How far are you willing to go to sell your brand? Dennis Jarrett is willing to go pretty far to get people to do business with Stratus Building Solutions.
“I often think my partner and I are more tenacious than we are talented,” Jarrett says. “We don’t take no for an answer. I don’t mean in an obtrusive way. If one door shuts, we go to another one or we get in through the window, whatever the case may be.”
While he was joking about climbing through the windows of prospective clients, Jarrett says relentlessness is the name of the game when it comes to building awareness of your brand.
“I know it’s difficult, especially when times aren’t going well,” says Jarrett, co-founder and CEO of the commercial cleaning franchise company. “You get frustrated and you think you’re doing everything. But there’s always a light at the end of the tunnel. There’s always an opportunity.”
Jarrett is an optimist, but he’s also a realist. If you work hard, you can be successful, but you may be pretty worn out when you finally get there. If you’re not willing to put in that effort, it’s probably not going to happen for you.
“It took us a long time to become newsworthy in St. Louis,” Jarrett says. “In the beginning, we were constantly told, ‘Well, we have a lot of stories like that,’ or, ‘It’s not relevant,’ or, ‘We’ll call you.’ What I would do is meet with these people face to face and constantly tell them my story. Take them to lunch, whatever the case may be.”
Jarrett and his partner, Pete Frese, who is a co-founder and president of Stratus, split duties to get their company where they wanted it. Frese handled the internal operations while Jarrett hit the road to drive new business.
“Get a key person, it could be an employee, it could be somebody else, who can help you with some of the key areas that are still big picture,” Jarrett says. “You can’t be in all places at once.”
While that person is monitoring things at home, you need to be out there selling your business.
“Don’t be bashful,” Jarrett says. “The key is diplomatic tenacity. That’s where people fall just short and they are really just around the corner from success.”
The difference maker is often the story you tell when you’re out there working hard to grow your business.
“Everybody has a good story to tell,” Jarrett says. “You just have to prepared to tell it many, many times repetitively to anyone who will listen. You don’t need a large advertising or marketing firm. These are the times where you build relationships with writers and people in the local community that are looking for a story or human interest that is public relations worthy. People look at our press and our brand and think we have this big agency behind us. We’ve never worked with an agency. It’s all been internal. We don’t have a big marketing department. It’s myself and one other person. It’s all grassroots, and if we can do that, anyone can do it.”
Stratus has grown to more than 5,000 franchisees, 60 master licensees and 11 employees who helped the company yield $63 million in 2010 revenue.
“Psychology is a big part of an entrepreneur who makes it,” Jarrett says. “You have to be optimistic, almost blindly. The key is to know there are going to be good days and bad days and you just have to stay at it and on course.”
Once you start to gather supporters and get some good feedback, make sure you share it to help generate even more business.
“That goes back to the perseverance, the patience and the tenacity to build your substance, even if it’s one brick at a time and it seems like it’s taking forever,” Jarrett says. “There will come a pay day.”
How to reach: Stratus Building Solutions, (877) 731-2020 or www.stratusclean.com
You can’t be afraid to reach out for guidance when your business is struggling. It’s not a sign of weakness, rather, it’s a sign of strength that you’re willing to admit when you need help.
“Everybody has a mentor or an adviser,” says Jarrett, co-founder and CEO at Stratus Building Solutions. “Sometimes, the best clarity comes from somebody who is not knee deep into the business. Someone who has done it before and can take a clear, objective look at the business. Listen to people. It doesn’t mean you always take 100 percent of what they say. But there is great feedback out there.”
You need to be strong enough to admit that an idea, maybe even your idea, is not working and it’s time to try something else. Humility is one reason Stratus has grown to $63 million in 2010 revenue.
“You have to have an appropriate mix of ego, because you have to have confidence in your decision making,” Jarrett says. “You can’t be wishy-washy. But you also have to be pragmatic enough to know when you’ve got to change.”
It’s a tough thing for leaders to admit sometimes.
“They believe with all their heart and all their conviction that they are doing the right things,” Jarrett says. “That’s why sometimes, you need to take a look at somebody outside. Sometimes it’s a board, a mentor or a banker. The key is to have some outside clarity.”
Dunn-Edwards Corp. was a model of inefficiency when Karl Altergott arrived as president of the paint manufacturer three years ago.
“We drew a diagram of all the trips it took a manufacturing associate to build our product,” Altergott says. “It was 23 to 25 touches just to make a gallon of paint. When you laid out the spaghetti diagram and really just mapped out here’s a person making a gallon of paint and kind of track them over the course of a day and what they do, it became quite evident that it wasn’t efficient from a financial standpoint. It didn’t allow us to build the product we needed to build in a timely fashion.”
Dunn-Edwards had two plants. One was in Arizona and had been built in the early 1970s, while the one in Los Angeles was built in the mid-1940s. Both were extremely antiquated and lacking in modern automation capabilities.
“When we hit peak demand in 2006, we weren’t able to keep up with demand and since then it just further deteriorated,” Altergott says.
The pressure eased a bit for the 1,500-employee company, though not really in a good way, when the recession hit and the housing industry took a plunge.
“If we ever reverse course, which we knew would happen, we wouldn’t have had the capability to support that,” Altergott says. “Our biggest challenge was trying to figure out how to address that and then how do we deploy capital to fix manufacturing while reducing costs and bringing us into the 21st century?”
Make a decision
Despite the aging facilities Dunn-Edwards was dealing with, it still would have been easy to blame the economy and put off a major financial commitment to upgrade the company.
“We didn’t need the capacity today,” Altergott says. “So why invest the money? Why take critical dollars and deploy them in a down economy and take a contrarian approach to the market and invest in manufacturing when the economy is in a declining mode?”
You do it because it needs to be done. And when Altergott looked at the lack of modern technology and the massive inefficiency involved in simply making a gallon of paint, he knew something needed to change.
He began by determining if the existing plant could be renovated.
“Can you fix your current plant? Or something this old, do you just scrap it?” Altergott says. “So we did a lot of analysis on what it would take to fix our current facilities. We looked at and modeled out building on a green field, updating our current facility, building a new facility on our current location or building a new facility at other locations. We just mapped out a number of different models before we selected the correct approach to take.”
When you are entering into such an important process, you need to be clear about whether information should be shared or kept confidential. In this case, at this stage, Altergott wanted to keep discussions behind closed doors.
“You have to have confidence that they are not going to share the knowledge that they know,” Altergott says. “If people can’t be in that role, they are not going to be employed in the company. It’s as simple as that. If they want to be part of the team, they have to be part of the process.”
Altergott and his team of about six people developed a list of scenarios. He was open to hearing fresh ideas, but they had to be plausible.
“You don’t want to rule anything out, but it’s got to be within reason,” Altergott says. “It’s a manufacturing facility. We’re not going to build a new plant in Texas when all our business is here in California. So we had multiple scenarios and each one had a different cash flow model, payback and return on investment. We looked at how we were going to finance the different options. We continued to refine it and refine it every couple of weeks depending on the data we had.”
