SBN Staff

Thursday, 29 June 2006 06:17

A vision and belief

James M. Petras and James D. Ireland III had a belief. They believed in the Midwest — specifically in Ohio and its Northeast region. They believed in the potential of people, and had confidence that this region had plenty of budding entrepreneurs with creative and innovative ideas.

These beliefs guided them in their quest to help provide financial support to help emerging technology companies thrive in a region not known for such endeavors. This quest led them to found Early Stage Partners, and though the journey required perseverance to get there, it was fueled by their solid beliefs.

Petras and Ireland founded Capital One Partners, the parent company of Early Stage Partners, in 1993 with the goal to invest in early-stage and middle-market companies that needed significant strategic and financial attention in order to grow. Over time, they saw much more of a need in the early-stage companies, so they shifted their focus.

They recognized a business opportunity in forming a fund to provide venture capital to the underserved Northeast Ohio region. With help from a State of Ohio grant, the seed capital was formed for Early Stage Partners. The team began investing capital and made its first investments in 2001.

The economy challenged their efforts during the dot-com bust and the Sept. 11 attacks, prolonging the period they needed to raise sufficient capital to launch a credible venture fund. In spite of the obstacles, however, they received fund-raising period extensions several times, and the company emerged two years later as the largest early-stage fund of its type in Ohio.

No other group in recent years has been able to raise more than one-third of the amount they raised in the same region. Even more impressively, they raised the money during the technology and venture capital market downturn and in a region with little history of supporting such initiatives.

Their efforts prove that a little faith in people can go a long way toward improving an economy. As a result, more small companies in the Northeast Ohio region are growing and thriving.

How to reach: Early Stage Partners, (216) 781-5134 or www.esplp.com

Friday, 16 June 2006 10:27

Trip Davis

Trip Davis is a huge fan of development. As president and CEO of TRX, he cultivates his employees' management and leadership capabilities by investing in both internal and external training courses for them. He also believes in mentoring programs to help his 1,333 employees reach their full potential, and his commitment has paid off. His dedication has fostered an empowered culture and brought in $118.6 million in revenue last year for TRX, which provides transaction processing services for companies in or affected by the travel industry. Smart Business spoke with Davis about how he manages and grows TRX.

Practice every day.
You would never ask a professional sports team to go out and play the most important game of the year and just say, 'We talked about this a little bit back in the locker room, now just go do it.' This is about developing the systems, processes and behaviors through practice.

Every day you have a chance to practice. You might have a conference call with a client or an internal team meeting, and you want the leader of that meeting to practice leadership and communication skills and get better every day.

It's about incremental steps that each person can take that help them improve. You add all that up, those incremental steps are making big steps for the company.

Envision potential when hiring.
Mistakes are made in the hiring process by hiring someone that has specific subject matter expertise in the functions for which you're hiring. Generally, that's going to come back to bite you.

It might take a month. It might take two years, but if you're hiring based on subject matter expertise, you're not evaluating leadership and management potential. As a result, that person will run out of gas when it's time to move to the next level.

It's easier to hire someone that understands the subject matter and has contacts or specific knowledge of the technology or the market. That's the path of least resistance.

If you take a step back and say, 'What's best for this organization, not only in the next few days, but in the next few years?' oftentimes you're not talking about someone who knows the ins and outs of the widgets. It's somebody who has a lot of potential as a person.

Empower employees to be self-starters.
We emphasize four senses: a sense of service, which is having everyone understand we're delivering a service that is critical; a sense of accountability to clients; a sense of urgency - that doesn't mean everything has to be done by 5 o'clock today; it might mean you're working on a project that's going to take two years, but there's certain steps you need to be proactive. You need to ask questions, provide updates, be a self-starter.

That goes to the last one, which is a sense of empowerment. If you get into a situation where you feel you are not empowered - there's something blocking you, there's something causing resistance - take a deep breath. Look around. Take a half-step back and try to figure out why you do not feel empowered. Reach up - ask somebody.

Reach down - ask somebody. Look left. Look right. Figure out the right questions to ask, the right steps to take to unlock the deadlock.

Trying to help people with those four senses and understand how they can be powerful as an individual and on the team makes a difference.

Create a reference for measurement.
Measurement is absolutely critical in determining progress and success. You're going to see different types of success based on what you're measuring and why you're measuring it. It's important to set goals and the relative range so you can track it.

If you can't measure it, you can't track it. If you don't set the right range, the tracking isn't going to mean anything.

In every category, you have to figure out a way to quantify it. Saying, 'We can't quantify it,' that's not good enough, because you can always create an index, always create a range. Being able to create a reference point and create a target is critical in measuring success.

Think holistically in running your business.
If I emphasize the financials, I can turn out to be a jerk as a leader. If I'm too focused internally, then I'm losing ground with clients and our sales efforts. That's the biggest challenge for any leader in terms of how do you balance your time.

