All you need to do is look around to realize that the world is changing at a pace faster than anyone could have imagined. Every day, competition increases and the rules of engagement are rewritten. Keeping up with the Joneses is no longer enough to ensure survival.
Those manufacturers that understand how to remain in a state of constant adaptation have learned that this may be the only true key to thriving in the new economic realities of the global economy.
In the links below, we highlight 17 manufacturers that have taken steps to get ahead of change and forge their own paths. These award winners, honorable mentions and panelists for the 2013 Evolution of Manufacturing Conference, presented by Cuyahoga Community College, are truly setting the pace for others in this region. And we even identified a handful of companies that were engaged in initiatives “of note” to tell you about.
The conference is designed to recognize and showcase manufacturers and technology companies that have adapted to competition in a global economy through improved operations, new technologies, products or services. The 2013 program focuses on the continued evolution to advanced manufacturing with a focus on breakthrough concepts, transforming old-line manufacturers into high-tech manufacturers and what it takes to remain competitive and relevant in a new manufacturing age.
This year marks the 14th year of this annual event. This year’s honorees are culled from an extensive nomination and selection process which began in early fall and ended in early December.
Congratulations to the honorees and honorable mentions.
Click the links below to read the individual profiles for all of this year's honorees.
2013 Evolution of Manufacturing - Panalists
Tom Salpietra, president and COO, EYE Lighting International
Eric Lofquist, president and CEO, Magnus International Group
Suzy Remer, owner and CEO, Midwest Box Co.
2013 Evolution of Manufacturing - Winners
- ArtiFlex Manufacturing LLC
- R.W. Beckett Corp.
- H.C. Starck Inc.
- RBB Systems
- Saint-Gobain Performance Plastics
- Superior Products LLC
- Visual Marking Systems Inc.
- Voss Industries Inc.
2013 Evolution of Manufacturing - Honorable Mentions
2013 Evolution of Manufacturing - Manufactures "Of Note"
2013 Evolution of Manufacturing - Sponsors
The times were tough for Roeslein & Associates in 2001. Sales had grown from just more than $1 million in 1990 to some $20 million in 2000. Now the volume of work was practically nonexistent.
“When you go without work for almost a two-year period and you use up every bit of retained earnings that you had, it starts to challenge your own beliefs,” says Rudi Roeslein, founder and CEO for a company that engineers, fabricates and constructs unitized modular industrial systems. “We were faced with this real identity crisis of was it all smoke and mirrors? Was I just delusional?”
Indeed, Roeslein and his company were in pretty dire straits. He let two members of his management team go and the six who remained each took a 30 percent pay cut. Roeslein and his partner, who only owned 25 percent of the 250-employee business, did not take any pay for 18 months.
“I said, ‘I’m not going to force you to do it,’” Roeslein says. “He had a family and both of us had kids at the time. We had the same bills that everybody else has. We just had to live on whatever we took out of the business previously in earnings. We tried to keep as many people as possible.”
As hard as he was working to keep the business going, Roeslein also had to fight the perception that it wasn’t ever going to get better. He had complete confidence that he would make it work, but it wasn’t shared by everyone.
“When people see that, how do you keep them enthused?” Roeslein says. “You start letting people go, and (others) want to bail out. They want to leave.”
As it turns out, Roeslein was right and his company did survive the business drought and emerge on the other side, growing to a $100 million organization today.
But Roeslein emerged a new man and a new leader. He was willing to look at himself in the mirror and ask the question that few brash, successful entrepreneurs ever want to ask of themselves.
“The big soul-searching that I did was, ‘OK, once I get out of this, even if we get the business, what am I going to do differently so I don’t get into this predicament again?’” Roeslein says. “That’s where you have to identify what are the necks in the hourglass? Am I the neck in the hourglass? I came to the conclusion that I was because of how I managed my business.”
The transformation began in 2002 with a realization that Roeslein needed to get his people more involved in guiding the business.
Empower your people
As Roeslein looked at his role in leading his company, he began to understand the problem.
“I wanted all customers to discuss their opportunities with me,” Roeslein says.
He had a CFO who handled the day-to-day personnel issues and Roeslein managed the engineering, business development and product management. But he also did selling and implementing and wanted in on every sales discussion.
He realized that had to change.
“You have to get over your own ego and really accept that maybe you’re the problem and not the solution,” Roeslein says. “Maybe the solution is right in front of you because you have all these brilliant employees and you’re just not releasing their talent.”
So as things began to pick up, Roeslein appointed the six managers who had been department managers and made them directors.
“I assigned specific customers and accounts on a regional and global basis, regardless of whether they were technical or nontechnical,” Roeslein says. “I divided it among them.”
The key to making this work was that Roeslein didn’t just call them into his office, tell them about the change and then expect them to figure out how to do it on their own.
“I said, ‘I will mentor you for a period of a couple of years,’” Roeslein says. “‘I will go with you to these customers, but ultimately, I’m turning these customers over to you. I’m turning these projects over to you. Then you guys figure out how to complement each other. Figure out who is best at construction, engineering and business development. One of you is going to become the president of the company.’”
It was a bold move, but Roeslein quickly knew it was exactly what his business needed.
“We quickly became a $100 million company, which under my leadership and style, probably never would have happened,” Roeslein says. “We would have been stuck at $20 million to $25 million because that’s what I could manage and that’s what I could keep my thumb on and have enough daytime hours to manage.”
If you feel like your company is stuck, it could be that you’re unwilling to let the people you’ve brought in to work with you and for you stretch their legs and use their talent. You’re only one person and if you keep all the important work to yourself, your company is severely limited in how much it can grow.
“You have to take the risk,” Roeslein says. “Put those people out there. Put them on the front line, put them in difficult situations and see how they respond. From that, you can start to formulate a plan as to who your leadership is and who your next generation is. That’s what I’ve challenged my six managers to do.
“Give guys an opportunity. Challenge them and push them beyond what you believe they can do and see what they can do. If you just keep them on the bench, they’re never going to be able to demonstrate their capabilities and you’re never going to know.”
Back up your words
If Roeslein had talked to his people about having a bigger role in the business or being empowered but continued to make the same decisions he had always made and lead the way he had always led, his company would not have grown.
“There are signals and indicators that employees read,” Roeslein says. “You say certain things. But it’s eventually what you do. What we did was we engaged them in a concept that signaled that we believed there was a future.”
That engagement was made with his six directors but also with every employee who had concerns about the company’s future during those dark days.
“Why would I have them working on all these improvements, cost reductions and things that work toward the future?” Roeslein says. “What I really focused on was let’s build and work toward the future. The future is confident, as far as I’m concerned. Why would I risk every penny that I have and everything I’ve worked for if I didn’t believe in it?
“That resonated with my employees and certainly with six out of eight managers.”
It resonated even more with those six directors when Roeslein rewarded their hard work and effort in getting the company turned around.
“These guys are going to sacrifice a tremendous amount of their lives to this company,” Roeslein says. “I told them a portion of their bonus each year could be applied toward ownership of the business. You’ve already made a huge sacrifice taking a 30 percent pay cut for two years to keep our business alive. Here’s your reward.”
The directors took advantage of the offer, buying out Roeslein’s partner and eventually reducing Roeslein’s share of the business from 75 percent to 51 percent.
“I don’t want to sell this business to outsiders,” Roeslein says.
Build for the future
Just as Roeslein mentored his six directors, he expected them to do the same for another group of leaders.
“If we want to grow the business to the next level, each of you needs to mentor six people,” Roeslein says of his message to his six directors. “That is the next step in the evolution of this company. You mentor six people, and you get the same level of confidence in them that I have in you.”
You’ve got to approach your business as though it were a team and you all make contributions to that team or you’re going to run into problems.
“It’s easy to be a really good guy and smile when things are great,” Roeslein says. “But when things are really bad, that’s when you find out your own character and your own ethos.”
So when failure occurs, approach it with the perspective of how the team can improve instead of focusing on the person who screwed up.
“Every leader needs to put their employees in a situation where they can succeed,” Roeslein says. “When they fail, they need to recognize they are part of the failure. You can’t have your people be so concerned about, ‘What are we going to do if we fail?’”
Roeslein says running a business is a lot like the whitewater rafting he used to do in Colorado and Utah.
“You’re just slowly going down the river and the sun is shining and you relax and your mind wanders,” Roeslein says. “Then, all of a sudden, you hit those rapids and those giant holes, and it scares the hell out of you. You wonder if you’re even going to make it through. It’s how you perform and how you treat everyone during those periods that really forms your character.”
How to reach: Roeslein & Associates Inc.,
(314) 729-0055 or www.roeslein.com
The Roeslein File
founder and CEO
Roeslein & Associates Inc.
Born: Salzburg, Austria. I was born in 1948 and came to the United States in 1956. I remember seeing the Statue of Liberty. One of my most lasting impressions was the train ride to St. Louis with my face plastered against the window looking out at the countryside. I didn’t speak a word of English.
Education: Bachelor’s degree in electrical engineering, Saint Louis University.
How did your childhood shape you? All of us had this work ethic where we believed no one was going to take care of us. We had to take care of ourselves. Kids can be cruel. Me and two of my German friends, instead of the three Amigos, we were the three little Nazis. So we went through some tough periods.