As you’re working through any type of process, whether it’s building a new plant or buying a new printer for the office, you need to make sure people know what responsibilities they have and then hold them accountable.
“You can’t outsource leadership,” Altergott says. “Every year, I have a plan that has probably 300 unique items on it. Every one has a name, a date and a deliverable. We meet every quarter and we go through that list item by item by item. People have to have things done. If they’re not done, I ask them why it didn’t get done. You don’t come to my meetings quarter after quarter and just say, ‘I didn’t get anything done.’ It just doesn’t work that way.”
As this process drew to a close, it became clear that the best option was to buy a spec building in Arizona that measured 300,000 square feet and could be transformed into a paint manufacturing plant with relatively little trouble.
“It was just an empty shell,” Altergott says. “It was built to be sold to somebody”
That somebody ended up being Dunn-Edwards.
Develop a plan
Altergott and his team approached the company’s board of directors and got the OK to proceed with turning this spec building into a paint manufacturing plant. It was now time to figure out how to make that happen. The one thing Altergott knew for sure was that he would NOT be leading that effort.
“During the construction phase, there are millions of decisions that need to be made every day,” Altergott says. “My job is not to be the project manager of this project because I have a whole company to run in addition to having this facility built.”
This would end up being a $40 million project and one that would shape Dunn-Edwards future for decades to come. So it was crucial that the project was given the proper attention and importance.
To that end, Altergott did not choose one of his own people to head up the construction team.
“One of my vice president subordinates wanted the job and I explained to him why he wasn’t going to get it,” Altergott says. “Once I hired Mark, who is my vice president of manufacturing, he clearly understood why I hired him. This other gentleman has really blossomed in the organization and he’s put himself into a position where if a job were to open up again, he’s in a great position to backfill it now because he has learned a lot in the last two years.”
If you’ve got a project that you view as being critically important to your company’s future, you can’t worry about bruising someone’s ego on your team.
“I’d simply ask, ‘Have you ever built a $40 million plant before?’” Altergott says for a response if someone is offended that you didn’t pick them for an important post. “If you’ve had that experience, we can go in that direction. But if you haven’t, we have to hire somebody in here who has the ability to really pull this off. You still tell those people they are valued and they have a future to grow within the company. But at this particular juncture, they didn’t have the qualifications that I was looking for.”
What you should be looking for is someone with experience managing a project similar to the one you want to carry out.
“For a project like this, I hired an engineer,” Altergott says. “Some plants are run from a maintenance perspective and some plants are run from an engineering perspective. I made sure I had a strong engineering mindset in the development of this plant. When it gets to flow dynamics and flow characteristics and the paint manufacturing plant, I really wanted a big engineer to help optimize the design for efficiencies and not just look at maintainability.”
You need to find the right person that matches your needs and the needs of the project so that you don’t have to worry about it. Well, worry as much about it.
“I don’t see how I could have done both,” Altergott says. “On the front end, from a strategic standpoint, I was heavily involved. Once we had the go decision, I was involved weekly with a conference call and understanding the pace and making decisions on things that were problematic. But I stayed out of everything else.”
You will never address every concern in planning for a project and you will never get through a project without at least one unexpected problem. And you’ll probably have several problems, some of which may cause you many sleepless nights.
“It’s never seamless,” Altergott says. “No matter how well you plan, there’s always things that you don’t anticipate. You have 1,000 decisions and 980 of them are great, but 20 will kill you. We had some bad data in our SAP system. You put bad data in and you get bad data out. So it took us a couple of runs through the process to cleanse the data so we could get better consistency in our deliveries.”
Altergott used his weekly meetings to get updates on what was happening and stay in touch and tried to stay away from his people working on the plant the rest of the week.
“We’d go through all the major issues that were surfacing that week,” Altergott says. “What are the big things that are not getting done? What is behind schedule? What is causing challenges?”
When problems do come to your attention, resist the urge to jump all over the leader you chose to lead the project and question why he didn’t anticipate the problem.
“I made a point to make sure he never felt as though he blew anything when we had some challenges,” Altergott says. “I made a point to bring him under my wing and say, ‘We’re in this as a team.’ When you move this quickly and make this many decisions, a couple times, you have a couple fumbles. As long as we get it fixed, and we did, it’s all good. When you see one of your subordinates and they are a little frustrated at the end of the table, you just need to bring them back in and tell them that it’s going to be OK. Provided you have the right person and you know that they are. If they’re not the right person, that’s a different scenario. But if you know they are one of your stars, you don’t just let them dangle out there.”
Despite the challenges, the project to construct a new paint manufacturing plant took about 27 months. The difference in efficiency brought about by the new facility and its automation capabilities was striking.
“It was 23 to 25 touches just to make a gallon of paint,” Altergott says. “Now we’ve got it down to two or three using our new automated system.”
The days of conveyor systems running from one building to another and then another are history too.
“We have over 1,500 automated valves that are all computer actuated,” Altergott says. “Historically, everything was done by hand and turning valves on and off and sometimes not even using valves. By using a lot of computer technology and using a lot of automation, we were able to really improve efficiencies by having it under one roof.”
It wasn’t easy though and the thing that surprised Altergott most was that much of the heavy lifting occurred as the project seemingly neared completion.
“Spending the money and building the plant is the easy part,” Altergott says. “Turning it on is the hard part. It’s everything. The complexity of a lot of automation just adds to it. Automation is great when it’s all up and running. But turning it on, just like debugging a computer system, it can be quite aggravating.”
How to reach: Dunn-Edwards Corp., (888) 337-2468 or www.dunnedwards.com
The Altergott File
Karl Altergott, President, Dunn-Edwards Corp.
Born: Los Angeles
Education: Bachelor of science in engineering, Loyola Marymount University, Los Angeles; MBA, Graziadio School of Business and Management, Pepperdine University, Los Angeles
How did your experience in the U.S. Marine Corps as a fighter pilot shape you?
You see so many great leaders when you are in the military. Gen. James F. Amos, the current commandant of the U.S. Marine Corps, is someone who I have met before. He actually taught me when I was a young captain and he is a great leader. When you see these strong leaders, you really understand what leadership is and how they take care of their people. And yet, they are very focused on the mission at hand. What I really learned out of the Marine Corps is the decisions you make are life and death, which are different than you do in the business world. No matter how crazy things can be in the business world, at the end of the day, I’ll go home to my family. You don’t always have that closure in the military.
Altergott on CEOs who fear talent: They want to be the smartest guy at the table and that’s the death of an organization. I’ve seen a lot of people struggle with it. You’re limiting yourself. I looked at my own personal success and growth and if I want to sit there and handicap myself by having subordinates that are not as intelligent as me, that’s a personal reflection of me and the success I will have. All you’re doing is handicapping yourself. Why would you build a team that is subpar just so you can be the smartest guy at the table? To me, that makes no sense.
You’ve got to show respect when you’re buying another company, especially one with the legacy and prestige of Merrill Lynch & Co. Inc. So Tim Maloney tried to use a great deal of tact in the days, weeks and months following the purchase of the well-known wealth management firm by the 288,000-employee Bank of America Corp.
