Q and A with Tom Nies
| Q1: | Tell me
about the founding of the company? |
| A: | I started to work in the IT industry
in 1962 with IBM. At that time, there were still vacuum
tubes powering the computer. I was lucky enough to get in on
the ground floor.
I worked through much of
the 1960's with IBM, and we started our business in 1968.
But, when we started, there was no software industry. We
were one of very few software companies. Few proved to be
viable.
Although several early companies
helped to invent the software industry, Cincom was probably
the company that proved our industry could be economically
viable. Our successes began to attract venture capital to
the industry in the mid '70s. But remember, we started in
1968. In those earliest times, there was not only very
little venture capital available, but even less debt
financing. So, we had to lift ourselves by our own
bootstraps. Profitability was demanded from the "get
go."
We started in Cincinnati. We're
still there; that's our headquarters. I believe it's an
absolutely ideal location. It's central to everything. It's
central in America. It's an ideal city,
Cincinnati. | | Q2: | How many
locations does your company have? |
| A: | Today, we have about 30 locations
around the world. Depending on changing currency values, we
now generate about 40% of our revenues in America, about 40%
in Europe, and about 20% in the rest of the world.
We started in Cincinnati. But I realized the
importance of international markets and wanted Cincom to get
as much early international experience as we could. So we
set up our first remote location in Toronto in 1970, and we
began developing worldwide as fast as possible. We traveled
to Europe and established operations in several locations in
1972.
By 1974 or 1975, we were operational
everywhere we are today, except for China and India, which
we've added in the last few years. But we've been on the
ground for the last 30 years as a worldwide international
company. By the late 1970's, we were already doing almost
two thirds of our business internationally. Today, we have
the largest percentage of international revenues of almost
any American-based company. | | Q3: | How many
employees does your company have
overall? | | A: | We have about
850 overall. | | Q4: | What are
some of your direct responsibilities within the company
today? | | A: | I am the
President and CEO, but my responsibilities span disparate
requirements. I have both a management role, which is
managing the current operations, and a leadership role,
which is developing, supporting and encouraging new
operations to pursue, and to achieve new
opportunities. | | Q5: | How has
business been lately? | | A: | Our business in
the last two years has produced all-time record profits:
2002 delivered all-time record profits, then in the 2003
fiscal year that just ended on September 30, we increased
that by 150%.
Over the last three years,
we've improved profits tenfold over where they were in 2001.
That's raised our earnings per share up tenfold in just two
years. But we've also increased our return on invested
capital from the 22% or 23% in 2002 to about 106% to 107%
for 2003. When you consider the average ROI of all American
business is about 3%, we were very happy to be generating
22% in fiscal 2002. | | Q6: | To what do
you attribute that success? |
| A: | The most important thing that's
helping us is the marketplace. The difficult economies are
forcing customers to be more discriminating in their choice
of product, suppliers and vendors, and to get the best value
and return on their investments. With these forces at work,
the demand for solutions that deliver high value and low
cost is increasing dramatically. So too are demands for
rapid and significant ROI, high reward and low risk. And our
customers want all of this to be realized quickly.
Fortunately, these trends have been Cincom's friends.
In boom times, like we had in the late 1990's,
too many choosers didn't seem to care how much money they
were throwing away. They bought heavily into what we call
the high-fashion, high-cost providers. These were heavy
marketing, heavy selling companies that too often delivered
sub-optimal value to the customer at excessive overall costs
typically four to five times Cincom's cost for similar
functionality and value. We have become
better at articulating our comparative value proposition to
our customers, especially at a time when they have become
more concerned about receiving value for money invested.
Because we've become adept at helping prospects see the
difference between Cincom and competing alternatives, we are
winning a higher percentage of sales competitions today than
we did a couple of years ago. | | Q7: | Conversely, what major challenges
has Cincom been facing recently? |
| A: | One of the most difficult challenges
for us, being a privately held company, is that we aren't
featured in the Wall Street Journal or on the
TV business news, etc. So we have to generate our own market
presence, largely unaided. This has to be done through
marketing, merchandising, advertising and other things,
which are primarily justified based on sales
We can't rationalize large-scale marketing and
campaigning, but we look for opportunities to display our
value. When we enter competitions, we often beat out
competitors because the economic value we offer is better,
while our functionality is just as complete, if not more
comprehensive. | | Q8: | What
strategies are in place to overcome that
challenge? | | A: | We pursue a
two-prong approach we call a "penetrate and
radiate" strategy. Our marketing campaigns begin with
our customers. We strive to help our customers maximize
value and satisfaction, and we encourage satisfied customers
to radiate Cincom through word of mouth or other means with
the aim of helping us become present in the minds of other
prospects. The second part of our strategy is to penetrate
deeper into our existing large-scale customers' companies.
