CACTUS ENTERPRISES Case Study



(Note from Gil Gordon: I wrote this case study for the TELECOMMUTE '96

conference.  It generated lots of interesting discussion about

telecommuting in the context of how a business operates.   Here's the case

study for your use, entertainment, or whatever.  You are free to download

and reproduce it however you want; all I ask is that you include the

following citation:



        This case study developed by Gil Gordon Associates

        for the TELECOMMUTE '96 conference.  For more

        information, visit  http://www.gilgordon.com



There are no answers included at the end of the case - but I'll be glad to

discuss what the case is designed to do, and what kinds of comments it

stimulated at the conference.  Just email me at 74375.1667@compuserve.com

with your questions or comments.)



This case study is designed focus your attention on some of the typical and

atypical issues faced by this somewhat unusual organization.



COMING IN FROM THE COLD



It was a bleak, frigid January day two years ago when Charlie Wilson and

his wife Sally were sitting at the kitchen table in their New Jersey home,

trying to warm their hands and themselves with some hot tea.  They had just

come inside from several hours of shoveling the forecasted "inch or two of

light snow flurries" that ended up being about fifteen inches of wet, icy

snow that was anything but light.



"Sally, I've just about had it with snow and ice and winter," complained

Charlie.  "This is the fourth major snowstorm this winter, and it's only

January.  I'm getting too old for this stuff."  Sally nodded as she sipped

the steaming tea and tried to thaw out.  "I know what you mean," she said. 

"I think I'm becoming allergic to cold weather."



They looked at each other and watched as the last few snowflakes that were

clinging to their hair melted into little puddles on the table.  At that

moment they realized it was time to make a change - a big change.





DOG BONES AND DEAD ENDS



Sally, in her early 50's, had just finished another year as a regional

sales manager with VitaPet, the country's largest manufacturer of

nutritionally-balanced and vitamin-enhanced dog and cat foods.  She has

spent almost twenty years with VitaPet, rising steadily through the sales

organization and amassing a wealth of information about retail and

wholesale grocery distribution channels.  The company was successful, she

enjoyed her job (most of the time), and all signs were that she could look

forward to continued growth with VitaPet. 



But that didn't excite her.  "I'm tired of selling dog and cat food," she

told Charlie a few weeks ago.  "The stuff stinks like hell, you can't talk

to the consumers directly, and I'm sick of all the lousy jokes."  Charlie

suppressed a grin at that last point as he remembered her reaction when he

asked Sally if "the business was going to the dogs" when she had a bad

sales quarter at the end of last year.



Speaking of having a bad sales quarter, Charlie didn't have much to laugh

about himself.  He ended up on the wrong side of a corporate downsizing two

months ago when he learned that his job as Vice President of Administration

for a local automotive-parts manufacturer was being eliminated.  The good

news was that he got a generous severance package, and he felt the odds of

landing a similar job were good; the bad news was that he really didn't

want a similar job.  



Charlie had spent most of his career moving through a succession of line

and staff jobs in the company, and didn't want to go somewhere else to do

the same thing all over again.  He'd worked in manufacturing, production

planning, engineering, and distribution - it was terrific experience but he

felt he was getting stale.  Maybe the downsizing was a blessing in

disguise.



Both of their children had graduated college and were out of the house, the

mortgage was almost paid off, and they had few ties to New Jersey.  





STORM CLOUDS AND SEVEN-IRONS



As Charlie got up to get some more tea, he walked by the TV and put on the

Weather Channel - just to see how much more winter they would have to

shovel before the storm ended.  While they were waiting for the local

forecast, they watched the announcer as he went over the weather map for

the entire country.



"And for those of you watching in the Southwest, you can look forward to a

few more days of beautiful January weather," he said, with that silly

weatherperson's grin on his face.  "Daytime temperatures will be in the

high 70's, and it will get down to the low 50's at night."  As the

broadcast cut away to some stock footage of golfers playing in shorts on a

cactus-fringed Arizona golf course, the announcer concluded, "It looks like

it's going to be another great day out there to get outside and enjoy the

bright sunshine!"



That did it.  That was the final insult.  Charlie put down his tea, slowly

turned to Sally, and asked, "Are you thinking what I'm thinking?"  She gave

him a long, deliberate nod and replied, "When do we start packing?"





TWO YEARS LATER ...



[NOTE: Through the wonders of inventive case-study writing, Charlie and

Sally have been magically transformed to happy Arizona residents.  Sally

quit her job, they sold their house immediately for $10,000 more than the

asking price, their children were absolutely delighted with the decision,

and they are wildly happy and successful in the Southwest.]



Cactus Enterprises, the company that Charlie and Sally started on the

outskirts of Phoenix, has been growing and thriving beyond their wildest

expectations.  The company specializes in a line of nutritious Southwestern

snacks to be sold to people elsewhere in the country - mostly in places

where a visit to the local Taco Bell is the closest most people come to

authentic Southwestern food.  And that's not very close at all.



