The journey they're on
By Frank O Smith, senior contributing editor -- Manufacturing Business Technology, 10/1/2006 6:00:00 AM
Every company listed today in the Fortune 500 began, one way or another, as a start-up. That is to say, it emerged via a transformative process that some might call “the hero's journey.”
Business writing is rich with these almost mythical tales, which so often seem to start in someone's garage. But garage or no garage, success isn't guaranteed, and those that do succeed have earned the right to tell the tale.
Manufacturing Business Technology's Emerging 40 Software Vendors listing celebrates those that survived the birthing to reach a certain stage of maturity. Though each story is unique—and the future remains uncertain—the paths followed by these entrepreneurial vendors have their common features.
Into the light
“Silicon Valley is a process, not a place,” says John Nesheim, president of the business consultancy Nesheim Group and author of High Tech Start-up and The Power of Unfair Advantage. “There are classic steps in the process that everyone follows.”
The first he terms the chaos stage, in which an idea is brought to light by a nucleus of vested individuals. “It takes a matter of months, rarely longer than a year,” says Nesheim, and is akin to “getting the call.”
This is followed by the “transition” phase, characterized by the assuming of more definite roles—i.e., a leader or spokesperson; someone to focus on markets; and an engineer to build a solution that meets the perceived market demand.
“The name of the game is solving big problems and becoming the market leader,” says Nesheim. “Small ideas generate small returns.”
In Nesheim's parlance, this birthing process is empowered by what he deems the single most necessary attribute for creating a market leader: “unfair advantage.”
An unfair advantage comprises several essential elements. The product must be unique. It must be viable for three to five years, and have a growth path that keeps it ahead of copycat competitors.
Additionally, the organization formed to introduce the product must successfully scale from being a start-up to a company with staying power.
Not all the companies found in Manufacturing Business Technology's Emerging 40 list are start-ups in the classic sense of the word. Not all are destined for greatness as dominant market leaders—or even destined to survive, given the acquisitive nature of today's largest software vendors.
Nor are all the companies the culmination of one seminal idea. Some took a while to find the right path to follow. And even then, according to Nesheim's research, fewer than six ideas in a million ever generate an initial public offering.
Inexact science
“It's not a science,” says Eddy Azad, president and CEO of Parsec Automation. “Most goals can't be reached by a straight line. If you marry yourself to a structure, you'll have problems. You have to realize there will be a good bit of chaos.”
Parsec Automation is a start-up with a legacy. It launched in 1988 with process-automation services for manufacturing clients. “The journey from 1988 to 2006 has been interesting. We didn't start with a specific idea,” Azad says.
Instead, one was discovered along the way.
“We realized in the mid-1990s that just doing process automation didn't give us a cutting-edge advantage over our competitors,” Azad explains. By 1999, Azad and his staff had developed a product prototype that addressed real-time manufacturing performance management—a category that didn't yet formally exist.
By 2000, an agreement was signed with supervisory control and plant-floor IT infrastructure provider Wonderware to deliver a private-label product. This agreement was renewed in 2005.
Also in 2005, with solid evidence that a strong market existed, Parsec Automation introduced its own TrakSYS product. The idea had legs. The company is enjoying 500-percent growth this year over last.
Focus is key, says Nesheim. “The most important thing is to have that one bullet. It either hits the target, or it doesn't.”
A single source
Though it would be a stretch to say IQMS is a start-up, President and founder Randy Flamm says back in 1989 he began developing in a garage what is today the EnterpriseIQ enterprise resources planning (ERP) system.
From then to now, IQMS remains committed to Flamm's original idea: a comprehensive enterprise system based on a single database and information source.
Flamm says this single-focus mind-set cost him customers and market share early on because he wasn't willing to tackle the Gordian knot of “best-of breed” system linkages. In his view, integration interfaces represented a loss of focus.
“We've always been below the radar,” Flamm says, “but we're starting to show up now because the concept of single source is coming of age,” primarily as a means of reducing costs, easing integration, and optimizing production—particularly for multiplant enterprises.