But I think the great equalizer for me was always sports. I started playing soccer at an early age and when you’re very good at something, kids accept that you’re good at that and a lot of that other stuff goes away.
Did the tough times then help you deal with them better now? I didn’t look at it as leaving long scars. Did it toughen me up and make me more able to take ups and downs in life? I think so. But I’ve never looked back and said, ‘Gee, those kids that held me down and tried to carve a swastika in my forehead were bad kids.’ It was just a sign of the times. Things were going on and you just fought your way through it and just keep on going.
Who has been the most influential person on who you are? My father. He’s the example of a completely selfless person. His whole life was focused around us.
Let people put use their talents.
Mentor leaders through growing pains.
Reward employees who help you meet goals.
It was a tough decision for Lizanne Falsetto, one that had the potential to go badly whichever way she decided to turn.
On one hand, she could continue selling the popular thinkFruit bar and risk confusing other customers who latched onto thinkThin as a company that makes snack bars that are low in sugar and high in nutrition.
Or she could drop the fruit bar, which had more sugar than Falsetto wanted in her products, and make a statement about thinkThin’s commitment to its brand name. She just had to hope that customers would appreciate the commitment more than they would mourn the loss of a popular product.
“It was very hard to explain the future of the vision because everyone just saw the numbers,” says Falsetto, who founded thinkThin in 2000. “Even the board saw the numbers. But I was adamant that this was about future growth. This was where the brand needed to be for the future to communicate one simple message that thinkThin is the weight wellness brand.”
Falsetto ultimately decided to drop the thinkFruit brand and hope that her customers would understand. Three years later, the 300-employee company seems to be doing OK without it.
The company is ranked No. 4 out of 119 national competitors in its segment, according to SPINS, a market research and consulting firm for the natural products industry.
The key to maintaining success will be Falsetto’s ability to keep her finger on the pulse of her customers and remain proactive about what they want from her brand.
“It’s about leveraging industry trends and really watching what’s happening and seeing the future before it gets there so you can be ahead of the curve,” Falsetto says. “Those are probably the two biggest parts of leadership.”
Here’s a look at how Falsetto makes tough decisions and grooms her people to meet their full potential to help thinkThin keep growing.
Let people do their jobs
Falsetto was confident in her decision to drop the thinkFruit brand. But she didn’t approach the decision-making process with her leadership team exhibiting an attitude of “I’m the boss and this is what we’re going to do.”
“I let the team, the executives that run their departments, speak for their department,” Falsetto says. “If I can’t rely on them to do that, then I don’t have the right people. I can’t be everywhere all the time. If I can’t open up the trust and let them see that I believe in what they are doing, then I’m not doing a very good job.”
So if there’s going to be a presentation on marketing, it’s the VP of marketing who leads the talk — the same thing with operations or any other department in the company.
The meetings are a visible demonstration of Falsetto’s philosophy to empower her people to do what she’s hired them to do and to take advantage of the unique expertise they possess.
She recalls an analogy her father once made about a business being similar to a basketball team.
“He would say to me, ‘You know, you have the two guards, the two players underneath and the center, and you look at that team and say everybody has to touch that ball to get it in the net,’” Falsetto says. “It’s very similar to business to me. I kind of look at building a team with individual skills, and I’ve gotten much better at finding what the skills are for the moment and what the brand needs.”
She says the key thing to think about with this analogy is that not everybody has to be able to shoot from the outside, have a good inside game and play great defense. If you take advantage of the skills each person brings to your business, and you’ve done a good job trying to fill your needs, you have an effective team.
“You don’t need to have everybody understand everything,” Falsetto says. “They need to have a passion in what they understand and what they bring to the table. That’s really important.
“A marketing head might not completely understand what’s going on in the financial world and doesn’t understand the details of accounting. But accounting really doesn’t understand marketing. They just know the numbers behind it. But together, there’s a passion.”
You get people who love what they do and you let them do it to the best of their ability, and then you do what you do best. You be the leader who brings it all together.
“If I see there is something that needs to be sewn in between the departments, then I will definitely bring it to the table,” Falsetto says. “How does that operations decision reflect on the sales side? Obviously, we’re all intertwined. It’s my job to make sure we’re all seeing the connection to that big pie. It needs to be one vision, but together, they all have a different piece of that vision to get there.”
When you operate that way and you have a tough decision to make, you can feel more confident in your ability to work through it because you know that you’ve got the best information at hand to help you make the right decision.
“When you surround yourself with really wise people, you are wiser and you make smarter moves,” Falsetto says.
Enhance your talent
The search for talent begins when you look beyond the slot you need to fill in your organization and think about what skills a person could bring to your business — and you talk to them about it and make them feel like an important part of the whole operation.
“People want to work for a company that has a purpose,” Falsetto says. “Every person around the table that works with you, if they feel like they have a stake in it, if they own it like you do, it becomes easier to communicate on that basis. They are in. It’s really important to empower them around you so that you can put your ego in check yourself.”
Falsetto regularly speaks with her employees about their own futures and what they can do collectively to make that future better, both for the business and the individuals.
“I have different tiers of goals for employees, and when I keep bringing them back to those tiers of goals, it puts it in perspective,” Falsetto says. “Did we successfully do this? Can we go back and look at this again? It’s organizing the goals per employee and making sure you come back to touch on those with them. It’s when you don’t communicate with employees that they start to wonder.”
Alignment is obviously crucial when it comes to personal and business goals. If the personal goals don’t match up with the goals of the business, then you’re not going to accomplish a lot. So you take the time to get updates and make sure everybody is on the same page and you don’t worry if you have to make course corrections along the way.
“ThinkThin is going to own the weight wellness sector. That is my goal,” Falsetto says. “What falls underneath that vision could change depending on what is happening.
“It could slightly tier to the left or the right, but yet the main vision is still there. It might be communicated differently. It might look a little different when you get there because of the roadblocks you must conquer to achieve the true vision of what you’re doing. But it’s ultimately having the steps of the goals to get to the topline vision.”
Don’t be afraid to let go
As the company founder and CEO, Falsetto spends a lot of time thinking about what she can do next to keep her business growing.
“What else can I make?” Falsetto says. “What other kind of flavor bar would people want? What’s unique? So that’s always something that I think you become better and better at. I think it’s surrounding yourself with people who are in the industry, knowing your customers and keeping hold of your vision.”
Falsetto knows what her place is in the company, but she has to rely on those conversations and relationships with her people to know where they stand. And there comes a time with some people where they just can’t grow anymore with you.
“Like they say, you only have your personal assistant in that chair for three years and then you move them to a new position,” Falsetto says. “You always want to rotate certain positions to be able to have them strive to be either better within themselves or bring some new depth to that position.
“When an employee feels that they can’t grow any more within the company, it’s better that I don’t find a place for them. I let them grow on their own. When you maneuver your business around that individual, you disrupt everything.”
Certainly when someone leaves who you’ve grown attached to, it can be emotional. But it helps to view it as a positive event. You helped this person grow and now they are taking what they have learned and applying it to continue growing.
If you’re constantly focused on bringing new talent in and helping existing talent thrive, your business will benefit from your efforts.
“You just strive to be better and better at it,” Falsetto says.
How to reach: thinkThin, (866) 988-4465 or www.thinkproducts.com
The Falsetto File
founder and CEO
Education: I’m a high school graduate. I was a basketball player, and I had a college scholarship offer. I had an option to go to a community college orSeattleUniversityand play basketball. I turned it down because I had a modeling contract on the table, and I decided I would rather travel the world.
What was the biggest takeaway from your modeling career? I didn’t do modeling to be famous because I knew I never would be famous. It was about making the money, it was about traveling and it was about the culture of where I was at. All of that really taught me the vision of looking ahead and thinking about where I want to be.
Who has been the biggest influence on you? My father has been the biggest influence on me. He is no longer with us as it’s been eight years since he passed. But he said many things that were very wise. My dad said, ‘You need to follow your dreams. When you follow your dreams, you will be successful.’ The other thing he said to me was if you ever lose those butterflies before a board meeting or before anything you’re doing, you have to stop and think about what you’re doing because you’ve lost the passion. Those things are so vivid in my head.
What one person past or present would you like the opportunity to talk to? I was thinking Margaret Thatcher. I just am in awe of her and think she’s a brilliant woman, very strong and statuesque. She really held true to what she believed in. But Lady Diana would be the other. The challenges that she was thrown into were not a choice.
Don’t get too locked in on the numbers.
Let your people use their talents.
Don’t shake up your team to keep someone.
Stacy R. Janiak was not thinking about becoming managing partner of the Chicago office at Deloitte & Touche LLP when she joined the accounting firm in 1992.
The graduate of DePaul University just wanted to do her job and make a good impression on the people who had hired her. But it was an impression left on her by a mentor who she had just come to know who shaped both her future and that of the firm in the years ahead.
“Within a month of my joining the firm, a woman who I held in high regard who was a manager at the firm turned in her resignation and said she was going back to school to get an advanced degree,” Janiak says. “She confided in me and said she just felt like she wasn’t sure she could do what needed to be done to make partner.”
Janiak had arrived at Deloitte at a significant point in the firm’s history. Leadership had become aware that the employee turnover rate was significantly higher for women than it was for men, and it had them concerned.
“There was a perception that women were leaving to just go home and have babies,” Janiak says. “Finally, there was a question that then CEO Mike Cook laid out. He said, ‘Do we really know that?’”
