Don’t take a cookie-cutter approach to the analysis process, because each country has regional and generational differences that create unique opportunities. While cultural and generational differences often drive demand on the consumer side, U.S. executives must consider dynamic industry cycles and a county’s openness and resources before attempting to position each country in the holistic picture of global strategy.
What’s the next step?
Jiang: After analyzing the data, travel to the country to experience the culture, validate your hypothesis and establish strategic business partnerships and networks. You’ll need seamless collaboration to understand the cultural nuances and build a supply chain. Infusing yourself in the culture will help you identify additional opportunities, since the best ideas often come from prospective partners, suppliers and customers.
Taylor: Meeting people is an important part of the evaluation process, and business relationships are like a marriage, so prospective partners must get to know each other before making a commitment. And your travels may yield additional opportunities, especially if you view things with an eye for the innovations being developed in other markets. Even though the U.S. may not be able to compete in labor-intensive manufacturing, we have endless opportunities to develop and export intellectual property, and there’s an unmet need for clean tech infrastructure in many parts of the world.
What else must executives do to succeed in the global marketplace?
Jiang: Remember that global opportunities and situations are fluid, so what seems like a great idea today may not work tomorrow. Conduct extensive scenario analyses so you are prepared to perform under a variety of circumstances, and keep your finger on the pulse of prospective customers by garnering feedback through open source social networking.
Taylor: There’s every reason to be extremely optimistic about our future, if we make changes in the way we conduct business and get our deficits under control. The key is to search out opportunities in global markets to develop innovative products and services that build on our strengths while embracing new ideas from other countries
Dr. Glen Taylor is the director of MBA Programs for Global Innovation at California State University, East Bay. Reach him at email@example.com.
Dr. Yi Jiang is the associate director of MBA Programs for Global Innovation at California State University, East Bay. Reach her at firstname.lastname@example.org.
Don’t be surprised to find Robert W. Scharar sewing buttons on his jacket. A boy scout since 1958 and now a board member of the Sam Houston Council, he has skills to show for his merit badges.
Scharar also credits the scouts with business networking. As founder, president and CEO of FCA Corp., a wealth management, financial planning and investment advisory firm with more than $500 million in assets, he researches potential investments. His involvement in community organizations forms connections to inform decisions.
“It’s important for businesses to participate in volunteer activities,” says Scharar, who also created four international mutual funds with assets of more than $50 million. “That’s a good way to expand your business knowledge and do something good at the same time.”
Start conversations. Just a smile and a hello and an interest will often spark a discussion. Ask about what they’re doing or ask about their country. We all like to talk about ourselves, so give a person a chance to talk about their country or their family or their job or their interests, and the conversation will unfold. It’s not always just one conversation, but it’s the continued friendliness that evolves from that.
In my BlackBerry, I write down the names of the people I meet at the counter at the airport. I can’t remember all those names, but you have no idea how helpful [it is].
Stay open to info. We’re always looking for ideas to invest in: trends of growth, trends of success, positive things that would make an investment worthwhile. Sometimes, it’s just coming up with the idea of the industry to be looking at. It may not be that particular company’s even available for sale; it just may mean that you get an idea that you had not pursued before.
Oftentimes, it’s not so much because I’m looking at their company, but I’m looking for somebody that has some technical knowledge that can explain some product I’m not familiar with.
When you open yourself to deal with people beyond your normal circles, you get great information. You can often learn a lot about the community by being willing to talk to people. Cab drivers often form that nucleus for a lot of people because they’re the only contact they have, but there’s a lot of contacts you can make if you’re willing to just reach out and look for areas of common interest.
Don’t make assumptions of people’s worth. Oftentimes, we get too hung up on titles and because of that, we don’t necessarily give people a chance to show what they can do. If you’re able to step back and recognize that people have value, you’d be shocked at what you can find out.
Keep lines open. Seeking information about what’s going on in the world that might apply to your business is generally not invasive. You can do that without people thinking you’re selling them something — because you’re really not.
