Joe Burgess saw a company in Insituform Technologies Inc. that was waiting for nation’s maze of aging underground water and sewer pipelines to fail so it could cash in on the recovery. But there’s a big difference between potentially making money and actually growing as a company.
“There has always been a disconnect at Insituform between the long-term potential of its business and the reality of its near-term growth potential,” says Burgess, the 3,000-employee pipeline service company’s president and CEO. “If I looked at how Insituform positioned itself in the past, it focused a lot on that long-term need and that, eventually, it was going to materialize and drift down to the local level and then this business would grow at a much faster pace.”
The problem, at least from Insituform’s point of view, is that pipelines don’t just break down all at once. And if they’re not broken today, most public officials at the local and state level are content to cross their fingers and hope they’ll hold out another year.
“So I could speculate that caused [the company] to take the approach that it would get better over the long term,” Burgess says. “We’ll just stay in this market and maintain our leadership position, and when the dam bursts, it will be a great story.”
When Burgess arrived in April 2008, he decided it was time to stop waiting.
“We’re a U.S. public company,” Burgess says. “We need to operate our business in the here and now. We need to look at the economic conditions and the now of our market and figure out how do we optimize financial performance for our investors now.”
Burgess does not deny that there is value both in planning for the future and trying to fill a niche.
“But if we had kept the company 100 percent wastewater and 100 percent in municipal markets, our company really is just floating along waiting for that dam to burst,” Burgess says. “There are some investors who have that kind of patience. But it’s my view most do not.”
Burgess needed to show people that there was revenue to be generated in areas besides just municipal sewer or wastewater pipeline rehabilitation.
“We needed to make some decisions and develop some workable plans to broaden the strategic direction of the company,” Burgess says. “That’s a challenge when you’re running a business that’s essentially been doing one thing for 40 years.”
Make your case
As the new guy, Burgess expressed respect for all that Insituform had achieved since the company launched in 1971.
“Insituform invented this business and was the leader in 1971 and is the clear leader now,” Burgess says. “If anything, it’s probably strengthened its position in these markets. That’s a great testimony to the technology roots of the business and the people that have poured their life work into what is a crucially important business.”
This proud history, however, was threatening to blind Insituform from other opportunities where its talents and its technology could be of great use.
“You can become so focused and enamored about what you do and your capabilities within it and then the markets change,” Burgess says. “You have this strong position, but it’s just not as valuable as it was 20 years ago. If you stay in that tunnel, you can switch from being a premium return company to a modest return company to a low return company. … You say, ‘Look, this isn’t about the past. It’s about this is where we are and if we want to continue in markets that are very competitive.’”
Burgess called the leaders of his business units together and initiated a review of the past and an assessment of the future.
“We tried to do some forward forecasting based on the improvements we felt we could generate in each of our businesses and modeled that out to see where it got us over time,” Burgess says. “We drew the conclusion that our core business would not get us to the premium return profile that we sought. At that point, you know you’re not going to fix it just inside with what you have.
“And so then we went to, ‘OK, let’s break down what we know how to do. Let’s look at opportunities that fit those skill sets and make sense for us to be able to tackle those confidently and to add value.’ We wanted to diversify into an industrial client base that would give us better balance as the company went through various business cycles.”
As you draw up plans and conduct round tables to figure out what your company could do, it’s critical that you keep your feet on the ground in making such plans.
“Many companies are in a low-return environment, but then they put together models that suggest or forecast that the situation will improve either through cost reduction or a turnaround in the market or a change in economic conditions or other things that they do,” Burgess says.
“Then they embark on that plan and two or three years later, it’s not there because the assumptions they made were overly generous. You have to be very rigorous about that. That was probably easier for me to do because I came from outside of Insituform. I’m not burdened with all the history. History can be a good thing, but it can also be a burden. So you have to be very rigorous about that. Because if you get that wrong, you might not see the situation as it truly is. That’s always a formula for making a bad decision.”
You need to base your decision on the facts as you see them at that moment.
“If there is a gap there, we have to do something different,” Burgess says. “Not blame it on the market or blame it on the capital structure of the company. We have to figure out how we can take the skills and the capabilities of this company and get to different markets.”
Execute the plan
Burgess and his team were ready to move on their plan. The highlight was the purchase of two companies, Corrpro and The Bayou Cos. Inc. The acquisitions would put Insituform in a better position to expand its presence in the industrial sector of pipeline remediation.
When the acquisitions were made, Burgess did not spend a lot of time worrying about aligning the two companies under the Insituform brand.
