Dustin S. Klein
Meaningful contributions aren't limited to the Pillar Award honorees. Here are some other noteworthy programs that the judges highlighted from the pool of nominees:
- The Lubrizol Corp.'s involvement in the Christmas in April program has helped several disabled and elderly Lake County residents maintain their homes. Says Mikey Darcy, executive director of Christmas in April Northcoast, "Because of their volunteerism, we were able to make repairs to two homes completely sponsored by the Lubrizol Corporation with financial and volunteer support." For the past nine years, the company has also donated $2,500 from the Wickliffe plant and another $2,000 from the Painesville facility to help those financially strapped individuals.
- Since 1993, the Arras Group has partnered with Greater Cleveland Habitat for Humanity in its effort to help build new homes in Northeast Ohio. Among its efforts, the Cleveland-based marketing agency has developed communication materials for GCHFH and donated $30,000 in 1994 to help build a home in Cleveland's Hough neighborhood. Owner James Hickey has closed the offices numerous times so that the company's 30 employees could work on-site to help build houses. Earlier this year, the Arras Group donated $2,500 to sponsor the first annual GCHFH Simple, Decent Golf Outing.
- Alcoa Corp.'s financial contributions have aided Templum House in its fight against spousal abuse. Two grants, totaling $15,000, were given to Templum's Youth Empowerment Program, which helps children who witness domestic violence.
- Bob Fairchild, owner of Fairchild Chevrolet, and his wife, Cindy, have been active volunteers in the city of Lakewood. They recently co-chaired a major fund-raising campaign that generated $13,000 for H20's (Help to Others) Summer Service Camp for 150 middle school students. Among local organizations the car dealership's efforts have helped are Lakewood Toy Lending Library-donating $300 and toys to get it off the ground; Lakewood Adult Education and Recreation Department-donating $21,000 since 1987 to purchase 4,500 T-shirts for youngsters; and Lakewood City Schools.
- More than 10,000 children have attended major sporting events over the past two years thanks to FOX Sports Ohio. FOX's Kids Zone was created to provide opportunities for kids who otherwise wouldn't have the means to see sporting events in person. Among the groups that have participated are Boys & Girls Clubs, Big Brothers Big Sisters, United Link, Deep Woods Center, Neighborhood Centers Association, United Way, Key Club, Neighbors Together, Just Friends and the Salvation Army.
Can't seem to find a supplier for the extrusion machine you've been looking to buy? Well, you may want to click onto Industry.net. Among the site's many offerings is a comprehensive source supplier directory which allows visitors to search worldwide for suppliers of more than 10 million different products.
Industry.net also offers articles on new applications for existing technology and tidbits about what's new in areas such as factory automation, supply chain development and ERP/MRP systems. There's also a loaded reference shelf stocked with federal and state safety compliance regulations and interpretations; engineering equations and formulas, and a drawing requirements manual.
And, if you can't find what you're looking for there, Industry.net's archives contain articles on dozens of issues, including what tools, materials and systems can be used to increase productivity and lower costs.
One of the most interesting areas is Invention Avenue, which offers a look at recently issued U.S. patents and their possible applications to manufacturing processes.
Industry.net is free, but does require registration of a user name, password and information about your company.
So you think you're prepared for a disaster? Well you'd better be, because even the heartiest companies are likely to suffer serious hardship due to catastrophe. And even the bravest CEOs should take note of these disaster-related statistics, compliments of the Business and Industry Council for Emergency Planning and Preparedness.
- Eighty-five percent of businesses affected by disaster shut down within five years. As many as 70 percent close their doors within two years.
- The average disaster causes the equivalent of 4.8 down days.
- The average Fortune 500 company loses more than $78,000 per hour of disaster-related shutdown.
- Ninety-three percent of businesses that lose their data center for more than 10 days file for bankruptcy.
- Seventy-five percent of computer-dependent businesses would suffer crippling losses if their electronic data processing systems were down for more than 14 days.
- Between 67 and 72 percent of Fortune 500 companies do not have or do not test their disaster recovery strategies.
