The big picture Featured

8:00pm EDT May 26, 2008

William Wang has never been short on vision. So when Irvine-based VIZIO Inc. surged past established household names like Sony and Samsung to become the largest seller of flat-panel LCD televisions in North America, VIZIO’s founder and CEO wasn’t shocked. It was all part of the plan.

“When I started this business, I believed we could do the things we’re doing today,” he says. “I’m a dreamer, I guess.”

Wang’s plan was simple — create a great product at an affordable price. That strategy struck a chord with consumers, because although many people were eager to experience high-definition TV, the technology was still very expensive. VIZIO’s lean business model allowed the company to sell a product made with the same components as its foreign competitors’ products but for a lower price.

As a result, VIZIO has experienced astonishing growth. Wang founded VIZIO in 2002 with $600,000 — six years later, his company has grown to nearly $2 billion in sales. VIZIO was the top computer and electronics company on the Inc. 500 in 2007 and No. 4 in the top companies intending to go public.

Running a company that is growing at such an incredible rate is quite a challenge. Like a rocket blasting into orbit, a company moving too fast can tear itself apart if the necessary precautions aren’t taken.

Wang had managed MAG Innovision, another fast-growth company before founding VIZIO, and it didn’t end well. He learned a lot from that experience, and he was determined to not make those same mistakes again.

Here’s how Wang has successfully guided VIZIO’s transformation from an unknown underdog to a respected brand that shook up the TV industry.

Make your business scalable

Wang says the biggest challenge facing the leader of a high-growth company is managing your resources — time, money and people. When he started his first company, he didn’t know how to do that effectively.

Wang’s first foray into the entrepreneurial world came when he was 26 years old. He had been working in tech support, answering customers’ calls about their computer monitors, and he began to think he could build a better monitor than IBM. So he founded MAG Innovision, and the company became an instant success.

“When I started, business was pretty easy — the computer market was booming, and we pretty much rode the wave,” he says. “But then the flip side of the wave came, and I wasn’t prepared. The reality caught up and the company I built wasn’t strong enough to weather the storm.”

After growing to $600 million in sales and 400 employees in six years, the market changed and MAG couldn’t adapt. Wang ended up having to conduct massive layoffs and sold the business.

He learned several lessons from his first attempt at starting his own business and applied each of them when he founded VIZIO.

First, Wang knew that he didn’t want to deal with the pain of layoffs and budget cuts ever again. So he developed a scalable business model to help VIZIO handle the fluctuations of a changing market.

“Because our business model is pretty scalable, that gives us the flexibility to go real fast or slow down our growth,” he says.

As part of the business model, Wang outsources several tasks to professional management companies. By hiring other companies to handle warehousing, shipping or manufacturing, VIZIO can focus on its core competencies — like designing flat-panel TVs — while leaving the other things to people who are specialized in that area. Although the company designs its products, the assembly is contracted to companies in China, Taiwan and Mexico.

Deciding which tasks to outsource and which tasks to keep in-house can be tricky, but Wang has a simple solution.

“Try to match it by value,” he says. “If we can do it better than they can or if we can do it cheaper than they can, that will determine what we’re going to do. Some things we don’t want to out-source at all because we don’t believe we should trust a professional management team to outsource product concepts. That’s something we’ll absolutely do ourselves. But there are things like warehousing or shipping — we’re nowhere close to the experts that they have. So we use them to perform such tasks for us.”

By using a scalable business model, Wang has the ability to ship 10,000 pieces per month or 10,000 pieces per hour. A range like that could wreak havoc on a company with its own shipping department. He would have to devote most of his time to managing the shipping department, which would leave no time for product concepts or strategic planning.

“It’s hard to keep up,” he says. “That’s one of the major reasons we’ve been growing so fast, is that we don’t have those obstacles.”

Build a strong team

The principle behind a scalable business model also helped Wang do a better job of managing another one of his resources: his people.

Wang says that when he was a young, fearless entrepreneur, he didn’t properly appreciate the power of a strong, balanced team. However, with age came wisdom: He realized that some of his employees’ individual talents and specialized expertise could help him guide the company to greater heights.

So, Wang insists that his employees get to know their co-workers to not only strengthen company culture, but to improve the bonds between his employees.

