Small businesses link up to better compete

Chicago (Reuters.com) -- When Comcast Corp. acquired AT&T Broadband, it wanted to put up its own call centers across the country. Rather than hire a national construction firm to undertake the project, the cable service provider turned to a group of independent companies that teamed up for the bulk of the work.

The advantages? Those entrenched local firms had established networks of local supplier and subcontractor contacts; they also knew the regional building codes and prevailing political winds in their geographic areas.

The nine companies, including seven builders, an architectural firm and a real estate services group, are part of a 10-year-old umbrella organization known as the Citadel Group. They check in with one another on a monthly video conference to discuss mutual business and share best practices, often inviting current and prospective clients to sit in.

Comcast says it's sold on the model.

"We work together in the same format; I never have to worry about any contract negotiations," says Loretta Simon, a vice president of real estate with Comcast Cable. She adds: "I'm getting the benefit of the local markets."

Citadel Group was set up as a company - each of the principals owns shares - and is governed by a board of directors. It has a director, housed in the offices of its suburban Philadelphia partner, who handles marketing and administrative oversight for the group.

Each of its members' Web sites has a link to Citadel. They share marketing costs but also benefit from economies of scale. Collectively they represent more than $2.5 billion in yearly sales, giving them a leg up on purchasing everything from carpet to lighting.

Since building their first nine call centers for Comcast, Citadel Group members have collectively procured more than 30 additional projects from the media giant. Sometimes the member companies contract individually; other times they form joint ventures or subcontract, providing regional oversight of a project.

"We feel that just because you're large and able to send a project person to a strange city, it doesn't mean you have the local resources, that you know the people," says Robert Cottone, president of both Citadel Group and IMC Construction, the Philadelphia partner.  "There are firms like Turner Construction, very large national players. We don't want to be that."

Building such a tight-knit group mandates careful development, says Joseph Krusinski, chief executive of Krusinski Construction Co. in the Chicago suburb of Oak Brook, Illinois, and a Citadel founding member. When a geographic gap dictates a need to recruit a new member, Citadel goes through strict due diligence, he says.

"It has to be a relationship based on trust. That's the No. 1 most critical thing," says Krusinski, whose firm is family run. "As you pick partners, you have to be sure those partners have an impeccable reputation, have the financial stability and the dedicated personnel to be the best in class."

    Idea with legs

As business becomes increasingly global, a variety of such models are cropping up among small to mid-sized companies around the country. According to research from the National Federation of Independent Business, at least 63 percent of small businesses report some form of alliance, ranging from shared production to licensing.

"Two plus two can equal 10 if you put together complimentary skills," says Debbie Thompson, president of Erie, Pennsylvania-based Strategy Solutions Inc., a marketing and strategic planning firm. "More and more, the client is looking for the best people to do the work that needs to be done. As long as it's transparent, it doesn't matter which company does the work."

And it's not just business-to-business industries benefiting from consortiums. Service businesses such as airport transportation are getting into the game, taking their cue from growth in Web-based travel reservations. One such alliance is the Go Airport Shuttle group, which comprises 39 independent shuttle service providers in the United States, Canada, Mexico and parts of Western Europe.

They joined forces last August in an effort to build reciprocal business at more than 100 airports and to better compete against larger rivals such as SuperShuttle, a subsidiary of France's Veolia Group, which runs ride share services in many major cities.

"We decided that the technology was out there," says the group's president, John McCarthy, who heads Continental Air Transport in Chicago. "Travel is being bought on line. The mom and pop travel agents were gone."

So the transport companies, which had developed long-standing relationships through trade groups such as the Airport Ground Transportation Association, created a central Web site to pre-sell rides to passengers on both legs of their trip.

Set up as a franchise, the alliance is saving its members money with joint purchasing of services such as credit card processing. They are also getting more for their marketing spend with national ads in in-flight magazines.

Go members are incorporating their new group's identity into their own local names, with monikers like Go Yellow Checker Shuttle, which serves Dallas/Ft. Worth. And progressively they are taking on the costly process of re-branding their vans in the brand's green-and-white color scheme to make them easily recognized by passengers.

"Our main objective is to book people before they land," says John Rowley, general manager of Go Shuttle Express in Seattle, who says that joining the network has lifted his sales by more than 2 percent. "We have national recognition."

Regardless of the industry, members of business alliances say the key to success is making sure everyone is on the same page.

"If you move too fast, it's a little confusing," says McCarthy. "It's important I think to spend extra time in the planning. So that everybody is moving forward."

Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com