The number of manufacturing jobs and production facilities increased statewide last year in every area but Northeast Ohio. The net loss to the regionwhich includes Cleveland, Akron, Canton, Solon, Elyria, Mentor, Twinsburg and Lorainwas a whopping 82 facilities last year, which took 342 jobs with them.
The area, however, remains the dominant employer of manufacturing jobs in the state. Its an odd predicament, considering that the overall climate for manufacturers in Ohio has been positive.
For the second year in a row, the number of manufacturers and manufacturing jobs has gone up. According to the 1999 Ohio Manufacturers Directory, Ohio has 22,760 facilities which employ 1,244,769 people, nearly 22,000 more than last year.
A closer look reveals why Northeast Ohio is taking a hit.
Manufacturing jobs are leaving the big cities for the suburbs and rural areas, explains Thomas Dubin, president of Manufacturing News, which published the report. Twenty years ago, a manufacturer needed the labor pool, transportation and support industries that only the major cities could provide. Now companies have many more options, and are locating their plants in whichever municipality is most cost effective.
When Art Holmes and his brother, Charles, founded Mayfield Heights-based Chart Industries in 1992 as a vehicle to take their six private companies public, the duo already had laid the groundwork for how to run the geographically scattered conglomerate from its Ohio headquarters.
Rather than retain a firm grip on each company's day-to-day operations and force them to conform to one method of doing business, the brothers let the existing management of each subsidiary keep its autonomy.
"I'm a firm believer in the entrepreneurial spirit," explains Art Holmes. "If you empower an entity to achieve its goal, they'll go out and do the best job they can. Especially if you don't micromanage."
Some would call Holmes' management style laissez-faire because he allows for seven different methods of management and accounting from seven different subsidiaries. But the softspoken CEO is quick to point out the company's financial success and strong market position - 1998 third-quarter profits were up 46 percent over 1997 and sales continue to climb steadily. Chart controls about 26 percent of the world's cryogenic equipment market with its product and services.
So how does Art Holmes manage a public company with seven subsidiaries scattered around the globe without stepping on anyone's toes?
The company's success, Holmes maintains, is due in large part to giving the presidents of those subsidiaries plenty of breathing room. "As a holding company, we provide them with capital resources and benefits such as purchasing power," says Holmes. "But we don't have the controls that some large companies often have. Each business has its own balance sheet and plan."
The freedom the subsidiaries enjoys is as much a function of the size of Chart's staff as it is Holmes' philosophy. The Mayfield Heights corporate staff is a lean, seven-person operation-two operating executives, three financial officers and two support staff members. Together, they loosely manage a total of 1,300 people around the world.
The system works because Holmes is fully committed to making it work. It's not a system for the manager who can't delegate. He carefully chooses the companies Chart buys, ensuring that its management staff-particularly the president-is someone who will flourish in an entrepreneurial-type environment.
Size is also a major driver.
"The size of any one plant impacts our ability for this to work and for Chart to grow," Holmes says. "Each plant has no more than 250 people. When you get above that, you begin to lose the feeling of unity and the effectiveness of what we're doing."
Chart's seven subsidiaries-Altec International (Wisconsin), CVI (Columbus), Chart-Marston (England), Cryenco (Denver), Greenville Tube Corp. (Pennsylvania), Process Engineering Inc. (New Hampshire) and Process Systems International (Massachusetts) - are run as separate companies. They share resources and buying power, but have separate management teams and financial books. Each president is responsible for his own company's success.
"I don't like a lot of second guessing so I don't force it upon our subsidiary presidents," explains Holmes. "If you have each entity in a self-contained autonomous state, you don't need a big bureaucracy. Our philosophy is simple - we just pick good people and let them go."
That's allowed each subsidiary to grow at its own pace-despite the related product lines-while receiving whatever resources it needs from the parent company. Says Holmes, "That minimizes the costs that we'd have as a big corporation, both direct and indirect, by having fiefdoms within a headquarters. Our style requires true empowerment by corporate management and this has been our philosophy out of the chute."
Watch, but don't hover
Once a year, Holmes and his corporate staff assess and approve each of the seven subsidiaries' business plans. Each quarter, the presidents report against the plan and give a rolling 12-month forecast on where their companies are expected to go.
