In todays fast-paced, e-world it may be surprising to learn that nearly half of the people living on this planet have never made or received a telephone call.
What is even more mind-boggling is that just a few short years ago, that number was somewhere around two-thirds of the globe.
Somewhere in between, cellular telephone technology developed to a point where people who live in parts of countries where there are no hardwire telephone lines were able to make their first phone call. In parts of India, for example, there are entire villages which have a single phone number and share a community phone that is delivered from home to home with charges billed by the minute.
In May, when America Online Chief Technology Officer William J. Raduchel visited Cleveland, he used that story to illustrate the huge technology gulf that exists today between nations and cultures, and the speed at which new technology moves once it drops to an accessible price.
The Web, he points out, is no different. By the end of this decade, Raduchel says our initial fascination with the Internet will have long faded, but the technology will be deeply entrenched in every area of our personal and professional lives.
In fact, it may not be too long until the Internet starts reaching those people who made their first telephone calls during the 1990s. If youre still among the doubtful about what the Web revolution really means, consider Raduchels take on the ways he believes the Internet will change your life and business by the end of the decade.
The price of technology will plummet.
The price of computers is dropping an average of 30 percent a year, while server and storage costs are falling about 40 percent annually. Raduchel says the next decade wont be so much about new technology as it will be about the revolutionary decline in how much it will cost to bring it to the masses.
By the year 2010, Raduchel says the cutting edge personal computer sitting on your desk today will be reduced to a $15 chip that can fit in a television remote control. Seem like an outlandish prospect? Raduchel says thats because such a steep decline in the cost of implementing new technology has no comparison throughout history. Further, people are not accustomed to such large changes.
Youre looking at pricing that many of you as business people have never experienced, he explains. Just think what the effect would be if, by the year 2010, gasoline was five cents a gallon. Changes of more than 30 percent a year are beyond our experience.
Every business will be an e-business
When e-commerce made its initial public splash in 1998, much of the national media warned that using the Internet to improve business may work well for some companies, but others would remain relatively unaffected. Today, those statements are highly questionable. In 10 years, Raduchel says, they will be totally absurd. He points out that even business owners in traditional industries like construction are already reaping rewards from using the Web to increase efficiency and grow profit margins.
Its doubling or even tripling gross margins, he says. I cannot think that there is any business totally or even partially immune to what is going on.
Common products will be Web-enabled
Everything from your refrigerator to your dishwasher to your microwave to your air conditioning system will be tied into the Web. The most compelling benefit of such a move is the fact that your appliance repairman will likely end up calling you for a service visit since technology is available today that will allow a dishwasher, for example, to predict a breakdown up to 30 days before it happens.
There are already signs of this move toward Web-enabled products. Raduchel says every major automobile manufacturer is currently dumping millions of dollars into research about how best to make money from their ultimate plan to embed an Internet browser in every vehicle that rolls off the assembly line.
All of the major automobile manufacturers are looking at cars as browsers on wheels, he says. By the end of the decade, you are likely to see automobile manufacturers making more money from selling you information in your car than selling you the car itself.
Most homes will be connected 24 hours a day
In the next 10 years, the dial-up method of reaching the Internet will be all but extinct, says Raduchel. Instead, millions of homes will have a 24-hour a day Internet connection that will allow all your Web-enabled products to communicate with the outside world. Although AOLs purchase of Time Warner may indicate Raduchel believes this future will involve plenty of cable modems, he seems to think Internet access from home will be created by several different mediums, whether it be DSL, cable or satellite.
By the end of the decade, the vast majority of houses in the U.S. will have a permanent Internet gateway in their home, says Raduchel. You will have a small box somewhere in your house that will be permanently connected.
The Internet will become invisible
Raduchel estimates by the end of the decade there will be as much media coverage and debate about the Internet as there is today about telephone systems and automobile brakes. The biggest indicator of an Internet-powered world will be the fact that you dont think of it much at all, although you will use it daily in both your business and professional life. If 10 years from now you realize the Internet is there, that indicates we have failed, says Raduchel. It has to be part and parcel to your life.
How to reach: America Online, www.aol.com.
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
The proliferation of dot-com solution providers always seemed to leave someone unhappy. Either the company was forced to give away too much and watch its profits dwindle or it was the buyers who were squeezed, leaving them uninterested in the approach.
Thats when the vice president of Weatherchem Corp. found eWinWin.
There truly is a win-win here for both sides of sales transactions, said Ostrowski. We reviewed a number of e-commerce competitors and chose eWinWin because its demand aggregation approach offers real benefits to both buyers and suppliers in an online environment.
As its name suggests, eWinWin founder and owner Greg Mesaros wanted to develop an e-commerce solution that offered benefits to buyers and sellers. He calls it the Demand Aggregation System.
For this particular dot-com, we provide turnkey business to business e-commerce solutions for suppliers, he says. Were taking the old business models and totally putting them on their side.
To understand how the system works, you must understand the word aggregation. Its a word that permeates the literature of eWinWin and the speech of its owners. Aggregation, as they employ the term, is to bring together a companys clients and use their collective buying power.
A manufacturer like Weatherchem, which produces several types of packaging products, contacts eWinWin and creates an online deal room. In the deal room, Weatherchem offers a product at a certain price for a certain quantity with a predetermined ship date. Weatherchem can then contact any or all of its customers for that product and invite them into the deal room. As the quantity of orders increases, the price decreases.
Companies like Weatherchem use molds to produce products. It can take as long as 12 hours to switch from one to another, and that dead time is potential lost revenue. Predetermining ship dates allows the company to be more economical.
The approach offers other savings as well, including better scheduling, improved operating efficiency, better management of working capital, lower transaction costs, access to hard-to-reach customers and a live database of buyers.
A lot of suppliers look at e-commerce and they get scared, says Gerardo Orlando, executive vice president of business affairs for eWinWin. Really, this is something thats very pro-supplier. The supplier can become more efficient, and they can use this as a tool to become a better manufacturer.
The buyer wins, because as more people buy, the price decreases. A buyer might even be willing to purchase more of a product in advance, knowing it comes at a lower price.
There really is an incentive for all the buyers to come back to the site to see if the price is going down to see if they can get even more of the product, Orlando says. So what this system does is it really goes to the cost of the goods themselves. And that is all tied to the efficiencies that the suppliers get through the system, through being able to plan their production better.
Currently, eWinWin offers four variations on the theme. In addition to those of suppliers, there are deal rooms sponsored by associations and buyers and cooperative deal rooms. Each company works with an eWinWin action manager who helps the company facilitate the process.
The company also hopes to create deal rooms up and down the supply chain. In that way, a company like Weatherchem could purchase its materials at a lower price and its clients can then sell their wares in their own deal room. And at each step in the process, eWinWin takes a cut.
eWinWin makes money three ways: through a fee for setting up the deal room, a monthly hosting fee and a transaction fee based on the amount of merchandise sold.
This is the perfect e-commerce model for Cleveland because it serves manufacturing operations.
We love being the underdog, Mesaros says. People are not looking at Cleveland right now for e-commerce solutions. And were sitting back going, theres no better place to be than Cleveland, because thats where our customers are.
If the solution works, Mesaros and Orlando think they might be able to meld their approach with other industries, including energy, natural gas and even bandwidth. But for now, their attention is on manufacturers and building their own operation.