Now, out of that can come opportunities because people say, ‘What do you do?’ I don’t necessarily even at that stage give them (my) card. But if it might be helpful, I’ll sometimes say, ‘I do work in that area. If sometime in the future you want to talk about it, feel free to give me a call.’
Don’t put them under any pressure, but you don’t want to be in a situation where you can solve their need and you’re not giving them the ability to work with you. You just have to be careful how you do it. We all are taken aback when somebody comes in and you feel like, if they don’t have a sale closed at the end of (30 minutes), they’re going to go on to the next activity.
Volunteerism … can lead to opportunities. If you try to go volunteer specifically to get X, that’s not going to work. But put yourself in an environment where the volunteer activities involve other people — particularly different people, not everybody who thinks the same way you do — and you just never know.
Just put yourself out there. I don’t go around handing my business cards to everybody I meet, but just let people know you’re open to questions. You’re rewarded in many ways for doing that — not always immediately, never from a particular activity — but by being engaged, you’d just be amazed at the kinds of things that evolve.
How to reach: FCA Corp., (713) 781-2856 or www.fcacorp.com
Back in 2002, when Peter Shaper joined the company that is now known as Harris CapRock Communications, the business looked much different than it does today. At that time, 80 percent of the company’s business came from the United States, mainly from energy customers who needed communications and network services for their critical operations.
Then, thanks in part to 2007’s acquisition of Arrowhead Global Solutions — which became CapRock Government Solutions and produced double-digit growth — and last year’s acquisition by Harris Corp., CapRock tapped into new growth avenues. The Houston-based company is expanding the services it offers, the vertical markets it serves and the geographic footprint it reaches. For example, it entered and provided service in 35 countries in 2009, shifting the balance so that 70 percent of CapRock’s revenue today stems from outside the U.S.
“The reason we have continued to grow even during the recession is by creating more breadth, by diversifying the verticals we’re in, diversifying the geographic markets we’re in, diversifying the services we deliver,” says Shaper, group president. “That diversification has made a difference.”
CapRock has seen 202 percent growth in the last three years alone, rocketing from 2006 revenue of $119 million to 2009 revenue of $359.3 million. That pattern landed the company on the Inc. 5000 list of the fastest-growing private companies and Space News’ list of the top 50 companies in the space industry, and it earned Shaper the distinction of Via Satellite’s Satellite Executive of the Year for 2009.
But accolades aren’t a reflection of rampant, unchecked growth. Shaper sticks close to the company’s core to evaluate new ideas and opportunities. That keeps CapRock growing in the right direction and stabilized for the future.
“Not all markets, not all parts of the world go into recession at the same time, and so by having the real breadth, we get some areas that are countercyclical so they’re growing when others are not,” Shaper says. “It’s rare that we find all areas of the world, all markets, all services growing at the same time, but as long as we have some that are, we can continue the overall growth.”
Set the course
For CapRock to grow in alignment with its core, Shaper has to lead the way with a clear strategic vision for the course.
“Have some vision for the future for reaching that next state or reaching a new height or a new goal,” Shaper says. “Share that with other people so they can see it, too, so they can all really work toward that same goal.”
Shaper starts with five imperatives encompassing the company’s vision. Because they’re considered competitive differentiators, those aren’t publicly shared — but they are certainly repeated internally as often as possible. Shaper takes every opportunity, from new employee orientation to quarterly all-hands meetings to strategic planning sessions, to align his 757 employees around CapRock’s vision.
“We tell all of our people that your activities need to be working toward those strategic imperatives, and they better be either growing revenue, growing margins or growing the team,” Shaper says. “Be able to communicate that strategy to (employees) … being very clear about how those goals are aligned with where we’re going strategically. It’s that repetition of the message that allows people to really start to get it.”
The goal in communication is consistency, and the key is relentlessness. It may get tiring for you, but repetition will keep employees motivated and keep you focused.
