When Ted Karkus became the chairman and CEO of ProPhase Labs Inc. in 2009, he knew he had a flagship product that could carry the company. Cold-EEZE lozenges had been the face of the company for 15 years, but with several straight years of declining revenue, Karkus knew some changes were in order.
Consumer feedback pointed to the taste as the primary product deficiency. With that information, Karkus decided to form a plan aimed at improving the taste and redesigning the packaging in an effort to inject new life into consumers’ perception of Cold-EEZE — and by extension, ProPhase Labs, which generated $14.5 million in 2010 net sales. Karkus says the company is anticipating an uptick in revenue in 2011 after four years of declining numbers.
Smart Business spoke with Karkus about how he revitalized the Cold-EEZE brand and how he got everyone in his company on board with the change.
What was the impetus for expanding your brand and improving your flagship product?
That was my COO’s idea. He wanted to include an insert in every package of Cold-EEZE as a way of communicating with our consumers. In that insert, on one side we had a testimonial. On the other side was a message from me that included a personal e-mail address, where any consumer could provide me with their thoughts and comments about Cold-EEZE. I personally read and respond to every one of those comments, and it was based on those comments that we came to the conclusion that it was time to improve the product.
We have loyal consumers that go back 15 years, but our consumers didn’t love the zinc aftertaste caused by the active ingredient going to work. So we listened to our consumers, and that motivated us to improve the taste. There are new flavor technologies available that didn’t exist 15 years ago, and that has helped us to improve the taste and, in turn, the overall product.
With regard to improving our packaging, we did an extensive amount of research. It was our consumers that helped us create the package, which we then tested in field studies comparing our new package to our old package.
How did you begin to roll out the plan and bring the improved product to market?
That requires careful reviews of our vendors and consultants, in much the same way we do a careful analysis of every employee we hire. Every vendor and consultant we hire goes through a careful interview process that includes meeting with several other vendors or consultants in the same category, and it requires an enormous amount of very careful thought.
How do you connect your employees to the plan?
I found the best way is through direct contact and communication and by involving the employees in the crafting of the communication. I don’t sit in a room by myself and make all the decisions while isolated from the employees of our company. Our employees work very hard, and they’re also very knowledgeable about our products, so I’m happy to include them in all steps of the decision-making process regarding our company’s future. At the end of the day, I have to sift through all of the ideas of all of our employees, as well as our vendors and consultants and come up with an optimal strategy for the future. But by including the employees, they’re informed.
How do you continue to ensure that the plan stays on track once it has been rolled out?
It is not an easy process. Where it starts is with creating a strategic vision for the future, and then analyzing ideas that either fit or do not fit into that vision. For example, our short-term goal was to decrease overhead, improve our relationships with retailers, and improve our flagship Cold-EEZE brand. We improved the relationships with retailers by travelling around the country as a senior management team. We met with all the major retailers who sell our product and came up with a plan to turn around the Cold-EEZE brand through changing the packaging, as well as improving the flavor.
We accomplished those goals. The next set of goals is to leverage the brand by introducing extensions of the Cold-EEZE brand, such as an oral spray. Moving forward, we plan to leverage our distribution platform by introducing products outside of our current category. The key is that it’s a multitiered approach combining short-term and longer-term goals.
How to reach: ProPhase Labs Inc., (215) 345-0919 or www.coldeeze.com
As the recession tightened the noose around the business world in 2008 and 2009, most businesses were forced into a reactionary mode. Long-range plans were scrapped in the name of evasive maneuvers and survival tactics. But even in the darkest days of the recession, you probably knew that there would be a point when the economic skies would be brighter, and you’d need to plan for the long-term future of your business again.
As the economy slowly recovers, that time is drawing closer. You are starting to gain a feel for how your business will need to operate three years and five years from now.
Over the course of the year, Smart Business has spoken with a number of Detroit-area CEOs on how to build and execute a strategic plan. Here are what three of them had to say.
“You really need to be able to understand what your checkpoints are along the way in any process or product or initiative that you are outlining. It really needs to be a candid self-assessment of what is the reality that your customers are dealing with, the reality of how you’re delivering on expectations, then making adjustments to it.”
Stephen Polk, chairman, president and CEO, R.L. Polk & Co.
“Stick to your game. Don’t let other competitors run your business. Don’t get caught in a fact-and-react loop, where they tripled their offer so you’re going to quadruple it. You have to realize that the economy might be different, but it doesn’t change the fundamentals. It just makes sense to stick to what you know is right. Be mindful of your competition, but don’t let them run your business.”
Gregg Solomon, president and CEO, MotorCity Casino Hotel
“The one-year plan is set in stone, but as much as I say it’s set in stone, you still need the ability to move and adjust. It’s just that when you move and adjust, make sure your modifications are still within some guideline of business practice, so you don’t blow your brains out on any of your particular metrics.”
Brett Healy, president and CEO, Webasto Roof Systems Inc.
Learn to do accurate self-assessments.
Don’t run your business on your competition’s terms.
Stick to your plan, but remain flexible when necessary.
Hundreds of years ago, towns and cities were built on rivers for the access to resources and the transportation advantages.
The river might not serve as the sole lifeblood of those towns anymore, but Matt Mittman is among those trying to prove that building in a river town still has strategic advantages.
Conshohocken, Pa., is a borough of more than 8,000 people, located in Montgomery County, on the north bank of the Schuylkill River, about 10 miles northwest of Philadelphia. Its location on the river and proximity to interstates and rail corridors make it an ideal place to start or relocate a business.
Now Mittman — a real estate agent who serves as a member of the city’s planning commission and as the chairman of the borough’s business development commission — is trying to get the word out.
