Glenn Barrett | Crain's Boston

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Glenn Barrett

Background:  

Headquartered in Amherst, Mass., OrthoLite makes insoles for shoes, servicing global brands like Nike, Adidas and Timberland.

The Mistake:

I'm currently running my third startup business. It was the middle one where I successfully lost money, but learned some lessons—and it informed everything I've done since then.

I'm in the footwear components business. And in my first company, which was called G2, I manufactured a component for rubber soles. I imported rubber soles from all around the world—from Korea, Taiwan, Malaysia, the Czech Republic, Mexico—and I sold them back into the United States. This is back when we made shoes in this country. I had big customers like Dexter Shoe Company and Cole Haan and Timberland.

That was a very good experience. I did well and then I sold that business and I went with the folks that bought that company to be the president of their footwear division. That didn't work out—let's call it a vision thing. And so I left there after a year, and because I am a serial entrepreneur I started another business called Onshore Productions. And I had a very good run importing components from various places in the world.The purpose of this company was to manufacture shoes for various customers of ours. So I graduated from making rubber soles to the complete shoe, and as such I was acting as the sourcing agent. So I opened up an office in Mexico and was manufacturing for very big customers in the States.

And this is where I learned my best lesson. I thought since I knew how to manufacture rubber soles I knew how to manufacture everything, and I didn't. I lost at least a million dollars personally, but this is where I say I got my Ph.D. in supply chain management. And the lessons I learned there have informed my decisions since then and helped me build up OrthoLite, which is my current company.

[At Onshore Productions,] I had three or four factories that were making products for me. What I learned was that in order to control your destiny you had to be able to control the processes. And I learned the importance of middle management. I kept hiring staff, and it was costing me money, but I put people into these factories that I was using, that I was contracting with, and they were actually running the production. So in essence we were doing all of the work without owning the means of production ourselves. Basically I woke up one day and I had about 40 people on my staff, and it wasn't a profitable venture. I had all this overhead, my customers were happy, we were paying our taxes, and at the end of the day there was really nothing left.

The reason it wasn't profitable is because there was too much reliance on third parties executing for me. I probably didn't do enough due diligence with the people that I was working with. And I didn't understand the whole manufacturing system.

You can give people responsibility, but along with responsibility people have to have authority to make decisions and get things done.

The Lesson:

The No. 1 lesson was, it is all about middle management. And it's all about empowering people. You can give people responsibility, but along with responsibility people have to have authority to make decisions and get things done. You tell them, “Do what you have to do in order to do your job.”

We now own the means of production. If you're using someone else's equipment, someone else's real estate, you don't really have all the levers you need to pull to control your own destiny. Today I own factories in China, in Vietnam, and in Indonesia. We make polyurethane foam and primarily it's used for insoles for shoes. We make about half a billion pairs of insoles a year and we service the largest customers, the largest shoe companies on the planet. We not only manufacture our products, but we manufacture the chemical systems that go into our products. The more vertical you get, the more you can control your destiny and the better you can service your customers. A lot of this comes from the lessons I learned running Onshore and seeing what it takes to run a factory.

Follow OrthoLite on Twitter at @OrthoLite.

Photo courtesy of Glenn Barrett