“The first step that we dealt with, and frankly continue to work on every day, was to get people to lower the gloves,” says Maloney, market president for both Illinois and Chicago at Bank of America, which took in more than $100 billion in 2010 revenue. “There can be a defensiveness or concern that somebody is going to lose in this trade or that somebody is going to get steamrolled.”
With the people Maloney came in contact with, he focused on the many good things that both organizations brought to the table in the deal.
“The first step was to get people to understand that there is inherent value and worth in each of these institutions and that we didn’t have to worry about one coming in to overwhelm the others,” Maloney says. “That wasn’t the intention and that’s not how we’ll be successful. Now that takes time and you have to prove that over time.”
Create opportunities for people on both sides to get together and get to know each other so you begin to chip away at those “sides” and start to create one team.
“It really ultimately comes down to having people develop a relationship and a sense of trust with their new colleagues,” Maloney says. “The mythology starts to melt away and people understand that these are skilled, honest and earnest professionals who have similar goals and objectives that I do. They want to take great care of their customers and serve them well and help us grow this company. The most essential step is to get it out of the theoretical and at the relationship level and help people to get to know each other and develop a sense of trust.”
You can’t force people to get together and if you try, it probably will only hurt the integration process.
“Natural selection does work,” Maloney says. “We’ve found people have gravitated and developed relationships that we wouldn’t have scripted in our infinite wisdom, yet they are working very effectively because we made it safe for them to do it on their own and they have taken advantage of that.”
Maloney has found success, particularly in the joining of Merrill Lynch and Bank of America, by finding early adopters or supporters and encouraging them to bring others on board.
“Do everything you can to support and encourage them,” Maloney says. “Make sure you share them back with the broader universe of people who may be taking more of a wait-and-see attitude or being a little bit more deliberate or cautious in pursuing this. Supporting those early adopters was a critical step for us.”
As long as people aren’t bringing others down or being overtly negative about the transition, you can afford to be patient through this process.
“There are going to be people who are either extremely cautious or reluctant,” Maloney says. “That’s OK. But what isn’t OK is anyone taking the position that they are going to undermine or be a detractor.”
Don’t expect your people to do all the work, of course. You need to be out there communicating and providing clear and candid updates on what’s happening.
“Here’s what the issues are and here’s how we intend to tackle it and here’s the help we need from all of you to help us get to this vision or end state that we think will be beneficial for our company, our employees and our clients,” Maloney says. “It’s the authorship up front and the frequent, candid communication that can help all employees row together to get the right answer.”
How to reach: Bank of America Corp., (888) 550-6433
Keep an open mind
When you’re in the process of bringing two companies together, you should enter the integration phase with a willingness to consider all options.
“We have two organizations with lengthy real histories of putting clients’ interests first and lengthy real histories of working as a team,” says Tim Maloney, market president for both Chicago and Illinois for the 288,000-employee Bank of America Corp. “That’s a great place to start from. What is then important is that you are respectful of the strengths that have made those different organizations successful in their own right. Try to build upon those.”
It’s not a matter of trying to make everything the same or trying to make everything different.
“They may take different business approaches and have different methods for very good reasons,” Maloney says. “So those practices that make sense to extend horizontally across the enterprise, we do that consistent with a shared set of values and authorship to drive it out. But at the same time, we’re a stronger company because we do have distinct companies. We do have distinct brands that represent distinct values and distinct ways of engaging clients. We don’t necessarily want to change those.”
Taking a company from start-up to success story is a daunting task for even the most experienced business owner. Having a solid business plan and financial backing may open doors, but once the doors have opened, the hard work has only just begun. In the endurance race to get a business off the ground and keep it thriving — or even just afloat, as the case too often becomes — many business owners neglect some critical steps.
“A business owner’s first line of defense is to be cognizant of the various actions to take from day one to proactively protect the business from failure,” says Steve San Filippo, founding partner at Sensiba San Filippo, a CPA and business consulting firm with four offices in the San Francisco Bay Area. “Understanding and controlling costs followed by implementing systems to keep you on track is key. Another important step is to surround yourself with expert advisers who can help you act on what you learn, anticipate and head off problems before they fully materialize or take advantage of opportunities as they arise.”
Drawing on his more than 30 years of experience as a business owner and working directly with clients from small companies to multinational companies to help them succeed, San Filippo sat down with Smart Business to discuss how owners can avoid the pitfalls that plague even the most promising companies.
What are the most critical success factors for business owners?
The statistics are not pretty — some 80 percent of all businesses fail in the first year, and another 80 percent or so go under in the next five years. Too often, when business owners are starting out they focus on short-term successes and overlook factors that are crucial to long-term success. So how can you beat the odds? The first thing every owner should do is create a plan that outlines goals and objectives, including how to manage financials, meet inventory demand, maintain the records, hire, and find and retain customers.
Also, I always tell my clients that the greatest investment they can make is to surround themselves from the beginning with the best professional advice they can get. I’ve had standing relationships with friends and business contacts in professional services industries for 30 years now in which we just call on one another once a year to touch base and find out how we can help one another.
Business owners are often unaware that they’re naturally a part of a number of different networks with invaluable knowledge. Actively engage with contacts new and old on LinkedIn and other social networking sites.
Make a list of all the professionals you’re likely to need in the course of your business’s lifetime — an accountant, a banker, a lawyer, an insurance agent, etc. Talk to more experienced owners to find out what professionals they wound up needing along the way. Then introduce yourself and begin to get a good idea of who you’d like to work with when the time comes. If business owners don’t do this early on, by the time they decide to find a professional to address a specific issue that has arisen, there’s often little time to find one who is truly a great fit.
What are the most expensive mistakes you see business owners make? And how do you advise clients to dodge them?
Some of the most common and expensive mistakes often stem from owners failing to realize that all business is regulated one way or another. For example, when it comes to the payroll, an owner has to know the difference between an employee and an independent contractor. If they inadvertently treat one like the other on tax submissions and withhold the incorrect amount of income, the result could be a tax violation and a potential unwanted IRS interaction that could take away focus from normal business operations along with extraordinarily high penalties.
A common mistake we see time after time is an owner who doesn’t maintain the books and records properly. It’s pretty typical for someone starting out to enlist a family member to do this as a cost-saving measure. All too often, clients come to me in a panic because they’ve relied on accounting software to be the brains of their bookkeeping without understanding that, while it can be a valuable tool, it is not the whole answer. I encourage owners to work with an accounting firm from the beginning to either manage their books or who, like our firm, provides ‘guardian angel’ services, such as our Business Services Department, which works with our clients and their bookkeeper to provide training on the software they’re using, and to produce timely, meaningful financial statements that help ensure business owners have the most accurate information and reduce the costs of financial statements and tax filings.
Consider the potential consequences of not maintaining the records properly — for one, the inability to secure a loan after the bank discovers the books are not in order. Often the only place a business owner can turn at that point is to personal credit cards, which can take them down a dangerous path because the interest can be prohibitively high.
