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Jeno F. Paulucci, Luigino’s, Inc.Jeno F. Paulucci, Luigino’s, Inc.

Ernst &YoungEntrepreneur Of The Year 2002

Ernst &YoungEntrepreneur Of The Year 2002

1

If you look closely at what is at the heart of most successes, you’re likely to

find someone with an idea—to do something new, to do something better,

to do something differently—and the determination to make it work.

In business, these visionaries are called entrepreneurs. They are the back-

bone of our country, building strong, innovative, and dynamic businesses

that provide jobs, grow our communities, strengthen our economy, and

improve the world.

Entrepreneurs are ordinary people who achieve extraordinary things, and

their efforts inspire others to do the same. That’s why 16 years ago we

established the Ernst & Young Entrepreneur Of The Year® awards. It’s our

way of recognizing the men and women who make the economy vibrant.

Today, through the Ernst & Young World Entrepreneur Of The Year®

awards—now in its third year—countries worldwide identify, salute, and

support these outstanding individuals.

One of them is Jeno Paulucci, the 2002 Ernst & Young Entrepreneur Of The Year. From his very first venture—an Italian-American selling

chow mein in the Scandinavian enclave of Minnesota—Paulucci has time and again defied convention and stereotype. In a 67-year career

that’s still going strong, Paulucci has built more than 50 companies, including four multimillion-dollar food companies, and has become a

trailblazer in the frozen food industry.

The following pages contain more of Jeno Paulucci’s inspiring story, as well as those of this year’s Entrepreneur Of The Year national

category winners and finalists. They are justifiably proud of what they have achieved, and we’re equally proud to bring their stories to you.

By any measure, successes have seemed hard to come by in the last year. But as the following examples will prove, entrepreneurs

continually recognize the opportunities that defeat risks, and make the most of them. In the process they’ve learned something

equally important—that sometimes the greatest risk of all is simply not taking one.

It’s a lesson we all could benefit from.

Sincerely,

Gregory K. Ericksen

Global Director, Entrepreneur Of The Year

Ernst & Young

Seeing Beyond the Risks

One man’s dreamfor entrepreneurship

in America is coming true.We are proud to support entrepreneurship through

the Entrepreneur Of The Year® awards.

Ewing Marion Kauffman's dream for America lives on

through the foundation he so generously endowed.

The Kauffman Foundation works with entrepreneurs

across the spectrum – young learners, aspiring entrepreneurs,

high-growth entrepreneurs and social entrepreneurs – to

encourage economic self-sufficiency and success by providing

expertise, programs and grants to entrepreneurship support

organizations.

Mr. Kauffman's dream for accelerating entrepreneurship

in America is coming true one day at a time. His enthusiasm

for life is reflected in the smiling faces of successful

entrepreneurs of all ages in healthier economic communities

across the nation.

4801 Rockhill RoadKansas City, Missouri 64110-2046

888-777-GROW (4769)www.entreworld.org

MasterJoseph W. Luter IIISmithfield Foods, Inc. . . . . . . . . .Page 13Harland StonecipherPre-Paid Legal Services, Inc. . . .Page 13

EmergingR. Greg BlairEscort, Inc. . . . . . . . . . . . . . . . . .Page 14

Douglas J. BartekMicrotune, Inc. . . . . . . . . . . . . . .Page 16Brian E. LeGette &Ron L. Wilson IIBig Bang Products, LLC . . . . . . . .Page 16

Health SciencesJohn M. GregoryKing Pharmaceuticals, Inc. . . . .Page 17

Matthew WinklerAmbion, Inc. . . . . . . . . . . . . . . . .Page 19J. Mario Molina, M.D.Molina Healthcare, Inc. . . . . . . .Page 19

ManufacturingHerbert V. Kohler, Jr.Kohler Company . . . . . . . . . . . . .Page 20

Todd WernerSure-Feed Engineering . . . . . . . .Page 22Farooq KathwariEthan Allen Interiors Inc. . . . . . .Page 22

Real EstateJohn C. MascaroMascaro Construction Company, LP . . . . . . . . . . . . . . .Page 23

Wilbur F. BreslinBreslin Realty Development Corp. . . . . . . . . . . .Page 25Gerald T. HalpinWEST*GROUP Management LLC . . . . . . . . . . . . .Page 25

RetailRowland SchaeferClaire’s Stores . . . . . . . . . . . . . . .Page 26

Lillian VernonThe Lillian Vernon Corp. . . . . . . .Page 28Richard B. CohenC&S Wholesale Grocers, Inc. . . .Page 28

ServiceBart Palmisano, Sr..Orthodontic Centers of America . . . . . . . . . . . . . . . . . .Page 29

Richard V. KeithCenter Partners, Inc. . . . . . . . . . .Page 31Robert B. KnutsonEducation Management Corp. . . . .Page 31

Supporter of EntrepreneurshipWilliam BynumEnterprise Corporation of the Delta . . . . . . . . . . . . . . . . .Page 32

Dr. Gyan R. ParidaSilicon Alley Entrepreneurs Club . . . . . . . . . . .Page 34Brien BiondiYoung Entrepreneurs’Organization . . . . . . . . . . . . . . . .Page 34

Technology/CommunicationsF. Neal HunterCree, Inc. . . . . . . . . . . . . . . . . . . .Page 35

Victor TsaoLinksys . . . . . . . . . . . . . . . . . . . .Page 37Shaula YeminiSystem Management Arts (SMARTS) . . . . . . . . . . . . . . . . . .Page 37

3

Entrepreneur Of The Year magazine

Global Director, Entrepreneur Of The Year: Gregory K. Ericksen

Program Director: Nancy Clark

Editorial Director: Warren Rappleyea

Managing Editor: Rebecca L. Grasso

Design Director: Julia Packard

Original Photography: Vincent Colabella

A Jury of Their PeersMeet the men and women who select our national winners . . . . . . . . . . . . . . .Page 6

2002 National Ernst & YoungEntrepreneur Of The YearJeno F. PaulucciLuigino’s, Inc. . . . . . . . . .Page 10

The World’s Business AwardThe Ernst & Young Entrepreneur Of The YearProgram . . . . . . . . . . . . . . . .Page 4

Seeing Beyond the RisksGregory K. EricksenGlobal directorEntrepreneur Of The YearErnst & Young . . . . . . . . . . .Page 1

A World of EntrepreneurialExcellence . . . . . . . . . . . .Page 8

C A T E G O R Y W I N N E R S & F I N A L I S T S

C o n t e n t s

4

The World’s Business Award

Entrepreneurs are the individuals

with the vision, determination, and

leadership to create the companies

that produce new industries, new jobs, new

opportunities, and new wealth. Each year the

most successful entrepreneurs vie for the

Ernst & Young Entrepreneur Of The Year

award, the most prestigious honor in its class.

Entrepreneur Of The Year winners represent

virtually every industry—from high tech to

high touch. They are the men and women

whose hard work and creativity have changed

not only their lives but ours as well—people

like Jeff Bezos of Amazon.com, Howard

Schultz of Starbucks Corp., Pierre Omidyar

of eBay, Inc., Scott Kriens of Juniper

E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

Growing a company from

an idea to an industry

leader requires a special

breed of individual—

someone who doesn’t

believe those who say it

can’t be done … someone

who views obstacles as

opportunities … someone

who won’t take “no” for

an answer.

It takes an entrepreneur.

Networks, Steve Case of America Online,

Richard Schulze of Best Buy Co. Inc., and

Dr. Phillip Frost of IVAX Corporation.

Here’s how it works. Seven to 10 winners

in various award categories are selected

from among the nominees by independent

panels of judges—comprising local busi-

ness, f inancial, academic, and media fig-

ures—in several geographic regions across

the U.S. In 2002, over 4,400 nominations

were received in 42 regions hosting the

Entrepreneur Of The Year program.

Regional winners are honored at awards

banquets held in each of the regions during

the month of June. They are also inducted

into the elite Entrepreneur Of The Year

Hall of Fame at the Entrepreneur Of The

Year awards event held each November at

the JW Marriott Desert Springs Resort &

Spa in Palm Springs. All regional

Entrepreneur Of The Year award winners

become eligible for the national awards.

An independent panel of judges selects

winners and finalists in several national

categories. From the winners, one is

chosen as the overall National Ernst &

Young Entrepreneur Of The Year. The

national Ernst & Young Entrepreneur Of

The Year winners and finalists are

announced at an awards gala that is the

culmination of the program. The next

Entrepreneur Of The Year Awards will be

held Nov. 20–23, 2003.

A nominee must be an owner/manager

primarily responsible for the recent

performance of a company that is at least

two years old. Nominations can be submit-

ted by anyone who is associated with a

successful entrepreneur—spouses, employ-

ees, bankers, attorneys, public relations

managers, or the entrepreneurs themselves.

All f inancial information submitted on the

nomination form is considered confidential

and will be used only by the sponsors and

by the independent panels of regional and

national judges.

5

Individuals who have made an outstanding contribution to the entrepreneurial spirit or

helped an entrepreneur become successful through business or academia are eligible for

the national Supporter of Entrepreneurship award, presented by the Ewing Marion Kauffman

Foundation. This award recognizes individuals who have consistently contributed time,

money, encouragement, and/or skill development to further the cause of entrepreneurship.

Nominees need not have founded a company or organization, and may come from the corpo-

rate world or any level of academia. To learn more about the Supporter of Entrepreneurship

award, please contact the Ewing Marion Kauffman Foundation at (888) 777-GROW, or visit its

Web site at www.entreworld.org.

S U P P O R T E R O F E N T R E P R E N E U R S H I P

H E L P U S G I V E T H E W O R L D ’ S

B E S T E N T R E P R E N E U R S T H E

R E C O G N I T I O N T H E Y

D E S E R V E .

We’re looking for successful men and

women who have founded or are growing

leading-edge companies. If you know

someone who possesses the skills and

determination to make a great idea work,

nominate him or her for the coveted Ernst &

Young Entrepreneur Of The Year award.

A copy of the nomination form and com-

plete information on the Entrepreneur Of

The Year awards program is available free

from our Web site at www.ey.com/us/eoy

or by calling 1-800-755-AWARD. Deadline

for nominations is April 4, 2003.

6 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

AJury of Their Peers

2002 National Ernst & Young Entrepreneur Of The Year judges: (standing, l-r) John Bello, SoBe Beverages; Joe Sansone, Pediatric Services of America; DennisFrandsen, Frandsen Corporation; William Saito, I/O Software; (seated, l-r) Maxine Clark, Build-a-Bear Workshop; George Dalton, Call_solutions.com; Rebecca Smith,A.D. Morgan Corporation; Paul Sarvadi, Administaff.

Selecting the best of the best entrepreneurs is a job for the experts. And when it

comes to building a successful enterprise from the ground up, nobody knows what

it takes better than someone who has already done it. That’s why all of the judges

in the Ernst & Young Entrepreneur Of The Year program are men and women who

have achieved business success in their own right.

7

The selection of the National Ernst & Young Entrepreneur Of

The Year is the culmination of a yearlong process that begins

with nominations each January. Panels of independent judges in

regions throughout the U.S. select winners in several categories. The

regional winners are recognized at banquets during the month of June.

This year nearly 450 entrepreneurs in 42 regions received awards.

All of the regional winners become contenders for the national awards.

The national judging takes place in San Diego under the direction of the

Ewing Marion Kauffman Foundation.

Each judge receives an extensive dossier on all of the national

candidates. During the judging process, they discuss and

debate the merits of the individual candidates in each category

against such criteria as leadership, profitability, management,

culture/values/incentives, originality, and degree of difficulty.

