Case page 54 and 55

.A Company That Loves to Turn the World Upside Down

In 1994, Peter Schnabel left his post at Intamin AG, a Swiss company
that specializes in making roller coasters, to start a competing company,
Premier Rides. Schnabel convinced Jim Seay, the executive in charge of
developing new rides for amusement park operator Six Flags, to join the
fledgling company. Seay, now the sole owner and president of Premier
Rides, manages the busiest designer of steel roller coasters in the United
States, a Millersville, Maryland-based company that has installed more
than 30 major theme park attractions, including Mr. Freeze at Six Flags
Over Texas, Speed at the NASCAR Café in Las Vegas, and Revenge of
the Mummy at Universal Studios in Orlando, Florida. A constant
challenge is developing new, ever-edgier rides that push the limits of
engineering while maintaining safety as a top priority. “Guests are very
sophisticated these days,” says Seay. “Their level of expectations is very
”.high
Given his background in the amusement industry, Seay understood from
the earliest days of the company one of the most important key success
factors in the roller coaster design business: offering a unique product.
Because theme parks are locked in a battle for market share, they demand
attractions that are one-of-a-kind. Virtually every roller coaster that the
company designs is unique, and each one pushes the envelope a bit
further, which requires a culture of creativity. To achieve that culture,
Seay has organized Premier around its design and engineering functions
and outsources all other activities, including construction of its coasters.
“Premier is very innovative,” says Bill Linkenheimer, an officer in the
American Coaster Enthusiasts, a fan club for amusement park
aficionados. “It’s the go-to company for parks that want to build
”.something customized. Its people are willing to do anything
Designing and building a new roller coaster takes several years and costs
anywhere from $5 million to $20 million. Premier Rides works closely
with amusement park managers in a process that closely resembles
scripting a movie. “They come up with the idea,” says Seay. “We come
up with the technology to meet the vision.” To create the popular
Revenge of the Mummy ride for Universal Studios, Premier took a seven-
act storyboard that the theme park’s creative team developed and turned
its engineers loose to generate ideas for bringing the ride to life. For
instance, the storyboard called for the coaster to back up abruptly and
.spin 180 degrees
A proprietary propulsion system that Premier Rides developed called the
linear induction motor (LIM) allows the company to make its roller
coasters among the most innovative on the market. Unlike a traditional
roller coaster, which relies on gravity for energy, LIM uses a series of
computer-controlled electromagnets that power up in rapid sequence to
accelerate cars at any point along a ride. The LIM system can create
incredible bursts of speed, propelling riders from zero to 60 miles per
hour in just 3 seconds! LIM produces enough energy to pull roller coaster
cars through 30 vertical curves, 25 horizontal curves, and 4 upside down
loops. In addition to its ability to produce energy and speed anywhere
along a roller coaster’s track, LIM is an amazingly simple and reliable
system that produces few breakdowns. “Other than the wheels of the
coaster, there are no moving parts,” says Ben Lovelace, one of Premier’s
.engineers
Premier has survived a shakeout in the roller coaster industry. Two of
Premier’s competitors, Arrow Dynamics and Giovanola, recently
declared bankruptcy after their projects went over budget. Learning from
his competitors’ mistakes, Seay is particularly vigilant about Premier
Rides’ finances and cost estimates. To avoid taking the company on a
financial roller coaster ride, he manages the company very
conservatively. “A company needs financial discipline to be successful,”
he says. “We pride ourselves on having no debt, cash on hand, and a
”.significant line of credit
Search online for information about the amusement industry. Identify .1
.three key success factors in the industry
Visit Premier Rides’ Web site. Describe the company’s strengths and .2
?weaknesses. What opportunities and threats does the company face
Which of the three strategies described in this chapter is Premier Rides .3
pursuing? What advice can you offer Jim Seay about the company’s
?strategy
Case page 61 and 62
Most entrepreneurs who launch businesses face established rivals with
greater name recognition, more resources, bigger budgets, and existing
.customer bases
How can a small start-up company compete effectively against that? It all
boils down to creating a winning strategy and then executing it. The
entrepreneurs profiled here developed strategies for their companies that
set them apart from their rivals and gave them a competitive edge in their
.respective markets
Book Soup
Book Soup, a small, independent bookstore that has served its loyal
customers from its location on Hollywood is legendary Sunset Boulevard
for 31 years, sets itself apart by stocking more than 60,000 titles and
specializing in hard-to-find books from small, international, and
university publishers. Rather than attempting to compete on price with
bookstore chains and online rivals, Book Soup emphasizes extensive
collections of books on subjects that appeal to its target customers, such
as film, art, photography, music, celebrity biographies, controversial
nonfiction, and literary fiction. The quirky little store also features a
regular schedule of appearances by authors for readings, which are
Followed by book signings. Authors who have appeared at book Soup
include Malcolm Gladwell (Outliers), Ralph Nader, (The Seventeen
Traditions), and Barbara Benjamin Marcus (Inside Out, a book about drag
queens). Signed first editions are a big draw to the store’s target
.customers
Inside the store and on the company’s Web site, shoppers can find
reading recommendations from employees (all of whom are book
fanatics) that point out books customers might otherwise overlook. The
Book Soup Web site also includes links to a company blog and to its My
.Space page as well as podcasts of author readings and interviews
Bogdan Reels
Stanley Bogdan began making reels for fly anglers in 1940 while working
for the Rollins Engine Company, a manufacturer of steam engines. In
1955, he quit his job and began making reels full time. Today, Stanley’s
son, Steve, and his wife, Sandy, own Bogdan Reels, which hand-build
reels in 15 sizes, from those designed to catch the smallest trout to those
made to handle a hard-charging Atlantic salmon. In a high-tech world,
Bogdan’s process is extremely low-tech. Except for a few springs; every
part of a Bogdan reel is machined and fitted in a small garage-sized
workshop in New Ipswich, New Hampshire, on a 50-year-old milling
machine and a 130-year-old lathe. The company does not even own a
computer. The unique feature of a Bogdan reel is the drag, a mechanical
device that allows an angler to slow and then fight a hooked fish.
