Segway is known for its zero emmision personal transport vehicle seen in shopping malls, airports and many city streets. However, their recent agreement with GM has them entering the next generation electric car marketplace and attempting to dramatically alter the paradigm of transportation in the process. Our most recent Leadership Interview is with Brian Cohen, Segway’s Chief Financial Officer. Brian has over 20 years of high-tech financial leadership in rapidly growing early stage and publicly traded companies. In his role as CFO of Segway, Cohen is responsible for managing the finance, information technology, legal, operations and human resources functions of the company. Since joining Segway he has already realized significant achievements for the company, including completing a new round of financing and playing a major role in the negotiations of Segway’s recent agreement with GM.
Prior to joining Segway, Cohen served as CFO for PHT Corporation, a provider of advanced information technology solutions for the pharmaceutical industry. His background also includes CFO positions at technology companies , including Telebit, Yantra and WebLine Communications. He managed the merger and acquisition process of Telebit and WebLine by Cisco Systems, Inc. He began his career at Price Waterhouse. Cohen is a certified public accountant and holds a bachelor of science in accounting from the State University of New York at Oswego.
We are pleased to present our latest Leadership Interview with Brian Cohen in which he talks about Segway and the overall future of the automotive industry:
Greg Selker: Brian, I’ve known you for over ten years. I’ve always admired you and I’m thrilled to have this opportunity to interact with you in this context. So let’s talk Segway.
Brian Cohen: All right, great.
Greg Selker: Segway is just such a fascinating story. The first personal transporters were introduced in 2001, then in 2006 – the second model, and the company has raised a very significant amount of venture capital.
There were the predictions by John Doerr in the early stages that Segway would be the fastest venture-backed company to reach $1 billion in sales, and clearly a lot has gone right although you haven’t reach $1 billion in sales yet. You’ve continually had great publicity and great product placement in the media. You see Segway on TV and in movies; and sales have experienced significant growth, but not to the levels envisioned.
And now you’ve introduced PUMA, the Segway platform that migrates to multi-passenger, zero emission, urban automobiles, and Segway has taken the bold move of establishing a partnership with GM. What do you see that needs to happen, both internally within Segway, and externally within the marketplace that will have PUMA be as successful as you all hope that it will be?
Brian Cohen: Well, John Doerr is probably one of the greatest venture capitalists, and a very enthusiastic supporter of all his companies. When I first met John during the interview process, I asked him what caused him to make the statement that he thought Segway would be one of the fastest VC backed companies to reach $1 billion in sales?
And at that point in time, the company was well on its way to completing a number of contracts that would have resulted sales of many, many PT’s (Personal Transporters). Unfortunately for a variety of reasons, the contracts were not completed.
But nevertheless, the company has been refocused on growing it’s market, growing its segments, and we have continued to experience great growth. And a lot of our efforts have been focused on finding new market segments – one of those would be the police and security market. If you walk through many major airports throughout the world today, you’ll see security workers using the Segway units.
Greg Selker: Absolutely. Segways are increasingly being seen as the transportation vehicles for security personnel. In face, you’ve got the recent Kevin James movie – "Mall Cop", where he is riding a Segway PT.
Brian Cohen: So it’s been a great platform, but every company in the technology industry needs to have multiple avenues, and technology is a means for creating additional products. With the technology that we possess, and it’s really technology that’s focused on electric transportation, we have been looking at potential partnerships to expand our product portfolio. We believe one of the best ways to do this is with strategic partners.
We were approached by General Motors with a goal of trying to create a much smaller electric vehicle, but much larger than a PT. Something that would have the ability to carry two individuals, be able to go up to about 35 mph, clean, green, very maneuverable, but with the footprint one-third the size of a traditional smaller vehicle. We were challenged by GM to forward our initial concepts and design of this vehicle in approximately a 90 day period. They wanted to see what we could build as a potential prototype to be able to move into the small electric vehicle market.
And to their surprise within 90 days we built the prototype that was revealed approximately this past April and shown to the world. And again, that was something we built within 90 days to demonstrate to GM the flexibility of the technology that we possess for electric transportation.
That ultimately led to a relationship with General Motors to build prototypes, and those prototypes will be revealed over the next 6 to 12 months. We’re very excited to have a great partnership with General Motors – have their experience, and to be able to work with them to help create a significant new transportation alternative that is primarily focused on very large congested cities. These vehicles are not designed for highways; they’re really designed for congested cities such as Paris, or Rome. A city where it’s very difficult to park, and more often than not you probably can’t go any faster than 10 or 15 mph anyway.