"It allows us to recognize how each company is doing without standing over the presidents' shoulders and watching them," says Holmes.
If a subsidiary isn't producing for an extended period of time, Holmes won't just stand still and let it flounder. While each president is responsible for the success of his company, Holmes can step in and make decisions for the presidents if necessary. He hasn't had to do so yet and would only consider it as a last resort. "I wouldn't like someone standing over my shoulder," he says.
Know when to ignore economies of scale
Unlike many companies its size-$171 million in sales through the third quarter of 1998-Chart doesn't use a systemwide software package for its subsidiaries. While using the same accounting program at each company might make some aspects of his job easier, that conformity compromises their long term gain. Explains Holmes, "We could put in a software system for manufacturers that's the same for each of our companies, but the problem is that some of our products are project-specific or order-oriented and others are widget-like. So one package won't fit all."
Nor does Chart use one uniform corporate report or financial system for all its companies. "We let each subsidiary put out monthly financial reports the way they always have," says Holmes. "We're not forcing anybody to change their management approach to meet Chart's. Chart lets them use their best management technique and reporting methods and we simply adapt to it."
Chart extracts the information it needs from each financial report and includes it in the corporate financial report for the stockholders.
Meeting of the minds
Chart's corporate staff holds quarterly meetings with the company presidents and individual annual meetings with the financial officers and manufacturing executives of each subsidiary.
"It's a chance to get together and talk about common issues and share ideas," says Holmes. "Then we discuss what's working for each business and the presidents can decide whether that's something they'd like to pursue. We encourage interaction and joint activity, but everything's done on an arm's length basis."
This has led to what Holmes considers a complex organizational structure made up of several flatter structures. "It's a more interactive style of management," says Holmes. "But it's not micromanaging. What happens is that you've got small manageable subsidiaries, each of which has few layers between the workers on the assembly line and the president. Bottom line, we let the market forces rule."
To the casual observer, it looked like the end of the road for Card Pak. On Nov. 11, 1996, co-owners Rick and Lisa Thomas stood amidst the smoldering ashes of the company's Warrensville Heights facility, surveying the damage from a massive fire. There wasn't much of a business left.
Earlier that evening, while the Thomases were on their way home from Las Vegas, 17 inches of heavy snow collapsed the roof of Card Pak's building, bringing down live power lines. One of the wires sparked, igniting the cardboard inside. By the time firefighters extinguished the flames, more than 75 percent of the 70,000-square-foot building was destroyed.
"Luckily, no one was hurt," says Lisa, company president. "But the company burned to the ground."
This wasn't the first tragedy to strike Card Pak-or the last. In 1994, a flood washed away much of the company's lower levels. Four months after the fire that left the company's future in doubt, one of the co-owners decided he'd had enough. He filed a lawsuit demanding the insurance money from the fire be divided 50-50 and that Card Pak's doors be shut for good.
Today, the company is still alive. In fact, it's thriving. Sales are up 33 percent since the fire-from $12 million to $16 million-and Lisa says the $20 million mark is right around the corner. What's more, Card Pak is putting the finishing touches on a new printing plant in Solon and plans to move in later this month.
The company's story isn't simply one of survival, it's about determination and perseverance-of the owners-and of the employees who stuck with them through the company's darkest days. But mostly, its a story about preparing a safety net to survive some of the most debilitating problems a business can face.
Learning from the past
In the middle of a parking lot that separates Card Pak's main offices from its manufacturing plant stand three concrete pads. Those-along with some scattered char marks on the back of the office building-are all that remain from the structure that once connected the two facets of Card Pak's operations.
The pads were the bases of Card Pak's original printing presses, explains Rick Thomas, CEO. "It (the fire) melted the aluminum side parts off the presses."
The fire could have been worse, Rick says. By the time it hit, Card Pak was well insured. That wasn't the case in 1994 when the flood hit. Seven inches of rain fell in an hour, causing a nearby creek to spill over its banks and race down a hill into the gully where Card Pak's building stands. Nearly three feet of water poured into the building, damaging most of the company's equipment.
