January 19, 2012

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Technology Industry Outlook

A Roundtable Discussion Among Local Leaders

Utah Business Editors

January 19, 2012

Participants: Richard Nelson, Utah Technology Council Hamilton Shattuck, IM Flash Hal Widlansky, Mangia Technologies Pratrap Khanwilkar, WorldHeart Mike Flathers, Sorenson Media Pete Ashdown, XMission Jeremy Hanks, Doba Kevin Laurence, Stoel Rives Russ Warner, Content Watch Clark Turner, Aribex Dave Cutler, Novell David Tietjen, ViaWest Jeff Nelson, Nelson Laboratories Kelvyn Cullimore, Dynatronics Corp. We’d like to give a special thank you to Richard Nelson, president and CEO of the Utah Technology Council, for moderating the discussion and to Holland & Hart for hosting the event. Utah’s technology industry continues to face the ongoing challenge of securing a qualified workforce. At our annual technology roundtable, industry experts discussed unique methods to educate, attract and retain top talent. The group also discussed the state’s Fund of Funds program and other state initiatives, while stressing the importance of a continued commitment to training and education in the state. Finding skilled workers has been a common problem among Utah’ tech companies. Has this problem improved during the last year? SHATTUCK: I'm with IM Flash Technologies in Lehi. We are the world technology leader in NAND Flash memory. We have about 1,500 technicians and engineers and support staff in Lehi. We've probably hired over 200 people in the last year in various different positions, and right now we are running about 50 openings for mostly engineers and technicians. Our biggest concern moving forward is really around finding experienced technicians. WIDLANSKY: I am the CEO of Mangia Technologies. We are a mobile transaction platform that allows you to order your food and beverages and souvenirs right from your cell phone at stadiums. We’ve been around for more than two years. We're eight employees, half of those added in the last 12 months. We plan to double in size during the next six months to about 20 by the end of the year. The biggest challenge for us is finding experienced management, particularly in technology management and in marketing in the technology space here in Utah. KHANWILKAR: WorldHeart has about 55 full-time employees, of which about 46 are here in Utah. And in the last year we've grown the workforce by 33 percent–all the way from CEO and a CFO to accounting and manufacturing staff. Hiring has been one of our challenges. We are looking for a couple of manufacturing operators with programming experience to run machines for us. We’re also looking for assemblers and production management. FLATHERS: I'm CTO of Sorenson Media. We've been in the video stage for a long time. We're often credited with being one of the companies that actually brought video to the Internet. We were the first video codec in output time and first video codec in Flash. So we did bring video to Flash and also QuickTime. We have about 50 employees right now. We agree that it’s difficult to find top technical talent. Even though the market is purported to be very difficult out there, that top talent seems to be employed already. CUTLER: Novell has about 3,600 employees globally, with about 800 here in Utah. Last year we didn't have much attrition, so we didn't do a lot of hiring here in Utah, but with the economy turning around, we are seeing some increased attrition and have 20 or 30 openings right at the moment. TIETJEN: ViaWest is a super regional provider of data center services, and perhaps the largest privately funded company in the U.S. that does this sort of thing. One of the challenges I see is that though Utah is very software savvy, it's tough finding IT infrastructure experience. It takes a lot to understand how to run this space effectively. J. NELSON: Nelson Laboratories is a medical device pharmaceutical product and tissue company testing laboratory. What we do basically is work with those manufacturers to ensure their products are safe, sterile and functional. They take our data and they use that with the FDA or notified bodies to support their wonderful life saving products. We have 342 employees right now, and in the last year we've hired about 20. While we’re happy to be growing, a specific hiring challenge for us is that we want to hire great scientists, people who really dig into the technical details of what is happening with the testing standards and really get deep product knowledge as far as that expertise. But the trick is they also have to be great people people. So they have to be able to be very scientifically minded, but also very cordial, very service oriented—and that balance can be a challenge to find. But we've found some great people and I think that is one of the things we've been most successful at—building a great team. CULLIMORE: Dynatronics Corporation is a 30 year old company headquartered in Cottonwood Heights. We're a manufacturer of medical devices for physical therapy. We have about 80 employees in Utah and about 170 nationwide. Last year we hired six people and we have openings for about three right now. We've had our biggest challenge in finding good IT people. We're launching an e commerce solution right now, which is challenging. As a proven technology leader, what one principle has been most valuable to you in building your leadership skills and why? HANKS: Work ethic—you cannot lead people if you expect them to do something you are not going to do. Lead from the front by working harder than the rest of your employees. CULLIMORE: I think you've got to be able to create a vision. If you are going to be the leader, you have to create the vision that