Theres nothing that really prepares you for an Internet start-up, Mesaros says. As cliché as that may sound to show you how old I am when I went to graduate school they actually taught you how to make money. Turn a profit. Thats not what a dot-com is scaling your model, creating satisfied customers and managing your cash flow, and then getting to the next level. This is a different form of the economy.
At eWinWin, however, the plan is to turn a profit.
Were going to be first and our goal is to always be better than everyone else, Orlando says. By being first, you have a head start both on technology and experience, and as we do this with more and more customers, well learn more and more and continuously improve our product.
How to reach: eWinWin, (216) 348-9700
Daniel G. Jacobs (email@example.com) is senior editor of SBN.
The pair, which worked together in Fishman's last venture, toy retailer All Wound Up, kept of a log of ideas from which they intended to make their next millions. As they met, the two considered which of those possibilities -- jotted down over the years --made sense to pursue.
"Stuart and I were arguing," recalls Khosla. "He liked three of the 32 and I like three of the 32, but there was no overlap. As we were explaining to each other what we liked about the ideas, this idea really came down between us and sat down on the table and said, 'I'm here. I'm the one.'
"We looked at each other and said, 'OK, we'll break for 24 hours because this one seems too obvious, because it incorporates the skill sets that we've learned and it's in an area which is a very large market and fragmented."
The idea that evolved, No. 33, was to create an Internet Web site that sold high-quality furniture at prices well below what any ordinary retailer could offer, while at the same time still giving customers an opportunity to sit on and touch the merchandise.
"It's really the convergence of standard retailing and Internet retailing in the most cost effective manner," Khosla says of the company that's been named OneWorld2U.
In the process, co-founders Fishman and Khosla developed a new e-business model. Recognizing that the Internet creates a cheaper, faster and more efficient operation, they landed upon what they hope is the perfect Internet business model. By giving their virtual business a physical presence in the traditional retail world without the huge overhead normally associated with running brick-and-mortar operations, the pair aims to effect real change in this developing marketplace.
As Khosla says, they are now in the business of "clicks and temporary bricks."
The methodology behind the idea is simple: OneWorld2U will sent up temporary showrooms at two-week intervals in cities around the country, where people can view the furniture they are buying online. They launched their first showroom July 29 in Cleveland at Tower City Center.
Even before they launched a site, the model received validation. The initial round of capital was oversubscribed. And those who got in early included some pretty heavy hitters in the local investment community.
"You've got the absolute best horse you could probably ride to this kind of party," says Boake Sells, former CEO of Revco Drug Stores and COO of Dayton Hudson (now Target). Sells is an investor in OneWorld2U and had held a stake in All Wound Up.
The business model
In the mad rush to turn the Internet into their business gold mine, many entrepreneurs forget one basic tenet: A business is expected to turn a profit. With very few exceptions, the only companies able to make a successful foray into e-commerce are those with solid brick-and-mortar histories.
Fishman and Khosla plan to join that select group. Their site offers hundreds of pieces of furniture directly from factories around the world. By eliminating middleman markups, they can offer furniture at rates far below those of the retailers with whom they compete.
"If you've been furniture shopping, you know every time you go into a furniture store, it seems like it's your lucky day, because the whole store is 50 (percent) off," says Sells. "And not only that, it's also your lucky day because it's Thursday, so you get an extra 10. The furniture people have ruined their pricing integrity. Stu is going to bring a one-price concept. This is a fair price for good furniture."
The concept is so radical a departure, and has such potential to disrupt the traditional marketplace that, after reviewing the business plan, their accountant half-jokingly suggested Fishman and Khosla walk around in flak jackets should their peers hire hit men.
"Because there are so many middlemen cut out, we think (the cost of our merchandise) is going to end up somewhere around 42 to 45 percent of discounted retail in a typical store," Fishman says. "So if something in a typical store (retails for) $1,000 and they say their price is $800, we're going to shoot to be 42 to 45 percent of that $800."
The Internet forces business to run cheaper, faster and, one might argue, too efficiently. An online business can run operations so cheaply that consumers disbelieve the prices they're offered. It's a problem Fishman and Khosla have embraced.
"One of our real concerns is that most people, when a deal seems too good to be true, it usually is," Fishman says. "So they aren't going to believe the values that we're offering. So what we're going to do is we're going to something called TIMS -- Temporary Internet Mobile Showrooms. We're going to go into each city. We're going to set up a Temporary Internet Mobile Showroom where people can actually come in and see the furniture that they're buying."
That ability to see and feel the value is key.
"The way we look at it is that it is just a more efficient business model," Khosla says. "If our consumers are given the opportunity to understand the business model, they will understand what the brand is. The brand is the business model. Get it at the factory, use third party inspection, check the hell out of it, make sure it's of the quality level that we want and ship it directly to the consumer. It's a very efficient model."
The ability to execute the TIMS is a skill Fishman and Khosla learned at All Wound Up, which in most markets is only open during the Christmas selling season. The stores are quickly opened and closed as needed.
"Those are the two things (retailers) hate," Khosla says. "That's what we've done for the last five years is open and shut down stores. That's really what these Temporary Internet Mobile Showrooms are."
They believe the skill set is so unique that they've followed in the footsteps of Amazon.com with its one-click technology and applied for a business process patent on the TIMS concept.
Learning from the past
Fishman lives for start-ups. It's a knot in his stomach fueled half by nerves and half by adrenaline. It's that drive that led him to build All Wound Up into a national chain for which he gained recognition as an Ernst & Young Entrepreneur Of The Year before selling the company to Border's Books & Music.
"This is what I love doing," Fishman says. "What we're doing here today is the biggest kick because you envision something, you dream it and then you have to make it happen. It's scary. It's a little bit like riding a roller coaster. There are so many ups and downs and so many thrills.
"To me, starting up a business is the most creative process around. Everything is always changing, evolving. It's sort of like trying to get your arms around a giant amoeba; it's always changing shapes on you and you've got to run with the flow. It's intense. You get to make so many decisions that are going to really affect the future. That's really why it's so much fun."
It is also the reason Fishman left his position at Border's to found OneWorld2U with Khosla.
With each new venture -- Fishman has been involved in a few prior to All Wound Up -- he's gained insight into the process, developed skills and learned to apply them to each new enterprise. Now, Fishman and Khosla have applied their skills to OneWorld2U.
"We have an understanding of not only what works, but what doesn't work and what to avoid," Khosla says. "So we've built this business model not only for what works, but to stay away from what we knew was taught in the last business model. We've been very careful about that. We've spent a lot of time making sure that the business model itself was rock solid."
The business model is simple to understand, yet difficult to execute. Fishman and Khosla were able to work their way back through the layers of middlemen: retailers, distributors, warehousers, importers and exporters that mark up the price of a product before it gets to the consumer.
"Not everybody has those layers," Fishman says. "A lot of people have those layers. Some people only have a couple of layers, but there always seems to be layers involved somewhere. We got back to the factory and we're going to do it through the Internet."
But it hasn't been easy to peel back the layers.
"For a while there, for a few years, it seems that every time we were up the river, we found out there's one more layer -- there's one more layer," Khosla says.
Over more than four years, visiting countries around the world, the pair slowly learned the process.
"We've been in towns that are so small it's shocking," Fishman explains. "We've flown into cities and then have had to take little commuter planes back into the boondocks, and then, on this one particular trip, we took a 75-kilometer (46.5-mile) car ride that took us four hours. The reason it took us so long is because the road looked like it had been through a world war."
