Perhaps a company’s most valuable asset is the capacity of its leaders to make decisions that sustain organizational longevity, rather than choices based on ego and personal gain.
Such selflessness is particularly rare in the Web-related business environment, where so many rushed to market with the intent to cash out early.
Whether Web-based or built with bricks, the ultimate test for any organization is the consequential decisions faced at the crossroads of growth. Ever since he left a successful advertising career to pursue a field naysayers predicted would be a short-lived fad, Howard Cleveland has confronted many such defining moments.
In September 1995, Cleveland launched the Fairlawn-based Web-development firm formerly known as Mozes Cleveland & Co. Focusing on new media design and integration, he piloted major Internet initiatives for prestigious clients.
By 1998, his projects had merited several industry awards, and annual billings topped $2 million. Buyers and venture capitalists came calling, but instead of selling out, Cleveland opted for growth.
A year later, he reached another crossroads, and made a decision most entrepreneurs wouldn’t even consider: He fired himself as head honcho.
“You get to a point in your life where you know what you don’t know, and this was the critical point at which I had to realize my strengths and weaknesses,” Cleveland says in retrospect. “My expertise was creative thinking and cultivating client relationships, but I didn’t have the skills to run a company. I had to do something about that so we could continue growing.”
In May 1999, Cleveland named Jim Zedella as his new president and CEO. Zedella had formerly filled senior management positions at fast-growing tech companies before growing his own entrepreneurial start-up into a profitable acquisition.
“My experience and strength was in organizing resources — financial, people and otherwise — to execute a business plan,” says Zedella. “When I looked at this company’s successes and its mission, I felt it was worth a shot to grow the organization.”
Cleveland looked to Zedella to lead the company to its next stage of development, which would free him to do what he did best: conceiving new growth opportunities.
“It’s hard to sell anything if you don’t see people, so I just let Jim do his thing, and I focused on working with clients and getting new ones to keep the money coming in,” Cleveland says.
Appropriately, Cleveland changed his own title to chief creative officer.
A year later, after the March 2000 acquisition of Quest4mation, a local e-commerce company specializing in back-end integration, Cleveland’s expanded venture debuted its new identity and company name: DigitalDay.
The Quest4mation acquisition complemented DigitalDay’s front-end strategy, branding and client-focused expertise. And Quest4mation’s president and CEO, Brian Scotese, became DigitalDay’s chief technology officer.
Leaps of faith
To drive DigitalDay toward long-term sustainability, Zedella planned to focus on controlled growth and conservative business management, especially considering the resources he had to work with.
“At first, I thought the company had more financial means than it did. But I found we’d have to make some very challenging financial decisions in order to hire the right people and put the necessary infrastructure in place,” Zedella says, explaining that Cleveland’s endeavor had simply grown too fast up to that point.
Money management was tricky, Zedella says, because in the real world of Fortune 100, customers pay in their own sweet time. That called for negotiating and managing reasonable pay terms with clients. To ensure timely payment for DigitalDay’s vendors, he prioritized and structured a tight accounts payable schedule.
“There’s no treatise for a Harvard MBA to read here, it was just Financial Management 101,” Zedella says. “But it was also being straight up with people.”
By “people,” Zedella means bankers. Surprisingly, he put himself at risk by personally guaranteeing DigitalDay’s obligations.
“I also put money into the company at a crucial point because I believed in what we were doing and I was willing to make that trade-off,” Zedella says.
Those decisions were monumental leaps of faith for him, considering he was working under a three-month probation arrangement.
And there’s the rub.
While it sounds sort of new economy cool that Cleveland fired himself and hired Zedella as his boss, the likelihood that that concept would succeed was less than 50 percent. Realizing that, the two made a quiet agreement that Zedella would be an “independent contractor president and CEO” for 90 days, and if things didn’t work out, they could part as friends.
“We didn’t announce that to the world, because if we did, the world wouldn’t look at me as the person in charge,” Zedella says.
Clearly, DigitalDay now had two leaders selflessly committed to securing the company’s long-term growth.
DigitalDay’s path to growth necessitated the ability to continually evaluate and respond to client needs. With that in mind, one of the first decisions the duo made was to co-found HATCHBOX in March 2000.
As an incubation services firm, HATCHBOX helps fledgling e-commerce companies grow into stable businesses by providing business, legal, accounting, executive, recruiting, facilities, Web development and promotional and marketing expertise.