Is there a specific point at which an owner should transition to a professional accountant?
I always recommend that clients work with a professional from the beginning, even if just to provide general consulting advice. In terms of when an owner should absolutely bring in an expert for the long haul, I’d say when some sort of meaningful transition occurs. Even if a family member has been able to handle the job, once the business reaches the point where there is a significant and sustained increase in some aspect of the business — the number of sales, revenue, the inventory or the orders — it’s time to bring in a professional.
Do you have any other final words of advice?
Being proactive, and not reactive, is key. No business owner is going to be able to control or anticipate everything that comes along in the life of the company. But being well prepared for the things that can be anticipated will allow for the flexibility needed to efficiently tackle the surprises that do pop up.
Steve San Filippo is a founding partner and audit partner at Sensiba San Filippo (www.ssfllp.com), a regional CPA and business consulting firm in the San Francisco Bay Area. Steve can be reached at (650) 358-9000 or email@example.com.
While some business leaders said the recession officially ended in June 2009, Tom McGraw would hardly agree.
“I think that those folks probably got into the Kool-Aid,” says McGraw, CEO of First National Bank of Northern California since 2002.
In 2009, the organization had a break-even year. And in the last three years, he watched as 345 banks went under.
“I think some of these banks that failed essentially were so paralyzed by the sheer volume of problems that they had that they just didn’t do anything,” McGraw says. “Then there were others who said, ‘Well, this thing is going to pass. It’s going to get better.’ For those people, denial was not just a river in Egypt. It was a way of managing things, and unfortunately, I think it led to their demise.”
Instead of being paralyzed by fear or in denial, McGraw thought that during the recession it was more important than ever for the bank to make the challenges facing customers and employees the top priority.
“By no means are we perfect, but I think we take a much more active approach when we have problems instead of trying to wait for them to resolve themselves,” he says.
Whether it’s with a customer or employee, McGraw wants to learn about people’s problems sooner rather than later so he can take swift action to address them. Personally, he’s found that having an open-door policy with customers and employees, especially in tough times, gives him the advantage of staying highly attuned to people’s needs.
On the bank’s home page, for example, McGraw lists his direct phone number and e-mail address so that customers always have someone to reach with any issue.
“I say, ‘Well, OK, if you’ve lost complete faith in us, then maybe that’s the right thing to do, but if you want to share with me what your challenge or problem or issue is, perhaps there is something I can do to try and turn it around,” he says.
Right away, McGraw also brought in all of the bank’s creditors who were struggling to help them find workarounds moving forward, such as switching to interest only payments.
“There were some where we had to take losses, but when those happened, we took them promptly,” he says. “We got them off the books as soon as we could rather than just holding onto them and hoping and praying that things were going to get better.”
For a CEO, this transparency and willingness to help also goes a long way in earning people’s trust and loyalty. More than 70 of the bank’s 180 employees have been with the bank for 10 years or longer.
“I think the access to management, our visits, our open-door policy — it really keeps a connection with what is happening within the system,” McGraw says.
By staying connected, you also know what people value and what keeps them inspired when times are tough. The company’s bank-funded employee profit-sharing plan has traditionally been a key factor in the company’s uniquely high retention rate. So while McGraw and his executive management team took no raises and bonuses in 2009, they were adamant about keeping the profit-sharing program.
“What we said is, ‘Look we’re in this together,’” he says. “‘If we can salvage a year and make some money, then we are all going to benefit from it. If we don’t, then we’re all going to have to feel the pain a little bit.’”
Through furthering a culture that ensures people are always a priority, McGraw has led FNBNC to survive a recession that many of its peers have not.
“You have to lead by example,” he says. “If you are going to ask people to take a little bit of a hit, I think that you have to, as well.
“Families stick together. They work through their problems. They’re not perfect, but they depend upon one another … and that’s the metaphor we like to use that holds for both our employees and for our retail customers.”
How to reach: First National Bank of Northern California, (650) 875-4865 or www.fnbnorcal.com
When CEO Tom McGraw spots someone in his company who isn’t executing well or isn’t happy, he makes sure he finds out why. To keep complacency at bay, it’s important to recognize people’s motives in their roles so you can figure out which employees may want to do more, which are unhappy and which really are content where they are.
“Sometimes you want to try to promote people,” McGraw says. “You want to push them. You want to see how far they can go. While that’s good in concept, the reality is that if they don’t want to go, you are going to set them up for failure.
“We have some tellers who have been here for 25 years. …That’s a very important job. They have the most contact with our customers, but that’s all they want to do. And then you take them and you put them in an operation supervisor position and they fail miserably. Well, they didn’t want to be there.”
As a leader, you need to be attuned to what people’s expectations are for their career, what their aspirations are, and then try to match those with positions in the company.
“So you’ve got people with various aspirations,” McGraw says. “If you can line up those aspirations and those skills with the position, the chances of success are much greater.”
Until the credit and financial crisis struck, Ted Bernstein was primarily focused on the successful niche that his insurance company served in the market.
“We were guilty of not looking at the macro picture of our industry and where change was going to affect us,” says Bernstein, the president and director of Life Insurance Concepts Inc.
As the supply of capital began to shrink and many people stopped spending money on life insurance premiums, demand for the company’s niche ebbed. What do you do when the product that you are selling no longer fits with what your customers need?
You start from scratch.
Through a process of “creative destruction,” Bernstein discovered the opportunity to transition the company online to reengineer its product and service offerings for future growth.
Smart Business spoke with Bernstein about how business leaders can use creative destruction to help them innovate.
What is creative destruction?
A typical example of creative destruction is the PC, because it essentially destroyed the main frame and gave way to an entire new business model that improved upon what was killed off. It is the idea of product progress, and it is a staple theory in support of capitalism, constantly serving the economy in positive ways. From an individual company’s perspective, it represents the idea of looking at established product lines and service offerings with the goal of improving the status quo. I think it is essential for growth in normal business times and essential during a sustained crisis such as the great recession we are now experiencing.
What made this process so difficult and challenging?
It’s easy to destroy for some and for some it’s easy to be creative. Being creatively destructive is a real challenge. In a period like we’re coming out of right now, it may be why some companies just flat out couldn’t make it — they could not recover or evolve through the destructive period — and why so many incredible companies grow up out of these destructive times.
One aspect of creating differentiation around us was that the product certainly had to be better. The other was you had to have a reason that you are going to buy from us, because maybe you’ve been buying from people who have been serving you well until we’ve come along. So we felt that we had to offer value to you that maybe you weren’t getting from others.
It’s really been a two-pronged thing that we had to differentiate ourselves with the product and then our ability to engage them to make them feel that they should use us.
How does destruction lead to innovation?
I don’t think you can go through creative destruction without getting as wide angle of a view as you can of your industry, which is not easy to do when you are an insider and you know your way around. You think you pretty much know how your industry works, and it’s pretty difficult to put yourself back in that position to almost be looking at it as if you know nothing. We did that. I would say everybody should force that view and that type of lens on themselves. They will see their industry and their business in a way they may not have looked at since they came into their business however many years ago.