“There is a main street, which is Fayette St., and it is full of retail shops and businesses. We’re also close to a number of main routes, such as Interstate 76 and 476, the Pennsylvania Turnpike and U.S. 202,” Mittman says. “I would tell a new business owner that we have just completed a revitalization plan, and a plan for the future of Conshohocken. And it digs down to what is needed in the borough. We already know that banks want to be here; we have Wawa (that) wants to be here. So there are other successful businesses that want to get into the borough.”
According to the revitalization plan, which Mittman helped construct, 20 percent of the approximately one square mile that comprises Conshohocken is zoned for commercial or borough use. Another 20 percent is used for manufacturing, while 40 percent is used for residential. The remaining 20 percent is related to transportation, including parking lots.
Above all else, Mittman says borough leaders want to see increased retail development, to help increase the profile of Fayette St., which runs southwest-to-northeast through the center of the borough.
Mittman says there are resources available to those who are interested in starting a business or relocating a business to Conshohocken. Chief among those is the business development commission.
“That is part of the reason we created the commission,” Mittman says. “To be the center point that can connect those businesses. We like to call ourselves a resource center, and if someone is looking to start a business in the borough and has specific questions, we can point them to the right spot. We can be the road map for them. If you were looking to start or relocate here, you would reach out to the borough hall. At that point, we’d provide you some resources to look over.”
The Conshohocken Borough Hall can be contacted at (610) 828-1092.
Population: 8,595 (2010)
Land area: 1.03 sq. mi.
Government system: Council-manager
Mayor: Robert Frost
Borough manager: Fran Marabella
Phone: (610) 828-1092
You know that you need a stomach for risk as a business leader. You need to be able to make the tough call and be willing to live with the consequences of being right or wrong on your decision. But your ability to handle risk extends beyond the boardroom and strategic planning sessions to the hallways and offices where your employees work. You need to take a chance on your people, build a culture that suits them and give them the freedom to think and perform in a way that best suits their talents. Below are several thoughts on managing risk for the sake of your culture and your people, from area leaders who recently appeared in Smart Business Orange County.
“Once you’ve set the stage and created a vision for how we can change, that’s all lovely, but at that point, this is all just words. But the proof will be in the pudding. Your first series of executions have to really show benefit, not only in improving the process but maybe also improving the workplace morale, employee satisfaction, things that people can really grab onto both tangibly and emotionally.”
Barry Arbuckle, president and CEO, MemorialCare Health System
“The biggest thing is, at the top, you have to be willing to take some risks. If you’re willing to take some risks, it actually encourages stepping outside the box and entrepreneurship. If you’re only willing to play it by the game and nobody is able to add their creativity or anything outside of the norm, then that becomes a stagnant culture.”
Greg Ashlock, market manager and president, Clear Channel Radio Los Angeles
“My management style tends to be more about hiring great people and letting them run, giving them the field. I’m not smart enough to micromanage these people, honestly. The technical breadth and diversity among the different technology areas that we have to cover … is staggering. I have to hire great people and really trust them.”
David Hankin, CEO, The Alfred E. Mann Foundation for Scientific Research
Your words must become actions.
Set the example of risk-taking from the top.
Give your employees the freedom to use their talents.
Dr. Robert Corrato founded Executive Health Resources in 1997 as a small start-up built around the concept of medical compliance solutions to hospitals.
Corrato’s new company created its own niche, which allowed for a highly entrepreneurial attitude within the organization. The rules weren’t set, the boundaries weren’t drawn, and Corrato was allowed a blank canvas on which he and his staff could create and innovate.
But in the ensuing 14 years, the game has changed. EHR’s leadership defined operational processes to guide the company as it grew to 1,600 full- and part-time employees. Through necessity, EHR became more operational in nature.
But innovation is what built EHR in the first place, and Corrato wasn’t eager to let go of the freedom afforded by an innovative culture. The expanding company needed a sense of order, but in order to keep growing, Corrato still needed to keep an innovative mindset at the forefront. He needed two mindsets, often divergent, to exist in the same culture.
“Oftentimes, the competencies that are required to be entrepreneurial and start something up are different from the competencies needed to scale an organization as it grows over time,” says Corrato, the company’s president and CEO. “With that in mind, probably the toughest personal challenge I have faced here has been changing with the dynamic needs of an organization in different iterations of growth. It has been a tough challenge from a learning perspective.”
Corrato has constructed components within his organization that focus individually on the innovative and operational elements of the business. But he also needed to figure out a way for the two components to develop a symbiotic relationship — the innovators offering ideas to the operators and the operators offering structure to the innovators. It has required Corrato to define the company’s culture in specific terms, hire people who can help promote the culture, and ensure that there is a system through which the innovators and operators can collaborate.
Define the culture
Like most young businesses, EHR’s culture wasn’t designed at the outset. It took a number of years for the culture to evolve and meet the needs of a company with rapidly accelerating growth.
In the early days of the company, Corrato and his staff focused on building up a core of industry knowledge, then listening to clients, responding to their needs and providing services to meet those needs in the most efficient manner possible.
“First and foremost, you have to build a deep expertise and knowledge in your space, and you have to initially keep your nose to the grindstone, listen very carefully to the clients you have been able to engage and cultivate those early adopters,” Corrato says. “Then, you have to couple that momentum with your deep knowledge of the industry to continually refine what those services or product offerings are going to be. Once you have a good concept of what the service offerings need to look like, you then need to say ‘OK, if we are going to be able to provide these services with excellence, and do it to a large marketplace, how do we take the best of what we do and scale it in a way that ensures a consistent, excellent approach?’”