It needs to be calibrated based on what your company is going through, what the industry is like and making sure you're calibrating to drive the company forward in a way that's productive and in tune to the situation.

Balance your work and personal life.
The word balance is so loaded because it's so important. If you don't have a balance between your work life and personal life, you might as well light the fuse to some sort of explosion that's going to happen.

It might take a couple months. It might take a couple years, but it's going to happen.

Schedule time in Microsoft Outlook for you to exercise, have lunch with your children, do something with your partner or spouse. Outlook isn't just a tool for business - it's a tool for your life, so schedule your life in it.

Create opportunities for yourself.
Build a business based on fundamentals. At the same time, be aggressive about accumulating information, accumulating insights, and be open to acting on those insights through some type of experiment.

We as managers often want to put things in a box and manage it in a box. Giving yourself and your company the chance to let it ride - to let it rip here and there - is critical, as long as you have some mileposts.

Give yourself a milepost – 'In 90 days we're going to check in, see how we're doing. Recalibrate, keep it going, stop it, whatever the case might be.'

It's not just throw caution to the wind. Give yourself the chance to run down some dark alleys, where you don't know what's going to happen.

Those are things that are hard to do as managers. To be successful, you have to create those opportunities for yourself. That's the special sauce of being a combination of entrepreneurial and opportunistic as well as systematic.

Develop your decision-making style.
Everyone's got a different way of making decisions. Find the right style that makes you feel comfortable with those decisions. As long as you develop some consistency in that style, folks will understand you.

You might be someone who understand things through your five senses, so you may need to see it, feel it, smell it before you can make decisions, and that's fine. If that's the case, put your hardhat and glasses on and walk the shop floor. Ask questions there - don't look at a spreadsheet.

Understand yourself as a person and what makes you tick. Unlock that and be yourself. That will help you understand things better and make better decisions.

How to reach: TRX, www.trx.com

Monday, 15 May 2006 13:27

Don Clampitt

There’s nothing new about paper, so Don Clampitt has had to learn how to grow a business in a mature industry.

Clampitt, chairman and CEO of Clampitt Paper Co. opened a resource center for creative professionals and their clients. The center allows the company to expand its presence and reach new customers by helping them meet their professional goals.

By implementing smart ideas like this one and leading by example, the company continues to grow, posting $137 million in revenue last year.

Smart Business spoke with Clampitt about how he leads his 288 employees and grows Clampitt Paper Co.

Engage with employees. Don’t be afraid to roll up your sleeves and get involved. Engage with your people and set the right example.

I treat people like I want to be treated. That’s a good rule of thumb to live by.

The worst thing you can do is not engage. There are a lot of leaders that are disengaged from their employees. In any industry, in order to be successful, you’re going to have to be involved with your people because without people, you can’t run a successful organization. If everyone knows that you’re committed and 24/7 thinking about their best interest, then you can be successful.

Trust your instincts. There are so many components to making decisions, but a lot of times you know you have a gut feel. If you’re actively involved in your business, you have a nose for what’s right and what’s wrong versus distancing yourself from the actual business. So some of these things you can make on the fly because you know instinctively they’re correct.

Have direction. I set my goals. I ask my entire management team to say how they’re going to implement these goals and when they’re going to do it, and we review these goals on a quarterly basis.

They’re trusting that we’re steering the ship on the proper course. We have a sales meeting, and in the closing, I go through what I believe the goals and missions of the company are, and not just for the next 12 months but for the next 60 months, so these people have an idea of where we’re going.

At the end of the day, people want to know there is a sense of direction and they want to know that people at the top, there are concrete thoughts behind decisions that they make and why we come up with decisions to go in this direction.

Develop a strong brand. A brand is a commitment made and a promise kept. I’m big on the brand. Our service platform has to be top-notch.

If we’re working at one level and we’re taking care of business all the way down the chain, we’re solving problems consistently and we’re telling people the paper is going to be there on time every time. You keep that promise. That’s what keeps people coming back to you.

It’s going to keep the business growing.

Squash problems when they begin. If you see an issue brewing, you need to address it right then, and that’s a big problem, no matter what company you’re in. This is every CEO’s challenge, especially ones that are more people-oriented.

You want to give everybody every chance, but when you realize there’s issues and you realize you’ve gone through the fostering deal, but still it’s not working quite right, you need to do something about it then. If you keep a problem in the organization, other people notice it and it begins to affect their work.

Retain management. The other thing that will inhibit growth is if you begin to change your management team regularly. There’s a great chapter from the book “Good to Great.”

The flywheel theory is you get up there every day and you get everybody pushing the flywheel a certain direction, and that’s how a company develops momentum, and momentum leads to growth. You’re only pushing it just a little bit, but after awhile, it begins to develop speed. If your president changes or your VP of sales changes, then all of a sudden, everybody doesn’t quite know what their marching orders are. The flywheel stops.

