Ray Marano

Monday, 24 May 2004 13:21

Doros Platika

Doros Platika acknowledges that he misses practicing medicine. The tradeoff, he says, is the opportunity to multiply his efforts on behalf of many more people than he could ever hope to affect in an active medical practice.

That opportunity comes for Platika through the Pittsburgh Life Sciences Greenhouse, a public/private partnership that invests in early stage biotech ventures in the region. Platika took over as president and CEO of the organization last November.

Indeed, Platika is in a position to help leverage the biotechnological strengths of the region into its next fast-growth industry. He says he believes that Pittsburgh has the promise of becoming a biotech center on the scale of that of Boston, San Francisco or San Diego.

No doubt that there's plenty of potential. Nationally, the life sciences attracted $4.9 billion in venture capital in 2003, or 27 percent of the total invested, according to PricewaterhouseCooper's Moneytree Report. With research at the University of Pittsburgh and Carnegie Mellon University in play in the region, intellectual capital abounds.

The two institutions' strengths, medical research and computer science, respectively, bring two critical ingredients to the mix.

"At the edges where those two fields merge, you have some of the biggest successes," Platika says.

Strong foundation support locally has helped to get the Pittsburgh Life Sciences Greenhouse off the ground, he says. Now, however, the region needs to assemble a strong cadre of angel investors to grow small ventures to a stage where they will interest venture capital from outside the region. That will help to focus needed attention on Pittsburgh as a biotech center, says Platika.

"Right now, in all honesty, we're a flyover city," says Platika.

Ultimately, he says, successes -- and failures -- will allow the biotech sector to continue to revitalize itself. Successful companies will spin off other ventures, and the failed ones will allow talented and experienced scientists and entrepreneurs to be recycled back into the process of fueling and driving new start-ups.

Platika spoke with Smart Business about the future of biotech in the region and the role of the Pittsburgh Life Sciences Greenhouse.

What do you see as the key role of the Pittsburgh Life Sciences Greenhouse?

A key component of the greenhouse right now is to prime the pump and seed the opportunities in the life sciences. And that includes in the universities, making sure there are the facilities there for people to do their work and top-notch people who will generate commercial opportunities, to nurture and help them through our various programs, not just providing capital but providing entrepreneurial assistance in the form of management assistance, providing an incubator, providing assistance in gaining access to both federal and private money.

All of that is focused on early stage companies, as well as recruiting entrepreneurs to the area. One of the areas where there is a bit of a lack in Pittsburgh is institutional capital. That's a gap that we need to fill.

What role do the University of Pittsburgh and Carnegie Mellon play?

Having those two come together and having an opportunity to develop bioinformatics and robotics that can lead to devices such as artificial limbs, that's where we have the potential to create a real powerhouse for new technologies and company development. If I were an investor, I would be looking for opportunities that appear to be taking two areas of strength and putting them together.

Historically, it's these hybrid opportunities that have yielded the home runs.

It seems like Pittsburgh has a lot going for it in this field. Are there any concerns?

What we have to be careful about is expectations. It's a field that's not going to happen in six months. It's a field that's not going to be as big as steel was in one or two years. So my biggest concern is, do we have the patience and stamina to stick with it?

I think if we stick with it and we believe in ourselves, there's nothing stopping Pittsburgh from becoming one of the dominant centers in the life sciences in the world in its particular niches where we have strength. I think the other concern is, if we try to succeed from the get-go across the board, that's the best way to use a lot of resources -- and this is one man's belief, and I could very well be wrong -- that could be a way to spend a lot of resources and not be competitive with other groups that have many more resources.

But I think if we choose carefully and leverage our areas of strength, Pittsburgh will become one of the leading centers in the world in those areas.

What are those areas?

Areas that combine computational strengths with the life sciences. I think one of the other areas where we're in the top 10 right now, if not in the top five, is tissue engineering, regenerative medicine.

People have not yet come up with a good business model in these areas, and that's a challenge. I think there's real potential in nanotechnology where it intersects with biology and life sciences. I think these are areas where we could become dominant.

Is there any piece of the puzzle that's missing?

I think we have a gap in the area of angel investors. We're blessed with very visionary foundations and more foundation capital per capita than most other regions, so there's money in this region, but it's more conservative money.

I think right now the best opportunities in Pittsburgh are if you are an angel investor or a small individual investor. In three to five years, I hope Pittsburgh will be as good an opportunity for the large funds. Right now, there are opportunities for the $100 million to $200 million mutual funds.

There are few opportunities that can adequately absorb the kind of capital that a $1 billion to $2 billion fund needs to put to work to make it worth their while.

