Lynchburg Business

Leader of the Month: Eric Hansen

Issue: April 2010 by Lynchburg Business in Inside The Magazine, Leader of the Month

Name: Eric Hansen

Job Title: CEO of Innovative Wireless Technologies (IWT) in Forest, VA

Age: 42

Hometown: Moneta, VA (grew up in Upstate NY, Corning)

When Ericsson finally closed its doors, how did that effect IWT – both from a business and staffing standpoint?  Did this change mark the beginning of rapid growth for IWT?

I left Ericsson in 1997 to start IWT with another partner. Fortunately, when Ericsson started downsizing, IWT had several years of stable growth behind us. The largest challenge for my team was retaining and hiring as many employees as we could while balancing “manageable” growth. There were so many good people available we really had to be selective of what specific skill set and mix we needed at that time for our business. IWT probably tripled our employee headcount in the three to four years surrounding the Ericsson exodus.

Ultimately, what the final Ericsson closure enabled IWT to do was to become a much more complete and rounded business in terms of capability and strategy. Ericsson had the complete suite of engineers necessary to perform high-tech research and to also launch the resulting products; IWT was well-positioned to take advantage of these resources during the Ericsson closure.

IWT started with just a handful of employees in 2000 and grew to more than 50 employees and multiple locations by 2005. Having managed a company with such a rapid growth profile, do you have any advice for other business owners that may experience similar growth patterns?

Expect chaos and challenges as it is a roller coaster ride. One lesson learned: Focus your time on hiring the right people up front. There is an excellent business book, Good to Great, that talks about “getting the right people on the bus.” My takeaway from the book and advice to others is to make sure that new employees are a good fit with your companies culturally and that they share your own priorities and values.

We were very fortunate at IWT to have such a large percentage of our team with industry experience. We were able to draw on this expertise to form a shared way of working, thus having processes in practice and thereby avoiding the formality and work of documenting everything from “scratch.” Managing multiple locations can be successful and provides for diversity and redundancy, but is entirely dependent on who you put in charge with managing the remote office. There are fundamental efficiency and communication constraints one must manage, which makes the remote office concept harder to manage. My suggestion: Pick someone who has an entrepreneurial background and cross-functional experience to run any remote office and build in incentives for success.

When IWT was just getting started, you had some very important relationships with companies developing Bluetooth technology, which wasn’t even on the market at the time.  How did these relationships affect the growth of IWT and your business model?

IWT has several business areas that provide diversity of revenue, clients and markets. At inception, IWT was 100 percent engineering-and-design services focused. Engineering services continues to be a strong component of our business model even though now we have more revenue from products than services. Our service business has built our network of companies and clients and provides opportunities for niche products and specials that our customers may need but are willing to source from a third party.

In this model, IWT was involved in many technologies and markets before they were prime time. We developed technology for Sirius Radio in the late ‘90s, Bluetooth in the early 2000 timeframe and other leading-edge technologies since. It keeps our experience base fresh and our engineers versed in the latest and greatest technologies and markets.

Specific to the Bluetooth example, my customer for this program was AT&T Microelectronics. The group we worked with was led by Phil Carrier (VP-Mobility), who later became my VP-Sales and Marketing. Similarly, I have an Advisory Board member which came from AT&T, Stan Swearingan, so there are personal ties as well from former clients. This network has the added benefit of creating product opportunities for IWT.

IWT currently does a significant amount of contract work for the Government.  How have these contracts affected your business plan?

IWT has about one-third of our business in the federal government space. We began exploring federal government initiatives to build our intellectual property (IP) with government-funded research grants, specifically Small Business Innovation Research (SBIR). IWT has won SBIR awards across defense, homeland defense and other federal agencies.

There are positive and negatives to doing business with the federal government. The positives are primarily opportunities which support Research and Development (R&D) and product development activities, with hopefully a product sales path thereafter. The challenge is, this is a long and intensive dialogue for a small business to be in. The analogy I like to use is turning around a large ocean liner. The federal government is the ocean liner—complex systems, large number of support people and lots of inertia (good or bad). It takes a while to turn that boat but when it turns it creates large wakes—wakes in this case being large orders.

Financial and Enterprise Resource Planning (ERP) systems will need to be government compliant and audited routinely, so you might need a secure facility, etc. Lots of investment is required and the process is long. End game: Do not count on a start-up business solely funded on government programs or you could die on the vine waiting for a win.

IWT started as a service-only company but always aspired to grow into developing its own products.  How difficult was it to make that transition into creating internal products under the IWT brand?

Transitioning from services to products is not for the faint of heart. It was a very difficult transition as you go from steady, predictable service revenue to large investments with the  “hope” of future sales. In the end, it comes down to risk tolerance, confidence in product/technology you are developing and closely monitoring R&D expenses. It is truly “crossing the chasm.”

The delicate balancing act of heavy R&D investments, while maintaining Earnings Before Interest and Tax (EBIT) performance, was our biggest struggle. Frankly, it was nearly impossible and we were lucky and blessed on several occasions along the path towards products. In 2006, IWT actually raised its first round of external investments to fuel some of the development activities. The collapse of the banking/financial system also made it even harder to explain R&D funding, which shows up as expenses on your Profits and Loss Statement (P&L).

So the question I’d want to know is, “Was it all worth it?” During 2009, our product business was the largest part of our total business and we experienced the highest growth we’ve ever had in the history of the company. The product business was the catalyst for this performance. This said, it’s not all a fairytale ending. We had several false starts along the way, promising opportunities that we invested in only to be disappointed. I read an article in one of my small business magazines which described the small tech company timeline which included phases called “Trough of Sorrow” and “Wiggles of False Hope” during this process…that’s pretty much accurate in my opinion.

Here is something that keeps it in perspective for me. Any Venture Capital fund has a win/loss ration of about 20 percent. So, they invest in 10 companies, one is a grand slam, two are doubles/triples and the rest fail. Why should we as entrepreneurs believe we will do any better than those experienced investors with deeper pockets? You will learn a lot along the way, but be patient and do not get frustrated if the first couple attempts are duds.

IWT has come a long way since it was originally located on Timberlake Rd, using the name Innovatek. Tell us one of your favorite memories about it.

Favorite memories…there are many, tough one here. Some involve the early days, with two to three employees working all night to meet a deliverable, throwing together last minute customer demos, moving from Timberlake office (old Girl Scout office), spinning Howard Stern’s wheel at his Sirius Radio headquarters, etc. Things that were most memorable for me are team events and successes when the IWT team had a major accomplishment or technical achievement.

I have a great team and I am fortunate to have such incredible talent. Company picnics and parties, golf outings, etc. are fun memories. I remember a chartered flight in a horrible snow storm and zero visibility where we thought we might die–many jokes were made about the “flying coffin” on that trip. I remember our first large scale sensor deployment for energy and another in border security. My team found a 50-lb. bag of marijuana on the border while deploying sensors. Another one of our guys was tracked by Killer Bees on the Southern Border…that was an interesting dilemma.

I was personally at our first mine prototype demonstration for underground communications. There were three to four customers, two federal agencies and three of our partners there. The system was crashing every five minutes before the demo and we were all biting our nails if we’d get through it. We had guys running recon, resetting units on the fly. We got through it and it’s funny to think back on it now. I laugh because sometimes I feel like IWT is in the “Dirty Jobs” business.