The new guy comes in, and he wants to throw it another direction. About the time that thing starts going the other direction, they change that guy. You develop no momentum because people are going one direction one time, one direction another time, so at the end of the day, it’s very difficult to grow because you haven’t developed any momentum.

Develop your skills. You’ve got to always be challenging yourself a bit. I’m involved in a group, and it’s a network of CEOs. These guys are in a noncompeting business, and the whole idea is that you share your problems, your issues with these guys that are in similar roles in different companies.

I go to them and I say, ‘I don’t understand capital markets,’ and they help me with that.

These guys are much stronger than I am, say, operationally, so they’ll ask very tough operational questions, and I’ve got to get my act together.

The other question that begs to be asked is, ‘What the heck do I really want to do long-long term?’ These guys challenge me to do that. Every CEO needs some kind of outside network. A lot of them have boards, but we don’t have a board here, and these guys challenge me to be thinking outside the box and challenge my thoughts.

Seek advice from others. By the time you’ve gotten to that role, you have certain things already in place, but don’t be afraid to seek advice from an outside source. That doesn’t mean you have to act on it, but seek the advice. If you’re engaged in your business fully, you’ll have a nose for your business, and you need to have that.

[Ret. Gen. H. Norman] Schwarzkopf said two things got him through. He says take charge and do the right thing. You already know, internally, what the right thing is most of the time because you wouldn’t be CEO of that company if you didn’t, and doing the right thing also involves the integrity issue of CEOs.

It seems like there’s been a lack of that, but you know in your heart what’s right.

How to reach: Clampitt Paper Co., www.clampitt.com

Thursday, 27 April 2006 07:34

Greg Dukat

When Greg Dukat took over as CEO of Indus International in 2004, he had two options: change, or lose the company. He chose to change, and during the past two years, Dukat has merged conflicting corporate cultures, better trained employees, focused on customer and employee satisfaction and re-evaluated goals. The result is he now has 620 employees cohesively working to grow the $142 million provider of service delivery management solutions. Smart Business spoke with Dukat about how he has effectively led change within the organization.

Start change with communication.
Change — although change always makes people uncomfortable — was necessary. But what we found was important, both three years go and today, is educating people on the things we’re trying to change and why it’s important to the company to be successful and getting their buy-in into the changes that are necessary and some level of comfort that the change we’re doing is taking the company down the right path. It’s education, open communication, the comfort level of the management team to answer any question and not be afraid that a question might be a difficult one from the employee base.

(It’s) everyone being comfortable in taking some level of risk because you can never get all the information to make the proper change. (It’s) a comfort level from the management team that if a decision is made and it’s not the right one, that they’re not so married to the decision that they’re not willing to make another change that would put the company back on the right path.

Make employees think as a team.
We consider ourselves, in a lot of ways, like a 25- or 30-year-old start-up. The philosophy we have is the mindset that everyone, including myself, has to be willing to do whatever it takes. It has transformed the company in our ability to deliver some of these things that, if we had the perception that it’s not my job, we’d never get that accomplished.

We’ve changed the mindset of our organization over the last three years. We’ve had to make hard decisions where we had people that wouldn’t fit the new model, and we tried to hire people with that mindset.

Then we’ve used the management team, to continue through repetition and through these training programs, to get them to think about breaking down barriers and be willing to do things that might be outside their normal realm of responsibility that would help the company be successful.

We encourage employees to be comfortable with suggesting and being involved in other parts of the business ... and do that professionally and with the utmost respect and get people to work as a team in a team orientation. That has really helped people be comfortable suggesting new ways of looking at things, of doing things and stretching past their normal day-to-day responsibilities and help the company be successful.

Merge corporate cultures with care.
We first discussed with our employees that no one culture is right because we’re the culmination of about four acquisitions over the last eight or nine years. We took the best of those cultures and we built a new one.

We said we really need to build through this new entity. We need to build a new culture that’s based on a value system that everyone is comfortable with, we all feel is important, and we can use as a decision filter for decisions we make in our daily business life.

The foundation is on a value system that fostered people to be honest and fair, to set expectations and exceed quality, communicate openly with respect, be good stewards of our resources, encourage development and reward performances.

We took people from all parts of the business, from different cultures and said: ‘What is common? What worked well? What set those companies apart?’ Even though the words used to describe the values were different in each one, it came down to seven or eight value systems that were consistent across every company. Then we asked those folks to come up with new language that would articulate this new value system.

Once we were able to get agreement, we used those people as the ‘evangelists’ into the organization. We took people not necessarily in a leadership role but who were informal leaders within each of those organizations, and we tasked them with going out into our organization and spreading the word about the new value system, the new culture ... and fostered that through their own informal leadership.

Always look to improve.
The fundamentals of our business are very important, and they’re what have made us successful. And we continue to be dedicated to those fundamentals and continue to work on them where we see things we can improve on. It’s not an overnight process, and that’s probably one of the toughest parts for CEOs.

You have to be patient. You have to continue to work hard on this.

