By Irwin Speizer

Thomas Jefferson fancied himself an inventor and innovator, and he wasn’t bad with a quote.

Here’s one: “I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.”

Jefferson, who had to write by candlelight, might appreciate how the citation is displayed today carved in a band under the dome of his memorial in Washington and illuminated with energy-efficient light-emitting diodes manufactured in a high-tech clean room in Durham.

Consumers aren’t likely to recognize its name, but electronics manufacturers worldwide know Cree Inc. as one of the top three or four sources of LEDs used in everything from traffic signals to message displays on wireless telephones.

About 58% of Cree’ís revenue in the fiscal year ended June 2002 came from LEDs. But there’s more to Cree than light, though describing some of its products is about as easy as catching beams from an LED.

For one thing, the mix is changing, testimony to the company’s commitment to research and development. Cree expects 70% of this year’s sales to come from products it developed or invented in 2002.

While the new products include LEDs, Cree also develops and makes devices from its patented process for fabricating semiconductor wafers from silicon carbide and gallium nitride.

They’re used in power transmitters and in lasers for next-generation DVD recorders. It also makes silicon carbide crystals, which look and feel remarkably like diamonds, for the gemstone and jewelry markets.

And Cree is working on new LEDs that will be bright enough to compete with light bulbs.

What sets Cree apart from many research-oriented companies is its unflinching focus on the bottom line.

Its research engineers work beside production workers, doing double duty finding ways to squeeze costs and increase efficiency. “We are a company that understands how to take fairly immature technology and put it into high volume and make money at it,”

President and CEO Chuck Swoboda says. ”If you think about it, traditional manufacturing companies aren’t considered very innovative. R&D companies aren’t very good at making things and making money at it.

We are an R&D company that has an unbelievable focus on making a product and selling it and making money at it.”

All of which are reasons why Cree is Business North Carolina’s High-Tech Company of the Year, presented by the magazine and KPMG LLP. At a time when slow sales, layoffs and cutbacks are the norm for high-tech companies, Cree got through the 2001-2002 slump without reducing employment and, though it lost money last fiscal year, it has surged back.

In its second quarter, which ended in December, it grossed .7 million, a 16% increase over the same period a year earlier, and netted nearly million.

For its first half, it grossed .5 million, up 25%, and netted .9 million ó compared with a million loss for the same period the previous year.

“They seem to have weathered the storm well,” says Jim Nichols, one of four judges and until recently the N.C. Commerce Department’s manager of electronics and information-technology development.

Jeff Reid, executive director of the Center for Entrepreneurship and Technology Venturing at UNC Chapel Hill, notes, “The percentage growth they had was phenomenal at a time when most high-tech is not doing well at all.

I believe their technological innovation has been a key to their success. They keep producing a product that companies want to buy.”

“They’re a technology leader and have shown a commitment to that by reinvesting a significant percentage of their revenue back into research and development,” says Jim Davis, senior vice president and chief marketing officer of Cary-based SAS Institute, last year’s winner.

“Their innovation, backed by a solid vision, has transitioned them from pioneer to industry leader.” Adds David Kinney, the fourth judge and BNC editor-in-chief and publisher: “Not only that, but a world leader born in our own back yard.”î

The judges selected Cree from the annual ranking of top tech companies that KPMG compiles. “This has been a difficult year for many businesses, technology companies included,” says Brad Hurrell, the partner in charge of the the list, which Cree capped.

After all, the tale of how Neil Hunter, his brother Eric and a trio of scientists from N.C. State University turned a scientific breakthrough into a manufacturing company already is legendary in Tar Heel tech circles.

Neal Hunter was a 25-year-old engineering graduate working in his first real job as an equipment salesman when he teamed with his brother, Eric (also a State engineering grad), to put scientific research they had encountered at the school into production.

They recruited three scientists from N.C. State who had figured out a way to successfully fabricate silicon carbide wafers, which must be produced at temperatures above 3,500 degrees ó heat so searing that controlling impurities and defects is nearly impossible.

Even microscopic defects or impurities ruin semiconductor wafers. In many ways, silicon carbide is considered a superior material for semiconductor uses than plain silicon because it can withstand higher temperatures and operate at higher power.

In 1987, with patent licenses from State for the new silicon carbide techniques, Hunter and his brother maxed out their credit cards and took out second mortgages to raise about 10,000 for the startup.

“It just seemed like the thing to do,” Hunter says. Yet, “there was always at least one person on the team saying, ‘We can’t do this. This is nuts.’

Fifteen years later, the company has about 1,000 employees and its stock, even after the economic slowdown, has a market value of more than billion.

Cree has managed to grow without taking on debt, financing its expansion with a combination of stock offerings and reinvestment of earnings.

“Cree has always been cash-flow positive,” says Jim Reed Jr., an analyst with Reed Global Advisors in Bellevue, Wash. “They have been smart with their money.”

Lately, Cree has been cashing in on the wave of new hand-held wireless devices that use LEDs for their miniature monitors. While most of the telecommunications industry is struggling, the one thing that is selling briskly is the mobile telephone with a tiny color monitor ó a device that uses LEDs.

Ram Kasargod, analyst with Morgan Keegan & Co. Inc. in Memphis, says one of Cree’s greatest achievements has been to prove that it can go toe-to-toe with Asian manufacturers and come out the winner in a commodity market. Cree’s fiercest competitor for LED sales is Japan’s Nichia Corp.