Over the years of shaping and reshaping EHR, Corrato has learned that a successful company’s culture revolves around three tenets. Employees need to believe in the value of their company’s purpose, there has to be a defined business case backing up the purpose, and employees have to extract a sense of enjoyment and satisfaction from their work. Without those three factors in place, it becomes difficult for a culture to sustain itself.
“It is a daily tactical initiative,” Corrato says. “It is very easy to have the right rhetoric, but if the people in the organization don’t see you, as the leader, living that every day, you can run into problems. Living it can be as simple as you’re walking down the hallway, you see a piece of paper on the floor and you pick it up because you’re proud of the way your office looks. It can be on a large scale, like ensuring that you’re there every day to support every person in the organization, whether they’re in marketing, account management or whatever component they might be in. If you’re willing to be tangibly available and a presence, that is the first step in getting to those three tenets of a good culture.”
Without your actions, your words become hollow, and the cultural seeds you’re attempting to plant will never sprout.
“This is an exhaustingly important job, because if you don’t do it, and keep doing it, it simply becomes rhetoric,” Corrato says. “And people are smart. If they hear rhetoric and don’t see the actions to match it, all faith is lost, and the foundation on which your organization should be supported begins to crumble away.”
Put people in place
From the start of the recruiting and interviewing process, Corrato wants the people who come through the door looking for a job at EHR to understand the company’s culture and what is expected of team members.
If you want your culture to embrace specific cultural tenets, you need to ensure that you’re bringing aboard people who can embrace and advance the culture.
“The last thing we want to do is take the time and effort to recruit and interview, and then bring the wrong person into the organization,” Corrato says. “It is much harder to do that than to prevent it from happening in the first place. That is why you need to develop a thoughtful, detailed recruiting process that allows the individual to learn about the organization along the way.”
Having a good recruiting process begins with having good recruiters. At EHR, members of leadership from the various departments meet with job candidates to explain how the company values both innovation and operational stability, and how it plays into that particular field.
It comes back to organizational connectedness. Your hiring process can’t be completely separated from your daily operations or the areas that will thrive on the ideas that new employees will bring to the table.
“Your recruiting can’t be disconnected from the operations and everyday goings-on,” Corrato says. “The folks who are leading various units of the company also have a role on their team as input into the evaluation of those coming into our organization. It is a good and structured approach that brings in the subject matter experts in our organization to do an evaluation of the individuals who come into the organization. The connection is important to have. If that’s disconnected, then you will find that the folks who are going to be working with the new, recruited individual may find that they have made a misstep in hiring, and that goes back to the fact that it’s much harder to correct a misstep than to make the right hire in the first place.”
Get things moving
If you’ve defined a direction and built a work force that can help support that direction, the question becomes, how do you get to your goals?
At EHR, this is where the question of innovation versus operations became prevalent.
“It is a classic dilemma of how do you take an organization that is very scaled and detailed, and how do you interject the ability to create innovation,” Corrato says. “It’s a constant dilemma because they are very different processes. The operational process is one where you’re measuring on a daily basis what you are doing and honing the operational machine. Innovation, on the other hand, is more of an approach that is centered on projects.”
Corrato’s solution was to break the innovation out from the operations. He set up innovation teams to produce ideas for new products and services. The ideas are pieced together by the teams, and then presented to the heads of the operational aspects of the organization for review. It begins a back-and-forth process between the innovation and operations sides of the business, that will, over the course of several rounds, refine an idea into a product that can be rolled out to customers.
“The key is to develop these processes within the organization that allow for the development of innovation, but very closely feed the ideas back to the operational organization,” Corrato says. “If you have an operational organization and try to have those people innovate, you will find that there is always a reason why the operations need to come first. There is always something that will have to be an operational priority, and it will get in the way of that innovation component coming first. That is why you need to segment that innovation aspect out in your organization, but have it connect back to the operational areas when the time is right, given the level of development of the innovation.”
The innovation and operation aspects of EHR have also developed a mutually beneficial working relationship because all areas of the company are narrowly focused on a set of end goals. The operational heads do not hinder the creative process of the innovation teams, but the innovation teams also have a responsibility to stick close to the organization’s mission and purpose with the ideas they create.
Innovation needs to work in harmony with operations because innovation needs to help propel you toward your goals. You need to keep your innovative minds centered on your purpose and mission. If you ever need to move away from your mission, that has to be a decision that comes from your head office, not from an idea generated down the ladder.
It helps if everyone in your organization, whether they are idea generators or process managers, stays in touch with the market and understands what customers want and need, and how you can best serve those needs. In a nutshell, you have to know what you do well as a company and constantly try to figure out new ways to leverage that set of core competencies.
Corrato says it’s a matter of going deep versus going wide. Companies that go deep strive to become experts in a narrowly defined area. Companies that go wide are constantly probing for new areas to develop, which may offer a more comprehensive set of products or services to clients, but may also force the company to sacrifice expertise in a particular area.
“I’ve heard a number of folks say that no company has ever gone out of business by focusing,” Corrato says. “So that’s why it’s critical to focus on the market and services, and what your clients need. Once you’ve done that, if you want to grow, you need to assess whether the market is expansive enough to allow for the scaling of an organization. Not every company has to be a large, scaled national organization to achieve success. But once an organization decides the track it wants to take, then you have to create a repeatable, standardized and scalable approach that will result in A-plus service.”
With new ideas coming from your innovation teams, you have to weight the positives and negatives of each and project the ultimate benefit to your company. Again, you come back to finding a balance between innovation and operations.
