Michael Krasny - IT Sales Innovator4:32 PM EST Wed. Nov. 13, 2002
|As usual, Rabbi Steven Stark Lowenstein and Michael Krasny, the founder and former CEO of IT direct marketer CDW Computer Centers, spent their weekly 23-mile ride through the Chicago suburbs philosophizing about life and all of its twists and turns. But on this day, Lowenstein steered into St. Elizabeth's Church in Glencoe, Ill., where the congregation recently finished building a labyrinth made of two-foot-high shrubbery. Krasny had never seen one like it.
As the two walked through the maze, Krasny was struck by how it mirrored the path of his life. After the two finished talking, Lowenstein stepped over the hedge and out of the labyrinth. But Krasny knew the journey wasn't finished.
"For whatever reason, I decided to follow a path out, which was just as interesting as the one I took in," Krasny said. "And I realized that after you've achieved one thing, there's a journey beyond that, and that path is also unknown."
Like so many times in his career, Krasny today stands at a crossroads. He "retired" two years ago and now runs Custom Woodworking Design, a woodworking shop in Northbrook, Ill., where he and a few employees make plaques and awards for friends and local businesses. Since the shop serves more as a hobby than a business venture, Krasny continues searching for his next path.
"Michael will always be searching because he's never satisfied with routine," said Lowenstein, rabbi of Am Shalom, the synagogue in Glencoe to which Krasny belongs. "He has an incredibly creative mind. He searches for life's meaning in everything he sees. He's a businessman with a soul."
Few who know Krasny can deny that. During his nearly 20-year reign as head of CDW, Krasny not only created one of the world's most successful resellers of IT products,he also developed a hybrid business model that melds distribution and solution provider functions. What's more, he created a company that's long been considered one of the nation's best to work for.
"Whenever he made a decision, he'd always ask two questions: 'What will the reaction of the co-workers be?' and 'What will the response of the customers be?' " said John Edwardson, the current chairman and CEO of Vernon Hills, Ill.-based CDW.
With his walruslike mustache, soft face and bright eyes that seem to find amusement in each bit of conversation, Krasny has become a man that many seek out for help or advice. He regularly sprinkles his conversations with philosophical insights, many of which are printed in CDW's "Philosophies of Success," a small red booklet that contains the principles on which Krasny built the company. Krasny composed some of the sayings himself and adapted others from views espoused by other executives and businesses. He doesn't care where a good idea comes from,if it works, he uses it.
In fact, one saying in the booklet, "Success means never being satisfied," led Krasny to make one of his most difficult decisions. About two years ago, he realized that someone else would have to lead CDW if it was to mature into a global company focused on selling more complex technologies and solutions. That person was Edwardson, named CDW CEO in January 2001 and chairman several months later.
"I was tired," Krasny said. "John [Edwardson] had the drive and vigor I didn't have. I had done it for 20 years, and I was proud of what I created. But I knew it was time to bring in someone who had the ability and was hungry for success. I was a hindrance."
Frank Vincent, an account representative at printer vendor Epson, remembers Krasny being on the verge of tears when he told him of his decision. "It was incredible to me that a man could put his pride aside, admit that he couldn't take it to the next level and step away from his baby," Vincent said. "Most executives would have stayed, no matter how much harm they would have done to the company. Not Michael."
Industry insiders say Krasny's last move at CDW, hiring Edwardson, was his final masterstroke. Under Edwardson's leadership, the company has thrived. But it was Krasny who built the business into a $4 billion powerhouse that efficiently delivers IT products to SMBs at the best prices available. Over the past 20 years, he laid a solid foundation that includes top-notch information and logistics systems, same-day shipping, tight vendor relationships and a corporate culture that still inspires strong loyalty and high employee retention.
"Michael pioneered a new model that remains very powerful," said Steve Raymund, CEO of distributor Tech Data, which counts CDW as one of its biggest customers. "It was a new model of reselling at the time. Step by step, Michael was building a company that proved to be the dominant force in the industry today."
Former Ingram Micro CEO Chip Lacy, a hard-driving businessman in his own right, still marvels at Krasny's accomplishment. "When you look at all of the microcomputer resellers in the last 10 years, one of the few that succeeded and continued to grow and develop has been CDW," Lacy said. "Most of the others failed. Not CDW. It's stronger than ever."