"That almost put us out of business," recalls Lisa. "At that time, we were severely uninsured." Lisa says they lacked business interruption insurance and adequate flood insurance and the owners had to pony up enough dough out of their pockets to keep the business alive. "It was a bare bones policy," she says. The close call caused Card Pak's owners to rewrite their insurance policy and increase their coverage across the board.
In November 1996, after the fire, the Thomases told the insurance company they intended to rebuild. They quickly settled the contents portion of the policy with an $8 million claim and ordered new equipment. They also collected business interruption insurance, which paid their vendors and employees. The die shop was moved to Wadsworth. Other work was outsourced to competitors. With the exception of one customer who dropped Card Pak, the company's customer base remained intact.
Within six weeks, the company was up and running-albeit with a makeshift facility. "We retrofitted our warehouse space in the back to create a mini print shop," explains Lisa. "Our employees worked around the clock. They're the reason we survived. In fact, when Rick and I arrived to see the fire damage, there were several employees sweeping up what they could salvage inside the building."
Surviving the unexpected
In March 1997, while the Thomases were still negotiating the rest of the settlement with the insurance company and formalizing rebuilding plans, disaster number three struck: the lawsuit.
"After the fire hit, Bob Blake didn't want to rebuild," recalls Lisa. Blake was Card Pak's co-owner and Rick's partner. "He wanted to take the money and retire. But Rick wanted the business to go on. We had 100 employees and figured a viable business was better than the insurance money. So a line was drawn in the sand."
That dispute made it difficult for the insurance company to determine what to base its settlement on, which held up the building portion of the insurance policy. "When the lawsuit was filed, that changed the concept for the insurance company," explains Lisa. "They had to decide whether they would give us cash value for the destroyed equipment or replacement value for new equipment. We intended to rebuild, but it was hard to demonstrate that to the insurance company with a lawsuit pending."
Finally, in late October 1997, the lawsuit was settled. The Thomases bought out Blake's 50 percent stake in Card Pak for $6 million. "That unified ownership and provided a clear vision for where the company was going."
Back to the basics
After the lawsuit was settled, the insurance company paid out its final settlement. The company replaced the destroyed printing presses with two state-of-the-art presses and two cutters, upgrading its operations significantly.
The new equipment has helped slash the company's turnaround time-from about a month to two-and-a-half weeks. "On any given day, we can fill 20 customers' orders and print one million cards," says Rick. "We can feasibly expand to $30 million a year in sales with the equipment we have."
For the rest of 1997 and throughout 1998, most of Card Pak's 88 full-time employees and 12 temporary workers toiled out of two disconnected buildings. "Our long-time employees didn't want to see this business fail," says Lisa. "They told us they'd do whatever it took to get through."
The rest, mainly craftsmen, were employed by several of the company's outside vendors and partners while the company outsourced their work. When all was said and done, none of Card Pak's 100 employees was laid off. Says Rick, "Not one person missed an hour's worth of work."
Finally, in June 1998, the Thomases purchased a 90,000-square-foot former stamping plant in Solon and began extensive renovations so they could reconnect Card Pak's operations under one roof. Among the improvements is a redesigned work flow plan to make operations more efficient.
"All this has been a psychological boost for our employees, and us," says Rick. "Everyone's seeing us get all this work done, and they're looking forward to a new beginning. We were made whole through the insurance process. Not many people can say that."
Michael Bryan, an economist at the Federal Reserve Bank of Cleveland, describes deflation this way: "Consider that the dollar is a metric by which we alter value," he says. "The Fed wants to keep that metric constant-where 12 inches is equal to a foot."
Say you live in a 4,000 square-foot house and want more space. So you order a 6,500-square-foot house today, measured with a 12-inch foot and contract to pay $150 a square foot. That's $975,000.
But in the nine months it takes to build the house, if the foot gets trimmed to just 11 inches, the house will actually measure 7,630 square feet when finished. If you had paid in advance, that $975,000 translates to $128 a foot. But if you pay on completion, you'll still owe $150 a foot for the "larger" house: $1.14 million.
That's inflation, Bryan says.
Deflation is when the measuring stick gets larger and larger-and the square footage gets smaller and smaller. If you arrange the same deal, but the foot grows to 13 inches during construction, your upfront payment amounts to $179 a foot for a 5,460-square-foot home. If, on the other hand, you contracted to pay $150 per square foot upon completion, when you measure the finished home, you'll owe $818,700.
