Magnus International Group announced that its founder, Eric Lofquist, has been named the Ernst & Young National Entrepreneur Of The Year 2012 Distribution and Manufacturing Category Award winner.
The Ernst & Young Entrepreneur Of The Year Award is the country’s most prestigious business award for entrepreneurs. The award encourages entrepreneurial activity and recognizes leaders and visionaries who demonstrate innovation, financial success and personal commitment as they create and build world-class businesses.
Alliance Solutions Group, a full-service staffing and recruitment agency with offices in Cuyahoga, Summit, Portage, Franklin, Lorain, Mahoning, Lake and Wyandot counties, appointed Mark D’Agostino as president of Alliance Solutions Group of Akron. D’Agostino is opening a new staffing “hub” facility in Akron that offers the company’s full complement of staffing and recruitment services from all nine of its business units. Previously, Alliance Solutions Group operated a smaller office in Akron that only served the manufacturing and warehouse industries
Medical Mutual recently announced that Kathy Golovan has been appointed executive vice president and chief information officer. Golovan will be responsible for the information technology division including IT infrastructure and development.
Before joining Medical Mutual, Golovan was a tax consulting manager at Ernst & Young. She joined Medical Mutual in 1998 as a tax coordinator. In 1999, she moved from finance to legal.
Kaiser Permanente Ohio recently announced that Dr. Nabil Chehade has been named the next president and executive medical director of the Ohio Permanente Medical Group (OPMG), the exclusive physician network for Kaiser Permanente members.
Dr. Chehade began his new role Jan. 1 and will lead more than 200 health care clinicians and professionals who work for OPMG in 15 Kaiser Permanente medical offices in Northeast Ohio.
C.C. Hodgson recently announced the addition of two architects, Mark Duluk, senior design architect, and George Gatta, design architect/project manager.
Duluk is a graduate of Harvard University and has more than 20 years of experience in master planning and design.
Gatta returns back to working with Hodgson where he had previously worked on the master planning and designing of several senior living campuses.
Interlake Industries Inc. announced that Lisa M. Habe has been appointed chairman of the board of directors. The corporation specializes in short- to medium-run metal stampings with facilities in Ohio and Florida.
Western Reserve Partners announced that David P. Mariano has rejoined the firm as a director. Mariano will focus exclusively on building Western Reserve’s buy-side advisory practice. ?
In the 40 years that Gary DeJidas has worked for GAI Consultants Inc., he hasn’t faced challenges quite like what he faced four years ago when the economic downturn dealt a hand of stagnancy, cutbacks or shutdowns. However, in those years, the GAI chairman, president and CEO hasn’t been as excited as he is today for what lies ahead for the $90 million engineering and environmental consulting firm.
“I’ve taken the position that yes, this is a downtime, but it is a great time to strategize and position for future growth,” DeJidas says. “We’ve grown to more than 800 employees now with 26 offices in 11 states. A lot of that growth has occurred in the last three to four years.”
The economic impact GAI experienced forced DeJidas and the business to buckle down and find ways to diversify offerings to rebound from hard times.
“The biggest parts of our business — our energy component, our transportation component, municipal services and real estate development — were greatly impacted by the economy,” DeJidas says. “As work either seemed to be delayed or actually shut down, we really had to adjust to the available work that was in the marketplace. It had a ripple effect through a number of our lines of business.”
Real estate development almost went to zero, municipalities were forced to cut their capital projects and states sidelined their department of transportation work. In the company’s Orlando office, nearly half of its 100 employees had to be let go due to the slowdown in work. DeJidas made adjustments and turned his focus on strategic acquisitions and growth initiatives.
“Because of the situation with the economy, most of us have had to right-size with the available amount of work that was out there,” he says. “We’ve managed to do a reasonably good job navigating through all of that.”
Here’s how DeJidas has adjusted to today’s business reality through acquisitions and smart growth at GAI Consultants.
When your company goes through a shock like GAI experienced because of the impact the economy had on its business four years ago, you can’t afford to hesitate when moving forward.
“No. 1, you have to make up your mind whether or not you’re going to be a risk-taker,” DeJidas says. “If you’re not a risk-taker, then you’re probably going to crawl in your shell and just hope it gets better. When I say a risk-taker, I mean a calculated risk.”
During the economic downturn, no one knew what to expect next. You could say the same about what’s in store for 2013. You just can’t be afraid to take chances.
“I don’t think any of us knows what the year is going to bring, but you have to stay optimistic that it’s going to be better than this year and not be afraid to take opportunities when they present themselves,” DeJidas says. “That separates a lot of CEOs in this world — those that are willing to take chances versus those that will be more conservative in what they do.”
He has taken the position that you have to jump at opportunities rather than sit and wait for an opportunity to gift-wrap itself.
“I’ve taken an optimistic view that we’re going to be successful, and when things start getting back to where they were in terms of economic vitality, we’ll be positioned to go a long way,” he says.
Strategically, GAI has been trying to grow its business in both new markets and new services. The company has expanded its markets in the Northeast, Southeast and Midwest, stretching as far as Wisconsin, which has been aided by new service areas.
“In the service areas, we’ve added things like airport-related services, nuclear support services, real-estate-related services and our objective is no matter what a client needs, they can find it here at GAI,” DeJidas says.
To make these additions successful in a time of economic downturn, GAI made the decision not to cut vital parts of the company.
“One of the things that a lot of companies do when things get tight is they cut things that will help them grow and develop,” he says. “Over these last three or four years, we have maintained all our training programs. If you want your staff to respond, you have to continue, even through tough times, to feed their career development objectives and look in those types of directions.”
Much like maintaining training initiatives in the company, DeJidas decided to turn his focus on areas that would benefit the business versus stressing over areas that weren’t adding value.
“The first thing to look at is what markets are responding right now,” he says. “If you have services that could be offered to that industry, you should strategically position yourself to do that. It’s really about finding areas that look like they are going to be strong financially in the coming years and trying to strategically move yourself in that direction.”
To achieve success in different areas that you haven’t been in before, you have to be nimble.
“You have to be able to say, ‘I’m heading in the right direction, or I’m heading in the wrong direction,’” DeJidas says. “You have to be able to see what’s working and what’s not working, whether it’s in a market area or a service area and make some adjustments.”
Make good on acquisitions
To take advantage of new opportunities in areas that GAI saw potential, DeJidas looked for acquisitions that could help give the company a foot in the door.
“It’s always better to go into a new market with an established reputation,” DeJidas says. “We’ve tried to go into markets and just position a person there and start from scratch. That’s a very hard way to go. That’s why the acquisition way, even if it’s a small firm with a good reputation that has been in that market for a period of time, is a much better way. That applies to services, too.”
If you attempt to break into a new market or service with no prior experience or history, you will have a long journey ahead of you to establish your business. DeJidas and GAI have used the economic downturn as an aid to make acquisitions that will benefit both parties.
“There are a number of really good firms that have had to struggle the same way everybody struggled, and some of these firms don’t have the types of resources that we have,” he says. “What that has resulted in is the number of firms looking for partners — someone to come in and acquire the firm and provide the resources for the firm to grow and develop.
“That’s where we’ve been very successful in identifying those opportunities with firms that I feel are very good firms but are casualties from the economic situation that we’ve been faced with for the last several years.”
GAI has been doing acquisitions for nearly seven years now. In 2012 alone, the company went through four acquisitions and saw revenue improve 15 percent over 2011.
“The biggest thing with acquisitions is finding a firm that has a similar culture even before you start talking about money or anything like that,” he says. “People in general have a very difficult time with change. So if you acquire somebody whose culture is dramatically different than yours, then they’re going to struggle and you’re going to struggle. You have to make sure culture is very similar.”
Sometimes it’s easy to ignore how cultures will match up because the opportunity at hand is so great. You have to strike a balance or success will be very difficult.
“I always lean toward the culture because if you’re acquiring good people and the firm has a good reputation, the odds are in your favor that you’ll be successful,” he says. “Is there a balance? Sure there’s a balance. A lot of times companies focus on the practice versus the business.
