Mini-podcast: Listrak's Ross Kramer on not investing in sales and marketing

An audio story from The Mistake Bank.

When Ross Kramer started his first technology business, he focused on the technical side to the exclusion of sales and marketing. In retrospect, that was a mistake.

You can download the story here.

Biography:
Ross Kramer started his first company, a web hosting firm named Vertex Internet, in his Penn State dorm room in 1997. He quickly noticed the struggles his customers were having in communicating with their customers efficiently and effectively, so he started Listrak to help with their email marketing needs. Under Ross’ direction, both companies have grown into technologically-advanced companies that are leaders in their industries.

Listrak services clients such as Daimler Chrysler, Motorola, L’Oreal and the Islands of the Bahamas from its Lititz, PA headquarters. Listrak is a two-time winner of the Central Penn Business Journal’s Top Fifty Fastest Growing Companies and the 2005 Growth Company of the Year by the Technology Council of Central PA.

Tags:
learning, Mistake Bank, sales, marketing, technology, podcast, investment

We may be running out of fossil fuels, but there's an inexhaustible supply of "strategic secrets" out there

I love the Harvard Business Review. But as the years pass I've grown less interested in the articles that offer me a secret sauce to easily grow my business, outwit my competitors or take advantage of new opportunities.

They begin to sound like the infomercial guy back in the 1980's showing me how to make millions by buying houses with cash advances on credit cards and selling the houses quickly for profit.

My question to him was: if your secret is really that great, why are you wasting time on TV telling me about it?

The latest effort is "The Strategic Secret of Private Equity" in the September HBR (free link). Apparently private equity companies have discovered a better way to run a company--buy it in order to fix it up and sell it. (It sounds suspiciously like the credit-card cash advance guy.)

Are many private equity companies doing well? Yes. Have they exploited inefficiencies in the market? Yes. Will these inefficiencies be around long enough to help anyone who reads "The Strategic Secret of Private Equity"?

No.

Markets are complex/chaotic systems (read this post from Gary Klein's guest blog on Cognitive Edge for insight on the financial markets as resistant to quantification). Past performance is no indicator of what will happen in the future, especially the near future. Factors that enabled the private equity boom, including initial reactions to Sarbanes-Oxley regulations, cheap and abundant bank financing, and, most recently, the pack mentality at work, will not and cannot persist. Complex systems adapt.

It's more likely we'll be reading something like "The Benefits of Lower Leverage" in HBR next year than people still extolling "The Strategic Secret of Private Equity." And the newer article will have as much long-term value. But that's the magazine business. There's always a readership for strategic secrets.

And if you think the supposed long-term advantages of private equity haven't been explored before, check out "The Eclipse of the Public Corporation" (link - $$) from HBR, published in 1989.

strategy private equity finance investment capital structure complexity Harvard Business Review

Young fashion designers show uncommon wisdom in business matters

There are lots of reasons to be impressed by the designers at Proenza Schouler, profiled in today's Wall Street Journal (link - $$). I'm most impressed by their business savvy--specifically how they have been able to grow their business from a self-funded startup yet retain control, a difficult task in the fashion industry.

The group, consisting of designers Jack McCollough and Lazaro Hernandez and CEO Shirley Cook (ages 29, 29, and 27, respectively), has cut a series of deals that stand out for their vision and good sense. I'd also say that the group has been willing to grow more slowly than others in order to maintain control. (In other words, they haven't gotten greedy.) Here are some examples of what they've done to date:

1. Created their first collection with money borrowed from their parents. That collection won a student competition at Parsons School of Design and was bought by Barney's.
2. Created a brand using their mothers' maiden names so that they couldn't lose control of their own names. (Think Joseph Abboud wishes he'd done that?)
   
3. Got venture capital to produce a second collection.
4. Won a contract from Target for a limited-edition collection. Used the Target money to buy out their VC.
5. Most recently, accepted $3.7MM of investment from the Valentino Group for a 45% stake in the company. The Valentino investment gives the group access to more advanced production facilities and Valentino's distribution channels in addition to capital.

These would seem like smart moves for executives twice the age of the Proenza Schouler team. That they could make such wise decisions so early in their careers is truly remarkable.

(Photo: a dress from the Proenza Schouler Resort 2007 collection.)

fashion management investment alliances growth entrepreneurism Wall Street Journal