Satisfied customers are a major concern for start-ups looking for reference accounts. For some, getting the first customer may be the most difficult and critical task. For IQMS, now with more than 350 customers, keeping them highly satisfied is an essential element of its go-to-market strategy.
“We're completely customer-driven,” Flamm maintains. “If you need a feature, we'll build it into the system so all our customers can benefit.”
At 98 percent, IQMS boasts one of the highest customer retentions rates in the industry, adds Flamm, and customer satisfaction is so fundamental to the IQMS business model that if a customer isn't satisfied, it gets its money back—guaranteed.
Surviving on scalability
Nesheim, who coaches start-ups and teaches at Cornell University, stresses the importance of scalability for a company striving to reach the next level. He's referring to scalability of operations, not product. Management changes that occur at growing companies are some of the trickiest steps in a company's evolution—typically involving a change at the top.
“You need a core team of leaders,” claims Nesheim. “When the tornado hits, the original CEO may have to step aside for someone more experienced. Cisco Systems had four leadership changes before it became a market leader.”
Apriso launched in 1992 as a consulting services/custom software company focused on production tracking. In 2002, it introduced a manufacturing execution system (MES). Today, the company's flagship product, FlexNet, is referred to as an operations execution system, encompassing manufacturing, quality, logistics, and supply chain functions. Last year, a new management team was brought in—the fourth since the company's founding—to secure strong growth.
“Apriso built a long-term vision around current technologies and architecture a few years ago,” says Jim Henderson, president and CEO since 2005. “Our goal is to take an excellent product and grow the company.”
That goal was what attracted him to the job.
Henderson spent 18 years with IBM, responsible when he left for a $7-billion revenue plan. “I got tremendous training at IBM, but I learned how to be a businessman after I left.”
Attracting capable employees whose work will aid Apriso in reaching its goals is one of the most important aspects of Henderson's job. In particular is Tom Comstock, former director of Brooks Automation's MES initiative, who today serves as Apriso's senior VP of product management.
“We spent last year focusing on restructuring,” Henderson says. “This year we've set an aggressive revenue growth plan of 50 percent, and we're on track to deliver that.”
In constant motion
Doug Lawson founded Incuity Software, a manufacturing enterprise intelligence software company, in 1998 as a technology supplier to Wonderware. This agreement expired in 2005.
In the last four years, Incuity has reinvented itself as a full-fledge software vendor, including development of the Incuity EMI solution, released in March 2006. In August 2006 it announced a Series A investment from American River Ventures and Palomar Ventures.
“Our relationship with Wonderware allowed us to get the business established and obtain several thousand customers,” says Lawson, still the company's CEO. “From a practical perspective, we were a remote development center. There was tremendous benefit in being a pure technology-focused company.”
Since 2001, Incuity has flourished based on both its technology and manufacturing domain expertise, which constitutes, in Nesheim's view, the company's unfair advantage.
“The Incuity product model is unique in the business,” Lawson says. “It is simultaneously Web services, distributed object framework, and relational database. It brings together knowledge of three distinct technologies combined with manufacturing domain expertise. That's what makes it adaptable to changing business needs.”
Building a successful start-up is a process, Lawson adds. “It is one of the reasons we secured venture capital—to stay in the process. Four years ago, it was a dream. Three years ago, it was a dream with some reality. Two years ago, it was starting to get exciting. A year ago, it was looking really hard. We want to become the dominant player in manufacturing intelligence. Right now, it's ours to lose.”
As these case examples have shown, emergence is a journey, one of the most enticing, exciting, and rewarding in business, as evidenced by the pleasure that those interviewed for this article are taking in the process.
Victory is achieved by tapping previously unrecognized abilities. It involves crossing critical thresholds, being tested, and encountering allies and enemies. Those that secure the “elixir” and then successfully make their way home after the journey are inevitably changed for the better.
Those included in the Manufacturing Business Technology 40 Emerging Vendors listing are embarked on that journey. It is an endeavor worthy of note for it is inspiring, instructive, and represents what is best in the world of business.