The point? Inflation favors those who spend immediately, while deflation discourages spending.
That's where the Fed comes in. Says Bryan, "It keeps the standard absolutely constant so that only real fluctuations in the economy are seen. You can manage demand by raising and lowering interest rates when things are good or bad."
When Scott Pease bought $35,000 worth of digital photography equipment between August 1997 and April 1998, the Solon photographer wasn't buying technology for technology's sake. He was investing in his studio's survival.
Pease's business wasn't struggling when he began making purchases. He had a thriving business taking photographs for catalogs and sales literature for such high profile clients as Eaton Corp., The Step 2 Co., Pioneer Standard Electronics and The Mazel Co.
But Pease prides himself on being both an ardent follower of advancements in his industry and being articulate and knowledgeable about commercial photography in general. He'd read industry estimates that projected by the year 2000 that 80 percent of all commercial photo projects would be done digitally by 40 percent of the photographers-those who were capable of such projects.
"That only left 20 percent of the assignments being done conventionally by 60 percent of the photographers," explains Pease. "That means it's going to be a nightmare for the guys who aren't set up to do digital photography."
Rather than be left with the majority battling it out for a smaller share of the pie, Pease in May 1997 chose instead to integrate digital photography into his 13-year-old studio.
In addition to planning for the long term, Pease's investment has allowed him to maintain more creative control over his work, lower costs and save himself and his clients money and time.
By now, most people have seen digital cameras in stores. Those models let you take pictures, which are stored on disc and can be viewed instantly on your computer. Color copies can be printed out for use in almost anything. The professional process is similar, but much more complex-and costly.
First, Pease bought a new computer, scanner, CD burner and high-tech photography software. The basic combination gave him the capability to scan in conventional photos, make computer-assisted enhancements and transfer the finished product onto CD-ROMs to take to the printing labs.
In August, Pease took it one step further. He bought a film scanner. That allowed him to scan in negatives for digital processing. In November, he purchased a color printer so he could print color photos at his studio instead of at a lab.
Finally, in April 1998, Pease added the final piece-a professional model digital camera. That gave him the complete package. "It was a large chunk of change to put out," says Pease about the investment. He hopes to recover that investment over the next five years by being able to provide a broader range of work. The equipment, he says, should last about 10 years.
When it all was integrated, things began to happen. Pease says with each new piece of equipment, he gained more control over the photography process. There was less reliance on photo labs to do his studio's film processing. That translated into lower production costs, which he could pass on to his clients.
Processing labs cost him about $125 per hour for scanning in the film and outputting it into a file, says Pease. If a slide or negative were needed, it cost another $125. With the new technology, Pease was able to charge his customers less than $100 an hour to do the same processing work.
"They noticed," Pease says. "In fact, there were several clients who were already familiar with the digital process and had used it in-house to alter images on their computers. When they saw we were using digital photography as well, it opened up a lot of work for us."
That included more catalogs, sales literature and trade show displays. It was a direct result of the benefits of digital photography-one of which is the ability to make composites of two or three different images on one finished photo.
Such was the case when, in early 1998, one of Pease's clients needed an image of a child on one of its sleds sliding down a snow-covered hill in front of a country home.
Pease could have taken the shoot on the road and found such a backdrop to take the pictures. But that would have been exceedingly expensive. Instead, Pease shot the child on the sled in the studio, surrounded by fake snow. Then, he took pictures of the house and the snow-covered hill. He transposed the image of the child over the other image to create the illusion that the child was in front of the house. The final result was so good it was nearly impossible to tell it wasn't one photo.
Previously, Pease shot pictures and had the film developed in a lab. He'd go over the photos with his client's art directors, who would suggest changes. The photos would then be taken to a service bureau, where they were altered to the art director's specifications.
But the digital process allowed all that to be brought in house. "I can do a whole lot more in a lot less time," he says. And because his work is more efficient, clients seem more satisfied. Especially, Pease says, since they're able to view images much more quickly.
