Communications

(Ghost Written)

In business, natural selection rules. Consider these tips to stay relevant in a tumultuous marketplace

By Jim Thornton

In today’s Darwinian marketplace, savvy companies recognize the need to adapt in order to remain competitive. Or in some cases, just to survive. This often entails reinventing your company’s vision to more closely align with trends and what your customers really want. A business leader should always think like an entrepreneur or an inventor. If you get too comfortable with business-as-usual, you’ll lose your edge.
In a turbulent economy and/or unstable political climate, companies have a natural tendency to play it safe, cease investing and in some cases cut costs. This is a mistake. Take, for example, JetBlue following the tragic events of 9-11. As flights drastically decreased, airlines began layoffs and other cost cutting measures. CEO David Neeleman saw it differently and committed to not lay off any of the airline’s 2,000 employees. Instead, Neeleman continued investing in his company and refined his marketing activities. The company was able to emerge from 2001 as one of the nation’s most profitable airlines.
Citing another example, Abercrombie & Fitch Co., after falling on hard times, reinvented itself during the Mid-90s. The company successfully positioned itself to be the hippest clothing line for college-age consumers. Observing how many clothing retailers lose control of their brand, Abercrombie took complete control of its product—from the brand’s atmosphere in its stores to its product development cycle. The company’s marketing strategy also included the A&F Quarterly—a magazine for its target customer, a popular website, and particular attention to where it located its retail stores.
Natural selection will reward those companies that are agile and able to adapt. Adapting can consist of altering product offerings and target markets, boosting customer service, and reinventing brands.    When I took over Provo Craft in 2005, the company was going through some challenges. Although the company’s performance was laudable, there was potential for more accelerated growth. Revaluating our approach, we began to target a market segment that had been ignored to date— technology products specifically for the female market.  We rolled out the Cricut™ Personal Electronic Cutter machine, which has since won numerous awards within the industry and without. We will shortly roll out a silk-screening product and a thermal bookbinding system. In addition, we saw a void in the “Green” space and will soon announce a solar-powered battery pack and several other environment-friendly initiatives. Since changing direction Provo Craft has tripled profits.
Here are three crucial steps to consider before changing company direction:

Know what your customers are thinking
Utilize customer feedback. Through surveys, or good old fashion research, find out what your customers really want and give it to them. Utilizing customer feedback will not only help in the product creation process, but will help refine operations, sales processes and whatever kinks you may have been previously blind to.

Give your brand a facelift
Brands get stale. Once you’re sure what your customers want, revive your brand and highlight the uniqueness of your offering. Start with new company messaging that will filter down to your new logo, packaging, advertising strategies and coverage in the press.

Hire the right team
This may be the most important thing you do. During my first year at Provo Craft I personally took on all executive roles to flush out the bugs. I then recruited several Fortune 500 executives to come join the company. Our CFO, Dave Chase, was recruited from Honeywell International; our executive vice president of sales and marketing, Brad Brusa, came from Newell-Rubbermaid; and our vice president of business development, Jeff Coulter, came from Intel.
I knew that without this caliber of talent we’d never reach our potential. It’s largely due to this executive team that Provo Craft has reached a pinnacle of success.
Companies need to anticipate changes in the marketplace and adapt before it’s too late. If competitors make the change first, it becomes that much harder to differentiate yourself. Natural selection has a way of dealing with companies that fall behind the pack.

There is a current debate within the marketing world regarding traditional PR strategies versus New Media strategies (blogs, podcasts, SEO, RSS, Wikis, etc.). Some are calling for PR professionals to abandon traditional strategies and tactics and rely solely upon New Media vehicles. Ironically, most of those calling for change are not PR professionals, but rather web/interactive consultants. These New Media advocates are convinced that traditional PR is dead and that PR practitioners must change PR completely in order to survive. However, I, like most PR associates, completely disagree. PR that focuses on these New Media communication vehicles is sometimes called PR 2.0, positioning traditional PR as somehow archaic. This couldn’t be further from the truth.
New Media strategies are touted for their ability to speak directly to the consumer or end-user. Some argue that press releases should be written directly to this audience. However; this argument is flawed. Press releases should still be written with the journalist as the intended reader. Ask yourself, when was the last time you searched out a press release online to research an item before buying it?
Here’s a personal example: I recently purchased RIM’s Blackberry 8700.  As a consumer, I didn’t search out RIM’s press releases. I looked for reviews in traditional media outlets that included the Wall Street Journal and CNET. I knew the product had been tried and tested by these reviewers. Seeing that the reviews were positive, I purchased the mobile device.
The point of this example—it’s all about credibility. The third-party endorsement and perceived expertise of the traditional media is still a powerful force in driving consumer action. If RIM would have solely relied on a PR 2.0 strategy for its product announcement, I would have likely “bumped into” the Blackberry 8700 press release, but I would have missed out on the third-party validation provided by trusted media outlets.
When done correctly, press releases do exactly what they’re designed to do. A press release’s core function is to inform and influence a journalist to write favorable about the material issue. Press releases also document a company’s progress and can act as an official company statement. Also, some technology companies, Novell for example, will issue statements containing technology updates to their user base, but they are very careful not to call them press releases because of the legal implications.
Traditional PR, using conventional media (print, broadcast, radio, online news, etc.), is not going away. If that were the case, then why are there more magazines, TV stations and radio stations that ever before? Not all PR is focused on the technology industry where the audience is tech savvy. According to a recent survey, only 39 percent of Internet users read blogs and only eight percent of Internet users keep a blog (Pew Internet & American Life Project). Also, PR being done on the local level would have to use local and regional media to reach that audience. For these audiences, a blog or podcast would be much less effective.
That being said, New Media absolutely has its place in PR. Traditional PR focuses on pushing content to targeted journalists. Incorporating New Media tactics will pull journalists to you. It’s very difficult to push a blog or RSS feed to a journalist. Thus, savvy PR pros who understand this are incorporating these new tactics, leveraging a push and pull strategy that is extremely effective in creating awareness for an organization.
Blogs and podcasts are great ways for companies to establish a brand, put a human face on their organization, build industry leadership and reach opinion leaders and the media. RSS news feeds can offer visitors to a company’s website or online news centers a way to get relevant information. Every time new content goes up on the site, visitors who have subscribed to the feed are alerted and brought back to the site to read the new content.
All PR materials, especially press releases, should be optimized for search engines. This significantly increases the potential to attract the media, industry influencers, investors or partners who are researching a company via the Internet. These new tools are just that—tools. When combined with traditional PR tools, they make the overall PR toolbox that much stronger. What does that mean for companies? Greater awareness, mindshare and thought leadership, which ultimately leads to increased revenue.