“If you have this amazing new opportunity, what is the opportunity cost?” Corrato says. “If the cost of going wide allows you to lose an opportunity that is right in front of you and has a lower cost to attain, depth would probably come before breadth. But if you’ve already saturated and solidified your current market and it is now time to look at adjacencies, to expand your offerings, you can create the opportunity to upsell to a satisfied client base. It’s really about the pros and cons of wide versus deep, given where you’re at in your current market.”
How to reach: Executive Health Resources, (610) 446-6100 or www.ehrdocs.com
The Corrato File
Name: Robert Corrato
Title: President and CEO
Company: Executive Health Resources
Education: Biology and psychology degrees, La Salle University; MBA, Wharton School of Business, University of Pennsylvania; M.D., Medical College of Pennsylvania
What is the best business lesson you’ve learned?
To create a business case for the Golden Rule — treat others as you would want to be treated. Always keep in mind doing the right things for the organization, and everything else falls into place. There is definitely a business case for doing the right thing.
What traits or skills are essential for a business leader?
First and foremost, honorability. You have to be honest. You also have to be able to take your vision and instill it in others, and instill confidence in the vision.
What is your definition of success?
My ultimate definition of success is when people are proud of the organization. If you have that and a culture that supports that, you have the foundation of a strong organization.
On the surface, Chad Hallock’s situation seemed contradictory: generate more business while spending less money.
Hallock, the CEO and one of five co-founders of Budget Blinds Inc., was forced between this rock and a hard place by — not surprisingly — the economic recession. As a manufacturer and installer of custom blinds, shades and drapery, Budget Blinds’ customer base took a hit as the economy took a nosedive in late 2008, slashing new housing starts and halting remodeling projects in the process.
That made it much harder for the company’s 800 franchises — employing about 2,000 people — to drive business and turn a profit. Up until the recession hit, the company had been growing by about 100 franchises a year, with a failure rate of approximately 3 percent. Once the economy began its freefall, Budget Blinds was opening 60 franchises a year with a 10 percent failure rate.
“The challenge was to keep our franchisees in business and thriving in spite of the situation,” Hallock says. “When things are great, you can get very little in the way of new business and still be successful. When the housing market goes, so does the lead flow they were accustomed to.”
Hallock and his leadership team had to re-evaluate how they were marketing the business, where they were spending money and how they were going about beating the bushes for new potential customers. With the economy crumbling throughout the end of 2008 and into 2009, Hallock and his team came to the conclusion that large, high-cost marketing campaigns paved a path to the poorhouse.
“You really have to take a look at how you’re generating those leads,” he says. “You can do things like a mailer, a magazine ad or a television ad. But those cost money. So we quickly realized we had to plug this hole another way, and that’s when I said we had to focus on the Internet.”
Over the next several years, Hallock and his team structured and rolled out a two-pronged plan: Get to the top of the main search engines without spending money on sponsored links and provide franchisees with support for their grassroots sales efforts, tactics intended to build up the customer base through personal relationships.
Don’t make them scroll
As a company with no storefront locations, Budget Blinds is completely reliant on networking and mass marketing to find new customers. By reducing the company’s emphasis on print advertising and moving toward the Internet, Hallock made it a necessity to get Budget Blinds to the top of all relevant Web searches, which meant he needed to partner with people in the growing marketing area of search engine optimization, or SEO.
Hallock had used the Internet as one tool in his marketing belt for about a decade, but now he needed it to become one of his main sales-driving vehicles.
“Over the past six or seven years, the Internet has given us the best bang for our buck,” Hallock says. “It’s called CPL, or cost per lead. Once you see that the Internet is helping to drive a certain amount of business, how can I improve that? How can I spend my money and time on things that I can improve?”
At the top of most Internet searches, the user will find a set of sponsored links. Those links are paid advertisements. The company pays a fee to get their link at the top of the page. Hallock wanted keywords and key phrases to do the pulling to the top of the search, not the marketing funds he was feverishly trying to conserve. But he was wading into the deep end of the SEO pool with e-commerce companies that are specifically designed to market and sell on an Internet-based business platform.
Though Budget Blinds markets over the Web and does not have a brick-and-mortar retail presence, the company isn’t designed to be an e-commerce outfit.
Hallock went to his Internet marketing agencies, which he has been working with for about a decade and began to map out a plan that would allow Budget Blinds to venture into the fray with e-commerce companies.
“We had a bunch of meetings, all the agencies getting together in our conference rooms and talking about the challenge,” Hallock says. “Just because they’re e-commerce doesn’t mean we can allow them to show up and place higher on the searches than we are. Before we solved that problem, several years ago, we weren’t showing up well at all on the free part of the searches. Now that we have worked together to address the challenge and solved it, according to recent searches, we’re the second-highest company in terms of SEO in our space. The company ahead of us is an e-commerce company, and they’re one of our key accounts.”
The key to mastering SEO, Hallock says, is to learn how large search engines such as Google, Yahoo and Bing work. The big search engines know who is searching for what. Once you have uncovered who is searching for your product or service, when they’ll search for it and how often, you can build a strategy that can help maximize your Internet visibility.
“We can go to Google and find out, for example, how many people tomorrow are going to search the term ‘blinds,’” Hallock says. “How many are going to search for ‘window company’ and ‘window treatments.’ Google has the ability, with the way they built their system, to see what type of searching is going on. There is kind of a fundamental math equation that says if all these searches are going on and I’m in the one through three position on the search results, I’m going to get X amount of traffic. And if I can convert on that X amount, it will generate a given amount of revenue. You put a profit percentage to it, and you decide what it’s worth to go after. How many resources and dollars should I spend if this is the potential outcome?”
If you’re going to make a large commitment to SEO and Internet marketing, one place you will need to spend money and resources is with your personnel. Despite a shrinking revenue base over the previous several years, Hallock has still invested money in beefing up his IT team.
