Tonight, on December 14th, as 1996 drew to a close, was the last day of this particular class for both my group of executive MBA students and for me. I tore myself away from my post as chief executive at my Walnut Creek based company and quickly wound my way up St. Mary’s Road to arrive just in the nick of time. At full speed, I strode through the door of the classroom to an odd scene. Most of the class was crowded around one desk; there was a buzz of excitement.
I hesitated for a moment, then inched over to the crowd, and saw that Cecilia Trost was the student sitting in that desk; the center of all the attention. Cecilia was a fast-track executive at AT&T for the past 18 years, and her demeanor and presence in class had always been the epitome of corporate: confident, professional and poised.
I quickly noticed that she wasn’t in pain and no-one was administering first aid, so the thought of calling 911 vanished. I put my briefcase down, sauntered over to the group and said, “Everything ok?”
Several in the group backed away from Cecilia with odd expressions on their faces, opening a line of sight between Cecilia and me. After a hesitation, one of them said only, “Ask her.”
I shifted my eyes to Cecilia, and without speaking, I asked her. With her game face on, not betraying much emotion at all, she said, “I quit”. She must have seen the instantly puzzled look on my face. I’d never had a student quit on the last day of class. Several students had needed a couple of extra days to finish the mandatory start-up business plan —and that was always fine with me.
Cecilia continued, “I quit my job, and am immediately launching the start-up as detailed in this plan”. She lifted a professional-looking business plan from her desk and handed it to me. Now I understood why the group had been clustered around her. As my questions began to fly, the rest of the class joined in. My professorial pride for my student was mixed with the class’s impression of her courage. What the class didn’t know was that the real test of courage was still ahead.
Cecilia was partnering with a colleague, David Marks, who was presently an electrical engineer driving forward a small division doing low voltage work (designing wiring in buildings for computers, video, security, telephones and other technologies) within a high voltage (designing power and lighting systems) firm. His company wasn’t too interested in putting any more resources into what David considered an area with great growth potential. Cecilia had an engineering degree, but had long since chosen to focus on business. The business plan had Cecilia and David both leaving their current firms to found TEECOM.
Flash forward to September of 2008: It was time for another progress report on TEECOM. I’d been generally keeping track of Cecilia, and knew the firm was still alive. This time, I arrived with plenty of time to spare in her downtown Oakland offices. I noticed the floor first, a beautiful hardwood floor with a pattern that suggested circuitry. I looked up and saw, through an engraved floor-to-ceiling glass wall, a 15-seat conference room with several executives meeting. On the wall was a company history poster showing key growth milestones created a few years back when TEECOM had celebrated its ten year anniversary, crediting the entire team for the success.
As the receptionist went to inform Cecilia that I had arrived, I thought about the magic of entrepreneurship that can turn an idea and a plan into a living, breathing organism. My last mental picture of TEECOM headquarters was from the time I brought Cecilia back to St. Mary’s as a guest speaker in 1997 and she told us a story from the first week of the business. They were loading their new server and David’s baby (now in middle school), attracted to the lighted switch on the power strip, crawled over and powered down their servers during a build. What a different picture 12 years later. I decided to dig into what Cecilia considered the keys to their success.
And success it was. The firm’s headcount now stood at 37, and revenues were 7.5 million with booked projects enough to be confident that 2009 revenues will jump to 12 million. Profits are strong and consistent, and they have no debt. TEECOM has earned a place in the most recent top 100 best places to work in the Bay Area, a place in the top 100 woman owned businesses in the Bay Area, and a place in the top 100 fastest growing businesses in the Bay Area. Their list of projects completed is impressive and filled with names we all know.
Not all Business Opportunities are Equal. The first thing Cecilia and David did right was that they chose the right business opportunity. David was deeply immersed in his industry and saw the trend toward convergence, where all the low voltage systems would come together and run over the IP (computer) network. He saw that the discipline was emerging from a sideline (compared to power systems design) to a critical piece of every building’s design.
Many entrepreneurs believe they can see the future as David Marks did. But too many don’t have nearly the knowledge base to make a good judgment. They dream up products or services in an industry or business where they have little experience. They don’t put their concepts in front of real customers to validate their ideas. There is no substitute for real industry experience.
