Capitalizing on Synergy

Possible deck: The Stoner is close to offering a "soup to nuts" menu of electrical and limited-energy services Denny Stoner has a major marketing problem. Yet, Stoner created the problem. Not only that, he likes having the problem! By opening various electrical and related (and somewhat unrelated) companies in what seems almost every conceivable direction, he and his people have created a sprawling enterprise - The Stoner Group, of Portland, Ore. By keeping their focus on the future, taking calculated risks, diversifying, making acquisitions, founding new enterprises - and being willing to take the hits from a few mistakes - Stoner and President Mike Falconer now have in place an electrical and limited-energy enterprise with spectacular growth prospects. All of this started with a small electrical contractor serving Safeway and some other supermarket chains. Supermarket work still provides a strong income stream to the company. But Stoner has gone far beyond those beginnings. The Stoner Group's various elements make one think of the old saw of the three blind men describing an elephant: One fellow feels the tail, another gropes the elephant's leg, and yet another caresses the trunk. The three animals they describe have nothing to do with each other . . . yet are the same creature! Picture a conversation at the coffee urn before a meeting of industrial and commercial building owners and managers in the Portland area: One fellow might say: "I solved my computer networking problems - I hired this controls company. They came in and installed a system up to Category 6 standards!" Another could comment: "That's good, but I've recently installed a state-of-the-art security system, complete with closed-circuit TV, from this company. Name-of-something Protective Systems." Yet another businessman might say: "We just put an addition on our building, and we had these people from Stoner Electric do the work. They do this kind of stuff for us; we call them all of the time. We like the service" An official with the Portland airport authority could add: "Have you seen the new automatic revolving doors at the airport? We're changing all of the doors. They make for easier access. Advanced Entry Systems did the job." A fifth remark might be: "Commercial Electric did our tenant improvement work recently, and you wouldn't believe how reasonable the price was, and what kind of service we got for that price!" A shopping mall manager could chime in: "Our parking lot lighting upgrade has made the place safer - you ought to see it! We got the proposal from a company . . . I can't remember the company name, but the guy I met with used to work for Sylvania out here. He knows his stuff." Hard to believe, but these folks could all talking about the diverse operations of Denny Stoner's enterprise. So the marketing problem is describing The Stoner Group's many and varied services to potential customers. In the process of taking the company from $200,000 in annual sales in the 1970s to $7 million in 1992 and to almost $20 million today, Denny Stoner and his employees have created growth opportunities they admit they haven't yet fully realized. Doors to opportunity Roughly 20 years ago, Stoner learned something about diversification: It's a good thing! At the time, Stoner Electric (founded by his father, Cal Stoner, in 1960) had an excellent reputation for serving supermarkets. These included the Safeway chain's area stores. On what turned out to be a fateful day, that grocery chain's construction director called Stoner in. "I'm not happy with the people who provide and maintain our doors," the man said. "I want your company to get into this business." Initially, Stoner hemmed and hawed. He'd never even thought about doors. The company his dad founded was a small group of skilled electricians! However, Denny Stoner is a good listener. After a bit more discussion, the maintenance director pulled out a list of his door-related maintenance bills from the previous year. Stoner's eyes flew open when he read the number at the bottom of the list. "It was a substantial amount," Stoner remembers. "That convinced me to try it." That conversation led Stoner into the automatic door installation business. As a supermarket specialist, Stoner Electric found that adding the door operation dovetailed with the company's electrical specialty work. Today, The Stoner Group's subsidiary, Advanced Entry Systems, is a major distributor for Besam, a Swedish company, one of the world's leading door manufacturers. Fly into Portland's airport, and you'll walk through revolving, sliding, and folding doors installed by Advanced Entry Systems, one of many Stoner divisions. "We're the biggest automatic door distributor in the Pacific Northwest," reports Dave Van Keuren, the door company's general manager. Most of the company's competitors are glaziers, not electrical contractors. While there's a lot of electrical work involved in installations, the glaziers generally subcontract it out, although some of them may do the installation themselves. Doing electrical work without a license is illegal in Oregon. Growth in this specialty has literally been an "open door" for Stoner: From the first day he held the expensive maintenance billing list in his hand, the company has reached roughly $2 million in annual sales. And, Van Keuren adds, it's still growing: "These doors are not just for the handicapped. Mothers who have babies in strollers don't want to struggle through a manual door. And as the Baby Boomers age, there will just be an increasing need for automatic doors." Beyond sales and profits, however, there was a lesson in the door business for Stoner: Diversify. Diversify - and, if possible, find more services to provide to your customers. That's what