I reconnected with the leaders from all aspects of our industry. I began having conversations with executives of insurance companies. I began having conversations with the professional associations, the organizations that monitor trends in our industry. We ran focus groups here at the consumer level and also focused on technology to see how technology was changing our industry. I kept pulling back the lens further and further and further so we could get as much of a macro, big-picture view as possible.
How can a successful company use this process to spark new ideas?
If every couple of years management puts itself through some type of crisis management exercise and you just imagine the worst — imagine your biggest supplier cut you off for no reason, or you could no longer acquire bank financing or whatever was most important to you, like capital was to us. If you could imagine that it was lost and lost quickly, how would you react? I think that’s an incredible exercise not just for the CEO or owner — it’s the team. You might find out who in your organization is better in your organization than you ever realized. Or you might find out some things about your organization that you maybe don’t want to find out but it’s important to find out.
How to reach: Life Insurance Concepts Inc., (561) 988-8984 or www.lifeinsuranceconcepts.com
Often I’m asked, “What is social media?”
For businesses, social media are where technology and social interaction merge. It leverages Web-based and mobile communication tools to allow for the creation of conversations and the content between consumers and brands. Social media channels such as Facebook, Twitter, YouTube, LinkedIn, Yelp and blogs are some of the tools businesses and consumers use to create and broadcast content and engage in social interaction.
These social media channels allow individuals and brands to shift fluidly between audience and author roles. Content generation and conversations within these channels utilize what is termed “social software,” to enable anyone without knowledge of coding to post, comment on, share or mash up content, and form communities around shared interests.
Think of an old-time malt shop at the mall. Conversations at these places typically took place on a one-to-one basis or within small groups. If a company wanted to “shake hands and kiss babies,” social engagement typically occurred one consumer at a time. The hope was that they’d leave the conversation empowered, with brand recognition, and wanting to evangelize the actions the company was looking to generate.
Whether the dialogue took place between brand and customer, within social cliques or simply on a one-to-one basis, someone would eventually break away and begin pollinating other conversations with the information they just gleaned.
Fast forward to what I’ve coined “the pollination effect.” Remember the shampoo commercial: “I told two friends, they told two friends, they told two friends,” and so on and so on? Harnessed properly, the pollination effect will create lightning in a bottle.
Don’t think that social media is going to be your business’ silver bullet. It takes time, dedication and strategy to create powerful customer relationships. Half the battle will be breaking through the noise bombarding your target audience for its attention. Today’s consumer has constant partial attention.
Imagine your target market. On the Web, they probably have multiple pages open, perhaps their iPod, TV or radio playing in the background, friends instant messaging and texting them, phone distractions, someone talking at them in person, browsing mail, and engaging on multiple social media channels — and you’re trying to attract their attention yourself.
Like a restaurant, social media has an endless menu of options. To reach your target market, the specials of the day change with hundreds of new social media channels developed daily.
The trick is figuring out which menu items will get your target markets telling their friends and returning for more.
Social media is public relations on steroids. Social media allow you to take your message directly to the masses and receive instant feedback. The tools to broadcast your message are endless.
Look at channels such as Facebook or LinkedIn. Sign up for accounts on most platforms and they’ll offer communication tools such as the ability to send e-mails to and from their platform, messaging, blogs, polls and content aggregation from other platforms such as Twitter.
To be successful, manage your time, have a solid game plan about what you’re going to say, whom you’re trying to reach and effective ways to reach them. Some platforms work well for one type of business and completely bomb for another. Blogs and LinkedIn typically work better for B2B businesses and platforms such as Facebook have higher B2C success rates.
To help determine the best platform for your business, research where the conversations relevant to your industry and target markets are taking place.
Adrienne Lenhoff is president and CEO of Buzzphoria Social Media, Shazaaam PR and Marketing Communications, and Promo Marketing Team, which conducts product sampling, mobile tours and events. She can be reached at firstname.lastname@example.org.
Zorik Gordon thought he had a plan to help ReachLocal Inc. make a lot of money. Unfortunately, he had completely misread the market and now found himself urgently needing a new strategy.
His initial goal was to build a company that would help small- and medium-sized businesses tap into the vast potential of online advertising. He wanted to lure them away from the old marketing methods of reaching out to consumers through the Yellow Pages and newspapers.
“We knew that was a huge opportunity,” says Gordon, co-founder, president and CEO at ReachLocal. “We also knew that the Web is fragmented, so it’s going to be very difficult because you can spend on Google and Yahoo and Bing. Before you could just write one check and you were good.”
But Gordon felt his company, which now has 1,381 employees, had solved that problem by developing a platform that would allow businesses to more seamlessly move their marketing efforts online. He was confident these businesses would jump at the chance to use this new tool to get the word out about their products or services.
“Initially, we were just going to partner with Yellow Page companies and marketing firms and just kind of be a technology provider, but distribution was going to be handled by somebody else,” Gordon says. “That failed miserably.”
It turns out that these businesses did not jump at the chance. They didn’t really jump anywhere.
“That ended up being ReachLocal Golden Rule No. 1, which is local [small- and medium-sized businesses] will never self-service,” Gordon says.
Gordon could have gathered his management team, headed to the bar and cried in his beer about how things should have worked out or how all the data had pointed to his plan being the right way to go.
But Gordon says you won’t get too far in business if you crumble every time things don’t go according to your best-laid plans.
“You have to be comfortable with a little chaos,” Gordon says. “Your job is to take all that chaos and turn it into order. … We evolved and said, ‘We need to build our own feet-on-the-street sales force.’ We didn’t say we have no business. We said, ‘Well, we need to make it easy for them. We need to deal with the Yellow Page guys and newspaper guys and build our own sales force.’ So we evolved and found a way.”
Gordon built a global sales force that helped ReachLocal reach those customers and got them to use the company’s platform and in the process, drive new business. Revenue in 2010 was $291.7 million, up from $203.1 million in 2009.
Here’s how Gordon has been able to stay cool in these kinds of pressure-packed situations and continually adapt in a turbulent world that shows no signs of calming down.
Do you find it hard to keep up with the changes in your industry? When things don’t go as you had planned, does it seem like it takes forever to regain your footing? If you answered yes to both of these, you may have a problem.
“There are really only two states a company can be in,” Gordon says. “It’s either being disrupted or being a disruptor. The pace of change is not going to go away and unfortunately, it’s only going to get faster. It is paramount for the CEO to really spin the cycles and to constantly keep the company positioned where it’s not being disrupted and it’s in a position of being a disruptor.”
When ReachLocal had to adapt its strategy to pull marketers from offline to online, it could have created a lot of disruption in the hallways at corporate headquarters. But Gordon did not waver from his belief that his company could impact the market in a big way.
“Those types of situations are when you have to push forward the hardest as a CEO to regain that perspective,” Gordon says.