You have to have an organization that’s dedicated to continuing to improve because you’ll meet certain objectives, and then you have to look at those objectives and say, ‘How can we take this to the next level and improve even further?’ We continue to re-evaluate how far we’ve come with surveys to both our employees and customers. We say, ‘OK, we’ve reached a certain level of objective. We need to set new goals. How can we enable ourselves to get to the next level?’

Be honest with customers.
The patience level of a customer and their willingness to work with you increases greatly when they think you are trying your best to improve the process. Even though you might misstep, if they truly believe that you’re genuine in this desire to improve and working hard to do that, even though there might be a moment or two where they say, ‘This isn’t working out,’ they’ll tend to say, ‘But I know you’re working on it, and I know you’re going to do the right thing in the end.’ That gets you through some of those tough situations.

You can’t be perfect all the time, and we never will be, but if they truly believe that we’re trying and continuing to improve the process, you’ll have a customer that says, ‘Even though we had an experience that wasn’t the best last week or two years ago, these guys are trying to improve.’

That’s what we want is our customers to believe, that even though there might be a challenge, they can look at it down the road and they say, ‘We stuck with them, they did the right things, and today, we’re one of their best customers.’ That’s the kind of experience we want them to have.

How to reach: Indus International Inc., www.indus.com

Monday, 30 January 2006 11:20

Honorable Mentions

FOMO PRODUCTS INC.
Fomo Products Inc. was facing a challenge — either eliminate one facet of its business or improve that facet to make it marketable across several types of industries. The company chose the first option, and the result is MAGNUM, a unique polyurethane foam spray gun.

When applying polyurethane foam, chemicals from two tanks are pressurized and pushed through hoses. The chemicals meet in a dispensing gun and form the foam, which is then sprayed.

Before MAGNUM, this system could only be used by companies able to work in a temperature-controlled environment, as the chemicals have to remain at a certain temperature. The MAGNUM system heats the hoses, allowing the chemicals to remain at temperature until they are mixed and sprayed. This allows companies to use Fomo’s system, even if they do not work in a temperature-controlled environment.

As a result of this system, Fomo was able to expand into the residential new construction industry, and its first six-month sales of 2005 exceeded the company’s entire sales for 2004. Fomo anticipates sales will triple in 2006, so instead of shutting down this aspect of the business, it is now focusing on how to change its manufacturing and warehousing to meet the demand.

How to reach: Fomo Products Inc., www.fomo.com

MOEN INC.
Moen Inc. is familiar with success. The company is the No. 1 faucet maker in North America and leads the plumbing industry. But it also knows not to rest on its laurels and to keep looking for ways to improve.

Moen implemented new document management software into its SAP system. The software, OnBase from Hyland Software, has helped it improve efficiency and better monitor its products. The backlog of its accounts payable has been reduced by 50 percent in the first six months of use. The software also increased the number of invoices the company is able to process without additional staff.

OnBase also provides a visible status of invoice processing, reduces hard and soft costs of photocopying documents and improves customer service. It also provides access to the system via the Web 24/7.

Moen is more efficient now, which will only help it as it continues to grow and improve while remaining a leader in the industry. How to reach: Moen Inc., www.moen.com

ENERGY WISE BUILDING SYSTEMS
Established just a year ago, Energy Wise Building Systems is changing the construction industry.

The company developed Expanded Polystyrene (EPS) wall and roof systems for commercial and residential industrial building. EPS is high-energy-efficient building materials that lock out mold and mildew and are unattractive to termites, which makes the structure more durable and appreciates its value at a higher rate than that of structures made of typical construction materials.

Energy Wise’s new technology makes the construction process much shorter. A standard wood-frame construction could take two to three weeks to frame, but with the company’s system, it can be erected by just four people in one day with a light crane. The company also has a technician to assist in the assembly process.

Energy Wise also designed a routing machine that can cut an entire truckload of EPS panels in about three hours, while it can take one person all day to cut a fraction of that.

All of these elements combined make Energy Wise Building Systems on the cutting edge of the construction industry, and its products can save energy costs by about 75 percent a year, a winner for both and its clients and their customers. How to reach: Energy Wise Building Systems, www.highperformancepanels.com

Monday, 30 January 2006 10:08

Roller coaster ride

The management at PartsSource knew the company was on the fast track to growth and that needed to make changes to accommodate that growth, but the process was filled with ups and downs.

The company quickly outgrew its first office, which was located adjacent to its warehouse, so it moved office operations to a larger site while maintaining its current warehouse. However, the arrangement presented logistical challenges, and it began looking for a new site almost immediately.

PartsSource, a multi-manufacturer alternative parts supplier, found another location. But as it was gearing up for the move, the property purchase fell through in the final stage of the location inspection.

It was running out of office and warehouse space, so management launched a new search. It finally found a new site and succeeded in moving all of its parts and office materials to the new location without disrupting customer service.