And there are more coming. “One of the concerns is, can competition from Southeast Asia impact Cree?”

Just how competitive and tough are Cree and its boyish-looking, 36-year-old CEO?

One of the companies it battles is San Jose, Calif.-based Lumeleds Lighting, which has as its director of sales and marketing one Mark Swoboda, who helped his younger brother land his first high-tech job at Hewlett-Packard, which later spawned Lumeleds.

Chuck Swoboda is repaying the favor by trying to snatch away Lumeled’s business. “Itís a good, healthy sibling rivalry,” he says.”Of course, I want to be winning.”

Mark Swoboda, the only other boy among six siblings, is a decade older and recalls his younger brother constantly hanging around and wanting to emulate him.

Their demanding father, the sales manager of a plumbing-and heating-supply company, stressed the importance of education and achievement and let the younger kids know each was supposed to try to surpass the one who came before.

“Our dad was always about taking responsibility,” Mark Swoboda says. “But he did it in a subtle way, always wanting us to take on more responsibility and be goal-driven. That’s what started it all.”

Their house in the Chicago suburb of Waukegan sat on an acre lot, and when mowing the lawn fell to Chuck, he quickly came to understand that he had to cut the grass precisely the way his old man wanted.

His brother recalls Chuck finishing the job, deciding it wasn’t quite right and running the mower over the whole thing again.

The real push for achievement came in local schools, where Chuck was the fifth Swoboda to pass through. “Just about every teacher I ever had had always had one of my brothers or sisters before me, and they always told me how good they were.

It was always a goal to do better. There was that natural inborn rivalry of a family unit.”

Mark Swoboda was the first in the family to get a college degree. When it came his turn, Chuck followed Markís path to the engineering program at Marquette University in Milwaukee.

He was still working on his bachelor’s in electrical engineering when the Hunters founded Cree. After graduating in 1989, he again trailed Mark, this time to Hewlett-Packard in San Jose, Calif., where he was hired to do marketing with an emphasis on engineering.

His little brother, Mark recalls, quickly established himself as not just bright and driven but someone who delighted in taking risks and doggedly pushed new concepts and products. One that he stumbled upon was a new way to use LEDs in mobile telephones.

He managed to get Motorola interested, which led to the first generation of its flip phones with an alphanumeric display. “It was a custom product and it was high-risk,” Mark recalls, “but the return was very good for H-P.”

In 1993, Cree went shopping for a product manager to run its blue LED production. When it hired Swoboda, the company had about 30 employees.

His workaholic ways and detail-oriented management style complemented Hunter, the self-styled company visionary.

Swoboda was promoted to president and chief operating officer in 1999, taking on much of the day-to-day operations. When the high-tech slump hit in 2001, Hunter stepped aside as CEO in favor of Swoboda.

In high-tech terms, it was a move toward youth and vitality. Swoboda was 33; Hunter, who still serves as executive chairman, was 38.

Under Swoboda, Cree opted to ratchet up R&D spending, from million in 2000 to .2 million in 2002, shifting jobs out of manufacturing and into research instead of cutting the employee head count.

It was an expensive move at a time when Creeís sales slipped along with the rest of the high-tech industry.

In the company’s fiscal 2002, it recorded a net loss of .7 million, following a profitable fiscal 2001, when net earnings totaled .8 million.

But when sales and earnings rebounded in the first half of fiscal 2003, in part due to some of the new products that Cree’s researchers had developed, Swoboda got instant vindication.

The companyís performance even converted skeptics such as Reid, the analyst. “I had a sell rating on the company for a long time.

I thought they were way overvalued. Then, in these last two quarters, they really hit their stride. I am becoming more of a believer.”

Still, Cree continues to operate in a very narrow market, which makes it vulnerable if something happens to one of its customers.

In 2002, 64% of revenue (excluding government contracts) came from five customers who primarily buy its LEDs. That percentage is likely to increase.

On April 1, Cree announced that one of its big five, Japanís Sumitomo Corp., had agreed to buy million of Cree LEDs through June 2004. It is Cree’s largest deal ever  more than four times what Sumitomo purchased in the 2002 fiscal year.

Swoboda understands that the company’s long-term health depends on broadening its customer and product base, which means finding another high-tech hit in its group of newer products.

He likes each of the emerging products ó the DVD laser, the amplifiers and the rest ó and ticks off, like some sort of marketing mantra, the advantages each can offer customers: more efficiency, higher capacity, lower costs.

But the key to the company’s growth might well lie in that subdued lighting found in the Jefferson Memorial, which only hints at the potential for LEDs in general-purpose lighting ó a -billion-a-year market.

Much of todayís lighting still uses the incandescent bulbs that Thomas Edison invented more than a century ago. LEDs use far less energy, put out less heat and last longer. The trick is to find ways to make them bright and cheap enough for general use and to sell homeowners and businesses on installing LED fixtures.

Analysts agree that a major shift may be coming and that Cree is one of the companies that will be battling to be a leader in that change.

There’s no guarantee, of course, that LEDs will be the technology that takes over. But if Cree’s gambit succeeds anything like that of the original blue and green LEDs that launched the company, the potential payoff is vast.

Millions, even billions, of dollars of new business is what Swoboda is hoping for. After all, making money out of research is what Cree has always been about. “I think what the founders of this company understood was that the only reason to work this hard at something is if you turn it into a real business.”