“Over the past three years, our IT team has grown to 22 people,” he says. “We’re not an e-commerce company, but we have grown our IT team and we have specific, exclusive agencies that handle our Internet, because of the level of commitment we’ve made. I am in meetings constantly, all focused on how we can improve our Web presence, how can we improve the lead flow.”
Lead the way
The Internet is a useful tool for marketing, but you can’t lean entirely on Web searches if your company isn’t structured strictly for e-commerce. You still need a personal touch, and that means putting power in the hands of the employees who develop relationships with your customers, and that’s where the second prong of Hallock’s strategy comes in.
You have to educate employees and back up their training with resources. At Budget Blinds, Hallock and his leadership team have worked for the past several years to give franchisees a ready-made jump-start in driving new business.
From the corporate office in Orange County, Hallock and his team have spent the past several years negotiating partnerships with major homebuilders around the country. The partnerships allow Budget Blinds to attain status as the exclusive provider for window shades and treatments in new homes.
“We’re working with a number of huge companies now, doing tests to see of they’ll be able to add us as one of their suppliers,” Hallock says. “With those kinds of deals in place, our franchisees don’t have to go out and generate leads. They automatically get a book of business when they start out with the Budget Blinds brand.”
If you’re going to ask a lot of your workers in the field, you have to provide them with a lot of support. You have to lay the groundwork before your people can excel. Hallock used his franchise system as an example of how to support employees in the field.
“The struggle with being a franchisee as the economy backslides is, I’m the franchisor and I’m asking, ‘What have you done for me lately?’” Hallock says. “But if you can start giving your people, the day they move into their franchise territory, some great opportunities, you’ll put them in a much better position for success.
“If, for instance, a franchisee knows that the brand is going to have a presence in all the big box retailers in their territory, that’s a big deal when you consider all the customer traffic that the different big box stores get. If you can negotiate deals to get into those stores, then when a franchisee signs on with you, they know they’re going to get all of that big box store’s traffic. They’re going to have a display in those stores.”
As a corporate leader, your job isn’t on the grassroots level. Your job is to hire the right work force to conduct operations in the field, and then leverage your resources to make them better at their jobs. Hallock has fully embraced the notion that he and his leadership team are the main support staff for the company’s franchisees.
“The franchisees are on the grassroots level,” he says. “They’re the ones we’re teaching to go knock on doors, go to meetings, do all the networking. That’s not corporate’s role. We have all the contacts, we meet with the vice presidents of the departments and work with them on a much higher level than grassroots.”
You need to maintain a global perspective on your business because you need to develop an accurate picture of how to best utilize your resources. Some employees, divisions and regions in the field will bear more fruit than others, for a variety of reasons. Hallock says that when you’re deciding where to distribute your corporate-level resources, it’s often best to aim toward the middle of the pack — toward the areas that are performing adequately, but could do much better. That is where the potential is often the greatest.
“Don’t always focus on the worst performers,” Hallock says. “I’ve seen people who want to focus all their time and energy on the worst part of their business, and you’re going to spend all of your resources and effort on trying to help them to be successful, and it won’t work. Instead, focus on where you think you can get the biggest return.
“The people in the middle, they’re responsive. They react when you give them sales tips, when you help them. You want to go where people will make a change, and the help you give them will put them over the top to where they’ll become more successful than they ever thought possible.”
Hallock’s multifaceted approach to driving new business has allowed Budget Blinds to weather the recession in relatively good shape. The company has remained in growth mode with a long-term goal of 1,500 franchisees. Budget Blinds generated $240 million in revenue last year.
“Just remember, don’t put your eggs in one basket,” Hallock says. “As you grow, probably eight out of 10 things won’t work the first time, but the two that do work make up for the eight that don’t. If you try only one thing at a time, when that one thing doesn’t work, you’re six months behind the eight ball again. You’re in an even worse position. That’s why you need to have that multifaceted approach.”
How to reach: Budget Blinds Inc., (714) 637-2100 or www.budgetblinds.com
The Hallock file
Name: Chad Hallock
Title: Co-founder and CEO
Company: Budget Blinds Inc.
What is the best business lesson you’ve learned?
Never let the failures get you down, because success always seems to be right around the corner. I can’t tell you how many times that happened. I work on things all the time that don’t work. But if I quit, I’ll never find the one thing that does work. When you’re hearing ‘no,’ you never know how close you are to a ‘yes.’
What traits or skills are essential for a business leader?
If you ask me, transparency is the one word I’ll come back to. They have to see your heart, your integrity, and your ability to take the bad with the good.
What is your definition of success?
Freedom. When I hit 1,500 franchises, and the franchisees are successful, I’ll have hit every goal I’ve wanted to achieve. That is what everyone bought into. And with that comes freedom. Freedom from worry over what is going to happen today.
They were definitely dropping some “New Coke” references in those first few months. But Patrick Doyle and his leadership team would just smile at each other. No matter what the media pundits said, they knew they were right.
When Domino’s Pizza made the decision to scrap its old pizza recipe in 2009, Doyle’s team had amassed a year and a half’s worth of data that said customers viewed Domino’s as a convenience brand first. They ordered Domino’s for a pizza in 30 minutes, not for quality food. Customers perceived the pizza itself as a brand weakness.
It’s something the leadership at Domino’s never really took to heart. Like its customers, Domino’s leaders had always viewed their specialty as convenience. Any complaints about the food would be offset many times over by the customers who kept coming back for the efficient service. It’s a philosophy that made Domino’s the worldwide gold standard in pizza delivery, with yearly sales in the billions.
That all changed in early 2008.