As experienced entrepreneurs, the judges know firsthand the

vision, determination, inspiration, and risks it takes to create a

winning business.

When their deliberations are complete, the judges select a national

winner in several industry and general categories. But that’s not

the end of their responsibilities. From the field of national cate-

gory winners, the judges must narrow their selection even fur-

ther—to one individual whose leadership and entrepreneurial

excellence clearly makes him or her the best of the best.

To determine their choice as the Ernst & Young Entrepreneur Of

The Year, the judges engage in a spirited debate on the merits of the

various national category winners. Afterward, each judge selects his

or her top three choices, in order of preference. This year, only one

entrepreneur was named on every ballot, and was the top choice of

six of the judges.

“This guy is awesome,” said one of the judges. “He is the American Dream. ”

“Everything [he] touches turns to gold,” added another judge.

After some debate on the merits of the other first-choice candidates,

the discussion continued. Finally, the moderator called for another

vote, and it was unanimous—Jeno Paulucci was selected as the

National Ernst & Young Entrepreneur Of The Year.

“Jeno Paulucci epitomizes what EOY is all about,” says one of the judges.

“I don’t think anyone can argue with what this man has accomplished.”

See for yourself what the judges saw in this outstanding entrepreneur.

The story behind Paulucci’s nearly seven decades building winning

companies begins on page 10.

Do you have what it takes to be a winning entrepre-

neur? How would your business rank against the

world’s most successful entrepreneurial ventures?

Find out in The Ernst & Young Entrepreneur Of The

Year Award® Insights from the Winner’s Circle

(2002). The book, by Gregory K. Ericksen, global

director of Entrepreneur Of The Year (EOY) for Ernst &

Young, draws on the

insights of both EOY

winners and judges

for an insider ’s look

at how and why

entrepreneurs suc-

ceed across the full

range of business

opportunities—and

obstacles.

Judge how you and

your business prac-

tices stack up

against the best of

the best—the winners of the Entrepreneur Of The

Year Award. Ericksen outlines make-or-break criteria

developed over 16 years in the EOY program to reveal

the business practices that can make the difference

between entrepreneurial success and failure. Learn

how you rate in the critical areas that help determine

business acumen, including leadership, innovation,

team-building, and financial performance.

The Ernst & Young Entrepreneur Of The Year Award®

Insights from the Winner’s Circle is published by

Dearborn Trade Publishing, a Kaplan Professional

Company, and is available through Amazon.com.

Y O U B E T H E J U D G E

8 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

A World of Entrepreneurial

For the past 16 years, the Ernst & Young

Entrepreneur Of The Year awards have

been identifying and recognizing the

people and companies that make a difference

in their respective industries and communities.

In that time, the Ernst & Young Entrepreneur

Of The Year award has become the barometer

of entrepreneurial leadership, not just in the

U.S. but around the globe.

The program has continuously grown in scope

and is now held in over 115 locations in 25

countries. Earlier this year Ernst & Young held

its second annual World Entrepreneur Of The

Year® awards in Monte Carlo to honor the

world’s most successful entrepreneurs.

Germany’s Stefan Vilsmeier, the 35-year-

old founder of BrainLAB AG, was

named this year’s World Entrepreneur

Of The Year winner. The neurosurgical

software innovator was chosen from a field

of 23 outstanding entrepreneurs from 22

countries by an independent panel of

judges, led by John Wall, president of

Nasdaq International.

According to Wall, “Successfully coping with

both the intellectual challenge of high-end

technology and the practical needs of going to

market is an outstanding achievement that has

deeply impressed the entire judging panel.”

BrainLAB’s mission, according to Vilsmeier,

is simple: “To change surgery through the

development and implementation of sophis-

ticated, clinically based software and to

become the leading provider of software

for minimally invasive therapies and

cancer treatment.”

World Entrepreneur Of The Year Stefan Vilsmeier (left), of BrainLAB AG , with Gregory K. Ericksen, global director, Entrepreneur Of The Year, in Monte Carlo.

Established in 1989, BrainLAB has indeed

become a worldwide leader in neurosurgery

and radiotherapy. The company develops soft-

ware and medical systems for the radiation of

tumors and the navigation of surgical instru-

ments in the human body.

Vilsmeier actually started out as an author. By

the time he entered the University of Vienna,

he had already written a popular book on 3D

graphics and was convinced that they had uses

above and beyond computer games.

In 1990, Vilsmeier developed the world’s first

menu-driven software for neurosurgical plan-

ning. Three years later BrainLAB had sold its

first system, and in 1994, systems were

installed in China. Under Vilsmeier’s leader-

ship, the company has helped create clinical

procedures and new applications in close col-

laboration with doctors to improve the quality

of health care all around the globe.

Its VectorVision software works like a global

positioning satellite for the human body, pro-

viding wireless, real-time feedback on a 3D

image about the position of a surgical instru-

ment. With this product surgeons can localize

lesions or treatment areas precisely, plan each

step of an operation on a 3D computer model,

and calculate the ideal access route to the treat-

ment area. VectorVision can be used on the

brain and in procedures such as spinal

implants and total knee and hip replacements.

BrainLAB, which has grown an average of 74%

each year since 1994, now employs more than

440 people in 50 countries. Sales in 2001 were

81 million euros. The company has earned 54%

of the worldwide market share for cranial radio-

therapy/radiosurgery. In Germany, Italy, Korea,

Spain, South America, and Taiwan the company

has captured market shares of more than 70%.

To retain the innovative environment of a

start-up, BrainLAB works with thousands of

9

Excellence

leading physicians and medical organizations.

“I also require each employee to participate in

annual site visits to observe an operation,” said

Vilsmeier, “even people from our accounting

department. That way, we’re always reminded

of why we’re here.”

In addition, company engineers are required to

contact one customer each month. “Being close to

our customers makes a difference,” Vilsmeier

said. “We bring back hundreds of ideas about how

to improve or expand products and services.”

Ernst & Young Chairman Jim Turley honored all

of the country winners by saying, “Entrepreneurs

are among the most prominent leaders who drive

economic development and make the world a

better place. By investing in the Entrepreneur Of

The Year awards, Ernst & Young fosters the role

of entrepreneurs as change agents for good and

awards their contributions and initiatives.”

More than 8,000 men and women from

around the world were nominated for the

Ernst & Young Entrepreneur Of The Year

award in their respective countries in 2001.

Following an extensive independent judging

process, including regional awards, 23

were honored as their country’s overall

winner and each was a World Entrepreneur

Of The Year finalist.

Australia—Dr. Peter Farrell, founder, chairman and CEO, ResMed, Inc.

Belgium—Jean-Pierre Delwart, CEO, Eurogentec

Brazil—Marco Aurélio Garib, founder and CEO, EverSystems Informática Comércio

Canada—Kenneth E. Field, chairman, Commercial Alcohols, Inc.

Caribbean—Ronald Bulkan, managing director, Precision Woodworking Ltd.

Czech Republic, Zdenek Jandejsek, managing director, Rabbit Trhovy Stepánov, a.s.

Denmark—Lars Larsen, CEO, Jysk

France—Pierre Saubot, CEO, Pinguely-Haulotte

Germany—Stefan Vilsmeier, president and CEO, BrainLAB AG

India—Brijmohan Lall Munjal, chairman, Hero Group

Indonesia—Dahlan Iskan, director and CEO, Jawa Pos Group

Ireland—Martin McVicar, managing director, Combilift Ltd.

Italy—Silvano Pedrollo, sole director, Pedrollo S.p.A.

Japan—Tetsuya Iizuka, CEO, THine Electronics, Inc.

Netherlands—Monique Brummans, managing director, Dieman & Van Gestel

New Zealand—Michael Whittaker, CEO, Atlantis Group

South Africa—Mark Lamberti, CEO and chairman, Massmart Ltd.

Spain—Simón Pedro Barceló, co-president, Barceló Group

Sweden—Bengt Agerup, president and CEO, Q-Med AB

Switzerland—Fides P. Baldesberger, president and CEO, Outils Rubis SA

United Kingdom—Vijay Patel, chief executive; Bhikhu Patel, managing director, Waymade Healthcare

United States—Dr. Phillip Frost, founder, chairman, and CEO, IVAX Corporation

2 0 0 1 E N T R E P R E N E U R O F T H E Y E A R C O U N T R Y W I N N E R S

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by Kathy Bull

10 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

MASTER

Jeno Paulucci is a man few people can

forget. With an affable, “tell it like it is”

personality, an ever-present laugh, and

irrepressible energy, this active octogenarian

has built more than 50 companies and orga-

nizations over the course of a colorful 67-

year career that’s still going strong.

Born to poor Italian immigrant parents in

post-WWI Minnesota, Paulucci helped his

mother run a small grocery from the front of

their modest home to help the family make

ends meet during the Great Depression,

while his father, an iron ore miner, worked

long days for little pay. The experience intro-

duced the young Paulucci to the grocery

business, a strong work ethic, and his great

gift for sales and relating to people.

Upon returning from a tour of duty in the

Pacific in WWII, Paulucci held a job in

grocery sales that proved successful but

left him yearning for a more independent

career. During the war, he noted that

American GIs had developed a taste for

Chinese food. It was then, in the unlikely

market of Scandinavian-settled northern

Minnesota, that the Italian-American

decided to market a chow mein he’d

adapted to American tastes by adding

spices and chicken broth. It was his only

product, and he canned and packed only as

much as he could sell and truck to nearby

Duluth each night.

The chow mein was marketed under the

Chun King brand, which eventually grew into

a line that included egg rolls and other spe-

cialty products. The Chun King Corporation

held 80% of the national market when

Paulucci sold it for $63 million in cash in

1967 to R.J. Reynolds Tobacco Company,

when it decided to diversify away from

tobacco. They hired Paulucci as chairman

of the new R.J. Reynolds Foods, now the

RJR-Nabisco giant. But he soon found the

corporate pace to be an uncomfortable fit

for a hands-on entrepreneur.

After four years helping to put together

the new R.J. Reynolds Foods, Paulucci

decided to turn his focus full-time to his

pizza business. His Northland Foods com-

pany had been making Wilderness brand pie

fillings and pizza mixes since 1950. In 1968

he formed Jeno’s, Inc. after adding frozen

pizza and a unique frozen pizza roll snack.

The thought had occurred to him that a

pizza roll could be produced with the same

equipment as egg rolls, without any

additional capital investment; only the

fillings would be different. The resulting

Jeno’s Pizza Rolls were a phenomenal

success, and in 1985 Pillsbury bought

part of the assets of Jeno’s, Inc. for

about $150 million.

Paulucci has a rule by which he has built

his companies: “Quality first, cost

second. I know it sounds insignificant,

but it isn’t,” he says. “The quality has

absolutely got to be there, and that’s why

we sample our products every morning or

the previous day.” It is Paulucci’s quality and

cost-competitive strategy that has allowed

him to become one of the leaders in the

frozen foods industry very quickly.

Quite possibly the crown jewel among his

creations is Luigino’s, the frozen food

company that he started in 1990 at the age

of 72. Based upon his mother’s authentic

recipes, and named Michelina’s in her

honor, Paulucci developed a line of high-

quality, high-value entrees that features

more than 200 products.

In just 12 years, the company—which

includes Michelina’s entrees and snacks

and Michelina’s Yu Sing Oriental entrees—

is one of the leading producers of frozen

prepared foods worldwide. With the

Budget Gourmet brands acquired in early

2001, Luigino’s brands now rank second in

the U.S., accounting for one out of every

four frozen food sales, and holds a 42%

market share in Canada, making it that

country’s leading brand.