Those words might have sounded strange coming from Jefferson, who delighted in dabbling and died deep in debt, but they serve as a guiding light for Cree.

This article originally appeared in the May 2003 issue of Business North Carolina.

Profiles of business owners respected in their industry appear in our newsletter and are available on our web site. We encourage association executives to tell us about their members who are leveraging their inherent advantages (trusted brand, excellent service, etc.) by embracing a “doing it right” attitude into their strategy for growth.

By Jamie Swedberg, Industrial Fabric Products Review

Think a company´s fortunes have to rise and fall with the local economy? Rubbish, says O´Brian Mfg.

With its tin-roofed houses, fragrant pine woods, and abundant barbecue joints, Wilson, N.C., still evokes images of the Old South. But O´Brian Mfg. Co., an industrial-fabrics firm located just off Highway 301 north of town, has a firm grasp of the new economy.

Originally founded to serve the state´s then-burgeoning tobacco industry, the company has responded to changes in the local business climate by branching out into broader territory.

It was 1961 when Withrow O´Brian started making truck tarps for North Carolina´s farmers. At the time, tobacco was the state´s primary revenue source. Even then, though, the industry wasn´t a perfect moneymaker for the brand-new company.

His son Woody, now chief executive officer, says business fluctuated with the vagaries of farmers´ fortunes. “One year, a cotton or tobacco farmer would have a really good year and order plenty of tarps. Then the next year it wouldn´t be good at all, so we´d be stuck standing there with nothing to do,” he says. “That was one of the reasons we switched.”

O´Brian still serves local farmers by making hand tarps and covers, but the company has widened its scope. First, it added commercial and residential awnings to its repertoire. It also diversified into compactor curtains, or “diapers,” for garbage trucks.

Then one day, a friend of Winnie O´Brian—Woody´s wife and the firm´s chief financial officer—suggested that the company ought to design automatic tarp systems for the waste industry.

The O´Brians took up the challenge, and the rest is history. A couple of decades later, automatic tarping systems make up 80 percent of their business, and they reckon that their company is the second-largest U.S. manufacturer of the systems.

The tarp-system units are simple in construction, but inspired in engineering. A giant pair of hydraulic arms unrolls a tarp from the back of the truck cab to the end of the container, neatly covering the cargo.

Drivers don´t need to risk injury by climbing all over the truck to attach the tarp; they simply operate a joystick. The O´Brians tout the systems as being versatile—they cover anything from a 10- to a 50-cubic-yard container. And they´re also easy to maintain, they say, since their hydraulics are enclosed and the arms rest below the level where they´re likely to get crunched by a container.

Having made significant inroads into the rubbish market, Woody says his company is tackling the dump-truck market, too. “We´re pretty much into covering and containment,” he says. “As long as it falls under that, we try to get into it, but if it doesn´t, we try to stay away from it. You don´t want to get too diversified.”

It was this series of changes that spurred the company´s explosive growth—from just a few family members to 31 employees in two facilities—in recent years.

Now, with its cavernous warehouse and cheery clerical staff, the firm resembles any number of other medium-sized industrial-fabrics companies. Still, it´s a little unusual at its core, and that may be one of the keys to its success.

Let the four winds blow

A loud jingling sound, like a behemoth bicycle bell, shatters the relative quiet of O´Brian´s 22,500-foot main facility. It´s the end of break, and a seamstress tucks a bookmark in her book and returns to work.

It´s a scene you might glimpse in hundreds of sewing rooms all over the country. Except for one small detail: The woman is only visible from the waist upward. The rest of her is concealed in a concrete foxhole in the middle of the floor. A glance around the room reveals several more foxholes, each outlined with yellow-and-black warning tape.

Sean O´Brian, Winnie and Woody´s 26-year-old son and the company´s sales and technical point man, explains: “A lot of other places have to build up tables around the sewing machines. But when we built this shop, we decided where we wanted the machines and just put holes in the floor.” The result is that the floor acts as one giant sewing table.

Overall, the O´Brians have been happy with the innovation. According to Woody, it´s a lot easier for seamstresses to feed large tarps through the machines when they don´t have to hoist them over the edges of tables.

The system certainly frees up a lot of room to walk, and the building contractor´s initial fears of a leaky foundation have proved groundless. There is one drawback, though, Woody says. With a typical wooden table, a coating of silicone spray can render the surface extra-smooth for easy fabric movement.

With the foxhole system, a friction-free surface might translate into shop-floor accidents. “We kind of had to play with this,” he says. “You can get the floor slick up to a point, but once you pass that, then you run into a danger of someone falling down.”

The foxholes aren´t the only evidence of inventiveness in this shop. In an adjoining room, separate from the squeaky-clean sewing area, the shop´s dustier, greasier operations take place.

Fourteen-foot-high garage doors allow “anything that´s street-legal” to be driven in and fitted with a tarp. Here, too, awning frames are welded, products are developed, and boxes are shipped. In one corner, traumatized truck tarps are dragged in for repairs, facilitated by another clever invention—a long, skinny light table. “A lot of people do repairs on the floor,” Sean says. “But Woody designed and fabricated this, which shows any and every hole in the tarp.” For ease of use, there´s a metal roller attached to the long side of the table.

“You just hook the tarp up to the roller, and roll the truck top as needed. There´s a little rotary switch in the back,” Sean explains proudly.