“What you really need is a blend of the two. You’re trying to obtain a balance between the quality in the services you provide and the ability to run it as a successful business.”
On top of finding a business that will improve your company and that is a cultural fit, you must also be able to identify strong leaders who can help your business grow.
“Make sure you have key individuals who are familiar with the business that you can really put trust and faith into once the acquisition occurs,” he says. “They are the ones that hold the key to the business and have all the client relationships.”
Ultimately, the key to a successful acquisition is doing your due diligence throughout the process.
“You have to go through an extensive due diligence examination,” DeJidas says. “Sometimes it’s hard to uncover all the rocks and see what’s under all those rocks.” ?
How to Reach: GAI Consultants Inc., (412) 476-2000 or www.gaiconsultants.com
- Don’t be afraid to take risks.
- Find new areas to grow your products or services.
- Make strategic acquisitions to grow your company.
The DeJidas File
chairman, president and CEO
GAI Consultants Inc.
Education: Went to Point Park University and graduated with a B.S. in engineering and also received an MBA
What was your first job and what did you learn from that experience?
I worked at a gas station years ago when gas was 25 cents a gallon and you would get your oil checked and you tire pressure checked and your windshield and back window all clean. The thing I learned from that was service. It was all about servicing the customer.
What is the best business advice you’ve ever received?
Never ask people to do something you wouldn’t do yourself. Lead by example.
What excites you about GAI’s future?
I think we are very well positioned to move forward dramatically. In 10 years that I’ve been CEO we’ve more than doubled our size. I’m excited to start thinking about the next 10 years.
If you weren’t a CEO, what is a job you have always wanted to do?
I’d like to be a professional golfer, but I’d probably starve. I would like to be a teacher and someday I may teach. I enjoy speaking in front of people and I enjoy teaching. With what I know, having the chance to share that with others would be very satisfying to me.
When Affiliated Computer Services Inc. was acquired by Xerox Corp. in 2010, Natesh Manikoth saw an opportunity to utilize the resources and talents of one of the most innovative companies around and apply that innovation toward solving transportation infrastructure problems.
The acquisition of ACS, a $6.5 billion company, created Xerox’s Transportation, Central and Local Government Group, where Manikoth serves as chief technology officer. The 6,500-employee division provides system solutions for tolling, parking and transit.
“Xerox has a rich history of innovation,” Manikoth says. “One of the first business units to take real active advantage of that wealth of innovation talent within Xerox was transportation.
“We became very active partners with the research community in Xerox to tap into their brainpower to say, ‘You guys have been doing wonderful work with document management and producing world-class printers. How do we take that talent and apply it to solving problems for cities?’”
The division has developed roughly 50 percent of the tolling systems in the U.S. and parking systems in areas all over the country, and it provides public transit systems globally in more than 30 countries.
Here’s how Manikoth is using innovation across divisions to create better solutions in the transportation arena.
Solve the real problems
A lot of large technology companies have started to realize that technology becomes commoditized over time. Business becomes a harder game, and growth begins to stagnate. So Xerox made a conscious choice to supplement its technology offerings with services in order to grow.
“That was the rationale for the acquisition of ACS,” Manikoth says. “Now we are probably a 50/50 company between technology and services. The offerings we have solve real problems that our customers have.”
In transportation, throughout the last 10 to 15 years and going forward, the biggest challenge is more and more demand. The problem is you cannot grow infrastructure fast enough to deal with that increase in demand.
“You cannot build your way out of the problem,” he says. “So you are looking for how you can use the existing infrastructure more efficiently. What we help do is one way of saying, ‘I have this fixed asset called the road with five lanes. I’m only able to transport X number of vehicles through there. How do I now make it X plus 10 percent more?”
Xerox’s transportation group was at the forefront of electronic toll collection, which was a simple way of improving the toll process and increasing traffic flow. The combined forces of ACS and Xerox allows some of the best minds to contemplate those problems.
“All that talent has really been focused on document management and improving information flow,” Manikoth says. “ACS, on the other hand, used to be the people who did the work and built products to solve a particular customer problem but was not necessarily helping our customers think about what happens 10 years from now. That is what Xerox did extremely well.”
Do some thinking
Xerox thought about document management and information flow and what the offices of the future might look like. Now those researchers have the opportunity to sit down with stakeholders in cities to think about what the cities of the future are going to look like.
“Seventy to 80 percent of GDP in this country is generated from urban centers,” Manikoth says. “So if there is one problem we can help solve which will have the maximum impact, it is to make those urban centers more efficient.”
In L.A., Xerox is helping to modernize parking infrastructure. The key component there is real data analytics to predict parking availability so that people don’t drive around looking for a parking space. Xerox used a dynamic pricing engine to optimize parking availability.
Also in L.A., Xerox implemented a dynamic pricing mechanism to let people use high-occupancy vehicle lanes, which have been exclusively for buses and other high-occupancy vehicles. Now you can pay a toll and use the HOV lanes. It’s an example of a slightly underused infrastructure now being used to improve the traffic conditions in the area and having people pay for the privilege of doing that.
Think innovation, think savings
Xerox is also looking at how it can improve the systems it creates for infrastructure. One of the research things that Xerox is working on is power saving.
“The idea is these pieces of equipment consume a lot of power, but they might be sitting idle a lot of the time,” he says. “So how do you reduce the power footprint?”
The transportation group is working with Xerox around the technology it uses in printers to save power and is applying that to systems in transportation.
“To do power consumption in an intelligent fashion is an art and a science and they have tons of research surrounding that,” he says. “The same thing applies to the transportation infrastructure.
“There are lots of places where we have equipment, which is powered on 24/7, but people show up at peak times and use it heavily, and at off-peak hours, it probably isn’t used at all. So there’s potential for energy savings in those environments, and we are applying that in our devices in transportation.”
Over the past couple of years, there has been a significant shift in the research stemming from technology to the services market.
“You have to adopt innovative practices that are successful in your other lines of business,” Manikoth says. “The common theme I see is people ask the researchers, ‘What are the solutions you have?’ The ones who I see being more successful are the ones who have conversations about the problems.
“You cannot draw the connection between what was your domain and research by looking at what the researchers are capable of. The connections start becoming apparent if you look at the problem a little more deeply.”
To make these kinds of connections, Xerox brought researchers from three different labs into conversations with its business units and didn’t say which problems were going to be solved. They asked businesses to articulate their customers’ problems with questions such as, “If the customers had a dream that they got fulfilled, what would it be? What particular problem of their customer would they love to solve?”
“When the problem is posed appropriately, the solutions seem to match things which we have solved before,” Manikoth says.
“... The first step is to really understand what the problems are and what the customers want to solve. What is their desire? What is their dream and what problems would they like solved in a picture-perfect scenario and then bridge that gap. Figure out whether you have offerings or whether your partners can bring something to the table to solve those problems.”
The reason Xerox asks questions up front is to make sure the problem is being broken down to its essence and that the wrong problem isn’t being solved.
“In the Xerox world, we’ve split research into things where we are partnering very closely with customers and then we have really exploratory research as well where we think about what some of the big ideas might be over the next four or five years,” he says.
“... For the foreseeable future, we believe making these cities more efficient in all modes is going to be very important. We think we can make a profitable business there and at the same time help cities improve their infrastructure and services.” ?
How to reach: Xerox Transportation, (312) 529-3284 or www.acs-inc.com/transportation-new.aspx
When Jon Irwin listens to music, he uses his Android smartphone to crank out the tunes. As president of Rhapsody International Inc., Irwin wants his customers to be able to listen to any song, at any time, on any device.
“You should never be without your music,” Irwin says.
That’s the motto with which Irwin leads Rhapsody. To provide that level of music access, he is implementing a two-pronged growth strategy that focuses on direct-consumer marketing and alignment with distribution partners to put Rhapsody’s services in front of more customers and increase its service capabilities.
Rhapsody, a 200-employee music subscription service company, has been in business for more than 10 years. Until 2010, it was a joint venture between Viacom, under MTV Networks, and RealNetworks before being spun out on its own.