“We had launched a new ad campaign called ‘You Got 30,’ which kind of took us back to our roots,” says Doyle, the president and CEO of Domino’s Pizza Inc. “While we weren’t guaranteeing anyone a 30-minute delivery, we were reminding them that most of the time, they’ll get their pizza in 30 minutes. The campaign emphasized how Domino’s saves you time and what you could do with that 30 minutes.”
The campaign fell on deaf ears. Consumers had heard it all before.
“They simply did not care,” Doyle says. “The consumers who already used us because they appreciated the convenience already knew what we were telling them. Those that didn’t, who said the convenience factor was great but we needed better food, it didn’t change their minds about anything. So it was right then, in March 2008, about two months after we launched that ad campaign, that we decided we needed to go back to the drawing board with our pizza.”
Take a bold step
To this day, it’s something of a parlor game at Domino’s Ann Arbor headquarters: Who else in the world of business has admitted an inferior flagship product, scrapped it and rebuilt it from scratch?
“We still can’t come up with one,” Doyle says. “The closest example I ever heard was an ad in the late ’60s from Volkswagen, which had a picture of one of their cars, and under the picture it said ‘lemon.’ They were dealing with some quality perceptions head-on, but it was a single print ad from 45 years ago. We have wracked our brains, and our ad agency’s brains, to come up with a comparable example where a company has come out and said, ‘Our product wasn’t good.’ We haven’t yet.”
To make the product better to the eyes and mouths of customers, Doyle and his team had to go directly to the source. The first step was to listen to the people who had an ax to grind with Domino’s. Throughout 2008 and into 2009, Doyle and the rest of the company’s leadership stayed quiet, listened and took their verbal lumps as consumers launched repeated salvos, comparing the crust to cardboard and the sauce to ketchup, among other things.
“We did every possible kind of research,” Doyle says. “We were doing qualitative research like focus groups, where you’re getting people into a room and having them help you get a sense for where the opportunities were. Those were the comments you ended up seeing in the commercials themselves. But then, we also went out and tested every possible ingredient change, every combination of new sauces, crusts and cheeses, until we thought we had it optimized. Then, we took the new pizza ideas to our most loyal customers to see if they’d appreciate the change. We took it to people who weren’t doing business with us. We went to kids, we went to every possible demographic group and kept testing it.”
The rounds of data gathering and testing put Domino’s on the path to wholesale product change. The recipes for the crust and sauce were completely remade, and new cheese would be used.
Doyle and his leadership team had their new product ready for rollout by the fall of 2009. Then came the next step: explaining themselves, first to the company’s 4,900 U.S.-based franchisees, then to public at large.
State your case
The biggest momentum boost for Doyle and his team might have come with a show of hands.
In the weeks leading up to the rollout of the new pizza, the corporate leadership at Domino’s held a series of meetings around the country, meeting with the leaders of all franchise locations.
“We had five meetings over the course of a couple of weeks,” Doyle says. “We showed them the research and talked to them about customer perceptions of the pizza. We had them sample the old product and the new product, and laid out all the implications for them.”
At one point during one of the meetings, Doyle had the franchisees sample the old and new versions, then vote for which pizza they preferred.
“At one point, we did a show of hands,” he says. “It was nearly unanimous. Out of over 1,000 franchisees in the room, there were 12 who preferred the old pizza. It was absolutely overwhelming. We made the case, we allowed them to give us input, but ultimately we had overwhelming support from our system. And that is maybe the most important constituency. Those are the people who pay us to manage the brand. They’re the ones who are relying on us to do the right thing.”
But Domino’s is an industry giant and a public company to boot, meaning the convincing didn’t stop there. When Domino’s made the announcement near the end of 2009, members of the media and pizza-consuming public were quick to whip out references to New Coke, the famous 1985 business blunder in which Coca-Cola reformulated its flagship beverage, resulting in a massive consumer backlash and, ultimately, the reintroduction of the old formula as “Coca-Cola Classic.”
However, Domino’s reasoning for changing their pizza recipe was fundamentally different from the reason Coca-Cola changed its formula a quarter-century ago.
“Interestingly, while New Coke won in blind taste tests, if you went to Coke customers, they’d tell you that the taste of Coke is why they bought the product. It’s what they were used to,” Doyle says. “When they changed the formula, they were messing with what made Coke what it is. What made Domino’s a household name was the fact that we deliver really quickly. We didn’t build our reputation around the taste of the old pizza. So it was a far different level of risk involved with changing something that consumers considered a weakness. At Coke, they were changing something that consumers considered a strength.”
By the time the New Coke questions came raining down, the new pizza recipe had already caused a spike in sales. The company’s first-quarter U.S. sales in 2010 were up 14.3 percent over 2009. Year over year, Domino’s finished 2010 with a 9.9 percent bump in sales.
“It actually made the New Coke questions kind of humorous,” Doyle says. “The fact that sales were up double digits made it very easy for us to say with confidence that we weren’t pulling a New Coke. Whenever we’d get the New Coke question, we’d just kind of smile at each other.”
But before Doyle and his team could chuckle at the New Coke references, there was still a great deal of work to be done. In December 2009, Domino’s had to retrain 4,900 franchises on how to make a pizza. Corporate leadership had to ensure that the old ingredients ran out and new ingredients were stocked as close as possible to the changeover period, which was the week between Christmas and New Year’s Day, when Domino’s rolled out their first ad campaign touting the new pizza.
It was a massive logistical balancing act, and it had to be carried out in the span of several weeks.
“We trained a hundred trainers, they each had 50 stores to cover, and there are typically two to three people in each store who are making the pizzas,” Doyle says. “We’d have the trainers organize the pizza makers into groups of 10 to 15 people per day. Over the span of a couple of weeks, each trainer probably trained about 150 people. You just get the people into a store and go to work. You show them how to do it, and you don’t let them leave until you’re confident they can do it right.”