“You obviously do think there will be synergies and ways that you can cross-sell and the business is starting to do that now,” Burgess says. “But out of the chute, we tried very much to focus on acquiring businesses that could essentially operate on a standalone basis and just drive increased performance at that business-unit level.
“We spent a lot of time with our core business increasing the performance requirements and eliminating cost. But by taking this approach, what we allowed the business-unit leadership to do was focus on their business and drive that to maximize their return without having to worry about this integration and cross-selling. I think that’s a key when you’re trying to dramatically expand a business. … If we tried to say, ‘OK, we’re going to buy these things and then put them all together in a complicated, integrated organization,’ I don’t think it would have done nearly as well. It’s always been key to me to maintain business-unit focus with as little corporate interference as possible.”
That doesn’t mean you just sit in your office and play solitaire and watch the world go by as all this is going on. You actually have a lot to do to make sure everything is staying on track.
You need to work with your board of directors to keep the plan moving. You’re communicating your strategy to investors so that they stay excited about your business. Maybe they even look to strengthen their investment in your company.
“You have an even longer list of potential investors that you have to expose to the business plan and strategy so you can attract additional business,” Burgess says. “You become the face of the community in your local communities and other communities globally. You also have a time commitment with your customer base. You can do all of those things and very quickly run out of hours to stay connected to what’s going on in the business and be active running the business. It’s easy to drift off into CEO land and out of the operating framework of your business.”
Burgess made time to meet with the leaders of his business units to keep in touch with what was happening. He kept an eye on goals that were set to make sure progress was being made toward achieving them.
But he also took time to make sure his employees had reason to be confident in his leadership.
“People want to know that their management team has a competent plan and is focused and hardworking and will do what they can to execute against that plan and improve the company,” Burgess says. “People are smart. If you roll out a plan, most people would figure out pretty quickly if you lack true belief in what it is you propose to do.”
You can’t assume that enthusiasm will wash away any flaws that may exist in your plan.
“Enthusiasm has its place,” Burgess says. “It ranges from the rah-rah you get in a sales meeting to the very focused and rigorous approach of figuring out operating performance and whether it can improve. I tend toward the latter. People can figure out if managers are focused, intense and rigorous on improving the business and making sure it achieves its goals. If they believe that, I think they would be enthusiastic about the company.”
The best formula to demonstrate confidence in your plan is to be direct and factual with your people. Don’t be sneaky. Tell people what you’re trying to do, how they can help and what the outcome should ultimately be.
“Whether you’re giving a message about the current performance, good or bad, the needed performance, the direction, a strategic direction, the need to change or the need to be better, it doesn’t really matter,” Burgess says. “What people really want to know is, what is the situation? … When they lose sight of that, they get disconnected from the purpose of their work. But maybe even more importantly, they lose sight of how their work contributes to the overall goals of the business.”
The numbers say Burgess has Insituform on the right track. Revenue has grown from $495.6 million in 2007 to $726.9 million in 2009. The company is also on its way to meeting its goal of a 15 percent return on invested capital.
In early 2011, the estimated return had grown from around 3 percent when Burgess arrived to 9 percent.
“A 15 percent return on invested capital is the level I believe we need to be at to sustain a strong investment premise for the company,” Burgess says. “We wanted to create a company based on the solid skill sets that were here at Insituform that could sustain performance in a much broader range of economic and market conditions. I think we’ve done that, or at least started to do that.”
How to reach: Insituform Technologies Inc., (800) 234-2992 or www.insituform.com
The Burgess File
Joe Burgess, president and CEO, Insituform Technologies Inc.
Education: accounting and financing degree, University of Florida
What was your very first job, and what did you learn?
I was a stock boy at a local pharmacy close to my house. It was my first exposure to business, whether I even recognized it or not, in terms of taking inventory. The guy that ran the store was the pharmacist.
He was very focused on trying to eliminate waste and maintain the right mix of goods people expected him to carry while not trying to saddle his business with carrying everything. I remember listening to him talk about business issues in terms of what we were going to carry. It just struck me, the wide range of issues that a person trained in pharmacy had to have to run a business.
Who has been the biggest influence on you?
My father, John Burgess. He was a teacher and a football coach by profession. He was an interesting guy and very well-read in matters of religion, history and current events. He got his master’s later in life.
He was a very smart man and always very well-prepared, whether that meant constructing a test, reading essays from students or studying film to determine whether a guy was going to come on a corner blitz. That’s something that has stuck with me for my life. In most business situations, being unprepared is not a good plan. It’s almost never goes the way you think it will if you’re not prepared.