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CNN Business Unusual

California Company Get Wired For Success; Unconventional Marketing Campaigns Boost Business; Country Singer Bankrolls Own Album

Aired June 03, 2001 - 02:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JAN HOPKINS, GUEST HOST: Ahead BUSINESS UNUSUAL, a little-known California company gets wired for success in the new economy. Businesses soar to new heights with unconventional marketing campaigns. And a country singer stages a comeback with an album he bankrolled himself. That's all ahead on BUSINESS UNUSUAL.

Welcome to BUSINESS UNUSUAL. I'm Jan Hopkins.

You've probably never heard of Compton, California-based company Belkin. But if you're a PC user, chances are you've used a Belkin product at one time or another.

Founded as a maker of copper wire cable in 1983, today the $400 million-a-year business is wired for far more. Gayla Hope has the story from Compton, California.

(BEGIN VIDEOTAPE)

GAYLA HOPE, CNN CORRESPONDENT (voice-over): It's like a train coming down the tracks, shipment after shipment of products. And it's rolling over the competition. Belkin sells connectivity devices for computers, and claims 80 percent of the cable assembly market.

The company started business in 1983. It's still private and truly is a locomotive.

CHET PIPKIN, OWNER AND PRESIDENT, BELKIN: The first year that we were in business, we had about $178,000 in annual sales. This year, we'll do in the neighborhood gross sales-wise getting pretty close to about $400 million for the year.

We've been growing at a rate of about 45 percent a year. So at that growth rate, within the next two to three years or so, it should be $1 billion a year in sales.

HOPE (on camera): If you haven't heard of Chet Pipkin or Belkin, don't feel bad. Many people haven't. Sixty percent of computer users at one time or another have touched a Belkin product and not even known it.

(voice-over): Like this guy shopping for a cable and picking out a Belkin product. Do you think he has ever heard of Belkin? PHILIPPE HARTLEY, CABLE SHOPPER: No, never. I'm not particularly sensitive to the names of companies that make cables.

HOPE: Retailers like Office Depot are, however. The store carries primarily Belkin connectivity devices. Buy a PC from the Dell web site and it will come to you coupled with Belkin branded products.

So how did this seemingly anonymous company based in Compton, California get to be so big?

PIPKIN: Our growth has really come from a lot of growth in the marketplace, also an absolutely incredible engine that the folks here have built that continually layer on new product families and new product concepts and ideas, which develop into an ever-evolving line of products and solutions for the marketplace.

UNIDENTIFIED FEMALE: Power failed.

HOPE: Like the power protector that works off of batteries and saves computer data by safely shutting down the computer after a blackout. And computer gaming devices are on target to hit the market very soon. The Speed Pad helps game players move faster.

Gamers here are trying out Belkin's new game products at the recent E3 trade show in Los Angeles.

PIPKIN: We have currently almost 40,000 unique part numbers. Part of that is just varying colors and cables and that sort of thing. But we've got a lot of stuff out there. And, of course, in the early days, 100 percent of what we did was all copper cables. That's now well below half of our total sales.

JACK KYSER, L.A. ECONOMIC DEVELOPMENT CORPORATION: That's amazing when you stop and thinking a tech company usually it's one key thing. But 40,000, that just sort of blows you away. This gives him -- how would you say -- staying power because he's not just a one- minute wonder.

HOPE: Belkin has a total of about 1.2 million square feet of manufacturing plants globally. And is highly automated.

PIPKIN: About 85 percent of our total order volume we never actually really see or touch. It goes directly from the channel part computer system and drops directly into ours.

HOPE: The computer system then matches orders in stock. If something is out of stock, it can be made the same day. Orders are filled by employees using a wristband computer. The device shows orders with product location codes.

PIPKIN: I think people scoffed at the model in the beginning that said, great, you're going to build some cable assemblies. As soon as the 1,000 people that need them buy them, what are you going to do then?

HOPE: Then came fast, and the orders kept coming. The young 19- year-old that started out making copper cables in his parents' garage has learned a lot.

PIPKIN: Once it's done, it looks easy. But to do it right, you really have to know what the end consumer knows and doesn't know, and what they're looking to do. And you need to anticipate those kinds of questions. And you need to anticipate them correctly.

HOPE: Today, Chet Pipkin, who believes very strongly in the power of packaging, empowering good employees, and lots of training for sales staff. But he actually knew nothing about business or hardware and software when he started out. What he did know was that the PC market was taking off.

