Re-energizing industry Featured

9:33am EDT February 17, 2012

Tom Pierson is an idea man.

As founder and chief technology officer of Houston-based TAS Energy, he has revolutionized the energy industry with new technologies, processes and markets by integrating principles from the power generation, refrigeration and packaging fields to deliver clean and affordable energy solutions.

“The role of the entrepreneur is to be disruptive, to come up with a completely different model that completely changes the value proposition,” Pierson says.

An entrepreneur at heart, he stepped back as CEO of the company to focus on his finest skills. Smart Business sat down with Pierson at the 2011 Ernst & Young Strategic Growth Forum to discuss how he identifies industry issues and thinks up innovative solutions to capture a niche.

Q: How do you approach finding market niches?

Look for industries that have done things a certain way for a long time.

You do have to be willing to not accept the status quo, to ask a lot of questions that people aren’t asking. To give you an example, why is energy infrastructure build the same way for the last 50 years? Why do owners who want a highly efficient plan have to go out and hire an engineer to design it? And then they give that out to contractors, and low contractors generally win, and then the contractor will build the plant.

If you wanted to summarize our vision, we want to be the Henry Ford of the energy infrastructure, to take an industry that for 50 years has done it through a bid and spec model ... and get the costs of everything down, especially the energy use. Because when you look at the overall economics, generally the way it works out is 20 percent of the overall cost is the capital to build the energy island, 10 percent’s O&M (and) 70 percent of the cost is the energy, is the fuel. And yet the old model didn’t even measure the 70 percent. They didn’t even have the right metrics.

Folks that will look across different industries have a broader view and can come up with some unique solutions. ... In our own case, we’re playing in three completely different industries. The first is power generation, the second is refrigeration, and the third is process and packaging. And all three of those industries are very different.

What you find when you start looking at these different industries is you can take ideas that power generation has perfected and apply it to HVAC (heating, ventilation and air conditioning). The whole idea of reducing the cost of the commodity — in power, it’s cents per kilowatt-hour — that concept didn’t even exist in HVAC. In HVAC, the analogy to that would be cents per ton-hour. They don’t think about it that way. It’s never been thought. Why? Because HVAC was never thought of as a utility, it was always part of the building.

How can you apply HVAC to power? Well, that’s actually how we started. Power plants lose output when it gets hot out. They’ve done that for 50 years. Why would you allow your output of your plant to go down right when demand for power is the highest? It’s physics, the law of physics. It’s the way gas turbines are. And because the power generators were not in the air condition business, they said, ‘We’re not God. We can’t control the weather. It is what it is.’ And so forever, industry and power generation have lived with this degradation in output, and the way they solve the problem is build more power plants. The right answer would have been, ‘Why don’t we simply cool the air going to the power plant and regain all of that power?’

Q: How do you engage with customers to learn how they use things, and then find out the best applications from other industries to apply?

You need to feel their pain. And you know, frankly, sometimes they won’t even know what their pain is.

We’re all busy, and it seems like we’re getting busier and busier every day. If you can do anything that makes people’s jobs easier and better, that’s a good thing.

The other mega trend that we have (is) everybody’s becoming such a specialist. We’re getting really specialized, but what we lose when we do that is this big picture. So there’s a huge need for integrators. Even if you’re a Fortune 500 company ... you’re not ever going to be the world’s greatest expert in everything. Some of your feedstocks, in our case power and cooling and heating, you may not be the global leader in that. If you want to be the global leader in your field, what do you want to do? You want to partner with folks that can provide that. You need a very integrated approach because you don’t want to have to invest, build up your own engineering resources. But at the same time, you want someone looking out for your best interests as though they were on your payroll.

So this idea of partnering and working together, not only with customers, ... it takes a lot of work on the part of both parties. It takes a lot of trust, because you’ve got to believe you’re no longer a vendor. You are really looking out for your customer’s best interests, and the only way you measure your success is their success. And you take that same philosophy downstream, because if you’re an integrator, you’re trying to solve complex problems by integrating a supply chain so that your customer doesn’t have to do that.

Q: What’s the difference between a founder and a CEO?

There’s actually quite a big difference. I consider myself an entrepreneur much more than a CEO. An entrepreneur, in my view, is someone that is able to go out, look at markets, see niches or needs that are not being adequately addressed, understand technology and what the available solutions are and come up with a creative way to bundle it up.

An entrepreneur can get a company started; they can get it going. But once you have a business that’s actually growing very rapidly, things shift. Now you have a lot of people issues, leadership issues and financial issues — just a whole process of running a company.

I think for an entrepreneur, his biggest mission is to grow, is to look for new opportunities. You can’t be complacent. ... If you are, it probably means you’re now successful and you’re buried in the bureaucracy of running a business.

You have to start staffing that and make a conscientious decision that you’re going to move back. And frankly, if you’re an entrepreneur in the gut, you’re going to want to be in the front anyway. Most entrepreneurs, I don’t think, are necessarily total nuts-and-bolts folks. They may understand the nuts and bolts, they may have built the first prototypes, but at some point, they really like going after the new, the unknown, and creating a new market that didn’t exist before. That’s what gets your heart rate up.

I found that that (the operations side) was absorbing a lot of my time, and I didn’t feel that my skill sets were (in it).

So I recruited someone who came in as our president to handle operations. I moved up to the CEO role. Later on, we got a lot of private equity, a lot of board meetings, and now the CEO role grew a lot and again. It was taking me out of being an entrepreneur. So I moved up, he moved up, we brought in a president and that’s kind of the way it worked.

My hat is off to CEOs who can do both.

How to reach: TAS Energy, (713) 877-8700 or www.tas.com