Rick Wallace: Follow the Business Model

Up until this time in our industry, service had been given away by the people that sold equipment. And the rationale was the new sales paid for the service. And he wanted to change the business model because he viewed that service would be a drag on the P and L. And the idea of charging for service would create a new business and annuity inside of the business. Well, he's trying to get an IBM sell, the first machine in IBM. The sales guy goes up to IBM, it's February, it's Burlington, Vermont. And the guy calls back and says, ken, I got good news and bad news. Good news is they're ready to buy. You finally cracked IBM. Now, IBM at this time is 25% of the market. They make their own equipment. It's a huge accomplishment. He'd never sold anything to IBM before. And the sales guy's going, downside is they were not going to pay for service. It's not going to work. And Ken says, cold up there. The guy says, yeah, it's February. Ken, you got a coat? Put it on leave. He didn't want to take the business unless he got the service contract because he knew once he gave away the service contract, he would never get another chance to sell it to IBM. He got the service contract, and the rest of the companies then followed, and the rest of the industry then followed and I'd say arguably changed the dynamics in the equipment industry, where service became something we charged for and created a huge annuity stream. Today we do $400 million in service a year, and it's profitable for the company and it continues to grow. So the point on this is when you make decisions and you make them early, they can have dramatic impact on where you're going. And you have to have the vision in the sense of what are the things you're willing to trade off, what are the risks you're willing to take, and are you really willing to walk away from business in order to make your model work?