He talked his dad, an engineer, into helping out. He then bought a PC cable at a store.

PIPKIN: I took it back to the house, took the thing apart, bought the parts we needed to build 10 more. We built 10, took the 10 back to the store and said, "Do you want to buy them?" Were shocked at, "Yes, I do. How much money do you want for them?" We didn't really think about that, quoted some price off the cuff.

The product was purchased. And that was our first order. So I'd love to tell you that a lot of planning went into the whole thing. But it was a little bit off the cuff.

HOPE: In fact, Chet Pipkin was only trying to raise money with the cable business. He was planning on starting what he calls a "real business" later on.

For BUSINESS UNUSUAL, Gayla Hope, CNN, Compton, California.

(END VIDEOTAPE)

HOPKINS: Just ahead, a look at some marketing campaigns that are full of hot air.

(BEGIN VIDEO CLIP)

GARRY HARUSKA, THE BALLOON INC.: Nothing turns a head like a 166-foot-tall pink bunny.

(END VIDEO CLIP)

HOPKINS: We'll explain when BUSINESS UNUSUAL returns.

(COMMERCIAL BREAK)

HOPKINS: As competition heats up, more and more companies these days are finding some unconventional methods to promote themselves. One way that's gaining some steam is advertising on hot air balloons.

It's not just the heavyweights who are launching these campaigns. Valerie Morris has a look at the real high flyers in the world of corporate advertising.

(BEGIN VIDEOTAPE) VALERIE MORRIS, CNN CORRESPONDENT (voice-over): From New Jersey to New Mexico, it's one of the most eye-catching trends in corporate advertising. Hot air balloons flying the flag for companies that offer everything from four on the floor to Chunky Monkey. They heat up and take off at festivals around the country like this one near New York City where balloon pilots who are up for a good time join corporate pilots with ad concepts that are bound to fly.

It's a sight that thrills the crowds, not to mention companies out to market themselves.

HOWARD FREEMAN, THE FESTIVAL GROUP: When you see an icon like the Energizer Bunny at 166 feet tall, 15 feet higher than the Statue of Liberty, it's great advertising for them. So it's a two-way street. And it's why more and more people are getting into corporate ballooning.

MORRIS: Balloon professionals run these airborne billboards on behalf of corporations. The pilots are trained to know the company as well as any PR pitchman. And when they're not soaring, they're selling.

HARUSKA: Well, for Energizer, this means that they have the largest corporate balloon in America flying coast to coast, border to border, spreading the news of their batteries, their new equipment, their new products to people all over the country. And nothing turns a head like a 166-foot-tall pink bunny.

MORRIS: This balloon is promoting another lighter-than-air craft, a freight-lifting airship from a company called Cargolifter, rolling out its product in 2004. Cargolifter doesn't have a big advertising budget, but it does have a big balloon. And that's turning out to be money well spent.

SAM PARKS, CHIEF PILOT, CARGOLIFTER: And we're finding out that it's about two cents per person that we present the balloon in front of.

TOM BOYLE, VICE PRESIDENT OF MARKETING LOGISTICS, CARGOLIFTER: We can get a huge coverage in a short period of time without having to go through some massive advertising campaign that we have to do video and have to do print stuff. We are able to, in a very cost-effective way, get in front of a tremendous amount of people.

MORRIS: An ordinary hot air balloon costs about $20,000. But a balloon that doesn't look like a balloon can run to $200,000 or more. It's called a special shape.

PARKS: What we're going to do this morning is just fly right over the top of the bunny, see if we can tickle his ears a little bit.

MORRIS: Companies use special shapes to tell you at a glance about their products and services from an inflatable moving van to the world's lightest cocktail. And on the side of the Cargolifter balloon, two little blow-up versions of the company's airship. PARKS: Whatever the message is, you want -- if your product is, in our case an airship that you want to try to get the airships on the side of the balloon. And you can do that with flat artwork. That's fine. But we want to be able to stand out even more. So by putting 42-foot airships on the side of our balloon, we're hoping that the public will remember us.

MORRIS: Dozens of those special shapes turn up at the biggest U.S. balloon festival of all, the Albuquerque International Balloon Fiesta. Among the corporations showing off their hot air advertising vehicles, Wells Fargo Bank.