Cleveland dreamed up the idea when several clients approached him with their desires to develop a dot-com, without fully conceived business plans, venture capital or marketing strategies.
He explains that, in allowing clients to work on-site with development teams during a four- to eight-month incubation period, HATCHBOX provides the infrastructure, financing, and development under one roof, in workspaces specifically designed for the early development and launch of these Internet companies.
Partnerships that Cleveland structured with DigitalDay, Arthur Andersen and Benesch, Friedlander, Coplan & Aronoff facilitate the HATCHBOX model. But as a separate entity from DigitalDay, HATCHBOX has its own management and staff, capitalization and investors. And unlike DigitalDay, which is a fee-based business, HATCHBOX takes equity in return for its services.
Another venture, in April 2000, was the launch of Cross Town Traffic — another entity with its own management and assets separate from DigitalDay.
Cross Town is a digital marketing firm focused exclusively on driving traffic to Web sites, a brainchild born out of Cleveland’s desire to help clients better promote their sites after development. (See sidebar, Cleveland’s creative strategy.)
“Since my background was in marketing and advertising, people were asking me what they should be doing to promote their sites,” Cleveland says. “We didn’t want to dilute the brand of DigitalDay as a Web development company by becoming a promotion and marketing company, so we launched Cross Town as a stand-alone firm to service the clients needs.”
Cross Town does more than create marketing programs using traditional media such as television commercials, radio spots and print and Internet banner ads. It builds marketing considerations into site development, and each site’s inner workings.
Nice guys finish first
Looking back, Cleveland says his eyebrow-raising changes have paid off. He credits Zedella for growing the entity from a $2 million per year boutique shop to what it is today, the premier strategic firm in the Midwest specializing in e-business strategy, technology integration, branding, e-commerce and Web development.
Likewise, Zedella applauds Cleveland’s insight and ability to creatively align business objectives with emerging trends in the marketplace. He says his investment in the company and his decision to personally guarantee its obligations was worth the risk.
“If a business has true barriers to entry and you’re not delusional, you can bet the farm on that,” Zedella says. “It was worth it to assure the bank that I’d stand behind this company.”
Perhaps that’s because — with 85 employees and a client roster including National City Corp., GE, Sherwin-Williams Co., BFGoodrich, Federal Express and other big names — DigitalDay’s billings are expected to exceed $11 million this year, which will necessitate hiring about 35 more people.
Cleveland and Zedella say they’ll continue to build on DigitalDay’s strengths by pursuing merger and acquisition opportunities in the Midwest. But they’re also reaching out to South America and Europe, with plans to establish a DigitalDay office in Germany or the Netherlands by year-end.
“We’re not going to open there speculatively, we’re opening to support the international work we’ve already got going over there,” Zedella says.
This is just another way of growing responsibly.
“What’s unique is that we’re not venture capital backed, we’re not a public company, and we live off our operating earnings,” he says. “We actually make payroll with just those resources, and in our marketplace, that’s pretty remarkable.”
So that’s the real story of DigitalDay’s trek to the high road of profitability. It wasn’t a case of a company growing like crazy. It was a matter of growing rapidly, yet responsibly — by way of an unusual compromise between a creative visionary and a pragmatic leader.
“You read these stories about companies reinventing themselves by looking at new approaches to the markets. But we’re going back to the basics of why I started this business — to help people maximize their investments in the Web,” says Cleveland.
“I’m in it for the long term, so it helps to have people that can plan strategies to meet those objectives.” How to reach: DigitalDay (330) 668-6669; www.digital-day.com
Cleveland’s creative strategy
At the heart of DigitalDay’s success is the model Howard Cleveland created to help clients define and realize their business strategies on the Internet.
Early on, Cleveland saw companies struggle with the new technology and lose track of their primary business and branding objectives. In 1997, he structured a methodology that tracks the progression of Web development, from identifying business strategies to Internet deployment.
Dubbed the “4D Process” — Define, Design, Develop and Deploy — the method emphasizes an iterative development cycle with multiple incremental releases to incorporate user feedback and keep pace with the Web’s technological changes.
Today, the formula includes a fifth D, for “Do Business,” to continue ongoing development long after a client’s original Web initiative launch.
To promote creativity and innovation, the process draws on skills in business strategy, marketing and branding, technology, design and communications. By allowing for the integration of the strategic and development phases, the process allows DigitalDay to collapse the traditional development sequence, capitalizing on efficiencies at every stage to complete projects faster and more efficiently.