How Doug Bergeron is scaling VeriFone to $3 billion in revenue Featured

7:33pm EDT December 31, 2011
How Doug Bergeron is scaling VeriFone to $3 billion in revenue

For Doug Bergeron, slowing down has never been part of the plan. He didn’t slow down after leading the buyout of VeriFone Systems Inc. from Hewlett Packard back in 2001. In fact, he spearheaded the turnaround of the struggling San Jose, Calif.-based company to return it to profitability. A decade later, VeriFone’s U.S. business has more than doubled to $500 million in revenue today, an accomplishment that somehow pales in comparison to the company’s global expansion.

“That’s pretty impressive, but what’s more impressive is that we grew our $100 million international business to $1.2 billion, 12 times the size of what it was when we purchased it,” says Bergeron, CEO of the company, which provides electronic payment systems and solutions such as credit card terminals.

Now that VeriFone has run out of time zones for expansion, Bergeron says his next challenge is mapping the road for the company to grow to $3 billion in revenue.

Partner up

To set the strategy for the company, much of Bergeron’s time goes to finding ways to merge and partner with companies that can further its vision for point-of-sale payment solutions. Last August, he announced that the company may spend up to $1 billion annually on acquisitions in emerging markets and data services. Around the same time, it acquired the electronic payments company Hypercom Corp. for approximately $485 million.

“We’ve realized that we’re an integral part of the payment system but we need partners,” Bergeron says. “We’re not going to do this on our own.”

Bergeron seeks out partnership opportunities that can be meaningfully large in furthering the company’s major goals.

For example, in 2011VeriFone partnered with Google to incorporate Near Field Communication technology into the company’s payment systems and introduce Google Wallet, an Android application that allows consumers to make payments with their phone using virtual versions of their credit cards.

“It’s hard to participate with 25 small companies,” Bergeron says. “It’s better to pick ISIS, which is AT&T and Google, Groupon, partnerships with companies like that, that have staying power and a lot of financial resources. We know that we have confidence that we can get shoulder to shoulder with them and move a market.”

In addition to seeking partners with big shoulders, Bergeron isn’t ashamed to say he always looks for a good deal.

“We will never overpay for anything,” he says. “Remember we paid $50 million for VeriFone in a market that is $4.2 billion today.”

You also want to partner with businesses that complement things that your company is already doing.

“I look for businesses where part of the problem gets fixed by being inside VeriFone,” Bergeron says. “Maybe they lack international distribution. Maybe they lack an R&D capability that we have internally. Maybe they have great products but a lousy sales force. We have a great sales force. So I look for something that not only is a good value, but once we put it inside and take some time tuning it up, that the outcome will be a much better outcome than it would have been before.”

Lastly, try to acquire companies where you could take some of the managers and make them great managers within your business. Bergeron has brought on a number of VeriFone managers, presidents and executive vice presidents through acquisitions.

He makes it clear that once people join VeriFone, there is no combining cultures.

“I’ve seen companies go broke trying to bend over backward trying to merge their culture with your culture,” Bergeron says. “We’re a very successful company. It’s a great culture. It’s fun. It’s fast. It’s feverish. But we’re not going to compromise our culture for a company that we bought.”

To protect your culture, it’s important to treat people as common citizens of the company from day one so they don’t feel like outsiders.

“They are not from the other guys,” Bergeron says. “They are not from the competition. They are VeriFone. We’re a better company for that as a result of it.”

Make strategic investments

To double the size of a billion-dollar business, it’s no longer about deciding which markets to enter. It is about building out existing businesses and services. That begins with casting a wide net to find new and profitable business opportunities.

“We’ve taken the philosophy that we have to invest prudently and not wildly, but we have to have our nose in almost everything,” Bergeron says.

One of the newer markets Bergeron is excited about is taxicabs. While you couldn’t use a credit card in a taxi three years ago, today the company’s electronic payment technologies are universal in taxis throughout New York, Boston and Philadelphia. The key is to look for broad market opportunities, he says. Pick markets with lots of upside, and don’t pick too narrowly.

“A lot of stuff we have our nose in will never ever pay off for us, but that is the price of admission to having the certainty that all of the stuff that does move on from trial to mainstream, VeriFone will be a part of,” Bergeron says.

As a leader, you can’t be overconfident and think you know how to pick all of the winners from all of the losers. You innovate successfully by staying actively involved in many different projects and experiments.

“If you try to be too cute and say I’m going to work on this project, not this one, this one, not this one because I want to optimize my spend … inevitably you probably won’t overspend,” Bergeron says. “That’s for sure. But you are going to miss some of the winners.”

Once you’ve found what seems to be a profitable market, you’ve got to get completely committed.

“Don’t just allocate a little bit,” Bergeron says. “If you are going to pick some projects, get committed and put some wood behind your efforts.”

That may mean taking an initial hit to surface an idea with customers, whether it’s offering the product or service for free initially or on a trial basis. To get retailers get on board with Google Wallet, for example, Google has provided large subsidies for many retailers to be able to upgrade the VeriFone systems with the technology.

“Often in the beginning of new innovations, you have to make it free just to offset the chaos that you’re asking a customer to go through,” Bergeron says.