A study was commissioned, and it was discovered that many women who left fit the description of Janiak’s mentor, who just felt there wasn’t an opportunity to grow and advance in the organization.
“They were going to work at other places they found more amenable to their personal goals and work goals,” Janiak says.
Deloitte leadership wanted to change that. The Initiative for the Retention and Advancement of Women was created to help ensure more opportunities for women, but it was more than that. It was launched with the idea of bringing more diversity and inclusion into every aspect of the way Deloitte did business.
“Each business is being impacted by the changing marketplace, by the changing consumer and by the changing demographics of the population, wherever they are selling their wares or services into,” Janiak says.
“Do you really understand how all of these factors are influencing your ultimate business? Isn’t it logical, given the changing nature of all of those factors, to have some of that change represented in the people who are working in your organization so you can better react to them and better position your products and services for the consumers of the future?”
The move to make inclusion and diversity a priority put Deloitte in a strong position to help many who were poised to lose their jobs at the former Arthur Andersen LLP in 2002.
“We distinguished ourselves on a number of fronts, but that was one of them as people looked at where they might extend their career in that particular situation,” says Janiak, who became managing partner of the Chicago office in September 2011. She is also the central region managing partner for audit and enterprise risk services.
In these turbulent times, when fortunes can change overnight, Janiak says Deloitte’s ongoing pursuit of diversity is more than just a feel-good story for the firm and its 3,800 employees. It’s a vital part of being successful company.
Focus on relationships
One of the biggest initial drivers that led Deloitte to get focused on being more diverse and inclusive was the money invested and talent that for years had been allowed to just walk out the door.
“We’re investing all these funds in very talented individuals who are walking out the door and, oh by the way, those individuals bring different and unique skill sets to us as a group that help us relate better and perform better with our clients,” Janiak says. “So why shouldn’t we address this?”
As Deloitte looked at its company and the way it did business, leaders realized that they were missing a crucial point of perspective in the way they operated the firm.
“Twenty years ago, I think you could have asked a group of partners at Deloitte, why should we focus on the women who are leaving?” Janiak says. “They are leaving. Let’s focus on the women who are staying.
“But now you really are missing something by not having a group of people at the table that is reflective of your buyers or the purchasers of your products and services. Force the conversation to what ways you might increase your internal diversity to have those ideas around the table.”
Each industry is different, but whatever business you’re involved in, communication and relationships are going to play a critical role in whether you succeed or fail. The easier it is to find common ground with your customers or potential customers, the better off you’re going to be.
And as you provide a more diverse front for your customers, you create more opportunities for your people at the same time and give them a reason to stay and grow in your organization, which helps you grow too. It becomes cyclical.
“If I take Deloitte as an example, one of the big pieces of data we looked at was how much we were investing in all our people to prepare them and train them and how much we could achieve from a revenue perspective if we were able to retain some of those individuals one, two, three or four years longer than we were at the time,” Janiak says.
“How did that change our overall organization by enhancing the level of experience before they chose to go pursue a different alternative career path?”
Janiak speculates that had Deloitte not changed, she probably wouldn’t be in the position she is in today. But she adds that it’s not solely about creating opportunities for women like her. It’s about adapting and positioning your company to succeed in a constantly changing environment.
“I don’t know if I would have stayed in an environment that was not inclusive and as flexible as it is,” Janiak says. “And I think given how the world has changed, you could probably say that about a lot of the men too. There are just as many men who struggle with family and just management of all these competing priorities. I think we’d look a lot different. I don’t think we’d be as successful, and I don’t think we’d have as much fun as we’re having.”
Set the tone
If you want to promote a culture in which everyone plays an important part in your company’s success, you’ve got to make it a personal priority to instill that culture.
“A big mistake would be making it a program versus being able to describe the business imperative,” Janiak says. “Describe why it is valuable to the organization and demonstrate that. How are you developing people on your own teams that you have responsibility for?
“It’s critical that the tone is set at the top and that leaders are held accountable for their progress. It’s important that it is on the agenda of the CEO. If you relegate it as a program and have it be several layers removed from the CEO, that could be a big mistake.”
Talk about the tangible reasons why it’s important that employees and leaders consider diversity in everything that they do.
“Our potential clients are asking, before awarding significant project work, what is your commitment to diversity and how do you demonstrate that?” Janiak says. “If we don’t have a compelling track record and story to tell, we’re not in the mix. Clients who are committed to it and see it as a core value want to be working with an organization that also shares that core value, and so it’s a competitive advantage.”
You’ve got to find a way to integrate it into your culture as a way of doing business, rather than something you’re going to try for a little while before you return to what you did before.
“It’s a strategy,” Janiak says. “Whether you’re including it as part of your talent strategy, your human resources strategy, your sales strategy, there are different ways to look at it and however your organization responds to strategic direction and execution of that strategy, that’s how you should say it. It should be similar to other core strategies that you disseminate through your organization.”
Janiak says she takes her role very seriously as a role model and figurehead for anything she tries to do at Deloitte.
“I view it as one of my roles is to make sure I’m present at the various functions of our business resource groups, which represent all kinds of different folks within our organization,” Janiak says. “It’s important that I hold myself accountable to having diversity on the teams that I’m responsible for — because people look at that and they say, ‘OK, not only does she say this is important for us to do, but she’s doing it and demonstrating support.’ People pay more attention to what you do than what you say.”
- Think about what customers expect to see.
- Be out front and visible when big changes.
- Don’t spare the legwork on strategies that may take time to mature.
The Janiak File
Name: Stacy R. Janiak
Title: Managing partner for Chicago office
Company: Deloitte & Touche LLP
Born: Aurora, Colo. It’s right outside of Denver at a U.S. Air Force Base. My dad was a mechanic in the Air Force.
Education: Bachelor of science degree, commerce, DePaul University, Chicago
What was your very first job and what did you learn? The very first job I got paid for was babysitting. I babysat twice a week for the people across the street and earned $1 an hour to feed them dinner, bathe them and get them to bed. That was a pretty good deal.
It was just the concept of going out and having people trust you with some authority at a young age.
Even though it was across the street and you had your parents as the backup, you were in charge. People had expectations. I was going to feed the kids and wash the dishes and they trusted me to do that and expected me to do that.
Who has been the biggest influence on who you are today? My mom. Her name was Rose. She was born in the early 1950s and contracted polio when she was 11 months old. To hear her describe it, it was almost like having AIDS back when people didn’t understand it. You were just ostracized.
She was told she would never walk without braces and she kind of made up her mind that she would not have that be. She is a very resourceful woman that was not given a great lot in life physically. She has made up for that in many ways. She’s the reason I believe there is always a solution and there is a way to get people to it.
Learn more about Deloitte LLP at:
How to reach: Deloitte LLP, (312) 486-1000 or www.deloitte.com
If you ask Doug Taylor what it’s like putting on a fireworks show, he would tell you that it’s like taking the Rolling Stones on tour. There are potentially hundreds of people involved in the background and a single show can require five or six tractor trailers, a few straight trucks and more than a week to set up, using 15 to 20 people a day.
“This should all be background for our customers,” says Taylor, president and CEO of Zambelli Fireworks. “All we want our customers and the spectators to see is 15 to 20 minutes of a fantastic display, just like the Rolling Stones really only want their spectators to see them up on stage for that hour-and-a-half concert.”
Zambelli Fireworks is one of the best-known names in the fireworks industry. The company employs 50 people year-round, increasing its employment to roughly 1,500 people around the Fourth of July. Zambelli launches 2,300 firework shows across 32 states each year with nearly 600 of them being around Independence Day.
The company puts on shows for municipalities, Major League and Minor League Baseball, the NFL, MLS, professional lacrosse, amusement parks, festivals, weddings and private parties. Productions can range in cost from $3,500 to more than $500,000.
“Our company has one of the best names in the industry,” Taylor says. “We have that, but if we don’t keep working on that every day, we’re not going to have it at some point. We have to continue to earn our reputation and that level of trust with our customers.”
That reputation, the ability to put on a fantastic show and customer service focus has been challenged recently due to three major issues that have put added pressure on Zambelli. The company has had to overcome delivery disruptions from China, the challenge of the U.S. economy, the impact of increasing raw material costs and labor problems in the Chinese market, which is the source of 95 percent of the product in the U.S.
“With those combinations we’ve seen product costs go up somewhere in the range of 45 percent in the last five years,” Taylor says.
Here is how Taylor continues to put on a great show by dealing with unexpected challenges through close relationships with vendors and customers.
Expect the unexpected
There are about 14,000 fireworks shows shot on the Fourth of July in the U.S. every year. So in 2008 when China shut down two of the four ports from where fireworks are shipped, it created a 25 to 30 percent decrease in the capacity of delivery.
“An awful lot of companies didn’t get deliveries that year and there were a significant number of shows that did not end up being shot,” Taylor says. “We ended up getting most of our deliveries that year, and with a large inventory, we survived it.”
Typically, smaller companies get in a couple of containers of product each year. They use up 90 percent of it and then order more for next year. Zambelli tends to carry over a year’s worth of inventory each year.
“That way we have a lot more cushion than smaller companies can afford to have,” he says. “That certainly helps us in a time like 2008 where the shipping was such a problem, but it doesn’t mean we had the exact inventory we wanted.”
