Jan 01 2005

Michael Krasny : 20/20 Visionary

Michael Krasny looks back on the passion and purpose that made CDW such a global success.

Leaving the CEO spot—especially when running a growing technology powerhouse—seems akin to walking off the court at the top of your game.

Yet walking away from it all was exactly what Michael P. Krasny did four years ago. Krasny says a moment of truth came when he realized his management decisions were originating more from rote muscle memory than from his heart. Over a period of 20 years, Krasny transformed his upstart Computer Discount Warehouse into CDW Corp., a multibillion-dollar technology provider. In the process, he made "doing business with people you like" a corporate philosophy, disarming naysayers with his incredible smarts, technology-driven decision-making and a warm smile topped off with his trademark mustache.

There's a placard at his new digs—an unassuming office front tucked in a suburban business corridor—that reads: I'm not hollering. I'm just passionate. Years after his start-up days, even Krasny now admits: "I was hollering." Still, just about everyone who has worked with the dynamic leader will attest that he also embodies every pound and megabyte of what passionate means.

Take the story of Rick Vasquez, currently director of technical services at CDW, which had $5.7 billion in sales in 2004. Nearly two decades later, Vasquez remembers the closed-door meeting like it was yesterday. As half of a two-man IT team, Vasquez needed network engineer certification, but failed the exam.

"He told me, 'Remember you have a deadline to complete this certification and I am counting on you,' " Vasquez recalls. "He said that he believed in me and that he had confidence that I would pass. His unique way of motivating people was the reason for my success."

Vasquez went on to pass the exam, and the next time he needed more training, Krasny offered to cover the costs—from his own pocket.

Ever the visionary, Krasny also knew in 2001 that it was time to move on to new ambitions. BizTech editor in chief Lee Copeland spoke with Krasny about building a multibillion-dollar technology giant. In the interview, Krasny discussed some of the tough calls and telling moments along the way.

Copeland: In starting a business, which comes first—the chicken or the egg? In other words, the passion to do it or the great idea?

Krasny: Some people have an idea, and they go about executing that idea. Some people sort of have a passion and sort of evolve without the plan. Before CDW, I had ideas, and I executed plans on starting one of these ideas—and nothing succeeded.

Copeland: Why not?

Krasny: Probably because I wasn't willing to take the risk that was necessary to truly launch the company. I had several concepts—several ideas. But I was never able to succeed in the execution.

Copeland: Any ideas that stand out in your memory?

Krasny: My father was an automobile dealer, so I grew up in the automobile business. I went out a couple times looking to buy or build my own car agency, then a hardware store and then a computer retailer, but nothing ever came together. I was just about as low at the bottom as you can get. I had this used computer, and one day I put an ad in the paper to sell it. I sold it and made a couple-hundred bucks. Then someone else came along and said they would have liked to have bought it. So I said that I would get them another one. I bought another one, delivered it and made a couple-hundred more bucks.

Copeland: Did you feel passionate about your new ­company?

Krasny: It wasn't a company. I was working from my kitchen table.

It was fun for me to go out there and be able to talk about computers. I wasn't selling—I was talking about something that I was and still am really passionate about, since I started playing with PCs in the mid-1970s.

Copeland: When did you realize that you had created a "real" company?

Krasny: If you read our philosophies of success, one is: "Success means never being satisfied." I was always so scared of failure that it was a long time, probably 15 years, before I realized we created a company that was built to last.

Copeland: In the early days, were there times when you said to yourself, "This won't work. I need to look for a regular job"?

Krasny: Often. One of those times was when our accountant took me to lunch in 1985. He told me I wasn't going to make it. I told him that I didn't know how, but I would make it. He put a little fear in me and made me realize I was going to have to figure this thing out.

Copeland: Did you make any changes after you had that conversation?

Krasny: At the time, I was brokering PC equipment to one of the largest PC mail-order companies in the industry. I recognized that their business model was not executing well (they eventually went out of business) and thought I could do it better. My vision was not to be mail order but to be telemarketing, the difference being that I would be service-minded. So I called the ad agency that represented us in the automobile business, told them what I wanted to do and asked them to place an ad for this new business. Their advice was, "Don't do it!" and for a while I listened to them and all the others who said it couldn't be done. Finally, I called the ad agency and told them either run the damn ad or I'd find someone else who would. They told me I'd have to prepay. So I prepaid the $4,000 ad; at the time it was the biggest risk I ever took. Before the ad had appeared, they called and told me it was time for the next ad. So now I had $8,000 out of the pocket and at risk.