“We are counting on retailers coast to coast to post these pilots saying, ‘I want to be part of that. I see a lot of consumers wanting to use their phones as a method to pay. I want to get a piece of that.’”

In other cases, such as with putting credit card capabilities in taxis, it may just take some evangelizing until people begin to see the benefit.

“With usage, people find that people spend more on plastic,” Bergeron says. “Governments collect more sales tax. Everybody wins with the electronification of payments. Typically the resistance is fairly short-lived.”

Either way, the goal with any investment of time and resources should be stimulating business.

“Ultimately, beyond the chaos, if customers aren’t willing to pay for something then it’s likely that no incremental value is being delivered,” Bergeron says.

While it takes some patience to evaluate an investment, a CEO needs to have the operating discipline to be able to call a dog a dog. If an investment isn’t profitable, move on and spend your time, money and R&D expenses elsewhere.

“Things do sometimes take longer to progress than one would like, but there comes a day in the evolution of any project where milestones aren’t being met,” Bergeron says. “Customers aren’t adopting. Customers aren’t paying. I think economics can be a great determiner.”

Cast the roles

Bergeron says to scale properly, make sure the right people are in the right positions over time. One of the main ways companies don’t scale properly is by not making sure the right people are the right positions over time.

“They think that it’s the same job, the same skill set,” he says. “It’s not.”

Bergeron gives the example of Asia, which used to be a $50 million division for the company. “When Asia is $250 million, like it is going to be next year, that’s a whole different set of skills,” he says.

“The guy running Latin America is running the company, in a sense, bigger than VeriFone was ten years ago.”

Bergeron says it is his responsibility to ensure all employees in the first two levels of top management are the right people for their jobs every year. In a company that was approximately 30 percent larger in 2011 than it was the previous year, one year can make the difference in someone outgrowing his or her job.

“It might be that there is some terrific employee somewhere in this organization whose skills and whose drive and whose capabilities have tripled in the last 10 years,” Bergeron says. “But guess what? We are six times larger, and that person has fallen behind.”

Today, the company has 700 U.S. and 2,800 international employees. When you’ve reached a certain size, developing the next generation of leaders is no longer a matter or training.

“At a certain level of executive management, there really is no training,” Bergeron says. “We’re not IBM. We’re not going to be sending people to Harvard for a summer workshop.”

Instead, you need to work with people to improve their skill sets in areas that can prepare them for the jobs they will be filling, for instance, by exposing them to different experiences.

“Part of the human development business is identifying areas of growth, and not just saying here is where you need to grow and walk away, but giving them a chance to work on those areas and providing the necessary additional experience,” Bergeron says.

“If there is a guy that I think is going to be running a continent one day, not just a country, and my concern is he doesn’t have multicultural experience, then I make sure that I take him out of his comfort zone and I give him a couple of countries where they don’t speak English. He has to travel there and learn how business is done another way.”

Bergeron believes that the company’s commitment to promotion from within is a cultural strength. It motivates people that if they work hard they can scale with the business.

“I want to give people at least the more-likely-than-not chance that if they continue to improve, there is going to be another bigger job for them if they want it,” Bergeron says.

With rare exceptions, very few of the company’s current executives and managers were outside recruits.

“For the most part, people who are running large countries, large continents today, were sales people that became product managers, that became country managers and just continued to overperform at every level,” Bergeron says.

As for Bergeron, his board is still giving him the thumbs up as the right CEO for the job. With the company six times the size it was when he took the job, it seems like a pattern that won’t break soon.

“I guess I scaled pretty well because the board has kept me,” Bergeron says.

“Time will tell, but it sounds like it’s going to be a very exciting next three or four years here.”

How to reach: VeriFone Systems Inc., www.verifone.com

The Bergeron File

Douglas Bergeron

Chairman and CEO

VeriFone Systems Inc.

Born: Windsor, Ontario, Canada

Education: York University in Toronto, Canada — B.A. with honors in computer science; University of Southern California — M.S.

What was your first job?

I had a paper route from age 10 to 16, gave accordion lessons from 16 to 20, and played accordion on Friday and Saturday nights in a wedding band.

What is one part of your daily routine that you wouldn’t change?

I love reading to my kids before bedtime when I'm not out of town.

Who are your heroes in the business world and why?

I admire Larry Ellison for his tenacity and unwillingness to accept no for an answer.  I try to live by that motto myself.

What is your favorite part of your job?

I love communicating to employees, customers, and investors. I love taking complex concepts and boiling them down to memorable and relevant simple themes.

Bergeron on the benefits of mobile payment technologies: The early word is that consumers are very anxious to replace a fairly simplistic experience that is the use of a credit card with a more robust experience that the retailer may know more about you based on the fact that your phone is a rich source of data for you. And as long as you permit it, the retailer may like to know who is there, why you are there, where you were before, what you are buying, (offering) some of the benefits that come from online purchasing, (such as) the one-click Amazon experience where they are suggesting other things to buy and knowing where to ship things automatically. There is an opportunity to create a richer customer-to-retailer experience once we start replacing cards with phones.