It wasn´t always this way. Until 1998, the entirety of O´Brian Mfg. was confined to a 15,000-sq.-ft. space across town, crowded with tables, equipment, and people. But in November of that year, the firm opened its brand-new, custom-built facility off Highway 301 and turned the smaller building into a metal-fabrication shop for its automatic tarping system frames.

It turned out they made the change just in time for Hurricane Floyd, which immersed the metal-fab shop—but not the main facility—in seven feet of water. The storm KO´d many neighboring businesses, but it only inconvenienced O´Brian; it turns out the metal-fabrication equipment was surprisingly resilient.

“All our hydraulic suppliers were really, really helpful,” Winnie says. “They told us to pull the plugs [on our hydraulic equipment], drain all the water out, and soak it in a bath of hydraulic fluid. It was recoverable.” The welders received the same treatment, as did a waterlogged forklift.

The only major casualty was a plasma table (a piece of equipment that cuts steel by generating electrical arcs) that racked up a massive repair bill; yet even that had a silver lining. “The table hadn´t run that well up until that point, and now it´s never run better,” Sean says, laughing.

Like father, like son

“I started working summers with dad when I was in school,” remembers Woody O´Brian. “After I graduated, I moved to Durham and worked at an accounting firm for a couple of years. Then, at my mother´s persistence, I came back and started working at the company.”

That was in 1974. He´s stayed ever since, and says his venture into the outside world helped him learn to work for others without any special treatment.

Good thing, too, because with the entire nuclear family on site, the O´Brians go out of their way to maintain a businesslike dynamic. No one seems to use the words “Mom” or “Dad,” let alone a term of endearment, at the office; it´s first names for everyone. It´s all part of keeping things running smoothly, Woody says.

“Winnie and I, we´ve always put it down to trying to keep the marriage relationship separate from business,” he explains. “We play out the business roles when we´re at work, and then when we leave work, we take up husband and wife roles. When you get home, you try and talk about other things.”

He says family members also stake out their own territory at the office, and rarely see each other during the day. That helps, he points out, when family resemblances kick in. “It´s just that he and I are so alike in so many respects,” Sean says, agreeing with his father.

“Sometimes we can work together fine, but other times, after about five or ten minutes we need to go work on different things. We´re so near alike, we just get on each other´s nerves.”

Father and son share a love of design and engineering. If left to their own devices, they say, each would while away the day puttering with new prototypes for the company´s automatic tarping systems.

They´ve even created a faux truck bed—a steel frame on blocks—in the warehouse, ready to be fitted with new pieces of machinery. “We get feedback from the end user on different products,” Woody says. “And so I guess that´s my small expertise. I´ll come back and visualize it and design it on paper, then do a prototype. Then we put it in our research department and test it, improve on it, redesign it, and get it ready for the market.”

Sean´s the same way, and has taken the design process one step further by mapping ideas out in DataCAD, a computer-aided design software package. And right now, he says, he´s got the ultimate in hands-on jobs: One of the company´s welders is out with a bad back, so Sean has volunteered for machine-shop duty for the next few weeks.

“Of course, while you´re doing all this, you still have the day-to-day activities of running the business,” sighs Woody. “You´ve got to stop whatever you´re doing and talk to the customer that wants to talk to you. Or you´ve got to talk to the two plant managers and make sure things are getting done at both locations.”

Nevertheless, both he and his son insist that they´re not as comfortable in front of customers, and would rather leave sales to the salespeople. They´re always ready to help clients in need, but their favorite activity is research.

Sean, with typical youthful enthusiasm, carries over his favorite aspects of work to his leisure time. His father points to a truck body wedged on top of a storage unit in the warehouse. “This is what he likes to do—he´s building a vehicle from scratch for four-wheeling. He built a chassis, and he´s going to put that body on it.”

Woody´s leisure pursuits tend more toward escapism. Back in the days when Sean was a Boy Scout, Woody developed a love of kayaking, and continues the activity to this day. “When you´re paddling whitewater, you can´t think about business,” he says. “If you do, you turn over and you get wet. So it keeps your concentration, and it keeps your mind off work.” Winnie, he says, prefers to sit outside the family´s beachside trailer, engrossed in a book.

Far afield

In the company boardroom, Sean waves a hand in the direction of a large U.S. map studded with thumbtacks. “We haven´t updated it in a while, but all the pins you see here are our dealers,” he says. “There are more in the Midwest now than we´ve put in.”

The automatic tarping systems, he explains, are sold throughout the United States and via one dealer in Canada. Winnie adds that recently O´Brian Mfg. set up a dealership in Venezuela to supply tarping systems for dumptrucks, and it´s struck a manufacturing agreement with a company in the United Kingdom.

“We take care of the local stuff here,” Woody says, referring to the truck tarps and awnings his company sells in North Carolina. “But [for the automatic tarping systems] we need a dealer in the customer´s area to provide good service to the customer.” The dealers are encouraged to provide full installation and warranty service to buyers, he says.

“What we send out is actually something in kit form,” Sean says. “They´ll get all the parts with the instruction manual, and possibly an instructional video if they´ve never done one before. In addition to that, they can call us if they have any problems, and we can walk them through it.”

Service, quality and consistency, Woody says, lie at the core of the company´s reputation. That´s why an ISO 9000 certification is on the agenda for late summer. “We´re getting excited about it, the closer we get,” he says. “I think it´s something that´s coming down the road, that everybody will be required to do if they´re going to do business with the big companies. We like to think we´re ahead of the game on that.”