PAM GARCIA, WELLS FARGO: The center stage, our brand new balloon, is shaped like a stagecoach, which, of course, is the Wells Fargo symbol. This is one of the largest special shaped balloons out here. It's 100 feet by 90 feet tall. Most balloons are about 40 to 60 feet tall.

MORRIS: The balloons at Albuquerque compete in races, or just compete for the attention of the more than one million spectators. They light up the desert sky at dusk in an event called the Balloon Glow. But hot air balloons are about silence as well as spectacle. When they're flying, the quiet is broken only by the blast from the propane burner.

UNIDENTIFIED MALE: If you look on your map, there is another small airport that is...

MORRIS: ... and the sound of conversation.

UNIDENTIFIED MALE: ... probably five miles I guess...

MORRIS: While down below, who knows how many eyes look up to see one of advertising's gentlest messages. Talk about the soft sell, this sell is soft it's lighter than air.

For BUSINESS UNUSUAL, I'm Valerie Morris, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: Up next on BUSINESS UNUSUAL, an Internet pioneer and his handbook on the new economy. We'll talk to former Lycos CEO and now author Bob Davis when we come back.

(COMMERCIAL BREAK)

HOPKINS: Internet pioneer Bob Davis is no stranger to the new economy. In 1995, he founded Massachusetts-based web portal Lycos. Davis then grew the business into a web powerhouse and stayed on board as CEO until its merger into Terra Lycos.

Now, Bob Davis is vice chairman of the company and also a partner at venture capital firm Highland Capital Partners. He has also put on another hat, sharing his experiences in his new book "Speed is Life: Street Smart Lessons from the Front Lines of Business." Bob Davis joins me now. Welcome, Bob.

BOB DAVIS, AUTHOR, "SPEED IS LIFE: STREET SMART LESSONS FROM THE FRONT LINES OF BUSINESS": Great to be here. Thanks.

HOPKINS: Now, street smart is the kind of operative term, right? Because you had to learn at a very early age how to support yourself basically. Both of your parents died at a relatively early age. What did that kind of self-sufficiency teach you for the rest of your life?

DAVIS: Well, it was tough as a kid. To be independent is not something I would wish on anyone. But nonetheless, you play the cards that you're dealt. And it gave me I think a sense of competitiveness, a sense of independence, a sense of -- a great sense of perseverance.

And so much about success in the business plan of today -- I talk about this in a chapter called "You Let Up, You Lose" -- is about believing in yourself and sticking with it and going the extra mile. And I think I picked a lot of that up as a kid.

HOPKINS: But you also learned how to take risks somewhere along the line. You jumped from IBM to an idea basically, right? Lycos was some professor's idea of a technology.

DAVIS: Yeah, that's it on the money. I had a couple of stops in between. But it was not a business, that's for sure. I came on as the first employee in June of '95 as a venture capitalist friend recruited me in to start this company that had no employees, no revenues, no earnings, and a little bit of software.

HOPKINS: And the Internet really wasn't anything at that point either.

DAVIS: No, it sure wasn't. The web at that stage was just in its very early days, just getting underway. I for one had never sent an e-mail prior to the time that I joined Lycos. So the web for me was a completely new experience.

HOPKINS: Well, you say speed is life. But speed also kills, right? I mean, we've seen a lot of road kill really from the Internet bubble bursting.

DAVIS: Yeah.

HOPKINS: How can you -- speed was really important in the early going, but it's not so important now. Or do you disagree?

DAVIS: Oh, I disagree. Speed has always been important in American business. This is a book if I can call it on speed leading, is what this becomes about.

And if we look at it in sports, a war, a business from the beginning of time, those that can act swiftly, decisively, rationally are those that typically prevail. Now this doesn't say speed with recklessness. This doesn't say driving to endanger. This is acting smart but acting swiftly. And some of the greatest business leaders in America today espouse the virtues of speed.

Jack Welch talks in the book about one of the regrets that he has. He said if it's anything, he took too long, didn't act swiftly enough in many of his decisions. And you find that from many business leaders.

So this book is by no means about the Internet. This is a business book for any type of company.

HOPKINS: But some Internet CEOs moved too quickly, didn't they? I mean, they spent their venture capital money too quickly...

DAVIS: Yeah.

HOPKINS: ... they maybe moved -- maybe their stock moved up too much.

DAVIS: Yeah.