The CDW saga began in the late 1970s, when Krasny bought a Radio Shack TRS80 and began writing programs to improve efficiencies at his father's car dealership in Buffalo Grove, Ill. After leaving the dealership in 1981, Krasny banged around for about 18 months trying to figure out what he wanted to do with his life. He ended up taking a three-day dBase programming class, which marked "the first time I was ever a star pupil. I absolutely loved it," he said.
Krasny then took a job with a doctor who was trying to automate nursing stations, but he left soon after the doctor changed the terms of their pending partnership. Short on cash, he decided in 1982 to sell the IBM PC he used for programming. He took out a "$3, three lines, three days" ad in the Chicago Tribune and sold the computer at a $200 profit. Realizing that there was a ripe market for PCs, he kept selling them through the paper and eventually set up shop as MPK Computers, a year later changing the name to Computer Discount Warehouse (CDW).
Krasny had found a niche as a computer broker, buying PCs and selling them each at a $15 profit. However, he began to question that business model after discovering that a mail-order company customer was making $200 per unit. "I scratched my head and said, 'What's wrong with this picture?' They were a small mail-order company with lousy service and lousy delivery times. They also had inventory problems," he said. "I learned from them on that day that inventory in this business is a great problem, and you had to minimize your obsolescence of inventory."
Now that Krasny found what he wanted to do, he had to figure out how to do it. He made that decision on the Monday after Thanksgiving in 1985, just days after CDW had placed a computer ad in a trade publication. Krasny answered a knock on the door and found a FedEx deliveryman outside with a handful of letters, each of which contained a certified check for product purchased through the ad. CDW had been selling about $100,000 in products per month. But that week, the company took in $75,000, and the phones continued to ring off the hook.
"The question was, do I try to do something for the short term and make some quick bucks or build something for the long term?" Krasny said. "I decided to take the high road, thinking that I would probably make less money in the short run but that I could make it last a little bit longer."
Krasny figured the long term meant two years at the most. Yet as the business grew, he became more passionate about making CDW the most successful seller of IT products. And he took that passion far beyond the 12-hour-plus workdays he logged six days a week for 17 years. One of the more famous Krasny tales involves a windstorm that ripped off a chunk of the CDW building's roof. Within minutes, Krasny was up on the roof, nailing a tarp over the hole. When startled employees inside looked up, Krasny yelled at them to get back to selling.
But Krasny's biggest contributions to CDW were the efficiencies he introduced to every aspect of the company. Early on, he installed a 25-foot, hand-operated roller in the warehouse, which helped employees fill a three-day backlog in one day. Today, nearly three miles of automated conveyer belts carry 25,000 products to the docks daily. To combat inventory problems, he created logarithms that gauged product sales and demand. He also established computerized databases of product and customer information to improve execution.
Although CDW today represents 50,000 product lines,almost 10 times more than it did five years ago,its billing department employs only seven people, three less than it had back then. The company also boasts some of the best-educated product reps in the industry, thanks to its CDW University initiative and continuous training programs. "We went from area to area of the company to search out our weakest links and build them into strengths. Every time we increased automation, we reduced the number of steps, wait time and keystrokes," Krasny said. "We learned a lot by going out and looking at a lot of other operations. We learned from looking at the failures, exploring the things they did and didn't do."
But one thing Krasny didn't have to learn from other companies was how to have fun. When one CDW department reached a goal, the entire company was included in the celebration. Krasny rented out amusement parks and took employees on three-day vacations. Jim Shanks, president of CDW's government division, recalled how, at one event, his friends kept bugging him to introduce them to the "big shot."
"They kept asking me, 'When's he going to get here?' I told them he is here. He's that guy bouncing up and down on the trampoline trying to do a back flip," Shanks said, laughing. "The beautiful thing about Michael is that throughout all of his success, he remained the same person."
Indeed, Krasny hasn't changed much in the past 20 years, continuing to follow and enjoy life's labyrinth. "I'm still searching for that next passion, something to keep me totally focused," he said. "Sometimes you don't realize what it is until it passes, but you can always take the path back to find it."