Greg Selker: So you just named two European cities. Where do you see this two-person vehicle, the PUMA, playing a role in major US cities?
Brian Cohen: I think the initial rollout would be in countries including China, India and many of the more congested European cities. I think it’s probably in a phase two or a phase three of the vehicle that we would address the US marketplace.
Greg Selker: Why is that?
Brian Cohen: There are a couple of reasons. One, is I look at the environment in which I live and operate. I live approximately 30 miles from my office. I’d have to go via freeway in order to get to the office. I would not be able to drive the PUMA on a highway.
Greg Selker: Right, that makes sense, but why not New York City?
Brian Cohen: New York City represents a potential opportunity, but at the same time it would require some regulatory approvals. You would not want to put these vehicles on the road next to a large SUV, or a large semi. So it may require separate lanes, and I think some European cities are already well on their way to changing the regulations for transportation. London is a great example of this. There are now tariffs imposed to drive within the city limits.
I believe that the Europeans are a little more advanced at this point in time in their desire to consider alternative forms of transportation. And I think while the US is becoming more aggressive in that regard, I still believe that there’s some catching up to do. I have no doubt that we will catch up eventually, but from a company perspective we’re focused on large market opportunities. We want to establish a foothold in some initial markets and then expand from there. And the interest has already been expressed by a number of European cities and governments.
Greg Selker: Well I know there are multiple factors which have contributed to creating the situation you just described in that European and Asian cities are more amenable to embracing this kind of technology. But from your perspective as the CFO of Segway, why do you think that the American automobile manufacturers, the legislature and the public have been so reticent to move forward and embrace this new technology and be in a leadership position as opposed to now playing catch-up?
Brian Cohen: That’s a great question Greg. If you look at the US automobile industry, many of the US manufacturer’s profits were driven by the sales of large vehicles. They just have not been able to create the same level of profitability from smaller vehicles.
The price of oil is significantly cheaper in the US than it is in Europe, and as a result people want, and can afford the comfort of a large vehicle. Plus, it’s not as difficult to park and navigate in many US cities as it is in Europe. I think that with the recent increases in the price of oil, and even though the costs per gallon of gas is cheaper than it was a year ago, I think it’s just a matter of time before we’re going to see significant increases in the price of oil.
The US automobile industry is now being forced to reconsider changes in its strategies, and there is a greater emphasis on smaller transportation, electric transportation, and cheaper transportation. I think the US government is doing a great job in trying to promote programs now that are going to force the hand of both the manufacturers and the public at large to consider alternative means of transportation. There’s a greater concern about the environment, which also is influencing consumer preferences.
So I think that we have been a little bit slower to move in the US than overseas, because we haven’t had to deal with some of the factors here that they’ve had to deal with in other parts of the world. But I think the playing field is starting to level, and the US will become increasingly more aggressive in pursuing other forms of transportation and smaller vehicles in general.
Greg Selker: Given the financial issues confronting the overall automotive market and GM in particular, how does this impact both Segway’s future, and the future of our country in moving towards greater fuel efficient and economically more impactful transportation?
Brian Cohen: I think that the manufacture and sale of large vehicles have disguised a problem within the US automotive industry for many years. And the US automotive industry has not been forced by the government to necessarily focus on the most efficient forms of transportation. Pollution, while it’s been a concern; hasn’t been the utmost concern.
Greg Selker: Right. Emission controls have been fought and have been slowed down within Congress and the legislature.
Brian Cohen: Now there’s a global focus on the environment and on emissions which is dovetailing with the US government becoming very involved in bailing out and supporting the US automotive industry. With the cost of gasoline expected to rise in the years to come, I think we’re going to see the automotive industry in the US become extremely aggressive in pursuing transportation alternatives that will require fuel efficient vehicles. I don’t know exactly what those requirements are going to be, or the dates in which they’re going to be implemented, but there is no doubt that the government focus in this area will speed the process.
Segway is extremely pleased to be a partner with GM, and one of the things that we’ve learned from this partnership is that the US automotive industry has not been avoiding the issue of moving towards more fuel efficient vehicles and smaller vehicles. It’s just a matter of how they do it. And I give GM a lot of credit in that they thought about the issues that any automotive manufacturer would face in going from a dominant focus on larger vehicles to smaller vehicles, and especially to electric transportation. Ultimately they decided, you can either take the existing form of transportation and try to go through the process of bringing the cost down and reducing the size; or, as GM has preferred, you try to partner with someone like a Segway, where technology and an entirely new platform is the key.
