2008 Distinguished Alumni Awards
T. Russell Shields, AM '63, MBA '67, Entrepreneurial Alumni Award
Spend Five Minutes with Shields
Image by Matthew Gilson
T. Russell Shields, AM ’63, MBA ’67, launched high-tech firms that served McDonald’s and Microsoft, expanded operations to Hungary and China, and cofounded an IT incubator with $100 million in assets.
For Chicago Booth Magazine, professor Waverly Deutsch queried Shields about developing a business model as a field emerges, capturing a new market in a year, and what it takes to excel across industries.
Building new companies is a sign of a successful entrepreneur. But defining new industries is the mark of an outstanding approach to entrepreneurship, an experience that describes the career of T. Russell Shields, AM ’63, MBA ’67. The winner of the 2008 Distinguished Entrepreneurial Alumni Award, Shields seems to be “perpetually in the right place for change,” according to Wired magazine. The cofounder and chairman of Ygomi LLC recently fielded questions from clinical professor of entrepreneurship Waverly Deutsch about his track record of more than 39 years launching new firms.
Deutsch: Your company, Shields Enterprises International (SEI), spans four decades and numerous business models, from developing mainframe data systems in 1969 to operating sales and technical support call centers today. Can you talk about the evolution of a business model for SEI? What allowed SEI to remain so flexible and relevant during such a long period of incredible technological innovation and change?
Shields: We started doing software for very large databases on the storage and retrieval of data. As we did that, we got experience with the people who use the software, particularly in some of the back-end systems like at Time-Life on doing fulfillment and other subscription handling. We carried that forward in a number of our businesses. We developed a large amount of software in the late 1970s and early 1980s for Motorola. That was the basis for us to do a second new business — the billing systems, where we both provided the software and used our back-end knowledge.
In the late 1980s, we did software for McDonald’s points-of-sale restaurant systems throughout the United States, and they asked us to start doing the call center support for that software. We took that basic call center business and built it up, moving from an early operation in Lombard, Illinois, in the Chicago area to Fargo, North Dakota, to make it a full-fledged professional call center. The McDonald’s business gave us a basis to expand to other customers like BMW and Microsoft. As we got into it, the software business had become worldwide, so we split the actual software development part out and arranged a leveraged buyout by those employees so that we could rebuild our software capabilities using facilities in eastern Hungary and in central China. Each thing has been a little step, not with long-term planning, but by responding to evolutions and positions in the marketplace.
Deutsch: Your career began with data processing, crossed into the math of database design, took a turn into billing services, spent time in retail systems, and finally landed in mapping data until you founded Ygomi, which has operating companies in telecom, vehicle communications, retail remote, point-of-sale systems, and call center services. What characteristics or skill sets have allowed you to excel across so many industries?
Shields: The core has always been applying computer technology to new evolutions of business services. As computer capabilities have improved, data handling has become better and computer processing cheaper, and it has become possible to do things that were not possible before. We’ve concentrated on back-end support — areas where we can have an impact and participate in new technologies, whether it’s billing for mobile phones as mobile phones began, or maps for GPS systems as GPS systems began, or now enhancing wireless broadband for both carriers and car companies as wireless broadband is beginning. These are all software-oriented services and businesses that support large corporations as new technology evolves.
Deutsch: Your second company, Cellular Billing Systems Incorporated, captured 90 percent of the wireless billing market in nine months. How did that happen so quickly? What was so incredibly compelling about what this back-office software provided?
Shields: When we started, one license from each city went to AT&T and similar long-term telephone companies, and one license went to the non-telephone companies, called non-wire line. And we got 90 percent of the non-wire line large-city business. Of the top 30 cities, we had every city but St. Louis and New Orleans. And the primary way was that nobody else was there. We had good partners including Marty Cooper, who retired from Motorola and who had invented the handheld phone, and Arlene Harris, who had come from working in the paging industry. Together we were able to go to these new companies like Cellular One and present a full-service solution when nobody else was doing it. It was mostly a case of understanding a market, providing a service for the firms that were new entrants in that market, and then delivering most of what we promised.
Deutsch: In its early days, NAVTEQ was focused on real-time driving directions while the user was in the car. Did you foresee the ways that underlying navigation technology would end up being used, like finding a restaurant on a cell phone or setting up a date based on proximity to a person? What has surprised you the most?
Shields: We started out with the belief that if you knew where somebody was and where they wanted to go, you could provide directions. And we tried, from an exploration standpoint, to see if they worked — many different things including PC products, kiosks, and similar things. Of the early markets in the late 1980s to mid-1990s, the only one that had any substantial volume was the in-car systems. And those were the groundwork of the current in-car systems. We certainly knew that there were a lot of other opportunities in internet and various kinds of computer mapping systems, and that there would be something on the mobile phone. It was never clear when it would cross over, as it has, where almost every adult in the Western world now knows what GPS is. Things that became quick phenomena took a decade or more to get to that point where they became a big hit.
Deutsch: Many successful entrepreneurs go on to become either angel investors or professional venture capitalists. And it seems that you have structured Ygomi as something of an incubator to invest in, build, and operate new businesses. Why do you think entrepreneurs like to invest in other entrepreneurs, and what drives your investment decisions at Ygomi?
Shields: Our investment decisions are made by leveraging the knowledge we have from the wide range of customers we’ve built up in the communications, automotive, fast food, and marketing service areas, and seeing where there are developments that we think new technology can exploit. I’ve never been in a position to invest in other things because we always had new things that we were building up and investing in.
I know a lot of successful people who will look at deploying their money in similar activities because they have better knowledge and are better able to evaluate them and determine what they think makes a good investment.
Deutsch: There’s an assertion in some of academia that you can’t teach entrepreneurship. There’s also a popular debate about whether an MBA degree is a good thing for an entrepreneur — opening doors in the network, teaching business fundamentals, providing a set of operating frameworks — or a bad thing for an entrepreneur — raising the opportunity costs, discouraging optimism with statistics and business failure rates, creating analysis paralysis by asking for so much knowledge and data in the business plan process before actually starting the business. After all, most businesses are started without a formal plan. Where do you come down on these two issues?
Shields: I do not have any idea how you teach people how to be entrepreneurs. When I was on campus that wasn’t a topic that was even considered. As we started our business, primarily as a software engineering consulting business, we didn’t think of ourselves as entrepreneurs. We just thought we’d rather work for ourselves doing consulting instead of going to work for somebody. The MBA was very helpful in the financial areas — understanding accounting, financial analysis — and things like that are continually useful. Along the way, I also got a master’s degree in history on campus, and that taught me a lot of analysis, how to express myself and write, and how to do a good proposal, as well as how to understand what motivates people. Clearly, those are skills you would want to incorporate into an entrepreneurship program. Maybe you could say that in some way, in the early 1960s, it was taught in another part of the university.