Does the absence of a large pharmaceutical company in the region concern you?

That's not a necessity. Boston isn't and never was, and I'm not sure if it ever will be, a huge pharmaceutical stronghold. For the most part, many of the biotech companies have grown billion-dollar products without any pharmaceutical company research and development in the area.

The closest is in Connecticut, where Pfizer and Bristol-Myers Squibb have research centers. That's also true for the largest center, the San Francisco Bay Area. San Diego has become a powerhouse in biotech without a pharmaceutical presence.

I would say having big pharmaceutical companies here would be a plus; not having them here isn't a deal-killer. How to reach: Pittsburgh Life Sciences Greenhouse, www.pittsburghlifesciences.com

Monday, 24 May 2004 13:18

Talking points

A gentleman called me recently to ask for advice in identifying opportunities to share his business success and wisdom with others through paid speaking engagements. I speak to groups from time to time, but not for money, so I thought that I'd like to find out how to do that myself.

This entrepreneur is rightfully proud that he has managed to build a successful business, one that he has pretty much turned over to his family. Now, he's got time and financial security, and he wants to give a little back and make a few bucks in the process.

To earn money doing something that most people find more distressing than a root canal, you need to have something of recognizable value to offer an audience, even if it's only your notoriety. The fact is, most of the speakers you see at events around town are doing it for free.

It's not the speaking that provides gain for the speakers, but the opportunity to get in front of an audience and get exposure for his or her company, prospects for services or to sell a book. Speaking in public, for most of us, is a means to some other end.

In any case, my suggestion to the caller was to first try to gain some public credibility for his business to establish himself as an expert. From my perspective, the best way to do this is to share his story through publicity; that is, attempt article placement in the news media to build credibility. Then he might be able to leverage the credibility into speaking engagements.

This gentleman may very well have something of value to offer other business owners, but the world may never hear it because he has placed an obstacle in the way of his success. The trouble for him is that his business is a wholesale operation, and he's afraid that publicity will bring prospective retail customers, which he doesn't want to be bothered with.

Doing anything of substance often has unintended or uninvited consequences. Launching a new venture, by its very nature, is going to attract attention, wanted or otherwise, if it is to have any chance of succeeding.

If the potential payoff is rewarding enough, you'll find a way to get around the obstacles or, perhaps, find opportunities in them.

Thursday, 29 April 2004 06:47

Less flash, more dash

Having the best Web site means having all of the latest and flashiest bells and whistles, right?

Not necessarily. In fact, some of the fancy features that make Web sites appear the most up-to-date and sophisticated might be getting in the way of your site performing at its best.

Flash-based graphics, for instance, while they can give a site a dynamic look, are invisible to search engines and may prevent visitors from reaching your site, says C.W. Kreimer, president and CTO of CommerSel Studios, a Web design firm.

Content is the single most important factor in achieving high search engine ranking, Kreimer says. Search engines love text-rich sites, but can only see HTML text on a page, not text hidden in graphics or flash animations. As a rule of thumb, he suggests, place about 200 to 250 words on each optimized page.

Kreimer also suggests the following to improve your Web site's search engine ranking, increasing the chances that potential visitors will find it.

* Put as much information as possible in HTML format. Provide at least a summary in HTML of white papers, technical reports or other substantial content at your site that is in Microsoft Word, Excel or Adobe PDF files. Some search engines will index .DOC, .XLS, and .PDF files, but you'll get a better ranking if you put the content in HTML as well.

"PDF files are great for spec sheets. They're awful for Web sites," says Kreimer.

* Don't hide your content in a database. Search engines don't crawl deeply into sites when the page contains links that contain question marks, an indicator for databases.

* Don't use graphics as links. As with Flash, search engines can't read them, says Kreimer.

* Regularly submit pages. Kreimer calls search engine ranking a "participation sport." But don't contribute too many pages at once, Kreimer warns. The search engines will think you're spamming them and won't index your site.

* Don't have pages that are devoid of branding and navigation to the rest of the site. Not only is it confusing to users if they reach a page that lacks navigation to any pages on your site, but your chances of having this page appear in the search engines is minimal.

* Make it easy for your customers to locate content on your Web site. Make sure it has an integrated search function, which will allow everyone who uses your site to locate the information they are interested in obtaining. How to reach: CommerSel Studios, www.CommerSel.com

Thursday, 29 April 2004 06:43

Taming the monster

In an ad for legal staffing company Legal Network Ltd., in an unmistakable parody of the cover of the Beatles' "Abbey Road," Karl Schieneman, co-founder and managing director, strides last in the queue.