“To a certain extent, they are hearing the same old thing over and over again. To the extent that we are energetic and enthused about it, then people don’t mind hearing the same thing over and over again,” Shaper says. “Sometimes you feel, ‘Boy, do I really need to go repeat this again?’ The answer’s always yes because there are always people who need a refresher on what we’re doing and where we’re going and why. It’s a great refresher for us, the management team that’s presenting the same imperatives over and over again, because it keeps us focused on what’s really important.”
Communicating your course also predetermines a compass to measure potential moves. By articulating your differentiators ahead of time, you set the filters that opportunities must pass.
“Any new product, any new market, any new service, anything new we want to do, we measure against: Is this really playing to our strategic objectives? Does this further where we really want to go in terms of our long-term vision of the business?” Shaper says. “If it’s not helping us along that path, then it’s probably not something we want to do.
“If it’s not our core strength where we have some reason to have an advantage, I’d rather not invest our time and our money that way. Where can we really compete in an advantaged way such that we have a good chance of winning and growing and being successful in that market?”
When you stick consistently to that core measuring stick, it’s also easier to communicate course adjustments to employees. You know how to explain a move into a new sector if it passes through your core filters.
“Here’s a new market we’re moving into — the maritime market. Here’s why we’re moving in,” Shaper would tell his employees. “If you look at our strategy, it fits squarely into where we’re going and what we want to do. Folks who are in remote and harsh conditions need mission-critical communications. They’re on a global basis that can leverage our scale. By lining up the strategic elements that make it make sense, it allows everybody to understand why we’re doing it.”
Shaper’s job would be easier if all he had to do was communicate the vision and then stand back as opportunities rolled in. Obviously, a lot more legwork has to happen before the company decides to pursue an idea.
He shares that workload with employees by equipping them to vet opportunities before they get to him. The constant communication serves to educate employees about the evaluation process they should use.
“We have to teach folks who are going to champion new ideas, new products, new services and new geographies how to evaluate them,” Shaper says. “Make sure they understand the strategy and where we want to go and how we’re going to measure whatever ideas they bring, so that the people on the front lines are filtering these out themselves.”
Some champions get more specific training because their positions involve finding ideas to turn into products. Some CapRock employees, for example, are tasked with geographic expansion, and others in R&D, engineering and development are responsible for ushering potential products and services to Shaper’s desk.
“Generally, for it to get any legs, someone has to decide, ‘I like this so much I want to be its champion. I’ve heard it; I know three or four other people who’ve heard it. I’m going to go out and do a little investigation. I’m going to put together a presentation and say, “Here’s something that we should do,”’” Shaper says. “Whether it’s a new product or service or changing something we have today, without a champion nothing really ends up getting (done).”
Depending on the opportunity, Shaper has different expectations for a champion’s preliminary research. A brand-new product or service would obviously require the most prep, ranging from customer discussions to market sizing and economic viability tests. A simple cost-saving idea, on the other hand, might not need as much background analysis.
The champion’s responsibility is then presenting the case to management.
“That champion will push the idea up the chain,” Shaper says. “Eventually, the executive committee will look at it, talk about it, push back, maybe ask for more information and say, ‘Well, that makes sense. It fits in our list of priorities to invest in. Here’s the capital to go make something happen.’”
Continuous communication indirectly paves the way for this pass-off. You can’t expect employees to present an opportunity to you if they don’t have an established connection. Interacting with employees regularly will make them more comfortable sharing ideas.
“By (communicating) often, doing it frequently, getting out and meeting people so it’s not the first time they’ve talked to me face to face, doing it in a casual setting — either walking around the office or at office events — it just will make the executives more real, more approachable,” Shaper says. “Really connecting with the employees is critical to be able to lead them. That consistency in forming connections with employees is what builds the bridge and allows them to be very courageous and transparent in bringing things to you.”
Run field tests
If opportunities are still standing after the champion brings them to Shaper’s executive team, then they have to face the field. The next test is how CapRock customers react.