The scope of the transition didn’t allow for a completely clean break between old and new. There was a period of about a week just before Christmas when a given store could have been selling the old pizza or the new.
Despite the months upon months of research, communication and training, Doyle still had a knot in his stomach as the initial rollout was taking place. Despite overwhelming evidence that the consumers wanted an improved pizza from Domino’s, there was no fallback plan if it failed. Doyle and his staff had to completely commit to the new product, because they were going to finish destroying the reputation of the old product by openly admitting its inadequacy. It was an all-or-nothing proposition.
“I remember one of the meetings with the franchisees,” Doyle says. “One of our greatest franchisees raised his hand and asked a great question: ‘I’m on board with the changes, but what do you do if this doesn’t work?’ All I could do was laugh and say, ‘My successor will have a really hard time dealing with that.’ There was no Plan B. There couldn’t be. On the plus side, when you’re facing something like that, it does tend to help you focus more.”
Domino’s, which generated $6.2 billion in global sales in 2010, also rolled out a similar product change in Mexico. The company’s overseas markets were not altered because they already use different ingredients from those used in North America.
Make meaningful change
Doyle admits that much of what happened is unique to Domino’s, but there are still some lessons about change that are applicable regardless of the nature of your business. Chief among them, you need to make change that has an impact. Otherwise, your customer might not even notice.
Don’t change the label and expect consumers to embrace it as a real, meaningful improvement.
“There are a lot of incremental changes made by companies and trumpeted to consumers as something completely different,” Doyle says. “But consumers tune it out. They know it’s not true. They recognize it for what it is. You have to do things that are material in order to get consumers’ attention.
“You walk up and down the aisle in the supermarket, and there are all kinds of new and improved products, with starbursts and arrows pointing to what is improved. But all they did was change the color of the cap on the jar. And then the company is surprised that consumers don’t get excited about it. You lose credibility as a brand and a company if you so clearly overstate the magnitude of the change. You have to make changes that are real and relevant to consumers, and big enough that they’re going to notice.”
How to reach: Domino’s Pizza Inc., (734) 930-3030 or www.dominos.com
The Doyle file
Name: Patrick Doyle
Title: President and CEO
Company: Domino’s Pizza Inc.
Born: Midland, Mich.
Education: B.A., University of Michigan; MBA, University of Chicago
First job: I was mowing lawns and maintaining some tennis courts when I was 12 or 13 years old. So pretty much as soon as I was tall enough to reach the lawn mower bar.
What is the best business lesson you’ve learned?
The fundamental lesson is that every business is about people, and the companies with the best people are going to win. If you’re recruiting the best and training the best, and getting the best excited about what the company is doing, you’re going to succeed.
What traits or skills are essential for a business leader?
The ability to listen well, the ability to build consensus when you need to build consensus and the strength of your convictions. Once you’ve listened, you go out and lead. That takes a bit of confidence sometimes.
What is your definition of success?
There are a lot of basic ones in terms of creating shareholder value, growing sales and earnings. But personally, what is most gratifying to me is to see the people we’ve brought into this business, whether employees or franchisees, winning and succeeding. It’s about seeing them build great careers and great businesses.
For Charles Schreiber, finding the best talent is only the tip of the human resources iceberg. At KBS Realty Advisors, that talent needs to be trained and prepared to jump directly into their new jobs.
KBS has a work force of 200, and Schreiber wants any new hires to be able to assume their full job responsibilities with 60 to 90 days of coming aboard. In that two- to three-month window, new hires need an education in the culture and structure of the real estate and investment firm, which CEO Schreiber co-founded in 1992.
Smart Business spoke with Schreiber about identifying and grooming top performers.
What are some of the key factors that you want to see in someone you employ?
An overused term is looking for the self-starter, but we are looking for people who are really thinkers. We give people a lot of responsibilities and the ability to grow in their job. So the people within KBS are problem solvers. They’re looking to improve not only their performance, but the performance of their whole team. We’re looking for leaders who not only finish their tasks by the end of the day, but sometime during the day and week, they take time and focus on how things can be improved, how things can be changed.
Another big one is integrity. That is our whole culture here. We work as a team, so we’re accountable to each other, so for example the performance in our reporting group and the fact that they’re completing their reports on a timely basis will have an impact on our reporting group. So if the accounting group is late, the reporting group is going to have trouble getting their reports out and distributed within a time schedule. They have to work evenings or weekends because the accounting group didn’t get their work done. So that is critical, the effort each group puts into their job and working as a team.
How do you identify a self-starter?
Sometimes it’s really simple. It’s something we’ve embraced and done for 20 years. All of the leaders in our company, I request that when somebody within their team comes to them with a problem, don’t bring the problem to them without bringing a recommendation along with it.
That is a fundamental step. If I have to solve the problem, I don’t need that employee. I just have to go do it myself. The positive is it requires everyone to think. The negative is that if somebody comes in with recommendations and you’re the supervisor, you really don’t want to say no. You want to encourage their ideas. So you need to manage that appropriately. So I think that it is a fundamental trait within a company like ours. Everybody at every level is solving their own problems, coming up with recommendations, and having the approvals that allow people to solve their own problems.
In the recruitment and interview process, how are you getting a feel for whether a person will be the right fit?
You have to be fairly challenging in the interview process. If I’m interviewing the person, they’re going to come in and have a key role within the company. I’ll go through at least two, if not three, meetings with them, and I’ll challenge them on their business skills. On the skills of etiquette, timeliness and just the fundamentals of being a good business person. I’ll challenge them on their dedication to their career, on their priorities, not only in their career but their life. You want people who are going to be successful not only in their business, but in their entire life. Hopefully by working with KBS, they’re going to have the tools where they can pursue personal goals. Those personal goals are really of interest to me.