Those looking for symbolism in the image may find it in the fact that Schieneman doesn't take the lead on every initiative his company undertakes. He knows first-hand that fast growth can be an opportunity as well as a challenge that can tax the talents of any entrepreneur, especially one who tries to do everything himself.

Schieneman's not the only entrepreneur who does battle with the demands that rapid growth can bring. It can impact a business at every turn, from creating financial cramps to bringing growing pains to the HR department. Entrepreneurs can get so busy building their business that they neglect adding to the structure that it needs to support it.

Ad agency Giant Ideas tries to figure out just the right time to add people, while apparel maker Earth Sun Moon Trading Co. struggles with identifying the right time to pick up the pace of growth and when to slow it down.

Legal Network offers corporate and law firm clients temporary or permanent lawyer talent from a pool of 5,000 screened attorneys. Last year, Schieneman opened an office in Cleveland, stabling top-notch lawyers in Midwestern cities, which allows him to offer their legal expertise to clients in large metro areas like Washington, New York and Chicago at a cost as much as 40 percent less than the going rates in those cities.

Schieneman and his firm have earned more than a dozen awards for their accomplishments since the company's start in 1999. His company grew its revenue nearly 1,500 percent between 1998 and 2002, earning it a place on the Inc 500 list of fastest growing companies in 2001 and 2003. Schieneman says the company likely will make the list this year, too, and is a cinch to break the top 20 on Inc's Inner City 100.

Schieneman learned quickly that fast growth can swamp even someone like himself, an entrepreneur with a law degree and an MBA, when he tries to do everything.

"As the initial entrepreneur, you tend to get your hands into everything, and you become the bottleneck," says Schieneman.

Although he continues to keep his finger on the pulse of virtually every aspect of his company, he's learned that the best way to navigate through rapid growth is to delegate responsibility to his staff, to the point where he doesn't always reserve the right to the final say on the company's next project or initiative. And he sees a lot of projects at the approval stage at the same time everyone else in the company sees them.

To engage his staff, Schieneman devised a strategy that calls for each employee to create a business plan that recognizes their responsibilities to the organization and the strategies that they intend to implement. Contract staff can earn rewards for reaching agreed upon objectives with clients, satisfactory completion of projects and achieving performance goals.

His willingness to let go, he says, has allowed him to develop relationships with companies, law firms and lawyers in other cities that have expanded his business and allowed the growth to continue.

"The only person I micromanage is myself," Schieneman says. "I never could have dropped what I was doing and focused on the markets where no one knows me."

And there are other pluses. Schieneman is able to pursue other business segments, including other staffing ventures that he expects to roll out this year.

Giant Ideas, big decisions

Bryan Ward, president of Giant Ideas, an ad agency that came from nowhere in late 2001 to place among the top six agencies in town, faces the task of figuring out how to deal with his business's fast pace of growth.

"Right now, the biggest challenge I have is keeping up with the growth," says Ward.

To date, Ward has turned to an array of strategic partners and independent professionals to complete some of the work that can't be done using in-house staff. But he wrestles with a dilemma that confronts every growing business: When do you add employees, and how many do you hire?

Ward ponders: "How many hats do I need to keep up with the growth?"

Companies in the midst of growth spurts often get themselves into trouble when they hire in a panic to fill slots, says Jack Roseman, director of the Roseman Institute, a consulting firm that helps companies deal with growth-related issues.

"When you're in a fast-growth mode, it's tempting to compromise your hiring standards because you need people, you needed them yesterday," says Roseman.

The HR factor

Earth Sun Moon Trading Co. launched a direct-to-consumer mail campaign last year that brought in more revenue in six months than the rest of its operations did for the entire year. That meant a hiring binge for the company, which now has 35 full-time workers and employs an additional 35 part-timers during peak periods.

"We literally had to hire 20 people in the last six months," says Nathan Depew, president and founder of the Grove City company that manufactures and distributes screen-printed apparel.

Earth Sun Moon Trading has doubled its revenue every year since Depew launched it in 1996. It posted sales of $2.1 million in 2002 and $4.7 million last year, and expects to do $7.2 million in 2004.

"I think the most challenging thing is constructing things as far as people go and trying to manage people throughout this," says Depew.

Depew says that Earth Sun Moon Trading periodically will launch a new initiative that requires additional employees and organizational structure. After each growth spurt subsides, Depew finds that it's best to allow the company to catch its collective breath.

"What I find myself doing is putting the pedal to the metal, then taking my foot off the gas for awhile and letting the organization catch up with the growth," says Depew.