everyone can embrace and see the direction that it is heading so that they can all be equally yolked in accomplishing the objective. FLATHERS: Don't be afraid to hire people that are smarter than you. I think that is a challenge that a lot of people face—they think, “I don't want to hire them because they are going to challenge me.” But you should share and allow someone else to step in and be a leader as well. WIDLANSKY: Check your ego at the door. This goes along with hiring people smarter than you. Don't be afraid to not be the smartest person in the room. I've been doing technology for 15 years and when I hired a CTO two months ago, I hired the smartest guy I could find. I am absolutely not the smartest guy in the room if he's in the room with me. But that's why I hired him—because he can make calls and he can bring experience to the table that I just don't have. WARNER: Get feedback from all levels of the organization. You will find some gems. Some people who are typically overlooked can have great ideas. TIETJEN: I'd say the ability to connect with people in a meaningful way is important. Talk is cheap. Where there is trust, things go quickly. Where there is no trust, things don't move. J. NELSON: Be transparent. Make sure that everyone knows exactly where you stand today and exactly where you are going. Communicate the things that the company is really going through so that everyone can be involved in discovering solutions. KHANWILKAR: Practice integrity. People need to trust and believe what you are saying. They need to be able to come to you if there are any issues. FLATHERS: You have to work hard and be in the trenches with everybody. I admire leaders who stick around with people and work. When you’re in charge, you could easily go off and let everyone else do the work, but being there and sacrificing with everyone is important. As an entrepreneur, what price have you paid to ensure your company's success? ASHDOWN: During the boom of the Internet in the 1990s, we had a lot of offers to merge or sell. I looked at a lot of those and although they would have benefited me greatly, they would not have been the best thing for my company and they would not have been the best thing for my customers, so I decided not to do it. J. NELSON: I work in a family business, and working with your family is a big price initially. That is something that is not easy to balance very well. I think that price was a heavy investment early on, but over the years that has been something that has paid off as a real investment—something that we have been able to overcome and really strengthen over time. KHANWILKAR: Family and friends are sacrificed. I count myself very lucky to still be married to the same spouse as I started off with. I have one child. She's graduating from high school this year, and I missed a lot of her childhood. Luckily over the last five years since I've sold the company, I've had the time to have a life, if you will, but otherwise you don't. Being the CEO of a startup company for 12 years, you have to be on 24/7, 365 days a year. What advice would you give to Utah’s emerging entrepreneurs? HANKS: One word: Act. A C T, act. Go do it. KHANWILKAR: Never, ever give up if you believe in it. J. NELSON: Too often Utah companies think that the route to exit is to merge their company or sell their company at a stage that is often premature. We have great companies that have a lot of potential and can do a lot of great things. Entrepreneurs need to believe in what they are doing and stick with it. TIETJEN: I think networking and finding mentors is important. If you are starting out as an entrepreneur, you clearly don't know everything. You need to tap in, network and learn from people. WIDLANSKY: Don't be afraid to fail. I learned more from my failed startup that raised $30 million in venture capital and went belly up than from some of the successes that I've had. And I take those things forward and apply them in my new company and we're more successful for it. WARNER: Don’t be afraid to ask for help. There are folks who are more intelligent or who have had experiences we can tap and get good ideas from. TURNER: What I've been telling my kids, because they are now in college, is that you want to be an entrepreneur, and you definitely want to be a business owner, but don't make that your first job out of college. Go out and work for somebody else, get some experience, spend four or five years in an industry, and work to really understand the business. Then go out on your own. What are you doing to connect with the younger, tech savvy millennial generation? WIDLANSKY: To connect with the millennials, I hire them. Half of my employees are under 30. We've got half a dozen interns, all college students or recent college grads. I've got a guy who does nothing but tweet and update Facebook for us. I’ve learned so much just following him around for an afternoon as he navigates the web and spreads our message virally. CUTLER: We’ve hired a director of social media at Novell who is coordinating all of our social media efforts. To attract more millennial workers, we are offering some flexible work scheduling opportunities and trying to give them meaningful assignments, as well as moving them up the career ladder. HANKS: You've got to watch what the younger people do. In our company, the youngest people are the customer service reps. And on one hand, it's really tempting for me to come in and say, “Let's just shut off access to Facebook” because I see it up on their screens a lot of the time. But they do great work and they are productive and their metrics are fine. Overall I think that it’s actually a danger to shut down their access to what they do because you