Strikepoint—Part Two
Mary Ann Dugan had left the meeting supercharged, rushing off to delegate everything so she could plunge into crisis mode—with Gan McManus, Ed Combs and anybody else in the hierarchy of Cornelius Footwear they decided to grab.
"It’s going to be a long day—and probably night," she’d told Gan. "Which reminds me, I’m going to requisition several pounds of Corporate’s gourmet coffee. None of that cafeteria sludge for my team."
And she was gone.
Others dispersed more quietly. Privately counting their stock windfalls, Gan thought, in light of the revelation that Ike Boone, chairman of rival Zip Athletic Wear, had just sweetened his takeover offer—not so coincidentally the morning after Bigger Scott had won the U.S. Open and credited the victory, and his amazing comeback, to Cornelius’ Corn Dogs.
Only three people remained in the conference room—John Enright, the CEO, Serge Saunders of Operations and Al Hirschorn of Finance, their three heads together. Talking takeover, no doubt.
Except John Enright was one of the good guys.
Wasn’t he?
Gan slipped out, feeling utterly adrift. Two hours before, jogging to work, he’d decided to jump ship—to accept the lucrative offer from Zip. In his mind, he’d already made the move north from L.A. to San Francisco—to a new title and new duties, a private office overlooking the Bay and bundled stock options. Now, incredibly, he was back on the leaky old S.S. Cornelius, being asked to redesign it before it was too late. Which it probably already was, no matter what grand logistical schemes he and Mary Ann and Ed could cook up overnight.
When it came time to actually implement the sweeping operational and cultural changes so desperately needed, wouldn’t Gan be stonewalled? Wouldn’t corporate inertia win out, as it always did at Cornelius? Did John Enright look like an executive eager to slug it out in the trenches, or to kick back and reap his rewards?
Heading back to his cubicle, Gan yielded to a stray impulse and detoured into a small, circular annex off the lobby. A center pedestal showcased a half-sized bronze figure of a male hiker with alpenstock, bald and full-bearded, muscled calves in uphill stride. Inside those sculpted boots, Gan conjured the prototype Corn Dogs inserts, handmade out of three kinds of leather, rubber and shaped cork. It was an engineering process that anticipated the laminations of a modern running shoe.
The hiker, of course, was George G. Cornelius himself, outdoorsman turned manufacturer. According to company legend, the old guy had also been a seat-of-the-pants logistician. Back in the late 1930s, convinced of a war with Japan that would cut access to Southeast Asian rubber, he’d bought up a warehouse full of Brazilian wild rubber and kept right on cranking out Corn Dogs, along with combat boots for Uncle Sam. Old George would have been thrilled by Bigger Scott’s comeback victory, Gan thought, not to mention the surprise endorsement of Corn Dogs.
"Wondered where you’d got to." Ed Combs stood in the lobby archway. "Communing with Our Beloved Founder?"
"Kind of. Looks like the end of the trail for the old guy, one way or the other."
"You mean if Cornelius becomes a division of Zip?"
"Right." From what Gan knew of Zip culture, once Ike Boone acquired all their patents, he’d cut every corner to make it cheaper. The final product would probably end up little more than a knockoff. Oh, the brand name might linger for a while, to squeeze the last drop out of Bigger Scott’s endorsement, but George Cornelius’ unique engineering concepts would be an early casualty of the takeover. And the trade secrets built into Corn Dogs would have vanished forever, just like the recipe for Stradivarius’ fiddle varnish.
"Let’s hear what the old guy has to say." Combs punched a button on an adjacent TV console. The screen blinked up an archival black-and-white loop of George Cornelius, standing at a blackboard and speaking in a scratchy twang:
"People who don’t have toes can’t walk or run," he was saying, pointing at a chalk drawing of a human foot. "Why not? Because there’s nothing to grab the ground. Every person who runs in shoes is trying to grab the ground inside the shoe, just like you do running barefooted. My thought was, why not put something inside the shoe the toes can grab onto and make the shoe like the person was running on soft ground? So I got hold of a runner with good strong feet and had him run on the beach and then made casts of his impact prints, then smoothed those down to see what the grabbing mechanism really was, and where you want support in the shoe…"
"That’s what it’s all about, Ed," Gan said after the four-minute loop was over. "It’s not about beating Zip, or being No. 1 in the marketplace—as desirable as those goals are—or even driving up the stock price and corporate profits. It’s about keeping one man’s vision alive," Gan tapped the dark TV screen, "and helping people to keep on doing all the activities they love. You heard what he said—’God made your feet to walk forever.’"