He adds that the firm is also concerned with providing a safe and pleasant work environment. That could be why, even though the entire O´Brian clan has just returned from a week away at a conference, none of them appears stressed out. Apparently, the business hummed along like a finely tuned machine while they were gone.

Woody shrugs, taking it as a matter of course. “You´ve got to look after your employees, and then your employees will look after you,” he says, smiling. And then he quietly slips back into the warehouse to continue his work.

Reprinted from April 2001 issue of the Industrial Fabric Products Review, with permission from the Industrial Fabrics Association International.

By Jamie Swedberg

O´Brian Manufacturing can be reached at http://www.obrianmfg.com.

Profiles of business owners respected in their industry appear in our newsletter and are available on our web site. We encourage association executives to tell us about their members who are leveraging their inherent advantages (trusted brand, excellent service, etc.) by embracing a “doing it right” attitude into their strategy for growth.

The retail environment poses many customer-relationship challenges.

High employee turnover and one-time customers are just two of the hurdles facing retailers trying to implement customer-centric strategies.

But one Connecticut-based clothing retailer is overcoming these obstacles using one-to-one principles to boost its share of customer and keep its Most Valuable Customers (MVCs) coming back.

Serving an upscale customer base of professional men and women, Mitchells is a million family-owned business with locations in Greenwich and Westport, CT (The Greenwich store, acquired in 1995, goes by its original name, Richards.)

The company´s database tracks each of its approximately 150,000 customers´ personal data and preferences, including size and style, as well as SKUs bought and prices paid since the tracking systems were installed in each store.

In fact, chairman and CEO Jack Mitchell personally keeps at his fingertips information about his top 1,000 customers. To use his favorite metaphor, the secret to Mitchell´s success is “hugging” the customers.

“I remember meeting one of the country´s top retailers on the runway at an Yves St. Laurent fashion show and he asked me, ´How are your outerwear sales?´” says Mitchell.

“I couldn´t believe he was asking about outerwear sales. My question was, ´How are your upper-end customers buying? Are they very satisfied? Are they coming in more or less frequently?´

He was product focused and I am customer focused. To us, it´s customers first and then the product—of course we search the world for the best product for each customer—and then the rest usually takes care of itself.”

This customer focus is a mind-set, he says, from when his parents started the business in Westport in 1958.

Today, there are nine Mitchells in the business, including Jack´s 97-year-old father, who started it all. “Every one of us makes a major contribution,” Mitchell says, “and they all have the same mind set; it has been and always will be customers first.”

Thirty years of data

In the 1970s, the company began tracking its customers´ purchases by category (suits, shirts, etc.) using an IBM AS 32 and then the AS 34.

The spotlight went on for Mitchell back in 1989, when he and his son Russell purchased the company´s IBM AS 400 and decided to track customers´ purchases, not only by category, but by actual stock keeping unit (SKU).

“When Russell and I were looking at the system, someone from a marketing firm asked us if we knew as much about our customers as we knew about our inventory,” he explains. “We realized at that moment that we didn´t…and then the light went on! We decided the whole system would be architected around the customer and then on what the customer bought.”

The changing retail scene also showed Mitchell that he was moving in the right direction.

“Two decades ago, people liked to go shopping. They were getting a reasonably decent level of service and they enjoyed it,” he says.

“Then the service dried up, and owners didn´t know how to get the customers back. We´ve learned that the most important [assets with regard to building the customer relationship] are the people you have working for you, and their mind-set to serve and help the customers.”

That vision flourished and grew when Mitchells acquired Richards. “The most important benefit we bought was the relationship that the sales associates and the tailors had with their customers,” Mitchell says.

“They had worked some 45 years establishing those relationships, but didn´t really know who their customers were. Associates were scribbling information down on pieces of paper.”

By introducing customized CRM technology, Mitchell was able to take Richards beyond the mom-and-pop stage.

“We brought in a system behind the scenes to track the important customer facts and we gave them the technology to manage customer relations effectively and profitably,” he adds.

Today, Mitchells and Richards share a customized customer database built in-house that is completely integrated with their accounting and inventory databases.

Profile…profile…profile

Gathering all that customer data begins with a profiling process in which sales associates ask customers for basic personal information, such as their names and addresses.

According to Mitchell, customers willingly provide the information because the retailer is respectful of its clientele´s privacy concerns.

“When we collect and file customer preferences or any other data customers provide, we are very sensitive to the whole area of privacy,” explains Mitchell.

“We never, ever share any privileged customer information with anyone—we don´t sell or rent our customer lists. We´ve even gone so far as to make sure all this information is password protected.”

As a result, customers trust the benefits of sharing their information with Mitchells´ sales associates, and go on to provide more personal data about their work and home lives, as well as their clothing preferences.

“Customers aren´t going to tell you their whole history on the first visit. But gradually you listen and you learn about them, and you know how to service them on a one-to-one basis,” says Mitchell. “You´ve gone from a transaction to a relationship.” (At 1to1 Magazine, we call this process “drip irrigation.”)

Enabling employees

As the face to the customer, sales associate buy-in is integral to making Mitchell´s vision of high-touch customer relationships work. To that end, store employees are authorized to “do whatever it takes for customers,” he says. “We don´t alter the price, but we´ll do almost anything to service customers and go beyond their expectations.”

Informational feedback is key to helping staff members achieve goals. Every morning in their work mailbox, sales associates get a recap of every sale they had the previous day.

