Racking up sales – Paragon Development Systems

Market strategy, innovation lift Oconomowoc PC firm to the paragon
One call to Craig Schiefelbein’s voice mail – in which the voice is out of breath and somewhat rushed – reveals at least one thing about the president and CEO of Paragon Development Systems:
1) He’s just finished working out in the company’s amply-equipped fitness center; or,
2) He’s been in a constant stream of meetings planning for the continued success of his fast-growing, PC company located in Oconomowoc, just off of Highway 67.
(Give yourself extra points for choosing 2.)
He admits that being busy is both good and bad. The bad is that he’s developing a crop of new gray hair on his 34-year-old pate. The good is that business is good. Really good.
Schiefelbein, his sister Peggy, and two others started the company as a wholesaler of computer components in 1986. Being a wholesaler enabled the fledgling company to cut down on its overhead costs – it started in a basement – and sell to a national market while not worrying about its image. It also wasn’t constrained by being tied to a high-traffic location, as most retail businesses are, which allowed the company to grow rapidly.
That strategy paid off in spades as the company recorded $1.8 million in sales in its first year. “We’ve had record sales ever since,” Schiefelbein says. He estimates the company would reach $30 million in sales for 1998.
PDS has three strong markets, targeting medium to large businesses, government and educational institutions, and the health-care industry – the largest segment of PDS’s business. The company’s emphasis is to provide solutions for its customers, even if it means selling PCs made by Compaq, IBM or Hewlett Packard, for which it is an authorized dealer.
And solutions for customers don’t necessarily come from top officers or the sales staff. One of the company’s recent innovations, the Rack N Roll, was suggested by production manager Kerry Marti. Marti was at a client location when he saw how much time was wasted just by taking PCs out of boxes and setting the systems up.
The Rack N Roll is simply a metal rack with wheels and PC units shock mounted to its multiple shelves. PDS was using the racks for its own use in the warehouse, so why couldn’t customers use them as well? Marti estimates that approximately 30% of all PDS’s 1998 sales, or 4,000 units, have been shipped using the Rack N Roll, with no reports of damage.
The Rack N Roll actually cuts down on damage caused by shipping because the number of people handling the units is significantly reduced. “These [racked systems] get rolled onto one of our trucks, if we’re delivering ourselves, or a third-party company that goes straight to the customer,” Marti says. “So it’s been a significant reduction [in handling] as opposed to the regular [UPS] shipping.”
“That was really innovative,” Brian Nowatske of Advanced Healthcare says of the system. Advanced Healthcare receives an average of 18 PCs per order and has purchased a combined total of 1,000 PCs, printers and servers from PDS to date. Nowatske estimates that the Rack N Roll system saves his staff one half hour per new PC being installed. And it saves space as well, which helps in the confined areas of medical clinics.
But the key for Nowatske in choosing PDS over other PC companies was PDS’s commitment to being a business partner with Advanced Healthcare. “They really do try to understand our business,” Nowatske says. “They really step up to the plate in terms of customer service.”
Being a local company also gives customers the satisfaction of knowing that if there are problems, they won’t have to deal with an unsympathetic voice over the phone. That happened too frequently for PDS customer Howard O’Dell of Waukesha Engine. Before PDS, O’Dell was dealing with a manufacturer in Utah and found the customer service to be lax. “I mean, what do you do when a company’s located 900 miles away?” O’Dell says.
Now, O’Dell feels that if he has a problem with one of the 400 PCs he’s purchased from PDS, he can stop on his way home from work if he has to.
The company’s pride in providing solutions for customers extends to life imitating art, marketing manager Carrie Buss says. When flat screen monitors showed up on the television show “ER,” “We had a customer call us and say, ‘I want one of those monitors,'” Buss says. “It took the salesperson a week to find it because, at that time, they were brand-new.”
Old-fashioned teamwork is still abundant at PDS, too, according to Buss. “Everybody really works together and leans on each other,” she says. “We still have that small company mentality where [you say] ‘I’ll just do it.’ Even as we’re growing older and larger, people still do that. They just roll up their sleeves and go down and help out.”
Schiefelbein is predicting that the company’s sales will be $100 million-plus by 2001 and the number of employees will increase from 80 to 250. “If an average company in our industry is growing at 35% a year, that would put us at $70 million [by 2001],” Schiefelbein says. “I think we’re better than average.”
According to the plan, the company will be a nation-wide provider in the health-care market while continuing to grow as a regional provider to medium and large businesses and government and educational markets.
He foresees evolving into the small business market as well. “The largest growth area in our industry will be in small businesses,” he says. “We’re trying to develop real value for small businesses.”
And while marketing to individual consumers is feasible, Schiefelbein believes that the company’s strengths play better to multiple PC buyers. From experience, however, Schiefelbein never rules anything out. If he had, he would be Craig Schiefelbein, MD, instead of Craig Schiefelbein, CEO. “While this is Plan B,” he says of the PC business, “I think Plan B’s turned out pretty well,” noting his original intention of being a medical doctor.