HOPKINS: And their employees got too greedy.

DAVIS: I think so on all counts. I agree with you. And one of the mistakes that was made on the Internet that I talk about in great detail is I think so many looked at this and said it was a new market, so new rules apply.

I think that that's hogwash. I think the concept of new economy is created by the charlatans of the web. This is all about traditional, old business practices that apply to companies that are started today and will apply to companies that start five years from now.

It's about building a brand. It's about hiring a good team. It's about generating profits. That's what building a successful business is. And that's what managing is about. And I try to focus on the basic principles that have allowed me in my career to do that successfully.

HOPKINS: And profits are important. I mean, one of the things that has been a recent blessing in the new economy is that it's not so new. You really do have to do kind of basic business practices. You have to have a business that turns a profit.

DAVIS: You're so right. It's funny now to look back on it. Lycos is a profitable company in 1997, one of the first web companies to ever toy with the concept of earnings. And I look back now and see it as comical. We were actually criticized at that point in time by many outside observers saying, "Why would they dare earn money?"

But, of course, a sense of fiscal responsibility is something that served us very, very well as the company developed. And as the shakeout began with so many Internet companies, it's what allowed Lycos to endure so strongly, the sense of earnings that we had underneath our company.

HOPKINS: And you probably merged at the right time. You got a good price. And the stock has come down sense. So timing is also important.

DAVIS: Timing is everything in life. We merged a little bit after the Internet bubble. So we didn't get it exactly right. But we sold the company for just under $5.5 billion, which represents just about a 300,000 percent return on our initial venture capital money. So I think it worked out pretty well for all involved.

HOPKINS: Thanks very much, Bob Davis.

DAVIS: Great pleasure. Thank you.

HOPKINS: And just ahead on BUSINESS UNUSUAL, a country singer makes a comeback on his own dime. His story when we return.

(COMMERCIAL BREAK)

HOPKINS: And finally, in the late '80s, singer, songwriter, and producer Rodney Crowell topped the country music charts with five number one records in a row. But he soon drifted from the spotlight, falling out of favor with radio big wigs after failing to repeat that success.

Now Crowell is staging a comeback. And he's doing it on his own terms this time with a record he bankrolled himself. Steve Young has this story.

(BEGIN VIDEOTAPE)

RODNEY CROWELL, MUSICIAN: Say that again.

UNIDENTIFIED FEMALE: My daddy comes from the east side.

CROWELL: Your daddy comes from the east side? Your daddy is funky.

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Rodney Crowell grew up on the low-income side of Houston's east side where he says his daddy beat up his mom. He sings about that topsy-turvy world on his latest record "The Houston Kid."

CROWELL (singing)

YOUNG: Crowell had to bankroll the record himself, even though he made a pile of money for the national music establishment with a monster record in the '80s that yielded five number one hits in a row. He wrote, produced, and sang them all.

But Nashville wasn't interested in banking a 50-year-old man writing about social problems like AIDS and alcoholism and domestic violence. Crowell hankered to follow his heart.

CROWELL: What I did, I just didn't feel like I could make that record over and over and over again and fell out of grace with those who guard the door of the big commercial radio.

YOUNG: The result is what Sinatra fans would call a concept album. It's a tender idea that life is full of pain, but also forgiveness, reconciliation, and redemption.

CROWELL (singing)

CROWELL: There were a couple of times when I came in and told my wife, "Hey, I just emptied our bank account making this record." Whether I spend every penny I have making it and no one buys it, at least I can say one time in my career I made a record that I believe in wholeheartedly because sometimes that's all you get.

CROWELL (singing)

MICHAEL RADLAUER, SONGWRITER: It's not cookie cutter material. It's personal. It has some soul to it, something that's really missing from country music now.

YOUNG: Crowell knows he won't get the returns of the record industry's corporate own. This time around there isn't much marketing or distribution muscle.

Is there a big appetite for thoughtful music? Other bands, Nashville, and Rodney Crowell's wife are waiting to find out.

For BUSINESS UNUSUAL, I'm Steve Young, CNN Financial News, New York.

(END VIDEOTAPE)

HOPKINS: That's BUSINESS UNUSUAL. If you missed any of today's program, you can catch it on the web. Just go to cnnfn.com/businessunusual.

I'm Jan Hopkins. Thanks for joining us. Goodbye from New York.

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