“It’s time to reassess and regain that clarity. It’s kind of like you put everything together in a nice box and it’s like molecules. They begin to dissipate in every different direction. When you get that feeling and when you feel that overwhelmed, it’s a signal that the vision and the clarity that you had is starting to fade.
“That’s when you really have to, as a CEO, be very cautious and careful and push the hardest to regain that clarity and assemble your team. Things get out of control much faster than they did. That’s the time to push the hardest. You can’t rest on your laurels. It used to be you had a strategy and there would be a clear two-, three- or four-year road map. There would be a few mulligans here or there, but things wouldn’t change so fast. But now things can upset themselves in six months time.”
Your response to sudden changes that affect your business will go a long way toward determining whether you come through the change in good shape or not. You have to give your employees reason to get excited about the opportunity that change presents rather than allow them to grow fearful of the new problems it could create.
“The conventional wisdom is to get bigger and become more conservative,” Gordon says. “It requires even more pushing from the CEO to retain that comfort with change and to embrace change. A lot of companies start to look at change as a negative. It’s for CEOs and senior managers to embrace change and be comfortable with it and to get their people to be excited about it.
“People are excited when they understand. If they understand it’s not just change for change sake, but it’s change that creates more opportunity for them and more opportunity to progress their careers and their jobs, they’ll be on board. It’s keeping that DNA of change is good. That’s where the opportunity for real growth comes from, with innovation and change and moving forward. It gets harder and that’s why you see big companies really struggle with being able to deal with much more nimble, less legacy start-ups that end up eating their lunch.”
Lead with confidence
When you’re embarking on a new project, you need to have a pretty clear idea of where that project is going to lead your business. It will put you in the best position to deal with the unexpected hurdles that always come into play.
“Things are won or lost before they get started,” Gordon says. “You go into meetings with an extremely strong perspective on where you want to take the business.”
Gordon had an idea about how to make ReachLocal a success. When that idea had to be changed, it surprised him, but it didn’t cause him to lose any confidence that his company could reach the end goal of building a successful business.
“When we started, we were going to be a self-service platform,” Gordon says. “We were going to recruit individuals on a commission basis to help us build our business. We ended up being a full-service, suited product that has a feet-on-the-street sales force. That’s the complete opposite from where we thought we were going to start with. We got there because we were constantly evolving and we saw the signals that the market was sending us and where things were working and we kind of followed that momentum. That’s a constant process.”
When you have confidence in yourself and you know where you stand on a project, it gives you confidence to listen to others with an open mind. You can hear their ideas and rationally think about how they might help or hinder your project instead of worrying whether they are going to make you look bad by showing that they know more than you do.
“So it isn’t a brainstorming session,” Gordon says. “It really is a stake in the ground. Here’s where I think we should be going and here’s what we’re seeing. It should be a lot of presentations and a lot of input from other people, having a pretty good idea of where the outcome should be, but allowing for that serendipitousness that can happen. If it’s too serendipitous and too much of a brainstorming session, you came into it without enough planning.
“There are companies where their strategy is a failed strategy and it’s just a complete free for all. ‘Hey guys, we need a new strategy.’ In the regular, ordinary course, as you reassess, you need to come in with a pretty clear sense that as the CEO, you’ve done your homework and you’ve prepared. You have a pretty strong sense of where you need to be going and you’re going to spend those days either solidifying that or opening it up for additive ideas or even changing course.”
That confidence will also enable you to tap into the potential that is out there in your people and get them engaged in helping your company implement its plan.
“It really is very important to be able to not only have the right opportunity but to be able to explain it and position it and make it tangible enough to really attract people to get with the cause,” Gordon says. “You recruit people to join and help go after this very large vision.”
You need to make sure that you’re constantly moving toward an understood outcome or destination. As discussions take place, it’s your job to keep everyone on the right path and make sure they don’t get distracted by things that don’t relate.
“The more focused your company is, the more that you can consolidate and focus your business on a few things, the better off you are,” Gordon says. “Companies that end up doing way too many things don’t end up doing any of them well. Multitasking is not a great company trait. Clearly there are things that need to happen, but I really believe the job of a CEO is to pick those things that are the biggest needle movers.”
Gordon had an idea of what ReachLocal could achieve, despite the problem with how it would be done. It was his job to keep everyone on track toward that goal, while at the same time listening and adapting the plan based on the input from the others who were involved.
“It’s one of the most rewarding things when you get this comfortable feeling that there is a real clear vision and real clear perspective and real clear road map,” Gordon says. “It’s the job of everyone in the company to execute that as well as possible. Those are the good feelings. When you come out of that process, having that clarity gives you peace of mind. You have gone through that process and you now have a way that machine can function efficiently.”
Try to think of it like you’re telling a story. Your job is to present a narrative that explains where you’ve been, where you’re going and how you’re going to get from one place to the other.
“Effective CEOs are able to constantly have a very strong perspective on where they are going and be able to articulate that in a way that everybody can understand,” Gordon says. “Those types of companies have a sense of purpose. That’s a skill set where if you were to go and find the great CEOs across the years, I think it’s something they or their managers were able to possess. It’s being able to articulate a vision and being transparent around that vision.”
Your people need that focus to keep them on track toward the final objective.
“If people have an understanding of where the business is going and why, that’s what gets people to really understand their purpose and their role to play in the organization,” Gordon says. “That’s the job of the CEO, to constantly be the person who steers the ship and is writing the story and getting everybody aligned with it.”
How to reach: ReachLocal Inc., (866) 500-1692 or www.reachlocal.com
The Gordon File
Education: Gordon attended dental school, but, as he says, “everyone including my professors and patients felt it would be safer if I left to pursue my business entrepreneurship.”
People Gordon admires: People like Steve Jobs and Jeff Bezos, the true technology innovators that continuously keep the world moving forward.
Gordon on communication: At a certain point, there are too many messages and that tends to get lost. It really is going back to that clear, simple vision that gets propagated. Picking that one thing to push. You can get a few things propagated and it boils down to getting that clarity of vision and purpose that you want to push. Then it’s pushing that through the tools that you have and being consistent with that all the way through. A lot of mistakes happen when there is too much information getting pushed to people and it just gets drowned out. If you pick the right set of things to go after, there’s a chance you can be pretty successful communicating that.
Gordon on stressful situations: In those moments, it’s when the CEO and management team has to fight the hardest. Spend more time on strategy and really understanding. A lot of that was goes away with having clarity and perspective about how things are going to play out and what you should be doing and how you could benefit as opposed to being affected by this. Spend more time on strategy so you get clearer perspective.
The best solution is being able to find, recruit and attract top talent from top to bottom. That’s what make businesses scalable. I’m not the world’s greatest management guru or CEO. But what I’ve been able to do is attract extremely talented people to this opportunity who understand where this business is going and what their opportunity is and run their departments in a very entrepreneurial way. We’ve been able to scale and grow very quickly. It’s really about perspective and people that is the key.
