A Role Model You Won't Find in Business Week

"Only a Duraflow distributor can give customers total performance."

Unlike iPods, wastewater filtering is not very sexy. That probably helps if you're looking for companies with the essential DNA to thrive in the climate change bought on by the tech bubble collapse. With a company like Duraflow Corporation, there's no glitter to distract you from seeing the raw fundamentals.

Ten years ago the people at Duraflow had a good business -- it was (and still is) called Compliance and Recycling Corp. (CARI). It focused on building plants that remove the waste in water used to make circuit boards and other electrical components. Based in Tewksbury, Mass, the company flourished serving the needs of computer and electronics manufacturers in the U.S. and especially New England. Today, of course, those kinds of plants are typically built in China -- somewhat removed from the typical CARI service call to, say, Springfield, Mass. or Salem, New Hampshire.

But instead of just becoming extinct like a lot of old-line New England companies, CARI gave birth to Duraflow, which has become the largest U.S. supplier of wastewater treatment technology providing total system solutions to Chinese manufacturers. That includes the latest technology (crossflow microfiltration modules), the chemicals that work with those modules, and the know-how to build and operate systems incorporating those modules.

How is that possible? There are lots of reasons, but probably the biggest was the founders' insight that China needed a scalable solution to its wastewater treatment problem (just as Duraflow needed a scalable solution to its problem of how to reach profitable, but distant, markets).

That solution was the Duraflow business model -- to equip and train Chinese distributors to provide everything a customer would need to comply with strict new Chinese environmental regulations. In other words, Duraflow's "real" business would be to create lots of CARIs, each one locally owed and operated, and each one selling a total solution, not just pieces of it. Getting all three pieces from a single source -- know-how, modules, and chemicals -- is less expensive for the buyer and more profitable for the distributor. There is, in fact, sufficient revenue to support the gold standard of compliance Chinese authorities want.

The result is a virtuous cycle of profitable distributors, happier officials, cleaner rivers, and more efficient manufacturers. The fact that Duraflow is helping transfer environmental technology to Chinese nationals, and helping locals build successful companies is their own right doesn't hurt either.

(A website transformation reflects the corporate transformation -- compare the Duraflow and CARI websites. The new site was designed by Schenkel/Stegman Communications Design. I wrote the text.)

A Class of Super CEOs

The failures of the tech bubble have received attention disproportionate to the value of the lessons learned.

Is there a difference between CEOs who lived through the collapse of the tech bubble and those who did not have to face that challenge? Asking this question is like looking at the DNA of people infected in an epidemic to see why some got sick but recovered, some died, and some never had symptoms to begin with. Scientists do that kind of research all the time to see what it is that protects some people -- as well as to see, whatever that agent might be, whether it can be transferred to others so as to protect them as well.

I suggest that we may have a new class of super CEOs among us. These are CEOs who have -- for lack of a better word -- genes that are different from those of the general CEO population. These are CEOs who know how to recover -- or how not to get "sick" in the first place. For all its pain, something good that may have come out of the tech collapse was that -- by its very scope -- it provided a large sample of CEOs who were able to do something most high-tech CEOs (and probably most CEOs period) could not.

I would suggest that the failures of the tech bubble have received attention disproportionate to the value of the lessons learned. Bubbles come and go. They're pretty predictable. And the causes are well understood. What's gone relatively under-reported and under-researched are the thousands of "everyday" success stories that seem to fly in the face of these cycles. These stories are different from the relatively small number of celebrity cases, like Apple Computer, that are constantly getting coverage -- but which most CEOs (or would-be CEOs) would find virtually impossible to emulate.

Two qualities distinguish this new class of super CEOs from the celebrities: there are many more of them and their lessons are more transferable. So their impact should be much greater.

Infosys on Innovation

"There’s huge innovation in creating a high-volume, low-price business."

--Nandan M. Kilekani, Infosys CEO

Back in February, I criticized Infosys Consulting for not publishing much thought leadership, aside from its Soap Box section. As a U.S.-based management consulting firm with an India-based parent in the IT integration business, it’s uniquely positioned to speak out on some of today’s most important topics. In the current issue of Business Week, the CEO of Infosys, Nandan M. Kilekani, takes advantage of that perspective in an article on “Obstacles to Innovation in China and India.”


Those obstacles to innovation are familiar: lack of infrastructure, a small middle class, labor inflexibilities, and (in China) a bad IP policy. Yet, to overcome these obstacles, the locals have had to be -- guess what? -- highly innovative -- for example, by building mobile telecom businesses that can make money at one cent per minute, and by selling consumer goods like shampoo in very small quantities and at low prices. Unilever and Proctor & Gamble have adopted this Indian model in some markets.

