The first three questions refer to the attached article. For these, imagine that David Hammond has heard of your skills in management, and has contracted with you to provide consulting services to his firm.
1. The first task he has assigned to you is to structure his planning process for the transition from a $250,000 company to a $2,250,000 one. a. What should his strategic planning process look like? Why? b. What sources could he use to get the data for each step of the process? c. What should he be wary of when he implements the plan? How can he overcome these potential problems?
2. The strategic plan was a success, and Mr. Hammond wants you back. He has an opportunity to outsource some of his manufacturing to Southeast Asia (note that this means that he will be doing less manufacturing in the U.S.), and is wondering about ethical issues. d. What is his responsibility to the U.S. workers he has already hired? e. What is his responsibility to the workers who will be hired by the outsourcing firm? f. How can he balance these?
3. Another success! In part because of the way in which his company faced the ethical issues, Kia Motors would like to do business with him, and furnish their Korean plants with his first aid kits. g. What entry mode would you recommend for his firm? Why? h. What cultural issues may the firm face? How could it address these?
September 21, 2003PRIVATE SECTOR Sweet Taste of Start-Up SuccessBy PATRICIA R. OLSEN ven for entrepreneurs who seem to do everything right, old-fashioned luck sometimes makes all the difference between scraping by and enjoying rapid growth. Just ask David A. Hammond.Mr. Hammond, 55, was no neophyte when he founded DLH Inc., a maker of specialized first-aid kits, six years ago.
As a Navy medic in Vietnam in the 1970’s, he knew how to treat severe wounds and injuries. After he left active duty, he served as director of instructional programs for the Navy’s medical department, and he later advised the Transportation Department about the creation of the 911 national emergency medical response service.Besides his technical expertise,
Mr. Hammond had honed his business skills. In 1982, he started a company called Itest in Newport News, Va., that made first-aid stations — steel cabinets packed with supplies and video instructions — for oil rigs and construction sites. The company had annual sales of about $500,000 and was profitable, he said. But to Mr. Hammond, two much larger markets — the home, and workplaces like office buildings and schools — were ripe for kits that could enable untrained people to cope with a wide range of emergencies. So he tinkered with scaled-down versions of his products.
After ending Itest’s operations, he began DLH in the bedroom of his home in Tinton Falls, N.J., with his wife, Linda, in 1997. Formerly a regional manager of custom decorating for J. C. Penney, Linda Hammond designed the kits’ packaging and the company logo and was in charge of product development.DLH’s patented kits contain supplies and instruction cards in plastic envelopes labeled and color-coded for specific injuries.The home kit, costing $30.95, has a packet for bleeding, another for sprains or broken bones, a third for bites and stings and one that contains extras, like latex-free gloves and plastic bandages.
The kit for vehicles and outdoor enthusiasts, also $30.95, contains packs for aiding breathing, stanching bleeding and treating shock. The industrial kit, which comes in two sizes, priced at $99.95 and $49.95, contains additional packs for burns, head and spine injuries, eye injuries and other medical emergencies.Like many other start-ups, DLH went on a marketing blitz. It persuaded organizations like the Newport News, Va., school system and businesses like the Chesapeake Corporation, a paper company, to try the industrial kits.
It signed up the National Safety Council as a distributor and landed contracts with Hertz and the Federal Bureau of Investigation. It wasn’t a bad beginning, but even so, revenues averaged only $250,000 in the first five years, Mr. Hammond said; the profit last year was $100,000.Then came the big break that every entrepreneur dreams of.In 1999, Mr. Hammond demonstrated his kits at the National Safety Council’s annual conference.
A few occupational nurses for the United States Postal Service saw them and suggested that he get in contact with their medical office.It turned out that the Occupational Safety and Health Administration had just mandated that Postal Service employees be supplied with first-aid training and kits. So DLH designed customized kits for the agency, one for its buildings and another for its trucks, and sold 180 of the larger industrial ones for testing
.Last May, Mr. Hammond got the good news: a Postal Service contract that he estimates will bring in $10 million over the next four years.”My heart was in my throat waiting for the final decision,” he said. Now comes the hard part. Suddenly, DLH must start producing more than 100,000 kits a year, quintuple the roughly 20,000 kits it has been turning out until now. To handle the surge, Mr.
Hammond says, he plans to hire several staff members, including three national sales representatives, directors of public relations and information management, and a chief operating officer over the next few months and to lease 6,000 square feet of office and warehouse space.He is negotiating with two New Jersey organizations that hire disabled workers to supplement assembly work now being done by a Missouri company that also hires the disabled.
“We have to go from a two-person operation to about five times that number without breaking stride,” he said.DLH continues to search for new customers. It has given test kits to the Drug Enforcement Administration, the John Jay College of Criminal Justice in New York and U.S. Cavalry, a company that sells military and adventure gear; it is also hoping to do business with the Department of Homeland Security.
The consumer kit was named a “best buy” last year by the Good Housekeeping Institute. And the National Safety Council has asked the company to develop a first-aid kit for farms that will contain supplies for amputations, for handling farmers’ injuries around heavy equipment. Mr. Hammond plans to add audio instructions, available at the press of a button, to the kits, and to branch out into foreign languages.
He expects huge growth in the home market and says his research shows that even people with emergency training like the detailed instruction sheets in his kits.”We think we’ve found the weak points in the chain,” he said.Still, it won’t be easy sailing.
Amit Bohora, a health care analyst at Frost & Sullivan in San Jose, Calif., gave DLH high marks for “making information-rich `smart’ kits in an industry which has traditionally been fairly stagnant.” But he noted that it was up against several established players like Zee Medical, a subsidiary of the McKesson Corporation, a health care services company; Johnson & Johnson; and many independent online suppliers.
Patrick Dunkerley, a portfolio manager at Victory Capital Management in Cleveland, said: “Given their innovation and success so far, they may have a c decent chance of being a long-term survivor, but customers vote with their money every day. Numerous competitors would like to eat their lunch.”But Mr. Hammond has a good shot at getting more good breaks, experts say, because such luck doesn’t just materialize out of nowhere.”People talk about overnight successes,” said Julian E. Lange, an associate professor of entrepreneurial studies at Babson College in Wellesley, Mass. “But they are rare.