However, PartsSource outgrew its new facility within 60 days. After setbacks with zoning approvals, it finally received the go-ahead and will break ground soon on its fourth building project on land adjacent to its current location.

With the setbacks in construction, PartsSource feared its growth would be stifled as the staff it had added would be unable to perform without space. As a solution, it hired outside sales staff to work in its largest markets. Although it was meant as a solution to a temporary problem, the company experienced more growth by using this sales strategy. PartsSource kept these outside sales representatives and created a new internal position to oversee outside employees and sales.

While the company quickly and continuously adapted to its rapid growth, its technology did not. The information technology staff realized it would need a new database to keep up with the increased volume, so it began upgrading and planning a transition. Just two weeks before the company planned to implement the new database and convert its records, the database began experiencing problem, sometimes erasing just recent orders, sometimes erasing an entire day’s worth of orders.

The staff began to do orders manually in order to keep up with the timeliness customers expected, and the company now has manual back-ups for all online functionality.

After persevering through many challenges and successes, PartSource is now more prepared to handle rapid growth and move forward.

How to reach: PartsSource, www.mypartssource.com

Monday, 30 January 2006 10:02

Leaning up

Bettcher Amherst wanted to “lean” up, so it implemented a strategic plan to improve efficiency and eliminate costs and wastes. The company implemented a 5-S workplace organization, value stream mapping, SMED and other tools, all of which have contributed to successes in its plants in Brook Park and in Reynosa, Mexico.

At its Reynosa plant, it reduced the set-up time on one press by 75 percent a week, freeing up nearly 500 hours of production capacity a year. The company’s production improvements don’t stop there, though — it also installed a plasma welder, which has increased production from 150 pieces per hour to 800 pieces per hour.

Bettcher Amherst also made several changes that are saving it thousands of dollars a year. The company re-engineered its plant layout to improve the flow of material. In doing so, it also eliminated nonvalue-added handling.

In addition, it rearranged its tool room for easier use. So far, the company has experienced about 90 percent of the $40,000 savings it projected by doing this. It also implemented a new parts washer to the plant layout, which has helped move more product in less time and will save an estimated $80,000 a year.

In another money-saving move, the plant developed a more efficient repeatable leak test equipment procedure. Its customers approved it, and the company implemented it to eliminate a bottleneck test station. It anticipates a savings of $40,000 from this program.

While these changes have all saved money, one of the largest money-savers has come from implementing in process quality packs, or IP Packets. The program started for five customers with 300 parts, and the benefits include reduced scrap and reduced nonconformances and corrective actions. It has also improved on-time delivery and reduced overall quality costs.

To implement this segment, the company evaluated the skill sets of all of its employees who were involved in quality assurance and also provided internal and external training about the effective use of measuring instruments. Between the training and the checks, the company should save about $100,000 a year.

How to reach: Bettcher Amherst, www.bettcherllc.com

Monday, 28 November 2005 12:29

Combining efforts

Collaborative efforts and unique management techniques converge to form the multifunctional Idea Center at Playhouse Square.

Art J. Falco and Jerrold F. Wareham worked together to form the Idea Center, which meets the needs of both Playhouse Square Foundation, of which Falco has been president and CEO for 14 years, and WVIZ/PBS and 90.3 ideastream, of which Wareham has been president and CEO for 12 years.

Playhouse Square Foundation is a not-for-profit organization that restored and now operates Playhouse Square Center, the nation’s second-largest performing arts center. The foundation strives to provide high-quality performing arts and entertainment programs and quality educational programs to the Northeast Ohio community.

Falco uses a unique management approach to propel Playhouse Square Center. He hires the best people for each area and allows them to run that area as they see fit in working toward the goals of Playhouse Square. The result is that Playhouse Square Center has become an economic power for the Theater District and downtown Cleveland.

WVIZ/PBS and 90.3 WCPN merged in 2001, forming ideastream, a multimedia public service that aims to provide thought-provoking programs and services to enlighten, inspire, educate and entertain its listeners and viewers. Wareham uses ideastream to connect people who want to learn with those who have knowledge to share.

He also strives for quality, creativity and diversity in the stations’ programming. Ideastream reaches about 2.8 million viewers and listeners through its public radio and television stations.

Falco and Wareham worked together to create the Idea Center to provide additional programming to meet the needs of viewers and listeners for WVIZ/PBS and 90.3. It also meets the needs of Playhouse Square Foundation by providing broadcast capabilities to allow its programming to reach more people.

By working together to form the center under one roof, Falco and Wareham were able to save $7 million and provide a model of how organizations can work together to strengthen the community and themselves.

HOW TO REACH: Playhouse Square Foundation, (216) 348-5258 or www.playhousesquare.com; WVIZ/PBS and 90.3 WCPN ideastream, (216) 398-2800 or www.wviz.org

Monday, 28 November 2005 12:04

Partnering with others

Main Street Gourmet is cooking up breast cancer awareness and strengthening the community through its philanthropic efforts.