With China controlling 95 percent of the fireworks used around the world, there really wasn’t a good alternative for Zambelli to get product from.
“You can get product out of Europe from Spain and Italy, which is extraordinary product, but it’s three to five times as expensive as what you get out of China,” Taylor says. “So that’s not a good solution. We did go out and find some pockets of product because we moved very early.
“Ultimately, we had to design our shows differently based on the product that we had available within our existing inventory.”
To help combat the issue of product availability, Zambelli put a focus on communicating with its producers in China.
“We worked for years to make sure we treated our vendors as partners and that they treated us the same way,” he says. “Because of that relationship, we began to hear early that there were going to be problems. Vendor relationships are very important — making them a partner versus just a vendor.”
Aside from problems abroad in China, Zambelli faced challenges here at home due to the poor economy. A number of the company’s customers had to rethink whether they could do a fireworks show similar to what they had done in previous years or at all.
“We saw a number of cities that had to decide where they were going to spend their money,” Taylor says.
One city in Ohio was in a position where it had to lay off more than 50 employees and as much as the leaders wanted to have a fireworks show, it was politically inappropriate to lay off staff and then spend $20,000 on a fireworks show.
“We had some communities that canceled their fireworks and a number of communities that reduced the size of their fireworks,” he says.
Zambelli has been shooting shows for some customers for more than 30 years. Maintaining those kinds of customers goes back to having a good relationship.
“We didn’t want them to begin to think about talking to somebody else, because there is always a competitor that will do it cheaper,” he says. “We worked with them and gave them as good a deal as we could possibly give them. These were customers that we had for a long time, and that’s the kind of relationships that we like to maintain.”
One of the other interesting changes that occurred during this time was that if a city couldn’t afford to pay for a show anymore, it found an outside group to take it on. Zambelli has begun helping customers find ways to afford a fireworks show if they don’t have the funds necessary.
“That’s a new role for our company and for firework companies in general,” he says. “We’re working with certain larger corporations and trying to find places where they feel it would be a good investment for their brand to go in and support a community. We’ve had to change our marketing role to where we are marketing more directly to sponsors.”
The solution to this problem again comes back to building relationships and forming partnerships.
“If you look at the crux of what a true partnership is, there are going to be ups and downs,” Taylor says. “The sooner that you can anticipate what’s going to happen, the better positioned you are to adjust to it. You have to have an open line of communication with a customer or partner.
“Keeping those lines of communication open allow you to be aware of any issues. Having that communication … helps make sure we are hearing what’s important to them.”
Improve your relationships
Due to the issues with product delivery, the economy in the U.S., the challenges of increased costs of raw materials and labor problems in China, Zambelli’s ties to its vendors and customers have had to be stronger than ever.
“Many of our customers make a decision through a purchasing agent, and they’re trained to find the best deal,” Taylor says. “The easiest way for them to find the best deal is if they said, ‘We have a $10,000 budget.’ If one company offered them 900 shells and another company offered them 925 shells, they’re going to the 925-shell company, even though they don’t fully understand how that count was come by.”
That’s one point where Zambelli will work with its customers to explain it is offering a complete event, not just a number of shells.
“We’re selling the level of trust you can have in Zambelli Fireworks because of what we’ve done for years and what we’ve done for you as a customer,” Taylor says. “We’re selling you some of the highest quality product out there. We’re selling you a safety record, which is as good as anybody’s. We’re selling an entire package. We’re not selling a count of fireworks on a page.”
This level of selling has been somewhat of a transition for the Zambelli sales force, because not only has it become more competitive over the last five years, but the Zambelli sales team has had to learn to sell a turnkey package and not let people make decisions based purely on a shell count.
“It’s been an education process to not only educate our salespeople, but for them to turn around and educate our customers so they can make better decisions,” he says. “The more understanding customers have about each decision they make and why those decisions are important, the more likely they are to hire us.
“We have to develop a level of trust with our customers that they know we’re going to deliver that fantastic show. We’re focused on maintaining and improving a high level of service to our customers and maintaining our reputation.”
How to reach: Zambelli Fireworks, (800) 245-0397 or www.zambellifireworks.com
Be prepared for unexpected challenges.
Form strong partnerships with your vendors.
Find ways to improve relationships with customers.
The Taylor File
President and CEO
Born: Port Arthur, Texas
Education: Attended North Carolina State University where he received a BS degree in science education and in zoology. He also received a MBA from Indiana University in Bloomington.
What was your very first job? What did that experience teach you?
The first job I had where I was working for someone else was mowing lawns at the age of 12 or 13. The first job I viewed as a real job was working in high school at a hardware store. What I learned there more than anything was the value of customer service.
When did you get into fireworks?
The first idea I ever envisioned of being involved with a fireworks company was in early 2007. I started work as the president and CEO of Zambelli in late May 2007.
What do you like most about fireworks?
It’s a fascinating industry, and it’s related to what I said about taking the Rolling Stones on the road. It is the entertainment business and although there are all kinds of technical and regulatory issues we deal with, at the end of the day if the spectators and the customer are happy with the result, then we entertained them.
Do you have a favorite Zambelli show?
At the Kentucky Derby Festival, we have two sets of barges that are each 600 feet long in the river and in the middle is a bridge that we shoot off of 3,200 feet of bridge. We’re able to fill the sky where people miles up and down the river are watching the show. The magnitude of that is incredibly impressive. On one side it’s the emotion and importance of the event to the community, and the other end is just the artistry and magnitude of what can be done.
What is the best business advice you’ve ever received?
My father taught me that the thing that you can’t give up is that level of trust that people have to have in you.
When Terry Lundgren was first approached by Macy’s in 1993, the retail company was bankrupt. Lundgren, who was chairman and CEO of Neiman Marcus at the time, was asked to come to New York to help turn around the company.
However, Lundgren had little interest in joining an insolvent company, especially since he had a good thing going at Neiman Marcus in Dallas.
With Lundgren’s ties to Neiman Marcus and his previous ties to Federated Department Stores as a former president and CEO of Bullocks Wilshire, executives at Federated persuaded Lundgren to come back with the idea of buying Macy’s.
“I thought that sounded pretty interesting, because I saw the synergy and the idea of the Macy’s brand being spread through the Federated stores,” Lundgren says. “It took six months to convince me, and then six months after that, we bought Macy’s.”
Today, Lundgren has built Macy’s Inc. into one of the biggest and strongest department stores in the country. The retail giant accounts for a third or more of the business for the brands that Macy’s is associated with. However, if you rewind just seven years, Macy’s wasn’t even big enough to advertise during its own Thanksgiving Day Parade.
“The No. 3 most-watched television program in America is the Macy’s Thanksgiving Day Parade after the Super Bowl and the Academy Awards,” says Lundgren, Macy’s chairman, president and CEO. “Fifty-eight million people watch the Macy’s Thanksgiving Day Parade every year. It was a spectacular event, and I couldn’t advertise on it, because we weren’t national.”
Lundgren watched the telecast as advertisements from Target Brands Inc. and JCPenney Co. Inc. aired on the parade, but none from Macy’s.
“I said, ‘We’ve got to fix this. We’ve got to think about how we get that Macy’s brand out there,’” Lundgren says.
Through well-planned and well-timed acquisitions and a strategy that brought Macy’s closer to its customers, Lundgren began to turn Macy’s into a force to be reckoned with, and the goal of advertising on the company’s own parade was beginning to look like reality.
“We had a lot of interesting turns in our industry and our company that really represent a lot of what happened in the industry over the last several years,” he says.
In October 2012, Lundgren spoke at an ACG Cincinnati luncheon event about the journey he and Macy’s has been on and what it took to build Macy’s into the powerhouse it has become.
After Federated Department Stores bought Macy’s in 1994, Lundgren became the president in 1997 and then the CEO in 2003. At that point, Macy’s was a $14 billion company with multiple brands and 250 stores.
Lundgren began to test the waters of expanding the Macy’s brand by combining it with other Federated stores.
“Business didn’t go up and it didn’t go down; it just became a non-event,” he says. “It surprised most of us, but we knew it wasn’t a negative.”
During the time of this testing, a prized department store came up for sale — Marshall Field’s in Chicago. Marshall Field’s had a stranglehold on the Chicago market and was powerful in the Minneapolis and Detroit markets as well.
“Those were three markets where we didn’t have any representation,” Lundgren says. “This was a natural opportunity for us to fill in the geography and have key stores in these very important markets.”
Lundgren negotiated to buy Marshall Field’s against one of his largest competitors at the time, The May Co., which was also looking to go national. Lundgren felt confident he had submitted a bid that was in the ballpark, but May Co. ended up offering several hundred million dollars beyond what Marshall Field’s was worth.
Although Macy’s lost to May Co. for the Marshall Field’s stores, Lundgren didn’t lose sleep, because he knew that it would have been wrong to overpay for the stores. He had seen that scenario before.
“We walked away, and that was probably the best decision that the board and my team made because everything changed and the credibility that I developed with my board from that point forward was a game-changer, because I had been CEO only for a year,” he says. “That process turned out to be really positive for all of us.”
One year later, in 2005, The May Co. was in trouble — it had paid too much for Marshall Field’s. The board fired its CEO and Lundgren went in to talk with May Co.’s lead director.
