President and CEO of Chicago United spoke with Negocios Now about Success, Strategy, and Scalability
By Clemente Nicado
Gloria Castillo is president and CEO of Chicago United, a corporate membership organization that promotes multiracial leadership in business to foster equality in economic opportunity. She spoke about growth strategies for minority-owned businesses and pursuing large corporate clients.
Q: What does it mean for the Hispanic business community to think big?
A: For Latino-owned businesses, thinking big is thinking about innovation. There are three key ways to grow your business. You can address consumer needs very directly. You can deliver value in very high margin to high-growth areas. Or you can think about creating scalable business models to address corporate needs. Our Latino businesses need to think about business models that can be scaled up to meet national demand. Large companies continue to reduce vendors, so each of their vendors must have the skills and the capacity and the scale to meet the client’s needs on a national basis.
Q: How do you build a business that can compete at the national level?
A: First, you have to be innovative and address a need that’s not currently being met, in a way that’s going to deliver new value to the corporations. You need to be aware of the concept of vendor reduction, because companies are going to use very large minority firms to meet their needs. But to be ready, you must have capacity. You can get capacity with organic growth, one customer at a time, but that’s tough and it’s going be a long trajectory. You can also do it through acquisitions, or through joint ventures with other businesses that have similar business models – you create a national network to pursue those large national opportunities. I also ask companies to think about their customers in a very strategic way. If you are dealing with a large corporation, do you understand their supply chain? Do you understand where you fit into that supply chain? Are you staying in the forefront of industry trends? If you intend to be a strategic partner to a large corporation, you must consider your own internal structure to support building scale.
Q: How much should business owners rely on their minority business status?
A: Some Latino businesses see their minority business status as the vehicle to grow their business, but I argue it should be viewed in the same way you would any marketing tool. It may gain you entry to a door, but the rest is your performance. .
Q: Can you share some ideas on how to structure your business strategically for growth?
A: Establish a board of directors. If you run your business without a board of directors, whether an advisory or governance board, you are making a mistake, and you are signaling to the world you are not going to grow. I know corporations that look at minority businesses without a board of directors and say, “They are not a company we will do business with – not for a strategic relationship. They don’t have the depth necessary to meet our needs.” If you are honest with yourself about growing scale, be honest with yourself about the need for a board of directors. They will keep you accountable, they will give you connections, and they will add to the knowledge base for your business. When you think about a business model for growth, you also need to think about support systems, for example how you’re going to capitalize your business. Many businesses are not able to be capitalized solely through bank financing. You should consider whether you plan to grow your business perhaps out of minority status by going to the capital markets and for that you need a long-term strategy.
Q: Why is growth so critical for success?
A: If you look at the roundtable of corporations who spend more than a billion dollars of business with minority firms, most of them reach the first billion dollars with fewer than 25 companies. Leading companies are not giving minority businesses $100,000 here and $25,000 there – they’re doing multimillion-dollar deals with minority firms. Build a strategy to handle multimillion-dollar deals, or corporate America may leave you behind.
Q: What about the minority businesses that seem to be doing the right things but still don’t grow?
A: Part of the challenge in Chicago and the reason we see this kind of leveling out is that as a rule, we don’t have a corporate community that is engaging in supplier development. In Chicago, we need a quantum shift in the corporate consciousness regarding minority businesses and what they can accomplish. We need to ensure that minority firms in the Chicago region have more than an opportunity to do business with our corporations, we need focus on development that benefits the regional economy through job creation. We have not done that successfully, which is why Chicago United launched the Five Forward Initiative, to focus on strategic business relationships between corporations and minority owned firms. We need to do that in the public sector, too, because there is need to strengthen the public sector commitment to doing business with local minority firms. I heard about a very large construction contract in Los Angeles, and all of the subcontractors are required to be domiciled there to qualify for the contract. You don’t see that in Chicago; we will bring in whoever from wherever, and that has to change if we want to grow our local minority businesses.
Q: How can we encourage large corporations to do business with minority-owned firms?
A: What’s good for minority business is good for all of the corporations that have made an investment in Chicago, right? Corporations have invested in infrastructure and they have invested in human capital here. So it’s good business to build a strong MBE sector as part of the business ecosystem of Chicago. The leadership of Chicago’s best large corporations understand that if we grow our local minority businesses to scale, they will become national companies. That in turn will create more jobs here, which will enhance our tax base, our education system, and the social and civic success for everyone.