are also then shutting down the touch point inside of your company to what the future of the world is going to be. Companies that come down with heavy hands in those kinds of areas might be making a mistake because, yeah, you might increase productivity by 5 percent, but you also might be shutting down your ability to watch how these people think. I'm 35 and these people are 12 years younger than me, but they think way differently than I do. I think the 10 years after that is going to be a whole other seismic shift and it's going to keep happening that way, and we need to keep tabs on what is going on because people are starting to function differently in the world. J. NELSON: It used to be easy for companies to just shut off access to Facebook. That’s changing, though, because it's not leveraged through your company network anymore. It's leveraged over cell phones, so you cannot really turn that off as a company. I think you have to adapt a strategy that focuses more on the results that people are generating. HANKS: I think social media is also over hyped. You need to understand that just because you put up a Twitter account doesn't mean you are going to drive sales to your company. You have to understand whether it is a direct application of your business, your marketing and sales branding. Or is it more of an indirect application? KHANWILKAR: In the contrary, face time is still very, very critical and meeting people face to face and talking to them is probably the most important thing in spite of social media. I agree that you better have a goal as to why you're getting into social media, and not just get into it because everyone else is getting into it. You can send all the e-mails you want, but it's amazing what five minutes of just meeting and talking can accomplish. It's hard to generate substantial relationships on the Internet. What are the global technology trends and emerging technologies that will help drive future economic growth in Utah and your companies? WIDLANSKY: I think the move to mobile is huge. If you look back 10 years, everybody was working on something on their desktop and it had a big screen attached to it. Over the last five or six years, laptops have now outstripped desktops in terms of sales and smartphones have now overtaken that in terms of productivity tools. Smartphones have gone from a single digit percentage to almost one-third of all phones sold. And the reason is people are using this as a tool, not just a communication device. So the ability to do more with this device, like transactions, like managing your personal time and data, is going to drive the global economy in the next 10 years. To the extent that we can embrace that, we can be ahead of the curve, which, frankly, is the whole reason my company exists. TIETJEN: I believe we are increasingly going to be managing our personal and our business lives wirelessly with a handheld device, and there is going to be some data that is going to reside on that device. But we are going to be able to go out and get that data on the Internet and through handheld devices. HANKS: This little thing [iPhone] is significantly more powerful, no matter how you shape it, than the computer that I took to college in 1992—and it fits in my pocket. I used to joke with people that the minute they could implant the chip in my hand, just sign me up because my life could be so much more powerful and easier. This smartphone is the chip. I don't go anywhere without this thing. And it's such a fundamental shift that's going to be shocking when we look back at it. TURNER: We are looking at technology for remote diagnostics, being able to do imaging remotely, transfer the data to central servers. Basically, a person can take an X ray in the field and the radiologist can receive it in their office off of a device like that. So I think you are going to see that type of technology embedded in all kinds of medical devices and other devices that will be interconnected to the world. ASHDOWN: I'm still a big proponent of Utopia. I think it's a unique network that no other state has. The cities that have signed up for UTOPIA are seeing it grow. We are signing upwards of 25 customers a day to a fiber network that has no peer anywhere else. I think that that is a real driver for technology in Utah. J. NELSON: On the life sciences side of the world, there is this interesting convergence, not only with technology and medical devices and pharmaceuticals, but the combination of products like a medical device combined with a pharmaceutical product. We are having to come up with unique ways to do testing. For example, normally you would sterilize a product at a high temperature and that would be an effective means of sterilizing it. Now it's a medical device that has a pharmaceutical product that is merged into the product and you cannot expose it to the high temperatures without damaging the pharmaceutical component. So that is really changing the thinking a lot. It means that a combination device and drug product can deliver in a unique way and in a new therapeutic modality, which changes everything. That is going to change a lot how we do testing. And it's going to change how companies come together as well. CULLIMORE: My optimistic side shares the same comments that have been said–that the sky is the limit on creativity when it comes to the medical device community. But there is also a side that is inhibiting and that is some of the legislation that is being passed that is driving jobs overseas and making it difficult to get medical devices approved in this country. Most companies now go to Europe first because the regulatory paradigm there allows them to market their products, whereas in the United