“We did a deal and got great talent merged in with our company,” Lundgren says. “Still today, some of my top leaders are from that May Co. acquisition. It was all good timing, and of course, we got Marshall Field’s through that.”
Now Lundgren had to make sure the company saved some money. It went from 11 operating divisions down to seven, taking out $1 billion of operating expense.
It sold Lord & Taylor for $1.2 billion, which May Co. owned, but was not consistent with what it was trying to do. David’s Bridal business was sold for $800 million. It closed or sold 80 department stores that overlapped and sold the credit card business to Citi Group for about $5 billion.
“That was a very big deal — this now was paying for the acquisition in a very significant way,” Lundgren says. “We were quickly getting our balance sheet in order as we were moving forward with these changes.”
Part of those changes was spending a year researching whether they could change the store names to the Macy’s brand.
“What would that feel like?” he says. “If you asked somebody, ‘Would you like to change the name from your favorite store called Lazarus or not?’ They’re going to say, ‘No, don’t touch my store.’ But if you just do it and you treat the store right and treat the people right and put in the right merchandise, people will generally respond to that, and that’s what happened.”
When it came time to make the national announcement that the department stores would take on the Macy’s name, Lundgren went to Chicago to announce it.
“In one day, we changed 400 department stores to the Macy’s brand,” he says. “We went from 250 stores in 2004 to 800 in a two-year time frame. We finally were a national organization and could advertise on the Macy’s Thanksgiving Day Parade for the first time in 2006.”
With Macy’s becoming a national brand, Federated decided it needed to align with its new direction. In 2007, Federated Department Stores became Macy’s Inc.
“Eight hundred of our 836 stores were called Macy’s and 36 were called Bloomingdale’s,” Lundgren says. “Calling the company Macy’s Inc. made more sense when people were thinking about who to invest in.”
Get close to the customer
Following the name change, Macy’s was on the move. However, the financial collapse in 2008 caused customers to cut down on shopping.
“They literally put their credit cards away and stopped shopping,” Lundgren says. “We knew we had to do something, and I wanted to do something anyway, but this was a really good time for change.”
Macy’s got rid of three operating divisions in the Midwest from seven and replaced them with a new idea.
“The idea of having a division that’s based in Cincinnati, Atlanta or San Francisco was to be closer to the customer,” Lundgren says. “The problem was we had gotten so big now that each division was looking after 100 or 200 stores, and they were in three, four or five states. They weren’t close to the customer. We had lost that connection.”
Macy’s took the three divisions that it eliminated and replaced them with 20 small satellite groups called districts. The districts had approximately 20 people acting as merchants and planners in each of these areas that would supervise 10 to 11 stores.
“They are in these stores every day, they are talking to our customers and sales associates and they are guiding us for what we should buy for Cincinnati or Columbus, Ohio, or Detroit and Chicago,” he says. “They are the ones who are influencing size, color, types of fabric and the brands that we need to carry.”
Becoming more in tune with the local communities forced Macy’s to do a lot of communication.
“It’s a missed point by a lot of big companies,” he says. “Lots of face time with me and my executive team is important. People want to follow your lead. They want to do what you want them to do, but you have to be clear and consistent.
“You can’t have a list of 28 things. You have to be clear, simple, direct, and you’ve got to say it over and over and over again. If you do that, people will respond.”
Having that local focus made all the difference in the world. It worked so well that even in 2009, when the recession was still clearly under way, those stores were outperforming the rest of the country because of the responsiveness to the local city.
“It didn’t take long for us to say, ‘We’re going all the way,’” Lundgren says. “We eliminated the other divisions and replaced them with 69 of these district teams around the country and had one buying office.”
Creating one buyer in New York City for all of Macy’s rather than the previous seven was a crucial move.
“Most of our suppliers are right up the street on Seventh Avenue in New York City,” he says. “One buyer goes to the Ralph Lauren showroom and says, ‘I’m ready to place my order.’ And they are standing at attention because instead of one of seven buyers, they better hope we like the line, because we’re a third of their business.
“We’re a third or 40 percent of everybody else’s business — Estee Lauder, Coach, you name it — Macy’s is the largest customer for almost everyone that we do business with.”
That consolidation has turned Macy’s into the only store you can buy certain brands because of the power it has with the one purchase mentality.
“The combination of that with the localization of the stores has really made all the difference in the world,” he says. “That was all rolled out in 2009.”
Macy’s executed on that strategy in 2010 and had one of the best years in the history of the company.
“We picked up more than $1 billion in same-store sales that year,” Lundgren says. “The year 2011 was significantly better than 2010. We picked up another $1.2 billion in same store sales. In 2012, we are off to a great start.”
Macy’s Inc. had fiscal 2011 sales of $26.4 billion across its more than 800 Macy’s department stores, 37 Bloomingdale’s stores, seven Bloomingdale’s Outlet stores, bloomingdales.com and macys.com. The company employs 175,000 people.
“I really relate it to that structure — the name change and allowing us to have a national presence but to act locally, and then the strategy, which we have executed the last couple of years,” Lundgren says.
- Look for the opportunities to build your business.
- Make strategic moves that position your company for growth.
- Understand what makes your business more effective for customers.
How to reach: Macy’s Inc., (513) 579-7000 or www.macys.com
Having employees who tolerate stupidity is literally Phil Libin’s worst nightmare.
“I’ll wake up from a dream in which somewhere, someone at Evernote is working on something right now and they don’t understand why they are doing it — they think it’s stupid. ‘It doesn’t make any sense. It’s dumb. I’m just doing it because somebody told me,’” says Libin, CEO of Evernote Corp., the company responsible for popular Evernote and Skitch applications.
“As soon as you have someone who is doing some work and they don’t understand why they are doing it, then you’re not a start-up anymore. You’re something worse.”
Considering the noteworthy changes that Evernote has gone through over the last two years, it’s no surprise that culture is ingrained in Libin’s mind. Since launching the Evernote product public in 2008, Evernote’s apps have gained fast traction with users who rely on them to organize personal data and information on mobile devices and platforms.
Since 2010, the company has tripled revenue annually while increasing head count from 30 to 250 employees. It also plans to reach a level of 500 employees by the end of 2013.
Taking notes yet?
While Evernote’s success is undeniable, Libin’s permanent challenge is creating what he calls a “100-year start-up” — i.e., maintaining the entrepreneurial culture that makes Evernote great while continuing to grow.
“I want everyone at Evernote, no matter how big we get, to understand why it is that they’re doing something and to see the impact of their work,” Libin says. “If we can maintain that, then we have a good shot of scaling the company in the future.”
Here’s how Libin keeps the entrepreneurial spirit alive at Evernote.
Like many Silicon Valley companies, Evernote offers employees a number of unique perks, including unlimited vacation time and catered lunches. Yet Libin knows enhancing employee productivity isn’t just about add-ons; it’s about removing the obstacles that inhibit people’s success.
“All of our benefits and our office life are structured around this idea that people who are here want to do excellent work, and it’s our job to eliminate any obstacles that get in the way of that,” Libin says. “Whenever we find things that impede people’s natural desire to be productive, we ask if we can eliminate that.”
Libin and his leadership team actively look for ways to make people’s jobs easier on a day-to-day basis, especially when it involves enhancing productivity. It’s why Libin played an active role in designing the company’s new 90,000-square-foot Redwood City, Calif. headquarters, which employees moved into last summer to incorporate features that improve workflow, such as an open work plan to facilitate open communication.
“It’s the first time that we’ve been in a space that we’ve actually designed,” Libin says. “Our previous two offices have been little start-up things — whatever we could afford at the time. This is the first time we’ve had a chance to think about our surroundings a little bit.
“There are a lot of small things. A lot of times you need something from IT. You need a power cord or an adapter or a keyboard or a mouse or a network cable … so you have to track down an IT person and ask them for it, and then they go into the supply closet and get it. Now you’ve tied up two people: the person who wants it and the IT person. It’s a small waste of time, but it’s a waste of time.”
Evernote solved this problem by stocking a vending machine in the cafeteria full of equipment such as headsets, power cords, mics and keyboards, which employees can freely access by swiping a card.
“You decide when you want something, you can go down and get it, but now it takes one person two minutes to do what two people took 20 minutes to do,” Libin says. “So there’s a lot of stuff like that, where it’s something that’s not a huge thing in itself, but it adds up.”
Ideas to improve a culture don’t need to be radical to make an impact on productivity. Removing a small obstacle can actually have huge benefits, especially if it affects a lot of people.
For example, Evernote’s open work plan makes talking on the phone the biggest source of noise for employees throughout the office. So instead of having everyone work around that, Libin and his team decided to do away with desk phones entirely. If someone needs to make a call, they are encouraged to use one of the company’s numerous conference rooms or meeting spaces.
“We find an obstacle and we try to get rid of it,” Libin says. “You can find 100 things like this and it adds up to a culture where people feel like they are trusted and respected. We don’t have to explain to people that you’re only allowed to take one mouse every six months. We don’t have a policy. Take as many as you want.”
Bring on the best
Evernote isn’t Libin’s first time leading a start-up business. Before founding the company in 2007, his career as a successful engineer led him to serve as president and CEO of the software companies Corestreet Ltd. and Engine 5, respectively. In both cases, Libin found that his programming background played a direct role in his leadership style — and not in a good way.