Copeland: When you start a business, you have to sift through a lot of advice. Can you offer any insights about which advice you should take versus when you should just say "thank you" and go on your way?

Krasny: I got advice not only from insiders but also from outside people. Everyone around me had an opinion. Usually they were pretty smart and had a basis for their advice. As an entrepreneur, I listened to everyone. I would process all the information and make my decision and then execute. Since I was taking input from so many people, I probably wasn't always so tactful in the way I made my decisions.

Copeland: Out of all of this, can you identify the "secret sauce" in formulating a successful start-up?

Krasny: There is no secret sauce, but there is a recipe. The recipe consists of equal parts of a) great coworkers who care b) loyal customers and c) execution.

The secret sauce in customers is recognizing if you don't work at keeping the customer coming back every day they can easily go somewhere else. You have to make sure you give customers value and reasons to be loyal to you.

The secret sauce of the coworkers is building a team that wants to win. I was, and am, both demanding of our people but at the same time loyal. We shared the success with CDW coworkers. They are the ones who made it happen every day.

The last piece of the recipe is the secret sauce of perfect execution in all areas. Another CDW philosophy is "Perfection is unattainable but if we strive for perfection we will achieve excellence." Our business execution is made up of accounting, customer service, distribution, marketing and sales. That's what made a successful business at CDW. Just look at the CDW Circle of Success.

Copeland: How do you hire people who share that vision?

Krasny: We service our customers. We do it in a fair and equitable way and create win-win situations. Anyone who doesn't want to be a team player or who has a different vision—they don't become part of the CDW team. Hopefully we instill the correct attitude in our coworkers.

Copeland: What did you look for in early employees?

Krasny: I believe that you ask people for 110 percent of themselves, but in turn you have to give 150 percent back. It's okay to ask people to be dedicated and work very hard, but you have to be willing to reciprocate, show the appreciation and share the success with them. That is one of the key ingredients of success.

Copeland: CDW didn't take on debt to grow. How did you manage that?

Krasny: We were fortunate that we didn't have to take on any debt. One of the reasons was our business model. We were turning our inventory every 10 to 14 days and paying our bills promptly in 30 days; we believed that quick pay made quick friends.

Our accounts payable funded our growth. That doesn't mean we didn't have cash-flow problems, because many times we did and on a few occasions had to draw on a bank line of credit. We were proactive in working with our vendors. We never paid anybody late. My concept was we had to show them we were a good credit risk. Literally twice a week I would call our major vendors, review our credit status and assure them that they would have a check. Every week they received those checks. It allowed our credit lines to grow beyond what was a reasonable amount because we had proven to be a good partner.

Copeland: What are the guidelines for making technology a part of your business?

Krasny: Early on in the process, somebody told me about this company with a great operating model that I had to see. I went out and visited them. They were probably 10 times our size. I was sitting down with the owner, who was complaining about cash flow. When I walked into the warehouse, there was no automation. I made a commitment that day to constantly find ways to integrate automation and technology to make our business more productive and make all of our people more productive.

Copeland: One of the biggest problems that small-business CEOs face is spending too much time in the weeds. How did you determine when you needed to be in the mix as opposed to micromanaging the mix?

Krasny: What I did was pay attention to the blockages—where the throughput issues were—whether it was people, systems, computers or marketing. I paid attention to different details at different times—whenever they needed my intensity in order to relieve the pressure. Nobody can build an organization from one person to thousands and pay attention to every single detail. But they must pay attention to those details that they feel are critical at a given time.

Copeland: What accolades are you most proud of?

Krasny: Being named one of the "100 Best Companies to Work For" by Fortune magazine. People appreciate what was tough love. They understood the passion, they understood the direction, but they also appreciated those little things we did. It goes to show that everybody feels they were part of a successful team. We worked hard, we played hard and they liked it to boot.

check out 20/20 Visionary Part 2

Editor's note: In 2005, CDW was the highest-ranking Fortune 500 company in Fortune magazine's list of "100 Best Companies to Work For," and CDW ranked first in its industry on Fortune's list of "America's Most Admired Companies."