The authors of the best-selling business how-to book Blue Ocean Strategy found a 2008 Ann Arbor business deal so noteworthy that they decided to feature it in their new book, Blue Ocean Shift, released Sept. 21.
Just as the American housing market was collapsing and the economy was entering a recession, Ann Arbor businessman Ted Dacko turned around a struggling healthcare industry consultancy called HealthMedia and sold it for a profit to Johnson and Johnson at a price of $185 million. Impressive at any time, the feat was highly unusual in 2008.
In Blue Ocean Shift, authors W. Chan Kim and Renée Mauborgne explore concrete examples of companies across various industries that succeeded by implementing the first book's strategy. Dacko's deal is cited as an example of using the Blue Ocean Strategy of creating "uncontested market spaces" in the healthcare sector.
Dacko says HealthMedia created those market spaces by finding the sweet spot between expensive but highly effective telephone or in-person coaching and ineffective but inexpensive generalized content such as websites and brochures.
But before that innovative new model of delivering health coaching could hit its stride, the NASDAQ crashed and venture capital dried up. HealthMedia's board offered Dacko a chance to turn the company around.
He chose to radically slash the staff from 85 to 18 and lived "hand to mouth," barely making payroll, for almost two years.
It was during that two-year period that the company published a randomized controlled study with Kaiser Health, proving that the HealthMedia model was promising, and Dacko first read about the Blue Ocean Strategy.
"The study showed we could really impact membership in terms of savings," Dacko says. "We could provide the efficacy of coaching at the cost structure of building a website, which was revolutionary at that time."
Dacko used the Blue Ocean principles to grow the company, and by the end of 2007, Dacko says the phone was "ringing off the hook" with venture firms that wanted to invest in the company.
The revival of HealthMedia ultimately led to the profitable sale to Johnson and Johnson, where Dacko continued to work for more than a year after the sale.
Today, Dacko's consulting firm, Arbor Dakota, shows other companies how to implement Blue Ocean Strategy and stand out from the competition.
His passion is helping to build CEO talent in the Ann Arbor area.
"In Ann Arbor, we have a number of great companies and great product ideas," he says. "The founders are people who know how to build a product but don't know how to build companies around those products."
He says that companies can't attract venture capital unless they have strong leadership.
"I find many founders don't know what a CEO does and when they find out what a CEO does, they want the title but don't want to do the job," he says. "It's a struggle to make them understand that, unless they transform from a founder to a CEO, the company isn't going to make it. Building a company requires more than a single skill."
Sarah Rigg is a freelance writer and editor in Ypsilanti Township. You may reach her at firstname.lastname@example.org.
Ted Dacko photo courtesy of Ted Dacko.