Not only were his products innovative, but

Paulucci had a knack for producing them

cost-efficiently. When Paulucci started

Luigino’s, he did so without a penny of

investment. In return for creating local jobs,

he received low-interest government loans.

What’s even more surprising is that he

entered his new Michelina’s product line into

the competitive frozen food market with no

advertising. Savings such as these allowed

Paulucci to be the low-cost producer in the

field. He relied on the quality of his products

to create word-of-mouth advertising, which

cost him nothing and allowed him to offer

the best value and lowest prices in the

11

MASTER

“ This is my sport, and I’ve won a few games. I’ve

lost a few, too, but the sense of accomplishment

is what I value the most.”

“ Like a farmer, I want to put back into the soil in my own

way in order that I can get a better harvest. …”

12 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

MASTER

industry. By keeping quality high and prices low

Michelina’s was able to gain market share and

become one of the leading brands in the U.S.

Paulucci says the people around him are his

secret for staying on top of his many busi-

nesses. “I feel that without dedicated people,

you can’t succeed,” he says. Excellent com-

munication and performance-based incentives

allow Paulucci to motivate his managers, and

trust them to do what they do best. Paulucci’s

Republic Banks of Minnesota, which he

purchased in 1989, are a prime example. He

has visited the banks only twice, and they

are doing very well, thanks to an excellent,

empowered management team.

“We visit with our people,” Paulucci says.

“We listen, whether it’s about work, family,

health, or whatever, and if there’s a prob-

lem, we try to take care of whatever it is. So

we build sort of a family relationship.” That

atmosphere of caring is reflected in the

company’s very low turnover rate, with

many people having been on staff more

than 20, and some even 40, years.

Making a difference in his employee’s

lives is something Paulucci has always

been dedicated to. Because of his willing-

ness to hire, train, and employ at union

wages those whom others considered “unem-

ployable”—the mentally or physically dis-

abled, the disadvantaged, addicts, or

convicts—the President’s Council on the

Employment of the Handicapped and the

National Association of Manufacturers

chose Paulucci as the United States

Employer of the Year in 1972. Similar

honors were accorded by the City of Duluth,

State of Minnesota, State of Wisconsin, and

National Rehabilitation Association.

“Like a farmer, I want to put back into the soil

in my own way in order that I can get a better

harvest and deserve what I am doing,” says

Paulucci. He tills that soil on a regular basis,

by staying dedicated to numerous causes. He

led the way to passage of changes to the

Taconite Amendment, also known as the

Paulucci Bill, which enabled steel industry

investment of nearly $3 billion in Minnesota’s

ailing mining region, creating 20,000 jobs,

and another $1 billion more in tax revenue.

He also founded and led the National Italian-

American Foundation and, with his wife,

Lois, established the Jeno and Lois Paulucci

Foundation, dedicated to a more productive

life for the poor, disadvantaged, and elderly.

“I look at my businesses and I’ve made

money. But I also look at my non-business

activities, and those give me more satisfac-

tion,” Paulucci explains. “You don’t

measure greatness, in my opinion, with

how much money you make or what kind

of record you’ve had.”

With everything Paulucci gets involved in, he

does so because he loves the challenge and

the fun. He thrives on the creative problem-

solving that comes with starting something

new, whether it’s a business or a social cause.

“This is my sport, and I’ve won a few games.

I’ve lost a few, too, but the sense of accom-

plishment is what I value the most,” says

Paulucci. “I marvel at what you can do if you

work hard, are honest, and make fun out of

your work. And that’s what I do.”

While waiting out the duration of a non-com-

pete agreement with Pillsbury, Paulucci and

his family created Heathrow, an amazing,

self-sufficient, “city of tomorrow” spanning

3,000 acres of Central Florida not far from

Disney World—a unique showcase live-work-

play community. The residential sector took

off immediately. But with the commercial

sector not faring as well, Paulucci took up the

challenge of finding a major new corporate

resident. The American Automobile

Association was looking for a new location,

and Paulucci wanted it to be Heathrow.

After numerous attempts to talk with AAA

brass, Paulucci finally landed a 15-minute

meeting, but was delayed by traffic. In char-

acteristic style, the then-68-year old Paulucci

got out of his hired car, crossed multiple

lanes of traffic, ran up a hill, scaled a barbed-

wire fence, and, after stopping only briefly to

freshen up, made it to the meeting on time.

AAA became the city’s first major corporate

tenant. In May 2001, Heathrow was named

one of the fastest-growing commercial

areas in America by Southeast Real Estate

Business magazine.

Despite the fact that at the age of 84 most

people would have retired long ago, Paulucci

has greeted his ninth decade by doing what he

does best, creating something new. His latest

venture—or adventure as he might prefer to

think of it—is Self Serve Centers, Inc., a

company designed to deliver quality foods

directly to consumers through vending

machines, club stores, convenience stores,

university food courts, and the Internet.

Paulucci is enjoying himself so much

these days he doesn’t think he’ll ever retire.

The reason is simple. “Being able to come

in with a creative product and bring it to

the American public, it’s just so damned

much fun.”

“Being able to come in

with a creative product

and bring it to the

American public, it’s just

so damned much fun.”

13

F I NA L IST: Joseph Luter was just 23 when—

following the sudden death of his father, who

had been running the company—he took over

management of the pork packing company

started by his grandfather. After six years,

during which he worked to buy back non-

family shares, Luter sold the company for

$20 million. Six months later, the new

owners fired Luter, but rehired him in 1975

to rescue the then-failing business. Within

just one year, Luter turned an $8 million loss

into a $393,000 profit.

Luter has successfully integrated more than

17 acquisitions in the last 20 years to

expand Smithfield Foods products in the

U.S. and internationally, and vertically inte-

grated hog production and processing to

create safe, affordable, consistent, and trace-

able products. At the heart of the strategy is

Smithfield’s proprietary genetic stock,

which enables the company to produce its

Lean Generation pork products.

Today Smithfield Foods is the largest hog

producer and pork processor in the world,

with more than $8 billion in revenues.

During Luter’s 25 years of leadership, the

company has delivered 28% average annual

compounded rate of return, and has outper-

formed the S&P 500 Index and S&P Food

Index by more 250%.

F I NA L IST: Necessity is the mother of inven-

tion, and Pre-Paid Legal Services is a prime

example. Harland Stonecipher became a

pioneer in providing prepaid legal expense

plans in the U.S. after an auto accident for

which he was not at fault brought on devastat-

ing legal bills not covered by insurance.

Stonecipher launched Pre-Paid Legal Services

on the premise that everyone needs an attorney

on call for legal advice and assistance, whether

an auto accident or a dispute with a roofer.

Pre-Paid Legal Services takes the

concept of “attorneys on call” from

strictly the domain of corporations and

wealthy individuals to the realm of the

common man by providing access to an

attorney for a small monthly fee. Members

choose an attorney from a network of

contracted providers, who are pre-

screened and continually monitored to

provide the best service.

Pre-Paid Legal Services, which went

public in 1977, currently has 1.3 million

individuals and more than 25,000 groups

under contract. The company increased

earnings per share by 40% in 2001 and

now markets legal expense plans in every

U.S. state and four Canadian provinces.

J O S E P H W . L U T E R I I IS M I T H F I E L D F O O D S , I N C .T I T L E : C h a i r m a nC I T Y : S m i t h f i e l d , V a .F O U N D E D : 1 9 3 6W E B A D D R E S S : w w w . s m i t h f i e l d f o o d s . c o m

H A R L A N D S T O N E C I P H E RP R E - P A I D L E G A L S E R V I C E S , I N C .T I T L E : C h a i r m a n , C E OC I T Y : A d a , O k l a .F O U N D E D : 1 9 7 2W E B A D D R E S S : w w w . p r e p a i d l e g a l . c o m

MASTER

E m e r g i n g C a t e g o r y W i n n e r

R . G r e g B l a i r

T I T L E : P r e s i d e n t

C I T Y : W e s t C h e s t e r , O h i o

F O U N D E D : 1 9 9 7

W E B A D D R E S S : w w w . e s c o r t r a d a r . c o m

Es

co

rt

,

In

c.

14 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

EMERGING

by Brian Moskalby Brian Moskal

15

Greg Blair has created a phoenix in the radar-detector business

from the ashes of not one, but two, bankrupt companies. The

galvanizing force? An unquenchable entrepreneurial spirit.

When Blair joined Cincinnati Microwave, Inc. as director of operations

in 1984, the radar-detector maker had a backlog of 25,000 units. It

could manufacture only 50 units a day, and by the end of the year, the

backlog had climbed to 35,000. Blair applied his operations experience

gleaned from 15 years at Procter & Gamble to CMI’s operations, and

within six months had completely eliminated the backlog. It earned him

the reputation as the “fix it person.”

Even so, CMI struggled financially in the 1990s, and

in mid-1996 Blair presented a survival strategy for the

company. Top management rejected the plan, and in

April 1997 CMI filed for bankruptcy. Blair, however,

purchased 15% of the Escort product line assets from

the CMI bankruptcy. A Chicago-based private investor

purchased the rest of the company with the stipulation

that Blair would be in charge of operations.

Blair’s strategy was straightforward. “Run lean, do

what you do best, say ‘no’ to diversions, like a distrib-

ution channel that doesn’t fit your brand, and realize

that you can’t be all things to all people.”

Blair hired 53 former employees from CMI (less than 50% of the

comparable staffing) to join the new company, now called Escort, Inc.

He provided a personal loan guarantee to his bank in order to obtain a

credit line, and downsized from a 172,000 square-foot facility to

24,000 square feet.

“We reduced our magazine advertising by two-thirds, accepted the

anticipated 50% drop in sales volume, and sized the company based on

what we thought we’d sell versus trying to sell enough product to make

the company profitable,” he says.

Using the same business plan originally rejected by CMI, the fledgling

company made money in its first month. During the first six months,

Blair accepted 35% gross margins. “That’s a win that I’ll take any day,”

he says. “After six months, we expanded our product line and distribu-

tion channels to include a big-box retailer, electronics’ boutique stores

and new car dealerships, and expanded the gross margins to 40%.”

Key to the success, according to Blair, was the amount of drive and

energy in the employees. “If we had a leg up when we started Escort

Inc., it was the people,” he says. “They had great talent and energy. It’s

one thing when people are totally disheartened and you’ve got to figure

out a way to get them excited. It’s another to see people who are ready

to get it done. We just had to tell them where to focus, because they

came fully motivated.”

Good people aside, Blair faced a major short-term challenge—

regaining the cooperation and trust of the parts suppliers and media

advertising vendors who had lost money when CMI failed.

So Escort executives hit the road, met face-to-face with critical suppli-

ers, and explained their business plan. The company promised to pub-

lish forecasts routinely, and orders would be consistent with its forecasts.

“Most importantly, we promised that we would pay for what we ordered,”

says Blair. By the end of year one, only one supplier insisted on prepayment.

That rescue experience taught Blair some invaluable lessons. “I learned

not to try to do too much at one time, always deal in facts, and never let

the word hope appear in the business plan,” he says. “Have a plan, focus

on what you do, and stick to it.”

In January 1998, after eight straight months of prof-

itability, Escort entered into a supplier contract with

Best Buy to provide high-end radar detectors. The big

loser in the deal was Beltronics Co., a major radar-

detector competitor that was soon forced to file for its

second bankruptcy in three years.