That's a good strategy, Roseman says. In some cases, the pace can burn out employees before the entrepreneur notices, leading to a drop in productivity or a loss of valuable talent.

"When you're going like a bat out of hell," says Roseman, "you don't realize that everyone else is going like a bat out of hell, too."

"People like to grow a company, but change is always unsettling as well," Depew says.

Fast growth -- the slow way

While few entrepreneurs build a business solely on luck, serendipitous circumstances can contribute to the good fortune of some enterprises.

Gib Zilner, a pharmacist by profession, opened Diamond Drugs as a 1,000-square-foot retail operation in 1970. Zilner began to serve nursing and personal care homes, getting his feet wet in the institutional market.

The superintendent at a state correctional facility in Greensburg suggested he bid for the business at his institution, and Zilner started serving the prison segment. Today, the 480-employee company has contracts with prisons in 39 states and brings in more than $120 million in revenue. An Inc 500 company, Diamond Drugs expanded at a 429 percent pace between 1998 and 2002.

But Zilner says he never tried to grow the company faster than its structure could support it, or so rapidly that it would fumble its existing book of business.

"We wanted to do the best we could so we wouldn't lose accounts," Zilner says.

Growth is one thing, but sustainable growth is quite another, he points out.

Says Zilner: "It's easy to expand, but you can collapse very quickly if you don't have a good foundation."

The typical track that many young pharmacists take -- and often reject -- has contributed to Diamond Drugs' success. Many pharmacy graduates find entry-level positions with large retail drug store chains as retail managers. While pharmacy grads often prefer to practice their profession, the retailers are interested in store profits and operations.

"They're worried about selling the two-liter pop, the light bulbs and the Christmas lights," Zilner says.

For pharmacists who want to compound and dispense drugs and not bear the additional burden of overseeing a retail operation, the institutional pharmacy environment is one that has appeal. As a result, while there is an overall shortage of pharmacists, Zilner says Diamond Drugs has never had a problem in attracting them, even though it's not in the middle of a large urban area.

Cash is king

While fast growth-- and, presumably, bigger revenue -- might seem like a problem that a lot of business owners would like to have, it can put a strain on a company's finances.

"You can get into deep trouble by growing too fast, spending money on inventory and all kinds of things that you need and find yourself without cash," says Roseman.

When Earth Sun Moon Trading was launched, Depew followed the track that a lot of entrepreneurs take when it comes to financing their ventures: He took out a home equity loan and charged purchases to his credit cards.

"It's hard to get a lot out of banks at the beginning," Depew says.

Depew eased his growing pains by bringing on two investors who were willing to take a minority position in his company and leave the management up to him. As a bonus, his partners are business owners and MBAs, able to give Depew valuable advice for running the company more efficiently. One of the tools that they helped Depew develop to manage finances was a weekly analysis that forecasts cash flow out for several months.

Earth Sun Moon Trading developed a track record that has led to a helpful banking relationship with First National Bank of Pennsylvania and a lending officer who Depew says "sees beyond the paltry surroundings of a start-up company." The banker has been willing to extend the company's credit as it has grown, allowing it to finance its expansion without being restrained by a shortage of capital.

Roseman says business owners need to think both strategically and tactically, looking out over time to forecast when the peaks and valleys in cash flow might occur and how to prepare for them. Taking on too much at any given time, he says, can place excessive strain on a company's financial and human resources. In some cases, the business owner needs the discipline to turn down work.

Says Roseman: "There are times when you're better off saying no to a contract."

How to reach: Diamond Drugs Inc., www.diamondpharmacy.com; Earth Sun Moon Trading Co., www.earthsunmoon.com; The Roseman Institute, www.rosemaninstitute.com; The Family Business Center at Citizens; www.citizensnatl.com; Giant Ideas, www.giant-ideas.com; Legal Network, www.legalnetworkltd.com

Thursday, 11 March 2004 12:11

Biotech boom?

The numbers are impressive.

Tobacco settlement money awarded to Pennsylvania -- $33 million of it --has been dedicated to establishing and funding the Pittsburgh Life Sciences Greenhouse, an effort to jumpstart and develop biotech ventures in the region.

The Pittsburgh foundation community has matched that money by more than two to one. The University of Pittsburgh has attracted more than half a billion dollars in sponsored research, two-thirds of it going into life sciences investigations. More than $5 million from the PLSG has flowed into the University of Pittsburgh and Carnegie Mellon University to attract top biotech researchers to those institutions.

