Though Dychtwald had never been much of a manager at Dychtwald & Associates, he went to Mexico determined to change. Business, he'd decided, was largely a question of skills; he planned to hire a team of Big Eight accountants to show him the arcana.
Mistake, Bernstein told him. You've got to know your own strengths, then attract people to provide the pieces you don't have. He had seen too many CEOs drain their energies with trivia, trying to be in touch with everything. Better for Dychtwald to spend his time "thinking about the implications of the aging of America, not worrying about time sheets." Dychtwald would work like the CEO of a five-year-old growth company, his job to define the mission and carry the torch, to attract good employees and work the road, spreading the message and looking for customers. Let Bernstein worry about operations and finance.
Rubenstein would worry about marketing. Dychtwald had come to the meeting with 15 different potential projects in mind, but Rubenstein made him focus. "Gee, you must have a lot of capital handy," he gently chided. Then: "We can help you fulfil all the dreams you have, but there has to be a reasonable sequence to them."
The initial criteria were simple. Dychtwald would have to learn to leverage, attracting joint-venture partners to cover development and marketing costs while trying to keep ultimate control of the product for Age Wave, hoping eventually to develop products that would keep on paying out over time.
Dychtwald found Age Wave's first three joint-venture partners in health care. The American College of Healthcare Executives paid $40,000 in marketing and distribution costs to turn Dychtwald's thoughts on hospital planning for the elderly into The Role of the Hospital in an Aging Society: A Blueprint for Action, a comprehensive and detailed planning guide. Marion Laboratories Inc., a giant pharmaceuticals company, put up more than $2 million to turn Dychtwald's ideas on training staff into a video series, an educational curriculum of 20 half-hour shows marketed as a joint venture with the Hospital Satellite Network (HSN). Age Wave's joint-venture partner for the Aging Resource Centers was each individual customer, billed a 50% down payment of the $150,000 fee at closing.
Rubenstein taught Dychtwald to set a premium price for his products based on their value to the customer, not their cost of production, then to deliver them with value added -- a planning blueprint 250 pages longer than required by the contract; an initial video program so strong that it subsequently aired on PBS; membership in the Age Wave Alliance for customers who bought an Aging Resource Center. Although none of the initial projects fulfilled the long-term annuity goal, each had at least a modest long-term potential, the potential resale of the blueprint to a trade publisher and the video program to medical schools, or the potential sale of new products by the pool of customers inside the alliance.
The managers who signed on to deliver the products and serve the customers are an ecletic group: a retired hospital executive who had felt "put out to pasture" and a fresh-faced Standford M.B.A. looking for a cause, a mother-daughter team and two married couples, including Dychtwald and his wife, Maddy, vice-president of education. Most, like Bruce Clark, had first met Dychtwald through one of his speeches, then been turned on because "he really believed he could change the attitude of the world." Michael Farmer, chief operating officer at HSN when Dychtwald negotiated the video package, was so impressed by Dychtwald's message that he took a 50% pay cut to become Age Wave's executive vice-president.
Dychtwald promised them: "It's your chance to move the world."
Apart from Farmer, few had much management experience; like their CEO, they were expected to learn about business as they built one. Bernstein taught them from scratch, starting with such simple concepts as cost of goods sold, margins, and yield, progressing to financial forecasting and reporting. More than skills, Bernstein tried to teach perspective, how to see the world in business terms. Mostly he asked questions, prodding and provoking, and forcing them to make, and defend, their own decisions.
Age Wave will be a holding company when and if it is sold, according to the business plan, with separate divisions for health care, housing, communications, and so on. So Bernstein set up each product line as a division from the start, and gave each manager full operational responsibilities. Each had to set his or her own profit-driven division goals, perhaps creating a new system to recognize, develop, and track leads or setting up a market-research program to survey customers and unconsummated sales. Each was expected to create, and stick to, a budget, and to find an underwriter for one new joint venture.
COO/CFO Bernstein was on site for three days a month; the rest of the time the managers reported to him through detailed weekly letters and regular phone calls. "It worked just the way I'd expected," he says. "People grow fast and do more, and they love it."
"The fact that Jim is now here makes us stronger, because it pushes responsibility down to the product manger, and forces a decentralization of decisions," Farmer agrees. "He's a master at not making decisions -- it's his Socratic style."