In January 2000, Escort Inc. purchased the assets of

Beltronics, making it a wholly owned subsidiary. “I

had admired Beltronics for years when they were a

chief competitor of Cincinnati Microwave,” says

Blair. “Whenever a headhunter would call me, I

would recommend the best managers at Beltronics,

because I wanted them hired out of the industry,” he adds with a chuckle.

Fixing Beltronics, however, required more drastic measures than CMI.

Beltronics had been losing money for four years and had experienced

two bankruptcies, so suppliers were even more uncooperative. But,

according to Blair, “Having the Escort turnaround behind us helped us

to win over Beltronics’ suppliers.”

In addition, Blair brought back a key operations manager who had

worked for Beltronics when it was the industry’s 800-pound gorilla,

downsized the company by 30%, and fired several unprofitable

accounts. “We cut sales commissions by 50%, but that gave the reps 4%

of something, rather than 8% of nothing, because Beltronics wasn’t

shipping product,” observes Blair.

The five-year-old Escort—capitalizing on the synergies of the Escort

and Beltronics brands—has averaged 80% revenue growth in the last

three years. “It’s all in the details,” Blair maintains. “There is no such

thing as luck.”

Blair likens his organizational wisdom to his experiences as the

crew chief of a Porsche Speedster racing car team. “Nobody ever

won a race they didn’t f inish,” he explains. “If the car breaks, you

don’t win. If the driver gets too aggressive and wrecks, you don’t

finish. In order to win, you must be there at the finish.”

EMERGING

“ Have a plan, focus on what you do, andstick to it.”

16 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

EMERGING

F I NA L IST: From his boyhood days working in

his father’s television repair shop, Douglas J.

Bartek developed an interest in electronics.

As an adult, armed with a degree in electrical

engineering and a M.B.A., he left a secure

management job and took an 80% pay cut to

follow his dream—developing an integrated

radio frequency circuit that was small and

powerful enough to handle the audio, video,

and data performance requirements of new

classes of broadband applications. So promis-

ing was his vision that within six weeks Bartek

received $8 million in venture funding in a

handshake deal honored fully by investors.

In 1999, Microtune took an existing, dollar-sized

mechanical tuner with hundreds of components,

expanded its functions and performance, and

reduced the chip to the size of a dime to launch

its first product, the single-chip MicroTuner.

Experts called it the most revolutionary advance

in tuner technology in the last 50 years.

Today Microtune designs, manufactures, and

markets tuners, amplifiers, transceivers, and

short-range wireless radio and baseband

processors for the global broadband commu-

nications, automotive electronics, and wire-

less connectivity markets. The six-year-old

company has grown to 1,100 employees, and

has been awarded 14 U.S. patents, with 42

applications pending.

F I NA L IST: Brian LeGette and Ron Wilson

are two engineers with degrees from

Wharton Business School who placed their

entrepreneurial dreams ahead of six-figure

incomes in Corporate America. It began in

graduate school when, as part of their

studies, the two had to create a consumer

product. After hundreds of ideas and sev-

eral prototypes, they designed a pair of

wrap-behind-the-head ear warmers. By the

time they graduated in 1995, LeGette and

Wilson had sold more than

1,000 units on campus.

After they had exhausted their

personal funds, 18 of their fellow students at

Wharton believed in the ear warmers so much

that they invested $100,000 of their corporate

signing bonuses to seed the start-up. When the

ear warmers debuted on the QVC home

shopping network, 4,000 sold in four minutes.

To date, more than 8 million units have been

sold to customers in 40 countries.

LeGette and Wilson have designed,

patented and marketed more than a dozen

products, including beach mats and chairs,

gloves, and sunglasses, that are sold at such

retailers as L.L. Bean, Macy’s, Saks, the

Sports Authority, and the Sharper Image.

D O U G L A S J . B A R T E KM I C R O T U N E , I N C .T I T L E : F o u n d e r , C h a i r m a n , C E OC I T Y : P l a n o , T e x a sF O U N D E D : 1 9 9 6W E B A D D R E S S : w w w . m i c r o t u n e . c o m

B R I A N E . L E G E T T E ( l e f t ) , R O N L . W I L S O N I IB I G B A N G P R O D U C T S , L L CT I T L E : C o - C E O sC I T Y : B a l t i m o r e , M d .F O U N D E D : 1 9 9 7W E B A D D R E S S : w w w . b i g b a n g p r o d u c t s . c o m

J o h n M . G r e g o r yK

in

g

Ph

ar

ma

ce

ut

ic

al

s,

I

nc

.

by Danielle Dayen

HEALTH SCIENCES

17

H e a l t h S c i e n c e s

C a t e g o r y W i n n e r

T I T L E : F o u n d e r a n d F o r m e r C E O

C I T Y : B r i s t o l , T e n n .

F O U N D E D : 1 9 9 3

W E B A D D R E S S : w w w . k i n g p h a r m . c o m

18 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

Acombination of hard work, strategic acquisition, and good

timing has allowed King Pharmaceuticals to grow from a

small manufacturing plant with $13 million in revenues to a

major player in the pharmaceutical industry with revenues topping

$870 million in 2001—in less than 10 years.

For founder John M. Gregory, King Pharmaceuticals is more than a

business; it’s a family affair. Gregory had already

launched two successful businesses—his own retail

pharmacy and General Injectables and Vaccines, a

company that purchased pharmaceuticals from

manufacturers and sold them directly to physicians.

But in 1993 he tapped into a pool of talent he had

been surrounded with his entire life—his broth-

ers—to found King Pharmaceuticals.

“One of the unique things about my brothers is that

they all have different talents,” Gregory says. “James

has a degree in public administration, Henry is a

medical doctor, Joseph has a business degree,

Jefferson and I are both pharmacists, and Jefferson

is also a lawyer. There was a job for everyone in the company.”

With a small initial investment and a lot of debt, the Gregory brothers pur-

chased a pharmaceutical manufacturing facility in Bristol, Tenn. With just 90

employees they began operating as a contract manufacturer for other phar-

maceutical companies. Under John’s direction, the company transitioned to

branded pharmaceuticals, acquiring and integrating Medco Research, Jones

Pharma, and more than 50 branded drugs into its operations.

Today, King Pharmaceuticals’ diverse portfolio of prescription products

ranges from cardiovascular and critical care medications to anti-infec-

tive, endocrinology, and women’s health products. The company oper-

ates five manufacturing sites and multiple offices in North America and

Puerto Rico and employs more than 1,700 people.

A major factor in King’s success has been selectively acquiring branded

pharmaceutical products that have growth potential, complement the

company’s product portfolio, and are exclusive or can be made exclusive.

Through focused promotion, marketing, and life-cycle management,

King then increases the sales and value of these products. “King was

there at the right time, when big pharmaceutical companies were selling

products, and we were able to take advantage of that,” Gregory explains.

One such product that has had a big impact on the company is Altace,

an ACE inhibitor that received a new clinical indication for prevention

of stroke. “That propelled that product to unbelievable sales,” Gregory

says. And a direct-to-consumer marketing campaign launched in April

2002 featuring professional golfer Jack Nicklaus didn’t hurt either. It is

a good example of the savvy marketing and promotion that the com-

pany has used to propel the growth of its products.

In a relatively short time, King Pharmaceuticals has had some

significant milestones. To ensure the company had the capital to

continue its rapid growth, King went public in June 1998 with the

largest pharmaceutical IPO of that year. Then in May 2000, King

moved from the Nasdaq to the New York Stock Exchange, and in

September of the same year was chosen by Standard

& Poor’s to represent mid-cap pharmaceuticals in

the S&P 500 Index. That year King also made

Investor’s Business Daily’s top 10 list of publicly

traded medical companies for 2000, outranking

industry stalwarts Merck and Pfizer.

“The growth has been so rapid and the market was so

ripe for what we were doing, the main challenge

we’ve had to overcome over these last nine years was

trying to have the right mix of debt and equity as we

move forward,” Gregory says. “The other challenge

we’ve had is that some of our growth has not just been

product acquisition, it’s been company acquisition, so

we’ve had to integrate companies into the King Pharmaceuticals cul-

ture. But I think that was a challenge we’ve been able to accomplish.”

In fact, while growth and profits are important, people are Gregory’s

main concern. His commitment to people is demonstrated with excel-

lent benefit packages, child care subsidies and educational assistance,

free and confidential counseling through an assistance program and on-

site chaplain’s office, and employee stock options.

In addition, Gregory founded the King Pharmaceuticals Benevolent

Fund, a non-profit corporation dedicated to ministering to people in

need. Fully funded by the Gregory family and King Pharmaceuticals,

and operated by Gregory’s sister Maryanne, the Benevolent Fund dis-

tributes medications and medical supplies to third world countries;

administers The Lord’s Storehouse, a food distribution ministry serving

community-based ministries within a 77-mile radius of the fund’s

Bristol, Va., headquarters; and assists widows who have little or no

family support through The Widow’s Mite ministry. The fund has also

provided 49 ministries with financial gifts and aided disaster relief

efforts in West Virginia.

In June 2002, Gregory officially handed over the CEO position to his

brother Jefferson. While no longer a part of the company’s manage-

ment, John Gregory hopes his brother’s leadership will continue the

acquisition growth strategy that has made the company so successful—

and add more research and development on products to move King to

the next level.

“As an entrepreneur, you have to be willing to take risks. If you’re not

willing to take risks, it’s hard to grow,” Gregory says. “I also believe it

helps to have a grounded relationship with your family. That provides a

type of stability in your own life that gives people a confidence to

follow you and believe what you say.”

HEALTH SCIENCES

“ If you’re not willing to take risks, it’shard to grow.”

19

HEALTH SCIENCES

F I NA L IST: Despite a complete lack of business

experience, Matthew Winkler left his job as an

associate professor at the University of Texas at

Austin, and started Ambion in a loft space in his

home in 1988. He originally envisioned a com-

pany that would produce purer enzymes, solu-

tions, and other reagents for biomedical research

and sell them at lower prices. But disappointing

profits quickly forced Winkler to focus on prod-

ucts that would give Ambion an edge in the com-

petitive biomedical supply industry.

The increasing use of molecular biology

and recombinant DNA techniques had cre-

ated a market for “kits” that would allow

researchers to perform procedures quickly

and efficiently without needing to set up

from scratch and purchase and test reagents

themselves. Ambion introduced its first RNA

kit in 1990 and patented a version in 1991.

Positioning itself as The RNA Company,

Ambion’s catalog has grown to include

more than 30 kits and 1,100 products,

enabling the company to grow at a rate of

more than 30% per year. The many uses of

RNA provide Ambion with built-in oppor-

tunities for further growth and the com-

pany has begun developing an RNA

organic chemistry capability, in addition

to a new division devoted to diagnostics

started in 2000.

F I NA L IST: Since its founding in 1980 by the

late Dr. C. David Molina, Molina Healthcare

has provided exemplary managed care to

those people in its communities who are

traditionally underserved. Of the 420,000

members receiving health care services from

Molina Healthcare, the average patient is a

single mother, often with limited English lan-

guage skills, supporting two or three children

on Medicaid, state benefits, and low-wage jobs.

To overcome financial, cultural, and lin-

guistic barriers, employees and physicians

who staff Molina Healthcare’s 21 company-

owned clinics must complete a four-hour

cultural and linguistic training module.

Employees are ethnically diverse—27%

Hispanic, 13% African-American, and 14%

Asian—and Molina Healthcare is the first

health plan to have an entire member Web

page translated in six languages.