In 1992, Main Street Gourmet started “Muffins for Mammograms,” a program to raise money to provide mammograms for women unable to afford them. The company hosts the week-long effort every year during October.

It works with Akron General Medical Center to bake, package and distribute muffins, cookies, brownies and breast cancer awareness literature to members of the business community. In recent years, Main Street Gourmet has also worked with Massillon Community Hospital and Lodi Hospital.

The efforts have raised more than $100,000 since the program started, allowing hundreds of women to receive potentially-life saving mammograms.

“Muffins for Mammograms” was nationally recognized in 1994 as a Bronze Award winner by the National Breast Cancer Board, and earlier this year, the Ohio Department of Health selected the program as an Ohio Cancer Control Model Program based on its creativity and impact on cancer detection and prevention.

Since 1995, Main Street Gourmet has supported the Workshop Program at the Weaver School, which works with people who are mentally challenged. Main Street Gourmet employs nine students from the school to perform duties at its corporate and production facilities.

In 1996, the Board of Mental Retardation and Developmental Disabilities recognized the company for its support of people with disabilities. It also received the 2004 Disability Employment Awareness Award from the County of Summit Board of MRDD.

Additionally, Steve Marks, co-founder and co-CEO of Main Street Gourmet, founded the Road Runner Akron Marathon. The annual event promotes health, fitness and community while also benefiting charitable organizations. The event attracts 5,000 participants, 2,500 volunteers and 75,000 spectators.

Main Street Gourmet also donates food to the Akron Canton Food Bank. Co-CEO Harvey Nelson is past president of this organization and serves on its foundation board.

Main Street Gourmet strives to better the community through its philanthropic endeavors and through economic development. It constructed a 60,000-square-foot headquarters and employs more than 100 people, boosting Akron’s economy.

Its combined development and service efforts have won it several awards and gained recognition for the company and for the city of Akron.

HOW TO REACH: Main Street Gourmet, (330) 929-0000, www.mainstreetgourmet.com

Tuesday, 11 January 2011 19:00

Changing technology

If someone told you that you could drop your operating costs by 40 percent, would you listen? If that same person said you could save between $70 and $150 per user per year in energy savings alone if you tried something new, would you try it?

A lot of companies are listening, and those same businesses are trying something new — cloud computing and software as a service (SaaS) — and reaping the many benefits, which start with the aforementioned cost savings.

“It’s about saving money, and there’s a tremendous amount of money to be saved, because if you look at IT budgets, nearly 80 percent of that budget, in many cases, is spent just to keep the lights on, which means the other 20 percent is the only money that’s actually able to be used to implement new technologies into the model,” says Jeff McNaught, chief marketing officer at Wyse Technology Inc.

McNaught’s company builds a device that replaces the PC, uses one-tenth the energy of a PC and connects you to the cloud. The device doesn’t make a lot of noise, but more important, it doesn’t cost a lot of money.

“When you look at cloud computing, operating expenses can drop by about 40 percent a year, and that’s real money,” he says. “These devices use one-tenth of the energy of the PCs. Now you’re really talking about saving real money.”

How cloud works

So the idea of saving that much money has caught your attention, and now you may be asking, “What exactly is this whole cloud computing thing anyway?”

Dave Hitz is the co-founder and executive vice president of NetApp, a company that sells enormous amounts of storage to people who need it. For example, Yahoo stores all of its e-mail accounts on his equipment, and the special effects for “Avatar” were stored on his equipment, as well.

“If you look at storage systems, they’re a lot like toilets — for two reasons,” he says. “No. 1, it’s where you put your shit. But No. 2, as long as they’re working, nobody cares. But when they stop working, they become the most important piece of equipment in the house or the data center. We don’t offer cloud services — we’re not a cloud service provider company, but if you look at the equipment that we sell, many cloud infrastructure environments are built on top of our storage as a foundation.”

From his perspective, Hitz sees two different definitions of cloud computing.

“Definition No. 1 of cloud computing is you no longer buy a computer,” Hitz says. “You access computing service over the Internet to somebody else’s data centers, and they spend the capital and they hire the people to build them and they do everything, and all you do is pay a monthly bill and access the service over the Internet. Style No. 2 of cloud computing is a completely technical definition, which has to do with if you’re going to build a data center, what does the architecture look like? And if the architecture has a lot of shared infrastructure, then people tend to call that kind of environment a cloud-computing environment.”

Using his first definition, cloud eliminates many IT headaches because how often do you have an overly positive IT experience?

“I imagine people would say their experience with IT has been less than optimum,” says John Dillon, CEO of Engine Yard Inc., a company that delivers an environment for software developers to write programs that run inside the cloud. “The reason is you spend so much money building all this infrastructure, that going the last mile, which is where you write the application that interfaces with the human, the user, doesn’t get the attention, doesn’t get the money and doesn’t get the investment.”

The idea of the cloud is essentially that you plug into the wall, and you get a whole data center.