Many of the places they visited were quite remote.
"We're actually going into towns where people stop us on the street and ask us if they can take their picture with us because they've never seen an American or an Indian," Khosla says. "We had people trying out their English on us, because they've learned English, but they've never actually spoken to an English-speaking person. One gentleman one time asked Stuart, 'What time is it?' Ten minutes later, he asked me, 'What time is it?' practicing."
"The real goal behind this is to develop a brand, a true Internet brand, where when people think of OneWorld2U they think of high quality, expensive goods that they pay rock-bottom prices for," Fishman says. "If we can really establish that brand, we'll have a huge operation here."
Fishman's optimism is well-founded. There is huge opportunity in the $201 billion fragmented furniture market industry for someone who can become a dominant player online.
"And we knew if we were going to work as hard as we were, we wanted to do something with a big vision," Fishman says. "We had lots of little ideas that would have been 10- or 20- or $50 million businesses, not that there's anything wrong with that, but we both wanted a shot at a brass ring. Neither one of us was born particularly lucky."We knew that we wouldn't be the people to take a company public, which is running $15 million in losses and have a $5 billion valuation. We figured by the time we got to market, we'd need to have a rock-solid business model." How to reach: OneWorld2U.com, www.oneworld2u.com
Daniel G. Jacobs (firstname.lastname@example.org) is senior editor of SBN.
Business in the 21st century is moving at an incredible pace, and that speed is increasing. Businesses, however, can only operate as fast as the technology they employ.
For small- and mid-sized businesses, finding technology that fits their business strategy can be difficult. In the telecom marketplace, words like digital and analog, and acronyms like DSL, T-1 and ISDN sometimes make a simple search for new technology solutions sound like walking down a circus midway.
Business decision-makers must sort through all the information, find out which technologies best fit their business needs and make decisions that will enable their companies to thrive. Voice-over-DSL (VoDSL) is one such technology.
VoDSL is an innovative way to use a DSL line. It takes a normal DSL line and splits it into separate voice and data channels. Utilizing VoDSL, businesses can access up to 24 voice lines with value-added services including high-speed Internet access -- giving them enhanced services at a cost savings.
Because small businesses tend to be a more cost-conscious customer group, many are ideal candidates for VoDSL, which bundles local, long distance and data services across a single access line and saves money. In fact, International Data Corporation (IDC), a research analyst group, has observed a trend among small businesses noting growth in integrated voice and data.
Although it is a DSL service and requires the same prequalification as regular DSL services, VoDSL should not be confused with the voice capabilities of other DSL services. VoDSL packetizes the voice and data, and sends both over a single DSL line.
As an integrated solution for small- to mid-size businesses, VoDSL allows customers to operate voice and data over a single line. Since packet-based VoDSL voice lines only require bandwidth when a call is active, data services are enabled when calls are not active. In other words, when the customer picks up a telephone handset to make a call, the DSL data traffic is throttled back to provide the bandwidth required for the voice conversation.
Because of this dynamic bandwidth, VoDSL is an attractive and less expensive alternative to traditional phone lines.
Voice-over-DSL works by using an integrated access device at the end-user location. Using a symmetrical DSL (SDSL), voice and data lines are connected, through this device, to the telephone company's central office. The end-user location must be within a certain distance from the central office. This prequalification ensures both the quality and speed of the voice and data traffic over VoDSL.
The VoDSL device packetizes all of a user's traffic and prioritizes the voice and data packets, giving priority to voice transmissions. Symmetrical DSL (SDSL) differs from other types of DSL because the outgoing and incoming data travel at the same speed. VoDSL should not be confused with the voice capability of ADSL, which enables a single voice signal to run along a copper line using a splitter.
In addition to the cost savings, VoDSL has several other benefits, including:
Fast Web access -- Enables employees to have direct Internet access without dial-up and empowers your business with high-speed capabilities like videoconferencing.
Excellent voice services -- Provides the same quality of service as traditional business lines with additional features not found on traditional lines.
Cost savings -- Small businesses now have access to extensive high-speed Internet capabilities without outrageous expenses.
As you search for providers, make sure to ask questions and weigh all options before making a purchase. Some things to ask your service provider about before you buy:
Service guarantees -- Ask what kind of service guarantees you will receive and compare them with other providers.
Equipment monitoring and management -- The provider should have systems in place to monitor your equipment. With 24/7 monitoring by trained professionals, you can count on a maximization of performance and a minimization of downtime.
Network security protection -- Your provider should maintain a secure connection between your on-site equipment and the provider's network to prevent information from falling into hostile hands.
Matthew Wajda is director of sales, commercial, for the state of Ohio at ICG Communications.
Is VoDSL right for you?
Some issues to consider when determining whether VoDSL can help your business:
- Is your business a moderate-to-heavy user of toll calling?
- Does it have between four and 24 phone lines?
- Have you considered purchasing some form of Internet connectivity? (i.e., dial-up, ISDN, T1 or DSL)
- Is your business interested in maintaining enhanced calling features, such as call waiting, call forwarding, speed dialing, caller ID or three-way calling?
If you answer yes to all of these questions, you should explore VoDSL as an option for your business.
> When Dennis Drennan rode into town five years ago to launch a local office of Realty Executives, he vowed to raid his competitors of their better agents in order to land his franchise within the top four area real estate companies within two years (see SBN September 1995).
Drennan, who had been vice president and regional director for ERA in Chicago before returning to Canton in 1995, had built a successful 20-year career as one of the top producers for several local real estate companies and for the 11-state territory of ERA he managed before deciding to set out on his own.
Now, five years later, Drennan's Realty Executives Commitment franchise has grabbed 10 percent of the local market share -- in number of listings -- and he has managed to hire 45 full-time agents without losing one to another real estate company.
While his success since his return to Canton may not be surprising, the fact that he achieved it by making a personal investment in each of his agent's personal and professional well-being is practically unheard of -- especially in the cutthroat world of real estate sales.
His secret weapon might just be his wife, Fran, who he brought on board a few years ago to recruit agents and provide overall HR services. Realty Executives franchises are set up so that agents work as independent contractors. They pay a fee to the franchise to work under the Realty Executive umbrella, for the office space and for the training they receive, but they get to keep 100 percent of their commissions.
"We're so different," says Fran Drennan, vice president. "There's no competition amongst agents. There's really a camaraderie where we celebrate each other's victories and we share our sorrows."
But simple encouragement barely describes the level of interest the Drennans take in their agents.
For one, every year, agents share in a personal and professional growth study. This year, they are studying the life applications of Stephen R. Covey's "The 7 Habits of Highly Effective People," called "Living the Seven Habits." At the beginning of each weekly sales meeting, the Drennans, who provide copies of the book for agents, recap what was discussed at the last meeting, and then delve into the book a little further.
"It's enough to get everybody on the same page," Fran says.
It's not required reading, but, as Fran is quick to point out, she knows the regime is being taken seriously because "you start to hear people using the terminology around the office."
The Drennans choose books that promote both personal and professional growth, because, as Dennis says, you can't separate the two. Last year, agents read and discussed Og Mandino's "The Greatest Salesman in the World."
Dennis' credo is: "If we become better people, we'll become better agents."
That may be why each sales meeting focuses on the principles on which Drennan founded his company: total honesty, no politics, the Golden Rule ("Doing unto others as we would really like them to do unto us") and always seeking the "adult/adult relationship" Covey writes about in his books.