Under the leadership of Dr. J. Mario

Molina since 1997, the company has

expanded its business model to Utah,

Michigan, and Washington and increased

its revenues by more than 250%. In 2001,

Hispanic Business rated Molina Healthcare

the 12th largest Hispanic-owned business

in the nation and third largest Hispanic-

owned service company. And national

managed care research firm Inter Study

ranked Molina Healthcare 14 on its list of

the top 25 national managed care firms.

M A T T H E W W I N K L E RA M B I O N , I N C .T I T L E : C E O , C h i e f S c i e n t i f i c O f f i c e rC I T Y : A u s t i n , T e x a sF O U N D E D : 1 9 8 8W E B A D D R E S S : w w w . a m b i o n . c o m

J . M A R I O M O L I N A , M . D .M O L I N A H E A L T H C A R E , I N C .T I T L E : C h i e f E x e c u t i v e O f f i c e rC I T Y : L o n g B e a c h , C a l i f .F O U N D E D : 1 9 8 0W E B A D D R E S S : w w w . m o l i n a h e a l t h c a r e . c o m

H e r b e r t V . K o h l e r , J r .K

oh

le

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Co

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by Brian Moskal

MANUFACTURING

20 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

M a n u f a c t u r i n g

C a t e g o r y W i n n e r

T I T L E : C h a i r m a n , C E O , P r e s i d e n t

C I T Y : K o h l e r , W i s .

F O U N D E D : 1 8 7 3

W E B A D D R E S S : w w w . k o h l e r . c o m

21

Kohler Company has grown from a small cast iron and steel

foundry with 21 employees to a world-class manufacturer with

22,000 associates and 44 manufacturing plants around the

globe, making it one of the oldest and largest family-managed private

companies in the United States.

John Michael Kohler, an Austrian immigrant salesman

turned foundryman, started the company in the midst of

an economic depression in 1873. In 1883, he entered the

plumbing business when he enameled a horse-watering

trough, fitted it with feet, and sold it as a bathtub.

“Persistence is what got the company through those

hard times back then,” says Herbert V. Kohler Jr., who

has led the company since 1972. “I can’t tell you the

number of battles that we have won against our com-

petitors simply because of our persistence to pursue

and drive an idea until fruition.”

During its 129-year history, the Kohler Company

has been guided by just three generations of the

Kohler family. Walter J. Kohler took over the management of the

company in 1905 following the deaths of his father, John Michael,

and his brothers, Robert and Carl. The reins of the company

passed to Walter’s brother, Herbert, in 1940 and to Herbert’s son,

Herbert, Jr., in 1972.

Since Herbert Kohler took over leadership of the family business, the

company has grown sales, net income, total assets, and stockholders’

equity at a minimum of 10% compounded annually. Through internal

growth and acquisitions over the last 30 years, the company has become

a global leader in products and services for living environments. “We

believe that most real growth must come internally, not through acquisi-

tions,” Kohler says. “When the firm does acquire a business, it’s for a

resource that it doesn’t have and can use in creative ways.”

Today the Bold Look of Kohler is a grouping of 30 businesses in four

major categories—plumbing, engines and power generation systems,

furniture, and hospitality resorts. Brand names include Kohler and

Sterling plumbing products, Baker and McGuire furniture, and Ann

Sacks Tile & Stone.

“I’m inspired by any technical or artistic breakthrough,” says Kohler.

“It’s the reason I work and I expect this company to continually work

to be on the leading edge of everything it does.”

Calling it one of the keys to building a successful business, Kohler

spends 40% to 50% of his time on new products, new processes, or the

strategies behind them. “We never let up. We have a strong new-product

development system that continues despite what the economy is doing,”

says the Yale University business administration graduate. “That’s

because new products are the key to the company’s future.”

Kohler Company doesn’t just give lip service to product innovation. It

measures it. It has developed a Vitality Index that weighs current total

sales against the sales of products in the last three years. “Our objective

is to have 35% to 40% of current sales come from products we’ve

introduced in the last thee years,” says Kohler.

To keep product innovation churning, the company reinvests 90% of its

profits back into the business. “That’s critical to what we do,” asserts Kohler.

“That’s the juice that allows us as a private company to stay on the leading

edge of product and process. Unlike a public company,

we don’t sell our stock or issue debt to raise capital.”

The Kohler Operating System, based on the continu-

ous improvement principles of kaizen and Six

Sigma quality standards, uses technology to drive

cost efficiencies and improve quality. “Be it an

engine, a generator, a toilet, a cabinet, a piece of

furniture or a five-diamond golf resort, there is but a

single level of quality in our products,” says Kohler.

“We differentiate price by the function of a product,

its engineering or design, or the materials we use to

make it. We never compromise on quality.”

That emphasis on quality guides Kohler’s commu-

nity efforts as well. The Kohler Company and the Kohler Foundation

provide support for the arts, the environment, historic preservation, and

youth at risk. Kohler’s interest in preservation led to the creation of a

500-acre nature preserve along the Sheboygan River, and a 1,440-acre

eagle preserve on the bluffs of the Mississippi.

Kohler also championed the adoption of a second 50-year plan for

company-owned properties and Kohler Village, one of the first planned

communities in the United States. Kohler took wasted and abused land

near the village and created what’s now called Destination Kohler. The

flagship properties of this resort area include The American Club resort

hotel, originally constructed in 1918 to provide housing for immigrants

and restored in 1981 as an elegant hotel. It is the only AAA Five

Diamond resort hotel in the Midwest.

Kohler is also a strong believer in giving back to the business community.

In 2000, the company endowed the Kohler Center for Entrepreneurship

in the College of Business Administration at Marquette University,

creating an Entrepreneur in Residence program to put students in

contact with business leaders.

Kohler’s leadership philosophy is simple and key to the company’s

market position. “It’s important that the leaders and most of the people

of the enterprise understand the mission and the guiding principles,” he

says. “If you have that, you’ll develop a unique identity very quickly

that will create a significant financial advantage.” It’s sage advice from

someone who’s done just that.

MANUFACTURING

“ I expect this company to continuallywork to be on the leading edge ofeverything it does.”

22 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

MANUFACTURING

F I NA L IST: Fourth-generation entrepreneur

Todd Werner parlayed a high school job as a

mailing machine technician into rebuilding

discarded machines in his garage and selling

them at a profit. He gained an intricate

knowledge of the machines and, by listening

to his customers, was able to develop and

patent a new type of paper-feeding device for

the industry. Equipment sales of his fledgling

company skyrocketed, only to be snuffed out

when it lost a yearlong, $1 million-plus

patent infringement suit.

Two months after losing the lawsuit and shut-

ting down his first company, and two years

before he won the case on appeal, an unde-

terred Werner started a new company, Sure-

Feed Engineering. He quickly designed, built

a prototype of, and patented the FlowMaster,

a mailing machine that revolutionized the

industry with an envelope inserting system

that can handle 12,000 envelopes, up to 10 x

13 inches in size, per hour.

In the three years since the FlowMaster was

introduced in 1999, Sure-Feed Engineering

revenues have quadrupled, net income has

increased nearly tenfold, and employment has

tripled. The coup de grace: Since the spring

of 2001, the company’s mailing and packag-

ing products have been marketed and ser-

viced worldwide by Pitney Bowes.

F I NA L IST: Farooq Kathwari is a risk-taker—

first when he protested against Indian rule

in his homeland of Kashmir in the 1960s,

then again when he immigrated to New

York, where he founded KEA International

Inc., an importer of Kashmiri crafts and

wall hangings. In 1980 Ethan Allen

Interiors purchased KEA and hired

Kathwari as vice president in charge of

merchandising and international operations.

When Ethan Allen’s parent decided to sell

the furniture maker in 1988, Kathwari took

another risk, and led a successful manage-

ment buyout of the company. He immedi-

ately undertook the reinvention of the stale

colonial-style furniture manufacturer. To

meet crushing interest payments on the

buyout debt, Kathwari eliminated 50% of

the product line within 24 months and repo-

sitioned the company as an affordable

maker and retailer of contemporary and

classic collections as well as colonial styles.

Kathwari has refocused advertising on

brand awareness and restructured the

manufacturing process by abolishing

traditional production lines in favor of

start-to-finish work groups. He has made

entrepreneurism the central tenet of Ethan

Allen’s business strategy. Between 1990

and 2001 sales grew almost threefold to

$904 million, and the debt-to-equity ratio

stood at a remarkable 2.1%.

T O D D W E R N E RS U R E - F E E D E N G I N E E R I N GT I T L E : P r e s i d e n tC I T Y : S t . P e t e r s b u r g , F l a .F O U N D E D : 1 9 9 8W E B A D D R E S S : w w w . s u r e - f e e d . c o m

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REAL ESTATE

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C a t e g o r y W i n n e r

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C I T Y : P i t t s b u r g h , P a .

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24 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

Considering his background, it might seem that Jack Mascaro was

destined to make his living in construction. But it was also his vision,

experience, and entrepreneurial drive that led him to create and build

Mascaro Construction Co., a general contractor, construction management,

and design/builder and major development force in the Pittsburgh area.

You could say that construction is in Mascaro’s blood. His grandfather,

Vincenzo, was a stone mason in Italy, building

homes and remodeling churches. Vincenzo’s son,

Peter, who is Mascaro’s father, earned a degree in

civil engineering and a Ph.D. in mathematics in Italy,

then came to the U.S. to study American building

methodologies, eventually starting a small bridge

construction company in 1941.

Construction was always a topic of discussion at

home when Mascaro was growing up. He and his

brother worked as laborers on job sites, and his

sisters were secretaries in the company office.

Although the business went bankrupt while Mascaro

was still in college, the desire to be in a family business lingered. “It is

important to me to carry on a tradition and make our name synonymous

with quality, integrity, and professionalism,” says Mascaro.

After graduating from the University of Pittsburgh with a civil engineering

degree, Mascaro worked in the field long enough to know he didn’t want

to be just an engineer for the rest of his life. He went to work for a con-

struction company, where he was given the opportunity to grow, eventually

becoming a regional vice president. But after nearly 20 years and feeling

he had gone about as far as he could, Mascaro struck out on his own.

What excited Mascaro more than anything else when he decided to

start his own company was that he could develop a culture unique in

the construction business. “When there were full service gas stations,”

explains Mascaro, “I always went to the one where the attendant said,

‘Hi, Jack. How are you today?’ He automatically washed the windows

and checked the oil and the tires. He did all the little things right. I

wondered why I couldn’t provide that kind of customer service in the

construction business.

“So, that became the company culture,” says Mascaro. “We were going

to do things right the first time. Even if it costs extra to get it done, if

we say we’re going to get it done, then that’s what we’re going to do.”

Mascaro’s success has been a result of his willingness to take risks and

work hard to achieve his goals. In 1988, Mascaro found a client who would

be willing to give his newly formed company its first major construction

contract if he could get a bond. Mascaro took a second mortgage on his

home, which gave him enough bonding capacity to get the job.

“My wife was the accountant and timekeeper, and I was the estimator

and project manager,” says Mascaro. “I worked off my ping-pong table

for three or four months.” Business was good enough in the first year

for Mascaro to pay off his mortgage, and the company

has continued to grow in income and prestige.

Today, a stunning mural Mascaro commissioned from

Douglas Cooper of Carnegie Mellon University greets

visitors entering the company lobby. “The artist repre-

sented some of my Dad’s roots with pictures of his vil-

lage in Italy, and there’s a montage of jobs we’ve done

in Pittsburgh that have added to the city landscape.

