EXPLORING THE WORLD WIDE WEB
CASE FOR DISCUSSION
Two Men and a Lot of Trucks
The Two Men and a Truck brand began simplenough. To help drum up business for her sons’parttimemoving service in the early 1980s, Mary Ellen Sheets made a line drawing of two stick figures in a truck cab and placed an ad in the local paper.
It worked. In fact, too well. Sheets, a single mother and data analyst for the State of Michigan,
kept receiving moving inquiries—even after her sons, Jon and Brigham Sorber, left for college. “One day, I came home from work and there were 12 messages
on the answering machine,” she says. Sheets was understandably hesitant to just turn
away business. So in 1985, she bought a used pickup truck for $350 and hired two men to do the heavy lifting. “That $350 was the only capital investment I ever made,” Sheets says. And seeds for the nation’s largest franchised moving company were planted.
SHORT HAULS.Today, Lansing, Michigan–based Two Men and a Truck operates in 27 states.
The outfit made 250,000 moves last year, generating $150 million in revenue along the way.
Its success was born largely out of Sheets’s early discovery that local, residential hauls—from Point A to Point B within the same city, as opposed to longdistance— were a greatly underserved market. She initially ran the part-time operation from her dining room. But as orders kept coming in and the business continued to grow, she found herself devoting more
time and energy, and began drafting formal business plans and operating manuals.
In 1988, after putting her third and last childthrough college, Sheets finally felt comfortable with
the risk of leaving her government job to run the company full-time. “Everybody said I was crazy,” she recalls. “I had a good-paying job with health benefits and vacation.” But she also says she had caught the entrepreneurial bug. “It was going pretty well. I was so scared, but I just wanted to do this so bad.”MAN’S WORLD. That same year, at the urging of a woman she met while speaking on a panel at Michigan State University, Sheets decided she couldleverage and grow Two Men through franchising. Ayear later, she sold her first franchise to daughterMelanie, a pharmaceutical sales representative. Thenher sons bought franchises, as did some of the movingmen. “After we had sold 10 franchises, my attorney
said, ‘I think you are going to make it,’” she says.“But I always knew we were going to make it.”Today, there are 152 franchise locations. Franchiseespay an initial fee of $32,000, but capital costs(including trucks and office space) bring total startupcosts to roughly $100,000. Royalties run 6% of grossrevenue, with an additional 1% for advertising—considered standard in the franchising world.Along the way, however, there have certainlybeen bumps in the road. For one thing, Sheets wasnever exactly embraced by the traditionally maledominated trucking business. At one point early on, she says, competitors reported her for minor violations. She was eventually hauled into court when some of her truckers drove 10 miles outside the company’s zone. Says Sheets: “We made a lot of mistakes and learned the hard way.”
SATISFIED CUSTOMERS.Unlike the other moving companies she had seen, Sheets decided that Two Men would put a premium on customer service. “Moving had a cruddy reputation,” she says. “I made sure everything was spotless. And we went out of our way for the customers.” Sheets put her movers in uniforms and gave them business cards, charged by the hour instead of weight, and paid for any damage to be fixed. The company’s mission statement remains: “Treat everyone the way you would want your Grandma treated.”
From the start, Sheets handed out postage-paid reply cards, with just five questions, to her customers. Last year, the company received 66,000 responses. Sheets says that only 1% of the comments are negative—and she uses them as an opportunity. “We want to get it right with our customers,” she
says. “Sometimes we send them flowers or a gift if something went wrong.” As a result, Two Men gets about 95% of its business from word-of-mouth referrals, eliminating the need for much advertising.
With no formal business background, Sheets says she has relied mostly on her own instincts and experience.