Profitability is on the mind of fund managers. Utah private equity firms are encouraging the slashing of costs, boosting of sales and new markets, and the paying down of debt. And it’s the CEOs that are in the hot seat. Private equity firms expect their CEOs to make the smart and aggressive moves that yield the required financial results. This often means making changes to management and culture to sustain those results.

“Utah firms are tightening up,” says Kent Thomas, founder of CFO Solutions. “However, there is still a lot of money circulating looking for good investment opportunities.”
In today’s tender economy, and with predictions of recession on the lips of financial pundits, private equity firms are treading lightly. Expect to see turnaround investments and buyout equity gain further traction because the price of companies will fall, while growth equity or “injection investments” will decrease.
“The fall out in the credit markets have made investors more cautious, but there is still reasonable activity in Utah,” said Fraser Bullock, co-founder and managing director of Sorenson Capital.
Despite the gloomy economic forecast nationally, private equity has made recent inroads in Utah. Sorenson Capital just closed their second fund, breaking a Utah record with over $400 million raised. Philanthropist John Huntsman Sr. and Robert Gay have started a new fund, Huntsman Gay Capital, with Steve Young, Richard Lawson and Ron Mika as key executives. In addition, Aries Capital, a new fund stemming out of Peterson Partners, has begun raising money.
“We’re also seeing a lot more interest in Utah from outside private equity groups,” says Jeremy Neilson, managing director of the Utah Fund of Funds.  “As Utah companies get more mature, and as CEOs and entrepreneurs demonstrate a track record of success, investments look a lot more attractive.”
Bullock agrees. “A great track record is the first thing we look for. Second, we want to see if the CEO can build a robust team of talent individuals. Third, we want to make sure the CEO has a clearly defined vision for the business.”
Although Utah’s economy ranks near the top, local firms are still focused on streamlining the operations of their portfolio companies. According to a recent Ernst & Young study, buyout firms replaced CEOs or CFOs at 17 of the 23 U.S. companies that they sold or took public in 2006. In order for CEOs to keep their jobs, it’s all about reaching the right benchmarks and the willingness to cooperate with these firms.
“Hitting the numbers and getting the desired results is most important,” adds Thomas. “However, the right attitude is vital. Private equity firms want someone they can work with. If a CEO has a big ego, is resistant to change and won’t take direction, the firm will drop them.”
That being said, private equity deals can be very attractive to CEOs and entrepreneurs. When buyout firms are typically looking to make three times the amount they invested, this can spell big money for the founder, CEO and exiting management team.
There are several examples of savvy Utah CEOs that have not only survived the private equity play, but thrived. Jim Thornton, CEO and president of Provo Craft Novelty, Inc., is one of these. Under the watchful eye of Sorenson Capital, Jim took over the company when it was failing to deliver the expected financial returns. In his first year he completely turned over the management team, personally took on all of their roles by himself to flush out the bugs, and reshaped it into a mega-profitable company. He grew the company’s revenue 38% in two years with an improvement of 227% in EBITDA, earning him an Ernst & Young Entrepreneur Of The Year for 2007.
“Working with the right private equity group is key,” said Thornton. “It’s a tough, scrutinized environment, but if you pull together the right team and focus on delivering the required results, it’s a win-win situation.”
Bullock says private equity firms want to act as advisors and counselors. “We don’t want to interfere with the daily operations of the business, but it’s important to have a CEO that sees us as a partner.”
Jonathan Coon of 1-800 CONTACTS is another notable example. In 1995 while completing an MBA program at Brigham Young University, he began selling contact lenses to other students. Seeing an opportunity he couldn’t pass up, he secured a business loan and raised a small amount of capital from a private investor. Last summer Coon successfully navigated the private equity waters and sold his company to Fenway Partners, a transaction valued at $347.87 million.
From the private equity point of view, they are looking to the horizon and the future of their investment. Period. They want a CEO who performs financially but is also tight on the softer skills, such as building teams, the ability to lead and inspire, and someone who will cooperate with them. If not, it’s often a deal breaker. The CEO is ultimately expendable.
To survive such a fate, Thomas advises that CEOs take their time courting the private equity group. “Do the research. Understand what the firm is looking for. They typically want their return within 2 to 5 years, and they’ll be very aggressive in achieving that.”