You take the Segway core technology, and you figure out what you need to do in order to make, for instance, a new Segway PT that now can go faster than the current PT at 12.5 mph. What can you do to make it more flexible and comfortable? I think it’s just a matter of time before the automotive industry in general starts to introduce more cars like the Chevrolet Volt.
I just saw that Ford is going to coming out with their own electric vehicle, and I think there are many upstarts including Tesla, that are starting to put a lot of pressure on the US transportation industry, and from this pressure, the US automotive industry will change.
Greg Selker: Well that’s almost hopeful Brian.
Brian Cohen: It’s hopeful and optimistic. It’s also something that says change is well on its way. You can’t necessarily go out and purchase all these vehicles today, but there will be a significant shift. And I think if we look forward ten years from now, the era of the large gas-guzzling vehicles will be a thing of the past.
Greg Selker: I actually agree with you, and am as equally optimistic and hopeful as you are. Because I think that it’s necessary for us. it’s not even a "like to" transition, it’s a "must make" transition.
Brian Cohen: We cannot continue to be dependent upon foreign oil.
Greg Selker: That’s really the bottom line isn’t it?
Brian Cohen: It’s a very dangerous position to be in.
Greg Selker: So let’s shift the conversation now towards leadership and the future, looking at not only products that need to come on line, but both existing and younger companies that now need to transition into delivering these new products. What do you see are the leadership qualities that are really going to be required from this next generation of companies – whether it’s existing companies or new companies, to deliver products and solutions that meet this very optimistic and hopeful future that both you and I are envisioning?
Brian Cohen: For a long time many of the more traditional established companies have had a "not invented here" syndrome, and I think one of the greatest challenges is in being flexible. If you’re a large manufacturer, you have to look at your core competency. One of the greatest challenges that the automotive industry faces today, is developing low-cost, long-range batteries. I don’t believe that the automotive companies of today are going to necessarily be the people to do that. But there isn’t any reason why today’s automotive companies can’t develop strategies that take advantage of this technology.
But in order to do this, you have to have the ability to develop new strategies, to look at what your core competencies are, figure out where can you partner to determine how to navigate from the current vehicles in production to these new vehicles which are dramatically different. In many cases, you might not have mechanical brakes. You will probably see, just as the computer industry is focused on digital media, the same thing will apply to an automobile.
So there will be less mechanical parts, and the entire automotive industry will go through a transition. It’s going to require companies to be creative, to be flexible, to understand how to partner, and also to be very quick on their feet. These changes are occurring as we speak. They are occurring throughout the world, and it’s important to understand that there aren’t many companies out there where their core competency is in battery technology.
And it’s an interesting paradigm shift where it could be that the companies that are the future of the automotive industry are the ones that are starting to strategize on how I build a car around a battery, as opposed to putting the battery into the car? It’s that type of thinking and the aggressive mind set to focus on change that will be key for the success of automotive companies in the future.
Greg Selker: So if I summarize the characteristics that you just said, I think flexibility and being pro-active, and then bringing these qualities to think differently about the problems that we have today.
Brian Cohen: Absolutely, and I think that if you look at many automotive companies today, their focus is on manufacturing. And manufacturing may not be the key to the automotive company of the future. It may be something that is out-sourced. Again, it’s thinking about what do you do best, and how you really add value, and what are non-value-added functions.
Greg Selker: So if we take these qualities of flexibility, proactive analysis of what your core competencies are, and applying this to thinking differently about today’s problems, where do you see some great examples of that kind of behavior and leadership today in the automotive industry?
Brian Cohen: That’s a good question. The automotive companies today are focused on largely restructuring their existing businesses. At the same time, they are trying to work on advanced technology initiatives. And I think these companies need to get through the restructuring phase, make sure that they are going to be viable, and at the same time, there are a lot of initiatives within these companies that are not publicly disclosed that do represent the qualities we’ve been discussing.
There are new forms of energy that are being considered, including hydrogen. But for a paradigm shift in the automotive industry to be real, it means that there also needs to be a paradigm shift in our general society. For instance, if you’re utilizing hydrogen, or electric batteries as fuel, there aren’t hydrogen re-fueling stations or battery recharging stations. It’s going to require, not only developing the vehicles of the future, but figuring out all the logistics and other aspects that are related to the maintenance and support of those types of vehicles.