“At my first company, I had this weird idea about people who work for me,” he says. “I thought, well, I can do their job better than they can, but I’m too important. I don’t have enough time.
“So I’d walk around and look at some programmer writing database code, and I would think to myself, I’m a programmer, too. I could write that better than he could, but I don’t have time so we can let him do it. And I’d look at a sales guy working and I’d think, well I could sell the product better, but I don’t have time so let him do it. I’d listen to the receptionist and I would think my phone voice is so much nicer than hers. But I don’t have time to answer the phone so let her do it.”
What Libin realized is that this superior mentality is self-fulfilling, breeding a culture where leaders are always second-guessing and micromanaging their people and where talented people don’t want to work. But if you’re trying to build a 100-year company, this kind of thinking just won’t fly.
“A lot of people instinctively are afraid of hiring people better than them,” Libin says. “So they tend to surround themselves with people who are mediocre. That’s the thing that kills a lot of companies.”
Finding and keeping the right is critical in fulfilling the vision of a 100-year start-up, which is why Libin encourages his direct reports and managers to follow the “hire better than you” philosophy for any position,
“I have to hire people who are so good that they can wind up running the company, and that’s true all the way down the ranks,” Libin says.
“Really embracing that philosophy is the only way I think you can scale and manage and really reduce stress, because anything I’m worried about, I know that there’s a person who’s much smarter than I am in that function, who’s also worried about it but actually in charge of dealing with it.”
Evernote may have a start-up culture, but the company has also come a long way from its start-up roots. In addition to its employees on five floors of its Redwood City office, Libin now leads an organization with offices in Austin, Texas, to Tokyo, Zurich, Moscow and Beijing.
“As we grow to be a bigger company, we’re not 10 nerds anymore,” Libin says. “We have designers. We have marketing people. We have people from all sorts of demographics. We are really broadened, and that broadens the products that we want to work on.”
It also broadens the scope of any given project, which can create a disconnect between a company’s departments, offices or teams.
“Very often in companies, and especially a big company, if you ask an average employee at the company, they kind of feel, ‘Well, I’m doing a job, the five or 10 people that I’m working with and I understand what they’re doing — they’re doing a good job,’” Libin says. “‘But those other guys two floors above me, I have no idea what they do. They’re probably just dumb.’”
One way that Evernote avoids communication and innovation breakdown is through cross-training. Taking a lesson from a friend who is a submarine officer, Libin implemented Evernote’s Officer Training Program, which mimics the idea of officers who must be trained in many different roles.
Each week, employees who sign up for the program are assigned to several random meetings outside of their department where they are encouraged to act as full participants. While the company is currently tweaking the program for simpler execution, the idea is that both the trainee and the group will benefit from the exchange.
“So if you are in IT and you sit in a marketing meeting, you see that the marketing guys do a lot of work, and they have difficult questions and problems,” he says. “It also works the other way, having a person in the room who hasn’t mastered the jargon. You wind up having to speak differently. You wind up having to think about things that you may not have thought about if you’ve been doing this job for 10 years.”
Other ways that Evernote promotes connectivity are using remote-controlled Anybots for telecommunication and video walls and “windows” to connect Evernote’s domestic and international offices. Set up near the coffee machines, the video walls are synced up to mirror Evernote’s different offices at the same time of day.
“When it’s 9 a.m. here and you’re getting coffee, you’re going to see 9 a.m. in Tokyo as somebody is getting coffee,” Libin says. “The point is you can connect with people. You can see who is there. You can see what they are wearing. You can have this ambient feeling because you know that you’re not the only person there. There are people all over the world working at Evernote that are also getting coffee.”
Experimenting with cultural perks, programs and policies should be an ongoing process, and leaders need to be willing to try and fail.
“The basic idea is we want people to be able to connect in as many different ways as possible,” he says. “When I’m traveling out of the office, and I connect to the Anybots, and I drive it around, and point the laser pointer at people, and yell at them to get back to work, everyone loves it.
“There’s no silver bullet. You say the core value is communication, and then you just find ways to make it a really magical experience.” ?
How to reach: Evernote Corp., www.evernote.com
The Libin file
Born: St. Petersburg, Russia
Education: Boston University
Why there’s never been a better time to be in business: I don’t think it’s ever been a better time to have a company, to be in business. This is the best time in the history of the world actually to be trying to build something because it’s much of a meritocracy than it’s ever been. If you build something great and you really focus on building something great then you get massive leverage in everything else because of app stores, smartphones and social media. If you make something great, then everyone is going to know about it. And everyone is going to be able to get it. … All I really want is to make great stuff. And that’s what all the people who work for me want, and it’s enough. It’s enough now to just make great stuff.
Why stress helps: As a CEO, it’s good to have a balanced diet of stress. You stress out about the product. You stress out about the finances. You stress out about improving about the office space. It’s good to have multiple completely different things to worry about and sort of balance those things.
Libin's best business mantra: I think the most important phrase is ‘simple is hard.’ That says a lot of stuff. In all ways it’s better to be simple than complicated, in terms of your product, your benefits, everything you do. You’re much better off being simple; and it’s the hardest thing to do. Always strive for simplicity, but also realize that it’s far harder to make something simple than to make something complicated.
On paper, Oleg Firer literally embodies the American dream. Moving to Brooklyn, N.Y., from the Soviet Union at the age of 12, he entered into business without a college degree and rose quickly to become the VP of a publicly traded company by his late 20s.
In 2002, Firer taught himself the payment-processing business — which would become his career — from the ground up and eventually partnered with private equity group Star Capital to start his own payments business in 2007.
With the help of his partners, Firer executed a roll-up strategy that included eight acquisitions between 2008 and 2010, combining the entities into a one payment-processing company — Unified Payments LLC. Today, Unified Payments has grown to approximately 50 employees and $59.5 million in revenue. And with a three-year growth rate of 23,646.3 percent, it soon shot to No. 1 on the 2012 Inc. 500 list of the fastest-growing companies.
“M&A is my background,” says Firer, co-founder and executive chairman, Unified Payments, which now processes about $10 billion worth of transactions for 100,000 merchants a year. “I like to find the diamonds in the rough and make them into diamonds. And that’s what we’ve done.”
Firer’s leadership has been critical in helping the company overcome challenges of integrating eight companies while managing fast growth and staying innovative in a competitive industry.
Smart Business spoke with the Firer to find out the keys to his M&A success and keeping Unified Payments on top.
SB: How did you choose which companies to target as part of the acquisition and roll-up strategy?
OF: The companies that we acquired had something unique about them. Being established is one thing — but they all had some sort of issues. We did a lot of distressed equity buys where they were either overleveraged or they were growing too fast and they couldn’t keep up with it or they had shareholder feuds or so on. Obviously, we looked at dozens of companies and we identified the eight companies that we liked the most, and we executed.
We also invested in human capital. Each one of these eight companies — besides having potential to grow and having a sales engine — had human capital behind them that we believed in. We don’t have eight different divisional presidents. We consolidated, and there were three people that I believed were the strong sales leaders to take this business to the next level. We bet on them. So it was not just acquiring for the core assets and growth opportunity; it was also acquiring them for human capital that knows this industry.
SB: What was your timeline for the acquisition strategy?
OF: The first acquisition that we did was the most expensive and the biggest. We executed the first acquisition in 2008 as a platform buy to do the add-ons that we did at later points. When we did the platform buy, it had a lot of human capital already behind it. Most of it needed to be restructured.
We bet on the sales leadership, but operationally, we had to break down a lot of departments in order to make this a success. That took awhile. And obviously, from the add-ons that we did, we moved some people around, and we hired some new people.
SB: When did you start integrating the businesses?
OF: We didn’t wait for the eight to complete. From the first platform buy, we started right away working on operations, restructuring the operations and making the operations stable. No matter what size of payment-processing provider that you are, you still need a core engine. For us, it was building an engine that’s scalable and having the outsourced pieces that we need in place to have 24/7 support and so on. It took a year to really build proper structure, and then when we started executing on acquisitions, it was about integrating them in the structure.
SB: When you are completing multiple acquisitions, how do you integrate them into your company in a way that doesn’t overwhelm your business infrastructure?
OF: It was easier with the add-ons because when you have an add-on, you strip away (general and administrative expenses) G&A and you integrate the asset into the engine if you see any new human capital that is an asset to the company. Then the rest we would strip down.
So the core support functions like customer support and technical support we would keep in the core engine. If tomorrow I’m presented with an opportunity to buy a payment-processing provider, I would let all the customer support and technical support resources go because I already have them in my core.
It’s like a puzzle. You see the missing pieces and you want to fill those pieces. Identifying the missing pieces and bringing those pieces in became easier after the first acquisition because we see that we’re lacking in a niche vertical. So now we know that the next acquisition that we do is going to be a new vertical. It has to have something special.
SB: How has the recession impacted the growth of your business?
OF: After we acquired the eight different companies, we consolidated, created this engine and decided to keep them in an organic growth strategy. We have been growing for the past two years organically from redoing these engines that we acquired.
This industry is very competitive. And with the recession the biggest thing that keeps me awake at night is that there are more businesses that go out of business. So it’s losing merchants and keeping up with attrition and the churn and providing outstanding service to the merchants that process with you — and providing them with innovative products so that they don’t go to the competition.