Then, about two weeks after each sale, the database prints out a satisfaction report from which associates will call their customers and ask about their shopping experience. But, “It´s not a solicitation call, merely a satisfaction call,” Mitchell is quick to point out.

This approach pays numerous dividends for Mitchell´s goal of stocking his customers´ closets. In fact, one of the company´s personalized services is to do just that — go into customers´ homes to clean and organize their closets.

“These men and women are very busy people and their expertise is not clothing. So we provide our advice, and even take pictures of the various clothing combinations that will work for them.”

One resulting success story features a customer who lived in Mexico but had a summer place in Greenwich. According to Mitchell, the customer bought her Mitchells salesperson a roundtrip ticket to Mexico City to clean her husband´s closet and stock it with his favorite Brionis. “She loved it, and we were told her husband loved it too,” says Mitchell.

Every byte has value

Data is also a key enabler to Mitchells personalized customer-centric approach; therefore, none of the details of its customer relationships is ever discarded.

In Westport, the history goes back to 1989; in Greenwich it goes back to 1996. “We never throw customer data away. We keep product records, for instance, on Polo shirts that we sold five years ago,” explains Mitchell. “Maybe we´ll try to reactivate somebody who hasn´t been in for three, four or five years. To do that, we need to know what they bought back then.”

A new data report that Mitchell introduced this year, called profiling, highlights many of the key bits of personal information, such as business title, spouse or children´s names, gathered by sales associates.

“For a customer to be profiled, he or she has to have provided us with some personal and professional information,” says Mitchell. “For example, in the profile of a customer who´s president of his company, we would see his name, home address, family notes, wife, sons´ and daughters´ names, as well as a daytime phone number, either home or business.”

Profile reports are prepared daily to gauge how many customers were profiled, and to provide associates with opportunities to update their customers´ profiles or ask them for more information. The reports have become a management tool for Mitchells to measure its associates´ success.

“In the report for the last two weeks, for example, the average associate profiled 73.4 percent of his customers. Anybody below the average has got to ´go back to school´ and work with me and our managers on how they can improve their profiling abilities,” says Mitchell.

“It´s important for all of us to understand that if we know our customers, then we´ll do better for them, and they´ll know they´ll get the personal attention they deserve.”

Mitchells employs nearly 200 people—174 full-time and 20 part-time—and Jack Mitchell makes a point of extending his high-touch philosophy to his staff, as well. “I meet frequently with each staff member and always talk to them by their first name.” Every staff member also gets a birthday card from the Mitchell family.

Tailoring the marketing effort

In addition to its in-store efforts, Mitchells uses targeted direct mailings and telephone calls to market to different customers differently.

According to Mitchell, the company sends hundreds of individualized mailings each retail season, most of which feature personalized notes from sales associates about favorite brands or designers. Customers who have given their permission may also receive phone calls about designer shows, or recently arrived stock in a favorite brand.

MVCs—customers that spend more than ,000 in any single sale—receive personal notes from Mitchell each year. He also sends a personal note to all first-time customers within three days of their initial visit.

All of these relationship-building efforts, as well as the customer response to those efforts, are stored in Mitchell´s database to track and improve the effectiveness of the company´s varying efforts.

And, although Mitchells collects email addresses, its CEO doesn´t believe that either his customer base—or his associates—are ready for full-scale email marketing.

“We´re going to start experimenting in the near future with some sales associates who are computer literate and will send email to customers who have told us they want to hear from us that way. But we have to go very slowly. The process has to be designed to work extremely well all the time, from the customer´s viewpoint,” Mitchell stresses.

Looking ahead

Along with adding email marketing to the current relationship mix, the organization´s future goals include profiling 100 percent of its customer base.

“Every customer that comes in ought to be profiled. And if our associates are forced to get into the computer and put the information there, they will start asking these questions earlier,” he explains.

For Mitchell himself, the local buzz around his company´s success from friends, customers and colleagues has prompted him to write a book, which will be published in the spring by Hyperion. The title? “Hug Your Customers.”

Karen Burka wrote this article for the 1to1 Magazine’s November/December 2002 issue. 1to1.com offers consulting, management, and publishing services to businesses wishing to maximize their relationships with their prospects, customers, and staff.

Karen can be reached via email or at http://www.1to1.com.

Profiles of business owners respected in their industry appear in our newsletter and are available on our web site. We encourage association executives to tell us about their members who are leveraging their inherent advantages (trusted brand, excellent service, etc.) by embracing a “doing it right” attitude into their strategy for growth.

The Opportunity

Doing business with family members has NEVER been a neutral topic.

Family businesses are a time-honored tradition.

In contrast, many companies have formal policies against doing business with people you have outside ties with, just because of the (MANY) possible complications.

The Solution

What follows is a discussion of how to accentuate the positives, downplay the negatives, and make good decisions for YOUR situation when it comes to matters of family business.

Family Business in History- Tradition and Legacy

It has been a tradition since time immemorial for families to work together. Young people become apprentices to their older relatives and learn the inner workings of business. After “earning their stripes” and completing their education, these young people are often groomed for high positions in the companies.

The connections, the early introduction to the key players and concepts, and the reputation they carry in their families names provide their customers with the security of dealing with a “known entity,” in what is now a very volatile marketplace.

There are many family dynasties that have spent many generations building reputations, building markets, and gaining experience that become their competitive advantage. The Gallo family in winemaking, the Eccles family in banking, and the Shane company in jewelry are examples of families that have (or had) several generations in building their businesses into vast empires.