It’s going to require companies to be able work within the legislative system and figure out how they can partner, not only to build great vehicles, but how they are going to power them, support them and maintain them for many years to come.
Greg Selker: Well as you look at Segway and moving the company forward, what are the qualities that you are continually seeking in hiring, building and developing the leadership and management team so that you’ve got an organization that is primed to be one of the major companies delivering on this potential future?
Brian Cohen: It’s interesting. I actually believe that the qualities haven’t necessarily changed over the past decade or two. Of the qualities we look for, number one is confidence. I can recall that when we first started discussions with General Motors, there were a number of people who didn’t believe that we could consummate a deal with them. General Motors was such a large company, and we’re a much smaller company. They have much greater resources. Many people just thought that it couldn’t be done. A lot of what we are able to accomplish came down to confidence.
So we’re looking for people who have confidence, who have a passion to succeed, to do things that have not been done before. People who want to grow, and who have a proven track record of getting into a company, starting in a position, being very successful in that role and taking on additional responsibility.
Attitude is extremely important. It’s an attitude that "I will find a way to get it done." It might not be easy, it may take a little bit longer than I thought, but there is a way to get things done. I think ultimately when you have an attitude like this; it leads to creativity and innovation. When I look at the future it’s clear to me that we’re going to be operating in a much different world. It’s going to be much more focused on global activities, on partnerships, and it’s going to be focused on solving problems that we have not dealt with in the past.
And doing these things requires a great deal of creativity, and as many people have said, "thinking is free." Take advantage of it, but ultimately have the confidence that you can succeed. People want to be around people who believe that things can be done. I think there are some great opportunities for many companies in the electric transportation industry, and in technology in general to continue to build great value for their shareholders.
Greg Selker: As you build out the management and leadership team at different levels within Segway, what do you do as a company to make certain that the people that you’re hiring have behavior that is truly reflective of those qualities that you just named?
Brian Cohen: So we’ll do what I would describe as more traditional type processes including reference checks. But I think the most important thing is, not necessarily asking people about their experiences, while that’s an indicator of success in the future, I think a lot of it is about sitting down with them one on one and asking them questions about problems that you’re anticipating you’re going to have to solve.
Then determine whether you would feel comfortable working with them, and to what degree can they think creatively? Do they exude the confidence, and ultimately if you believe you’re going to partner with them, do you believe that that person sitting across from you is going to make you and your company successful? It’s very similar in some respects to dating, where you don’t want to necessarily rush into anything, it takes time, and it takes both parties to communicate with one another to make sure that you’re forming a bond that’s going to be lasting.
Greg Selker: Got it. Let’s talk about the challenges that you’re confronting as the CFO of Segway in this current environment and economic downturn. With Segway’s commitment and focus, not only on innovation and the future of green mobility, what are some of the ways that you can instill this culture of innovation and creativity while balancing rewarding successes and also tight-fisted financial control?
Brian Cohen: Well in this environment that’s a great question, and the capital markets are extremely difficult at this point in time. A company like Segway has a great technology platform and multiple opportunities to bring new products to market. We realize that while we have tremendous opportunities, we cannot do it all ourselves, and continuing to raise capital is extremely dilutive. We’re taking an approach that’s focused on partnerships. General Motors is the first major partnership we announced, and that’s for the PUMA prototype. At the same time, we’re also talking to a number of other very large transportation companies. We’re trying to figure out how we can work together so that we can bring our core competency to them. There are many attributes these companies possess, including distribution. There’s a large potential market opportunity that we should be able to structure a relationship, where each one of us leverages the other and neither of us has to go it alone or raise a significant amount of capital in order achieve success.
So I believe in this environment, even though it’s not necessarily easy, if you have the opportunity to partner, this offers the quickest road to success. But it’s most important to make sure as you enter these partnerships, that you have a clear understanding and clear expectations established upfront so as you continue to move down the path of partnership, you avoid surprises.
Greg Selker: If you could be a little bit more specific. As you structure these partnership agreements, what kind of surprises are you trying to avoid?
Brian Cohen: So for instance, it could be cost overruns. So it’s making sure that you understand up front, what are we trying to achieve and how we are going to monitor it. If we get to a point where we believe we’re not going to achieve the milestone at the intended cost, what do we do?