He spends a lot of time setting up collaborative efforts and events. He says creating additional opportunities for teamwork will eventually make employees work together by default and begin to rely on each other.

“I spend a lot of time making sure all my lieutenants spend time getting to know each other,” Wang says. “Not just day-to-day work but to understand personally what they are all good at or bad at.”

He says if employees know each other well, they will be more willing to work together as a team.

In a high-growth company, trust is vital to a smooth-operating team.

“We have to be able to watch each other’s backs. If a certain person is really good at something, we should have faith in that person doing that certain task and vice versa,” Wang says. “If you’re not good at something, somebody else has to make up your weakness.”

To effectively manage a fast-growing company, not only must you build a strong, balanced team but you also need to properly utilize that team. Wang says the only way to keep your company afloat — and your sanity intact — in the face of tremendous growth is to delegate as much as possible.

“I’d like to delegate everything,” he says. “That’s my goal; my goal is to make sure I’m irrelevant to the company. That always has to be my goal, and I’ve been working toward that.”

For an entrepreneur who founded his or her company, letting go of so much responsibility can be difficult. But Wang says you have to remember that your employees need to feel responsibility, too, and, in some cases, they may have better insight on a matter than you do.

“Don’t get me wrong; it’s very hard sometimes,” he says. “But I’ve been through this once already. Sharing responsibility is one of the most important tasks to achieve — versus trying not to let go.

“I made a lot of bad choices. I made a lot of bad mistakes. The reason was that I’m not good at particular things, which is why somebody else should be able to help me with those things.”

Keep it lean

Wang has taken an aggressive approach to the LCD TV wars. To compete with its major rivals, VIZIO has to watch its cash flow very carefully.

“The money issue, you have to manage it with care,” he says. “Every single dime counts.”

That may be hard to believe coming from the CEO of a $2 billion company, but it’s the strategy he’s used from day one. One way Wang keeps costs low is by keeping the company’s structure as lean as possible. The company employs less than 100 people in the U.S., and most of them provide customer support at the company’s Irvine headquarters. There are no corporate jets or padded executive salaries at VIZIO.

The company maintains overhead costs at less than 1 percent of its sales. At the largest consumer electronics companies, overhead can be 10 percent of sales.

The frugality runs all the way through the company. Wang makes sure his entire team knows how important cash flow is to the business by showing them the effect even a small change can have on the bottom line.

“For example, we watch our inventory closely,” he says. “We watch our receivables closely, and we treat each dime — everybody on our team treats each dime — like it’s our money. You have to handle those resources we have with extreme care.”

Another way Wang gets employees on board with his lean operations is showing them what happens to the money that is saved. By investing that money in the company’s marketing and branding efforts, Wang increases consumer awareness of VIZIO.

“At the end of the day, it’s about brand equity,” he says. “We value our brand equity strongly, so if we make any money, we want to put it back into the brand.”

Companies like Sony, Samsung and Sharp have the advantage of decades of name recognition in their favor. That’s a tough hurdle for a six-year-old company like VIZIO to overcome.

“The only way for us to establish that — compared to the giant companies with $100 billion to $200 billion budgets — is we just have to save every single dime and penny we make and put it back into branding,” he says.

In the company’s early days, Wang limited advertising costs to less than 1 percent of VIZIO’s total sales — just like he did with overhead costs.

However, as part of its push to raise brand awareness, VIZIO has increased its advertising and marketing budget. The biggest sign that the company was ready to compete with the TV goliaths was signing pro football star LaDainian Tomlinson to an endorsement deal. The resulting advertising campaign helped raise its profile among football fans — one of the market’s largest target demographics.

After becoming the top LCD TV seller for North America in the second quarter of 2007, VIZIO held onto the top spot in the third quarter but fell to third place in market share for the fourth quarter.

Still, the company’s six-month run established the company as a force to be reckoned with in the LCD TV market, and Wang is determined to prove his company is here for the long run.

“Business is not just about having a dream and chasing after a dream,” he says. “It’s also about how to manage resources, how to build a team, how to build enterprises, how you weather the storm and how you go through the tough times.” <<

HOW TO REACH: VIZIO Inc., (949) 428-2525 or www.vizio.com