Change Of Face
After his father was murdered in 1981, computer database expert David Wheeler developed a program that could pinpoint perpetrators with startling accuracy by sifting through crime reports, tips and other investigative data. The first time he tried it, the program linked several seemingly unrelated crimes and fingered a suspect. "I've got something here," he thought.
In 1991, Wheeler, 39, founded InfoGlide, Inc. of Austin, Texas, to sell the software program to law-enforcement agencies. Local and national police departments utilized it to investigate everything from serial rapists to international terrorists. But other, cash-strapped public agencies lacked the financial means to support Wheeler's start-up. Says InfoGlide CEO Jay Valentine, 50, "If the client loves the product but can't afford to buy it, there's no market."
In 1996, InfoGlide discovered a new market. Fraud rings were costing the insurance industry hundreds of millions of dollars in spurious claims each year. Insurance investigators' efforts were stymied by the same problems police faced. There were huge files of accident reports, names, addresses, driver's license numbers and the like, many intentionally garbled by criminals to avoid detection. The first time Wheeler ran a file of insurance claims through his program, "it lit up like a Christmas tree," he says.
InfoGlide immediately re-targeted its efforts toward insurance firms. Soon, orders were practically pouring in. In 1998, Wheeler raised $5 million in venture capital. Today, his company has 38 employees and is worth $100 million.
InfoGlide's experience is a prime example of shapeshifting. Also called transmigration, it's the practice of morphing a company so it can enter a peripheral or related industry. "We're seeing an enormous amount of transmigration going on right now," says Barry Sheehy, president of management consulting firm CPC Econometrics Inc. in Savannah, Georgia. Examples include Greyhound Corp.'s change from a bus company into consumer-products maker Dial Corp. and Westinghouse's transmigration from industrial manufacturer into broadcaster CBS Corp.
Transmigration is also occurring in such industries as financial services and health care. The reason, Sheehy says, is that transmigration is a key to long-term success in a changing environment. "If a company lasts more than a generation," he says, "they've transmigrated once if not more."
Mark Henricks is an Austin, Texas, writer who specializes in business topics and has written for Entrepreneur for 10 years.
The idea of changing forms precedes modern business. Ancient civilizations passed down legends of werewolves and shapeshifters like the Norse god Loki. A more recent example is American Express, which started out a century and a half ago as a freight forwarder but has become a preeminent global financial services company. Some companies even see shapeshifting as a key to survival.
Transmigration involves more than jumping fences to get into what appears to be greener pastures, Successful shapeshifters are careful to enter new businesses where existing core competencies will give them an edge. For instance, says Sheehy, American Express migrated into financial services after becoming expert at doing money transfers for immigrants it was transporting to 19th-century America.
To identify a transmigration opportunity, listen to the fringes, advises Sheehy. "Very rarely are these transmigrations spawned from the center [of an organization]," he says. "It usually comes as an opportunity on the periphery."
Suspect a transmigration opportunity if a sideline business unexpectedly begins producing sales and profits that are growing faster than your main business. "Pay attention when something that should be a sideshow starts looking less like [that] and more like the main event," advises Sheehy.
Techniques such as economic value added, or EVA, analysis can also help you determine whether the activities are adding value to your company. "As these businesses begin to prove themselves," says Sheehy, "they tend to add value very quickly."
Don't move too radically to take advantage of transmigration opportunities, however. Stay involved in your established businesses while exploring new ones. Eventually, the older businesses may die natural deaths, but don't hurry them. "The old can go on for a long time," says Sheehy. Often, profits from the old business pay for the costs to start the new one.
Shapeshifting is as tricky and risky as it sounds. It's hard to focus on the periphery of your business. Sheehy says executives at one of his client companies resisted expanding a sideline business that was actually producing half the company's profits as well as growing faster than the core operation. "You'd be surprised how long it takes people to recognize that," he says.
Shapeshifting also creates tension in a company, as a long-established business is cast aside in favor of a new one. Employees who are comfortable in the old world are likely to resist being pulled into an unfamiliar one. The situation is worsened by the fact that shapeshifting means leaving behind the things that got you where you are and is best begun while the old line of business is still seemingly viable. "You have to have the discipline to be able to shift money to support these new areas," Sheehy warns.
A Growing Trend
Transmigration is destined to become more familiar to all types of businesses. Thanks to forces such as e-commerce and globalization, boundaries between industries are blurring, value chains are adding and subtracting links, and large numbers of companies are facing pressure to develop new markets to replace dying ones. "It's happening more frequently," says Sheehy, "because competitive environments are forcing it."
But you shouldn't force it. "This isn't about going out to find someplace to transmigrate," Sheehy says. "It's about going to the periphery of your organization to find out where it's already happening."
It's happening again to InfoGlide. In 1999, it became apparent that InfoGlide's technology was ideally suited to analyzing large files of Web-based customer data to identify a firm's best customers and their specific tastes. Suddenly, the door opened to opportunities in customer relationship management and online vertical retailing.
"We're not really in the fraud business," Valentine says. "We're in the business of giving you the most detailed information about your customer. When he changes his name, address and identity numbers in order to avoid you finding him because he's being fraudulent, we can still tell you all about him. And every industry cares about knowing their best, worst and fraudulent customers."
Having gone from law enforcement to insurance to general business markets in just a few years, InfoGlide might be an extreme example of shapeshifting. Nevertheless, the scenario is one that any business could face if its market changes. As Valentine says, "The market is the ultimate wisdom. The market is going to tell you what you have to do."
- Winning the Race for Value: Strategies to Create Competitive Advantage in the Emerging 'Age of Abundance' (Amacom) by Barry Sheehy, Hyler Bracey, Rick Frazier and Adrienne Hickey explains how companies can, among other techniques, transmigrate to meet changing market needs.
- Shapeshifters by Marlene Piturro, is a September 1999 article in Management Review magazine that examines transmigration from a big-company perspective.
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