“That was kind of a great combination, because we were able to leverage the technology within RealNetworks and the marketing prowess of Viacom and MTV Networks to promote the Rhapsody brand to support the business,” Irwin says. “In 2010, we separated as an independent company, and … since that time, we have more than doubled our customer base. We announced last December that we had gone over 1 million subscribers.”
Those 1 million-plus subscribers pay $10 a month for the company’s primary product, which provides access to more than 16 million songs and spins up Rhapsody’s annual revenue north of $120 million.
To keep subscribers happy and gain new ones through the growth of the business and its capabilities, Irwin has already lined up a few key partnerships. Recent acquisitions include Napster’s U.S., German and U.K. businesses.
“What you see in doing that since the spinout is an entrepreneurial company with great resources, that’s operating in this business at scale and has been able to innovate — not only on mobile products but on distribution models through companies like Metro PCS and Verizon Wireless and is expanding internationally by acquisition with Napster,” he says.
Here’s how Irwin is speeding up the tempo at Rhapsody through a dual-pronged growth strategy.
Support your strategy
Rhapsody was the first on-demand music subscription provider. It saw a market with an opportunity and it capitalized on it.
“Most recently, if you look at the trends within this space and what the business has done, we were so far out in front of this business, nobody else even entered it until the second half of the last decade,” Irwin says. “The business really started to grow beginning in 2009, driven by some of the capabilities of smartphones, mobile devices and network capabilities that really enabled music to be truly portable and make it a fantastic user experience for people to take music with them.”
To expand on the capabilities of smartphones and mobile platforms, Rhapsody has partnered with companies in the wireless arena.
“Last August, we launched a partnership with Metro PCS, which actually took the access model of music to a bundled concept,” he says. “Metro PCS is the largest noncontract wireless carrier in the United States, so customers get unlimited music included with their wireless plan. That’s a very exciting way for us to bring our service to folks.”
Rhapsody also saw an opportunity to buy the Napster business from Best Buy as a way to reach more customers. Best Buy had acquired Napster in 2008 and thought it was a natural fit for the music and connected devices sold in the store and subscription music play.
“What had happened over that period of time was there were challenges in the retail space and Best Buy was working on aligning its strategy,” Irwin says.
Best Buy was soon unable to give Napster the attention it needed. Napster’s product innovation and growth began to suffer because of it.
“We approached Best Buy a little over a year ago and started discussing whether it makes sense for Best Buy to alter its strategy a little bit and not walk away from it, but maintain a stake in the digital music business and be an equity stake in Rhapsody and we would take over those customers and operate the business both in the U.S. and overseas,” Irwin says.
“They decided that made a lot of sense, because it allowed them to focus on their core business. At the same time, they were able to stay in the game with the digital music and subscription music business that’s consistent with a lot of the products they sell.”
Rhapsody acquired Napster last November in the United States, and at the end of March 2012, it also closed on the acquisition of the Napster business in Germany and the United Kingdom.
“That gave us our first international presence, which is an indicator and foreshadowing of future expansion we plan to do over in Europe,” he says. “We not only acquired a great customer base to be No. 1 in the market in Germany, but we have a very capable and seasoned team to continue to build the business, not only in Germany and the U.K. but in the rest of Europe. That was an exciting time for us to support that aspect of the strategy.”
Irwin and Rhapsody plan to keep looking for the opportunities that align with the company’s strategy.
“We are bringing the Rhapsody service to consumers directly and are continuing to innovate on the mobile products and work with distribution partners, both in the United States and internationally,” he says.
“This is to include music in their core offerings and work in partnership with those distribution partners, whether those are cable companies or wireless carriers, to make sure the way the service is being delivered to their subscribers is good for everybody involved. I don’t think there is anybody in the business better than us at doing that.”
Grow through acquisition
The acquisition of Napster played right into Irwin’s growth strategy. Napster helped Rhapsody reach more music listeners and the connection to Best Buy allowed Rhapsody to expand the kinds of devices customers could use to listen to music.
“If you go into a Best Buy store, a lot of the electronics they sell have Rhapsody integrations built-in,” Irwin says. “Overall, getting us in front of those customers is consistent with our mission and our goal of having all the music you want within arm’s reach.”
While Rhapsody acquired Napster less than a year ago, it has been a key factor to the company’s recent success because it was such a good fit. Growth through acquisition is successful if that acquisition supports your objectives and strategy.
“For us, scale and being able to acquire those subscribers and bringing them over to the service was a natural fit,” he says. “In the subscription business, scale is important because the more subscribers we have, we’re leveraging the platform that we built. That consistency with business objectives is No. 1.”
Once you have acquired a business, the No. 2 most important thing to keep in mind is the relentless planning and caring you need to do about how you treat the customers of the acquired company.
“You want to welcome them in a way that isn’t disruptive and, in fact, actually delights them and makes them happy they are over in this new house,” Irwin says.
Rhapsody did specific things in the planning and the migration processes so that what was important to those customers was already in place when they transitioned to Rhapsody’s services.
“They may have created playlists on Napster of their favorite songs,” he says. “They certainly had their own user names and passwords that they had created. They had libraries filled with their favorite artists. Their music collection is very important to them.
“So we made sure that as soon as they signed on and they were moved over to the Rhapsody service, all of those familiar characteristics of their music collection were there. Their playlists were there. You were able to continue to recommend music to them based on their listening history. They didn’t have to go create new accounts. We just made it very smooth for them.”
Attention to those migrating customers is crucial, but so too is a focus on the talent from the acquired company that may be beneficial to your growing business.
“No. 3 is there are a lot of very talented people that you can find in companies that are dealing in the technology space,” he says. “How do you combine the two companies, bring them together, merge them and make sure the talent that you emerge with from the acquisition is even greater than you had when you entered it?
“There were some very good business-minded individuals and people with strong technical skill sets that are happy and productive employees that help to carry that across. You have to tap the talents of the potential acquired company.”
Through the leadership of Irwin and the continued execution of the company’s dual-pronged growth strategy, Rhapsody is positioned well to continue to be a strong player in the subscription music space.
“The trajectory that we’re on now over the past 2½ years is pretty exciting,” Irwin says. “We’re a small start-up company coming back into a very exciting industry with tremendous resources, a customer base that has scaled, technology that has matured, and a brand that MTV Networks helped build. So we’re really set up to run forward and have fun.” <<
How to reach: Rhapsody International Inc., (206) 707-8100 or www.rhapsody.com
Charles Bunch has seen firsthand the resilience of the Pittsburgh region through both thick and thin. As its local businesses have started to rebound from the recession, so too must the region.
The founders of Pittsburgh Plate Glass, or PPG Industries Inc., as it’s known today, were attracted to the Pittsburgh region because of the coal supply needed as an energy source, the sand and mineral resources, and the river transportation system that were critical for the manufacturing and sales of those first plate glass products.
Today, the 129-year-old company, led by Bunch, who is chairman and CEO, is coming off a record year of nearly $15 billion in revenue and the company is still proud to call Pittsburgh its global headquarters.
However, much like how PPG transformed from strictly a plate glass manufacturer into a manufacturer of glass, coatings and specialty products, Pittsburgh itself has had to transform to continue thriving in an ever-changing business environment.
As part of the Vision Pittsburgh speaker series, Bunch spoke to local businesspeople about what PPG has and is doing to aid the region in the matter and what initiatives Pittsburgh needs to focus on to build up its economic development and attractiveness for new business.
“We have a strong presence in the Pittsburgh area as do many other companies,” Bunch says. “U.S. Steel, PNC, Heinz and Wesco are all Fortune 500 publicly traded companies still headquartered in Pittsburgh. If you include local companies like Mylan, CONSOL and Dick’s Sporting Goods, the Pittsburgh region rises to fifth place on the Fortune list for company headquarters.”
With that said, Pittsburgh still needs to work hard to attract and retain business investment and economic development.
“We need to foster small business, but I believe we also need to foster big business as well,” Bunch says. “Big business provides technology, innovation and supports many of these smaller businesses, leading to a healthier overall ecology for growth and now we’re creating that environment here in our region.”