SB: How can you manage risk when you have customers who are struggling?
OF: It’s pretty much keeping your ear to the ground and working with partnerships. ... When MasterCard launched a PayPass program, which is a ‘contactless’ card, we were the first organization to launch it for them in New York because we understand what it takes to roll out technologies. By working with the industry’s innovative associations, such as Visa, MasterCard and Discover, and working with technological partners that we have, it makes us stand up to the competition.
SB: How do you make sure that you’re not growing too quickly?
OF: You want to have gradual growth. Pulling in the reins on a monthly basis and slowing down the growth is really the most challenging. Once you let marketing loose, it’s hard to pull in some marketing areas. Growing too fast can permanently damage the company. So it’s about growing methodically, managing within the budget.
With us, there is an acquisition cost to every merchant that we bring in. So if I want to pull in the reins, I just shrink the budget for that month. It’s growing at the pace where the business can afford to fund marketing and then fund G&A.
SB: Any lessons learned the hard way?
OF: If you’re a business leader and you’re an operator, choose the right capital partner that believes in you and that will give you an ability to take this to the next level. I had to go to a few capital partners, and it was challenging to find a capital partner midtransaction. Adding another capital partner during a transaction was even more challenging. So the challenge I had was going through several capital partners; when you’re already committed, you can’t go back.
Get a firm commitment and make sure that the partner that you choose believes in the overall picture and not just a piece of it. Believing in just a piece of it could cause you to run into to problems later in the game.
SB: What are the main lessons have you learned from your M&A experience?
OF: Everything takes longer and it costs more. So you need to be very conservative in your estimates and be very conservative in your projections. Be very cognizant of time. Underpromise and overdeliver — that’s my model.
SB: What advice would you have for another business executing an acquisition?
OF: I had to go through a lot of companies to really believe in the eight that we did. And I mostly believed in them because of the people. It all starts at the top. If you have the right people at the top, if you have the right business leaders, it becomes very easy to do a transaction. If you don’t have the right leadership and business leaders that you rely on, everything else can crumble.
And then, obviously, it’s always challenging to find good people for any business. But if you find somebody that you believe in and that has the track record, don’t let the person go. ?
How to reach: Unified Payments LLC, (877) 621-9110 or www.unifiedpayments.com
The Firer File
Co-founder and executive chairman
Unified Payments LLC
Born: Soviet Union
Education: New York Technical College
Management style: There are two styles to me. First of all, I have an open door policy. I speak to every employee in the company and everybody has direct access to me. I meet with my employees all the time. And I don’t consider them employees; I consider them partners because we have a common goal, and we need to work toward it. And I think outside the box. There’s no strategy that I would not look at. There’s no opportunity that I would not look at.
What you do for fun?
Jet skiing, boating
Who have you never met but would you like to have dinner with?
Warren Buffet, to get an insight on what it takes to be the most successful investor of the 20th century and understand what it takes to spot the hidden jewel in the companies he invests in.
What would you be doing if not your current job?
I would be a politician.
How do you regroup on a tough day?
I spend time with my kids.
What destination would you still like to visit?
What’s next for Unified Payments?
Every month and every day we raise the bar because of the fact we have to grow, and I’m not satisfied with the growth that we have. So we still want to grow a bit more. We still have some internal restructuring that I’m working on, and as I execute a little bit more organic growth and do a little bit more acquisition, one day who knows? I might exit. So it’s making the business big enough to be palatable to somebody smarter than I am.
For Dan Roitman, much of business is science.
Since founding specialty Internet retailer Stroll LLC in his University of Maryland dorm room 13 years ago, Roitman’s career has consisted of an ongoing series of hypotheses, experiments, data analysis, adjusting of hypotheses and formulation of theories.
Roitman’s scientific approach to business-building has developed a highly entrepreneurial culture at Stroll, in which team members are encouraged to share ideas, innovate and test their assumptions. It’s a mentality that has helped the company sustain a period of rapid growth — 80 percent in 2008 and 50 percent in 2009, followed by a year-over-year 100 percent growth margin from 2010 to 2011. In 2012, the company surpassed $80 million in annual revenue for the first time.
But maintaining a forward-thinking mindset throughout the entire organization isn’t something that just happens. It requires CEO Roitman to hire, train and empower his people to achieve the desired results. It’s something that was driven home to Roitman during the recession, when he had to suspend the growth of the company for a year due to a lack of additional financing from Stroll’s bank.
“That was my biggest concern, because we had always been a growth company,” Roitman says. “Then, due to circumstances beyond our control, we had to put a specific order volume cap on the business.
“It really became more about communicating that this is the challenge, everybody knew what was going on in that environment, you had a lot of economic hardship, you heard a lot about layoffs that were going on elsewhere. I have to imagine everyone was happy that we were doing well, but frustrated that we couldn’t do better.”
Through it all, Roitman has had to focus on motivating his employees, maintaining a sense of transparency, while still encouraging open thought, experimentation and the scientific mentality that had made Stroll a success in the first place.
Embrace best practices
It’s easy to say you embrace best practices as an organization. Actually discovering, selecting and implementing best practices from another entity are another ballgame. Even if you are able to discover and select an outside idea that you think will help your business, there is a good chance you wouldn’t implement it — at least, not in the form in which you discovered it.
“I once heard a speaker talk about the idea of cloning best practices and how most people don’t have a so-called cloning gene,” Roitman says. “If I told you, right now, the secret to making a million dollars in 90 days and if you followed my instructions exactly, you’d make a million dollars; most people wouldn’t be able to follow it exactly. They’d start to think about how to improve upon what you’re telling them.
“Sam Walton would go into any competitor’s store, and even if it was a really shoddy store, he’d find something they were doing better than he was doing. Through that process, through a million little optimizations, he became a formidable competitor and then an industry leader.
“So if someone is doing something better than you are, you should at least recognize that they are and be willing to try it in your business as well.”
But it is a double-edged sword when it comes to adding new policies and processes to your organization. You don’t want to corrupt the external idea, because it was successful elsewhere for a reason, and that is why you want to on-board it at your company. But you also want to give your people an opportunity to think of ways they can improve upon the idea or alter it so it better fits your company’s specific situation.
For Roitman, that is where the need for a culture that utilizes a testing-based, scientific approach becomes critical. His team members at Stroll can propose new ideas and changes to existing ideas, but they have to back the proposals up with supporting data.
“If you have a constant, iterative testing philosophy, the barrier to testing is very low,” Roitman says. “So if somebody is doing something on, say, the marketing side, you ask yourself about the probability of something similar working in your business. What is the probability of this one idea being more successful than another?
“Ultimately, you have finite resources for your various departments, so you do have to have a mechanism for prioritizing — some kind of filter for what you believe the contribution or change will be.”
Roitman ran into a best-practices testing scenario when he and his leadership team noticed marketers in his company’s space were having success with video marketing initiatives. Through testing and quantification of the results that Roitman’s team believed Stroll could expect, the company was able to implement its own video marketing initiatives.
“Since then, we have won two major awards for our video marketing,” Roitman says. “That is an example of us taking a best practice from outside and utilizing it in a way that betters an area of our company.
“In another area, we’ve also brought in an industry expert to advise us on our shipping costs. It led to us having a 30 percent reduction in our shipping costs (in 2011), and we should have another 30 percent reduction (in 2012).
“We didn’t directly adopt a best practice from somewhere else in that case, but the insight from the industry expert that we brought in allowed us to take things to the next level in that area, and it’s information we wouldn’t have gotten any other way.”
Learn from mistakes
Another aspect of having a culture that is focused on experimentation and learning by doing is a willingness to accept mistakes and failure as part of the process. That is, as long as the failure is part of the process and not a part of employee underperformance.
With entrepreneurship as a key building block of Roitman’s culture at Stroll, often he is willing to take new products to market, and let the market determine whether the idea was good or not.
“Obviously, it depends on what level you’re talking about making mistakes,” Roitman says. “But if you inherently have a testing culture, you know you’re going to have failures, and it’s simply going to be a part of the experimentation process.
“But there are failures of concepts or improvements, and there is failure of performance, which is an entirely different category. The performance category isn’t just a matter of experimentation. It’s a matter of setting up support structures so that people don’t set themselves up for failure. You have to work with them to define goals up front that are realistic and all the general management concepts around that.
“Once you’ve defined the goals, you need to check in with your people to make sure they are on track and setting up workable project plans.”
If you’re working with your people to set achievable goals and realistic project plans, it becomes much easier for you and your leadership team to separate a bad idea from a bad performance.
“It’s all in the mechanics around your execution, which you need to have in your processes,” Roitman says. “If someone just isn’t performing, there is an issue there. But if it’s an idea itself that is failing, but everyone thought it was worthwhile to pursue and a reasonable move to make at the outset, there is no problem in that case. And you have to cultivate that mentality within all layers of management.”
To help guard against large-scale mistakes that could have wide-ranging implications for your company, Roitman says you should put platforms in place that allow you to test new ideas on a smaller level, then scale the successful ideas to larger projects involving more people.
It is a tactic that allows you to commit fewer resources to a project initially, while still getting a sense for whether the idea will work — which is a critical factor as many companies are still struggling with resource management in the wake of the recession.
“That can definitely be something you’re doing; we’ve done that ourselves,” Roitman says. “For instance, in our call center, we’ve rolled out a small-scale test in one area, see how that does, then roll it out on a larger scale.
