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Service With a Smile

When Larry Kaplan decided to launch Omneon Video Systems with Don Craig, Ed Hobson, and Mike Gilbert in 1998, he was making a leap. But, having made similar leaps with companies like Tektronix and Grass Valley, he could be confident of a soft landing. After all, the work he did on the VM700 test-and-measurement device for Tektronix in 1979 was still paying dividends (and is still considered the de facto standard). So why not trust his instincts again?

What he and the other co-founders didn't know was that they were launching their company at just about the worst possible time. The vast majority of dotcom companies soared with optimism in the late 1990s. Like Icarus, though, they were burnt by reality and sent crashing to earth.

Omneon Video Systems, though, was different.

Its goal was to give broadcasters a chance to ride the IT cost curve, particularly with respect to server storage and networking. That approach created an opportunity. But, even so, it took savvy management skills to stay aloft in the strong and tumultuous winds of the dotcom crash.

"When we started the company, the timing was good. Then we hit the worst downdraft in the last 50 years," says Kaplan, currently executive chairman of Omneon. "Very few companies survived, and having survived and seen how this has taken off brings a smile to my face. It was quite a ride."

Today, Omneon is thriving, thanks in part to a massive deal with PBS that will bring Omneon servers into every PBS member station. Landing that deal required Kaplan to tap into one of his prime business beliefs: that a manufacturer needs to listen to its customers. If there is any characteristic that defined the dotcom boom, it was that companies ignored market realities. Instead, they told customers what they needed.

Kaplan and company, however, listened; they didn't assume. That's a lesson he learned during his 20-year career at Tektronix. From 1973 to 1993, he worked on the company's video-test and -measurement business, eventually becoming CEO and president of the Grass Valley Group, Tektronix division.

His first real success was the VM700 test-and-measurement device. Kaplan says customers played a major role in its development and design. The goal was to build a product that spurred the customer's imagination and, in turn, furthered ideas. Once customers felt invested, they would start naming new features that could be added in future versions. Kaplan and Tektronix scored.

To this day, the VM700 is seen as the preeminent test-and-measurement product in the industry. "It's all about establishing an open relationship with the customer," Kaplan adds.

He says that's the challenge companies face in tough times. "Great companies always go through periods when things aren't going well, and they tend to get inwardly focused and think things will go on forever," he explains. "They stop looking and listening to their customers."

Grass Valley Group in its heyday is a case in point. "It was the place to be," Kaplan recalls, still amazed at the connection it made with customers. "I remember ABC's Julius Barnathan at an NAB convention in the mid '80s sitting next to the switcher on the booth because it was cool."

The Grass Valley Group soon stumbled, though—for one thing, creating two separate production-switcher divisions. It became inwardly focused and, among other things, stopped taking advice from Kaplan and others at sister company Tektronix. In 1989, Kaplan was tasked with turning Grass Valley around. The two divisions were folded back into one, and the company introduced the 3000 production switcher, the successor to the popular 300 that was the standard in live production. "It was very difficult because there was a culture that had built up in the '80s," he says. "Once a culture goes sour, it's tough."

Grass Valley turned the corner after its acquisition by Thomson. "The way they're executing is pretty darn good," Kaplan adds, "and they're appealing to the customer that wants a full-service supplier. That's their strength, and their brand strategy is now consistent with that."

Looking forward, he believes Thomson's main competition won't come out of the broadcast space. "IBM is going to come into the video market with an IT proposition. It's going to offer a platform infrastructure and partner with application companies. Does that sound familiar?"

It does to Kaplan. Omneon has a similar strategy.

The advantage Omneon has over an IBM or other IT-centric vendor is that it's focused on the broadcast industry. It wasn't too long ago that major IT-related vendors like Digital, EMC, Sun, and IBM attempted to enter the broadcast market only to be rebuffed. But times are changing. "TV engineers are going to become very adept at how this IT stuff works. They need to understand the issues associated with it," Kaplan says. "The question is, 'How do I build a broadcast facility upon it?'"

Gazing into the future, he believes the industry should brace for how quickly HD will be deployed for standard-definition applications. News, syndicated shows, and advertising are just a few of the areas awaiting an HD explosion.

"Implementation of full-time HD is going to take off like a rocket in this country because no one wants to be the negative guy," he adds. "Three years from now, we're going to look back on this period, and the adoption curve is going to be shocking. The ESPN announcement that they were going full-time HD was the inflection point."

He can't wait to figure out what customers will want next. Kaplan believes strongly in a tight customer relationship, but he doesn't see it as the key to leadership success. Instead, he favors building a strong, effective team that can beat the competition. And it's not about skill sets; the trick is evaluating values.

"It's the value employees have toward themselves and the customer," he adds. "We've very customer-oriented. We have an almost weird obsession toward our customers. But I think it's healthy."