The Drennans' involvement with their agents extends beyond the workplace. Everyone spends a day each summer helping to build a house for Habitat for Humanity, while the company donates cash (this year, $5,000) to the project.
Fran says that the camaraderie gained from working together toward a cause like that can't be duplicated.
"It's a whole new opportunity to see the agent, to see their strengths, and for them to see us. It's fellowship and it's fun," she says.
She says those experiences help create memories for the agents, and as a result, a history for the group overall.
"Once you have a memory in place, you can refer back to it, just like traditions with a family," she says. "You just have that sense of belonging."
The Drennans also host picnics, parties, dinners and lunches for agents to celebrate just about every occasion -- from new hires to each agent's anniversary.
And every day, agents are encouraged by Fran (a former chemical dependency counselor) to bring their problems to work.
"There are so many times that agents get beaten up out in the real world," Fran says. "We hope this is a haven where they can come and get a pat on the back and a hug. If you're doing battle out there, you don't need to do it internally."
Maintaining a 'safe haven' means discouraging competition among agents, a practice that flies in the face of traditional sales environments.
"We don't have any salesman of the month parking places. At meetings, we don't say, 'Who has seven listings, stand up, and whoever doesn't have any, crawl under the table,'" says Fran. "Everyone is on the same level. Everyone here is professional. How divisive is encouragement with a parking spot, for someone to have celebrity while someone else is kicked down? "We don't believe in it and we don't do it." How to reach: Realty Executives Commitment, (330) 492-2162
Connie Swenson (email@example.com) is editor of SBN.
Mark Goldfarb cannot recall the number of times he and his partners have heard the offer: the promise of easy cash and a name loaded with brand recognition. It is, without question, a tempting lure.
But Akron's SS&G Financial Services has managed to hold its own in an industry rife with mergers and buyouts.
"We've been approached by all the major consolidators," explains Goldfarb, who is a bit reluctant to share many of the details about the suitors who have beaten a path to his doorstep over the last few years. "We really didn't think a lot of their business models made sense. And, at the end of the day, you can have all kinds of services under one roof, but you've still got to take care of your clients."
That is the long and short of the accounting industry. While companies such as American Express and Century Business Services motor through the accounting profession snatching up independent CPA firms, SS&G has managed to keep its name off of the ever-growing laundry list of industry acquisitions.
Instead, Goldfarb and his partners have pursued their own acquisitions. They've spent the better part of the past 18 months transforming the accounting firm formerly known as Saltz, Shamis & Goldfarb into SS&G Financial Services.
First, in March 1999, SS&G acquired Akron's McWhorter & Co. to form the base of its health care practice. Then, it added Chagrin Falls-based employee benefit consulting firm R.C. Morris Inc. and Westlake-based technology consultants F1. Finally, and most recently, SS&G acquired the Columbus CPA firm of Green and Wallace Co.
The deals boost SS&G's annual billings about $5 million and increase its work force to 280, making SS&G the largest independent accounting firm in Ohio and one of the 50 biggest in the country.
"The bean counter is no longer a bean counter anymore," Goldfarb says of the influx of new client services to SS&G. "Or, at least now, there's a different way of counting beans."
These are strange days to be a CPA. The profession was in the process of evolving from bookkeeper to business consultant when the rules changed again. A dwindling pool of qualified professionals, a booming economy and the need for a quick and easy business succession plan have mixed together to fuel an age of rampant consolidation in which you can hunt, be hunted or try to stay out of the way.
How this trend will ultimately affect the more than 44,000 small, independent accounting firms in the United States depends upon whom you ask. Answers vary from "not much" to predictions that many of these small players could end up gasping for air if and when the U.S. economy takes a nosedive.
"There is a strong entrepreneurial spirit alive in the hearts of many of the smaller practitioners. I don't really think they see it as change or die," says Tim Fogarty, a professor and chair of the accounting department at Case Western Reserve University's Weatherhead School of Management. "It's a difficult sell because the phones keep ringing and there are more tax returns to be done."
It's not only the small players that industry observers are worried about. Independence-based Century Business Services' lackluster stock performance of late is an indicator to some that perhaps bigger is not always better. The bottom line is this: It doesn't matter what level of the highly fragmented industry food chain an accounting firm falls into, those in the top office are looking over their shoulders to figure out how to emerge from the changes as survivors.
Keeping up with the competition
Of the 45,000 CPA firms in the United States, few are considered "national." Carve the 100 largest firms from that list and you are left with roughly 44,900 businesses that each have fewer than 50 CPAs.
It's obvious from those numbers that the small accounting firm will not become extinct any time soon, but some wonder why so many were bought by just a handful of big-name players. Industry watchers point to the booming economy, a dwindling work force, business succession planning and client demand as the reasons.
"Part of it is trying to keep up with what's going on with the larger firms -- the Big Five firms," says Fogarty. "They have certainly gotten aggressive in terms of trying to offer their clients one-stop shopping for a diversified portfolio of services and these small firms have not been able to keep pace."
Likewise, Alan Anderson, Senior Vice President of Technical Services for the American Institute of Certified Public Accountants (AICPA), sees the needs of the customer driving the consolidation trend.
"Clients are demanding more," he says. "They like to go to one place to take care of everything."
But while the Big Five -- Arthur Andersen, Ernst & Young LLP, KPMG Peat Marwick, PricewaterhouseCooopers and Deloitte & Touche -- and other players in the profession roll new services into their portfolio of client offerings, many smaller firms can only sit on the bench and watch. Stir in the hefty price of integrating new technology and it soon becomes apparent why some CPA firms look at a merger offer as a life preserver.
"If you're a CPA who has eight or 10 people working for you and you're 55 or 60 years old, what are your options?" says Goldfarb. "Somebody who offers you some cash, stock and an opportunity to continue to run your division of a business is a better option than figuring out whether people in your office have the financial capability to buy you out and the expertise to keep clients."
So what are the owners of small CPA firms doing to help their businesses reach their full potential in this age of consolidation? As it turns out, not much. The booming economy has brought most firms more business than they'd ever seen before, making it difficult for owners to focus on much more than simply keeping up with client demand.
"There really is no panic," Fogarty says. "There is no incentive to change. There is no time to look around and see what's going on. As long as people are happy making as much money as they had in the past, or even a little more, they will certainly stay where they are.
"It's only when they start, as I say, to dream the dream of fabulous wealth, that they start to listen to these consolidators and see the advantage of being part of a larger enterprise."
Strategic movement in the middle
"If I thought there were disadvantages, we clearly wouldn't have done it," explains David Sibits, who has fit in this interview via cellular phone while on the road to visit a client.
Sibits is the managing partner of Hausser &Taylor LLP, a Cleveland accounting firm that made headlines in February when it sold all of its nonaudit business to industry powerhouse American Express.
"Their vision is to be the top service provider to the middle market for tax advisory services. To us, it was a very, very desirable thing to be part of."
Nevertheless, when the 65-year-old, 270-employee independent accounting firm -- one of Northeast Ohio's largest at the time -- signed on the dotted line with American Express, it stood to some observers as an undeniable sign of the changing times. Yet, Sibits does not like the portrayal of American Express as an organization on a ruthless acquisition campaign merely for the sake of building an empire.