And venture and angel investors are showing interest in backing biotech companies. Birchmere Investments, for instance, has brought in its first life sciences partner.

The landscape is just as notable. Two world-class universities churn out research in science and information technology, two disciplines that converge in the relatively new field of bioinformatics. The Pittsburgh region is one of the top five locations in the world for tissue engineering, thanks to the development of companies such as Cellomics and TissueInformatics, and the talent that organizations like them have attracted to the region.

That drawing power is exemplified by the recent recruitment of a senior executive from Baxter Pharmaceuticals to Renal Solutions.

The stakes are high and the opportunities enormous, say local players.

"I think there are tremendous opportunities in this area," says Bernard Cambou, a partner in Birchmere Ventures who came to the fund specifically to evaluate biotech companies.

"Biotech is coming back, it's coming back big, at least on both coasts," says Doros Platika, president and CEO of the Pittsburgh Life Sciences Greenhouse.

The key to making the most of Pittsburgh's resources, Platika says, is for the region to identify areas of strength, match them with areas of opportunity, accelerate the creation of start-ups and attract new companies and technologies to Pittsburgh.

The value of identifying key areas of opportunity is critical, says Platika. Singapore, he points out, has determined that it will attempt to carve out a market in human stem cell technology, a sector that researchers in the United States are wary of because of the legal and ethical issues surrounding its investigation and application.

Singapore has concluded, says Platika, that by the time the moral and legal considerations are sorted out in the United States, Singapore will be far ahead on its own stem cell research and development.

In the wake of the tech boom, it appears that there are differences in the way investors are evaluating life science opportunities. Angel investors, burned by vague opportunities in IT during the tech boom, are looking for models that are more clear-cut in terms of their viability and the time it will take to achieve their exit strategies.

"I think what we want to see is a specific timeline," says Gus Mantia, chairman of Advanced Global Technologies, an angel fund comprised of 50 physicians.

Many of his fund's investors are in their 50s and 60s, says Mantia, and are looking for investments with shorter time horizons. Biotech ventures, because of their long development cycles, can be less attractive to this type of investor.

Platika says investors are leaning toward making larger investments in fewer companies, indicating that they are taking harder looks at ventures and raising the bar for potential investments.

Indeed, the angel investment community says the most critical thing that organizations like the Pittsburgh Life Sciences Greenhouse can do is to qualify companies for investment.

Says Mantia: "The biggest thing you can do is bring those companies to maturity and filter them out for us." How to reach: Pittsburgh Life Sciences Greenhouse, www.pittsburghlifescience.com, Birchmere Ventures, www.birchmerevc.com

Thursday, 26 February 2004 08:41

What research reveals

Tom Nist's wife doesn't share his enthusiasm for banking. If he tells her something that might interest banking insiders, she's rarely impressed.

Her typical response, he says, is, "So what?"

In truth, Nist, senior vice president, business banking, for PNC Bank, isn't surprised by his spouse's lack of interest in his industry. He and PNC have found that most business owners don't share his enthusiasm for banking, either.

"You don't get very excited about banking," Nist says of most business owners.

Nonetheless, he says, businesspeople rate a good, competent banker as a valued member of their team.

PNC's research over the past three years, much of it through focus groups, has revealed plenty of information about the attitudes that business owners have about banking and has spurred PNC to improve the way it serves those clients.

"Those focus groups aren't at all about how do you like your checking account," says Nist. "We already know you don't like your checking account."

Instead, PNC uses focus groups to determine customer satisfaction levels and customer commitment, which Nist describes as the willingness of customers to refer the bank to other potential customers and to purchase their next banking need from PNC.

PNC found that 75 percent of its customers use the bank for transaction processing, access to payment systems and other services, not for loans. While only 25 percent borrow money for their businesses, all want the bank to be available to provide funds should they need them.

"Everybody is very attentive to the bank's willingness to provide capital," says Nist.

To respond, PNC added some touches to improve the borrowing experience, Nist says. Most improvements revolve around making sure the client has the right information to make a decision about borrowing, such as how to collateralize a loan.

The research is also designed to determine customer perceptions of their relationships with their banker.

"Part of our research got into a so-what-is-your-banker-to-you conversation," says Nist.

Industry research revealed that 70 percent of business customers said they never heard from a banker. PNC's surveys revealed similar results.

In response, PNC implemented a contact strategy, which calls for every banking customer that has a relationship with a contact officer at the bank to hear from someone within PNC at least four times a year. The contact may come as an in-person visit, a telephone call or an e-mail from a branch employee or call center worker.