he's done. Security boom Take the Protective Systems business, run by Dan Holladay, a 15-year veteran of limited energy work. Holladay came to Stoner from another electrical contractor. In the business's first year - 1999 - sales should reach, or top, $1 million! "At the other electrical contractor, they stuck me in with the voice/data people, and I was doing that work," says Holladay. "I don't really like that work. Then I came here, and they put me with the door people." "Yeah, we had him with the door people," remembers another Stoner executive. "Then one day, Denny said: 'If we hired him to do security work, what's he doing in the door business?'" As they say, the rest is (recent) history. At heart, the zero-to-$1-million growth of this fire alarm, access control, and CCTV business is based on work that Stoner Electric used to subcontract to specialists. A bit of additional growth - and the source of more in the near future - will come from customers of Stoner's other companies, who are learning that Stoner now offers security. Additionally, Denny Stoner strives to notify union contractors in his area of Protective Division's existence. "A lot of them subcontract the fire alarm and security work, and they usually think they don't have a choice but to sub it to a specialist who is nonunion," says Stoner. "Now we've provided them with a choice." What's more, there's the possibility that Holladay can sell security-only installation work to specific customers. That hasn't really been a priority in the start-up phase, as the company has coped with this success story. As Falconer says, "Thus far we've kept Dan pretty busy just with the work we used to subcontract out." But some day new customers will come to Stoner via the security route, something that will start . . . as soon as Stoner solves his marketing problem! Controls of all sorts Stoner Controls is another limited-energy-focused subsidiary, and it presents, in microcosm, the Stoner marketing problem in sharp focus. What can you say about a company division that tells customers it will do their: · energy management work, · refrigeration, · HVAC controls, and · their voice/data/video systems? If the first three projects seem to go together, it stems from Stoner Electric's history. The Controls operation's roots are in serving supermarkets. The company has worked for various supermarket chains in the West, supplying energy management systems. "Our Controls electricians are IBEW people, trained in both electrical and HVAC," explains Mike Dodson, who runs this operation. "They understand the electronics needed to control systems. And they understand refrigeration." With this kind of staff already in place, Denny Stoner categorized the new opportunity in voice/data work as a Controls function.. At present, about 25 percent of the division's sales volume (which approaches $1.5 million) are in voice/data/video. "We have limited-energy electricians who can work for one or the other of our operations," explains Dodson. "Some of them are assigned to the Advanced Entry operation, and some to Protective Systems, and some to Controls, but we've been known to move them around. "We've been lucky to get a certain kind of high-performance person in these jobs. They are well-trained IBEW people, of course, but beyond that they've really learned a lot on their own. These are the kind of people who seem to need to be challenged - and they respond to the challenges." Growing in electrical, too While the various specialty divisions represent real growth for The Stoner Group, the electrical operation is the heart, soul, and standard-bearer. Leading this operation is Mike Falconer, who started with the company in 1974 as a material handler. "Our biggest problem in all of this time occurred two years ago," he recalls. "We were growing, but Denny and I realized that we were being limited by a lack of qualified manpower. We thought about an acquisition or two, but we weren't sure what that would bring us. So we looked around and tried to figure out why you would buy another contractor." The Stoner Group had tried to grow by opening a northern branch office in Seattle. That experience wasn't rewarding, and was discontinued. So if geographic expansion wasn't in the cards, Falconer and Stoner figured a strategic acquisition would make sense. "We realized that there is a really good reason to buy an established contractor: To get that core group of excellent electricians that work for the company - the same thing we have here," says Falconer. "That's why we've recently purchased Commercial Electric." While Stoner Electric is a larger contractor with the capability of tackling major jobs, Commercial Electric's specialty was tenant improvement work - smaller tickets. The acquired company's average job, according to Falconer, was about $40,000. "They had that really great core of people, more than a dozen of them, and a good base of commercial customers." As of the summer of 1999, The Stoner Group hadn't fully integrated Commercial into its operations. Instead, the companies remained in separate locations, because the growth in already-owned businesses had filled up the parent company's headquarters building. But Denny Stoner was scouting out real estate this summer, looking for a building big enough to house the growing Stoner family, including Commercial employees. Yet another division inside The Stoner Group is the Lighting Service operation. Cal Frost, the former Sylvania district manager for Portland and Seattle who runs this Stoner operation, has about a dozen lighting technicians who regularly work at lighting installations. This division's work includes retrofits, outdoor lighting, and service. Is marketing the key? The Seattle branch closed, a casualty of Stoner's thirst for