With the market for computer backup storage devices decreasing about 15 percent a year as far as revenue and number of units sold, Simon Garneau feared that Digital Storage Inc. might soon be one of the many in the technology scrap yard.
“It took us awhile to see that it was declining because obviously all our suppliers were trying to convince us otherwise — that it is growing, and it is exciting,” he says. “Secondly, there are all kinds of competing and advancing technologies that satisfy the demand for more storage.
“So our challenge was what else can we do because if storage devices and distribution are all we do, we will disappear from the surface of the map,” Garneau says.
The parent company, Dexxon Group, which distributed high-capacity tapes for computer backups, decided it was time to diversify rather than to stick with the way things had been. Its response was to establish a division in North America of Emtec, its retail side of storage devices that grew in Europe out of the former BASF brand.
But there was a challenge, and Garneau knew it would be a formidable one.
“The whole strategy was to focus on the retail market of which we knew absolutely nothing,” he says.
“We had no idea how retail worked, how do you introduce these kinds of products to retail, and we were facing very large and well-established competitors: SanDisk, Kingston, Lexar and PNY,” he says.
Garneau was not fazed. His business sense told him that in a competitive market, you have to be different to survive.
Here’s how Garneau, president of Digital Storage Inc. and Emtec North America, built a $75 million successful retail business over the last four years by offering customers something the competition didn’t.
Pitch to a different crowd
If you are a clothing manufacturer and you are searching for the next big thing, it may be as easy as signing a promising designer and going with his or her creations. But Garneau didn’t have the luxury of just adding a new line to the market he was already in.
He was finding himself in the much the same stadium, but he was going to have to pitch to a different crowd.
“Digital Storage had focused on the commercial market, or the B2B as a wholesale distributor,” he says. “Our challenge was to find a growth market for the company because we knew that we could not stay where we were.”
The company started looking for opportunities in the data storage arena because it was a field in which it had familiarity as well as capabilities with logistics and distribution. Emtec would be the company’s own retail brand in North America that was sold through the business-to-consumer sector. An added bonus was that the European division had been marketing flash storage, or key USB flash drives, for a number of years.
Garneau and his team began discussions with existing customers about what Emtec could deliver that other companies would not.
“For instance, doing private labels, modifying their products, packaging it differently and that sort of thing,” he says. “So we decided as a strategy, we said, ‘Well, since we have no brand recognition, we will do for them what the other guys wouldn’t do.’ That was our differentiation strategy.”
The company began creating the novelty type of USB flash drives, with animal characters and popular culture comic icons such as Looney Tunes, Angry Birds and the European Asterix characters.
“Up to that point, most flash keys were totally utilitarian; they were all black or silver, fighting on price and no special attraction,” Garneau says. “But taking the lead from the customers, we decided to do private labels, and we added colors, patterns, schemes, shapes and forms and so forth. That’s really how we got in.
“So we got lucky in that sense and based on the advice of our marketing reps, they gave us good coaching as far as which programs to support with the customers.”
Garneau says that by taking the approach of listening to the customers, being sensitive to what they want, responding, making suggestions, engaging in a working dialogue as opposed to a high-pressure sales pitch — as well as receiving a vote of confidence from the headquarters in Europe — a solid retail effort was launched.
Get off to a good start
Once Garneau and his team had their strategy, it was time to find those who would drive in the revenue. The question then was whether to go in-house with sales associates or outsource the efforts.
“The No. 1 issue was if you don’t know anything about this business, you hire manufacturers’ reps,” he says. “We went with manufacturers’ reps because we felt that they would know the business, we would have the benefit of their contacts, and we could move quicker, if you will, and we only pay once we have sales, so it is not a drain on cash flow.”
Garneau was able to recruit in a short period of time a network of manufacturers’ reps, including one particular standout whose performance was excellent. A major opportunity for a large line review with a large company was obtained, which as luck would have it, already had a relationship with the European division of Emtec.
“Then here in the U.S., we were able to get some strong references from distribution customers who could say, ‘Digital Storage is very strong from a logistics point of view, and they are responsive, and we are happy with them,’” Garneau says.
With a sound strategy and a good bit of luck, Emtec was underway in the U.S.
“The first order we got was like $4 million,” he says. “We literally created a new category of flash keys. Now, we are challenged to keep it up because all our competitors are trying to imitate us. We have a thriving business.”