How to reach: KBS Realty Advisors, (949) 417-6500 or www.kbsrealty.com
Jerry Williams thought it was going to be a good thing when the firm that provided software services to Schuylkill Valley Sports Inc. sold its business to a larger software firm.
“We thought that the larger software company was going to take the aspects of this other company, integrate them and make it a more solid system,” said Williams, president of the $25 million sports equipment and apparel company.
Last year, Williams needed software to support the retail and wholesale aspects of his business, so to save money, he agreed to let the software provider try a beta version of a new management software system. But Williams and his staff quickly found out that the system wasn’t ready for use. As the holidays approached, the staff at Schuylkill Valley Sports was flying blind, unsure of how much money or inventory the company had. Williams and his leadership team were thrust into crisis management mode.
Smart Business spoke with Williams about how to manage through a crisis and how to stay prepared for when things go wrong.
How did you react to that situation?
The biggest thing is it completely stressed out every employee. They basically had to do their job blindly, based on experience, and as a result, some can handle the stress and other people can’t. A lot of what I had to do was deal with people, calm situations down. A lot of it was just sitting with people individually and try to get them to not panic. Take it one day at a time and get them to do their best. For some it worked, others were ready to jump ship. It depended on the person. Some people thought the sky was falling, some held it all in, even though they were equally frustrated.
How did you start to dig the company out of the crisis?
The biggest thing was to pressure the software company, to let them know the effect it was having on us. At the same time, they knew if this system doesn’t function, no one in the industry is going to purchase it. So I had let them know that without threatening them and try to work on it in a way that was mutually beneficial.
However, as I ratcheted it up with the president, their reaction was kind of acting nonchalant. They told me that they always have problems when they roll out something new, and it was going to take six to 12 months.
But there was no point in getting angry with them. The same sales task you had with your employees, you had with the software company. You had to sell the software company so that they would understand that they had something riding on this, and it wasn’t just all our problem, but do it in a way that wasn’t threatening.
We began to see improvement probably at the beginning of March. Our people knew they went through the worst part, several were still sarcastic, but the key people were starting to realize it was a work in progress and these things can’t be corrected overnight.
What would you tell other CEOs about managing a crisis like this?
Well, first off I’d tell them never to do a beta test. But really, I’d tell them to prepare mentally for the worst, and I think that was the biggest challenge. Our people didn’t know how difficult this was going to be. We weren’t prepared for the all the challenges. The only thing you can think of is to prepare for the worst-case scenario, not having information, not being able to do a sale or a return or a credit card sale or paying invoices. If you prepare for the worst case scenario, as challenges come up, you will be better prepared for the difficulty.
How to reach: Schuylkill Valley Sports Inc., (877) 711-8100 or www.svsports.com
As the founder, president and CEO of TradeFirst.com, Fred Detwiler maintains an organized bartering system among his client businesses. His clients offer their services to the TradeFirst.com community, and accumulate points that they can use to purchase services from other members.
But the system wouldn’t work without building and maintaining customer relationships, both between TradeFirst.com and its clients, and between the clients themselves.
Smart Business spoke with Detwiler about how he maintains relationships at his $40 million company, and how you can do the same.
How have you addressed building and maintaining client relationships?
As a bank, which is what we sort of are, working with our clients to help them is one of our biggest challenges. If you’re a bookseller or a printer and somebody doesn’t pay you, barter is never more than two to five percent of somebody’s business. It’s the gravy part of it, but they still need to make sure they have cash flow. We have been able to assist companies to stay in business, because a lot of the overhead expenses can be converted into trade. That saves cash in their checkbooks.
We started in 1978. So right after we started, we had hyperinflation and oil embargoes. We’ve been through a fair number of cycles, and what has been interesting is the nature of business, people dealing with each other through our system, they use our services and sell products on a daily, weekly, monthly basis — but in the latest economic downturn, there are companies going out of business.
Somebody starts up, they’re going, somebody doesn’t pay them and suddenly they go out of business. So we tend to lose accounts, but we’ve also been able to continually grow and expand, so that has more than made up for it.
What would you tell other business leaders about staying close to customers?
How can you stay close to your customers if you don’t stay close to your customers? You know what I mean? You need to have a dedicated staff to do it, you need to review it, you need to make sure you’re getting to all customers.
We try to use technology to assist customer service people, so that no one is being left behind. What I tell my staff is if you’re a school teacher and have 40 people in your class, and you have your 10 people who are in the front and always raising their hands, it’s easy to focus on them and forget about everyone else. So you need to make sure you’re bringing out clients who may not have focused on what we’re doing. They may have joined because they thought it was a good idea, but they never put the understanding into how it works. They never educated their staff.
How do you educate your staff on customer service?
Our customer service brokers, the goal is to give those people the tools so they know that all clients are being serviced. We have members that start out with us, they get business, they spend it — life is good. Then we sort of have people who don’t get business and everyone forgets about them. They don’t get business because they may have given us the wrong information. They may be a print magazine but somehow put on their application that they’re an online publication. Because they didn’t fill out their application right, they weren’t marketed properly.
So how do you do it? If you don’t create opportunities for face time, to get out and visit with your clients, you have problems. In this digital society, everyone wants to do everything electronically. But I do know that people still like to do business with people. If you are not personally involved, you’re leaving money on the table and your long term relationships aren’t formed.
How to reach: TradeFirst.com, www.tradefirst.com or (248) 544-1350