"You want me to say ‘Amen’?"
"It’s me I’m preaching to, Ed. I was gonna quit today. Heck, I was gonna quit five minutes ago. Go to work for Ike Boone, if you can believe that."
"Everybody likes to work for a winner."
"But we can’t let him win, Ed. We gotta—"
Combs’ cell phone went off. "He’s with me," Combs said, mouthing Mary Ann. "In the lobby. You bet, we’re on our way."
"She ready to go?" Gan asked.
"Her exact words were, ‘Let’s get ready to r-u-u-u-u-u-umble!’"
In the Customer Service conference room five minutes later, Gan told Mary Ann about his "epiphany" in the lobby. "You know, back in college, when I was working at a Cornelius warehouse as a flex-time picker, my feet used to kill me after a night on the cement slab. I’d get out of bed next morning still limping. I told the foreman I had to quit. He told me to take off my fancy tennis shoes and try a pair of basic Corn Dogs. It was a miracle! At the end of the shift, no pain! The company product put the bounce back in my step. Which is why I stuck around, I guess."
"Why do we need Bigger Scott?" Mary Ann said facetiously. "Let’s build our campaign around Gan."
"All I’m saying is, we’ve got to make this work. We can’t sell out."
"So what do we do to keep that from happening? I remind you, we have a little more than 23 hours."
"Gan has a good point," Ed Combs said, scratching his gray crewcut. "Let’s not dismiss why we’re doing this."
"You’re not gonna start quoting General Pagonis again?" Mary Ann said in mock exasperation. The truth was, she was appropriately respectful of Combs’ years of service under the legendary logistics wizard of Desert Shield and Desert Storm.
"My point is," Ed went on, "everybody in the company needs to buy into our mission."
"Starting with John Enright," Gan said. "We’ve got to get all the top brass more excited about going after this opportunity than how much they can pocket by signing their proxies over to Ike Boone."
"So what is our mission?" Mary Ann said, eyebrow arched, pencil poised.
"To help people stay on their feet, to keep playing all the games of their life. Something like that. The better we succeed, the more folks we help, the more we’ll prosper."
"Okay," she made a bullet, "revamp mission statement. Spread the gospel. Next?"
"We need a two-tiered strategy," Ed Combs said.
"General Pagonis again?" Mary Ann asked.
"You got it. From Day One in Saudi, we had to address the immediate crisis, which required a highly defensive posture, but also look long term, to prepare for going on offense. Short term, long term. We can’t lose sight of either one."
"Gotcha," Mary Ann said, writing rapidly. "We’ve got immediate logistical problems. Long term, we start looking at process redesign."
"You’ll have to excuse me a minute." Gan stood up. "Before I can contribute, I’ve got a bridge to burn." He walked to the window, taking out his cell phone. Rob Wylie at Zip picked up quickly: "Gan the man! What’s the good news?"
"I’ve decided to stay on at Cornelius, Rob. I’m just calling to thank you for the generous offer…"
"So, when were you going to tell me?" Mary Ann wanted to know when Gan rejoined them a moment later.
"This morning. I came in to resign. The Bigger Scott deal, and the chance to work with you and Ed on logistics, pretty much changed my mind."
"Only ‘pretty much’?"
"George Cornelius clinched it."
"Except," Ed Combs said, "if Enright caves in, we could all end up working for Zip."
"Then let’s get busy. Take a look at this." Mary Ann placed a printout between them, with what looked like Chinese characters. Gan bent closer. It was the office-delivery menu from a nearby Oriental deli. "They also do dinners."
"Let’s recap," Mary Ann said several hours later, flipping the pages of her legal pad. She started down the early bullet points:
"Form in-house cross-functional Leadership Team—"
"SWAT team," Combs reminded her.
"—with top managers from all departments….
"Revamp mission statement." Mary Ann glanced over her reading glasses at Gan. "Remember, don’t give me any feel-good, New Age baloney. We’re not doing this out of altruism, or to cure grandma’s bunions. At least I’m not. My goal is to put the price of Cornelius common so high it’ll leave Ike Boone’s takeover offer in the dust." She moved to the next items:
"Explore idea of offering Bigger Scott percentage deal to be Corn Dogs pitchman….