The company does all its sales by mail order; it has no retail sales at

all.  The line of specialities - such as marinated cactus leaves,

freeze-dried cactus flowers, and polished cactus spikes ("Pick Your Teeth

with a Piece of the Old Southwest" is the advertising slogan) - were

selling to upscale customers all across the country.  There's nothing

especially unique or innovative about the specialities themselves or how

they are produced; what Charlie and Sally did was to cleverly create the

market niche for these products while capitalizing on an abundant supply of

cactus and some fairly standard recipes.



Sales were booming, reviews from food critics were excellent, repeat orders

were increasing, and it looked like Cactus Enterprises could do nothing but

keep on growing - along with the value of Charlie's and Sally's business.



[Note: Had this been a real case study, you would have learned all the

other background about how they got into this business, where they found

financing, how they overcame problems with production and distribution, and

all the other details.   For now, just pretend that everything worked out

flawlessly, and that Charlie and Sally somehow managed to cope successfully

with all that MBA stuff.]





SO WHAT'S THE PROBLEM?



Every case study has to have a problem, and this is no exception.  Cactus

Enterprises' growth was fast becoming a problem.  [Hint: when a case study

says that something was "fast becoming a problem," that's a pretty strong

indication that you should start paying attention again.] 



The company had grown to almost 200 employees - with approximately

one-third each in production, shipping, and customer service, and a handful

of assorted administrative staffers.  The building that Charlie and Sally

leased was filled to capacity - and then some.  While they anticipated

growth when selecting the building two years ago, they had no idea that

their original team of about 30 people would grow so quickly.



Specifically, there are three urgent space problems:



1. The customer service group that processes incoming orders via telephone,

fax, and the company's Web site is on the verge of a revolution.  There are

two people at each desk, the noise level is becoming intolerable, and

complaints about slow deliveries or incorrect orders are starting to come

in more frequently.



2. The cactus processing and packaging area has grown into a three-shift

operation and still can't produce enough product.  Charlie and Sally want

to add a second production line for freeze-dried cactus flowers - the

best-selling item -  but just don't have enough space.  They are losing

$10,000 a month in sales because they can't build inventory fast enough.



3. Sally wants to start a new line of "sampler packs" with small jars of

each of the three main products packed in a decorative box (along with one

of their catalogs), to be sold at the Phoenix Sky Harbor Airport gift

shops.  She figures that if visitors and tourists can buy a sampler pack at

the airport on the way out of town, they may become long-term mail order

customers when they get back home.  



There's no problem filling the little jars on the production lines; the

problem is finding the space to pack the sampler boxes before taking them

to the airport for sale.  This packing job is very important because if the

boxes aren't packed correctly, the jars might fall out and break on an

airplane.  That's all Cactus Enterprises needs - a bunch of lawsuits from

airlines that can't get the smell of marinated cactus leaves out of

airplane seats and carpeting.





YOUR CHALLENGE



Your challenge for this case is to advise Charlie and Sally on how to

approach this space problem.  [Note: the operative word is "approach"; 

there's no way that you can come up with a complete plan with the

information provided so far.]



Here are some facts and assumptions that you can use:



1. MONEY - there's plenty of it, and the owners are willing to spend money

to make (more) money.  The one exception is overhead expense, which Charlie

and Sally always try to minimize.  They don't mind investing in the

business; what they hate is spending money on overhead items that don't

generate any return.



2. TECHNOLOGY - It will be relatively easy to move just about any of the

jobs away from the current office/production location, with the exception

of some of the production work.  The processing and cooking equipment for

the cactus is large and needs special conditions such as temperature

control, a supply of purified water, etc.



3. ATTITUDES - Sally's attitude is "I'll try anything," and Charlie's is

"So will I - as long as it works."  Therein lies the challenge.  Sally is

primarily in charge of marketing and distribution, while Charlie takes care

of operations.   They do, of course, share in all major decisions because

(as you may remember) they are a happy, successful couple that is enjoying

their new life away from the cold and snow and New Jersey.



Charlie isn't really against innovation.  Where he differs from Sally is

that he has less risk tolerance than she does, and is less willing to try

something entirely untested.





THOUGHT-PROVOKING POINTS TO CONSIDER



1. Since this case is ostensibly about telecommuting, after all, it would

seem likely that part of your action plan might be to suggest that Cactus

Enterprises sends its customer service department home or elsewhere

off-site, and converts the vacated space to production use.   Don't

overlook that possibility - but don't necessarily assume that you should

suggest this.



2. Remember that you're dealing with two entrepreneurs who made a major

lifestyle change, invested their last cent to start the business, and now

are enjoying the fruits of their labor while trying to figure out how to

get out from under this monster they have created.  This is the crucial

turning point for many new businesses; the next 6-12 months could be the

most important period in the company's history.



3. Consider what core expertise and skills Charlie and Sally bring to this

business; what might that suggest about what they should do to solve this

space problem?  



[Hint: they have sort of stumbled into the current success based on the

product line and marketing approach they developed.  While one option is

certainly to expand what they have done, another option is to take off in

some different directions.  You can assume they will stay in this niche of

Southwestern specialty marketing, but you need not assume they will be

limited to the current products or current distribution method.]



At this point you may be wondering to yourself, "What the heck does this

all have to do with telecommuting?"  If so, congratulations!  That's

exactly what you should be thinking now, because this case is - and isn't -

about telecommuting ...]