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Weekly UpdatesBOB LAIKIN HAS LEARNED a few lessons in entrepreneurial leadership over the last 20 years as he's led Brightpoint into its initial public offering and highflying days on Wall Street and then through periods of rapid declines, restructuring and rebuilding once again into a global cell phone distributor.
Those lessons and his perseverance were honored at the 2008 Indiana Entrepreneurial Leadership Awards, where Laikin was given a special presentation of the William L. Haeberle Legacy Award. The annual program is organized by the Johnson Center for Entrepreneurship & Innovation at Indiana University Kelly School of Business, the state of Indiana and Premier Capital Corp. and its top award recognizes those who have made a career of contributions to the state's business community.
Laikin accepted the award, noting that being an entrepreneur means surviving both the ups and downs of the market and others perceptions of your company's success. "Building a company has its great times and some very difficult times," he says. And Laikin has experienced both of those in great measure.
Laikin recalls early success in 1989 when the company did $9 million in sales but couldn't get bank financing "because mobile phones are just a passing fad." Five years later, Brightpoint went public and Laikin says the same bankers were offering him $100 million lines of credit.
As it became obvious that cell phones were changing the telecommunications industry, Brightpoint stock soared and hit a market cap of $1.4 billion by 1998. Laikin was celebrated as Wall Street's youngest and most successful CEO at the time. "From 1994 to 1998, every comment was a positive one," he recalls, remembering how strangers in his hometown of Indianapolis would come up to him in restaurants and share stories of how the investments in Brightpoint stock allowed them to pay off their mortgages and send their children to college.
Not only were such comments rewarding, but they affirmed Laikin's priority of serving his shareholders. "That's who we work for," he says, placing them at the top of a list followed by customers, vendors and employees. But he learned firsthand how quickly markets change. By 2002, the company's value had collapsed to just $10 million.
"We had a wild ride. We learned a lot more from our mistakes than our successes," says Laikin, who jokes now that he got a $500 million education in the process. But at the time, it was no laughing matter.
Laikin admits that it was easy to stop listening to the good advisors he had in the early years, who urged him to focus on managing costs, being careful with credit and closely watch the bottom line. The "new" advice was to focus on rapidly growing revenues and worry about nothing else while large financial institutions pumped money into the company and drove up its stock price.
"You get caught up in that and start thinking this is how businesses should be run," he says, recalling road shows where he would fly into a city, make a quick presentation and have young fund managers agree to buy millions of dollars of Brightpoint stock. "And then one day you wake up and start reading how your company is overvalued."
That's when Laikin says he learned some tough lessons of entrepreneurship ... many of which are being learned by others in the current recession.
"On the way down, most people don't cut their losses early enough and they become too emotionally involved," he says. While that observation is often applied to stock trading, Laikin says it also applies to letting employees go, shutting down a division or pulling out of a foreign market.
And he stresses that it's not easy for CEOs to put aside their egos, especially when they have been on the public stage and everyone sees their successes and failures. But Laikin says just like you might cut off a finger to save a hand or cut off a hand to save the entire body, executives must be willing to accept the need for drastic cuts in their business to pay down debts and allow the company to survive.
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Another lesson is to be willing to accept real purchase offers in a falling market, rather then to hold out for hopes of a better deal.
"If I had a choice between liquidity and valuation, I'd go with liquidity," he says, noting the window of opportunity for such sales can be very short.
"In life and in business, timing is everything," Laikin adds. And in some ways, he figures he was lucky to have experienced difficult times before and had the opportunity to rebuild as a stronger company. Today Brightpoint has 3,000 employees in 28 countnes and handles one in 12 of all cell phones in the world at some point in their distribution from manufacturers to users.
As the company recovered, Laikin says he has been careful not to repeat previous mistakes and believes Brightpoint is positioned well to be a low-cost provider in the current economic climate. He sees future opportunities in international markets and with advances in smart phones that will continue to drive sales. And while he would much prefer a growing economy, Laikin knows something about surviving in difficult times.
Innovation Award-Product. Quadraspec, the West Lafayette company that develops diagnostic testing for medical research, is the 2008 winner for the product innovation award. Its new diagnostic tool is designed to assist veterinarians in identifying common illnesses that affect household pets.
CEO Chad Barden says the new product allows vets to test for heartworm in dogs and cats and for the feline leukemia virus. The company's next step is to test for multiple diseases from a single drop of a pet's blood. Although the new product is a validation of the company's research in other areas, Barden also notes it serves a very important role in providing a source of revenues for the coming year. That's something he urges other development companies to find.
"Sell what you have today and capitalize on what you have developed," he says, noting that the financial markets make it very difficult to raise capital without having such a revenue stream. "That's really what has allowed us to provide the sustainability that many startups don't have," he says.
While Barden says it is difficult to predict how the economy will perform in the coming years, he cautions that even the best plans to raise capital and find equity financing may not be possible and he advises companies to find ways to operate, grow and thrive without raising outside money. "As a business owner, it's my job to make sure that we are not counting on things that may not come to pass," he says.
He suggests taking a hard look at current development projects and finding ways to bring the most promising ones to market quickly. By reviewing existing products and research that has already been tested, Barden says companies should identify which items are the most marketable and focus resources on building those into revenue streams.
"You have to look at where you want your innovation to be in three years or five years from now," he says. "That's where the art of being an entrepreneur in an innovation business really come into play"
Innovation Award-Process. Interactions Corp. in Carmel is also embracing innovation in developing a new service or what the company calls "the second service revolution." The 2008 winner of the process innovation award combines human interaction with technology in a way that allows tasks to be performed by both.
CEO Michael Cloran sees that process as a logical progression from the earliest mass production in the industrial revolution followed by the growth of the service sector in the past 30 years. Now new technology systems blend the two by creating services such as airline reservations systems that can integrate automated flight data, pricing and other information and seamlessly shift specific tasks between humans and computers.
Cloran says such innovation can spur other ideas and help to build entire new systems. "The idea for the second service revolution got more interesting as each problem associated with it was solved--usually the reverse occurs and the shine comes off an idea as each problem is addressed and worked around," he says.
However, he cautions that innovation must be accompanied by focus on specific business objectives. "Folks that are good at innovation, tend to want to do it too much," he explains. "A key thing I've learned is that you need to focus innovation on what you do differently than anyone else and make sure those innovative juices aren't applied to everything. If you find yourself innovating around basic tasks in addition to running a company centered around an innovation, you're making a mistake."
In the current economic climate, Cloran advises a focus on innovations that can produce cost savings, retain customers or increase revenues within existing systems. Taking those steps now can generate large returns when the economy turns around and begins to grow. "A couple of our huge customers are telling us exactly that--their goal is to clean up and streamline during economic downtimes," he says.
Growth Award. The 2008 Growth Award went to Defender Direct, an Indianapolis company that started in CEO Dave Lindsey's spare bedroom some 10 years ago and has expanded into a national company Defender Direct markets, sells and installs ADT security systems and DISH Network satellite television and currently has 1,300 employees, with approximately half working in Indiana and the rest located in more than 40 other states.
CEO Dave Lindsey says the company has experienced more than 100 percent growth in the past two years and is on track to have $150 million in sales in 2008. He credits that success and rapid growth to an emphasis on developing people. "Companies don't grow, people do," he says.
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