With the help of the Allegheny Conference and local business leaders looking to keep Pittsburgh on top of its game, Bunch outlined key areas of focus for the region moving forward.
Companies must help the region
In order for a specific region to prosper, its companies and business environment must also be doing well. PPG Industries is a company that has stayed true to Pittsburgh and has helped the region grow as it has grown.
“Over the past several decades, PPG has evolved from a diversified manufacturer of glass, coatings and chemicals and is a more focused leader of paints, coatings and specialty products,” Bunch says.
“We still maintain some of those glass manufacturing roots here, but in the 1980s, through a technological invention developed in our Allison Park Research Center, PPG revolutionized the automotive paint industry with electro-deposition coatings for corrosion protection. Rust is no longer an issue, and that comes from PPG’s invention more than 25 years ago.”
PPG has brought its technologies and products to customers around the world and is now the global leader in automotive OEM and aftermarket coatings and in aerospace, industrial and marine applications for customers such as General Motors, Mercedes-Benz, BMW, Boeing and Caterpillar.
“PPG has strategically chosen to focus on paints, coatings and specialty products due in large part to the global growth potential in those businesses and because we view coatings as our strongest suit where we could best apply our technology and innovation in a business in which we could become an industry leader,” he says.
“More recently, we have accelerated that transformation through organic growth and more than 30 acquisitions around the world to strengthen our global position over the last 15 years.”
Today, PPG is the largest global manufacturer of coatings to all of the industrial end-use markets and is the second-largest manufacturer of paints and coatings in the world. In addition to these coating successes, PPG’s R&D efforts in its chemicals group developed the first plastered photochromic optical lenses, which have grown into a $1 billion optical lens business under the brand name Transitions.
“At the same time that we’ve transformed our business portfolio, we’ve also expanded our geographic footprint,” he says. “In 2001, 74 percent of PPG sales were in the U.S. or Canada. Today, that’s less than 45 percent. Ten years ago our sales in the Asia-Pacific region accounted for 3 percent of our company.
“Now Asia-Pacific has grown to 17 percent of PPG sales. Today, 28 percent of PPG sales are coming from emerging regions such as Asia, Eastern Europe and Latin America. We have developed an improved geographic profile and have truly built PPG into a global enterprise.”
This global growth does not come at the expense of jobs in Pittsburgh or in the U.S. and the explosion of growth PPG has seen is great for the local region.
“Ten years ago, at the end of 2001, PPG posted revenues of $8 billion and net income of $387 million,” Bunch says. “In 2011, we delivered revenues of $15 billion and an all-time record of net income of $1.1 billion with earnings per share last year of $6.87, which was more than a third higher than our previous all-time record. We nearly doubled our sales and tripled our net income in 10 short years.”
As a result of that success, PPG is having a positive effect on Greater Pittsburgh and giving back to the community to help it flourish.
“In 2011, PPG spent some $100 million with vendors, suppliers and consultants in the Pittsburgh area,” Bunch says. “We employ some 2,500 people in the region and our foundation provides more than $5 million in funding for nonprofit organizations, much of it in the Pittsburgh region.
“Our success has enabled us to support key regional assets, and this past year, PPG renewed its commitment to the Pittsburgh Zoo and the PPG Aquarium for another 10 years.”
While much of the company’s recent growth has been overseas, its headquarters and almost all of its research and development activity is taking place in Western Pennsylvania. That commitment is what other businesses need to be willing to do to continue to build Pittsburgh’s economic development.
Identify the challenges
Pittsburgh is far from being down in the dumps, but there are certainly areas of the region that can improve to attract more business and opportunities available to aid in that mission.
“I believe that there are three significant challenges but also opportunities to attracting and retaining businesses in our region,” Bunch says.
“The first is energy. I believe this is a key challenge for most global manufacturers throughout the world, and more pointedly, here in the United States there is growing competition to access abundant, reliable, affordable and environmentally sustainable energy and feedstock sources.
“We’re on the cusp of an energy revolution here in the United States.”
New drilling technologies have enabled access to natural gas and oil reserves that are quickly turning the country into a globally competitive low-cost energy power. The Pittsburgh region has a lot of expertise in this industry.
“We are at ground zero in the shale gas story, but we have important technologies and roles to play in the development of sustainable energy sources like solar, wind and nuclear where our universities and our small and large technology companies are leading the way,” he says. “The expanding energy industry is creating jobs and supporting growth in other sectors from manufacturing to financial services.”
The second challenge for Pittsburgh is the need to continue to invest in the region’s transportation infrastructure and the availability of access to the region by air.
“We’ve clearly seen a reduction in air traffic and flights through the Pittsburgh International Airport,” he says. “As we become more global it’s important that we have an airport that can serve the needs of our employees and our customers.”
In many cities and regions, airports are the most important asset in community development. Pittsburgh has a modern but underutilized airport that is not living up to its potential. As a result, the Allegheny Conference along with the airport authority and the Allegheny county executive formed the Regional Air Service Partnership.
“This joint initiative demonstrates to the airline industry that the airport, the elected leadership and the business community are working together to improve air service,” Bunch says. “This initiative is paid off with such airline investments as United’s nonstop service to the West Coast and Delta’s nonstop service to Europe.”
The third clear obstacle to economic investment groups is Pennsylvania’s tax structure. The major state tax, corporate and income tax is uncompetitive. At 9.99 percent, it is the second highest in the country.
“This creates a very negative first impression for potential investors,” Bunch says. “In addition, Pennsylvania is the only major state that taxes the amount of net operating losses that a company can carry forward and offset against its tax liability.
“Pennsylvania’s corporate net income tax proportionate formula penalizes companies for expanding their physical presence and hiring employees in Pennsylvania because it does not utilize the single sales factor as utilized by many other states. The Pennsylvania state tax burden on business is a major in hindrance.”
Leverage strengths and opportunities
While there are several challenges that the Pittsburgh area needs to improve upon to make the region more attractive for businesses, the city, surrounding areas and local companies are making plans that address the weaknesses.
“Some people will tell you that Pittsburgh can’t compete with larger cities or Sun Belt states and there’s nothing we can do about it,” Bunch says. “I don’t believe this is true. I do, however, believe that in order for the Pittsburgh region to be more successful, we must work to leverage our strengths.”
The Pittsburgh region has some of the best educational institutions and hospital systems in the country, and as a result, research and development is more than $3 billion in the local economy.
“This is clearly a home for innovation here in the Pittsburgh region,” he says.
Bunch, who is chairing the Allegheny Conference this year, believes the organization dedicated to improving economic growth is in a unique position to build on these strengths for the betterment of the region.
“Beginning in March of last year, the conference convened 26 planning sessions across the region that involved more than 750 individuals, members of our regional investor’s council and partners,” he says. “We took stock of our progress to date and discussed an agenda for the three years to come.”
The conference developed a plan that includes three strategic priorities designed to take full advantage of what the region has to offer today.
“First, we wanted to enhance the opportunity for individuals and employees,” he says. “We will work to help connect diverse individuals to jobs and careers by identifying the skills needed and by increasing awareness of these opportunities among educators, students and workers.
“We will help employers by marketing the region globally and by building the capacity of existing businesses to succeed including the creation of a new venture capital fund to support the success of entrepreneurs and start-up companies.
“Second, we want to strengthen our communities by bringing together partners to take a fresh look at places in our region that have languished. We will seek to champion needed improvements to state laws and policies and work across political boundaries to streamline things to better integrate transit and transportation.
“Lastly, we want to energize tomorrow’s economy. We will work on improving our tax and regulatory climate, including creation of a site development fund to ensure that our region can provide competitive locations to accommodate business expansion and relocation.”
A focus on these strategic priorities will lay the groundwork for sustainable prosperity in the region.
“We’ve made a lot of progress on many of the fronts,” he says. “To succeed, partners across our region must come together to make it happen.” <<
How to reach: PPG Industries Inc., (412) 434-3131 or www.ppg.com
The Bunch File
Chairman and CEO
PPG Industries Inc.
