Ranked #1 in the World
Dallas philanthropist and entrepreneur Scott Walker emerges from a freeway tollbooth in his meteorite gray 2009 Aston Martin DBS and looks for an opening in the traffic. A motorist in the adjacent lane hesitates as she fiddles with her cell phone, and Walker accelerates into the space ahead of her.
“I always take advantage of an open spot,” Walker says. “Don’t give me an opening because I’ll take it.”
He’s talking about his driving habits but also his business philosophy. “I’m always moving forward,” he explains as he cruises to lunch on an overcast summer afternoon in the Texas city he has taken by storm. “I’m not stopping.”
Walker made millions on the 2005 sale of BillMatrix, a Dallas-based venture that handles electronic bill payment services for clients such as insurance companies, utilities and cell phone service providers. But instead of retiring, the 1981 Thunderbird graduate and trustee moved forward in 2007 as chairman and founder of ProCore Laboratories, a contract filling company near Dallas that already is turning profits and expanding.
In addition to this venture, Walker juggles investments in a retail leather company in San Francisco, a stone quarry and rock-crushing operation near Dallas, a vineyard in St. Helena, Calif., and he is contemplating a ProCore spinoff. He also has taken an interest in the future of Thunderbird’s Walker Center for Global Entrepreneurship, which adopted his name in 2008 following a historic $11 million pledge.
Despite the ostentatious Aston Martin that has just 238 miles on the odometer, Walker indulges in few over-the-top luxuries. Most of the time, he drives a modest Jeep Wrangler.
“This car is my one present to myself,” he says. “It’s a lot of fun.”
As a rule, Walker invests his capital in new income streams and lives well within his means on the return he accrues. “Most people invest and then they stop,” he says. “My philosophy is to keep investing.”
Walker accelerates the car again, and the 510-horsepower, 12-cylinder engine roars above the soft jazz playing on the surround-sound audio system. A few minutes later, he pulls into a parking lot across the street from Primo’s Bar & Grill, a Tex-Mex restaurant where the idea for ProCore Laboratories took shape about two years ago.
Walker hands the Aston Martin keys to a valet, and a pedestrian turns to gawk. “The valet should pay you to park that car,” the man says.
Walker smiles and agrees.
A company is born
Walker has a long history at this restaurant in uptown Dallas.
Back when he was poor and single in the early 1990s, he and friend Jim Tehan used to come in hopes of meeting women. In more recent years, the friends often sat at the bar and talked business.
Tehan owned ASG Labs, a distributor of sunscreen, bug spray and other outdoor activity products. The company used contract fillers to manufacture its products and put them into tubes and bottles. But problems plagued the industry.
“They would never give me a good quality product,” Tehan says. “And they would never give me straight answers.”
Sometimes, Tehan says, his contract fillers would omit ingredients. Other times, they would substitute one ingredient for another or use the wrong ratio of ingredients. When Tehan would call with questions, customer service representatives would dodge him for weeks.
Walker listened to his friend gripe about the industry and recognized an opening — like the one he took on the freeway in his Aston Martin.
“One day we were sitting in the restaurant having a beer, and I turned to him and said, ‘I’m tired of hearing you complain,’” Walker recalls. “‘Tell me what they do wrong.’”
The friends made a list of problems in the contract filling industry and then came up with solutions. By this time, Walker had closed the $350 million sale of BillMatrix and was finishing a commitment to stay with the company as CEO through spring 2008.
“Scott figured out the bottle-filling industry while sitting at that bar,” says Tehan, who is now ProCore president. “I think it took him 15 or 20 minutes to figure it out after listening to me complain.”
The partners leased 90,000 square feet at a new building in Coppell near Dallas/Fort Worth International Airport and built their own company from the ground up. ProCore opened its offices in March 2007 and started filling its first bottles later that month.
“Until ProCore opened, there had never had been a filler that could do consistent batches time and time again,” Tehan says. “One batch might be thick. One batch might be thin. At ProCore, batch one and batch 500 are the same.”
Walker says brand owners of lotions, drinks, powders and creams are lining up to do business with them, and the company adds about four new clients a month.
“We’re a contract filler on steroids,” Walker says. “We’ve got customers for life. They will never leave us because they know all the other contract fillers out there in the market will play games with them.”
Filling a need
White plastic bottles move in a single-file line along a narrow conveyor belt toward a ProCore filling station, where a spout pumps exactly two fluid ounces of berry-flavored energy drink into each container.
Unlike many energy shots on the market, this stuff actually tastes good. ProCore chemists working in another section of the plant have perfected the formula.
The filled bottles continue down the assembly line, where workers wearing rubber gloves and hairnets manually check each container. In the blink of an eye, another machine shrink wraps each bottle in a blue plastic label.
The line is moving like clockwork, with churning pistons and gears keeping time. But a quality control manager hovering nearby sees something she doesn’t like.
She gives the order, and the assembly line grinds to a halt.
Plastic wrap labels continue shooting downward — about one per second — but now they spill into a pile on the conveyor belt.
“Those cost four cents each,” Walker says. “But our products have to be right. A bad batch can devastate a brand owner.”
Walker says a company needs a winning business plan to succeed, but managers also need discipline to follow the plan and enforce policies.
“It’s all about discipline,” he says. “Most people fail because they don’t have the discipline to stick to a business plan and a principled business philosophy.”
Tehan says he used to sit up late at night scratching his head trying to think of anything he was forgetting as ProCore’s plan took shape. Every detail had to be considered, from signage outside the plant, office furniture and vacation policies to weightier matters such as hiring qualified managers and acquiring all the appropriate machinery.
The list continued to grow. “The one thing you take for granted will put you out of business,” Tehan says.