There are even current tax breaks for employing your children. Some very smart families have their children work in the family business, and a portion of their salary goes into their education fund. This allows for additional tax advantages.

Working in a family business (as a non-family member) can present a unique set of benefits and problems. I worked for a small family-owned florist shop in college. It was extremely unwise to have a disagreement with a member of the “ruling family” because the rest of the family would hear about it almost instantly and your future with the company would be suspect.

There was also much gossip among non-family members about the pointlessness of trying to be successful in a family business because no matter how hard you work, “you´d never have the right genes.”

On the other hand, I worked at another family-owned publishing company whose approach was to treat all of their employees like family. We had a barbecue on the premises every other Friday, communication was extremely open, and it was a wonderfully warm and nurturing environment.

My boss treated everyone like a son or daughter. They were happy to help out an employee whose home was damaged in a storm, (we were given half a day off on the condition we showed up at Dave´s house in overalls with tools in hand) or to cover for a secretary who needed time off to care for a sick child. It was a surprisingly nurturing environment, unheard of in the modern, cold corporate culture.

Modern Corporate Culture- Keeping Things Simple

This is all very well and good if your family owns the company, but for the rest of us, working with family has some definite drawbacks, and even some formal obstacles. And for good reason!

Avoiding conflicts of interest, or the appearance of conflicts of interest, is central to the human resources policies of many companies. Most forbid direct reporting relationships between family members or even dating couples. There is the possibility that other employees will see a relationship as a factor in a raise or a promotion, or on the contrary, in a disciplinary action.

A breakup, divorce or intergenerational family fight can make it very hard to maintain complete fairness and objectivity in the workplace. The HR department´s job is to avoid any such turbulent possibilities by keeping things simple.

There is also the issue of confidentiality. Many people confide in their spouses and families about issues at work, which provides a much-needed outlet and is not likely to cause any harm if the spouse or family member´s work is not related.

But with interconnected projects and departments, there is always the possibility (or perception) that families that work together may have the advantage of inside or shared information that their co-workers don´t have.

In his book Office Romance, Dennis M. Powers details what he calls Office Wolves, Office Hyenas, and Office Black Widows- people that can make life much more turbulent in an office where spouses or dating couples working together.

His “Wolves” are people who are so intent on dating a person in the office that they make life difficult for the object of their affection that doesn´t reciprocate their feelings. “Hyenas” are people who enjoy being in the middle of whatever gossip they can dig up, and “Black Widows” are the injured parties from extracurricular office romances. All this can lead to a lot of, well, complexity, to say the least.

On the other hand, we spend at least forty hours a week at work, and pour out creative energy and inspiration and get to know people we work with. It´s a fact of life that some of those people are likely to develop relationships. Powers reports that one third of all romances begin at work. Many people leave companies or start their own simply to spend more time with their families.

Many of the best qualities in the people we work with are also the best foundations for relationships- or the best qualities in the people we love and respect in our personal lives are the best reasons to work with them. Trust, understanding, shared values and mutual goals are all great reasons to work together.

With many companies merging, relocating, or becoming international, some companies are relaxing their policies about spouses and family members working together, especially at remote locations. An executive sent to Lisbon to open a new office agreed to go if his wife could also find employment there. The Human Resources department found an opening that fit his wife´s qualifications, and made an exception to the HR policy since they would be working in the same department.

Love and Money- Working with Families

Here are some suggestions we´ve heard for maintaining familial bliss as well as sound business. Some of these guidelines also apply to doing business with friends, an equally tricky topic.

It is as important to be as courteous to your family as it is to strangers. We sometimes become too relaxed with family members just because
we see them every day. We take for granted that they´ll put up with our moods in ways other people wouldn´t understand. This can lead to problems with family members, or with other employees who feel awkward seeing these interactions.

Establish boundaries. Make sure you spend enough non-working time with your family members that you see them as individual people that you have a healthy relationship with outside of the company. Have separate family outings, holidays or weekend activities where you DON´T talk business.

Be professional in public or at work. Expressions of affection could make other employees feel uncomfortable.

If you want to be alone together or have a private conversation, go away from the company property for an intimate lunch or cup of coffee. But don´t abuse the privilege and allow either person´s duties to be neglected.

If you are the employer, have very specific policies about reporting relationships and expectations of behavior to avoid conflicts of interest, sexual harassment, or the potential appearance of either. Working in separate departments, for example, might be an ideal solution where a couple can work at the same facility but avoid any potential problems.

If you own a family business, be sure the lines of communication to non-family employees are good. Make sure that no one feels disadvantaged for being left out of conversations and decisions that take place around the supper table. Keep the appropriate people (based on their role in the company) involved in all decisions.

Don´t talk about your family members personal life with other members of your staff, except in terms that are absolutely non-controversial. (Don´t tell your co-workers that you don´t approve of who your daughter is dating, for example, if your daughter works in the next office!)

Make sure each member of the corporate structure has the option to leave the company without impacting the company more than necessary. Don´t assume that a person is a “lifer” just because he or she is a family member. Whether or not they take the “exit clause,” just having one makes people feel less trapped and ensures that they are there by choice.

Respect each others´ decisions and authority. This may be particularly difficult for parents. Just because you´re the Mom that doesn´t mean you can tell your son how to run his department. Keep your comments appropriate for your role in the company, rather than your role in the family.