growth. operation is an example people will cite of a problem created by the company's thirst for growth. However, with the people and operations now in place, the company's future seems limitless. "We've been very quiet about what we've done, up until now (the day he was interviewed by a national magazine)," says Stoner. "People who find out about the level of our diversification are usually pretty impressed. "Marketing will be the key from here," says Stoner. "My philosophy is to treat our customers fairly and keep them forever. So the key is going to be developing relationships with new customers. We really see what you might call a 'marketing problem' as a tremendous opportunity for The Stoner Group!" When the Stoner team solves this problem, it is just possible that - with all of the synergies between the divisions, and the various offerings that the company can present to a single customer - the company will . . . go nuts! BIO: SALIMANDO is a Vienna, Va.-based freelancer specializing in electrical, voice/'data,/video construction and integrated technology issues. He also writes the twice-monthly "Web Prowler" column on Electrical Contractor magazine Web site: SIDEBAR BELOW Stoner Approaches United Salad Job from a Variety of Fresh Angles If you've ever looked over (or eaten) the bagged, prepackaged salads available in the past years, it's possible you've "done business" with United Salad. If you've kept an eye on that part of your supermarket over recent times, you've noticed that there's more and more of this kind of precut, prewashed fresh food for sale - as Americans substitute money for time. It's no surprise, then, that United Salad is expanding its operations, moving recently into a brand new 100,000-square-foot food processing facility. "You need a state-of-the-art facility to meet the new standards of the industry," said Ernie Spada Jr., grandson of the company founder. Company growth is such that United is contemplating adding a 50,000-square-foot building inside of one year. For The Stoner Group, the new United Salad facility was a chance to show off some of the company's various assets in the same installation. Journeymen from Stoner Electric, and limited energy electricians working for Portland-based general contractor Grady, Harper & Carlson, Inc., under the Stoner Controls and Stoner Protective Systems banners all played a role in getting the building up to snuff. Time is of the essence to United Salad, which operates on a 7x24x365 basis. There is, literally, no time to waste - in the operation that takes vegetables, greens, and fruits directly from the field, processes them, packages them, and ships them out. Delays are costly: The produce has to come in fast, and get out fast; brown lettuce does not fly off of supermarket shelves. Those government-mandated standards to which Spada referred require strict temperature controls. Stoner's various operations have helped United Salad to put together a state-of-the-art communications and operations management system. Consider just these various services: "Category 6" installation: The customer initially wanted a Category 5 system installed. However, Mike Dodson, head of Stoner Controls, talked the Spada family (which owns United Salad) into an installation complying with the latest draft Category 6 standards. "The equipment is from Panduit and Berk-Tek, and those companies guarantee that what we used here will meet Cat 6 standards," explains Dodson. "I spoke to Terry Spada," he continues, "and told her, 'You're spending millions to have a state-of-the-art building. Why not spend a little extra now on the voice-data system, and save money later when you won't have to upgrade it?'" Work on United Salad's voice/data system included 140 data drops and 140 telephone drops. Monitoring on-site - and remote: CCTV cameras monitor operations in seven locations inside the United Salad building, as managers have to stay on top of the operation and keep things moving. These were installed by the Protective Systems operation. However, a recent extension to the initial installation augmented the video feed to run outside of the building - to the home of one of the family managers, who installed an ISDN hookup to his home. Now he can monitor a situation that might develop without driving to the facility. Combined electrical/limited energy installation: When some humidity controls were added to the facility's initial spec, Stoner's various operations worked hand in hand. Explains Dodson: "Stoner Electric electricians put in the conduit work, and the limited energy technicians put in the control devices." In addition, the Protective Systems operation put in a fire alarm system from Radionics, for which it is a dealer. Finally, Stoner did the conveyor belt system's electrical work. The company's operations include a UL 508 panel shop, which built the motor control panelboards. - J.S. Captions: Fly into Portland's airport, and you'll walk through revolving, sliding, and folding doors installed by Advanced Entry Systems, one of many Stoner divisions. Work on United Salad's voice/data system included 140 data drops and 140 telephone drops. A CCTV camera installed by Stoner's Protective Systems operation, monitors factory work for United Salad. Possible Quotes: Beyond sales and profits, however, there was a lesson in the door business for Stoner: Diversify. Diversify - and, if possible, find more services to provide to your customers. That's what he's done. 'If we hired him to do security work, what's he doing in the door business?'" Our Controls electricians are IBEW people, trained in both electrical and HVAC.. They understand the electronics needed to control systems. And they understand refrigeration." - Mike Dodson

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