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Description
EXECUTIVE OVERVIEW
Since its founding in 1974, Printing Control Graphics (PCG), a recent acquisition of Houston-based Consolidated Graphics (NYSE: CGX), has been known as a high-end, boutique, commercial printer, producing annual reports, presentation folders, catalogs, brochures, and direct mail. Before 2000, PCG was a successful medium-sized printing company with nearly $13 million in annual revenues. However, after the dot.com bubble burst in 2000-01, the slide in earnings began with back-to-back years of successive losses. But that was before Richard Lancaster joined the ranks of this rapidly sinking ship in June 2003 as Vice President of Business Development.
When Mr. Lancaster joined the company, revenues had fallen to $7.5 million and the company had an operating loss of more than -10%. At that time PCG was owned by a failed consolidator called Kelmscott Corporation, which in turn was owned by J. P. Morgan Chase and GE Capital, and managed through the JPM workout banking group. The goal on joining the company for Lancaster was to affect a turnaround and transition as quickly as possible and to help the Kelmscott group's effort to earn its way out from bank ownership.
Lancaster, at the age of 43, has lead PCG on a steady march back to profitability. Revenues in 2004 jumped to $10 million from $7.5 million in 2003 when he came onboard. However, the company's bottom line still showed some red, with losses of $716,000 in 2003 and $100,000 in 2004. Then in April 2005, after the closing of the merger with CGX, Lancaster was promoted to President of the company, and ever since the company has been profitable each month. July 2005 operating income came in at 18.5%, while the industry standard is around 5%. While the turnaround and transition is not complete, Lancaster feels the company is well on its way to becoming an industry leader in terms of operating income. The organization-wide restructuring resulted in a:
* 20% reduction in the workforce.
* 19% replacement in the remaining workforce.
* Crossed-training 60% of the staff.
* Increased sales revenues due to new customers.
* 10% increase in cross-selling additional value-added services to existing customers.
* Investment in new, state-of-the-art digital printing technology.
* Reduction in operating costs through various process efficiency improvements.
Lancaster noted in a presentation to executives at his new parent holding company that he set out six core ideas in leading PCG's transition, but pointed out that these principles were not all that different from using persistent, consistent, good management principles anywhere:
* Sales Focus--"nothing happens until somebody sells something!"
* Program Selling--sell value-added programs, not tactical printing jobs.
* Cost Consciousness--embed this in everyone for everything we do and make results clearly visible.
* Quality-Centric--customers know us as a high-end boutique printer, thus we must deliver a quality product to differentiate ourselves in the marketplace.
* People Focus--respect employee's longevity and knowledge. If people truly feel valued, this is infectious in their interactions with customers and with each other. Have fun (e.g., BBQ's for the staff and horse races for customers).
* Insist upon integrity in all that we do--always take the high ground on any issue where "circumstantial ethics" can creep into decision making.
What is particularly amazing about Lancaster is that he had no prior experience whatsoever in the printing industry I a traditionally "good-oldboys" industry.
Born in England into a British military family, Lancaster spent his youth traveling the world with his parents and attending Britain's equivalent of The Citadel military boarding school, followed by a small liberal arts college in Nottingham, England. Prior to joining PCG, he held a number of sales and marketing executive positions in various companies such as Dun & Bradstreet in Australia and England, Digital Systems/Avaya in Seattle (a computer/telephony mainframe manufacturer), and Nextel Communications, where he was the Director of Marketing. In addition, in 1994 Lancaster started up CobWeb, Inc., one of the first Internet companies in the Seattle area and a pioneer in the emerging field of online technology.
By 1996 he was running the company profitably as CEO and by 1999 he was actively funding the company through "angels" (i.e., private venture capital and institutional investors across the country as he pursued a product development strategy). Lancaster fashioned CobWeb into an ecommerce service provider, developing an application on emerging Microsoft technology, E-Storefront. CobWeb was then backed by a global investment banking firm, Lazard, out of San Francisco. Lazard and CobWeb embarked on a consolidation of six other Internet systems integrator firms across the U.S. and Canada to create a major new player in the Application Service Provider field, providing enterprise-wide application services to medium and large firms.
However, timing is everything, and CobWeb's attempts to raise $60 million to fund the closing of seven simultaneous mergers of the companies involved in the consolidation fell right into the abyss of private equity investing that marked the beginning of the dot.com crash. With the consolidation in tatters, the 9/11 disaster then served to finish off CobWeb as a going concern as the technology marketplace was lobotomized almost overnight and new sales revenues dried up. Lancaster voluntarily closed the company in June of 2002, having paid off the bank and all but a few of the creditors, laying off over 40 people, and transitioning the customers and technology to another firm to be supported.
Personally devastated by his first major business failure, and the cruel reality of "Thanksgiving Dinner Syndrome" ("when you have to face relatives over the Thanksgiving dinner table for the rest of your life knowing they lost their investment in your company"), he dropped out of fulltime business for 12 months and worked as a part-time consultant on an Open Source project out of Singapore, as well as on the very successful launch of "Scene-It?," a new DVD board game--now the fastest selling board game in history. Lancaster licked his wounds and contemplated his future.
What happened to Lancaster, like so many of his startup peers, is both a personal and professional transition story--going from the highs of running your own company and negotiating with investment banks and venture capital firms, to the depths of despair, having lost it all, and then career uncertainty. What lessons can be drawn from this experience and applied to company turnarounds and transitions across different industries?
DIFFERENCES BETWEEN DOT.COM AND PRINTING INDUSTRIES
It is conventional wisdom that different types of skill sets and business foci are needed to successfully lead a high-tech start-up versus a relatively stable, mature industry (see Figure 1). Therefore, it is not surprising that the founders of startup companies are often replaced by managers whose skill sets and experiences are more consistent with a pattern of stable growth. It is equally plausible, however, that a manager of an entrepreneurial venture may adapt his or her behaviors to fit changing business demands and environments. In other words, a manager can change his or her behaviors to a certain extent, dependent upon his or her prior experiences and predisposition, rather than it being assumed that they should be "replaced." In PCG's case, sales skills were necessary to grow top-line revenues, given historically slim industry operating margins and increasing price competition as a result of consolidation. Sales skills are often transferable... |
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