There’s a little section, too, with pictures of the family.

So there’s a message in the art,” says Mascaro.

Mascaro Construction has been part of many important

projects in the Pittsburgh area. Two from which

Mascaro derives particular satisfaction are the remodeling of Heinz Hall

from a multi-purpose facility into a great symphony hall for the Heinz

Family Endowments, and Heinz Field, home for the Pittsburgh Steelers

and Pitt Panthers.

Passionate about his profession, Mascaro has been president of his

contractors association for the last three years, working to build strong

bridges between management and the unions. Mascaro helped inaugu-

rate a program on construction management at his alma mater, and

established a scholarship in honor of his father. To further perpetuate

the company name, Mascaro’s three sons are in the business. John Jr. is

in charge of field operations, Jeffrey is the chief estimator, and Michael

is manager of business development. “My goal is to make sure my kids

are part of this tradition,” says Mascaro.

Mascaro believes he has been blessed with success so he can help other

people, and he has a lot to give back. He is creating a foundation that

will allow him to continue to give money to the religious, educational,

and environmental causes he has supported for many years. Included in

these wide-ranging interests are the Holy Family Institute that treats

children whose families are in crisis, the Construction Management

Program at the University of Pittsburgh, and the National Aviary.

Mascaro still loves to work at his work. In moving toward the

future he reminds himself that getting older makes people more

cautious, but that he must continue to be willing to take risks.

Mascaro also understands that part of his future will be giving up

the reins of Mascaro Construction, taking a back seat, watching

his children and other key people run the business. That’s just

f ine with him.

“I have to listen to the younger people,” says Mascaro, “because

the great thing about youth is they don’t know what they don’t

know. I have to nurture that entrepreneurial spirit.”

REAL ESTATE

“ It is important to me to carry on a tradition and make our name synonymous with quality, integrity,and professionalism.”

25

REAL ESTATE

F I NA L IST: Wilbur Breslin’s journey to

becoming a major force in residential real

estate on Long Island, New York—and in

five other states—began in a family fruit

and vegetable store. It was there that he

came to understand business success is

predicated on knowing and filling needs of

the customer.

When he opened Breslin Realty, a residential

real estate office, times were propitious.

Breslin capitalized on the growing number of

people seeking to relocate from crowded met-

ropolitan areas to suburbs like Long Island.

With Breslin’s finely honed sense of real

estate values, the company has flourished,

adding commercial realty and offering full

real estate services. A hallmark of Breslin

Realty is converting decaying properties into

attractive venues, including adding to the sur-

rounding area through landscaping, open

spaces, and improvements to road patterns.

Breslin Realty has participated in the

creation of 12 major residential communities,

developed more than 29 retail centers, and man-

ages 6 million square feet of real estate in five

states. Fourteen major development projects on

Long Island include the Hub at Hempstead, a

national model for successful redevelopment

that rejuvenated Hempstead village by replac-

ing more than a dozen outdated buildings with

a shopping center with national retailers.

F I NA L IST: Gerald T. Halpin’s 50 years in the

real estate business are marked by a

number of pioneering accomplishments,

including development of one of the first

mixed-use office parks in the Washington,

D.C., metro area. Halpin entered real

estate in 1952 with the construction

of a major manufacturing complex for

Atlantic Research Corp. In 1962, he

founded Westgate Corp., which became

WEST*GROUP, a full-service real estate

development, construction, brokerage, and

management organization.

WEST*GROUP has a well-earned reputation

for quality and integrity through its work on a

long list of highly successful office, retail,

industrial, and residential endeavors and has

garnered numerous industry awards. Among the

company’s recognizable and respected works

are the WEST*GATE and WEST*PARK office

parks in Tysons Corner, Md., headquarters to

major corporations such as Capital One,

Freddie Mac, MITRE Corp., and Gannett/USA

Today. In addition, WEST*GROUP has five

prime properties within one mile of

Washington’s Dulles Airport.

Halpin leads by example, and no small

part of his success has come through

his ability to create the right teams to

accomplish the jobs at hand. He gives

back to the greater community by serving

as a driving force on many corporate

and charitable boards, especially those

concerned with environmental preserva-

tion and conservation.

W I L B U R F . B R E S L I NB R E S L I N R E A L T Y D E V E L O P M E N T C O R P.T I T L E : F o u n d e r , P r e s i d e n tC I T Y : G a r d e n C i t y , N . Y .F O U N D E D : 1 9 5 3

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26 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

R o w l a n d S c h a e f e rC

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RETAIL

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27

Rowland Schaefer doesn’t have an MBA. He didn’t come from a

background of wealth or privilege. But he does have an entre-

preneurial drive that has propelled him further than education

or circumstance ever could.

It was Schaefer’s past that truly positioned him for the future. A child of

the Great Depression growing up with no father and little money, doing

without was par for the course. For Schaefer it built a lifelong philoso-

phy of constantly taking risks to better his situation, regardless of how

much success he achieved.

Schaefer dropped out of high school at 16 and went

to work to support his mother and brother. It was

during that time he learned many important business

lessons that have carried him through his career. At

one of his first jobs as a door-to-door vacuum sales-

man, Schaefer tried to talk to his boss about the

daunting sales climate he was facing. His boss

replied, “Either you get the job done, or don’t come

back.” That kind of pressure motivated Schaefer to

work to succeed, regardless of the odds.

After a succession of sales jobs, Schaefer launched

Fashion Tress Industries (FTI), a retailer of fashion

wigs, which he took public in 1961. He learned the business and

became a pioneer in the industry, buying hair in India and the Orient for

better prices and setting up a factory in Korea to export wigs to the U.S.

Schaefer grew FTI into the largest importer of wigs in the world before

the industry flattened.

In 1973, the company name was changed to Claire’s Stores Inc. when

Schaefer purchased the 25 Claire’s accessories outlets. His vision was to

sell fashion jewelry and apparel to one of the fastest growing consumer

groups at the time—teen and preteen girls. He was a first mover in tap-

ping into this previously overlooked market segment, which estimates

now place at more than $150 billion in disposable income.

Schaefer’s focus on the end user—from store design and customer ser-

vice to trend monitoring and merchandising—has kept the Claire’s

brand en vogue for more than 40 years with a notoriously fickle cus-

tomer. “Jane Q. Public is our boss,” says Schaefer. “If she doesn’t buy

what we are selling, we better find out what we are doing wrong.”

Through smart strategic decisions and acquisitions Claire’s has experi-

enced explosive success over the years—and continues to grow. Since

1997, the company’s revenues have increased 97% from $466 million to

$918 million for 2002. This remarkable growth has been achieved with-

out advertising. Instead, Claire’s has successfully harnessed the power of

brand recognition, customer service, and location.

Claire’s Stores has become the leading mall-based retailer of popularly

priced—typically $2 to $20—accessories, costume jewelry, and apparel

for young girls and women aged seven to 26. The Claire’s brands now

include Claire’s Accessories, Icing by Claire’s, and Mr. Rags, which

merchandises casual apparel and accessories to teen boys. Schaefer’s

goal to “accessorize the world” has built a truly global company, with

stores throughout North America, Japan, the United Kingdom, Ireland,

Switzerland, Austria, Germany, and France.

Schaefer credits his success to deep-rooted principles that he lives by.

“Treat people with respect, always be honest, and, most important, be

honest with yourself,” he says. “If you don’t tell the truth, people will

get wise to you.”

He also believes that the easiest way to grow as a person is to surround

yourself with people smarter than yourself. “I tell everyone, give me an

argument and tell me when I am wrong—I know I

don’t have all the answers,” Schaefer says. “I am very

proud of all of the people who work for us.”

Schaefer thinks of his employees as extensions of his

family and treats them accordingly. When an

employee learned that her husband had a brain tumor,

Schaefer paid for the couple to come to New York in

order to receive treatment at Sloan Kettering Cancer

Center. He paid for the funeral of a family member of

an employee who couldn’t afford it, and helped

employees whose homes were destroyed when

Hurricane Andrew hit South Florida.

Although considered a father figure by many of

Claire’s employees, the people who most admire Schaefer are his

four children, two of whom now serve on Claire’s management

team. E. Bonnie Schaefer is executive vice president of Real Estate

for the company, and Marla Schaefer is executive vice president of

Claire’s Boutiques, Inc.

What Marla admires most about her father is his ability to turn his set-

backs into successes. “He wasn’t always successful, so he was never

afraid to take a risk,” she says. “He never worried about the outcome. He

always found a way to make it work. His setbacks propelled him forward.”

Marla describes her father as a man with a strong sense of family. When

his eight-year-old granddaughter (she’s now 21) was diagnosed with

diabetes, Schaefer vowed to find a cure. He has donated more than

$10 million to the Diabetes Research Institute Foundation and serves on

its board of directors. Schaefer has also given much to the South Florida

Community where he lives, serving on the board of governors for the

Weizmann Institute of Science and as Honorary President and

Humanitarian Founder of the Miami Jewish Home and Hospital for the

Aged. And he is helping to fund a solar research center in Israel.

The still vital and energetic octogenarian has achieved a great deal in his

life, yet he remains as grounded and humble as when he began. “I did

nothing special,” Schaefer says. “I only tried to be friends with the

American public and tried to give them what they want.”

RETAIL

“ Treat people with respect, always behonest, and, most important, behonest with yourself.”

28 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

RETAIL

F I NA L IST: Lillian Vernon has a long history

of being ahead of the times. In 1951, the

expectant housewife took $2,000 in savings

to go into business for herself, with just

two products—a monogrammed purse and

belt—and a single $495 ad in Seventeen

magazine. Vernon received $32,000 in

orders, paving the way for what has

become one of the leading specialty catalog

and online retailers in the country. Today

Lillian Vernon Corporation has more than

$250 million in annual revenues, and offers

over 6,000 gift, housewares, gardening,

seasonal, and children’s items.

Among Vernon’s numerous firsts, hers was

the first company founded by a woman to be

listed on the American Stock Exchange. And

in 1995 Lillian Vernon was an early pioneer

in e-commerce with the launch of its first

consumer Web site, which is experiencing

double-digit growth and is the company’s

fastest-growing business segment.

In her more than 50 years in business,

Vernon has led the way in the workplace as

well by supporting women’s issues, educat-

ing men and women about sexual harass-

ment, and instituting a flex time and a

maternity-leave policy that guaranteed job

security long before the Family Medical

Leave Act came to pass.

FINALIST: When Rick Cohen joined his family’s

food wholesaling company in 1974, he saw

that, although C&S Wholesale Grocers had

become a supplier to sizable supermarket

chains, its growth was stagnating. Cohen set

out to change that with some risky proposals.

He convinced his father, then CEO, to move

the company from Massachusetts to Vermont

to lower operating costs and provide better

access to highways. The company built a

state-of-the-art warehouse to accommodate

the large accounts it needed in order to grow,

and asked employees to take pay cuts to sup-

port the strategy.

Cohen’s risks paid off. Since he took over

leadership of C&S in 1984, the company has

opened 24 additional warehouse distribution

centers along the East Coast, making it the

third largest wholesale grocery distributor in

New England. C&S is the wholesale supplier

to more than 1,700 locations in 12 states, and

is a primary supplier to 27 military bases in

New York, New Jersey, and New England.

Cohen continues to push boundaries and

innovate to improve the company’s perfor-

mance. He built an incentive program that

improved productivity and increased prof-

itability for employees and the company.

Sales over the last 16 years have increased at

a compound annual growth rate of 20%.