He says the decision to sell Hausser & Taylor's nonaudit accounts to American Express was simply a way to combat industry pressures including a thin work force and the rising cost of technology, while retaining the entrepreneurial attitude that has been part of the firm since its inception. It was that combination of benefits that Sibits says other players who courted his firm in the past simply could not offer.
"We're a pretty desirable date to the take to the dance," he says. "This allows us to be the entrepreneurs that we were and still have the benefit of big company involvement. A consolidation into PricewaterhouseCoopers or Ernst and Young or whoever would have changed the entire make-up of the organization. This didn't. It allowed us to be who we are."
A few miles south along I-77 lies the headquarters of a public company that has shared the spotlight with American Express as a major industry consolidator that has aggressively snatched up smaller accounting, employee-benefits and business consulting firms during the past few years. But, after an all-time high stock price of a little more than $25 two years ago, Century Business Services, or CBIZ as it's more commonly known, has hit rough times.
In the past year, there have been accusations of overstated revenue, job cuts and a disastrous quarter that sent CBIZ stock nose-diving to an all-time low of just a few dollars a share.
Recently, the company publicly stated its intent to regain the trust of Wall Street investors through a major internal overhaul; however, calls placed by SBN to the company's headquarters seeking someone to share their side of the story went unanswered. Regardless, CBIZ is the name that rolls off the tongue of many analysts when they point to an example of the very real risks that accompany consolidation.
"It's a bit uncertain if these consolidations are successful," says Fogarty. "I know the CBIZ stock price has plummeted. What the market is saying is that they aren't sure if the efficiency and the gains are real. A lot will depend on how the other pioneers, like American Express, do in this business.
"If they are successful, then a lot of other people will jump in."
Anderson, of the AICPA, agrees. He says it is much too early to declare the consolidation trend either a big winner or a big loser because of mixed results from the industry heavyweights who have already tried it.
"It's hard to see what sort of impact there's been," he says. "Obviously, the first group that really broke the norm and started acquiring CPA firms was American Express. Then you started seeing nontraditional players like Century Business Services and H&R Block doing the same thing.
"The jury is still out on how successful those acquisitions have been for those particular firms."
Bolstering the Big Five
One might expect the Big Five firms to be sitting on top of the accounting profession like kings, simply because of their deep pockets and sheer size. However, the road is seldom that smooth.
It is within the ranks of the Big Five that competition seems the fiercest and pressure to innovate is at its peak. In fact, much of the responsibility of the Big Five firms lies with reinventing the CPA profession in the face of the enormous economic changes spurred by the advent of the Internet.
"We expect right now that 25 percent of our service lines within E&Y will have to be replaced over the next four to five years, period," explains David Price, Area Managing Partner with Ernst &Young LLP for the Lake Erie Area. "Just imagine 25 percent of today's revenue source not even being here four or five years from now and having to replace that because of this changing new economy."
The manual process of tax preparation is slowly migrating to the Web and is one of E&Ys new services. Meanwhile, the practice of sending auditors to pore over financial records is well on its way to extinction, Price says, replaced by a new practice in which clients send information to be audited via a secure Web connection.
In addition, Price says E&Y has determined it does not have all of the core competencies necessary to consider itself a full-service firm, leading it to seek alliances with professional service providers while also trying to strike deals with smaller accounting firms to serve as network partners.
That's not to say E&Y isn't working to internally diversify services. One of the firm's creations was a consulting arm that last May was sold to Cap Gemini after the Securities and Exchange Commission urged CPA firms to avoid providing both accounting and consulting services for the same client.
"The SEC said that accounting firms need to dislodge their consulting groups if they were significant," says Price. "Since ours was very significant, we made a decision to sell them. You're best to have a first-mover advantage. With it, we think we've created a competitive advantage.
"Now, we can do audit work or consulting work for a client, where we couldn't before because of the audit conflict."
E&Y has also partnered with a Washington D.C. law firm to establish one of the first alliances between an accounting firm and law firm on this side of the Atlantic. The practice is common in Europe, and is a trend that most analysts say will grow in popularity in the U.S. over the next few years.
So, at the start of a new millennium and in the midst of a new business environment unlike any experienced before, Price says the best stance E&Y can take is to build a company culture that promotes creativity and the ability to turn on a dime. The firm has already "changed at the speed of light" during the past year and a half, he says.
One of those moves was changing professional attire to "business casual" unless clients request more formal dress. The move was a conscious effort to bring on board employees who might fall outside the traditional suit-and-tie business image for which accountants have been known for years.
"Our theory is, we didn't create this, we're just moving toward it," Price explains. "The more diversity you have in your organization, the more creativity and therefore, the greater amount of innovation."
But what happens when innovation is simply not enough to not only sustain but also grow billing in an industry in which revenue is expected to drop by a quarter in the next five years? That, Fogarty believes, may lead the Big Five into markets now predominantly served by local and regional firms, a move he expects would draw battle lines between the large and the small.
"There are kind of turf battles going on already with some perceptive CPAs trying to expand their boundaries and other ones are trying to protect their boundaries," says Fogarty. "Probably, the Big Five will continue to make inroads into the middle markets and small markets that had traditionally been served by regional and local firms."
So what does a small CPA firm have to do to survive? Most people familiar with the industry have the same two pieces of advice: find a niche and build alliances. Anderson believes that during the next three to five years, it will be key for small firms to brand themselves as experts in providing a certain services or working with clients in specific industries, whether it be retail, hospitality or manufacturing.
A second and crucial part of Anderson's "survival" plan is to take the strength-in-numbers theory behind consolidation and use it to preserve the independence of like-minded small firms. SS&G Financial Services has already created an organization known as "The Leading Edge," an alliance that boasts more than two dozen CPA firms spanning the United States. Robert Littman, a partner at SS&G, explains that the concept was used by the industry for years as a way to increase business, but is more useful in building an alliance of firms with similar philosophies, which can share their expertise and experiences with each other.
"What we did was go out and find firms that were similar in size to us, similar in philosophy and culture to us, so we have the same issues," says Littman. "A firm with 200 people has a whole different set of issues than a firm that has 15 people."
The next step for SS&G is creating an investment services entity that all of "The Leading Edge" firms can buy into that allows each firm to save on the costs of doing business and gives member firms more industry clout than they would have alone.
Today, SS&G Financial Services is unrecognizable from the 15-person firm it was when Goldfarb jumped on board 13 years ago. One look at how far the firm has come, specifically within the past year and a half, and it is not difficult to see that Goldfarb has heeded what is quickly becoming one of the most popular maxims of the Internet age.
It is no longer a battle between the big and the small, but the fast and the slow.
"It used to be that things were the same way year one as they were year two and year three," he says. "It's not that way anymore. You have businesses who were on the top of the hill a year ago, who are literally out of business today because they haven't kept up."It's a very fast-paced business world and our business is no different from that of any of our clients."
How to reach: SS&G Financial Services, www.ssandg.com; Ernst&Young LLP, www.ey.com; AICPA, www.aicpa.org; Case Western Reserve University Weatherhead School of Management, www.weatherhead.cwru.edu; Hausser &Taylor, www.hausser.com
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
Janice Gusich opened the doors of Akhia Public Relations with three clients on six-month contracts.
She started her own business after her long-time employer, M.H.W. Advertising and Public Relations, closed suddenly after 40 years of operation in Cleveland.
Nearly four years later, Gusich still has those same three clients and many more, and she's moved her offices three times to accommodate the firm's tremendous growth. Now settled in Hudson, Gusich reveals the universal truths that have kept her motivated and successful.