She credits her time volunteering at a hospital crisis intervention center with helping her to handle customers over the phone. “It taught me empathy and how to listen,” she says. STICK MEN U.When it came to marketing, Sheets took a similar grassroots approach. She printed brochures and placed them in apartment
buildings, handed out mugs with the Two Men logo filled with jelly beans, and turned the trucks into mobile billboards—displaying the original stick-figure logo. Her goal was, and remains, to bring a personal touch to an industry known for its uniformity and stressed-out customers. Like most successful franchisers, Sheets realized the need for consistency. In 1998, she established Stick Men University, a comprehensive training facility at the company’s Lansing headquarters. Here, franchisees and movers learn the basics—from answering a customer’s first phone call to a handshake after the move is done. On site, there is also a two-story house set up to simulate many moving challenges, like transporting a piano down a narrow staircase and moving crates of fragile china. At Two Men’s computer lab, franchisees learn to pay their royalties electronically, check their colleagues’ spending patterns, and communicate with each other about what’s working and what’s not. “I want them to be successful as fast as they can,” Sheets says. COMING HOME.Richard McBee, a former seventh-grade social studies teacher in Birmingham, Alabama, is the most successful among them. Eleven years ago, he decided to go into business for himself, and has since become Two Men’s top franchisee— with $5 million in annual revenue, two locations, and a third in the works. “I’m still astonished at what we’ve done,” he says. The Two Men system and a well-respected brand convinced McBee to make his initial investment of $90,000. “I didn’t feel comfortable getting into a business without a lot of support,” he says. And once up and running, McBee made his own success by expanding his customer base slowly, and enlisting a payroll service and legal and tax advisers to help avoid mistakes along the way. Two Men is once again a family affair. Sheets is CEO and daughter Melanie Bergeron is president and chief operating officer. After stints in the corporate world, Sheets’s sons have returned—Jon is a franchise owner and board member, while Brigham works as director of licensing. “I’m still shocked by our success,” Sheets says. “I worked so hard, I never really knew how big it was.” Indeed, the company that began almost by accident could easily be re-named One Family and Thousand Trucks. Or more simply, a family success story.
CASE FOR DISCUSSION
Siemens’s New Boss
Workers at a Siemens unit that makes X-ray machines and other diagnostic equipment were shocked when, in 1998, a cocky new boss asked them to work more flexible shifts to speed production. The new guy, a 40-year-old up-and-comer named Klaus Kleinfeld, even wanted some people to work weekends, then practically unheard of. Yet employee representatives knew the unit in the Bavarian town of Forchheim was getting beat up by rivalGeneral Electric Co. and that shareholders were naggingSiemens to dump its medical equipment unit.Everyone’s job was on the line.
The negotiations were tough. But Kleinfeld won over workers, hanging around the factory asking
detailed questions. He answered e-mails from employee reps almost immediately, even late at night, recalls Werner Mönius, chairman of the workers council in Erlangen, Germany, home base of Siemens Medical Solutions Division. “He was able to motivate people to pull together,” says Mönius. The workers signed off on Kleinfeld’s plan, which helped cut the time it took to build a $100,000-plus diagnostic scanner from six weeks to one. Siemens Medical is now Siemens’s most profitable business. And that cocky young boss? This month Kleinfeld, now 47, becomes chief executive of Munichbased Siemens, a $100 billion behemoth that operates
in 190 countries and makes subways, light bulbs, power plants, auto parts, automatic mail-sorting equipment, and more. With 430,000 employees and 12 major divisions, Siemens is the rock of Germany Inc., which still needs to learn how to survive and thrive in a world where heavily taxed, slow-moving European companies operate at a disadvantage. If Siemens can reach new levels of profitability, maybe the rest of Corporate Germany has a chance, too. Siemens Chief Executive Heinrich von Pierer and the company’s supervisory board, which includes such corporate luminaries as Deutsche Bank CEO Josef Ackermann and former Allianz Group CEO Henning Schulte-Noelle, skipped over more seasoned top managers to choose the ferociously energetic Kleinfeld. He’s a prime example of a new breed of German manager, fluent in English and comfortable in settings from Tokyo to Toledo. “This generation has grown up in a much stronger international
environment than the earlier one,” says Hermann Simon, chairman of Bonn consulting firm Simon- Kucher & Partners. “They understand the need to be global.” With his big laugh and knack for storytelling, Kleinfeld knows how to network globally as well. He sits on several corporate and charitable boards abroad, including aluminum-products maker Alcoa and the Metropolitan Opera in New York. “I love him. He’s a generous, funny man,” says Beverly Sills, chairman of the Met, who gushes about Kleinfeld’s
ability to appraise opera performances. If nothing else, Kleinfeld should help put to rest stereotypes about dour German execs. At a November dinner in Munich with business journalists, one Italian scribe waved his Nokia mobile phone in Kleinfeld’s face and demanded to know how Siemens can compete with the handset industry’s market leader. Kleinfeld replied by snatching the Nokia phone and dropping it in a glass of water. The message: We’ll drown the competition. (Kleinfeld later gave the journalist a waterproof Siemens phone instead.) But the reporter’s question was legitimate. Does Kleinfeld have what it takes to fix Siemens’s money-losing mobile-handset business and other underperformers? In its home market of Germany, where Siemens