But “in the end,” Kilekani says, “innovation capability” in India and China depends on having an economy and a culture that’s more like the U.S.

Well, sure. But why then bring up those Indian examples of innovation that Western companies emulate? Maybe the “obstacles” to innovation are also an advantage -- because they force people to think of ways to overcome those obstacles, and those ways can be applied elsewhere. That is innovation from cultural and economic cross-pollination -- not just from imitating one particular culture or economy. One obstacle to innovation in the U.S. might be a U.S. centric view -- something that India and China might help the U.S. overcome.

Innovation Anyone? Anyone?

The web site builds on Ford's national ad campaign, Driving American Innovation.... It aims to emphasize forward-thinking technology over power for its own sake ....

--Detroit Free Press, 9/12/06

The Ford ad campaign raises an interesting question: Is innovation something you sell for its own sake (like power)? Or should it play a support role in marketing that emphasizes more tangible product benefits like higher gas mileage or fewer repairs? I'm thinking support role since who cares how innovative something is if it gives me what I really want? Besides, just saying something is cool probably makes it less so.

Ford's message, by the way, isn't actually that innovative itself. Look through any 1950s era Life Magazine and you'll see lots of ad copy hyping automotive innovation and lots of cars that look like space ships. What has changed is the technology employed (like blogs and Flash) to convey that message -- intended to reinforce its newness or coolness.

Ford's innovation is using a new and improved way to say "New and improved!" How cool is that?

A Point on Presence

"Eighty percent of success is showing up."

--Woody Allen

The inverse is also true: eighty percent of success is getting someone else to show up. When you boil it all down, that's what marketing is all about -- high-tech, consumer, strategic, or otherwise -- it's to get someone present.

In that context, the word is not just a metaphor. Even if someone is physically in the same room with us, we know that what really counts is whether they are really there or are thinking about something else. Furthermore, even if the "room" is virtual (like a website), a person's decision to be present is no less critical.

Presence is perhaps the most important thing people own -- even more than money. That's why victims of assault often take themselves out of the moment if they have no other escape. It's not just to avoid trauma, but also to withhold value.

That's also why getting someone's presence is harder than getting their money -- although the two events often go hand-in-hand, but not always. As Owen Thomas points out in today's CNN Money site, few people who upgrade to Vista will spend much time thinking about it. They'll simply acquire Vista as a byproduct of their next PC purchase. Microsoft may have our money, but does it really have us? Does it matter?

For most of us, however, getting paid means getting other people to show up when we offer them that opportunity. That's why the recent rush to build physical bank branches is so interesting. Physically showing up someplace is the literal definition of the word presence. This is not just "eyeballs" or share-of-mind. This is the real thing. And it obviously has to do with factors other than the product, which is a commodity.

There are, no doubt, a consistent set of universal factors -- some subset of which are involved whenever people volunteer to physically show up. If you know what those are, and can control them, you can probably get people to show up whenever you want. That would make selling anything -- even when physical presence is not technically required -- a lot easier.

What's Behind the Bank Branch Building Boom?

"Today, there has been a serious change of mind. Banks view their branches as gold mines, not costs."

— New York Times (8/9/06)

Ten years ago I ghost wrote an article for A.T. Kearney about how the Internet was going to take over banking. It was inevitable -- given the web's huge convenience and cost advantages. Why would anyone stand in line at a teller window when most of the time they can go right up to an ATM or, even better, just go online? For years I've been waiting for the lines at my corner Bank of America branch to disappear. Frankly, I had expected the branch itself to disappear when Bank of America bought Fleet.

Neither happened. And in fact the branch has recently been expanded -- with the addition of a cozy living room area with couches and coffee table and coffee. As for the lines -- they are longer than ever. (I think swapping out a Stop & Shop next door for a Whole Foods Market also helped build foot traffic.)

As The New York Times recently reported, we are in a nationwide bank branch building boom -- with retail deposits up 4.8% per year from 2001 to 2005. There are now more branch banks in Manhattan, according to the Today Show, than Starbucks.

This trend says a lot about the relationship between marketing and technology. Money, from a strictly technical point of view, is the purest form of commodity and logically should lend itself better to electronic commerce than anything else, even books. You don't have to see or touch money, or read a sample chapter, to know exactly what you are getting. It's something that everyone understands completely.

The contradiction is of course interesting, but what is even more interesting is that it flies in the face of what had been the conventional wisdom. Once again, we find we act differently than we think we will. Many people obviously get value out of standing in line and interrupting their day -- at least where money is concerned. Maybe the world only looks flat.