Appreciate the good things about each other. It becomes easy to focus on the negative when you spend a lot of personal AND professional time together. Remember (and point out) what you admire and love about one another.

Conclusion

Doing business with family and friends can be very rewarding. It can also be very complicated and difficult. It always involves an even more stringent standard of etiquette than usual, but if appropriate measures and safeguards are taken, it can make life, work and relationships a rich, rewarding tapestry that brings the best of both worlds.

Paula Gamonal is an owner of Ravenwerks.com, an online community serving managers and executives that addresses topics of leadership, teamwork, best practices, customer service, marketing and technology. She is also the author of Author of Taming the Dragons- 50 Essays from the Business World.

Technorati Tags: Family Business Succession

Swiss Meat & Sausage Company is a 3rd generation family owned and operated business located in Swiss, Missouri, a small town in east central Missouri.

Swiss Meats has been online for just over a year (www.swissmeats.com), and in that time, the Internet has proven itself to be a valuable tool for expanding their mail order sales.

Bill Sloan had been selling his homemade German sausage at the counter of the country store he operated with his wife.

As sales of his sausage increased, he decided to expand the business, and in 1969, Swiss Meat & Sausage Company was born.

Bill´s son Mike now runs the business, and Bill continues to take an interest in the company he created over 30 years ago.

“He still comes in on payday!” jokes Mike. The second generation is extremely active in the business.

In fact, the entire family is involved: Mike´s sister Sharon is the office manager, shipping coordinator, and manages the company´s website; His sister Vicki is involved in production, and sisters Dina and Janice work for the company part time.

Swiss Meats had been opened as a local outlet for local products, but over the years, many farms and businesses closed. Mike knew that he would have to expand and diversify in order to keep the company afloat.

An ever-expanding mail order division proved to be one valuable cash generator.

“When we started the company in 1969, it was a small, custom meat processing operation for local farmers and ranchers. They would bring in cows and hogs and we would butcher them for the local farmers.

But through the 70´s and 80´s, a lot of these people died off or the farms began to disappear. That took a big chunk of our revenue. We had to come up with other avenues of revenue to stay in business through the 80´s and 90´s, so slowly but surely, we started to expand our mail order business.”

“We got customers in our retail store because we´re near a tourist area. The store itself is in Swiss, Missouri, which is a small, one-road, no stop sign town— if you blink, you´ll miss the town.

But we´re close to Hermann, Missouri, which is known for its wineries and its German heritage, so we get a lot of overflow from the city of Hermann, and we get tour busses coming from Branson.”

Customers to the retail store frequently enquired about mail order. Initially, Mike says, mail order was not an option they had seriously considered, but customer requests suggested that the demand was there, and Mike understood that diversifying the business was key to its ultimate survival: “To be a small company in the meat business today, you need to diversify. Some companies know that, and some haven´t found it out yet.”

And Swiss Meat is certainly diverse. At present, their company has multiple operations that run the gamut from retail sales and catering to wholesale, and from deer season processing to mail order.

To grow the mail order component of their business, the staff has been collecting email addresses via in-store sales, through the website itself, and by requesting information from customers placing phone orders.

Their site is capable of handling online orders via credit card. Their e-commerce features are powered by Microsoft.NET´s Passport system, which provides businesses with online shopping capabilities without requiring dedicated personnel or expensive servers and hosting arrangements.

In addition, the site serves as an entertaining and informative virtual press kit, providing ample information on all of Swiss Meat´s varied services, their award-winning products, and the family behind the business.

Like so many of the other companies we have profiled, Swiss Meats is using the Internet to expand tenfold on the information they might put in a Yellow Pages ad or a 30-second commercial spot.

Mike feels that the biggest challenge to longevity facing family businesses like his lies in preparedness—both being ready to embrace new trends and technologies like the Internet, and having plans in place for business succession.

“A lot of the businesses in the meat industry don´t have the next generation to pass the business on to. Many of them are in their 50´s and beginning to think about retirement.

Those are the companies that aren´t going to be there in ten years. The ones who have a successor need to look outside the box and see that what was successful for them twenty years ago isn´t necessarily going to be successful in the next twenty years.”

“Eating habits have changed, people want pre-cooked food, time is an issue to them. People in the business have been hearing this for years, it´s not new news, but some of them have been slow to realize that these changes affect them, too. But it costs money to get there [to the next level], and they´ll need to make a decision.”

Mike feels comfortable making these decisions and planning for the future. In 1997, the company underwent a major expansion, building a 6000 square foot addition to increase their productivity, which in turn helps to guarantee their stability in the years to come.

“It didn´t change the business over night, but in our minds, we wanted to be ready for the next generation to have the ability to do things that other companies are just now beginning to figure out. And that´s worked out very well for us.”

The same can be said about their Internet presence: it gives them (and their successors) an edge over their competitors while at the same time broadening their customer base. Both of these factors will help Swiss Meats prosper as the 3rd generation prepares to take the helm in the years to come. Mike is certain that if they hadn´t made the decision to grow their sales online, the company´s future growth would be limited.

“We aren´t using the Internet to its full potential, but we know we will. We know enough and see enough, and we have enough confidence in our product to know that we´re going in the right direction.”

Profiles of business owners respected in their industry appear in our newsletter and are available on our web site. We encourage association executives to tell us about their members who are leveraging their inherent advantages (trusted brand, excellent service, etc.) by embracing a “doing it right” attitude into their strategy for growth.