States the rigor is significantly greater. That is a big concern to our industry. KHANWILKAR: Of course this health care IT communication and remote monitoring is something that we are looking at because we want to have our patients go out and lead near normal lives, which is they go out and go jogging and go to work, but they also need to be accessible to the health care provider to see how that device is working. The other trend we’re seeing is most of our patients are getting information about products like ours, LVAD, through the Internet. So patients are going to the doctors and saying, "Look, Doc, I've got heart failure and I've done my research and I want an LVAD.” I think the trend is definitely going more global. And then the other trend in our industry is kind of the marriage, if you will, of biology and engineering. We make things of titanium, electronics and stuff that we put inside to pump blood. I think the marriage of stem cells and tissue engineering with what we are doing will eventually be the future of heart failure treatments. CUTLER: I think another trend for the future in high tech is this concept of the cloud where instead of companies investing in their own infrastructure and their own software, they will get software as a service and infrastructure as a service from these cloud providers. How do you keep yourself and your company on the leading edge of technology? CUTLER: We read a lot to stay plugged in with what is going on. SHATTUCK: Certainly we at Intel Micron have great access to scientists, so we travel a lot to Micron and to Hillsboro, Oregon to keep up with the technology and engineering as well. I think we're really just trying to keep up on technology and hire the most knowledgeable people. WARNER: I believe in listening to customers because they are typically out there trying things that you have not thought of yet. Listen to your partners who service those customers and watch your competition because if they are as good as you are at watching your customers, those are areas where you probably ought to be. Throw the pass where you think the receiver is going, not where he was. HANKS: There are certain people that are hard coded to be technology tinkerers. Some of us in this room are maybe more predisposed to that; we like to tinker with things. I know my two IT employees are way ahead of the curve. Those guys are doing things with these devices and their iPads—I don't even know what they do. I meet with them once a week to have them show me what is cool and new. And even though it might have nothing to do with Doba or drop shipping, there are things that I can extrapolate from and then get ideas from. So find these technology tinkerers and use them as mentors. J. NELSON: One of the things we've really benefitted from is benchmarking off of other great companies. For example, we started to put in a lean initiative at our company. We read case studies about what to do, but we found that we needed to actually see lean initiatives in other companies. So we visited Autoliv in Ogden, which has done an excellent job of implementing a very lean operation. Actually seeing how they have done that allowed us to see what we could do at our own company, and it's not even a related company. CULLIMORE: I think you have to be aware of what is going on in your industry all the time. Benchmarking is important, but you can never lose sight of the fact that your edge is your own innovation. You have to be the innovator. You have to be the one who is trying to figure out what you want your competition to be looking at from you, not necessarily what you are going to glean from your competition. I'm not denigrating at all the fact that you need to be aware of what is going on and being up to date and knowing what is happening, but success is keyed off of innovation in the technology sector, and you have got to be constantly creating and innovating if you are going to be successful. FLATHERS: As to keeping your saw sharp, reading and educating yourself is one thing that you’ve got to keep doing. Oftentimes you can get caught up in knowing the buzzword but not really knowing what is going on, and nothing shines through to an employee like if you really don't know what you are talking about. How have the Utah Fund of Funds, USTAR and the Engineering Initiative impacted your organization? How have these initiatives changed the outlook of the technology industry in Utah? WIDLANSKY: I think the Fund of Funds has been a great catalyst in terms of having folks take Utah seriously as a place to build technology and bio tech and life science companies. When I came to Utah seven years ago, there were three venture capital firms and one angel group. Now you have this sort of spotlight shining on the fact that the State is spending money to grow businesses in Utah. The challenge is going to be keeping successful businesses in Utah. How do you take the money that is supposed to be flowing into companies in Utah and keep those companies, those jobs and those great innovations here so that we can have those experienced folks build the next generation of companies? The challenge is not getting it right once. The challenge is getting it right again, and that is the place we need to focus on now. KHANWILKAR: I think USTAR definitely has been very helpful in attracting good researchers. But it's going to take awhile for all that resource to show up inside our companies, but it's great that they are doing it in a systematic way instead of just kind of depending on luck and happenstance to make something happen. HANKS: I think [USTAR and Fund of Funds] are good ideas, but they haven’t impacted me or Doba. I agree that it's going to take time for some of them