“We will always take these ideas and go out to some key customers — typically key customers who we would like to be the initial buyers — and we will make sure we spend time with them on, ‘OK, this is what we’re thinking about doing. Here’s the need we think it solves. Is this something that you would buy, and where does the price point need to be?’” Shaper says. “We’ll have customers come in and help us develop what the end solution is so that we’ve already got a known market by the time we’re ready to go to market.”
You could conduct general market research and read articles about the state of the marketplace, but Shaper prefers listening to the voice of the customer. In addition to regular one-on-ones between customers, salespeople and management, CapRock sends out surveys and sets up additional events to solicit feedback, such as the Customer Advisory Board, or CAB. CapRock invites a broad cross-section of customers from different markets, different areas of each market and different functions within client companies to achieve a diverse spectrum of perspectives.
“We run the CAB as a forum for them to talk and us to listen,” Shaper says. “We facilitate the discussion, but we try to do as little of the talking as we can because that’s where we get the real value — it comes from listening, not from talking.”
To get open feedback, CapRock keeps itself out of the conversation until the end. The two-day session starts with an objective focus on customer needs before shifting into a company-specific evaluation.
“Our core focus at our CABs is usually what’s coming next,” Shaper says. “What challenges are you facing? What opportunities do you see? We have discussions all around the future — what they see coming and what’s happening.
“We specifically carve off a separate section where I stand up and ask them, ‘What are we doing well at CapRock, and what are we doing poorly?’ so that the discussion around the marketplace and the challenges and opportunities doesn’t become colored by commentary around CapRock. … Using their challenges and opportunities at the end of the two-day meeting, they help us prioritize: Here are the most important places for us to spend our development dollars. Those next products, services, capabilities that we should be investing to generate are based on the two days of discussions that they just had.”
If done correctly, customer feedback solicitation is continuous. You’re constantly gathering input from meetings with customers, survey results, advisory board sessions and quarterly marketplace reports. Keep your ears perpetually perked for patterns.
“It’s a steady stream, and you’re always listening for trends within that stream,” Shaper says. “(We) all sit down and discuss what are we hearing, what’s going on, and the trends will start to come up: ‘Well, I’ve been hearing this three, four, five times. We ought to think about acting on this.’ As you start to hear the consistency and something becomes a trend, then you start to believe that it might be real and you take action.”
Shaper relies on this process for testing ideas against CapRock’s core-centric success, separating growth opportunities into pursuits and passes. Throughout the process, he also gets employees on board with the direction they end up taking.
“We want to have those opportunities to really kick ideas around, discuss them with some emotion and then know that we’ve got to make a decision,” Shaper says. “Once we make a decision, we understand why it wasn’t just a random decision but we’ve got some rationale why and we’re all going to back that.”
How to reach: Harris CapRock Communications, (888) 482-0289 or www.caprock.com
The Shaper file
Harris CapRock Communications
Education: Master of business administration degree from Harvard University and bachelor of science degree in engineering from Stanford University
What was your first job, and what did you learn from it?
My first job was a summer job when I was in high school, and I was a gofer. I literally drove a truck, picked things up, dropped them off, drove things all around town, picked up equipment, supplies. The most important thing it taught me was that I wanted to be one of the guys who was working in the office, not one of the guys who was working out on the manufacturing floor.
Whom do you admire most and why?
I admire children most because they have such a fantastic positive outlook on life and none of the weight of negative attitude and bad things having happened to them. That’s just such a wonderful way to go through life. I wish I could still have a child’s attitude.
If you could have any superpower, what would it be and why?
It would clearly be the ability to control time. One thing I definitely don’t have enough of is I never have enough time. So if I had the ability to slow time down and create more for myself, that would be my superpower.
If you could have dinner with anyone from any time, who would it be and why?
I would probably choose Jesus because so much of world history since then has been dominated by differing religious views; the crux of them all is during his lifetime, from the Jews before and after, to the Christians, to what that did to the Muslims. I just think that’s a fascinating crossroads in the history of man.
What’s your favorite stress relief?
It’s exercise — playing basketball.
What’s your favorite local spot for a business lunch?
I love going different places all the time so I guess my favorite spot is always the next one that I haven’t tried.