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Taking charge

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  • | 7:36 a.m. January 17, 2013
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John Koch did not spend years working his way up through the ranks of the containerized moving and storage industry. When he was named president and CEO of Clearwater-based PODS Enterprises, the industry leader, in August, he had no experience at all in the field.

But even as he endured job interviews with as many as seven PODS leaders at a time, Koch undertook exhaustive research. Later, he drew insight from his background as a division president for security company Tyco International's ADT services. A systems engineer by training, he had risen in the cellular and security industries as he helped chart their growth.

Koch's approach to the top position at PODS could be a textbook case of how to take on the presidency of a company when switching industries. First, he found similarities with his previous positions and built on them. Then he visited employees in their far-flung locations and listened to their concerns and suggestions. He evaluated how PODS' resources could be used more efficiently, and studied competitors to discern where the company might wrest more market share. Finally, he established close phone ties with PODS' private equity owner, Bahrain-based Arcapita Bank, which enabled him to get swift answers and approval to execute new plans. Arcapita bought PODS in 2008 for $451 million.

Both the security industry and the moving and storage industry are highly fragmented, with many competitors, Koch realized. And in both cases, customers are often spurred to purchase the service because of an event occurring in their personal lives. In the security field, the trigger might be a burglary that leads to a decision to invest in protection, while a student's departure for college might trigger a decision by her parents to downsize and request a moving container.

“In both types of business models, you need to understand what the triggers are” that drive demand, says Koch. And a CEO needs to make sure the company's brand is uppermost in the consumer's mind when he or she begins researching which service to buy. That means a strong Web presence, with sophisticated search engine marketing and optimization.

In a report issued after it acquired PODS, Arcapita noted that the company operates across industry sectors with combined annual revenue of $40 billion, but had captured less than 1% of the total market. Part of Koch's task is to grow the company in new markets without incurring excessive costs. That means deciding where to invest the company's resources.

“Part of what I'm working with the management team on, is what are the right areas to be focused on?” Koch says. “It's prioritizing. How do we make sure that the resources are allocated appropriately? One of the things we're careful about is making sure we're not spreading ourselves too thin.” That means paying attention to the core services of containers and moving, and sticking to a plan for growth and improved market share.

To achieve these goals, he does not plan to drop markets. Currently, PODS has 145,000 containers across the markets served by the company and its franchisees, mainly in North America, although some international services are available. The brand is growing faster than the industry, says Koch. When it comes to determining priorities, the leadership team is zeroing in on where to make allocations: Whether to invest in more physical containers or more Web-based customer service agents to assist the growing number of clients.

This year's priority won't be trucks. “What we're trying to do is improve routing, improve usage of our trucks, and try to maintain to some degree,” says Koch. “We won't have a lot of truck purchases this particular year, but we'll be purchasing more containers.”

Typically, PODS places a metal or wooden container on a customer's property for a few days or weeks while the customer fills it with furniture or other goods, and the container is then stored in a facility until the customer needs it, or it can be transported across town or across the country and unloaded in a new location.

And the company is eager to win new customers, a goal Koch valued earlier in his career. On the floor propped against his bookcase lies a framed dark silhouette that he brought with him. “That's just a basic pirate flag,” he says, obtained during his days with a small cellular company. “We were always looking to take market share from smaller companies. That's always a reminder that we're trying to steal market share.”

Costly regulation
As he leads the company into the new year, Koch faces a particularly difficult challenge. Potential federal regulation could cost PODS, an acronym for “portable on-demand storage,” millions of dollars each year.

Trucking van lines are lobbying Congress to apply regulations that govern the van lines to the portable moving and storage industry as well, says Rob Vespa, president of the Mobile Self-Storage Association, and chief operating officer of Tampa-based Mango Moving LLC.

If PODS and other portable storage firms become regulated, they would likely have to publish pricing tariffs, and some states may require inventories, additional insurance and workmen's compensation packages, says Vespa. The do-it-yourself movers who favor containers could find a changed market if such rules are applied. Van lines, which compete for moving dollars, are leading the charge to have the rules imposed, adds Vespa. “They were fighting pretty hard right through December.”

Asked how he would advise Koch, Vespa replies: “I'd have my own labor in-house. If I was the CEO — king for a day — I would really put a hurt on the van lines and offer full-service moving as well as mobile storage.” However, he adds that he has worked for van lines and understands that they “feel that the playing field is not level.”

There is plenty of moving business for both traditional van lines and the newer mobile container firms, Vespa adds. “I think there is an opportunity for co-branding and partnerships.”

PODS already is regulated through various trucking and storage rules, says Koch. “It's something we do pay attention to, because you never know when a competitor may want to steer regulations to benefit them, and potentially disadvantage us.” Nationally, PODS has less than 1% market share of all moving and storage business. Within the portable moving and storage, field, however, “we have the leading market share,” he says.

Going public?
Although working with a private equity firm was one of the attractions for Koch in accepting the CEO position, he says that taking PODS public is “definitely” under consideration. “We're trying to position the company for an event in the next couple of years, and that could either be an IPO or, who knows, it might be a sale to another strategic buyer —another private equity firm.”

The company and its backers haven't set a date for a potential sale or IPO, but it's likely to occur within five years, and perhaps as soon as three years, says Koch, who has an ownership stake in the company. “I have an opportunity to be an owner in the new company whether on a public basis or a private basis,” he adds.

For the present, he likes the private company model, because it offers a less cumbersome path to decision-making than the layers of permissions required before actions can be approved at many public companies.

Although a public offering or private sale may be a few years away, PODS is taking steps now that are designed to continue its healthy pace of revenue growth, which Koch projects to be 8% to 11%. The firm doesn't disclose revenues. “We expect solid growth, in our long-distance revenue as well as our local storage revenue,” he says. One path to growth is a focus on commercial customers.

Since the company was established in 1998, some two-thirds of its revenue has come from residential moves and storage. Now, PODS wants to ramp up the commercial side by offering services to companies that are renovating, or growing or shrinking. Associations that store memorabilia such as T-shirts, hats, buttons or pamphlets, also can make use of the containers, says Koch.

Although commercial business now accounts for less than 10% of annual revenue, he hopes that will change. “We'd love to see it 30% within the next three-four years.”

Over the same period, the CEO will focus on other topics: company associates and franchisees; evaluating and improving the customer experience from the first viewed ad to the container removed from a property; determining whether current solutions are the right ones — if containers are the right size and design; and examining distribution channels, from website orders to sales centers and partnership agreements with people who refer business to PODS.

As he outlines core goals and connects with employees in the days ahead, Koch will draw inspiration from enterprise leaders who preceded him. On his shelves are books by Jack Welch, the former chairman and CEO of General Electric. What he learned from Welch is: “Be honest. Confront the brutal facts. Jack Welch always did that,” he says. “Attract the best talent and give them the opportunity to flourish,” he adds.

Koch also learned from former Tyco CEO Ed Breen. “He did a magnificent job, coming in after [earlier Tyco CEO] Dennis Kozlowski,” he says. Breen took a company headed for bankruptcy and salvaged its parts, says Koch.

But PODS is healthy and growing, and first in its field. After five months, Koch is still pleased with his decision to take on the company presidency. An executive search firm contacted him last spring and asked him to consider the CEO role, he recalls. “Lo and behold, it was exactly what I was looking for.”


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