PNC also discovered that customers at PNC and elsewhere aren't fully aware of the range of services that banks can offer their customers.

"There's a huge gap across the banking industry between what a bank can do and whether their customers know it," Nist says.

For instance, most customers are unaware that they can complete an emergency wire transfer of funds by going directly to the bank's wire transfer department, completing it in half the time and at half the cost required if they went through a branch office.

Even if business owners don't display the same degree of eagerness about banking that Nist and his colleagues share, they can be assured that they are needed nonetheless.

"Business owners tell us very consistently, with a lot of emphasis, that a good banker is a really important asset," says Nist. "What I'm hearing most from my customers is, 'Can you figure out what I need?'" How to reach: PNC Bank, www.pnc.com

Monday, 08 December 2003 10:34

Pacesetters 2004

Things move quickly and constantly in the business world. A Mass Mutual study found that CEOs of nonfamily businesses have an average tenure of four years, the same length of time that Smart Business has been recognizing its annual roster of Pacesetters.

Corporate Pittsburgh doesn't seem to experience the dramatic highs or lows or the games of musical chairs in the executive suites and boardrooms that typify business in some faster-paced markets.

Nonetheless, there have been substantial changes in assignments and direction on the part of past Pacesetters and their companies since we began back in 2000 to recognize local business luminaries for the designation.

James Liken left his post as president and CEO of Respironics Inc. this year to become its vice chairman after leading a stellar turnaround of the medical products company. Roger Byford left the CEO post at Vocollect to go back to his first love, doing research for the company's voice recognition products. Jim Cederna pursued consulting work after leaving the CEO post at Calgon Carbon.

Jerry Thompson, former director of Ketchum's Pittsburgh office, went to work at the firm's new regional office in Chicago after yet another scaling back of the office here. Frank Brooks Robinson left the helm of the Regional Industrial Development Corp. for retirement following a long and distinguished career. Not one to remain idle for long, though, Robinson was elected to chair the board of the Carnegie Institute.

Dennis Yablonsky left the Pittsburgh Digital Greenhouse to join Gov. Ed Rendell's administration. Bill Newlin gave up his post as CEO at Buchanan Ingersoll last year to join Dick's Sporting Goods, while Thomas Van Kirk succeeded him at the firm. Rick Stafford finally managed to retire as the Allegheny Conference attracted Florida's Michael Langley to take the organization's post as CEO. Internet service provider Stargate was sliced up and sold off in bankruptcy court, leaving its young founder, Marc Ruscitto, looking for a new challenge.

A profoundly sad departure was the death last year of Fred Rogers, a gentle soul and gifted communicator who left an indelible mark not only on Pittsburgh, but on the entire globe.

In true Pittsburgh style, a number of Pacesetters have stayed the course at their companies. Atul Bansal, CEO of Laurel Networks, is still at it at one of a handful of dot-com era tech companies that hasn't burned through all of its cash and looks like it will make it. Andy Fraley and Dave Nelsen are managing to keep CoManage, another tech venture that raised investors' expectations into the stratosphere, viable as well. Rob Cochran has expanded the already huge #1 Cochran auto dealership in Monroeville into one of General Motors Corp.'s largest.

At Smart Business, we've come to expect a nearly inexhaustible supply of talented, dedicated business leaders in the Pittsburgh region worthy of recognition. For 2004, we've selected a group of Pacesetters that is the smallest yet, but they are individuals who exemplify the dedication, hard work and talent that resides in the best of the best.

We honor their accomplishments and extend our best wishes for their continued success, no matter how things may change.

Monday, 08 December 2003 10:23

The forklift index

A friend recently mentioned that one of her business associates uses the "forklift index" to gauge the business cycle.

The rationale goes something like this: When this seller of replacement parts for forklifts sees sales bump up, he knows that business activity is beginning to bounce back. Shipments increase, forklifts get put to harder use and, consequently, need more frequent repair and maintenance.

For most businesses, though, the calendar is a pretty good predictor of business activity.

For some retailers, August is a welcome month as families prepare to send their kids back to school and outfit them with supplies and new clothes. And lots of retailers make their biggest profits around the holidays in November and December.

January and February, however, are long, cold months for most of those same merchants.

In the retail food business, August is typically the slowest month. Customers go on vacation, spend their weekends at summer getaways and, during extremely hot spells, eat less and eat out more often. For the restaurant trade, August is one of the best months, according to the National Restaurant Association. People at home eat out more, while people on vacation eat out more, too. Maybe restaurateurs have a "knife-and-fork index."

