podcast | February 16, 2015
Case Study: CEO Driven Sales Strategy
Chris Cole, CEO of Intelligrated, made an appearance on the SBI Podcast. The subject of the interview was the role the CEO plays in the development of the sales strategy.
You can listen to the podcast here.
Intelligrated has approximately $700 million in annual sales, employs close to 3,000 employees, and is in the industrial automation business.
By listening to this podcast, you will learn why:
Chris, and his team, went from $0 to $700 million during a very difficult economic cycle. There is much to learn from him.
CEO Driven Sales Strategy
Speaker: Welcome to the SBI Podcast. Offering CEOs, sales and marketing leaders ideas to make the number.
Greg Alexander: Hello, SBI Podcast listeners. This is Greg Alexander with Sales Benchmark Index and welcome to this week’s podcast. Today I am joined by Chris Cole and Chris is the Co-Founder and CEO of Intelligrated. Intelligrated is a provider of automated material handling systems. This company was founded in 2001 and today it has over 2,300 employees and generates an estimated 600 million dollars in annual revenue. Chris himself has been a CEO in the high tech capital equipment industry for 14 years and has a total of 30 years experience in this industry.
A little fun fact about Chris, in 2008 he along with his co-founder Jim McCarthy was named Entrepreneur of the Year by Ernst & Young in the Ohio and Kentucky region. Chris, welcome to the show.
Chris Cole: Thank you, Greg.
Greg Alexander: All right. Today, we’re going to talk about CEO driven sales strategy. I’ve got to open up with a question that is striking and that is from 2001 to 2015 this country went through dramatic swings. We had the dot committee pop, financial crisis housing bubble and we went through a couple of wars and yet during that time period when other companies had a really difficult time of growing you went from zero to several hundred million bucks in a relatively short time period. How did you do it?
Chris Cole: I wouldn’t say it was easy and that we didn’t also face a lot of those challenges. Of course in the first years when we started the company I convinced my co-equity investors because I was putting a lot of my own money up that starting a company in a recession was the best time because when the market turned around in 2002 we would be ready with really fresh product. I forecast the end degree of the recession a little bit too early and we wind up having to grow a company where we had to take market share from someone else which is a whole lot more difficult when you’re a small company and you’re competing against billion dollar multinational companies.
In our case, we were competing with both the big German international company and a big British company. We really focused on customers and I know everyone says that but we really tried to listen more intently than the industry was and tried to come up with products and services that would make them successful. Not that we didn’t have fits and starts but it really, really helped. We got some good customers. They told other people about us and that really lead to the growth that we’ve seen.
Greg Alexander: Okay. Listening to customers, coming up with products and services that will help your customers be successful. Classic strategy right there.
Chris Cole: I learned a long time ago, Greg. There’s only one essential part of running a business that’s customers. You can make pretty much everything else up but you have to have somebody who’s willing to pay for what you’re providing them.
Greg Alexander: You should tell that to some of these new internet companies who don’t think anybody has to pay. When you thought about sales strategy and the context of that overall strategy, did you have a specific sales strategy then and now? Was it all just one aligned strategy all centered on the customer?
Chris Cole: I certainly hope that the sales strategy was aligned and centered on the customer. There’s no doubt when we started the company our strategy was to become … First, most of the people that we had in the company and all of the sales people that we started with were long term players in the industry. We had a good reputation but I can tell you having a good reputation when you’re backed by a company with substantial assets is a whole lot different than having a good reputation and having a small company with no tangible assets behind you.
We were selling to gigantic companies. Big retailers mostly. Every time they bought from us it was a bet the company, bet their careers on us because if we failed the cost of failure to that customer was way in excess of what they paid us for the job. We have to find those inspired customers who wanted to really change what the impact of logistics was on their organization and felt that we could really do it where no one else could. That gave them the courage to bet their career on us.
Obviously that was a pretty tough thing to do in the early years. It becomes much easier after you’ve succeeded in helping other people but we really appreciate some of the early customers who took that chance with us.