Education: Received a degree in international affairs from Georgetown University and a master’s in business administration from the Harvard University Graduate School of Business Administration.
Facts: After joining PPG in 1979, he held positions in finance and planning, marketing and general management in the United States and Europe during his first 12 years with the company. He was named general manager of architectural coatings in 1992, vice president of that unit in 1994, and vice president, fiberglass, in 1995. Bunch was elected senior vice president of strategic planning and corporate services in 1997, and executive vice president, coatings, in early 2000. He was named president, COO and board member in July 2002; CEO in March 2005; and to his current post in July 2005.
Bunch is a member of the board of directors of the H.J. Heinz Co. and the PNC Financial Services Group, as well as a member of the University of Pittsburgh’s board of trustees.
Throughout Ohio, there are companies and organizations that are developing a wide range of innovative solutions to meet energy challenges. In turn, the state has many great assets that lend themselves to the energy industry and help create ways to improve energy resources or provide ideas on how to develop new ones.
As a way to bring together companies, researchers and supply chain manufacturers across Ohio to share ideas for developing innovative, advanced energy technologies and capitalize on common synergies for future business opportunities, NorTech held its Advanced Energy B2B 2012 Conference & Expo Oct. 30 and 31.
“The whole reason that we’re interested in holding this event is to promote the idea of building collaborations and partnerships among our cluster companies,” says Dave Karpinski, vice president of NorTech and director of NorTech Energy Enterprise. “That guides our programming, the design of our event and our target audience.”
The event last year was a mix of discussions on energy sectors and potential growth areas within Ohio such as solar, energy storage and fuel cells, smart grid, biomass, waste streams and energy efficiency, as well as trade show exhibit space.
One of the things new this year was a panel of some of the major projects going on in Ohio from a renewable, advanced energy standpoint.
“The purpose was to give the attendees a sense for the breadth of projects that are going on and where they’re being deployed in different parts of the state,” Karpinski says. “It was a good lesson about matching the technologies with the resources in our state to be able to generate renewable and advanced energy based on our renewable portfolio standard.”
What provided an even more exciting opportunity for economic development are all the products and solutions that can be generated, developed, manufactured here and not only used in Ohio but also exported around the country and around the world.
“If you think about energy and advanced energy, all of these systems are massive, large-scale, durable, good processes with lots of manufacturing, materials and components,” he says. “That’s what we are strong at in Ohio.
“We’re coupling our research and development strengths with our ability to make these things and produce these processes, systems, battery solutions, fuel cells, etc., to have an impact here.”
NorTech also tries to generate local demand for these products in the state so the companies developing these solutions have local customers to work with as they develop and perfect them.
“It’s much more productive if your developing, manufacturing and deploying systems are close by,” he says. “That will make you more competitive as you scale up and export around the world.”
This work surrounding collaboration and partnerships with energy companies is part of what NorTech calls road mapping.
“That process helps us identify where we think we have strengths in the region, what the companies are in these clusters and what the competitive picture looks like against other regions,” Karpinski says. “Then we work with these companies to come up with a game plan for cluster growth.”
One cluster NorTech is excited about surrounds two companies that convert waste plastics or waste polymers back into crude oil. The technology, as oil prices have increased over the years, has become more attractive and viable.
“They’re relatively small output … so there is a little bit of a challenge to get the attention from buyers of oil for really small sources like this,” he says.
NorTech is working with a couple of its companies in the cluster on federal advocacy efforts to open up this waste stream to qualify as renewable fuel for the country’s federal renewable fuel standard.
NorTech is also working with Quasar Energy Group, which produces a technology called anaerobic digesters that take biomass waste and, through a biological process, generate methane.
The methane can be compressed, cleaned and used as compressed natural gas for transportation applications as an alternative to gasoline or diesel fuel.
“One of the challenges that they had was getting equipment for these dispensing stations,” Karpinski says.
Because Quasar didn’t want to be experts in CNG dispensing systems but wanted somebody that could work with them that could develop that, NorTech partnered the company with South Shore Controls.
“We identified that need and have a project ongoing with Quasar and South Shore Controls and are working with our partner Magnet to help design the appropriate piece of equipment such that South Shore could be the manufacturer for Quasar,” he says.
Through these kinds of efforts and the information being shared during events such as the Advanced Energy B2B 2012 Conference & Expo, companies are getting help to achieve their growth targets.
“We hope it will stimulate some interest in working in some of these companies and provide chances for collaboration,” Karpinski says. ?
Over the course of the past six years, Tony Thomas hasn’t had to hunker down in the face of the economic recession — he’s had to plan for 10 to 15 percent annual growth over those six years.
Thomas, who serves as executive director at Welcome House Inc., a 295-employee organization devoted to helping individuals with intellectual and developmental disabilities, has been focused on overcoming funding challenges, diversifying services and continuing growth.
“We don’t really know what people are talking about when it comes to a bad economy or an economic recession; it just hasn’t happened to us,” Thomas says. “There’s been a lot of growth in the developmental disabilities field because the need is so great.”
Within Cuyahoga County alone, there are 600 to 700 people waiting for services. Providers such as Welcome House have been trying to expand services and create opportunities so people with disabilities have quality homes to live in in the future.
“That’s why the recession really hasn’t hit us at all,” Thomas says. “It’s gone in the opposite direction.”
Challenges of Growth
While Welcome House has experienced exceptional growth over the recent years, it hasn’t come without challenges and obstacles to overcome.
“The biggest challenge we have is the number of people who need services far exceed the number of spaces and opportunities that we have,” Thomas says. “What we are trying to do is to look for new and creative ways to serve people.”
The other thing that’s been a challenge for Welcome House has been that both the federal and state government changed their funding restraints.
“They’ve done some different things in their funding cycles, so the traditional programs we used to rely on to build a group home, some of those funding streams have changed,” he says. “So what we’ve had to do is be creative in the way we approach public funding to try to get dollars available to serve the people that we support. That’s really been our biggest challenge over the last four or five years.”
Welcome House has tried to counter this change by creating a home health care agency within the organization to draw new dollars from the federal government through the Medicare program.
“That’s a way we have tried to balance out,” he says. “If something changes in the state system, we try to look for federal dollars to support that. If things change in the federal system, we look at how the state may supplement that or go to the county for some creative ways to work with them. That’s what we are good at doing and that’s how we work.”
Another way around funding changes has been expanding fundraising beyond government sources.
“We try to do events and other kinds of things that will create opportunities,” Thomas says. “People can get behind us and support us through our fundraisers, through our events, through volunteering with us and a whole variety of ways.”
The growth Welcome House has seen doesn’t come to organizations that keep doing the same things over and over. Welcome House looks to differentiate itself from other providers in Cuyahoga County.
“We differentiate ourselves from those other organizations by looking at what the needs are out on the horizon and trying to plan for those services that may be needed two to three years from now,” Thomas says. “An organization like ours needs to change. It’s not something that can stay constant. We really need to change and adapt our organization to meet the growing needs and the changing needs of people with disabilities.”
It’s that kind of thinking that has separated Welcome House from other similar organizations and has contributed to its growth.
“It’s trying to think about what the future is but also trying to think outside the box,” Thomas says.
When it comes to out-of-the-box thinking, you need employees who share your vision and drive to make a difference in the organization.
“You have to recruit people who not just share your vision but also see the need for changing the organization and expanding services in different directions,” he says. “If you’re an organization or business and you’re staying in one line of business and that’s all you do and the market changes or the needs change, you’re not adapting to it. You have to adapt to it and you have to change and you have to have people on board, especially in your leadership positions, that are willing to look at changing the organization and aren’t afraid to make those changes.”
To make those changes a reality, you have to plan things out as an organization.
“If you agree to do something you have to also agree to change your organization to meet that need,” Thomas says. “Our people are very into doing that. They see the need to do it and they see the need to move the organization in a different direction.” <<
How to reach: Welcome House Inc., (440) 356-2330 or www.welcomehouseinc.org
Andy Zynga has been in business surrounding open innovation for more than 10 years now. As CEO of NineSigma Inc., a 70-employee company that engages organizations with external innovation resources, Zynga helps companies prove that open innovation is a valuable resource.