Every business encounters problems and challenges. But some businesses are more forgiving than others, providing enough forward momentum (and profits and cash flow) to help the business to survive. Growing demand for services or products that are not readily available is one of those factors that can make a big difference, as it did for TEECOM. No matter what happened, there were lots of opportunities for work all around them, and with the constant change in technology as the world marched toward convergence, there were many opportunities to distinguish themselves as knowledge leaders.
Business Discipline as a Competitive Advantage. The history of many firms in the professions (like architects, lawyers, doctors, etc.) is that a professional leaves a firm and starts his or her own firm, often without any business training. The firm grows to a certain size, then struggles without the needed business experience and discipline. That’s where Cecilia came in. She says, “I wish I could tell you some particular move we made that got us where we are today. But I think the truth of it is that we just built the business one brick at time, paying careful attention to the fundamentals.” She referenced the discipline of writing that first business plan, where every aspect of the business had to be thought through, addressed, and planned for. She says, “I wasn’t allowed to leave a section of the plan blank, or glossed over. I remember when I wrote in the draft that we’d attract top talent to do a better job than our competition, you asked me how I’d do that, how I’d attract them, and how I’d be able to afford that kind of talent.” The final draft of the plan addressed those challenges.
Cecilia and David continued the systematic management of the key fundamental processes that would keep TEECOM healthy and ready for continued growth. By 1999, they had developed some language of their own that continues to guide their business discipline.
The Three Machines. They began to think of three functions in their business that had to run well for a broad based, sustainable success. The human resources side of the business was called “the hiring machine”. This machine had to dependably produce great new hires in advance of new projects. They stick to a careful applicant screening process that includes testing, phone screening, and group interviews to be sure they hire correctly. Over time, they expanded the hiring machine’s functions to include training for their own people, and good retention practices as well.
There is the “project machine” that represents their marketing and business development efforts. In order to grow, they needed a steady stream of project bids and wins. In their industry, as in many others, relationships are key, so Cecilia, David and their entire marketing and business development staff are constantly meeting with existing and potential clients, forming those relationships. The “jackpot” relationships are those that produce a continuing stream of projects, like UC Berkeley, who became a client in late 1997 and is still a top client of TEECOM’s today.
Last is the finance function, or the “cash machine” that dictated that they must invoice quickly, manage their receivables consistently, keep expenses down and billable hours ratios up. Within each machine, Cecilia and her team do annual planning and budgeting, and take the time to be sure that the machines are synchronized and will support each other’s objectives.
Keeping “the machines” humming is critical for any business regardless of whether the business is growing, holding steady, or declining. All the functions of a business should work at a certain level of proficiency, lest they hold the business back. I’ve often thought of being a CEO as a process of rotating my attention through each of my departments every six months. I’d tend to problems and processes, helping to improve them and bring the functioning of the department up to the next level. After about six months, I’d typically find that another department really needed help, and I’d shift my focus. The truth is, as a business grows or changes, what worked in a department a year or two ago can cease to work, and will need to be modified. A business requires continual tending.
Cecilia’s co-founder David Marks had a very early vision of convergence. It was almost ten years from the day they started TEECOM that true convergence became a reality. It took time for equipment manufacturers to embrace it, and for other conditions to shift enough to allow a greatly increased number of buildings to have all their systems rely on the IT network. But it’s here now, and convergence is driving TEECOMs expected leap from 7.5 million in revenue this past year to 12 million next year. That leap will put to the test Cecilia’s “machines”. But even though Cecilia got honors on her business plan in 1996, the grade she really cares about is the one that will come from TEECOM’s performance in this pivotal year.
- Plan carefully before starting a business, and be sure your assumptions and judgments are based on experience and careful, customer facing research.
- Picking the right opportunity, where you’re taking advantage of a trend or supply/demand imbalance can make up for the many mistakes you’ll make along the way, and will increase your chance of success.
- Pay attention to business fundamentals and have the discipline to keep the key drivers functioning well. In this case, they were business development, finance and cash flow, and HR/recruiting.