Greg Alexander: When you think about it now I mean obviously you’re very successful company but it’s not as if Intelligrated is IBM or GE if you will. You still have that challenges right behind you.
Chris Cole: I think we have to operate like it’s never behind us. Although we are a much safer choice today because like you said we’re a six or 700 million dollar company today. We still have to earn our living every day. We’re not in a business where we have to resell the new sales every year. Our recurring revenue is a smaller part of our sales which comes from the after market. Every year I got to sell the whole backlog over again. To do that, we have to be relevant to our customers and we have to still provide them with something that they think will help transform their business.
I mean, I really sincerely mean it when we try to tell our customers if they buy from us we’ll get promoted. Many times they do. You have to always be hungry for that growth.
Greg Alexander: We’re going to take a break here to make you aware of something I think will be helpful so we’ll be right back.
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Greg Alexander: Welcome back everybody. Let’s continue our conversation. Chris, recently you made a bold move into the software business through an acquisition and I’m sure that there was a strategic reason for that. There was probably a big benefit to the customer in doing that or you wouldn’t have done it. How was that impacted your go to market model?
Chris Cole: The biggest single challenge with that is traditionally our main customers has been the Vice President of logistics or the Vice President of distribution. Increasingly we believe that the sell is a total fee sweep sell especially to the CIO as well. In the old days automation of logistics or automation of the factory floor even was pretty much handled by the VP of manufacturing or the VP of distribution. A lot of CIOs have been burned by having embedded software systems that have become major problems to support over time because they didn’t know what was in it.
We increasingly think that the software is a strategic part of why customers should buy from us. We felt there was a great demand or need for logistic software that worked well with automation. We felt the acquisition would help us grow that part of our business not just to be in the software business but to be in the total solutions provider business so that our customers could trust there’s no separation between the software that they are buying and the Intelligrated pieces that they are buying. We’re still early in that journey.
We’re a couple years in. We certainly see it resonate well with customers but there’s a lot of work to do to continue to grow the software applications and for us to prove to customers that we can deliver on that vision. So far we got some very, very happy customers. I would point out prior to that acquisition we had very, very successful software part of Intelligrated. This really just added a new, more capability to what we already had.
Greg Alexander: Okay. Our experiences when you have a significant new customers on your case the chief information officer that you need to call on. It requires a different type of sales approach and maybe even a different type of sales person. Have you seen that?
Chris Cole: I would say yes and we have been growing not completely parallel but we certainly have a separate software selling organization that is more attuned to selling to CIOs and showing them what we can do. I think one of the challenges is to make sure that we keep the selling cycles coordinated. There is a tendency I think in the software business particularly stand alone software companies to focus on smaller sales and more turnover in their sales force and more turn over in their customer base.
Whereas we have a relatively fewer number of target customers and I cannot afford to just walk away from them. There’s a few big retail companies, there’s a few big internet companies and I have to continue to be relevant to them even if the first approach isn’t successful. The big challenge has been blending the people who call on the CIO and getting them in line with the people who are calling on the VP of distribution. There are very few constants in the world but I would tell you it is remarkable how many organizations do not have good communications.
I’m talking about customers and potential customers who have very poor communication between their CIO and IT organization and their operations folks.
Greg Alexander: Do you view your team that’s calling on that company in total as a conduit between IT and the business and how do you approach that?
Chris Cole: Yes. I mean every case is a little bit different but we have to be careful that we don’t become a hammer for one part of the organization against the other part of the organization. That’s a very bad situation for any vendor to be put I but we also need to make sure that we can help explain the common goal and why the IT department need certain things and yet why the logistics department need certain things and what we can do to best satisfy both. It has been very interesting.
We had customers, the IT organization didn’t want anything to do with us because we were IT people and now all of a sudden they become our biggest advocates because they’ve seen what we can do to help them. They are almost pushing our traditional customers to say, “Hey, you need to be going faster here. We need to get this stuff in.” Every selling situation is different.