"My biggest inspiration was my dad," she says. "He was a tool and die maker with eight children. He believed in loyalty and working hard for what you want. It's funny, out of eight of us, five own our own businesses. I think that's a great example of what comes from a strong work ethic."
Gusich had her first job at age 13. By the time she was 16, she had saved enough money to buy her first car. Her predisposition for hard work proved both an asset and a challenge when she became an entrepreneur.
"My first inclination is to write that proposal or do other work for a client," Gusich says. "I had to train myself to work on visionary issues that were vital to the company's growth.
"In the beginning, you have to do everything yourself, from hiring the cleaning staff to bringing in new business. There is some security in doing the work and achieving, so it's hard to step out into areas you don't know about. It's uncertain ground, but if you're going to grow a business, you have to step into territory you've never charted before."
Performing the job of CEO, while difficult at first, is now Gusich's favorite part of the day. She says her leadership role is to provide a vision, inspire and provide support for employees.
"One of the things I'm most proud of is that I've been able to build a wonderful, supportive and talented staff," Gusich says. "That makes my job easy. When I'm under pressure, I can simply look around me and feel confident with a quality staff I know will perform."
Gusich used lived the 8-to-5 grind, commuting more than an hour to work with an infant in daycare.
"I was unhappy, exhausted and I hated every minute of it," Gusich says. "Too many companies are worried about the bottom line. As a result, they don't have quality people and they don't have fulfilled employees. You will always get a better product from a happy employee."
Akhia offers a flexible schedule to accommodate employees' personal lives and aspirations. It also boasts a zero turnover rate among its eight full-time employees.
"The most important thing I can provide is a quality of work life," Gusich says. "I think my staff chooses to be here because it fits their lifestyle. People love coming work when it helps them achieve both their personal and business goals."
Maintaining balance is a priority.
"I take the time to be as good of a parent as I am a CEO," she says. "I couldn't look at myself in the mirror if I worked at the expense of my kids and I would never ask my employees to do that, either."
Listening to others has paid off for Gusich on the road to becoming a CEO.
"I also listen carefully to anyone that I admire," she says. "I knew how to do PR work but I didn't know how to run my own business, so I asked those that I admired. If I'm in a room with someone like Bob Schneider (CEO of Patio Enclosures Inc.) who built his own business from scratch and turned it into a multimillion dollar business ... when he talks, I listen."
Gusich credits Schneider, a long-time client, with one of the most important lessons she learned about growing a business.
"Bob said to me, 'Don't worry about getting new business. Do a good job with the business you have and new business will come to you,'" Gusich says.
Part of doing a good job is putting herself in her clients' shoes.
"I take a personal interest in my clients' businesses," she says. "If I owned their business, what would I want to achieve? That helps me become a good custodian of their money and their aspirations."
One of the most important lessons she says she can share with clients is to pay attention to their image.
"You never get a second chance to make a first impression," Gusich says. "That's something I did right away.
"It's a hard lesson for a small business but image means everything." How to reach: Akhia Public Relations, (330) 463-5650
When North Coast Professional Sports Ltd. sealed the deal last December to buy the Cleveland Crunch from George Hoffman, it was the culmination of a nearly year-long endeavor to purchase what Michael Gibbons, the group's chairman, calls "an undervalued property."
Gibbons -- also senior managing director of investment banking firm Brown, Gibbons, Lang & Co. -- and his majority partners, Paul Garofolo and Richard Dietrich, knew they were inheriting a winning indoor soccer franchise. But the group, which also includes minority owner Gary Zdolshek, also acquired a business with a poorly developed infrastructure that barely broke even each year and participated in a league that lacked strong leadership and seemed to constantly teeter on the brink of disaster.
"It wasn't much of an organization," says Dietrich, the group's CEO and owner of three Northeast Ohio machinery manufacturers. "We essentially built a new franchise. What we bought was a winning soccer team, not a company in the normal sense of the word. The business aspects were nonexistent."
With that in mind, Gibbons, Garofolo and Dietrich spent the bulk of 1999 developing a strategic plan designed to solve those off-the-field problems and, at the same time, keep the Crunch successful on the field. So when North Coast assumed ownership on Dec. 10, 1999, Gibbons and his partners weren't in a position to make drastic changes.
Instead, they sat tight during the remainder of the season and watched the Crunch reach the finals, only to lose to the Milwaukee Wave. Only then did they embark on an ambitious off-season initiative that set in place a new operational model and a new attitude.
Today, as Gibbons, Garofolo and Dietrich ready themselves for their first full year of team ownership, things couldn't be more different. Only the Crunch's winning ways seem to remain. In fact, Garofolo says he's reminded of the old Cleveland Force glory days, when then-owner Bart Wolstein ran a formidable soccer industry in Northeast Ohio and legions of fans packed Richfield Coliseum for every game.
"Any business is made up of people," Dietrich says. "The team is simply a department of the business. You have to be consistent all the way through in order to have a successful business, and you have to be committed to making it happen."
So far, the changes are working. Season ticket sales are the highest they've been since the 1980s. The organization's support staff has doubled. There is a greater emphasis on community involvement through Crunch-sponsored soccer camps.
And, later this month, the National Professional Soccer League will announce a new commissioner that Gibbons and his partners helped handpick from the ranks of the NHL.
Here's how this unlikely trio of business partners has affected change in the professional indoor soccer industry without incurring unnecessary penalty kicks or harming their core product.
Develop a business infrastructure
Among the three majority owners, Gibbons, Garofolo and Dietrich have owned six businesses and founded two sports leagues. They've experienced -- and beat -- the overwhelming odds of making a business successful, both from start-up and from inheriting existing ventures.
"This is a for-profit business," Dietrich says. "As much as we want to win, our true measurement will be winning on the balance sheet."
Though they declined to share the purchase price of the team or its current payroll, professional soccer team price tags pale in comparison to the $530 million paid by Al Lerner for the Cleveland Browns or the Indians' $70 million-plus payroll. For example, owners of the most recent NPSL expansion team, the Toronto Thunderhawks, paid a $250,000 franchise fee earlier this year to buy into the league.
Out-of-pocket expenses aside -- Gibbons says the four partners put up all the money -- Garofolo, the group's president, says North Coast is committed to investing however much money it will take to succeed.
"There's a tremendous opportunity to rebuild this organization and get it back to the levels of financial success that the Force experienced," he says. "It's a matter of getting the structure in place and information into the community."
To that end, Garofolo has doubled his staff -- from 10 employees to 20 -- and tripled the office space for the Crunch's corporate offices, moving from a small Solon building to a larger one in Warrensville Heights. Whereas Hoffman relied on hiring employees directly from college to fill the support staff, Garofolo went with experience, including a former vice president of ticket sales from the Cleveland Cavaliers organization.
He also plucked from one of Dietrich's companies a comptroller who is charged with overseeing the financial side of the business. And, Garofolo introduced technology where it hadn't been used before, installing a state-of-the-art computer network to help the staff coordinate all aspects of the business.
All of this has been with one goal in mind -- reaching or exceeding the level of business success that the original Cleveland Force had in the 1980s.
Getting back there, however, isn't expected to be an easy task.
"There's been a significant drop in support since 1988, when Bart Wolstein tried to sell the team to George Hoffman," Garofolo says. "The deal didn't work out, so Hoffman took a one-year leave and came back as the Crunch. Getting back to those levels will take some time."