A funeral home owner once told me that his business is almost always very slow around the Christmas and New Year's holidays. An auto mechanic I use says he can tell when it's September by looking at the activity at his garage. Things grind to a halt as his customers take late summer vacations and realign finances in the wake of back-to-school spending.

Back in the days when cars changed their styling every year, September used to be a great month for auto dealers. Buyers eager to make an impression on their neighbors or co-workers would rush into the showrooms and scoop up one of the new models. Nowadays, however, auto dealers can be pretty sure that a wave of SUV buyers will invade their stores after a heavy snowstorm.

If you have some bellwethers in your business that help you predict which way your industry might be going but that don't turn up on the evening news, I'd like to hear about them. Your responses will give us an idea of how closely you read Smart Business, a key indicator for our enterprise.

Wednesday, 19 November 2003 19:00

Plain Brown rapper

Harry Brown is wearing a dress shirt with an open collar. No big surprise, really. Casual attire is no longer a novelty in the business world, even on a weekday. Lots of executives aren't even bothering to wear neckties, save for the most formal business meetings and events.

Brown, however, seems like he has spent most of his 43 years on the job with his sleeves rolled up.

A self-described "good mechanic," the president of North Pittsburgh Systems Inc. appears as though he would be more content connecting or repairing lines and switches than poring over financial statements, making presentations to stock analysts or talking with journalists.

"I learned it from the ground up," Brown says of his on-the-job education in the business his grandfather founded.

Brown may not be the typical telecom company executive, and North Pittsburgh Systems isn't a run-of-the-mill telecommunications company. The company, which serves as the holding company for Nauticom, an Internet service provider and consultant; Penn Telecom, a competitive local exchange carrier; and North Pittsburgh Telephone Co., an incumbent local exchange carrier, has managed to transform itself from a traditional telephone company into a diversified telecommunications operation, earn strong recommendations from analysts and the business press, and make substantial capital equipment improvements without taking on excessive debt, all while remaining financially solid.

The straight-talking Brown -- once a welder, a race car mechanic and later a special services engineer at North Pittsburgh Telephone, an affiliate of North Pittsburgh Systems -- must be at least as good at the nuts and bolts of corporate management as he is with coaxial and fiber optic cables.

Business 2.0 magazine this year ranked the 400-employee public company among the nation's 100 fastest-growing technology companies, no easy feat for a mature company in a struggling industry. It's even more remarkable when you consider that one of its three divisions -- and its largest -- is a local telephone company, a segment that is compelled by regulatory requirements to provide service even where there may be no demand for it and that faces competition from wireless carriers.

Particularly in the residential market, traditional phone companies are finding customers opting for cell phones instead of landlines. Nonetheless, an incumbent local exchange carrier like North Pittsburgh Telephone is required to build infrastructure to accommodate all new development within its franchise area, no mean feat for a company that services one of the fastest-growing areas in the region.

The company's growth has been bolstered by adding two divisions -- Nauticom, an Internet service provider founded in 1989, and Penn Telecom, a competitive local exchange carrier and inter-exchange carrier launched in 1979 that offers services including long distance, custom calling cards, broadband connections and telecommunications equipment.

Simple formula

North Pittsburgh's success may be due to the fact that the 97-year-old company and Brown stuck to a simple formula for doing business during the telecom boom: Most of the time the brass, at the urging of Brown, decided to make money instead of splashes.

"We don't want to buy market share, we want to make money," Brown says.

The company has survived and thrived at a time when a lot of telecom ventures fizzled and even as the big companies continue to struggle in the wake of the speculation and overbuilding that began in the 1990s. The Telecommunications Industry Association contends that the industry has not recovered from the loss of 600,000 manufacturing jobs in the sector over the past three years.

For much of its existence, North Pittsburgh has been an incumbent local exchange carrier, serving residences and businesses with telephone services within a 285-square-mile area in northern Allegheny County, southern Butler County and western Armstrong and Westmoreland counties. But the emergence of the Internet and the Telecommunications Act of 1996, designed to increase competition among telecommunications providers, changed the face of the industry.

Those changes opened the door for Penn Telecom, launched as a business telephone services provider, to operate as a competitive local exchange carrier and expand long-distance and other services beyond North Pittsburgh Telephone's prescribed service area. All three companies under North Pittsburgh Systems benefited from the decision to invest heavily in the system's fiber optic transmission lines, part of an ambitious five-year, $50 million capital improvements program completed in 2002.

Learning from mistakes

Not that North Pittsburgh hasn't made some wrong turns. Brown acknowledges that the company has made its share of errant moves.

"We've wasted some money, but we learned a lot through that, and we have never made the same mistake twice," Brown says.