"It used to take up to three days to get film processed," he recalls. "No longer. It puts the image immediately into a client's hands. More work can be done in a shorter amount of time. And if changes need to be made, we can take the digital image and work on it right there."
While it's difficult to say exactly how much more efficient the integration of digital equipment has been, Pease says it's improved productivity for each project by between 100 and 200 percent. "It's all the same medium now," he explains. "Since it's in the computer, it's all part of the same loop-from the moment the photo's taken to the moment it's printed out."
So far, more than a third of Pease's regular clientele have taken advantage of the studio's digital abilities. "Once they see it used, they want to use it every time there's a shoot," he says. "The rest are catching on and getting on board slowly. It's quickly becoming the choice."
If you havent already heard from your insurance company about Y2K, the next rude surprise is as near as your renewal date. Insurance providers across the nation are trying to exclude Y2K-related problems from policy renewals.
Fearing a repeat of the underwriting mess of the 1980s from a run of pollution and asbestos claims, insurance companies have begun an aggressive effort to inform companies that conventional coverages property, business interruption and directors and officers insurance wont help them if monetary damages result from the millennium bug.
Business owners who want protection from Y2K-oriented damage can get it, but at a price. Premiums for such policies are running about 10 percent of coverage that is, a $1 million policy will cost $100,000. Even then, coverage is available only after a lengthy paperwork process that tells the insurance underwriter precisely how much youve done to prepare for Y2K.
But Brad Norrick, a senior vice president at Cleveland-based J&H Marsh and McClennan, the worlds largest risk and insurance services firm, says you dont have to pay a ransom for coverage, nor do you have to remain exposed.
Marsh & McClennan, for instance, used its muscle to avoid the coverage exclusions that underwriters were creating.
We asked them to tell us what it would take to keep the policies in place and cover any Y2K related problems, explains Norrick. We also told them that if they wouldnt work with us, wed move all our business to underwriters who will.
With assurances in hand, Marsh & McClennan then turned to its clients. Were working with (them) to make sure their compliance programs are enough, he says.
Thats done through analysis reports, which detail how each client company is preparing for Y2K. The report covers issues similar to what underwriters ask on the questionnaires, but Norrick says theres a difference. Weve recommended that our clients not fill out (questionnaires) because they could be used against them as a warranty. The report answers the main concerns underwriters have, without that risk.
Those concerns include:
- What resources are dedicated to the problem;
- When the company expects to be Y2K compliant;
- When the company began addressing the problem;
- Whether the company has met target dates so far.
Norrick says smaller organizations may find they have the same flexibility with underwriters if they talk to them and proactively address concerns.
All underwriters are interested in what companies are doing to prepare themselves, he says. If they look at the exposure and see the effort merits it, most will continue to provide coverage under their separate existing policies.
How to reach: J&H Marsh and McClennan (216) 523-3661
Charles Stack may be the first person to ever sell a book on the Internet. Its not a stretch to call him the Ferdinand Magellan of e-commerce, exploring the very edges of the online world at a time when the Internet was text only, security encryption was still military technology and people trying to sell stuff were as welcome as a 16th century Spaniard in the Pacific. Stack courageously ventured into those inhospitable waters in 1992 when he founded the worlds first online bookstore Book Stacks Unlimited long before the World Wide Web existed.
What Stack remembers most about that first online sale was the waiting. Interminable waiting. He first got word out about the bookstore by placing ads in magazines dedicated to the esoteric world of online bulletin board systems BBSs in computerese.
Then, day after day, Stack and his small staff passed time at the office, waiting for someone anyone to see one of the ads and dial the phone number that would let their computer log on to the bookstore.
BBS technology lets you watch the guy navigate through the site, Stack explains. So we sat there and watched the modems, with the ringers turned up loud.
After a week of nervous fidgeting, a modem finally hissed and lit up. Stack and his staff huddled around a single monitor to watch the historic transaction unfold.
I remember watching this person typing very, very slowly, Stack recalls in an uncharacteristic chattiness. He navigated so slow.
The minutes dragged; the staff waited for the visitor to make a purchase; Stack tried not to interfere. But a mix of excitement and frustration got the better of him. We couldnt stand it anymore, Stack says. Finally, we broke in on his session and told him he was our first customer.