Dean Friedman remembers one client in particular:
“It was a 35-store chain of restaurants that had a really difficult time building a database and creating an opportunity to have a rewards program,” says the CEO of Real Integrated, an advertising and marketing firm with $28 million in media billings last year. “One of our younger people came up with the idea for an opportunity in this space, and we grew a database from under 4,000 to approximately 27,000 Facebook friends, which is now driving that restaurant’s business through weekly offers.”
It’s not the traditional way that marketing and ad agencies have done business, but it’s example of the need to keep your eyes focused on the horizon when running a business. As technology has become more prevalent as a mass-marketing tool, Friedman and his staff have found it necessary to not only implement new technology, but find more creative ways to use it, constructing customized solutions to meet client needs.
“We’re a traditional agency, and had been for 50 years, the last 20 of which I’ve overseen,” Friedman says. “We’re really good at what we do, we have a fabulous product, and people perceive us as a great local agency. But what wasn’t being perceived was all the digital efforts we had been making. As the transformation has been occurring in the whole media marketing world, we have evolved.”
To build an organization that can take advantage of new opportunities, you need to build an open culture in which the employees that spot new opportunities are empowered to bring them to management for consideration. As it pertains to technology in particular, Friedman says that means you need to give a voice to your technology-savvy team members.
“One of the great things I’m learning throughout all of this is to take advantage of youth,” Friedman says. “I’m 59, and I don’t have all the answers. A lot of people in my organization have more answers than me, and are on the front lines more than I am. So my greatest advice is to keep an open mind and listen to everyone. As we’ve listened to our people, we’ve developed and refined our forward-thinking mindset.”
John Ozdych, the firm’s president and creative director, encourages dialogue throughout all levels of Real Integrated, helping to promote an atmosphere where there are no bad ideas and change is viewed as progression, as opposed to upsetting the apple cart.
“Everyone has to be agents for change, stewards of change and technology,” Ozdych says. “They have to be looking across the Web, combing through what is out there and bringing it back to the agency. If a new technology has been introduced out there, we’ll ask which of our clients could benefit from this solution, and we’ll also invite our clients to show other clients what we’ve been doing for their business. So it keeps going back to having that open dialogue throughout the business.”
Getting your employees to think ahead is critical, but clients and customers also need to look at what’s next. Your employees provide your services to customers, but the customers are the end users.
“What I believe is happening, and what is critical in all of this is that our clients are realizing that not every idea has to come from the CEO, or the president of the client company. Instead, ideas can come from anyone internally. The ideas bubble up now. I don’t care where the ideas come from and neither do our clients. We want to keep building a culture where everyone can have an idea or a suggestion.”
How to reach: Real Integrated, (248) 540-0660 or www.realintegrated.com
Forward-thinking companies don’t just look to the future for their own benefit. Sometimes, they’re able to bring a client along for the ride, and open the client’s eyes to new ideas.
Bill Eubanks is in charge of co-op services for Real Integrated, and has a marketing relationship with Kentucky Fried Chicken that goes back to 1979. KFC has historically been extremely old-school when it comes to marketing practices.
“If there is anything I know, it’s that KFC has a plan that is exceedingly traditional in its approach to the business,” Eubanks says. “But as an agency, what has given us added juice is the way we’ve structured things here, the partnerships we’ve created with vendors on the leading edge, to begin to offer a traditional client very nontraditional ideas.”
Real Integrated recently developed a website called MyLocalKFC.com, in which KFC store operators can promote their businesses in a manner specific to the locale. KFC operators weren’t used to it, but the new concept has started to gain traction as store owners have seen the value in it.
“That’s the kind of thing we weren’t doing recently, until we really started to emphasize the way we communicate internally and the partnerships we’ve created with leading-edge vendors,” Eubanks says.
Billy Cyr had been leading a company that had operated with the same supply chain and technology for the past 15 years, lacked a competitive product line-up, and was dabbling in businesses that weren’t helping the company grow.
Cyr, president and CEO of Sunny Delight Beverages Co., a 600-employee, $550 million drink business, knew the company needed to make changes to grow. The challenge would be figuring out what changes would have the biggest impact.
He acquired two new brands to expand the Sunny Delight line-up, sold an underperforming European business, and made a significant investment in the company’s supply chain and overall operations in the US.
“We have built a supply chain that’s both chilled and shelf-stable, increased the wholesomeness of our products, and invested in the supply chain and built that out,” Cyr says. “As a result of that, we are more profitable than we were several years ago and we’re certainly in a stage now where we have a clear path to some pretty significant growth.”
Through acquisitions and a $70 million investment in the future of Sunny Delight, Cyr has made a push for the company to be more competitive in a tough beverage industry.
Here’s how Cyr revamped the company with new products, technology and a narrowed focus on U.S. growth.
No matter how hard you look within your own company for growth opportunities, sometimes they just aren’t there. You have to be willing to bring in opportunities from outside.
“(Acquisitions) are always tricky because it’s where opportunity meets strategy,” Cyr says. “You could have the best idea on the best acquisition, but if it’s not available at the right time and you’re ready for it, there’s really not much you can do about it. We like to think of ourselves as staying very, very close to the industry and constantly aware of where the opportunities might be and how they might fit with us. You have to be open to the unexpected and be ready to say no. We say no nine times out of 10, because if it’s not right, why waste your time and why waste the seller’s time?”
Being open to the unexpected is exactly what put Cyr and Sunny Delight in front of the Fruit2O water and Veryfine juice brands deal, both from Kraft Foods.
“The Fruit2O and Veryfine acquisitions have been a gold mine for us and have done extremely well,” he says. “When we first saw the materials on it we looked at it and we said, ‘You’ve got to be kidding, why in the world would we want this thing?’ We went in and took a look at it and said, ‘Well, there’s something here.’ We kind of entered the process a bit reluctantly and ultimately turned out to get a deal.”
Not every opportunity works out that way. You have to constantly pay attention to your industry.
“At the end of the day, you’ve got to be connected to your industry, you’ve got to know what you’re looking for and have people knowing what it is you’re interested in,” he says. “You’ve got to pursue those things at the right time, but you have to at the same time be open to some things being a little unexpected.”
A CEO has to be very clear about where value creation is going to come from.
“Value creation is what acquisitions are all about,” he says. “Every acquisition has sources of value creation and sources of value erosion. You have to minimize value erosion from things that might go wrong or could go wrong or might result in a one time cost. You want to maximize value creation on things where you’re going to get operating synergies or revenue growth or cost savings. Keeping those out in front of you and optimizing those that make the most sense is critically important. Be clear, decisive and transparent about how things are going to run. If you’re not, people will muddle along and do the work, but they won’t understand where value is created.”
Focus on the best performing units
Shortly after installing Fruit2O and Veryfine into the company’s product line-up, Cyr had to make another big decision about the direction of the organization.
“We were looking at our opportunities and looking at where we want to spend our management time and energy,” Cyr says. “We quickly concluded that the European market was going to be one of our slower growing markets. It was a market where we did not have significant scale. If we wanted to build the scale there to become more competitive, we were going to have to make several very sizable investments—either acquisitions or infrastructure. When we compared that to the opportunity to make further investments in our North American business, we quickly concluded the North American business would be more lucrative for us.”