"Design major ad campaign to exploit Scott endorsement. Mix footage of George Cornelius with Bigger Scott on TV…"
This wasn’t just a matter of marketing, she reminded them, but a logistical priority. The longer Scott’s endorsement stayed fresh in consumer memory, the more time they were buying to get fresh product flowing into stores.
And they’d have to move faster. Five months was typical turnaround time on a new retail order—if everything went smoothly with their existing manufacturing plants in China and Thailand, and with their shipping connections across the Pacific.
But five months from source to shelf was just too long—especially when the window for Corn Dogs, wide open now, could close quickly. They could end up with unsaleable product backed up in the pipeline all the way to Asia.
An advanced planning tool would help predict demand and plan daily manufacturing capacity. But that was long range. In the meantime, their demand forecasting would have to rely on educated guesswork, based on input from Geoff Mullins’ sales reps and constant feedback from focus groups and market surveys.
"What we really need," Gan suggested, "is to get connected to point-of-sale information in the merchandising systems of all our big accounts—either through EDI or the Internet. That way we can spot trends faster and respond quicker to what’s happening in the retail environment."
"In the meantime," said Ed Combs, "why not do the old-fashioned thing? Let’s set up a boiler-room to call each of our main stores, say every Monday morning, and find out what’s been selling and how much?"
"Our top-tier retailers will need to buy into that idea, Ed," Mary Ann said, "and they will, if they see enough trending happening so they know they’re going to make money on it. Let’s set up some meetings."
She added bullet points.
"Back to that five-month lag time," Gan said. "How about switching to air freight?"
"You beat me to it," said Combs, whose expertise in Far Eastern cargo was acquired during two Vietnam tours as a transportation officer. "We’re dealing with a volatile fashion trend, right? No way every shipment can take nine or 10 extra days on the water—maybe more, if you hit a typhoon."
Air freight became another bullet point.
"What about the cost of sending everything by air?" Mary Ann asked.
"We could still use containerships for unfinished goods," Combs suggested. "You know, that idea Hal Matsuura talked about—mass customization, building shoes to a certain level in Asia, shipping those in containers, then sizing and finishing over here? Again that would allow us to react faster to market changes because we’d have half the product already built."
"The old assemble-to-order idea," Mary Ann said, making another bullet.
"That’s standard procedure for all the laptop makers in Taiwan," Gan said. "They fabricate basic designs, then let their customers—Dell or IBM or Compaq—tweak them right in the assembly plants, adding or removing options. That lets vendors brand and diversify their product lines—and get to market quickly."
"Don’t they also ship laptops direct to their vendors’ big retailers?" Combs asked. "That’s something else we might copy—air-freighting Corn Dogs to big accounts straight from Asia. That gets us to market a lot faster —"
"And it cuts warehousing, shipping and handling costs," Gan added.
Mary Ann made the notation, but her mind had drifted back to an idea surfaced earlier: "You know all those half-finished shoes, which we ship over here in containers? Why not do our final production cycle—sizing, adding the trim package or whatever—in a Foreign Trade Zone? There are plenty of FTZs around the Harbor. We wouldn’t go through customs, or pay import duties, till the shoe was actually finished and shipped to market."
Ed and Gan agreed this was worth exploring. But there were more fundamental problems—two at least—which they’d been tiptoeing around the past several hours. One of these was manufacturing capacity. Or lack thereof, according to Alex Ordonez, the executive in charge.
"I think it’s time we paid Alex a visit," Mary Ann said, capping her pen and closing her notebook.
"I’ve been thinking about it ever since
the meeting," Alex Ordonez said, as they settled around a corner table in his office. "How can we make more shoes?"
"What did you come up with?"
"A million elves with little hammers," Ordonez said deadpan. Nobody laughed. "Actually, I haven’t come up with a solution. Outsourcing is our only hope, but, like I said this morning, most of the Asian contract manufacturers are already tied up—a lot of them by Zip."
"Somehow we’ve got to untie them," Gan said. "We’ve been talking about outsourcing, too, all morning—but for our distribution network. There’s just no way we can take all this Asian inventory into our existing warehouses and then reship. The obvious answer is to find a 3PL with global expertise and existing infrastructure, which we sure as heck don’t have, not to mention logistics being one of our core incompetencies. So let them take the demand based on what retailers are saying they’re selling and ship accordingly. But somehow we left manufacturing out of our thinking."