But consider what Garofolo, Gibbons and Dietrich have accomplished so far. Season ticket revenue through the end of August exceeds all ticket revenue from the 1999-2000 season. More groups have been booked in advance of this season than the number that attended all of last year. And, 82 percent of season ticket holders renewed their tickets for the 2000-2001 season.
"You have to go out and solicit the orders," explains Dietrich. "And, you have to go on the offensive."
An unlikely alliance
Garofolo, Gibbons and Dietrich had never met before 1994, when Gibbons and Garofolo were introduced on a plane on their way to a meeting with investors for a potential deal.
At the time, Garofolo was acting as a consultant to a friend, Gary Russell, and his North American Sports Camps company, who was looking to break into the football and soccer camp business. Garofolo was considering becoming part of the deal. Gibbons was brought in to assess the deal and, if it looked viable, have Brown, Gibbons, Lang & Co. act as the money source.
"I was there to help raise money for the deal," Gibbons says. "But we determined that he (Russell) only needed a few million. We (Brown, Gibbons, Lang & Co.) normally deal with a $10 million investment. The deal just wasn't economical for us to be in."
Gibbons helped lead Russell toward investors who could fund the project and, as it turned out, Garofolo chose to pass on becoming a partner. Instead, Gibbons and Garofolo were tapped for the company's board of advisers, positions they still hold today.
It was on that board of advisers that Garofolo and Gibbons began talking about other sports-related businesses they could pursue.
"Paul said we should meet with George Hoffman because the Crunch was an undervalued property," Gibbons says. "He had the background with soccer and sports marketing, and I wasn't very knowledgeable about it, but it seemed like something worth pursuing."
Garofolo had followed the Crunch for more than just financial reasons. He was vice president and general manager of the Force under Wolstein. When the Force folded, he left to join the international sports marketing firm ProServ Inc., where he gained a different skill set.
He oversaw national sporting events and marketing efforts and worked with top agents David Falk and Jerry Solomon and clients such as Michael Jordan, Dominique Wilkins, Patrick Ewing, Jimmy Connors and Greg Lemond.
In 1992, Garofolo founded Signature Sports and Marketing, which focused on athlete representation; consulting to corporations, sports properties and their leagues in strategic planning, marketing, licensing and execution; and event management and marketing. He also co-founded the International Basketball League.
So when the late '90s rolled around, he was itching for yet another sports opportunity. To him, the combination of meeting Gibbons and the opportunity to buy the Crunch must have seemed like fate.
Dietrich linked up with the duo through mutual business services representation. He and Gibbons shared accountants and attorneys. Dietrich, who owns Glass Equipment Development Inc. in Twinsburg and Edge Seal Technologies and Leading Edge Distributors, both in Walton Hills, founded a youth soccer program in 1982, and by the late '90s, was considering getting involved in something larger.
An avid soccer fan -- he played in high school and college before coaching youth soccer at the high school level -- he met Gibbons and Garofolo around the time they were looking for sports-related deals.
"We were considering buying the Crunch and doing a sort of roll-up of soccer complexes around Northeast Ohio," Garofolo says. "That's how we met Dick. We eventually decided not to pursue that idea. The risks outweighed the benefits. Instead, we focused on buying the Crunch."
The three owners realized their unique backgrounds would bring a combination of business ownership, league front office experience and financial savvy to the Crunch's boardroom table.
"It was something that had been lacking," Garofolo says.
Strengthen the process and product
While other plans to develop the organization were in motion, Garofolo says North Coast made a strong push to build community awareness about the Crunch and get fans excited. The team was, after all, the most successful franchise on the field in Northeast Ohio, having captured NPSL titles in 1994, 1996 and 1999, and reaching the finals nearly every year.
The first push was to get the players out in the community in front of fans.
"What really separates soccer from other sports is that our athletes are still willing to accept the term role model and work in the community," Garofolo says. "And, unlike other sports' athletes, ours are basically normal-sized guys."
North Coast increased the number of soccer camps the Crunch and its players were involved with this past summer. In 1999, the Crunch hosted 13 weeklong soccer camps for 600 children; this year, the team hosted 54 camps with more than 3,500 participants.
"The sport is truly a grassroots sport," Garofolo says, adding that with an average ticket price of $12, it's a much more affordable entertainment option than baseball, football or basketball.
But, building awareness and getting more people to the games would be all for naught if the league wasn't stable. That had been a serious problem with indoor soccer, going back to the Force days, Dietrich says. It's one reason why team owners leaguewide forced Steve Paxos, former NPSL commissioner, to step down after 12 years while they undertook a worldwide search for a strong leader.
Gibbons, Garofolo and Dietrich spearheaded that search, and later this month, Steve Ryan will be announced as new NPSL commissioner.
Ryan is the former president of NHL Enterprises, the sponsorship arm of the NHL. He's credited, says Dietrich, with putting the NHL on the map. Under Ryan's tenure, he took sponsorship revenue from $2.1 million to $45 million and licensing revenue from $30 million a year to $1 billion a year.
"The NHL isn't the blueprint for us," Dietrich admits. "But, our intent is to see the league elevated in status. We have a good entertainment product. It just has to be marketed better."
Dietrich says strong leadership will help stabilize the NPSL, allowing him and his partners to move forward with their plans of building up the entire Crunch organization.
"He (Ryan) has inherited a league with no infrastructure, much in the same way we inherited the Crunch," Dietrich says. "You're going to start seeing changes in the league now. But those changes will be intentional ones.
"And, if we do our job correctly, we'll help build the sport of soccer, not just in Cleveland but leaguewide." How to reach: Cleveland Crunch, (216) 896-1140
Dustin Klein (email@example.com) is editor of SBN.
But while some strategists might view calling a journalist an asshole a strategic error (and others might cheer the characterization), the faux pas was the result of a technological mistake -- he thought the microphone was not yet turned on.
Bush, or any other candidate for that matter, can't afford to make the same mistake with his Internet strategy.
The Internet has provided candidates with the ability to send targeted messages en masse. And new technologies continually offer more powerful tools to political hopefuls to reach greater audiences with more refined messages.
But along with that comes the opportunity to make bigger mistakes.
To help keep George W. from repeating his mistakes online, the campaign sought the services of Mike Connell, president of New Media Communications. Connell is a veteran of the political process, having worked for the elder Bush, Congressman Martin Hoke and Ohio Gov. Bob Taft.
"My ties to the Bushes go back to 1987 and 1988. I worked for the George Bush for President campaign, the father," Connell explains. "I started out working in Iowa. Then I got tapped by the deputy manager of the campaign, who asked me to go out to Washington (D.C.) to design the tracking system that the campaign used."
After the inauguration in early 1989, just three years out of the University of Iowa, Connell found himself in Washington, D.C., working for the president. After Bush's presidency ended in 1992, Connell worked for a newly elected representative from the West side of Cleveland.
"I was working for a freshman congressman named Martin Hoke," Connell recalls. "That was in early 1993 (in his Washington office). Near the end of 1993, I was married and I had two kids. He asked me if I'd be interested in moving to Cleveland, Ohio, and working out of the district office. (It was) a good opportunity and I'd been travelling back and forth between Cleveland and Washington already.
"I really liked the community. It was about the right size. It basically had everything I needed."