Due to NineSigma’s mission, the Ohio Third Frontier recently awarded the company a $2 million grant to aid small and medium-sized businesses in Ohio in gaining access to open innovation and solution providers around the world.
“The success of open innovation is something that departments of development take note of,” Zynga says. “The Ohio Third Frontier said, ‘Why don’t we help to grow this state and the businesses in this state and create new jobs by giving the smaller corporations access to technologies just like the big guys and let’s find intermediaries that can help to make that happen.’
“That’s where they were looking for companies, such as ours that could do this, and that’s how we ended up winning this $2 million Ohio Third Frontier grant.”
Open innovation can impact a business in numerous positive ways. It is Zynga’s and NineSigma’s goal to help Ohio small businesses achieve success by using it.
Open innovation has to do with companies going outside their own four walls to find new technologies, knowledge and ideas. That means going above and beyond the trusted network of people you’ve worked with all along.
“The power of open innovation is getting solutions that have nothing to do with your own,” Zynga says. “The very first step is to be able to define the problem in a way that is clear, compelling and concise,” he says. “Then you have to do cross-industry outreach and look around the world for people who may have an answer within your industry and outside the industry. Then thirdly, you have to filter through all the proposals that come in as a result.”
Open innovation helps to accelerate the innovation cycle.
“Rather than sitting there trying to reinvent the wheel, companies all of a sudden get all of these great proposals on their desk within four or five weeks and they get access to all these great technologies from around the world,” he says. “Tapping the global brain is what this is all about and we are, so to speak, the people that tap the brain for our clients.”
To help make this process easy on your business, you should dedicate someone to lead the effort.
“The CEO should make someone dedicated champion of open innovation,” Zynga says. “Somebody who is the process owner that works with the other internal resources in order to utilize the power of open innovation to the max.”
Open innovation is really about creating your own intellectual property with the help of additional pieces that you are using to accelerate the overall IP.
“When clients have internal champions that own the process, typically the success rates are two to three times higher than they would be without a champion,” he says. “That is a big recommendation for the CEOs of the world to find someone internally to understand how this works and get training so they can get everybody around the table when it comes time to review all those great solutions.”
Allow open innovation to help you
Almost every product development process has some place in it where there is a bit of a challenge or a stumbling stone. Those are the times where open innovation can be your company’s best friend.
“These are the moments when somebody’s got to make a decision to say, ‘Do I go look in the world to see who’s got a solution we could tap into?’” Zynga says. “If the answer is yes, we have seen accelerations by 30, 40 and 50 percent. So people get to market much, much faster and can realize some real savings.”
When companies start to do these technology searches, it also helps to positively impact corporate culture to one of more openness.
“The biggest obstacle in all companies is usually the not-invented-here syndrome,” Zynga says. “Companies say, ‘We can solve this with our own people; why should we even go look outside? We’ve got the smartest people anyway.’ When you receive all of those excellent proposals, you get to see different approaches that people take to solve a particular problem.
“Surely your own R&D people have their own hypothesis as to how that can be solved, but just seeing the different approaches from around the world enhances your knowledge. That means there might be other projects that this may have a positive impact on within the business.”
Open innovation can also de-risk the whole product development process.
“It helps you to see what’s going on out there and what all the approaches are,” he says. “It helps you to say, ‘Am I on the right path?’ You may run a technology-strict project and find out there is no answer out there … it’s so unique no one has done it before.
“Likewise, if there are tons of solutions already for something that you’re developing internally, you may say, ‘Whoa, I didn’t know there are already so many solutions to this.’ It helps to de-risk and it helps to bet on the right horse.” <<
How to reach: NineSigma Inc., (216) 295-4800 or www.ninesigma.com
It was late 2008 when Ross Bushman and his team had just finished a new strategy for the next five years of business at Cast-Fab Technologies Inc. Bushman, who is president and CEO, along with his team were excited about the new strategy that was put in place and what it could mean for the company.
However, just a few months later, 2009 began and the castings and fabrication industry was hit hard by the recession. Cast-Fab Technologies, a 280-employee, $50 million gray and ductile iron foundry that supplies castings, patterns, steel-welded fabrications and precision sheet metal components, lost nearly half its business virtually overnight.
“We went through some hellacious turmoil in our industry, to say the least, back in that 2009 time frame,” Bushman says. “It was a period of about five or six months where a lot of that drop occurred. It wasn’t that we just lost 30 or 40 percent of the business in one day. We didn’t lose any customers. What we lost was our customers weren’t buying anything and that was different.”
With its customers taking a break from business, Bushman and Cast-Fab had to look elsewhere to keep business going.
“We knew we had to stay strong, make some painful choices early on, and we didn’t procrastinate on them,” he says. “We knew there would be opportunities to pounce on.”
To take advantage of those potential opportunities, Bushman stuck to the company’s plan, reassured employees that things would be all right with hard work and new customers would be found through diversifying the business.
Here is how he carried Cast-Fab Technologies through the downturn.
Involve employees in your strategy
The recession caused panic in a number of businesses as individual industries began to see the effects of the economy. Bushman, however, wasn’t going to let panic set in at Cast-Fab — he communicated what the organization was going to do.
“Our people were going home every night and the news was not good,” Bushman says. “Everybody had a friend, a neighbor or a family member affected somehow by the economy.
“People need clarity and every day we were out there trying to talk about those things and we kept talking to them about reaffirming America’s manufacturing excellence. That was what we were after.”
To achieve manufacturing excellence Cast-Fab aimed to diversify the customer base, establish new customer relationships and continue to grow with current accounts. To put that plan in motion Bushman involved many people in the strategic planning process.
“You have to involve a lot of folks in the organization,” he says. “People are usually pretty surprised at how much different kind of numbers and things we are sharing even down to key shop-floor personnel. Team members need clarity. They need the ‘what’ and the ‘how.’”
Deciding who to include in the strategic planning process can be a difficult decision. A good strategy group involves people from different levels and experience.
“We certainly have the key managers involved, but we’re also looking out for those up-and-coming associates who are going to be the key folks five or 10 years from now and getting them to be part of the process,” Bushman says. “At the end of the day, these folks own the plan — the strategy map and the numbers on the scorecard and what specific metrics we are doing — they are intimately involved in developing those things with us.”
You want to pull in folks who are on a track to do some bigger and better things for your company down the road.
“That just helps with the breadth of opinion,” he says. “In the C-suite, we all can get blinders on at times and forget that information isn’t assimilated through the organization as much as it comes to you. That’s why your players need clarity — the ‘what’ and the ‘how’ — and you have to communicate those things.
“The toughest part that any organization has is getting an outside force’s perspective of what’s coming at you and trying to look at where things are going to be five or 10 years from now and what you need to be doing today to get there. That’s where some of those outside folks can help challenge you.”
People are usually surprised at how many folks Cast-Fab involves in its strategic planning process.
“We have around 280 folks today and we’ll take 25 or 30 people off-site to really be part of this process and really help map the future of the organization,” Bushman says. “They then own the plan and they believe in the words and the numbers that are on the page. It’s not just me or my brother sitting up there talking about those things and that’s really worked well.”
Having all of those people in the room to help form a plan is extremely beneficial when it comes to gaining buy-in for a new direction.
“I talk to our folks and tell them, ‘This is your chance to write the script for the next four or five years for the organization,’” Bushman says. “It’s not just me standing up there going over the same old charts and numbers. We’ve really created some good alignment within the organization as far as goals. We’re getting people pulling in the same direction.”
To get your company on the same page and moving together, it takes patience and persistence. Bushman has identified the five dysfunctions of team training to get his employees in line.
“You have to be willing to get better and not just go through the motions,” he says. “Sometimes to get better you’ve got to have some conflict and some change. So we’ve used the five dysfunctions of a team training, which talks about dealing with issues in a professional way. Sometimes it’s not fun, but we’ve spent a lot of time getting the right people that fit together.”