Ordonez smiled. "It would be great if we could outsource the whole deal." He waved at a wall map of Asia behind him. "Scale up our own factories as much as we can, then if we can somehow scrounge up a bunch of Asian suppliers that can make shoes—third-party manufacturing sites all over the place, from Singapore to Ho Chi Minh City. Start fanning out production. Give Ike Boone a run for his money over there." He gave a bleak smile. "At least we can try."
"The other obvious advantage to that," Gan said, "is if the trend dies, God forbid, and we need to shut down production fast, we just close out our contracts with the third-party manufacturers and logistics providers, and get out unscathed."
"We’ll need an on-the-ground team," Ed Combs said. "While Alex goes searching for manufacturing sites and gets them up and running, someone will need to work directly with our logistics people in Asia, from whatever 3PL we pick, to move product out of manufacturing as quickly as possible."
"Either of you guys free?" Ordonez asked. "I could sure use your input over there."
"They’re both free," Mary Ann said. "If we can sell John Enright."
"What do you got?"
John Enright, their white-haired CEO, punctuated the question with an anticipatory hand clap, like a sultan summoning his next concubine. It was eight the following morning, the deadline for presentation of their plan to convince Enright not to sell the company to Zip. For whatever Enright decreed, all knew, the Cornelius stockholders would ratify. There was a curtain-time tension in the conference room, the same faces looking down the long polished table at Mary Ann Dugan, again flanked by Ed Combs and Gan McManus. All three were exhausted, running mostly on fumes and caffeine. Alex Ordonez remained mid-table, next to his immediate boss, Serge Saunders of Operations, but Mary Ann now counted Alex solidly on her team.
Now or never. She cleared her throat and launched: "You’ll find the basics of our plan in these handouts." She patted a stack of papers beside her. "But since they’re talking points, we’d like to talk you through them first…"
They took turns—all four of them, with Mary Ann going over the business logic, Alex handling manufacturing, Ed and Gan the 3PL distribution component. Gan closed with his personal appeal—reminding them that Cornelius had something of unique value to offer the world, a vision that could empower them all not merely to preserve the company, but to grow it dramatically.
"Nice words," remarked Al Hirschorn the instant Gan sat down, "but let’s get back to the outsourcing. Your timeline, it doesn’t make sense. Where do you budget time for writing a requirements document, evaluating logistics providers, sending out RFPs, evaluating responses, making site visits?"
Mary Ann jumped in: "Gan has been doing all those things, in an ongoing informal way, the past six months. I’ve know I’ve got a file full of his memos and recommendations, and you’ve been on the distribution list, too, Al. Ed has contacts with the biggest 3PLs, going back for years, and so does Alex. The four of us had our short list of candidates by three yesterday afternoon, our basic requirements document boiled down to bullet points by four, and we’ve been making phone calls ever since—and I’m talking all night long."
"I suppose you’ve already picked a provider?" John Enright said, with the faintest hint of smile.
"We have a recommendation," Mary Ann said. "A team from Brannan Logistics is ready to fly down from Seattle on their corporate jet this afternoon, to make a pitch for our business.
"Brannan isn’t a top-tier 3PL," said Al Hirschorn, turning to John Enright. "No big provider is going to consider this kind of interface, in this time frame."
"Wait a minute, Al," Enright said. "I’d like to hear what they have to say. Did you folks talk to Jeb Brannan personally?"
"He’s coming himself," Mary Ann said. "Turns out he wears Corn Dogs, too."
The Brannan name seemed to tip the scales a bit, Gan thought, except with Al Hirschorn. Gan definitely felt an energy shift in the room, a sense that their plan could really work.
He was right. On an informal table vote, Al Hirschorn of Finance was the lone naysayer. "It might work, it might not," Hirschorn said. "But Ike Boone’s offer is a sure thing. And too damned good to pass up."
"Who says we’re passing it up?" Enright countered. "If Jeb Brannan can make a persuasive case, and Alex can scare up the manufacturing capacity, and Mary Ann’s SWAT team strategies work even half as well as her little dog-and-pony show this morning suggests, Ike Boone will have to reconsider his deadline and sweeten his bid. I vote we go ahead and execute, build the business dramatically, invest in it. And you can bet Ike Boone won’t go away."
So Enright—the only vote that really mattered—was obviously with them. They’d won! And yet Gan and Mary Ann and Mary Ann left the meeting feeling oddly deflated, wishing they’d gotten a more wholehearted endorsement.