Following the congressional elections in 1994, Connell opened his own shop, New Media Communications, a Web consulting practice that specializes in the political arena. Connell serves as the Web strategist for the George W. Bush campaign, and handled a number of Internet-related projects during the Republican National Convention.
He also works with several Senate and House of Representatives candidates, including Sen. Spence Abraham (Mich.), Sen. Rick Santorum (Pa.) and Rep. Heather Wilson (N.M.)
SBN spoke with Bush's Web guru to learn more about the role of the Internet in modern politics.
Technology and media have long played a role in American politics. How has the introduction of the Internet paralleled that trend?
In its most basic sense, what has happened is going back to 1960. The media mix and campaign politics really proved to be the proving ground for television.
That's when it became introduced to campaign politics. What we're seeing here today is a very similar evolution where the media mix is evolving again. And the Internet is becoming mixed in with how we communicate with the masses.
Because the Internet is becoming so commonplace, and so many Americans rely on it as a channel for news and information, it's really a perfect tool.
What does the Internet offer the process that other media can't?
There are some advantages that the Internet has. I don't see television, radio or print going away, but I do see the Internet becoming a stronger component, more interactive than traditional media.
It also allows campaigns to better target their messages. It allows campaigns to talk to people directly, provide unfiltered messages. Quite frankly, it's some of your most effective communications. It's some of the most effective, best-spent money.
How does that compare to more traditional approaches?
Television for instance: Many larger campaigns (focus on) why you're the best candidate, what you're all about. It's a lot of information and not a lot time to do it in. It's a proven fact that if that campaign (puts a Web address) in that ad, people will log onto the site and they'll go out.
They're able to self-collect information. Do they want to know more about the candidate? Then they can go into the bio section. If they want to know the candidate's positions on the major issues of the day, or their pet issues, they can drill down into the agenda of the Web site.
Someone actively following the campaign can find out what the campaign is putting out in terms of new information that particular week.
Television is a passive medium. People simply sit back as the tube beams images and sounds at them. To find information on the Internet, people must actively seek it. How does that factor into a Web strategy?
People make choices every day. People choose to vote; people choose not to vote. Somebody who's already made up his mind may not have a reason to go to the Web site.
Maybe they want to get more involved in the campaign. Maybe they want to volunteer or make a financial contribution. Those sorts of activities can be supported via the Internet.
Maybe they just want to stay better informed on what's happening on the campaign trail. View the new information or sign up to get e-mail alerts when key things are going to be in their area.
What can we expect in the future?
What we're seeing is evolution taking place. Our first inclination was that we can do video delivery over the Internet. Let's take our campaign ads that we spent thousands of dollars to produce and digitize them and repurpose them.
It was a good idea, but the thought started to evolve. That's great the ads take advantage of new capabilities. E-mail has started to evolve. (We are working on) the delivery of more interactive messages -- e-commercials, radical mail. You're going to see a lot more sound and video. How to reach: New Media Communications, (216) 781-3172
Daniel G. Jacobs (firstname.lastname@example.org) is senior editor of SBN.
What do the banking and cemetery industries have in common? If you said both have vaults, you're right. And both have a safekeeping role.
Beyond those attributes, it might take a while to figure out a connection.
But PWCampbell saw a link between the industries that made perfect sense to the 90-year-old construction company. It has entered the cemetery sector in a partnership with a Canadian company that introduced a new method for constructing the concrete crypts used in mausoleums.
PWCampbell has built its business substantially on design and construction work for financial institutions, including commercial banks, savings and loans and credit unions and, more recently, for health care clients. Its specialization has allowed it to carve a niche that has provided significant repeat and referral business in a 13-state area for the RIDC Park-based company.
So it was natural, say its owners, to seek out a specialty field in which to expand its business.
"It's a niche market, and one of the things that's been good for us is not to go after something that's glamorous, but something that's good repeat business," says Jim Campbell, the construction company's CEO. "Both of these niches are relationship oriented, and that's what we've been good at."
PWCampbell has teamed with Royal Building Systems, a Woodbridge, Ontario, manufacturer, to develop an extruded PVC plastic product, Plastiform, that is assembled for use as a concrete form and remains in place as an integral part of the construction. The assembly of the plastic parts, which Campbell describes as similar to putting together Legos, produces a crypt that is superior in fit and function to the conventional poured or precast concrete products commonly used in mausoleums.
PWCampbell has completed two projects for the St. Joseph Cemetery in Monroe, Mich.
Securing a strong reputation in the mausoleum industry would provide opportunities for repeat business for obvious reasons, but as PWCampbell officials quickly learned, the barriers to entry are formidable. In the relationship-oriented industry, operators tend to do business with the same circle of vendors and service providers over a long period of time and are slow to switch to alternatives.
"Cemetery people as a rule are fairly conservative and are not anxious to try something new out of the gate," says Campbell.
It's no wonder. Mausoleums are substantial commitments for cemeteries and big-ticket projects, often running in the millions of dollars. Once built, construction features are virtually impossible to alter.
"We provide a product that that has to be maintained for generations," says David Shipper, president of the 6,000-member International Cemetery and Funeral Association.
With that in mind, cemetery managers usually opt for the safe choice when it comes to crypt construction, as a wrong decision could bankrupt a small cemetery or cost the executive of a large operation his or her job.
Playing on their strengths
Campbell and his brother, John Campbell, the company's president, believe they can overcome the barriers and make the cemetery business a mainstay by playing on their strengths.
They have demonstrated their commitment to the business by staying in touch with the industry through trade shows and personal contact. Competitors and others in the close-knit industry were skeptical when PWCampbell showed its wares at trade shows and industry events, but now, the Campbells say, the skeptics are starting to show curiosity about their business.
"In order to gain access to the market, you've got to get yourself known," Shipper says.
The most successful companies in the industry, he points out, are typically those that have mounted strong marketing campaigns.
To get the business launched, PWCampbell hired two people to run the mausoleum business, both of whom have considerable experience in the industry. While the Campbells are experienced in the construction business, they knew they needed expertise in the cemetery industry.
"It was almost like a law firm that does corporate work and wants to do litigation," explains John Campbell. "We went out and bought individuals, by putting them on the payroll, who understand the division."
Gaining a cost advantage
There may be one other factor working in PWCampbell's favor. The cost of building the traditional pour-in-place crypt and the scarcity of labor could tip the advantage to systems like Plastiform, which requires less skilled labor to build.
The cost of construction for the Plastiform system is about the same as for poured crypts, but the Campbells believe that, with time and experience, they will be able to cut their costs.
"We believe that, in the future, as we learn more and get more efficient at it, it will be less expensive than pour-in-place," says Jim Campbell.
That will be a critical factor, says Shipper. Cost plays a central role for cemetery operators. If a company can demonstrate a significant cost advantage with a comparable product, he says, it will be competitive.
And finally, since little succeeds like success in any business, getting a project under its belt was essential to PWCampbell's marketing efforts. With a completed project and a satisfied customer, it has a demonstration site it can use to sell to prospective clients. Selling to once-skeptical prospects will be much easier, say the Campbells, with a real-world example to show.
Says Jim Campbell: "If we can secure three or four more projects next year ... it does appear as if it will snowball. Once one or two people buy into it, it does appear as if it will be what's accepted as the best way to do it." How to reach: PW Campbell, www.pwcampbell.com; International Cemetery and Funeral Association, www.icfa.org
Ray Marano (email@example.com) is associate editor of SBN Pittsburgh.