When you’re trying to get buy-in for a new strategy or direction for the company, it is rare that you will please everyone, but it is critical that you get a majority on board with you.
“You have to keep working your strategy so it becomes ingrained in what you do,” Bushman says. “My dad told me years ago that if you got even 70 percent of your workforce on board, buying in to what you were doing, that’s probably world class. You’re probably not going to have everybody, you just have to keep getting some converts each day, each week, each year to what you’re trying to do and you’ll slowly move the needle.
“An 80 percent solution executed on time is better than a 100 percent solution executed late. It may not be perfect, but start the plan and start it working and work on the implementation phase. It’s about getting a little bit better each day as opposed to giant leaps.”
To move forward with a plan each day and each week, you have to put emphasis on the implementation of your strategy.
“Too often people go through a huge strategic planning process, they come out with a great plan, but they spent months and months doing it, and at that point, people are exhausted,” he says. “When the work needs to begin on the implementation side, it fizzles out a little bit.
“We really shortened the time on the strategic planning side and we really focused on the implementation. On the implementation side is really where plans are won or lost and strategies are won or lost.”
Following Cast-Fab’s strategic planning process in 2008, the economy tanked and implementing a plan and sticking to it became more important than ever.
“One of the principles and beliefs that I use is that decisions in crisis demand calm leadership,” Bushman says. “We really knew that and really communicated as best we could with the organization.”
Bushman used that calm, yet determined demeanor to steer the company in a positive direction. With current customers putting business on hold, Cast-Fab looked to gain new business. It brought on new clients and diversified its offerings.
“We knew there would be some opportunities in the marketplace and there were,” he says. “We continued to use our strategy, and we continued to look at where we wanted to go and that’s how we made our decisions. We made some painful cuts at the time, there’s no doubt about it, but we were proactive with those. We didn’t wait too long.
“We really saw where things were heading pretty quickly and that allowed us to stay strong in many ways.”
The opportunities Bushman communicated to his employees came up in time. Cast-Fab made an acquisition and gained business from competitor demise.
“We had our most successful year that year of new customer generation,” he says. “We really needed to, because our current customers weren’t buying anything. I knew if we could get some more spokes into the fold once the current markets came back we’d be in pretty good shape.”
Throughout this period, Bushman made it a point to stay as positive as possible and celebrate any small wins the company made.
“You have to spend a lot of time talking about the positives, not just the negatives,” he says. “People think you have your plan and you come in and talk about the stuff that’s not going very well.
“We try to celebrate success, because how boring would that be to just come in and talk about the problems all the time. We try to spend three times the amount of time on the positives as we do on the opportunities for improvement.”
Some of those positives have come from the new product offerings that Cast-Fab has created over the years in order to diversify.
“Part of the strategy that has been working really well for us is we have developed a couple of product lines of our own to help us diversify,” Bushman says. “We have a line of bank equipment products that’s sold under the business and brand Security Systems Equipment. We do safes, vaults, safety deposit boxes, pneumatic tubing systems and anything that a credit union or financial institution may need that’s metal-based.
“We have another smaller division that does products for water and waste water treatment. That business is sold under the name Coldwall Wilcox Technologies. These are subsidiaries of Cast-Fab that are a smaller piece of what we do, but they do help us diversify.”
The key to diversifying to help grow your business is to not leave the core competency of your business behind.
“You can’t stray from your core competencies,” he says. “Ten years ago, we didn’t know anything about bank equipment, but we knew how to make fabricated product. An opportunity came up to make an acquisition there, and we did that.
“Eight years ago, we didn’t know much about the products in water and waste water treatment other than they used a lot of castings and fabrications, machining and assembly. We had to learn how to sell some of those products and establish ourselves in those markets, but at the end of the day, we know what we do here in this building pretty well, and we’ve never strayed far from that.”
By sticking to a strategy of following core values and diversifying the business, Bushman has led Cast-Fab into new realms of business. He plans to continue that growth.
“As a family business, we don’t want to be doing this just for one or two more years; we want to be doing this for 30 years and beyond and get it over at some point maybe to a third generation,” he says. “So we’re trying to do those things and make those decisions now for the long haul.” <<
How to reach: Cast-Fab Technologies Inc., (513) 758-1000 or www.cast-fab.com
Utilize employees from different levels in your strategic planning.
Continue to work your plan as you gain buy-in.
Diversify by using core competencies.
The Bushman File
President and CEO
Cast-Fab Technologies Inc.
Education: Attended Miami University in Oxford, Ohio and received a productions and operations management degree. He also received an MBA from the University of Cincinnati.
What was your first job and what did you learn from that experience?
My very first job was at Carlisle Construction. It was a heavy equipment construction company that rented cranes, dump trucks, etc. I was the guy who swept the gas pumps, worked in the truck wash and steam-cleaned the engines so the maintenance group could work on them. It was a pretty good experience for a 14-year-old learning different stuff. I learned how different people dealt with conflict.
What is some of the best advice you have received?
My dad taught me years ago that pigs get fat and hogs get slaughtered. We use that a lot here when we’re talking about relationships with OEMs that we’re trying to establish for the long term. So when we’re in negotiations or doing pricing we’re talking about getting a fair return for what we’re doing to be able to sustain and grow the business, but at the same time we’re not looking for just one sale or a home run. We want to be able to do this for the long haul with them.
Whom do you admire most in business?
My dad taught me most of what I know. He’s been my hero in life. I was also part of a mentoring group here in town several years back with a fairly famous local business guy, Bob Kohlhepp. He is the chairman of the board over at Cintas and has been a great mentor to me and taught me a lot as well.
What are you most proud of at Cast-Fab?
I would have to say it was some of the work we did for the military. We did things on both sides of our business, ranging from ductile iron bomb bodies to some of the fabrications for the MRAP vehicles. A lot of our stuff isn’t necessarily seen when it is in use somewhere. It’s part of a machine or inside the guts of a machine, but when you can point to something that our folks are doing to help out our troops overseas, that’s pretty special to us.
When Joe Peilert came on board at Veka Inc. in 2010, the company was 2½ years into a more than five-year building recession. The company had gone through its first layoffs in its 30-year history, and it seemed there was no end in sight to the shrinking construction market.
Veka Inc. is a 500-employee, $110 million manufacturer of PVC and vinyl extrusions for residential and commercial windows, doors, fences and decks. As the number of homes being built in the United States continued to decline, Veka saw some of its customers shut their doors and its competition struggle to stay in business.
“By the time this was all said and done, 75 percent of the market was gone,” says Peilert, Veka president and CEO. “You’re looking at the peak of 2 million homes being built a year, down to 405,000 homes in 2011. It was a massive breakdown of opportunity.”
Peilert and his leadership team had to act to ensure Veka wouldn’t be the next company closing its doors.
“When you’re in a situation like that, morale is a challenge with employees and customers alike,” Peilert says. “That wasn’t something that was exclusive to Veka. It was a very tough emotional state for people because they were used to growth and success.”
As Veka’s new CEO, Peilert needed to do his due diligence within the organization, which gave him an opportunity to evaluate the business and gain a strong understanding of its operations. However, he had the added pressure of an industry that kept slipping more and more.
Here’s how Peilert identified key areas of strength for Veka and created opportunities within a shrinking market.
Evaluate the business
Peilert has spent a majority of his career in the building materials industry. He was attracted to Veka because it was a quality leader in the industry, and as a family-owned business, it provided a unique working environment.
“It’s a family-owned group with a global presence, which is a great mix because you get a long-term commitment to growing the business and what that provides to me is what I like to call the luxury to make the right decisions,” Peilert says.
“A lot of times you find companies with a three- to five-year horizon, and if you go through a recession, you can bet you start cutting maintenance, you start cutting people development, expenses and things like that.
“With the type of view we have for growing a business bigger and stronger for the next owner generations, you continue to do those things through difficult times and that is very attractive.”
Peilert took advantage of that luxury to make the right decisions. He addressed the people at Veka to share his plan for moving the company beyond the building recession.
“We gathered around 60 managers and supervisors here, which gave me the opportunity to introduce myself and talk about mainly what I considered to be key ingredients for a successful organization,” he says.