"It sounds like no matter how great a job we do turning things around," Gan said in the down elevator, "our efforts will only culminate in a more lucrative takeover down the road."
"Then we’ll just have to change Enright’s mind about that by our results," Mary Ann said. "Now, we’ve only got about five hours before the Brannan team arrives. I don’t know about you guys, but I’m going to take a nap."
The call to prayer floated across
Kuala Lumpur, overtaking Gan McManus on his early-morning run through the manicured acreage of KLCC Park. In fact, as he glanced over his shoulder, the amplified sound, drowning out the slap-slap of his Corn Dogs, seemed to be coming from the soaring, minaret-styled spires just behind him, the Petronas Twin Towers—the world’s tallest buildings. Gan checked his watch. He was already sweat-soaked from jogging in KL’s legendary humidity, but in twenty-five minutes he would be showered, dressed and downstairs in the Mandarin Oriental Hotel, directly ahead on the other side of the park. He and Alex had a breakfast meeting with representatives of Hai-Tek Industries, which, despite its name, specialized in fabricating plastic sandals and rubber thongs. He hoped to persuade them to take a piece of the action on Corn Dogs.
In the two hectic weeks since Enright gave the go-ahead, Gan had been all around Asia with Ed Combs, Alex Ordonez and a multilingual team from Brannan Logistics. But so far they’d located only two, possibly three new manufacturing sites here in Malaysia, and were negotiating with another plant in Dhaka, Bangladesh. But it just wasn’t enough. Gan felt a growing frustration, seeing their entire plan on the verge of unraveling simply because they couldn’t get enough damned Corn Dogs made.
It was looking more and more like they should have jumped at Ike Boone’s first offer.
There was an abrupt vibration on Gan’s hipbone. His summons—not to prayer, but just as imperative. Every member of the Cornelius team carried global phones, linking them to each other and back to the War Room in Los Angeles. Gan unclipped his, flicked it open and, without breaking stride, huffed his good morning.
"Gan! I’m sorry! I’ll call back—"
"It’s okay, Mary Ann. That rapid breathing you hear is just me jogging. No Oriental hijinks, I assure you. Is it still yesterday in L.A.?"
"Gan, the reason I called—"
"How’s the media blitz going?"
"That’s why I called. We got good news and bad news."
"Start with the good."
"Enright got a call from Dave Flynn at Corners."
Gan, though standing still, now felt his pulse begin to race. By most estimates, Corners was now the world’s third-largest discount chain. Which was great for Ike Boone because Corners stocked Zip’s budget line, but zero Corn Dogs.
"Is Dave Flynn giving us an order?" Gan asked.
"You could say that. What happened, based on Bigger Scott’s endorsement, is Dave Flynn went out and bought a pair of Corn Dogs—and started jogging again for the first time in years."
"Hallelujah. What kind of numbers are we talking about?"
"We’re still crunching them. Flynn’s talking about replacing Zip with Corn Dogs in all the Corners’ outlets—worldwide that’s more than one thousand!"
The implications were dizzying—and indeed Gan felt giddy. With the Corners account in their pocket, not only could they do production planning with confidence, but he and Alex could stop begging all over Asia for manufacturing capacity. Hell, they could lure away some of Zip’s big contract suppliers. Even better, they could plug directly into Corners’ global supply chain, releasing Corn Dogs at the factory door in Asia, and saving Brannan for smaller accounts.
"Mary Ann, that’s not good news. That’s fantastic news. It solves absolutely everything!"
"I didn’t give you the bad news yet."
"Couldn’t matter. Not with Corners in, excuse the expression, our corner."
"I’m afraid it could, Gan. We just learned that Bigger Scott has signed an exclusive multi-million-dollar endorsement deal with Zip."
Gan swore, then regrouped. "Hell, we don’t need Scott any more. We got Dave Flynn."
"Not according to Enright. The Corners deal hinges on the Scott endorsement."
Gan swore again. There had to be a way out. "What about Scott’s speech after the game? The whole world heard what he said about Corn Dogs saving his career. Zip can’t stop us from using that. It’s news. Did you check with Legal?"
“We just got through talking with Holly Needham. She said if we use Bigger in any kind of media campaign, you can bet Zip’s attorneys will drag us through the courts. And their pockets are a whole lot deeper than ours.
“What do we do?”
“Enright says we stop everything and go back into crisis mode.” Mary Ann paused, then concluded: “Come on home, Gan.”