The Internet: Bridging The Gap Of Global Commerce
I had a remarkable experience (at least to a man of, ahem, my technical virtuosity) communicating with Erin, my daughter, who is studying this fall at the University of Dublin. I called her, at no cost, via Skype and we had a nice, long video chat. The video feature significantly enhances our feeling of connectedness helping to bridge the 3,500 miles separating us. Of course, frequent visits to Erin’s Facebook page and her blog has kept Sue, my wife, and myself up to date on her weekend excursions, complete with great pictures and commentary. Ironically, I think we know more about aspects of Erin’s life now than when she lived at home. It is amazing these wonderful tools allowing one to maintain closer contact at a cost about $25 month, the monthly cost of a high speed internet connection, which is far less than the long distance phone charges parents of college age students bore not even 10 years ago. This got me thinking about how our portfolio companies utilize the internet. In my previous blog titled “It’s A Small World After All” I discussed how globalization, made more pervasive by the internet, has impacted our investment strategy. This month I would like to discuss its impact on Staci, one of our portfolio companies, which makes extensive use of internet enabled tools.
In 2006 MCM Capital Partners, a Cleveland based, small cap private equity firm led the leveraged recapitalization of STACI Corp., a $40 million China based low cost country (“LCC”) provider of electronic manufacturing services (i.e., circuit board and box build assemblies) and supply chain solutions of sourced OEM components to middle market customers, the majority of which generate less than $500 million in annual revenues. Additionally, STACI serves both a domestic (63% of revenue) and an international (37% of revenue) customer base predominantly located in Europe and Asia.
MCM has encouraged the use of e-marketing tactics, both internally (hence this blog) and by our portfolio companies, as evidenced by Point To Point’s presentation at our CEO Summit. STACI, led by CEO Dennis Docherty, recognized the importance of an effective e-marketing program to cost efficiently reach a global target market comprised of small to middle market sized companies. The Company’s e-marketing efforts began rather modestly with a traditional brochureware website. While informative, the website was only going to be visited by an interested party already familiar with STACI; however, the real challenge and opportunity was in attracting new, potentially high value visitors, who were previously unfamiliar with the company.
STACI has invested in the human resources and capital in revamping its website, inclusive of adding video highlighting the its world class factory, sourcing and manufacturing capabilities, numerous case studies and internal performance metrics. Additionally, STACI implemented a multifaceted e-marketing strategy employing a number of tools, inclusive but not limited to, listings on popular B2B sites Alibaba and global spec, use of a social media sites, authoring relevant blogs and publishing youtube videos designed to increase brand awareness and increase customer leads. Today, over 50% of STACI’s leads are derived from inbound internet centric marketing efforts, up from 0% in 2007, and the company has garnered a number of new significant customers. Without internet enabled tools, it is highly likely STACI would be a smaller, less profitable company. However, the use of such tools, while important to STACI’s growth, is only part of the story.
The internet’s cost efficient and immersive communications capabilities has an equally profound impact on the Company’s internal and external communications. The use of immersive communication tools such as web based video conferencing has been critical in the conduct of weekly sales meetings, employee training sessions and managements’ ability to effectively coordinate an international team located in Chicago (headquarters, global sales and marketing, domestic JIT and warehousing), Germany (European sales), Hong Kong (customer support, finance and administration) and Dongkeng, China (ems manufacturing and component sourcing). Additionally, all of our board meetings are conducted via web conference, enabling us a convenient and direct contact with those key members of the senior management team located overseas.
Quite simply, without the internet and related internet centric tools, STACI is significantly smaller and has a far larger investment in communications expense and infrastructure.