Sales figures support that observation. Two years ago, the business grew by 32 percent, last year 37 percent, and this year, Garneau budgets about 50 percent growth.
Keep the old as important as the new
If a company launches an innovative venture and the sales figures indicate that things are pretty rosy, there is still the challenge the company faces of how the new plays against the old.
“When you face a situation like this, the challenge is how do you motivate the people — all of them?” Garneau says.
“You have a group of people who are dedicated to your old business, which is declining. And at the same time, you are building a new business, which is all new and exciting, but you have to keep a balance between the two because you need the first one to provide the cash to fund the new one.
“The key challenge then, which is also ongoing, is how do you motivate everybody and not make the old people feel that they are not so important anymore versus the new guys who are building all the excitement,” he says.
Should you find yourself in this or a similar situation, communication will often make or break the situation.
“We do this through a lot of information exchange,” Garneau says. “We tend to be very open with everybody. We share the numbers. We have town meetings every quarter. We state the strategy in simple terms.
“The trick is to make sure that everybody feels they have a role to play and that they are very important in that challenge.”
This has to be reinforced all the time, Garneau says.
“I like to do a lot of walking around,” he says. “If I talk to the people in the warehouse, they have to understand how important it is for them to be quick and caring and satisfying for the customers, which they do. But everybody has a role to play. We need people to sell the old media because we have to maintain that business as long as we can.
“So it’s ongoing. Let’s communicate; let’s talk. Let’s share the information. Everybody’s important; everybody has a role to play.”
In short, you need to develop your company culture to include two extremely important aspects.
“What makes us different from others is that people care,” Garneau says. “Everybody here cares. If a customer hurts, everybody hurts. We don’t tolerate indifference. We don’t hire indifferent people; you have to be excited. You have to believe in what you do, and you’ve got to care.”
The second point is to try to be fast, not fast to the point of making mistakes but to the point, quick and responsive.
With a major retailer that didn’t know Emtec from anyone, Garneau established a 24-hour turnaround policy for communications.
“Every single thing that they asked of us, we responded within 24 hours,” he says. “They were totally surprised. They were flabbergasted. It gave us such credibility with them because they were thinking, ‘Well, gee, if they respond to our legalese that way, we can only imagine how they will service our account.’ And we really got their attention that way. We ended up doing business. We’ve been doing millions of dollars of business with them ever since.” ?
How to reach: Digital Storage Inc., (800) 232-3475 or www.digitalstorage.com
The Garneau File
Digital Storage Inc. and Emtec North America
Born: I was born and raised in Québec City, Canada. I am French-Canadian.
Education: I have two degrees from Université Laval in Québec City, a bachelor of arts and a bachelor of science in engineering physics.
What was your first job and what did you learn from it?
As a teenager, I pumped gas at a gas station. I realized that, in those days you had to serve the people gas. But it struck me that most people wanted to talk to you, as opposed to sitting in the car and to let you finish filling the gas tank. So it really hit me. I felt that, gee, this was an opportunity to be of service and be pleasant and listen and be curious about these people and you can have a little chat. It could be to your advantage to take the lead with people as opposed to assuming that they don’t want to talk to you.
What is the best business advice you ever received?
I will give you two that really hit me and served me well in my career. I worked for a CEO, and the big thing he taught me was that his approach was to focus on revenue first. Everybody believes that a budget is a license to spend, well, it is not. You only spend if you have the money. If the money is not in there, let’s talk revenue first.
As for the other one, I was the president of the division at National Computer Systems in Minnesota. I learned from the CEO not to feel obligated to fix every problem at once.
Who do you admire in business?
I don’t go by names; I admire attitude and style. Just to give you one example, one billionaire CEO I used to run a company for was so humble and simple had such respect for people. If he made a commitment to you, he would always honor it. That is the kind of person I respect. To me, when I give my word, I come through with it, even if you cross me. I will meet my part of the bargain. But it is this kind of honesty and commitment that I admire. I like people who commit and come through with their commitment.
What is your definition of business success?
Make your numbers, because if you don’t, you can explain and this and that but when you make your numbers, everybody is happy, you are satisfied and everybody wins. And you don’t have to explain it for too long. I remember when I applied for this job that was the point I made to the people. At the time, out of 30 years in business, I had made my numbers at least 28 times. To me that is important.