L I L L I A N V E R N O NT H E L I L L I A N V E R N O N C O R P O R A T I O NT I T L E : C E OC I T Y : R y e , N . Y .F O U N D E D : 1 9 5 1W E B A D D R E S S : w w w . l i l l i a n v e r n o n . c o m

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Rogerby Roger Mortonby Roger Morton

30 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

Taking the pain out of orthodontic practices is the tenet central to

Bart Palmisano’s success with Orthodontic Centers of America.

A licensed attorney and Certified Public Accountant,

Palmisano’s idea was to create a company that would take over all

business aspects of a practice and let doctors focus their knowledge and

training on what they know best: treating their patients.

“When I was in accounting,” Palmisano says, “many of my clients were

doctors, as well as a variety of other health care

professionals. They could generate income, but just

couldn’t keep very much of it.” So he teamed up with

long-time friend and client, Gasper Lazzara, Jr.,

D.D.S. “He knew a lot of orthodontists,” explains

Palmisano. “I knew a lot about organization and

business.” Their collaboration resulted in

Orthodontic Centers of America (OCA).

OCA develops orthodontic centers and manages

the business functions for affiliated orthodontic

practices, including handling money, paying bills,

purchasing, and patient accounting and scheduling,

as well as other services, such as advertising and marketing. The

retail-oriented approach provides economies of scale, convenience,

and other incentives not possible with traditional practices, including

an affordable payment plan with no down payment.

As a rule, orthodontists get patient referrals from general dentists or

other patients. Direct advertising reaches potential patients who know

they want the service with information on affordability and location.

According to OCA statistics, in 2001 orthodontists affiliated with the

company for one year averaged 569 new case starts. The 2000 national

average per orthodontist was 219 new case starts.

“I go by the theory that, like our customers, those in the health care

profession are all good practitioners,” says Palmisano, “but they are

basically not business people. We’re able to give them simplified

information, so they understand where they are all of the time.

Simplicity is what they really want, a client desire I learned in my

accounting practice.”

With a need to communicate with customers and maintain current

data in one place, OCA relies heavily on technology. The Internet,

with protected access, is key to OCA communications. The company

has developed proprietary systems and services, including an

Internet-based patient scheduling and accounting software that

allows it to write checks, handle payroll and employee benefits, and

do purchasing. And practitioners have immediate access to key per-

formance indicators such as production, revenues, and expenses.

“No one is able to generate information as efficiently and inexpensively

as we can,” Palmisano says. “We take the business burden off doctors by

telling them what they’re doing correctly and what they’re doing wrong.”

Rather than financial statements that can be cryptic and difficult to

understand, OCA distributes quarterly report cards to each practice, with

grades from A through F, and a grade point average. Grades are based on

criteria such as increases in new patient contracts or collections.

The report goes to the practitioner as well as the staff, who can receive

incentive pay up to 10% of base pay, depending on the grade point aver-

age. Palmisano believes the staff helps drive a business but doesn’t

always understand the business aspects of their roles. “We explain what

they need to do to pick grades up,” he says. “This way, all of us are

pulling on the same end of the rope.”

Orthodontic Centers of America is an unquestioned

success—meeting or exceeding Wall Street’s earning

expectations for the last 29 quarters. It had more than

$351 million in revenue for 2001, and for the past

five years has been among the top 5% of U.S. public

companies for earnings growth. The company has

grown from 11 affiliated practices in 1989 to more

than 600, with 3,500 employees in 850 locations in

43 U.S. states and five countries, including Puerto

Rico, Mexico, Spain, and Japan.

Despite OCA’s phenomenal growth and perfor-

mance, Palmisano is not resting on his laurels. He is eager to move the

company forward, envisioning huge growth potential domestically and

internationally. “We have no competition, good cash flow, and a lot of

experience,” he says. “It’s a matter of taking the company to the next

level, and that’s what I want to see.” In fact, in November 2001 OCA

merged with OrthAlliance, Inc., a provider of management and con-

sulting services to more than 200 orthodontists and pediatric dentists.

Palmisano places great value on the entrepreneurial skills of individuals.

“You can’t operate international business by long distance,” says Palmisano.

“You have to have good people on the ground and excellent information

systems to rely on to have a shot at success. The people we look at to

handle business abroad need skills and maturity—not just a concept.”

Called on to lend advice to those who would be entrepreneurs,

Palmisano emphasizes a willingness to take risks and the need to

understand the economics of a chosen business model. He speaks

from the depth of his own experiences.

“Look at the risk,” he says. “Put it on a spread sheet. Take time to put

together a business plan. Be willing to eat up your savings, but don’t go

into a lot of debt. Figure how to get the business to the point at which

it’s generating cash flow. Grow at your own rate—it may take years. If

you do that, then you’re going to be a success.”

SERVICE

“ You can’t operate international busi-ness by long distance. You have to havegood people on the ground and excellentinformation systems to rely on. …”

31

SERVICE

F I NA L IST: Looking to escape the cold Maine

winters of his college days, Richard V.

Keith headed to California and the first of

two highly successful ventures. A job with

a temporary employment agency allowed

him to see the potential of the business, and

in 1990, Keith moved to Colorado and

founded Apple One Employment Agency.

Within five years he had grown the business

more than 1,600%, then sold it and set his

sights on third-party call centers as the next

big growth opportunity.

In 1997 Keith founded Center Partners to

provide companies with outsourced opera-

tions like customer service, technical sup-

port, and help desks. Keith’s vision was

bolstered by his understanding that call

center success is predicated on hiring

well-qualified people and providing them

with high-level professional training and

state-of-the-art technology.

What started with just 10 employees grew to

2,500 in five years and was profitable in only

its second year. London-based WPP Group

plc bought Center Partners in 2001 and

retained Keith as global CEO for worldwide

call center enterprises. Post-merger, the new

entity will employ about 4,000 people with

revenues of $175 million, enabling it to pro-

vide seamless global customer care solutions.

F I NA L IST: Setting goals and achieving them

is what makes Robert Knutson tick. After

working his way through college, he

embarked on a career in investment bank-

ing, only to interrupt it to pursue his dream

to pilot a jet. Knutson served five years in

the U.S. Air Force flying jet fighters, before

rejoining banking, moving from financing

operations to mergers and acquisitions.

While working to help a client acquire the

Art Institute of Pittsburgh, Knutson saw

the institution’s potential. He joined the

school’s board of directors, and within a

year was offered an ownership position.

Now known as Education Management

Corp. (EDMC), the single entity has grown

through the careful acquisition of smaller

schools to become one of the country’s

largest for-profit educational entities, with

an enrollment of 40,000 students on 40

primary campuses in 26 cities and revenues

of $500.6 million for fiscal 2002.

Knutson knows the value of focusing on

customers—employers and students, 90%

of whom find employment within six

months of graduation. And EDMC main-

tains an extensive database and contacts

with potential employers to match gradu-

ating students with current market needs.

Knutson still isn’t f inished setting goals.

Over the next five years he plans to

increase enrollment to 80,000 and gener-

ate revenues in excess of $1 billion.

R I C H A R D V . K E I T HC E N T E R P A R T N E R S , I N C .T I T L E : F o u n d e r , C E OC I T Y : F o r t C o l l i n s , C o l o .F O U N D E D : 1 9 9 7W E B A D D R E S S : w w w . i n f o @ c e n t e r p a r t n e r s . c o m

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W i l l i a m B y n u mE

nte

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by Danielle Dayen

SUPPORTER OF ENTREPRENEURSHIP

32 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

S u p p o r t e r o f E n t r e p r e n e u r s h i p

C a t e g o r y W i n n e rT I T L E : C h i e f E x e c u t i v e O f f i c e r

C I T Y : J a c k s o n , M i s s .

F O U N D E D : 1 9 9 4

W E B A D D R E S S : w w w . e c d . o r g

William Bynum has made a career out of providing entrepre-

neurs with the tools and support they need to make their

dreams come true. After graduating from college, Bynum

decided to get some experience in the working world before going

on to law school. He took a job in his native North Carolina with an

organization that was working to promote employee ownership as an

alternative to the plant closings that were happening in the late 1980s.

It was a fateful decision.

“I found that many times the people we worked

with—rural workers, minorities, and women—did a

good job developing business plans, but would be

turned down for financing by traditional financial

institutions,” Bynum says. “So we started our own

credit union and received a lot of support from

socially responsible investors. Soon we had more

money than employee-owned businesses, and we

started to loan money to businesses that support eco-

nomic development in underserved communities.”

That experience was the end of Bynum’s law career

and the beginning of a lifetime of helping under-

served, financially disadvantaged communities and

their people by promoting entrepreneurship. In 1994, while working

for another organization doing rural development in North Carolina,

a friend told Bynum about Enterprise Corporation of the Delta. The

company had recently secured a seed grant and was looking for

someone with Bynum’s qualifications and experience to get the

organization off the ground.

In the Delta region of Arkansas, Louisiana, and Mississippi, Bynum

found the same sort of hardworking people in need of a little assistance

that he’d known in North Carolina. The challenge of developing solu-

tions in one of the most economically distressed regions in the coun-

try—Arkansas, Louisiana, and Mississippi consistently rank lowest

among the states on most socioeconomic indicators and the Delta gen-

erally ranks at the bottom of such indicators within each state—was

one he couldn’t pass up.

With only a conceptual design and skeleton for ECD, Bynum brought

together a staff of talented individuals with private sector and banking

experience, many of whom were Delta natives who had moved away in

search of better job opportunities. ECD gave them the chance to come

home and make a positive impact in their own community.

Today, ECD has closed an important financial gap in the Delta region,

helping to deploy capital more efficiently. “We do our business in a

way that is complementary to what banks do,” says Bynum. “Banks are

some of our primary investors and partners, and we feel that ECD is an

important part of the financial continuum in the region.” Since 1995,

ECD has closed 171 loans totaling more than $27 million, leveraged

$33 million in additional financing from other sources, and made

nearly 40% of its loans to minority- and women-owned businesses.

In addition to capital, ECD works to bring valuable development

programs and tools into the Delta region. FastTrac, a national

program introduced to ECD by the Ewing Marion Kauffman

Foundation, helps entrepreneurs learn to use low-cost marketing

strategies, develop financing strategies, hire personnel, and manage

cash flow. The Delta Employment Enhancement Project (DEEP)

promotes public programs and incentives that benefit low- and mod-

erate-income workers and their employers. Delta BusinessLINC

facilitates mentoring, buyer-supplier, and other

business relationships between large corporations

and smaller Delta firms. Over 1,000 entrepreneurs

have benefited from these programs.

Another important area of ECD’s work is its

strategic investments in companies that can make

a substantial impact in the Delta region. A recent

investment in a high-speed telecom company that

traditionally targeted urban markets is already

making a difference in a region where two-thirds of

the ZIP Codes don’t have an Internet service

provider. “We try to leverage resources and show

what can happen if strategic investments are made in

key areas,” Bynum says. “We have to work to close the gap between

this region and the rest of the country.”

In addition, 2001 saw the announcement of the Emerging Markets

Partnership, a comprehensive effort to stimulate economic develop-

ment in the Delta supported by all three state governors and the leader-

ship of Fannie Mae, Entergy (the area’s electrical utility), and the W.K.

Kellogg Foundation. Managed by ECD, the partnership will carry out

development strategies targeting six primary areas: child care, enter-

prise development, health care, telecommunications, workforce devel-

opment, and housing. ECD projects that the partnership will generate

$500 million in new investments in the Delta over a five-year period.