With the support of the company's board, North Pittsburgh ventured into a highly speculative business in 1999 with the Nauticom Sports Network, a service that provided online broadcasts of high school and small college sporting events as well as other sports programming.

"It was a disaster," Brown says.

With the growing interest in the Internet and lots of dot-coms looking like they were poised to reap millions, offering radio-type broadcasts of scholastic sports over the Internet supported by advertising seemed like a winning idea. But the conceivers of the idea didn't anticipate that users of the network wouldn't necessarily be at the computer screen to be influenced by the ads.

North Pittsburgh shut the network down at the end of 2000, selling the broadcast equipment to Management Science Associates Inc.

And it hasn't been without other pains. Charges associated with the WorldCom and Global Crossings bankruptcies cost the company $501,000. Slowing demand for services within the North Pittsburgh Telephone Co.'s franchise area made it necessary to reduce the division's work force by 15 percent, accomplished during the second quarter of 2003 through retirement incentives and layoffs.

"That was the first time we had to do that," says Brown. "That was very hard to do."

The key to growth for the company across the board, says Brown, is to replace lost revenue and customers on the North Pittsburgh Telephone side with new business acquired by Nauticom and Penn Telecom.

Despite personnel cuts at North Pittsburgh Telephone, the introduction of technology and the growth of broadband bode well for the company. The U.S. Telecom Association predicts that overall demand for broadband services will grow by 30 percent over the next two years. The International Telecommunication Union estimates that about one out of 10 Internet subscribers globally paid for high-speed service in 2002. DSL broadband service is available to 99 percent of North Pittsburgh System's residential customers, the segment that is driving the growth of broadband.

And while North Pittsburgh Systems isn't big enough to enter the wireless business directly, a segment that Brown says is taking a bite out of incumbent local exchange carriers like North Pittsburgh Telephone, it has partnered with YYireless1.net to offer wireless Internet access where access had not been previously available or was severely limited. The two companies launched a project this year that provides wireless service in parts of Hampton, O'Hara and Shaler townships.

Finally, the factor that's likely high on the list of the reasons for North Pittsburgh Systems' success may not be technological at all. Brown's plainspoken demeanor and candor are things that he not only reserves for himself but qualities he expects from those around him as well.

"You've got to surround yourself with good people," Brown says. "If you surround yourself with people who are going to tell you things you want to hear, you're in trouble." How to reach: North Pittsburgh Systems Inc., www.northpittsburgh.com, Nauticom, www.nauticom.com, Penn Telecom, www.penntele.com

Tuesday, 04 November 2003 07:03

Fore sight

Greensburg Country Club is set to celebrate its 100th anniversary next year, but its chance to reach its centennial was nearly snuffed out by a clubhouse fire.

A fire in 1999 destroyed a third of the clubhouse, led to water and smoke damage to most of the rest and put the survival of the club in jeopardy. But instead of viewing the fire as a setback, the club's 400-plus golf and social members and its leadership eyed at it as an opportunity to upgrade the facility.

"We just had someone hand $1.7 million to us," Pete Sesti, the club's president told the membership. "Match it and we can have the best facility in Western Pennsylvania."

It took six months of decision-making and planning, and 18 months of construction to finish the clubhouse. In the meantime, the club lost its social members, although it was kept its golf course open and retained golf members.

A makeshift kitchen was rigged in a tent, and the swimming pool cabana was boarded up to serve as an office. During the process, the club lost several key employees, and factions within the membership argued over how the club should proceed, bogging down the process.

A group of members displeased with the direction that the leadership wanted to take the club in threatened to sue to get their way.

The club got some key assistance during the process. Irwin Bank extended a line of credit and a cash advance before the insurance settlement arrived so the club could keep operating. One member, a former Mellon-Stuart Construction Co. employee, kept tabs on the construction.

Sesti's family kept his two Delmont businesses going so he could spend time at the club throughout the process.

By the time the planning, haggling and construction were over, the club had installed a $1 million irrigation system for the golf course, added a 400-person ballroom and a formal dining room and done a complete renovation to the rest of the clubhouse. Meeting rooms received upgraded audiovisual capabilities and the kitchen was completely redone.

Sesti says the club is booked for events for all but two Saturdays in 2004, and club members are using the facility more frequently than before.

While the leadership could set the direction of the club during the recovery process, Sesti says, the most critical component in keeping the club going was getting the right management in place.

Says Sesti: "The biggest thing is to select the people to build the team." How to reach: Greensburg Country Club, www.greensburg.wpga.org