“It’s IT as a service, just as you get electricity or water,” Dillon says. “In business, you, in most cases, don’t have your own power plant, you didn’t dig your own well, you didn’t build your own building, you don’t have your own fire department or police department. So why on Earth do we basically give power to a group to build something that has been built before in-house, and then hope it works?”

Dillon also points out that in the United States, capital expenditures are a huge expense. In fact, about 50 percent of capital expenditures in America are information technology.

“Unbelievable,” Dillon says. “How many people are getting the ROI on this? What’s happening with the cloud is some big companies are saying, ‘Look, I’ll build the data center.’ It’s changing who buys, why it’s bought, and it changes the capacity and the economic decision-making process around IT.”

When you look at how much money most organizations spend on their IT systems, these cost savings are a big driver and will, ultimately, be a game changer for business.

“Amazon, who is a leader in cloud technology, told me that they think it’s a $1 trillion a year potential business,” Dillon says. “So if there’s a trillion dollars at stake, that means every company within 50 miles of here is going to make a really big bet, and it’s so disruptive, because the buyers are going to change, and the sellers are going to change.”

The other benefit, aside from cost, is that you now have everything that is on your PC in one location that can be accessed from anywhere — not just from the PC itself.

“When you take your software and your applications and your data and you move it to the cloud, something’s happened,” McNaught says. “First off, the cloud is the data center of your company and you can always get to it. You’re connected to the Internet, so you can get there from home, from the conference center, from the airport. And guess what? Because it’s not on a PC with a hard drive failing and memory getting filled up, it’s protected. It’s backed up. It’s secure. So the cloud provides this real opportunity to take the things that make up our work life and, within five years, our home life as well, and move them to this one place where we can always find our stuff.”

The evolution of cloud

Dillon is amazed by cloud computing, and if you look at how it’s evolved and how it’s changing business, it’s hard to disagree with him.

“This cloud thing is the biggest thing that’s happened in technology since the IBM computer, and that’s pretty big, and at least as big as the Internet in terms of economic disruption, because it changes how and where we do our computing,” Dillon says.

He says to go back a few years and remember how every small and midsized business had a room with computers in it and maybe a server or two.

“As businesspeople, you probably didn’t understand what they were for, but you knew they were important and you wrote checks,” he says. “It was hard to be good at that, because you had a business to run, and presumably you were an expert at that business, and you used technology to be good at that business or best at that business, so it was a necessary evil.”

Over the last 10 to 15 years, a variety of things happened that became game changers. First, we got the Internet.

“Everybody is connected — not just a few people are connected — and we’re connected not just inside our companies but outside our companies,” Dillon says.

Second, access became ubiquitous with the advent of cell phones, BlackBerrys, iPhones and laptops.

Then access got cheap — almost free. It doesn’t cost you anything to go to Google and look up any information that you want.

“You think about that perfect storm that happened — we’re having an explosion,” Dillon says. “The applications that are being built today are no longer these little things you do inside the building. You don’t write a general ledger for 12 people — you’re doing something that interacts with employees, vendors, suppliers, and what you’re trying to do is provide those people with a wonderful experience.”

McNaught would add another element to that perfect storm — the PC itself. He asks if you really love your PC.

“I don’t mean what you do on your PC, but how many of you love the physical hardware incarnation?” he says. “The keys, the noise, the weight, the dragging it around, and, oh, by the way, if you drop it, it’s probably not useful the next day. It’s part of the business — people don’t want to buy these anymore. The cloud is really the place where you take the things that were on the PC, and you go put it there.”

McNaught says the data indicates that PC market share, which is about 94 percent now, will drop over the next decade to about 10 percent.

“It’s not because less PCs will be sold — maybe a few less, but it will lose its role as the core device we use to access our stuff,” he says. “You’ll see this huge proliferation has already started with tablets and mobile devices and mobile phones and the mobile Internet exploding now. The question becomes, how do I access my stuff? How do I access it securely? And how do I access it at the lowest cost?”

These are questions that most people would agree are incredibly important. In fact, these questions are reasons why cloud hasn’t been successful in the past.

“This had been tried before and it’s failed, because there were two things we couldn’t get right as an industry,” McNaught says. “Early on, we couldn’t make all the software that was important to your business work reliably. We walked into the hospital and the hospital says, ‘We have 400 applications, we can only make 350 work on the cloud. Where are the other 50 we need to execute?’”

The other factor was user experience.

“If you get, from the cloud, an experience that is the slightest bit less robust than the experience you get at home or the office today, what are you going to do?” McNaught says. “You’re going to go beat the living daylights out of the IT guy who suggested the cloud.”

But now, the technologies have changed, and these two pieces have largely been addressed. On top of that, security is stronger than with a PC, and that’s why companies large and small are now using the cloud.