“It’s pretty amazing what people can do when they have the tools,”

says Bynum. “Entrepreneurs need capital, tools, and support sys-

tems. We provide those resources, and they have shown time and

time again that they can compete with companies anywhere. That’s

what keeps me motivated.”

ECD is in the process of reshaping itself to take on a broader role in the

Delta and in the three states overall. “All the things we do emanate

from ECD’s strength as a provider of development finance,” says

Bynum. “As long as we continue to build from that strength, we have a

bright future. My objective is to build the premier development finan-

cial institution in the country. This region needs it, deserves it, and

we’re blessed to have partners who help us.”

SUPPORTER OF ENTREPRENEURSHIP

33

“Entrepreneurs need capital, tools, andsupport systems.”

34 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

SUPPORTER OF ENTREPRENEURSHIP

F I NA L IST: As a first time entrepreneur

attempting to establish an Internet ven-

ture, Gyan Parida found that the right

advice and guidance wasn’t available at

any price. So he decided to start his own

community of entrepreneurs to support

each other and, most importantly, provide

everything for free.

Started in 1999 as an online discussion

forum, Silicon Alley Entrepreneurs Club

(SAEC) quickly grew to 250 members,

attracting dozens of would-be CEOs to its

monthly events. When the market crashed

in 2000, SAEC did not give up on new

ventures or entrepreneurs. Parida

expanded the club’s mission and devel-

oped a system to provide a variety of free

support services to entrepreneurs of early-

stage start-ups by getting local businesses

to swap their services for advertising and

promotion through SAEC events.

This unique strategy covers more than 70% of

the group’s operating expenses; the other 30%

are covered by similar strategies, enabling

SAEC to continue to provide high-quality ser-

vices to its members at no cost. Today SAEC

has more than 4,000 members and is hoping to

expand to other hubs of technological innova-

tion once its programs have been fully refined

and tested in New York City.

F I NA L IST: During the five years Brien

Biondi has led the Young Entrepreneurs’

Organization, YEO has evolved from a pre-

dominantly North American-based group

with 1,200 members to a global organization

with more than 4,500 members in nearly 40

countries. The leading peer-to-peer global

resource, network, and community for

young entrepreneurs, YEO offers a variety

of training and experiences to its members,

including confidential member-to-member

forums where new ideas can be tested and

explored, local chapter meetings, focused

seminars, multi-day international confer-

ences, and an interactive Web site.

Under Biondi’s direction, YEO has

expanded into Europe, India, and the Middle

East, launched powerful alliances with other

organizations that champion entrepreneur-

ship, and standardized and expanded key

YEO programs, such as the forums—now

considered the number one benefit of mem-

bership. In addition, Biondi understands the

expanded role entrepreneurs play in the

world today and has incorporated social

philanthropy programs into YEO’s offerings.

But the most far-reaching and future-oriented

innovations Biondi has prompted are the

unprecedented tools for communications,

data management, and benchmarking against

other companies in similar industries

available on the organization’s interactive

database, YEOnet, ensuring that its mem-

bers have the resources to turn their ideas

into reality.

D R . G Y A N R . P A R I D AS I L I C O N A L L E Y E N T R E P R E N E U R S C L U BT I T L E : F o u n d e r , P r e s i d e n tC I T Y : N e w B r u n s w i c k , N . J .F O U N D E D : 1 9 9 9W E B A D D R E S S : w w w . s a e c l u b . c o m

B R I E N B I O N D IY O U N G E N T R E P R E N E U R S ’ O R G A N I Z A T I O NT I T L E : C h i e f E x e c u t i v e O f f i c e rC I T Y : A l e x a n d r i a , V a .F O U N D E D : 1 9 8 7W E B A D D R E S S : w w w . y e o . o r g

F . N e a l H u n t e rC

re

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I

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.

by Lindsey Siegle

TECHNOLOGY/COMMUNICATIONS

35

T e c h n o l o g y / C o m m u n i c a t i o n s

C a t e g o r y W i n n e rT I T L E : E x e c u t i v e C h a i r m a n

C I T Y : D u r h a m , N . C .

F O U N D E D : 1 9 8 7

W E B A D D R E S S : w w w . c r e e . c o m

36 E N T R E P R E N E U R O F T H E Y E A R 2 0 0 2

While Cree Inc. is a company that has always sought the

bright lights, Neal Hunter has remained hard at work

making sure it would be much more than a flash in the pan.

Hunter is one of six scientists at North Carolina State University who

founded Cree in 1987, and he’s been a key leader throughout the many

challenges of the company’s first 15 years.

Cree was launched around the idea of developing silicon

carbide as a viable alternative to other semiconductor

materials for light emitting diodes (LEDs) and other light-

ing applications. Today it is the world leader in developing

and manufacturing semiconductor materials and electronic

devices made from silicon carbide. Cree LEDs have found

their way into everything from consumer and automotive

electronics to traffic lights, where they are a low-power,

long-life replacement for conventional light bulbs.

“It was always about being tenacious and conserving

cash,” says Hunter of his business philosophy.

“Obviously, you have to fund and pick among critical

R&D projects, but at the end of the day, if you don’t

have the cash you aren’t going anywhere.”

Bottom-line discipline was essential to Cree’s success, because, for all the

promise of silicon carbide as a semiconductor, the inordinate difficulty in

handling the material assured the company a difficult development

process. Hunter and his colleagues persevered, however, eventually taking

the company public in 1993. Cree has since become the top producer of

silicon carbide and silicon carbide products in the United States.

As has been well documented, the late 1990s were a heady time for

high-tech companies, and Hunter acknowledges it was difficult not to

stray from his core philosophy in a time of easy money. Many CEOs,

particularly of new start-ups, thought that the ready supply of cash

would always be there. Others took the opportunity to cash out and let

someone else worry about developing the business they started.

Hunter did neither. He took the boom—in hindsight a bubble—not as an

opportunity that wouldn’t go away, or as a chance to feather his own nest,

but as a unique circumstance to position the company for the future.

“We did a [secondary stock] offering in January of 2000 right at nearly

$300 million,” Hunter explains. “We did that to the exclusion of being

able to trade. Obviously we had to sign lock-up agreements during that

deal so at the time when our stock price was highest all the directors

and officers locked themselves out of being able to trade for a six-

month period and did what was right for the company.”

By not buying into the hot trend, Cree looks to be coming out both a

short-term and long-term winner. “We really solidified our balance

sheet for what we thought at that time was maybe five to seven years,”

Hunter says. “Now it looks like it’s even longer.”

While other companies soon found themselves cutting staff to survive in

the face of falling sales and mounting inventories, Hunter was leading Cree

into a period of heavy investment in research and

development. “Because we did all that R&D, we’re

essentially sold out of our products and we’re adding

employees,” says Hunter. “That particular strategy has

worked very well for us in taking care of our people.

We understand that they are a very important asset.”

The deterioration in the economy that took place

in 2001 was a disaster for many technology com-

panies, but Cree saw its fiscal 2001 revenues

jump roughly 64%, from $108 million to more

than $177 million. The acquisition of Goleta,

Calif.-based Nitres Inc., and Ultra RF Inc., a

Sunnyvale, Calif., company, contributed about

25% to that growth, but both acquisitions were made at almost negli-

gible cost, according to Hunter, who notes that the acquisitions were

primarily done with Cree stock.

“What our financing did for us was, when our stock valuations came down

with the rest of the market, we then went in and bought stock back at a much

lower price than we did those acquisitions for,” Hunter explains. “We essen-

tially removed the dilution we had as a result of those stock offerings earlier.”

When the market downturn hit, Cree announced plans to buy back as

many as 7 million shares of its stock, and by February of this year had

purchased more than 2.5 million shares at prices far below what they

were able to issue shares for not long before.

The downturn in the high-tech sector in 2002 did affect the bottom line

for Cree, but the company faired far better than most and is forecasting

significant growth in the coming year based on early sales reports that

show earnings increasing by 20 percent over the first quarter of 2001.

While it started with light, Cree was never blind to the other advan-

tages silicon carbide possesses as a semiconductor. Ultra RF, now

known as Cree Microwave, has helped the company exploit silicon

carbide’s natural advantages for a variety of wide-bandwidth radio

communications and cellular infrastructure applications. Compared

with other semiconductors, such as silicon and gallium arsenide,

silicon carbide has higher thermal conductivity and can operate at

higher voltages and with higher power density.

Cree has even found a market for its silicon carbide products outside of

high-tech applications providing raw bulk crystals that are cut and mar-

keted as moissanite, an artificial diamond. “It allows us to get better

economies of scale in our crystal growth operations,” Hunter says. “It’s

another great application for our product. We’re always churning ideas on

how can we get silicon carbide out there in larger volume applications.”

TECHNOLOGY/COMMUNICATIONS

“ At the end of the day, if you don’thave the cash you aren’t going anywhere.”

37

TECHNOLOGY/COMMUNICATIONS

F I NA L IST: For Victor Tsao, doing business

is all about sharing. He built Linksys with

the vision of enabling people to more

easily communicate, create, and share

ideas and knowledge. Six months after

Tsao and his wife, Janie, launched

Linksys in their garage, they were selling

networking systems and print servers via

direct mail and catalogs from a tiny suite

in Irvine’s business district. Within two

years Linksys products were on the

shelves of major retailers.

But Linksys was competing with some very

big players. Instead of going head-to-head

with them, Tsao targeted the then-tiny retail

market. And that’s where sharing really paid

off for Tsao. He treated retailers as partners,

not customers, and sent his entire sales team

of five to each and every one of his retail

partners’ locations. The Linksys staff taught

personnel at CompUSA, Office Depot,

Staples, Best Buy, and Office Max stores

how to set up home and office networks.

The relationship it built with retailers allowed

Linksys to become a recognized brand name

in network products. Since 1996, Linksys has

been the No. 1 retail chain supplier of com-

puter peripheral and networking products,

and growth is now rapidly spreading through

other distribution channels as well.

F I NA L IST: When it comes to identifying

and correcting network problems, more

and more companies are turning to a

SMARTS solution. SMARTS is System

Management Arts, founded by Shaula

Yemini. Through her work in IBM’s

distributed systems software technology

department, Yemini envisioned the emer-

gence of true distributed systems and

understood that proper management and

maintenance of such systems would be

integral to their success.

Yemini launched her company, with support

from her brother, without sales or marketing

experience and the knowledge that the first

sale was nowhere in sight. It took four and a

half years, during which she ran through

$6 million in investments, to bring a product

to market, but when she did, Yemini was able

to create a sizable revenue stream that allowed

her to obtain the necessary additional funding

for the company’s growth.

While most technology companies have

been happy to maintain sales over the last

two years, SMARTS has experienced

tremendous growth. Sales increased more

than 75% from 1999 to 2000 and nearly

100% the following year. Today SMARTS

develops, sells, and supports a full suite of

infrastructure management solutions that

are relied upon by hundreds of industry-

leading companies, including many of the

Fortune 1000.

V I C T O R T S A OL I N K S Y ST I T L E : P r e s i d e n t , C E OC I T Y : I r v i n e , C a l i f .F O U N D E D : 1 9 8 8W E B A D D R E S S : w w w . l i n k s y s . c o m

S H A U L A Y E M I N IS Y S T E M M A N A G E M E N T A R T S ( S M A R T S )T I T L E : F o u n d e r , P r e s i d e n tC I T Y : W h i t e P l a i n s , N . Y .F O U N D E D : 1 9 9 3W E B A D D R E S S : w w w . s m a r t s . c o m

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