has 38% of its workforce—compared to 58% in 1994— employees are demonstrating a willingness to work
longer and accept modest pay raises to keep jobs from moving overseas. Abroad, Siemens can draw
on a lower-cost workforce and decades of experience to cash in on rapid growth in giant markets like China and India. In December, for example, Siemens won a $460 million order to supply locomotives to China’s state railway. Profit in the fiscal year ended was up 40% over 2003. But Siemens still suffers in comparison to archrival GE, whose shares have had a total return of 423% over the past 10 years, versus 273% for the German company. Von Pierer himself has admitted that he wasn’t always able to push change as fast as he would have liked. It’s not just a question of cutting costs. “In the innovation game, productivity and R&D matter more than cost structure,” says William M. Castell, CEO of GE Healthcare. Siemens boasts that its engineers and scientists generate more than 8,000 inventions a year, but it needs to do more to turn those innovations into commercial products. Siemens was a leader in introducing mobile-phone handsets with color screens and built-in MP3 music players, for example, but wasn’t able to translate its tech edge into market strength. Can Kleinfeld succeed? He doubtless has the drive. Kleinfeld’s father, a shipyard laborer who became an engineer by studying nights, died when the boy was 10. That was a “brutal” experience, Kleinfeld says, but
the hardship that followed forged a determination to succeed. An only child, he stocked grocery shelves at
age 12 and has held a job ever since. After studying business at Georg August University in Göttingen,
Kleinfeld put in stints at a Nuremberg market research firm and at drugmaker Ciba-Geigy before
joining Siemens’s corporate sales and marketing department in 1987. The new Siemens chief was a multitasker before anyone used the term. Many of his generation milk Germany’s free university system for years. But Kleinfeld completed his doctorate at the University of Würzburg while working full-time at Siemens and raising a young family. (His wife, Birgit, is a teacher, and they have two school-age daughters.) “That was an extreme burden,” recalls Ulli Arnold, now a business professor at the University of Stuttgart, who supervised Kleinfeld’s thesis work on corporate identity and strategic management.
“ENDLESS ENERGY”
His stamina is already legend inside Siemens.“Working hard earns the right to play hard,” Kleinfeld once told students at the University of Rhode Island, and he lives the creed. George C. Nolen, CEO of Siemens Corp., the company’s U.S. unit, recalls returning from a European trip with Kleinfeld, who runs or lifts weights every day. “I was dead tired, and he runs the New York City marathon. The guy has endless energy,” Nolen says.
Kleinfeld’s résumé reflects ambition as well as talent. He has held 10 jobs within the company in 17 years, including building Siemens’s in-house consulting arm into a power center. The unit had eight consultants
when he took it over in 1995. Under Kleinfeld, it grew to 170 operating under direct control of the management board, and was involved in turnarounds of divisions such as power generation. It helped formulate and run the TopPlus program, a late-’90s drive to apply stricter standards to managers and fix or prune marginal businesses. His job-hopping and role as an internal consultant have led to muttering that Kleinfeld is short on operational experience. “He’s a bit full of himself,” says one outsider who has worked with Kleinfeld. But his
stint as a consultant has also allowed him to explore every corner of the far-flung Siemens empire. He enjoys regaling dinner partners with tales of his adventures, such as an all-night session with the glum managers of a troubled Japanese unit. By dawn, fatigue and sake loosened the managers’ reserve: They worked out a new business plan.
NOT SO LONELY AT THE TOP
Winning friends and influencing people—and neutralizing the rest—is crucial at a vast company where local barons have built their fiefdoms over the years. Kleinfeld was one of the main inventors of One Siemens, a program designed to get company units to cooperate better to win business. He got a chance
to put theory into practice when Siemens sent him to the United States in January 2001, first as chief operating
officer, then, a year later, as CEO of New Yorkbased Siemens Corp. Under Kleinfeld, units including Medical Solutions and Power Transmission & Distribution joined together to supply diagnosticequipment, software, telecommunications, and power to a new hospital being built in Temple, Texas,for Scott & White Healthcare System. Kleinfeld won’t enjoy unlimited power as he tries to crunch Siemens into a seamless unit. Formally, he is not CEO but chairman of the management board, a body that operates on the principle of consensus.
He probably can’t take such action without von Pierer’s support. But he may get it. Siemens is scheduled
to announce plans for the handset unit on Kleinfeld’sfirst day as CEO, and von Pierer has said sale or closure are options. Even in labor relations, Kleinfeldhas room to maneuver. Labor leaders know that they must give way on wages and hours to slow the outflow of jobs to Eastern Europe and China. “We can hinder it, but there’s not much we can do to stop it,” admits one top official of the IG Metall union, which represents Siemens workers. A whole generation of young Siemens executives, keen to conquer the world and frustrated with the
bureaucracy, is also rooting for Kleinfeld. Robert H. Schaffer, a Stamford, Connecticut, consultant who has
helped design training programs for Siemens as wellas GE, says that the mid-level managers at Siemens
“are as bright and as aggressive as any I have met.”Bright and aggressive—that describes Kleinfeld, too.
The talent is there. But the task—transforming the prime symbol of Germany Inc.—is huge.