John Case

The Market Makers

 

Heiniger came up with some designs, bought a small metal-fabricating shop in Hiawatha, Kans., and began turning out customized Ford trucks -- equipped with tanks, specially developed sprayer booms, electronic controls, even a patented sonar system that keeps the booms at precise heights over the ground on uneven terrain. No Farmbelt slump for Heiniger, who's now selling a couple of million dollars' worth of truck systems every year. Nor is he letting any corn grow under his feet. Realizing that the evolving industry gave him the opportunity to create still another market -- to capitalize on the new competition, in effect -- he's selling his lightweight booms and other products to other sprayer manufacturers.

The granddaddy of such expertise-based diversifiers has to be Pioneer Pipe (#93), which zoomed from a scant $500,000 in revenues five years ago to nearly $16 million last year. CEO Dave Archer chuckles as he describes his company's trajectory from business to business: first it was pipe fabrication, then mechanical contracting, then contract maintenance work, then steel erection, then general construction, even a little residential and commercial plumbing.

Aimless opportunism? Nope. What ties all those businesses together is the CEO's expertise in hiring specialized, highly skilled union workers and deploying them exactly when and where they're needed. Archer, a former business manager for the pipe fitters' union, employs union pipe fitters, ironworkers, carpenters, welders, and so on. To get started, he began fabricating big pipe assemblies for chemical companies such as Du Pont and American Cyanamid.

But diversification seemed only natural to someone with Archer's expertise. Mechanical construction? "We were already on bid-and-inquiry lists to fabricate the pipe. And we'd have people asking, 'Did you ever consider installing it as well?' Most journeyman pipe fitters have done that kind of work, so we had the knowledge." Maintenance? The building-trades unions had recently agreed on a standard facilities-maintenance contract offering companies 90% of standard rates and the assurance that no local union demands would interfere with the work. "We were one of the first contractors to use that agreement in the area."

Gradually, Archer realized his skilled employees and managers could do nearly anything in their field. He bid on and won a job to build a bank in Marietta, Ohio. He got a contract to disassemble a plant in Stamford, Conn. "We do jobs a lot of pipe fabricators would walk away from," he says. "We once assembled 13 or 14 tractor-trailer loads of 36-inch plastic pipe and sent it to Kansas for B. F. Goodrich. It took us six or eight weeks.

"We don't usually work with plastic pipe. But if a guy says, Can you do this? my instinct is always to say yes. Make him feel positive. It gets you one step closer to being that guy's first call."

For all the differences between the tightly focused companies and the diversifiers, there's one big similarity between them and one big payoff from the market-creating strategies they pursue. Notice anything unusual about all those examples? Not one of the companies has much competition. Other businesses might try to outsmart or outflank competitors. Inc. 500 companies, more often than not, maneuver themselves into a position where they don't really have any.

One Big Idea market creators such as BioGenex or Allsup or Gateway leave the competition behind almost from the beginning. BioGenex and Allsup were selling their wares before anyone else even knew about the business. Gateway wasn't first off the mark, but it didn't take long to outstrip competitors in its one narrow niche. How many companies can sell only through Gateway's channel and for as little as Gateway can?

The diversifiers, similarly, elbow their way into enough niches so that would-be competitors have a built-in disadvantage. Golden Cheese faces plenty of competition in the cheese business but less in whey-protein concentrate. RHS is in distribution, systems assembly, and specialty manufacturing. And though there are plenty of pipe fabricators and contractors in the Ohio Valley region around Marietta, how many can do everything that Pioneer does? "The competition is fierce," says Archer, "union and nonunion alike. But we've tried to have the flexibility to put together whatever kind of package a guy needs. Staying flexible is what's enabled us to carve out a niche."

In the end, that may be the best explanation for why companies such as Dave Archer's or Rick Heiniger's or Ted Waitt's find themselves on the Inc. 500 -- and why some companies, indeed, seem to make the list year after year. Whether they have a single great idea or several pretty good ones, these CEOs have steered their companies into what amounts to a private segment of the marketplace. It's private because they themselves have created it.

Anyone who does that will find fast growth -- Inc. 500 growth -- hard to avoid.

 PREV  1 | 2 | 3