“There’s an adage in the IT industry that when you introduce a technology that reduces costs, you’re giving up benefits, and if you introduce a technology that gives you big benefits, it costs you a fortune,” McNaught says. “The thing about cloud computing is that it fires on both cylinders — it reduces costs dramatically and delivers incremental benefits that you don’t get with the current model.”

With kinks being worked out to create a compelling and viable technology option, how companies do IT is starting to change.

“One of the big drivers of why this is happening and why all these benefits occur is because cloud computing is a lower-cost architecture,” says Brian Jacobs, founder and general partner of Emergence Capital Partners. “You can deliver more computing power to more users for less cost, and that is a compelling driver.”

How cloud can affect you

You may think this sounds great and believe that cloud computing is important to the future of business, but if you are skeptical, Hitz has a warning.

“I’ve had the opportunity to ask a lot of CIOs, ‘How is cloud computing affecting your business? How much cloud computing are you using?’” he says. “The most common answer I get is, ‘It doesn’t affect our business at all yet, and we’re not using it at all yet.’ I will tell you that almost all those CIOs are wrong. They’re already using it but not thinking right.”

He say that CIOs need to think differently and compares it to the early days of the transition from the mainframe to the PC. In those days, if you asked CIOs if they had a PC strategy, many said, “Oh no, that’s not part of what we’re doing,” but half the employees had PCs.

“When data started leaking out the door because somebody lost their PC, who do you think the CEO went to beat up?” Hitz says. “The CIO, and the CIO said, ‘Well, PCs aren’t really IT.’ Those are the CIOs that are gone. I predict the exact same thing is going to happen to the CIOs who think that cloud computing isn’t happening in their business. … There’s an enormous amount of work that CIOs need to start thinking about — how do I get my arms around all the cloud contracts that are being found in little places scattered around?

“It’s affecting a lot more than people are realizing, because they’re not defining it broadly enough. If they look at that broader definition, the stuff they’re already sort of doing or in denial about, that stuff is a pretty good road map to where the future is headed, just more.”

Not only is it affecting how your business will run, but it’s also going to change how new companies enter the market, meaning fewer barriers to entry for future competitors.

“Silicon Valley is very much a startup culture — there’s always something starting up here, and it’s important to note that cloud computing also changes the economics of a startup,” Jacobs says. “A startup today doesn’t need as much capital to get going because of cloud computing. A developer, who could be an independent contractor, an engineer who’s working at a day job and at night has a new product he wants to develop — he can log in to a platform as a service like Engine Yard, and they can start developing their product without a single dollar of investment. They can work for free developing the product until they’re at the point they can introduce it to the market.”

As a result, the venture capital industry is much different than it was 20 years ago. In fact, Jacobs’ company started in 2003 with the idea that more and more technology would be delivered as a service as opposed to being built by companies.

“Cloud computing and software service has really hit technology like a giant wave, and all of these business models are service providers — companies that are building technologies and not selling to their customers but operating it on behalf of their customers and charging their customers a monthly fee in exchange for that service,” he says. “That’s a different kind of venture capital and that’s the focus of Emergence Capital.”

Aside from all the ways that cloud computing will change business, it’s also changing how employees approach their jobs. While people can work from home in their pajamas, it’s often difficult, and in many cases, employees don’t have access to everything that they could if they were on their PC in the office.

“Cloud computing lets you access your work environment, and you’re on your couch — maybe in your pajamas — and you’re doing real e-mail and doing real work, and yeah, maybe your boss is getting a little more work out of you, but you’re doing it, quite honestly, voluntarily because you get to work in your environment, you’re not in the office, you’re not sitting in front of the computer in the office and you probably have better TV shows on,” McNaught says. “The technology that cloud computing provides is about saving cost and delivering additional benefits.”

To give you a real example, Hilton Hotels decided to close its physical reservation centers and send all of its reservationists home with devices that connected them securely to the Hilton system.

“What Hilton found was they could close all those buildings and save those costs of real estate, and they saved all the energy costs of running the PCs in the buildings, and they found the employees were happier, because they were working from home — maybe in their pajamas, but nobody could tell. They were working over secure devices, so Hilton didn’t lose any data, and they were working over a device that didn’t have the complexity of the PC, so they weren’t calling the IT staff out to their homes to fix this,” McNaught says. “Cloud computing allowed Hilton to save money in so many ways that satisfaction increased, and they found that people working at home would take a lower pay. They saved on all sorts of fronts. Cloud computing has a transformative effect on all kinds of business.”

Cloud computing is changing the way businesses start and operate, and if you recognize and embrace that, it can make all the difference in how successful your organization can be.

“The reality is, as companies try to find ways to grow and compete in an ever more challenging economy, you have to do something different to be different than your competitor,” McNaught says. “If everyone is using the same old client server architecture — the PC connecting to the server — you really don’t have many opportunities to compete.” <<

How to reach: NetApp, www.netapp.com; Engine Yard Inc., www.engineyard.com; Wyse Technology Inc., www.wyse.com; Emergence Capital Partners, www.emergencecap.com