Greg Alexander: It’s great to hear the story because I often advice CEOs that the sales team needs to bring more value to the customer and to the business than just selling the product or the solution. In this case you guys are acting as almost strategic business consultants to them and helping them improve their overall business. By the way, if you do that well and you’re differentiating yourself versus the bad guys and they are rewarding you with that extra value added by giving you their business.
Chris Cole: We get a very high percentage by our business from repeat customers and the only reason I think we do that is because they really see the value that we can bring to them. Frankly, there’s more opportunities today than I almost imagine there could be 13 years ago when we started the company.
Greg Alexander: Interesting.
Chris Cole: Our backlog in the pipeline not our sole backlog. Sole backlogs there are record too but the pipeline is at a record level of jobs and leads and processes that we’re working on.
Greg Alexander: We need to take a quick break so we’ll be right back to you.
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Greg Alexander: Welcome back, everybody. Let’s dive back into the conversation. Okay. Let me pivot to another area that I wanted to pick your brain on here. You have private equity partners that injected growth capital into your company. Various stages of its evolution. How was your strategy changed as a result of that?
Chris Cole: I want to be a little bit careful about the term injected growth capital. We started the company with a private equity group where our management put up a substantial amount of money and private equity investors put up a substantial amount of money. We grew the business and a little more than two years ago we bought out the original equity holder PE company with a new one but there wasn’t a lot of capital put into the company at the time. It was just recognizing the value of it and management rolled a very, very substantial amount of their equity over into the new structure.
We have a very strong balance sheet but we have a model where for a large part we can grow by very good cash flow management by generating faster cash flow than the growth of our inventory and receivables. What the injection of a new private equity partner instead has brought it’s less about capital although there’s access to capital should we want to make a big acquisition. It’s really been their ability to focus on a long term whereas when we were the smaller PE company any drop one way or another or any plus or minus just highly magnify the returns on their fund.
Now, we’re a small part of a much bigger company that gives us the ability to be far more patient in terms of building a long term strategy. Frankly these guys have great access globally to talents that are smaller partner just didn’t have. It’s opened up a world to us. We’re now expanding internationally. Into China and Latin America in a much bigger way. Candidly, they have a lot of technology investments which has helped us as we tried to identify opportunities in the software and technology areas.
They brought some skills, they’ve really been great partners but I don’t want to take anything away from the guys that helped start us up. Believe me in 2001 we started this one week before 9/11. They could have backed out right after 9/11 and they hang in there with us and has helped us build a great company.
Greg Alexander: That’s great story. Good clarification points so there’s much more value that the private equity firm is bringing to the table other than just capital so that was a good clarification. Thank you for that. Obviously, a great story. If I’m a hot shot sales leader, sales manager maybe a top-notch marketer, why would I want to work for you?
Chris Cole: I think the biggest single reason people want to work for us is that we’re a long term relationship company with our customers. We build valuable relationships and we grow those valuable relationships. If you’re in sales and marketing, everybody wants to play for a winning team and that’s been a good thing but we’re also in a very high growth end of the world. I actually was recently had investment banking industrial conference earlier this week. Most of the companies we’re talking about 3 to 5% annual growth.
We’re seeing double to four times that growth in our market and what we think we can do we may be going a little quicker than the market but if I was a sales person the idea of automating logistics is a very, very exciting time to be in this business as more and more people buy things from the internet and dot come business and things have to work faster and faster in a more coordinated way. I think it’s going to be a very, very big market for us for quite some time and it is not just a local market it’s becoming a global market.
Greg Alexander: Right products, right industry, right time. I mean it’s a great time to be associated with Intelligrated and sounds like you’re hiring.
Chris Cole: Yes we are. Just looking at plans for next year and we could again hire 400 people next year as well as we hired more than that this year.
Greg Alexander: Wow.
Chris Cole: By the way, we’re 2,600 people you said 2,300 which is probably what we had in writing but we’ve grown enough this year. We’re now at 2,600.