Stack had spent a year painstakingly programming the BBS for ease of use an unusual nicety at the time and he wanted to ask the customer what was taking so damn long. Instead, he prudently typed the more open-ended message: Why do you like this service?
He waited through an abnormally long pause, and waited still more as the answer appeared on the screen in front of him, one painstakingly typed letter at a time:
A...s... ... a... ... b...l...i...n...d... ... p...e...r...s...o...n..., the response began. Several minutes later, Stack understood what the technology meant for his first customer, who had a computer that read ASCII text aloud and a Braille keyboard for input.
The selection eventually reached more than 500,000 titles under Stacks ownership, but for all his vision about the impact of the Internet on consumers, Stack failed in one critical area: He didnt anticipate the excitement it would generate in the financial community.
If his goal from the start had been to take the enterprise public, Book Stacks today might be the premier online book store. But Stacks entrance into the world of Internet finance came before the impossibly high multiples achieved by one high-tech stock after another.
Instead, he sold the business in 1996 for $4.2 million to the company that has since become Cendant Corp. (At the time, its sales volume apparently had already been eclipsed by the months-old Amazon.com, though Stack has never revealed any meaningful clues about the finances of his businesses.)
It was an unquestionably profitable payday for Charles Stack but nothing compared to the $32 million that Amazons IPO attracted just a month after the sale. All of which made the transaction seem rather familiar to Stack, who has spent the last 20 years a step ahead of the mainstream and a step behind the big money.
But in the mind of this reclusive entrepreneur, that is about to change.
After quietly undermining the foundation of the retail book trade, Stack has now taken aim at the software business. His latest venture, Flashline.com, sells software components online, and Stack believes it will change the way businesses acquire and build their software applications. This time, his plan includes remaining the market leader.
Then IBM came out with the first real PC, recalls Stack. And I computerized the entire law practice.
Stack soon branched out on his own to take his computer know-how to other law firms. I wrote time and billing software and case management software, he says. I realized it was more fun than practicing law.
In 1984, he founded Parallax MicroSystems Inc., which designed and implemented custom software for law offices. That business plodded along until late 1988, when opportunity knocked. Stack says simply, The Wellington Group broke up.
It was a consortium of law firms that handled asbestos liability claims across the United States one firm in each city. Suddenly, Stack says, defendants were forced to find new representation, and Parallax software was in the middle of the gold rush. We wrote our first asbestos case management system that year and grew 25-fold overnight. he says.
For the next three years, Stack crisscrossed the country, hawking his product.
By the time asbestos business slowed down, he had stumbled across computer bulletin board systems. In the days before the graphic capabilities of the World Wide Web, BBSs were the first online communities, allowing people with a shared interest to post messages and create conversations, regardless of their geographic location.
Though his background wasnt in retail, Stack made an immediate leap in understanding that the power of this new medium was not in idle conversation, but rather in applications.
All we ever did was database technology, he says. So I thought it would be cool to combine a BBS with a database and sell stuff.
In 1994, when most people were looking for @ on the keyboard, Stack developed Book Stacks Web site.
The business was a success. It received national awards for content, innovation and design. But Parallax never provided enough cash to market the store effectively, and by 1995, Stack believes, it was too late.
Though he says he lined up venture capital, the deal never closed. Stack blames the overbearing headlines generated at the same time by the Amazon.com start-up. But Stacks reclusive nature may have played a role, too.
He was right out there with the first practical use of the Internet. Anybody that was doing Web technology back then knew of him, offers Ron Copfer, of Copfer and Associates, who first tapped the emerging Internet at the same time and for the same market as Stack using it to do research for courtroom attorneys.
The community of Internet-savvy entrepreneurs was small then perhaps no more than five or six people in Greater Cleveland. Oddly, none of them know Stack personally.
Ive never spoken with him or met him to this day, Copfer says.
I dialed into his telnet store, recalls Mark Geyman, founder of Netforce Development and another member of that pioneering clique. Everybody did back then. But Ive never met Stack.
Even Stack admits that hes an inside guy more interested in building an infrastructure than promoting a business though hes not quite ready to concede that may have been why he failed to raise capital for Book Stacks.