At the same time Cyr and his team were contemplating their decision, a Japanese company offered to buy the European business to build its own presence there.
“When you have somebody who is as determined as they were knocking on your door and wanting to own your business in Europe and you’ve already mentally decided that it’s OK to separate your business, it makes for a fairly simple and easy decision to separate the US business from the European,” he says. “It has paid very big dividends in terms of focus and the ability to make the investments we want to make in the US.”
When making decisions that will shift the focus of the company, you have to be as certain as possible that you are making the right move.
“It’s always easy to give advice on this one from the outside in or looking back,” Cyr says. “I think every CEO would tell you that they always wait too long to make some of the decisions that could help narrow and tighten the focus. Part of being eternally optimistic is you believe that every part of your business — every child that you have is going to succeed and be great. You don’t want to decide to narrow your scope to focus on the few things that have the greatest chance of being successful. You don’t stop paying attention to two children to focus on the other two. You have to always be focused on all of them, but in reality when you look back and look at it as a business and not as your children, you quickly figure out that there are some things you do need to do when you’re narrowing your focus and that’s always a tough call. The minute you think it’s a possibility, you might really want to think it’s time to go do it.”
Invest in operations
With a narrowed focus and a new product line-up, Cyr could turn his attention to growing the North American business and improving the company’s operations.
“We’re making a very sizable investment in our manufacturing operations,” Cyr says. “We bought a plant in Texas. We’re buying all new filling lines that are going to speed up our manufacturing processes. We’re automating all of our warehouses. We’re upgrading our IT system. We made several very significant improvements and those are things that would have been tougher to do if we hadn’t made the decision to focus on North America.”
Making those improvements took a lot of evaluation of areas where there were opportunities that hadn’t been seen before.
“In this particular case, we stepped back and said, ‘It’s been 15 years since our supply chain and our packaging lineup was last revisited,’” Cyr says. “Sunny Delight’s supply chain in North America had basically been frozen with the technology and the basic platform it was built on in 1994. So in 2009 we said, ‘Maybe after 15 years the world has changed.’”
There were three fundamental changes that had a big impact.
“No. 1 is our gallon bottle business had gone from being a relatively small part of our total business to being more than half of our business in North America. So when it was originally designed for our manufacturing operations, it was designed to be sort of an adjunct to the portfolio rather than a key part of the portfolio. The second thing is our customer base had changed. In 1994 we were selling virtually nothing to Wal-mart and in 2009 and 2010 when we started looking at this project, Wal-mart was our single largest customer. The third thing is our technology changed. The speed of filling lines and the capability of equipment to operate at higher speeds had all changed dramatically. They all changed in different ways and when that many different things change that much over a 15-year period, you know there has to be opportunity to do the business better.”
Cyr and his team spent a year analyzing the entire operation and found that moving to higher-speed lines and developing a new bottle would help save money and meet consumer’s needs.
“It would allow us to reduce our operating cost in our plants,” he says. “It would allow us to run with much higher-speed lines, which are higher-quality, higher-reliability lines than we had before.”
The faster lines sparked a new design for the SunnyD bottle, called the quadro-bottle, which took Sunny Delight’s iconic cylindrical bottle and replaced it with a rectangular one.
“That rectangular bottle offers four very distinct benefits,” he says. “One is its less packaging material so there’s a savings and it’s more environmentally responsible. The second is it fits in the refrigerator door so the consumer can easily use it in the refrigerator. Third is it moves to an off-center spout so it’s much easier to pour. The fourth is because it’s rectangular it’s much more efficient through the supply chain. It fits on the store shelf and allows the retailer to fit 22 percent more product on the shelf and it fits on pallets more efficiently and fits in cases and in warehouses more efficiently. It gave us these four significant steps up versus what we had before and that became the basis for our business building opportunity.”
Much like the decision to sell the European business, this project took some major foresight and planning on Cyr’s part.
“I didn’t know what the solution was, but I knew that the world had changed and we needed to respond to that change,” he says. “You have to focus on the big drivers, not the little ones. What are the big broad strokes that are going to have a dramatic impact? Those will give you 99 percent of the benefit and you’ll be able to do it with 50 percent of the effort as opposed to pushing so far that you push all the little pieces too. The other part is focusing on making sure you’re harnessing the full capability of the organization.”
The best way to harness the full capacity of your business and see all the potential opportunities is to gather and consider the advice of others in your company.
“It always starts with having people around you that you trust who can give you very good information and input,” Cyr says. “The second thing is to start trying to figure out where all the biases are. When your folks have been looking at the business over an extended period of time and looking at it through the same lens, they’re pretty much going to see the same thing. At some point you have to step back and say, ‘I need to find a different lens, a different way to look in at the same issue.’ Where can you see an obvious sign that you aren’t seeing the whole market or somebody’s seeing the market differently than you do? Where do you find that the choices and directions that you’re making aren’t consistent with what others may be doing? That’s because they have a different lens on the same set of circumstances.”
To get a different lens, Cyr relies on the perspective of his board.
“They look at the business through a lens that is different than the lens that I have,” he says. “When I hear them say something that inherently makes no sense to me or doesn’t seem to fit the situation, rather than thinking it must be wrong, I always ask myself the question, ‘In what context is that statement true?’ If you ask yourself that question, you ultimately will find a different way to look at the exact same set of circumstances and almost always it is dead-on right. It teaches you something else about the set of circumstances that you completely missed. Start with understanding where the biases are and then go directly after those. If your biases perceive the world this way, eliminate that bias and you’ll see it a completely different way.”
HOW TO REACH: Sunny Delight Beverages Co., (800) 395-5849 or www.sunnyd.com
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The Cyr File
President and CEO
Sunny Delight Beverages Co.
Born: Palmerton, Pa.
Education: Graduated from Princeton with a degree in history and East Asian studies.
What was your first job and what did you learn from that experience?
I was self-employed. I did everything from snow-shoveling to lawn-mowing to house-sitting to having a newspaper route. I did anything to make a buck. If you’re willing to do something that other people are less willing to do or aren’t willing to work as hard at, you could make a lot of money. It was also self-reliance, independence and dealing with customers.
What is the best business advice that you’ve ever received?
My father always encouraged us to take risks. That’s one of the biggest sources of advantage that I have and one of the things that is most in shortage today. We’re all far more capable of doing things than we think and the downsides of failing are much less than we think. The upside is usually much bigger than you think.
If you opened your fridge, what Sunny Delight beverages would we find?
We have a lot of Fruit2O in our refrigerator right now. We have a regular 64oz bottle of Sunny Delight. One of my kids loves it and I certainly drink it. We have the Veryfine red fruit punch that’s very good. My daughter likes some of our fruit simple smoothies and our Bossa Nova products, so some of that is in there as well.
Do you have a personal favorite?
I have seasonal favorites. In the summer I need the water when I’m running, so the Fruit2O fits in there. I drink a lot of SunnyD in the winter time.