Greg Alexander: Okay. How would somebody seek employment there? They just go to the website or what instructions?
Chris Cole: The best thing to do is go to the website and see what we’re about. We also list opportunities there but if you are interested send an email from our website to our HR folks or even send one to me, chriscole@intelligrated.
Greg Alexander: Fantastic. Okay, we’re going to take a quick break here to make our audience aware of a new offer.
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Greg Alexander: Hope you found that useful. Let’s dive back into the dialog. Chris, I want to ask you one appointed question and it’s a selfish question but I’d like to get your honest feedback and you’ve never been afraid to give me your honest feedback. Most CEOs that we deal with due to their success they feel all the problems that they have especially with sales and marketing can be solved internally. They are usually right. I mean, what you’ve done there is amazing and you’re going to have the answers to the challenges. Yet you, hired at our firm and you purposely sought out advice from an objective source. How come?
Chris Cole: I think there was very much the feeling that although we have done a great job and we continue to do a great job, how do we really maximize the performance of what we are doing. Most of our people have been in the industry a long time. We need to grow our sales and marketing forces and we wanted to get some ideas and some benchmark on how we were looking compared to the very best players in our industry or similar industries. I think we hired. I had to get a look at what are some of the areas that we should be questioning not that we’re doing anything wrong but there’s bound to be things that we could be doing better.
We’re always striving for continuous improvement. I would tell you when we looked at our company overall the manufacturing side and the engineering side are very, very, very process driven. The sales and marketing side has probably have less process in it than any other single part of the company and we felt it was worthy of going out so I had to look at better ideas on how to add the right amount of structure and process to our selling efforts.
Greg Alexander: Yup, when we see that quite a bit sometimes sales marketing is too much art and not enough science so re-balancing that is obviously a good thing to do and my compliments to you for having a courage to get an alternative opinion. The last question I had for you is the area of marketing. There’s lots of debate in the industrial space if you will. The B2B space on the relative importance of marketing versus sales. We have a point of view on that and that is marketing its relative importance is increasing and in some cases that are rapid base but sometimes alone in that view. What is your candid commentary on that?
Chris Cole: I think the jury is out. What I would tell you is in the industrial companies that I had been involved with during my career which is more than 35 years. Marketing have not been as much about building demand. It’s been more about advertising product management and shows. I do think there is more to marketing than that clearly when you start looking at fields like software, there’s a very highly evolved process. Those type of companies go through in terms of lead generation and almost more of a mechanical approaches to marketing and I think we need to learn where some of those tools can yield positive effects for us.
I don’t think we’re going to solve all our marketing problems inside. We are going to continue to use both inside and outside help. It’s funny when you’re around the company you think everybody knows about you because our customers know about us but you wonder what the real potential is if other people knew what we could do for them and I think good marketing is about trying to connect some of those dots on a prospective bases rather than just reactive basis.
Greg Alexander: It is an emerging field and it varies greatly by industry for sure. Your industry, we have relatively speaking a small number of customers and prospects. It’s been large amounts of money on this mission critical read. That’s very different than a software company that might have hundreds of thousands if not millions of customers that’s been a little bit of money, that’s more of a marketing challenge than a sales challenge so I can understand that point of view.
All right, listen we’re at our time. Just a quick recap we just spend some time with Chris Cole who’s the founder and CEO of Intelligrated. Our topic today was a CEO driven sales strategy and we heard from Chris about all the things that he did to grow his company. 13 year time period from zero to several hundred million dollars and how he is connected working backwards from the customer in all things I always connected his sales strategy to his corporate strategy. Chris, on behalf of the listeners in the firm SBI. Thanks a lot for sharing your commentary with us and contributing to our body work.
Chris Cole: Thank you very much too, not only for you Greg but for a number of your associates who to this day continue to help us figure out how we can become a multi-billion dollar company rather than a multi hundred million dollar company.
Greg Alexander: Great, thank you for that. Have a good day. Take care.
Chris Cole: All right, thank you. Bye.
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