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Key Idea: Hire from Big Business

Bill Hagstrom worked for a huge health care company.  He was brought in to rescue what the investors thought could be a ship sinking with their dollars.

Key Question:

A: 

Replace yourself at the top.  The person who grew UroCor was not the founder.

Bill came from big business and there he learned the importance of strategic and analytical thinking. Big companies will not allow leaders to jump into projects without being able to explain the why and the how. The discipline of working in a large organization prepared Bill to be the leader of a startup.

Q: Can and should everything you learn from a big business apply to a small business?

A:
No. Bill says that many people who work in big business are successful because the company as a whole is successful. In a startup you must be able to function without a staff of employees and you must have a bias for action. You can't sit around thinking about doing something, you have to do it. In a startup, creativity, drive and motivation are essential. Also, Bill was trained to run his division from financial and profit and loss statements. This information does not give you a clear picture of cash flow, and cash flow is essential to small business.

Q:
Why, in the beginning, did Bill have to spend 30-40% of his time raising money?

A: In a startup there is always more expense than can be supported by sales. Leasing space, buying equipment and hiring people is very costly and convincing customers to try a new product is the hardest part. Bill was raising money by selling shares in the company.

Think about it

Are you stuck?  Should you hire yourself a boss?  What are your weaknesses?  Should you hire a person who is strong where you are weak?  Do you really care who runs the company as long as it is making money?

Clip from: UroCor (acquired by Dianon Systems)

Oklahoma City: This episode of the show was done to learn how to take a company public. Here the founder had raised the first-round of private equity investment to commercialize his invention but didn't know how to run the business and get those products into the market. 

The early-stage investors brought in Bill Hagstrom (pictured above). 

We see that it took a person with Bill's experience to get this disease management business into gear. Today UroCor provides a comprehensive range of services for detecting, diagnosing and managing bladder, prostate and other complex urologic conditions.

Under Bill's leadership, in just six years UroCor grew to $25 million in sales with 200 employees. One of UroCor's biggest obstacles was recruiting experienced leadership from large health care companies in the East.

Bill Hagstrom is all about constantly learning.

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UroCor, Inc. (now Dianon Systems, Inc)

Bill Hagstrom, former CEO

800 N. Research Parkway
Oklahoma City, OK 73104
800 634 9330

Visit our web site: http://www.urocor.com

Office: 800 634 9330

Business Classification:
Also: http://www.dianon.com Health Care

Year Founded:

Hire from Big Business

HATTIE: (Voiceover) With just over 200 employees and about $25 million in sales, UroCor is defining disease management in the major urological disease categories because last year $1 out of every $6 was spent on health care, and with costs continuing to increase, more organizations are looking to total disease management for cost containment. The right idea at the right time will fail without the right leadership.

How did they decide to hire you?

BILL: They brought on board a search firm out of New York City, and as I was at a point in my career where I wanted to move into an early stage company environment and had most recently served in about a $1 billion division of an $8 billion company, I was strongly looking for an opportunity to build a business from scratch. That's what I wanted to do. I mean, I yearned for that risk. There's a certain type of individual that's highly motivated by challenge. And, degree of difficulty actually provides the next higher level of motivation.

I had never done product development before. I had never created a department before. I'd never done a turnaround before or raised money before, so these were all brand-new, first-time experiences. So there may be a mind-set that one can develop as it relates to how to approach a situation that you have no experience in, frame it out productively, look for resources and then an effective way to model your options and alternatives and come to resolution on it.

HATTIE: What do you think you learned from big business that you never want to see happen at UroCor?

BILL: Well, I learned several things along the way. On the positive side, I learned very strongly what analytical techniques one needs to be advancing within the business, how to look at strategic dimensions, how to look at the vision or framing out a business. But I think what's real important is to look at what individuals can successfully transition into a smaller business or an early stage enterprise.

And it's got to be an individual that has a very strong bias for action because in a small business, lack of progress moving forward is exceedingly apparent as a starting point. Second has to be a person that isn't used to a lot of staff or hasn't gotten so far removed from the actual work that they can't get things done by themselves. In my last position within a large company, I had a staff of 80 people. When I arrived here, the whole company was 12 people. So you've got to be able to do things that you--you have to be not so far removed from the work that you can't do it yourself.

BILL: Absolutely. You have to be quite self-sufficient. And I think a lot of people in larger enterprises, too, were a part of the success of the organization. They moved along with the organization. But as it relates to their ability to make their own individual contribution on the stand-alone basis, there really aren't a lot of those people that have a level of creativity and continuous drive and motivation to, in the face of obstacles, get up and keep doing it again and again until they prevail. They may have, again, just been so much a part of the system as opposed to driving it further forward themselves.

I think another thing that's real important in transitioning from large companies is that you're trained as a general manager so much to focus on the P&L as opposed to having extensive background work experience typically with cash flow and balance sheet. And in an early stage enterprise, cash really is everything. So you start with the capital structure in cash and look at how you're consuming cash along the way, and a lot of people don't have experience in raising money, and certainly I underestimated that role along the way.

Perhaps in the first few years I spent up to 30 percent or 40 percent of my time in capital formation.

When push comes to shove, the most important thing to the investment community is going to be the management team and resources that you put into place. I think most venture capital funds believe that management can overcome weaknesses sometimes or flaws in technology versus if you've got a strong technology but you've got very limited or flawed management. That business probably isn't going to go as far.

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