Smoothness is the secret to a good drag, and Stanley invented a double-
brake system that uses two spring-supported brake shoes that gently, but
firmly, clamp down on the spinning disc, minimizing the chances of a
fish breaking off. The unique drag makes a distinct whirring sound that
one happy customer who owns six Bogdan reels describes as “the muted
joy of exultation.” Even though the price of a reel ranges from $1,300 to
$2,200, Bogdan, which turns out only 100 or sorrels a year, has a 3-year
waiting list. Bogdan reels are so hard to come by that used ones often sell
!for more than new ones, fetching as much as $3,000 on eBay
Which of the three strategies described in this Chapter are these .1
.companies using? Explain
What advantages does successful execution of their Strategies produce .2
?for Book Soup and Bogdan Reels
?What are the risks associated with the strategies of these companies .3
Case page 167 and 168
A Business Plan: Don’t Launch Without It
A recent study by the Small Business Administration reports that
entrepreneurs who create business plans in the early stages of the start-up
process are more likely to actually launch companies and complete
typical start-up activities such as acquiring a patent, attracting capital, and
assembling a start-up team more quickly than they are more likely to
actually launch companies and complete typical start-up activities such as
acquiring a patent, attracting capital, and assembling a start-up team more
quickly than entrepreneurs who do not. “Early formal planners are doers,”
write the study’s authors. “Challenging prospective entrepreneurs to
accomplish a formal business plan early in the venture creation process
enables them to engage in additional start-up behaviours that further the
”.process of venture creation
Geo-Logical
Daniel Stewart is one entrepreneur who believes in the value of building
a business plan. Stewart was running a sink-hole remediation business,
Geo-Logical, that he had created with a partner in Port Richey, Florida,
when he realized that operating their business effectively required a
unified software platform rather than the hodgepodge of software
applications that they had been using to manage the projects on which the
company was working. Stewart worked with a software developer to
create a program that allowed his company to create proposals, track
projects’ status, send invoices promptly, and, most important, complete
projects on time and within budget. The engineering companies and other
businesses with which Geo-Logical worked took notice and began asking
.to purchase the software
Stewart realized that to capitalize on this business opportunity he needed
a business plan. Although Stewart and his partner were not seeking
external financing, they decided that developing a business plan would be
a crucial element in the company’s success. “We’re our own investors,”
says Stewart, “but to be a responsible entrepreneur, you have to see things
as they are.” Their first task was to conduct a feasibility analysis of their
business idea, which involved analysing the software package’s market
potential and preparing a fundamental financial forecast. Enthusiastic
feedback from potential customers convinced them that a significant
market existed for the product. Stewart and his partner also created three
sets of financial projections: a most likely forecast, an optimistic one, and
a disaster scenario. Creating the plan also brought them to the realization
that they needed to add to their team someone who was experienced in
starting and managing a software company. Stewart and his partner
recruited to their board of directors Jim Eddy, who had started and
managed to profitability three technology start-ups, before launching their
software company, Envala. All of their planning paid off. Envala, which
targets small companies with its productivity software, is growing rapidly
and now has customers across North America, Europe, and the
.Caribbean
Roaring Lion Energy Drink
When Sean Hackney began writing his business plan, his intent was not
to start a company but to convince a soft drink maker to hire him. When
Hackney, who had worked for Red Bull North America, showed the plan
to his father, a corporate attorney, and a family friend who had been a
managing director for Red Bull, “they said, ‘don't send this to Coke or
Pepsi. Start the business, and we’ll help you,’” he recalls. Hackney took
their advice and launched Roaring Lion Energy Drink. Based on
customer feedback, he chose to distribute the energy drink as a boxed
syrup that distributors can serve with a soda-dispensing gun rather than in
cans, which restaurants, bars, and nightclubs dislike because of the
storage space they require and the wasted product they create. In its first
year of operation, Roaring Lion generated $900,000 in sales. It reached
its break-even point within 16 months. The company now boasts sales of
$6.2 million and has customers across the United States and Europe.
“We’ve grown the business from a $62,000 investment to the number two
energy drink in bars and nightclubs,” says Hackney. He credits the
original business plan he wrote and has since updated several times with
much of Roaring Lion’s success. “I had a lot of stuff in my head that
needed to be put on paper,” he says. Hackney still relies on a regularly
.updated plan to guide the company, which now has 32 employees
Some entrepreneurs claim that creating a business plan is not .1
necessary for launching a successful business venture. Do you agree?
.Explain
What benefits do entrepreneurs who create business plans before .2
?launching their companies reap
Suppose that a friend who has never taken a course in .3
entrepreneurship tells you about a business that he or she is planning to
launch. When you ask about a business plan, the response is, “Business
plan? I do not have time to write a business plan! I know this business
.will succeed.” Write a one-page response to your friend’s comment