When we are successful at a specific location or division,
we encourage our customers to help us extend these value
gains to other divisions or locations.
We
are also pursuing a substantial expansion in our direct and
indirect sales and marketing capabilities. We're adding
staff, significantly expanding our market presence, and
putting "more feet on the street." We hope to
expand our sales presence by at least 50% for the near term.
We produce a substantial amount of our own
software. We're a very committed software developer, and we
probably have one of the biggest percentages of RAnd;D
to total revenue in the industry. We also
have software-supplying partners and allies who build and
develop Cincom technology. But at least 80% of what we offer
we build. | | Q9: | How would
describe your company's culture? |
| A: | First of all, it's one of total
commitment. We call ourselves Cincomers."Our culture
transcends national, religious, and ethnic bounds, and we
have a certain set of ideas, values and beliefs that we've
developed over the years.
One of the most
important of these ideas is that we exist to create and
serve customers. That's our purpose for being. The
customer's best interest comes first. And our motto is we'll
do "whatever it takes" to serve that customer.
This is not a fancy marketing slogan. The whole idea of the
culture of our company is one of service orientation.
As the company president, I am the servant of
the servants of our customers. I serve our managers and
executives, they serve the rest of our people, and we all
together serve the customer. | | Q10: | What plans
does your company have for expansion into new markets? I
know you mentioned that previously? |
| A: | Our goal is to expand adjacently, not
to pursue things where we lack adequate experience. We
strive to grow from our core competencies and to expand
outward accordingly. In the same way that we "penetrate
and radiate" within our existing customers, we develop
related technologies and related offerings. We constantly
look for adjacent areas we can successfully leverage to
intensify our new offerings into new geographies and new
industries. More intense focus in specific industries is
also a priority.
We have long been a
provider in manufacturing and a variety of different
industries. And, we have a lot of financial services
customers. About two years ago, we began delivering
industry-specific solutions for financial services
industries: banks, insurance companies, etc. That's another
expansion that we're working on now. |
| Q11: | Are there
any awards or distinctions that your company has received
that you'd like to tell me about? |
| A: | We've gotten some very significant
awards and distinctions. During the early years of the
Ronald Reagan administration, they developed the "E
Awards" for emphasizing export. We were the first
software company to receive an E Award, and later the first
to earn the E-Star Award, which was for superlative levels
of export.
We were proud to win these
awards for an important reason: America is falling down
badly on the need to balance trade and this is resulting in
colossal trade deficits. So, the ability to compete in world
markets and to be recognized by the American Government as a
leader in this area of export endeavor is, I think, an
important award.
Secondly, President
Reagan himself came to Cincinnati in August 1984.He singled
out Cincom and built a whole speech about our company.
President Reagan suggested that high technology and software
would become the future of America and that Cincom was a
role model and exemplar for others to
follow.The Smithsonian, America's national
museum, also recognized Cincom, along with just a very few
others, as ones who first built the software industry.
We've also received awards from national
governments around the world. For example, the former Prime
Minister of England, Sir Edward Heath, gave a presentation
that talked about Cincom bringing the software industry to
England and recognized the role that Cincom had played in
helping to advance England and the British interest in
high-tech fields. | | Q12: | What
advice would you give other company leaders coping with this
economy? | | A: | I would say
that companies should put their customers first, and the
people who are serving those customers a very close second.
Shareholders should not be the primary focus for the company
because this causes companies to put their customers and
their people in second, third or fourth priority. Some
companies have become so obsessed with shareholder value
that they neglect, or even seek to exploit unfairly, their
customers, and pay too little attention to their people.
This, I believe, is a very dangerous game to play.
It's almost impossible for many public companies
to properly balance support for all their constituencies
because the pressure for market share value is so great that
they can't find a way to do well all things at one time.
It's unfortunate. But, my advice would be to focus on your
customer, their interests and desires, and on one's own
people. Focus on your products, deliver the best value you
possibly can at the lowest overall cost, and provide the
best environment you can for your people. In the end,
shareholders will be well taken care of as a result, and not
as a focus. In this way, all constituencies, or
stakeholders, can be optimally served. |
| Q13: | Is there
anything that you wanted to discuss that I didn't ask
about? | | A: | I think it
might be of interest to note that commitment to our company
is one of the things I ask of our people. I try to do this
by example and by encouragement. Because of my own
commitment to the company, I am now the longest-serving CEO
in the computer industry today.
I mention
that because I seek no glory for myself. But as a result of
that type of commitment by so many Cincomers, we have the
longest average personnel tenure of any software company in
the industry. We also have the highest returnee rate of
people who may have left our company to pursue interests
elsewhere and have returned to our company.
The ideas our company stands for are
embraced by our people. In an industry where turnover is the
rule, stability of an organization is one of our great
strengths. I'm grateful to our people for their faith in
Cincom. | << Return
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