“In some other areas, we’ve broken down into teams across different areas of the company and tried different things in each area. That allows us to gain some insight into how we can work with different needs and different management methodologies.”
As you go through these processes, you have to keep in mind that your role as the leader is to serve as the traffic cop who ensures that the right type and right amount of resources find their way to the right areas of the organization, into the hands that can best use the resources to produce the ideas and product that turn the highest profit.
“Everything is interrelated,” Roitman says. “Departmental activities roll up to the company at large. So my job is to make sure the plan we have communicated is clearly on track, everybody knows the most important things we have to focus on, and there are no other distractions. We have a lot of ideas flying around, which is a good thing, but we still have to maintain focus. As far as the direction you are going, you have to define what is in and what is out — you have to define both.”
How to reach: Stroll LLC, (215) 701-3300 or www.stroll.com
The Roitman file
founder and CEO
Education: International business and German degrees, University of Maryland
First job: Unofficially, I mowed lawns and shoveled snow. Officially, I had an internship with the Department of Defense after my first year of college.
What is the best business lesson you’ve learned?
The earlier you can establish the elements of a strong culture, the higher the probability of success of the organization. It starts out with just getting revenue and having a business in the first place, but after that, you need to have a vision and clear goals around that vision, and the right people on board with the proper motivation. Having the right operating conditions helps that immensely.
What traits or skills are essential for a business leader?
One thing that we really focus on in our organization is transparency. After that, you need to be able to develop a really strong vision that influences the organization years into the future. People have to know what they’re doing and why they’re doing it.
What is your definition of success?
Success comes at a couple of different levels. On a micro level, it’s accomplishing something meaningful within the organization. On a macro level, one of the greatest forms is giving back to the community and creating jobs. As we all know, our economy needs sustainable, productive jobs today.
Don Lowe used to run a simple business.
“We had a small offset machine, we printed black ink on white paper, and sometimes we would bind it for our customers,” he says. “It was that way for many years.”
Franchise Services Inc., which operates printing and marketing services franchises such as Sir Speedy, Signal Graphics and PIP, did one thing and did it well. For decades, it was enough to grow and remain profitable.
But as the 1990s advanced and gave way to the new century, technology started to evolve at an increasingly rapid pace, and Franchise Services quickly found itself at a crossroads: adapt or risk the long-term welfare of the business.
“The digital world changed our world completely,” says Lowe, the CEO of Franchise Services. “Our role is now to look at new technology and ask ourselves if it’s a threat or an opportunity. If it’s a threat, we decide what to do with it. If it’s an opportunity, we exploit it. It keeps us very busy, but it’s also very good for us.”
Lowe has needed to add new technology and new services to fill the expanding needs of his franchisees’ customer base — which comprises primarily companies with fewer than 50 employees. Facing their own battles for survival in an economic climate where nothing is a sure thing, the businesses in Lowe’s customer base need services beyond printing. They also need full-service marketing support with a heavy emphasis on creating and maintaining a strong Internet presence.
“That is why, over the recent years, we have moved from a print-centric model to one that focuses on both print and marketing services,” Lowe says. “We’ve needed to expand the products and services we offer to our customers. If you think about small business owners, they’re always pressed for time; they often can’t even spend time on building the business because they’re already wrapped up in managing what already exists. So they need help on multiple fronts, and our job is to provide that help.”
Providing that help has required Lowe and his team to listen to franchisees and their customers, and gain an accurate read on the best ways to serve customers in a challenging and ever-changing climate.
Know the game
The biggest game-changer for Franchise Services came in the proliferation of Internet-based communication throughout the ’90s. In the span of about a decade, the primary conveyance for the written word migrated from paper stock to computer screens. Items that were normally sent through the mail over the span of days could now arrive in your email inbox in a matter of seconds. Internally, filing cabinets gave way to servers as a means of storing data.
“A number of the products we were producing for customers moved to the Web,” Lowe says. “Customers could use the Internet to distribute price lists on a daily basis, and even some training manuals migrated to the Internet.
“If you think about it, even business cards, letterhead and envelopes, all that business declined from where it was in the ’80s and into the ’90s, because we don’t send letters anymore, we send emails. That was the first indicator that we needed to start finding some products and services to backfill some of the products and services that were losing traction.”
But to find new areas of growth, Lowe and his corporate leadership team had to get plugged in to what their customers needed in a print and marketing services company. For Lowe, that meant studying trends, and frequent conversations with franchise owners across Franchise Services’ spectrum of brands.
“You have to understand specifically what the customers’ needs and wants are,” Lowe says. “Everything starts with the customer. If you don’t understand the customer requirements, you won’t be able to fulfill them. So you need to listen twice as intently as you speak, so you can determine what those needs and wants are.”
You can look to macro-level observations in industry publications to get a read on the next big technology that could affect your industry. But to understand how your business is changing on a granular level, you have to make trips to the front lines. Sometimes, the change that satisfies the most customers in the shortest amount of time is decidedly low-tech and relatively inexpensive to implement.
When Lowe and his team speak with franchisees, they aim to find ways to better connect their services to customers, with an overall goal of improving the customer experience.
“For example, today we provide mailing services at most of our locations, and that is a direct result of understanding that 65 or 70 percent of what we print ultimately ends up in the mail,” Lowe says.
“So why don’t we go that last mile, provide mailing services to our customers, and even take the printed pieces in the envelopes and take them to the post office? That is an example of why you spend a lot of time figuring out what is happening in the market.”
In addition to frequent dialogue with franchisees, Lowe and his team also gather information from customer focus groups designed to provide feedback regarding whether Franchise Services is meeting their needs, and in turn, the needs of the market in general.
“The thing we always try to remember is we don’t produce anything at the corporate level,” Lowe says. “All of our services are delivered at the franchise-network level. So we have to maintain consistent contact with everyone involved in those relationships, both the franchisees and the customers. There cannot be an ivory tower anymore. If you’re not staying in touch with the customer, you’re not staying in touch with the business.”
Become a change agent
To change with the evolving needs of the market, you need to first construct an organization that is capable of visualizing change and realizing the need for change. At Franchise Services, Lowe developed a change-focused organization by hiring people who aren’t afraid of venturing into unknown territory while at the same time being creative enough to devise new solutions to meet ever-changing customer needs.
“It’s a big reason why you hire first for cultural fit, then worry about the skill set needed to complete the job,” Lowe says. “If the person you hired can’t fit the organization, or if the chemistry just isn’t right, it’s not going to work.
“You might be able to make it work for a short period of time, but you can’t build a company with that type of hiring policy. A lot of people know that Jim Collins wrote the book ‘Good to Great,’ where he talks about the need to have the right people in the right seats on the bus, and it’s true. It’s not necessarily just about having good people. It’s also about having the right mix of people, otherwise the organization is going to fail in the long run.”
If you can find employees who are open to and willing to facilitate change, it then falls on you as the leader of the company to provide an environment where they feel the freedom and flexibility to try new ideas and implement new innovations.
Lowe facilitates an environment that embraces change by developing a strong sense of trust throughout the corporate ranks and extending to the company’s more than 500 franchised locations. He develops and reinforces the trust factor by ensuring that communication remains transparent throughout the organization.
You and your people need high ethical and moral standards, which set the basis for the amount of trust that you can develop between management and employees,” Lowe says. “It’s also important that everyone understands what the goals are. We don’t have a large staff, so it is important that everyone is aligned with the goals, both on a corporate and franchise level.
“So we talk to our franchisees about their goals and aspirations for their business, and their results, and through that, we develop a team spirit. That helps to drive enthusiasm and gets people ready to show up for work and get busy doing what you get paid to do.”
Lowe’s willingness to change and adapt, and find people willing to do the same, has helped maintain Franchise Services as a strong presence in its industry. The company’s franchised locations generated $448 million in sales during 2011.
“There are certain skills that are required in this business, but beyond that, it quite frankly comes down to attitude,” he says. “The people that work well in our environment take instruction, but they certainly also understand the importance of dealing with and satisfying the customers. A lot of what we do comes down to how you adapt to customers and serve their needs, as is the case in just about every industry. A smiling face and a soft voice goes a long way in our business, every bit as much as the professional skills they need to have in order to get their job done at a high level.”
How to reach: Franchise Services Inc., (800) 854-3321 or www.franserv.com
The Lowe file
Franchise Services Inc.
Born: Shelbyville, Tenn. I grew up in Hopkinsville, Ky.
History: I’ve been in business since I was 12 years old, when I was a paperboy. I’m 71 now, so I’ve been in business for almost 60 years. I’ve been a shareholder of this company for the last 40 years.
What is the best business lesson you’ve learned?
Hire good people, keep them informed and trust them. Beyond that, set the bar high for achievement, and make sure they understand your culture and promote it.
What traits or skills are essential for a business leader?
Vision would certainly be high on the list. You also need integrity, because people need to follow your lead, and it is very difficult to follow someone you don’t respect. And if your organization doesn’t agree with your vision, you won’t have a fair chance to be successful. Also, working hard is still a great trait in this country. If you work hard, it will put you in good places.
What is your definition of success?
It’s the opportunity to do what I want to do, when I want to do it and with the people who are important to me, and to get our franchise people to do important, meaningful things to help them sustain their businesses.