Nothing to hide
ProCore emerged from the process with several features never seen before in the industry.
Walker and Tehan knew that other contract fillers preferred to work in secrecy, keeping brand owners in the dark about the chaos that happens behind closed doors. ProCore solved that problem by installing surveillance cameras all over the plant.
Brand owners can go online anytime their orders are being filled and watch the process from their laptops or any other computer with Internet access. Clients also can visit the plant unannounced and make inspections.
If they have questions, Tehan returns their calls promptly.
“Most people in manufacturing do not want to show you what’s going on because of the chaos and all the issues,” Walker says. “But we have nothing to hide here.”
ProCore also reduces waste through a propriety system that tracks inventory in real time and links it to the company’s accounting system. Tehan knows the status and location of every raw ingredient, container and label that goes through the plant.
Company chemists also take an innovative approach to product development.
Other contract fillers wait for their brand owners to make a request before they develop a product. But ProCore chemists take the initiative.
They create concepts for their brand owners and approach them with innovative ideas. The effort pays off for ProCore because contract fillers retain the rights to the formulas they develop.
“No one has ever done this in our industry before,” Tehan says. “You’re a partner here, not a customer.”
ProCore already is making plans to open a second Dallas plant in late 2009 or 2010 with 200,000-sqare-feet of floor space and more high-speed assembly lines. Walker and Tehan say their plan for the company is $500 million a year in revenue.
“We’re the biggest contract filler in north Texas after one year,” Tehan says. “Soon we’ll be the biggest in Texas, and then we’ll be the biggest in the South and then in the U.S.”
Down but not out
Everything Walker touches prospers now, but that was not always the case.
The low point in his career came in 1990 when the economy dipped. He lost his job as a bank executive and the six-figure salary that came with it.
He couldn’t find another job for nearly two years, and many of his friends questioned his work ethic. His marriage fell apart and his wife left him and moved away with his son.
At one point, he found himself living in a one-bedroom apartment furnished with little more than a bed, TV and chair. He had about $300 in his checking account and relied on friends such as Tehan to pick up the tab when he went out.
Despite the meager circumstances, Walker did not consider himself a failure. He says failure implies finality — and he was far from finished.
Walker grew up in an Air Force family and lived all over the country as a boy. He graduated from Utah State University in 1977 and then came to Thunderbird School of Global Management because the school represented something off the beaten path.
“Thunderbird changed my life,” he says. “It set me on the path I’m on today. Without that, I never would have achieved what I have today.”
Walker had experienced success as a banker after leaving Thunderbird, but he noticed that many of the executives he respected in the industry were leaving and pursuing riskier ventures. This idea appealed to him, but he realized he did not understand all the details of how to build a new venture.
He looked for an established entrepreneur who could show him the basics and found William Conley Jr., a friend and serial business builder who was starting an Internet backbone infrastructure company.
Walker signed on as the second employee of DirectNet Corp. and became chief financial officer of the technology firm in 1995. After one year of hard work with few paychecks, the company was sold to GTE.
Walker returned briefly to the corporate world but then joined Conley in another venture, this time as a founder and chief financial officer of one2one Learning Foundation, a nonprofit organization involved in the development of individualized curriculum programs for children.
It was during this period that Walker discovered the untapped potential of a tiny bill payment company later called BillMatrix.
Entrepreneur of the year
A friend asked Walker to find a buyer for the company, which had just four employees at the time.
Walker started cleaning up the firm to put it on the market, and during this process he discovered that the company had never fully developed. He focused on a concept called TelePay, which allowed consumers to pay a small fee above the amount owed for the convenience of paying their bills over the phone without writing a check or visiting an office.
Walker took ownership of the company in 1999 and went to work as president and CEO. Within a few years, BillMatrix was processing more than $9 billion in bill payments annually, and clients included several Fortune 500 companies.
The staff of four grew to 300, and Ernst & Young named Walker its 2006 Entrepreneur of the Year in the services category for the Southwest region.
When Walker left BillMatrix to focus on contract filling, many people warned him that his background in banking and technology would not translate to manufacturing.
Walker, who enjoys breaking rules, dismissed the skeptics.
“I don’t challenge the laws of man and God,” the maverick says. “I challenge pre-conceived notions.”
Walker says the important thing when developing a business plan is not the type of industry but the underlying philosophy.
“It’s not about manufacturing,” he says. “It’s philosophy about how to run a business.”
Focus on friendships
Walker says this is why he decided to endow the Thunderbird center led by Bob Hisrich, Ph.D., a professor, author and global entrepreneur.
Walker wants aspiring entrepreneurs to have a world-class resource center at Thunderbird where they can learn fundamental business philosophy that applies to any venture, anytime.
Hisrich says he approached Walker about the center’s naming and endowment in 2005, and the two men quickly became friends.
“When we met, we just really hit it off,” Hisrich says. “Thunderbird needed the money for the endowment, but it’s the relationship I have with him that’s even more valuable to me.”
Walker agrees that relationships matter most in business.
He says Tehan stayed loyal in the early 1990s when others gave up on him, and now the friendship has led to a thriving business partnership.
“Jim and I always new we’d do something together because we share the same vision and values,” Walker says. “It turns out that I was the first one to come up with the capital.”
Walker also values his relationship with his wife, Suzanne, and their two young children. And he maintains a close relationship with his adult son from his first marriage.
“People are everything,” Walker says. “Give me a mediocre product with a top-quality management team, and I’ll beat anybody with a superior product and mediocre managers. That’s why companies fail. It’s not the products. It’s the people.”
May 19th, 2011 at 1:34 pm
great stuff!
keep up the good work.