Greg Selker: So here we’re cutting to the heart of keeping the financial controls in place, or putting financial controls in place that will allow the true measurement of creativity and innovation.
Brian Cohen: The financial controls are always important, but if we ultimately have to look to numbers on a piece of paper, it may be too late. It’s just not getting an agreement done that’s important. I ultimately believe that you should take the agreement, sign it, and you hopefully put it in the drawer and never have to pull it out. It’s then the relationships that you’ve built, the processes that you administer and how you work with one another that are going to be the key to success. And every partnership will encounter a problem, at which point you need to figure out how to work together and not against each other to move forward and get beyond the issue and achieve the goals of the partnership.
Greg Selker: Got it. So as we look forward again to this hopeful and optimistic future that has unbridled success with Segway and other companies that are delivering these innovative solutions through partnerships, and through rethinking existing problems from a new perspective within a new paradigm, what do you see the leadership of existing transportation automotive companies doing that will contribute to this kind of shift in consciousness?
Brian Cohen: I think to a large degree, some of it is not necessarily a natural shift. Some of it has been forced by government regulation, and more recently, the government forcing the automotive industry’s hand in making some long-needed changes. Some of it has been forced by competition, and ultimately it’s forced based upon financial models for companies. And the models of yesterday as well as the models of today, are largely becoming history.
In order to be able to play in the new era of transportation representative of this future we’ve been discussing, companies will have to establish footholds in the market. And while there are many opportunities for this– there are all types of vehicles today that are either powered by gasoline or diesel etc., there are many alternatives. As I mentioned, electric is one, hydrogen is another, and it’s looking at the market opportunity and understanding the regulatory hurdles that you’re going to have to deal with. The PUMA vehicle is not designed to drive on a sidewalk, there are no regulations that allow that. At the same time, it is not designed to be driven on your traditional roads.
Greg Selker: Right.
Brian Cohen: So it’s going to require significant shifts in many aspects of the business, including how you work with governments, not only in the US, but throughout the world to accept these new forms of transportation and make them safe. And our core infrastructure will have to shift as well. The roads of the future may be dramatically different then the roads that we’re accustomed to today. The vehicles of the future will be much lighter, and so they won’t necessarily require the infrastructure of today. If you look at these smaller vehicles, there may be changes in how they inter-operate with another. There may be communication systems that manage the distances and the speeds of these vehicles, and there may be systems that will allow you to automate getting from Point A to Point B. There may be systems that will re-route you based upon traffic patterns.
But I think a lot of our challenges we’re going to face in creating new forms of transportation will be focused on trying to anticipate these and similar issues. And while it’s often times easier to build a vehicle, I think the more difficult problem is how to make sure that this new type of vehicle is going to be safe? How do you make sure that there’s a market available to you, and especially, how do you deal with the regulatory issues so that you can develop and bring these products to market and know that this is going to be a market opportunity available to you?
Greg Selker: You’re right. I think this gets back to thinking of things very, very differently. And as we look into this future, many of the ways in which we do things today won’t be the way in which we do things in the future.
Brian Cohen: The change is already happening, and we have to embrace it.
Greg Selker: Yes, I believe that. So that leads me to the last question, which is looking back on your career, what’s the best piece of leadership advice that you’ve ever received and why?
Brian Cohen: Well, I’ve had a little pink pig that’s been with me, it’s plastic. A pink pig that’s been on my desk for probably at least 15 years. I don’t recall where I got it from. Business is always about negotiation. You negotiate internally, you negotiate externally. Everything you do really comes down to negotiation.
The reason the pig is on my desk, is to always remind me never to be a pig. If you’re involved in a deal and you’re holding out for that last percentage or that last dollar, what if you don’t get it? What if the partner on the other side of the table, whoever it may be, decides that you know what, you’re too difficult to work with. I think I’m going to go work with your competitor.
Greg Selker: Yes.
Brian Cohen: Did you really achieve your goal? So ultimately the best advice I ever received, is "don’t be a pig." Always focus on the big picture. Make sure you achieve your goal, and make sure the other person or other company feels good when the day is done.
Greg Selker: Well that is sound advice to live by my friend. Brian, thank you so much for speaking with me. I’ve enjoyed this conversation very much.
Brian Cohen: Greg, this has been great and it’s always a pleasure speaking with you and working with you. And I will look forward to the next opportunity.
Greg Selker: Thanks.