“What it boils down to are mainly two things — No. 1 is people who care. They care about the company, the customers and the co-workers. The second element is a well-defined strategy and an execution plan that’s linked to it. If we have those two things going in the right direction, it doesn’t matter what the industry and what the economy does; we’ll do well.”
Once he had met with key people he spent the rest of his first week listening.
“You have to spend time with the employees and with the customers and allow them to talk about their ideas, their concerns and their perspectives because you’re a sponge during that time,” he says.
A big part of what Peilert soaked up was the condition of the company’s customers and competition.
“With the customers, there was quite a bit of consolidation going on in the market,” he says. “As you can imagine, there were a number of people going out of business, so for us it was important to understand if we were aligned with the right people, both from a culture business philosophy point of view, as well as their approach to the market and product positioning.
“We wanted to make sure we provide them the right products. Our design capabilities that we have in-house allowed us to help our customers to transition from a new-construction-focused business into a renovation-focused business. That’s where we spend a lot of time proposing new concepts that help them get into those markets faster and more successfully.”
Peilert also had to fully understand the company’s three stakeholder groups — ownership, customers and employees — which he relates to a three-legged stool.
“There is an inherent balance to the system and the fact is you can’t neglect one group over an extended period of time because you introduce imbalance, and ultimately, that three-legged stool collapses or you fall off the stool,” Peilert says.
“You’ve got to understand the needs of those three groups and make sure that you address them in a balanced way. Understanding that inherent balance and managing that is the key.
“Once you’re there, you can never undercommunicate. You’ve got to constantly be visible, approachable and building trust all the time.”
Rally your team
Building that trust was crucial as Veka employees watched the building market continue to contract and began questioning whether the market would ever get better.
“Ultimately, communication is key in bad times more so than in good times,” Peilert says. “You need to be honest with people and you cannot overpromise. That is really dangerous.
“If you overpromise, then you lose your credibility and then you lose the buy-in and the business culture of the company is also being damaged.”
Peilert spread a message to the employees of Veka that he wanted to see them show an ownership and can-do attitude.
“You always find the people on any given day who will talk about the Steelers and find the negative things,” he says. “That’s really dangerous if that is prevailing in an organization. Fortunately, we have a lot of people, based on their seniority, that had seen the good times and they understand that this is a phase that, at some point, will come to an end.”
Not all of the employees were able to view the market situation with that mindset, so Peilert had to make sure he was allowing employees to voice their concerns.
“You can give company updates where you stand in front of 100 people, but the more effective way, while it takes a lot more time and effort, is to have those one-on-one interactions,” he says. “You get some good quality discussions and people talk about their concerns. They listen and they are not afraid to ask questions. That in my opinion is the best way to reach people. You’ve got to walk the plant.”
That kind of attention to individual employees greatly helped Peilert in the buy-in process. To get his management team on board, Peilert took them for an off-site strategy meeting at Fallingwater, a groundbreaking mansion that Frank Lloyd Wright built over a waterfall in the Allegheny Mountains.
“We took a tour of the building, and it became very obvious that the man had a phenomenal vision and an exceptional amount of focus on detail,” he says. “We said, ‘That’s how we want to approach our business and that’s how we want to develop strategy.’
“The second day we started mapping out our game plan going forward. People got a sense for how we wanted to tackle the business and certainly were inspired by the building and the thought behind it. If the management team has a can-do attitude and shows that ownership attitude, at some point, everyone else in the company will follow that lead.”
To truly rally your employees behind a new direction aside from company meetings, one-on-one discussions and strategy sessions, you have to celebrate your small wins.
“You show people you are hitting the milestones and when you hit those milestones, you’ve got to talk about them,” Peilert says. “You start building the confidence and building the momentum.”
To keep momentum going, Veka had to make several changes to account for what was happening in the industry. The company closed a location in Youngstown, Ohio, and converted its Canadian operation to a warehouse and logistics center to retain critical mass at key sites. It also made adjustments to personnel to help the company head in the right direction.
“Some of that was done, but there was quite a bit of work left to do in terms of looking at both cost and business development,” Peilert says. “At the end of the day, I made it clear to my management team that you can’t cut yourself to prosperity. With that being said, we said, ‘We can grow share and we can grow in bad times. We just have to have the right approach to the market and the right products.’”
Peilert started to break down the critical success factors in each area, one being cost management and the other being new business development.
“Once we had identified them in a fishbone diagram [which identifies many possible causes for an effect or problem], we started to break them down into further detail,” he says. “Once we had the detail, we started to put initiatives behind them. Once we had the initiatives, we attached them to a SMART execution plan.”
SMART is a big initiative for Peilert and the company. It’s an acronym that stands for specific, measurable, achievable, responsible and time-based.
“Once we started breaking this down into individual initiatives, people said, ‘That is achievable. That is realistic,’” he says. “Once we started to see traction on some of those projects and we had the additive nature of those initiatives, people started to gain confidence again.”
There wasn’t a magic trick or a rabbit that Peilert pulled out of his hat — it took rolling up his sleeves and clearly outlining performance expectations.
“I think that helped once people understood very specifically what they need to do to succeed in their job,” Peilert says. “In many cases, that’s not been properly defined. You typically see performance improving once you measure and once you set a target. So we spent quite a bit of time establishing metrics.”
The company focused on quality ratings, internal metrics and specific improvement targets aligned with the philosophy of SMART.
“We wanted to make sure that they were achievable, so we broke them down in quarters and showed a step-up improvement,” he says. “Those were key elements that people say, ‘I can do that over the next quarter. And if that’s possible, I can do it again the next quarter a little bit better.’”
Breaking objectives down into bite-size goals made a big difference. The key is being able to define your core business and put resources behind opportunities that will move the business forward.
“You start off by defining what your core is,” he says. “That’s always worthwhile revisiting and putting on a test vent. Once you’ve done that, you want to make sure you fund your biggest opportunities properly and put the right people behind it.
“It’s not always the biggest account that deserves the best person, but it will always be the biggest opportunity. Ultimately, you just have to spend time in the market and understand the leverage and the levers you have for success.”
Veka’s hard work paid off through a 56 percent reduction in quality claims, the signing of new business and a good growth return. So far, 2012 has been a good year.
“What we are seeing in 2012 is the beginning of a slow but steady recovery,” Peilert says. “People are starting to create households again and that’s how home construction benefits. It will not be a return to the 2 million unit residential homes, maybe we’ll never achieve that again, but it’s now a stabilized system that has experienced some slow and steady growth not based on government programs but based on recovering market strengths.
“For Veka, we are very excited about some of our partners that we have and our customers in the market that we’ve been able to work with on new designs for products that zero in on energy efficiency, sound insulation and impact resistance. Those are all big trends and big needs in applications that will help us grow faster than the market.” <<
How to reach: Veka Inc., (724) 452-1000 or www.vekainc.com
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The Peilert File
President and CEO
Born: Altena, Germany. I came to the U.S. in 1991.
Education: Has a Diplom Oekonom/MBA in business and economics from Ruhr-Universitat Bochum
What was your first job, and what did you take away from that experience?
I worked in my dad’s CPA office. I did classic, old-style accounting with a big journal where you had to write every entry in. That gave me a sense for the complexity of business, but also the need for accuracy and execution.
What advice would you give someone else stepping into a new CEO role?
For me personally, I’ve always strived for having the freedom to shape the direction of the business. There is a saying one of my mentors always said, which was, ‘It’s better to be the head of a mouse than the tail of a lion.’ It was always attractive to me to rather than work for a large organization to work in an organization where I can impact the structure and reach the people. I would recommend to a CEO to be the guardian of the company culture because that is a very precious asset.
Who is someone you admire in business or leadership?
I look up to George Washington. I have a painting of Washington crossing the Delaware in my office, and to me, that is the essence of leadership. If I look at my career, the founding CEO of Ardex, Herbert Goller, was a great mentor to me.
If you weren’t a president and CEO, what is something you have always wanted to do?
One day when I retire, I could see myself teaching.