So when he got an offer to sell the business outright, he took it. Even then, he wouldnt talk about himself or his ideas. The book store, he told SBN at the time, is the real story.
After selling the business, Stack stayed on to develop new ideas. Id been doing Internet retail for a few years and saw the next big thing was going to be digital products, he says. If not packaged products, then services.
As soon as he figured that out, he signed a noncompete agreement and in early 1998 left Cendant to open Flashline.com.
I saw a great opportunity, he says. And it was best to do it as a start-up.
Thats about three months worth of work, Stack says. I had to determine things that dont even exist yet. Were about a good year ahead of everyone else. We will be well-poised when this industry does take off.
But Flashline had to start small. Stacks only rule: It had to sell a downloadable digital product.
He settled on typefaces. The company offers more than 720 fonts, most for less than $39. While nobody at the company will offer even the slightest hint about sales volume, Stack says traffic has been good enough to let him develop Beans By Design the product that he thinks will change the software business.
Beans By Design, which is based on the Java programming language, allows software developers to upload original programs to the Flashline server. The idea is to create a marketplace where software designers and companies come together to commission, buy and sell reusable software components that simply plug into existing software.
For instance, a company that doesnt need an entire ERP program could buy just an inventory control module or commission a designer to create a specialized module.
More than 200 software developers worldwide have signed on, according to David Goebel, Flashlines director of business development.
Contrast that to todays software design, which offers two choices: Buy an expensive custom package for your business or buy an off-the-shelf package and pay consultants to adapt it. Either way, the bill is likely to be tens of thousands of dollars for a system that still falls short 12 months later.
In Stacks model, users buy components that generally sell for less than $500 apiece, and drop them into existing software.
This is the outsourcing of customized software components online, says Goebel. And no one else is doing it. What happens is that people find components that fit 80 percent of what they needed [that arent] exactly what theyre looking for. With Beans By Design, they can provide specs and have the designers bid to develop the specific customized component in an auction setting.
As new components are developed, they are added to Flashlines database, creating a cafeteria-style system for customized software. That, says Stack is the revolutionary aspect: Reusable software components will finally move software development from craft to science and with it bring faster development, lower costs, bug reduction and reduced maintenance.
In my most optimistic moments, I think Flashlines model will change the way softwares made, Stack muses. On a more realistic level, were trying to make a fundamental change in an industry.
One of Stacks lesser-known enterprises was the early registration of nearly two dozen high-profile Internet domain names, including books.com (Book Stacks) and cleveland.com which he sold to Cleveland Live.
We sold all the best ones , he says. Disney paid Stack $25,000 for movies.com. Brokering domain names has become a lucrative (if not well-regarded) business. But Stack never made out that well. We got between $15,000 and $25,000 each, he says.
That begs the question Why does Stack think hes about to hit the jackpot this time, after a history of visionary enterprises that have only performed well enough?
First, he says, Ive been in the custom software business since 1984 in one way or another. This is a more natural fit for me.
Second, the experience with Amazon.com taught him the importance of promotion. For Flashline, Stack has sought and received publicity among the half-dozen or so leading trade publications in software development.
He has beefed up his PR and marketing staff, and no matter how uncomfortable it makes him, he allows himself to be prodded into public appearances and handshaking opportunities.
Stacks usually grim countenance has been replaced by a warmer facade. Though hes still likely to answer questions with the kind of short, uncolorful phrases that brand him a tough interview among the journalists he needs, you can at least see the effort in his face. He has accepted the need for a more public profile.
Hes been featured at several Internet software conferences, and slowly is gaining the national reputation he might have earned years ago.
As a result, Flashline is starting to develop the elusive and all-important buzz that is central to success on the Internet. A simple keyword search for Charles Stack and Flashline turns up dozens of glowing references from software developers and purchasers.
But most important to his success and the success of anyone who dabbles in Internet businesses is the one thing Stack seems to have today that he never had before: an appreciation for the money.
He says he will raise capital (he met with prospective investors the day before his photo shoot with SBN and termed the meeting a nightmare that went well). And he will eventually take Flashline public even if it means smiling til it hurts. Perhaps then hell finally earn his place in the history of Internet exploration.