to play out. I think Utah Fund of Funds needs to be tweaked somewhat. TURNER: My company has seen benefits. For example, we haven't gotten any funding from the Fund of Funds, but we have used the SBIR Assistance Center that was part of the USTAR initiative. And we just submitted a proposal to the National Institutes of Health through the assistance of that SBIR Assistance Office. So we are seeing some benefit even if small. SHATTUCK: I think the Engineering Initiative was certainly key in bringing Intel Micron development to Utah, and knowing that the State was looking for business growth in technology—I'm sure that was in the decision making process that made Intel and Micron go ahead and develop that plant and bring it down there. WIDLANSKY: I think the Fund of Funds is a great story, but I don't think we have seen nearly the upside we should have from the massive investment. If you read the charter for the Fund of Funds, the requirement is that you need to look at investments in Utah. There is no requirement to make investments in Utah. And as someone who has been living in the venture capital world now for over 10 years, I can tell you that this is the worst venture market I have ever seen. It's been consistent and drawn out and there are not a lot of active investors writing checks right now. And you would think that putting $100 million to work would create real dollars and real money flowing into companies in Utah, but I don't think that we have had the impact that we should have from the dollars that have been spent. The fund is constructed to give a great return for the taxpayer, and from my perspective that should be secondary. The great return for the taxpayer is the creation of great jobs. Those folks will then pay taxes and build the overall economy. The investment return should be a secondary goal, and I don't think the fund is constructed that way, and I think it's a structural problem. R. NELSON: The intent of the legislation is to get enough return so that the taxpayer does not have to pay anything—and at this point the taxpayer has paid nothing. HANKS: I agree that the Fund of Funds has shined a light on the state, but that is an expensive branding campaign if that is all you get out of it. I think we need a flowchart that says, "Here is where the dollars went." That would be very telling as to how many Utah companies got dollars versus other companies, or are they still just sitting in the bank account of some fund that flies to Park City to “look at deals.” Governor Herbert has stated education as one of his top priorities. What recommendation do you have for Governor Herbert to better prepare our K-12 students? HANKS: Require computer programming for every student. I want my four year old to understand a little bit about how that works. I had to take shop class and home economics—make students take a couple of programming classes. KHANWILKAR: Something that UTC has stressed is rigor. Be more demanding in science and math classes. R. NELSON: I would underline rigor and relevance. You've got to have relevance with rigor. And you’ve got to have math—it is the critical thinking skill, not just for technical talent for your companies, it's for jobs in the 21st century, period. Anything you go into, you need math, and we need to make sure it's relevant math. J. NELSON: We need to have metrics that we all agree to. Metrics that will not only measure student achievement, but how education is delivered. If we can get on the same page about the metrics that matter and we can really be continuous about measuring how we are doing relative to those metrics, I think we will be able to find and correct the problems. CULLIMORE: I think we have to encourage innovation in education. There is a tendency to get stuck in a paradigm and stay with it instead of looking at what more can be done. Canyons School District, which is the newest in the state, recently came out with differentiated diplomas, getting different tracks for different types of education. Some are going to be considered advanced diplomas for those who have those aptitudes. If we can find ways of encouraging innovation in education, it would go a long way, because you cannot do things the way we've done them in the past without expecting the same results. R. NELSON: It's a very, very complex issue, and unless we engage in the classroom and unless we elevate our involvement in the classroom, we are failing. As industry leaders, we need to encourage ourselves and our employees to be involved in mentoring kids in the classroom. KHANWILKAR: We shouldn't forget the nontraditional students as well. I toured the BioInnovations Gateway (BiG), and I think that is an awesome way to generate innovation and creativity. The high school students I talked to said, "We cannot stand being in a lecture setting. We just don't learn anything." At BiG, they get hands-on experience that really fires them up. We should not forget the side of creativity and innovation. TIETJEN: The key word here for me is relevance. The saddest thing is we have people in Utah who need jobs, but they are not qualified for the jobs we have to offer. We need a better dialogue between businesses and education to narrow that gap. Businesses need to say, “Here are our job requirements and here are the skill sets we need.” WARNER: I think we should consider giving kids in grade school language instruction. We live in a global economy and I think we are a bit sheltered. I've traveled in my work for 20 years to about 35 countries and it really does expand your mind, your vision, your tolerance and your business skills by speaking another language and learning about other markets.
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