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Change Of Face

Entrepreneur, April, 2000 by Mark Henricks

Entrepreneurial shapeshifters may be in one business today and something entirely different tomorrow. The key is knowing when it's time to change focus.

After his father was murdered in 1981, computer database expert David Wheeler developed a program that could pinpoint perpetrators with startling accuracy by sifting through crime reports, tips and other investigative data. The first time he tried it, the program linked several seemingly unrelated crimes and fingered a suspect. "I've got something here," he thought.

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In 1991, Wheeler, 39, founded Info-Glide, Inc. of Austin, Texas, to sell the software program to law-enforcement agencies. Local and national police departments utilized it to investigate everything from serial rapists to international terrorists. But other, cash-strapped public agencies lacked the financial means to support Wheeler's startup. Says InfoGlide CEO Jay Valentine, 50, "If the client loves the product but can't afford to buy it, there's no market."

In 1996, InfoGlide discovered a new market. Fraud rings were costing the insurance industry hundreds of millions of dollars in spurious claims each year. Insurance investigators' efforts were stymied by the same problems police faced. There were huge files of accident reports, names, addresses, driver's license numbers and the like, many intentionally garbled by criminals to avoid detection. The first time Wheeler ran a file of insurance claims through his program, "it lit up like a Christmas tree," he says.

InfoGlide immediately re-targeted its efforts toward insurance firms. Soon, orders were practically pouring in. In 1998, Wheeler raised $5 million in venture capital. Today, his company has 38 employees and is worth $100 million.

InfoGlide's experience is a prime example of shapeshifting. Also called transmigration, it's the practice of morphing a company so it can enter a peripheral or related industry. "We're seeing an enormous amount of transmigration going on right now," says Barry Sheehy, president of management consulting firm CPC Econometrics Inc. in Savannah, Georgia. Examples include Greyhound Corp.'s change from a bus company into consumer-products maker Dial Corp. and Westinghouse's transmigration from industrial manufacturer into broadcaster CBS Corp.

Transmigration is also occurring in such industries as financial services and health care. The reason, Sheehy says, is that transmigration is a key to long-term success in a changing environment. "If a company lasts more than a generation," he says, "they've transmigrated once if not more."

TRACKING TRANSMIGRATION

The idea of changing forms precedes modem business. Ancient civilizations passed down legends of werewolves and shapeshifters like the Norse god Loki. A more recent example is American Express, which started out a century and a half ago as a freight forwarder but has become a preeminent global financial services company. Some companies even see shapeshifting as a key to survival.

Transmigration involves more than jumping fences to get into what appears to be greener pastures, Successful shapeshifters are careful to enter new businesses where existing core competencies will give them an edge. For instance, says Sheehy, American Express migrated into financial services after becoming expert at doing money transfers for immigrants it was transporting to 19th-century America.

To identify a transmigration opportunity, listen to the fringes, advises Sheehy. "Very rarely are these transmigrations spawned from the center [of an organization]," he says. "It usually comes as an opportunity on the periphery."

Suspect a transmigration opportunity if a sideline business unexpectedly begins producing sales and profits that are growing faster than your main business. "Pay attention when something that should be a sideshow starts looking less like [that] and more like the main event," advises Sheehy.

Techniques such as economic value added, or EVA, analysis (see "Cutting Edge," December 1998 available at www.entrepreneur.com) can also help you determine whether the activities are adding value to your company. "As these businesses begin to prove themselves," says Sheehy, "they tend to add value very quickly."

Don't move too radically to take advantage of transmigration opportunities, however. Stay involved in your established businesses while exploring new ones. Eventually, the older businesses may die natural deaths, but don't hurry them. "The old can go on for a long time," says Sheehy. Often, profits from the old business pay for the costs to start the new one.

SHAPESHIFTING SANDS

Shapeshifting is as tricky and risky as it sounds. It's hard to focus on the periphery of your business. Sheehy says executives at one of his client companies resisted expanding a sideline business that was actually producing half the company's profits as well as growing faster than the core operation. "You'd be surprised how long it takes people to recognize that," he says.

Business Services Industry

Change Of Face

Entrepreneur, April, 2000 by Mark Henricks

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