April 19, 2010

When Patrik Louko leaves his native Finland for one of his frequent business trips to San Diego, he sometimes just shakes his head and smiles - considering that he gets on a plane in sub-zero temperatures and debarks into Southern California's paradise-like climes. But it's not just the temperature that warms Louko, it's also the reception he and his company - Footbalance - have received in the United States.

That reception - and later success -- he believes, would not have been possible without the efforts of a UCLA Anderson Global Access Program (GAP) team, whose efforts were crucial to the company's expansion into the lucrative - and essential - North American market.

Footbalance - a company that customizes and mass markets shoe insoles -- is the brainchild of Erkki Hakkala, a Finnish physiotherapist specializing in podiatric medicine. In his own practice, Hakkala became frustrated by the length of time it took to produce comfortable orthotics (aka corrective shoe inserts) for his patients. Like a true entrepreneur, Hakkala developed a superior method for creating these insoles, with a technology so fast and easy to use he came to believe that the process could be converted to a retail environment. The whole procedure is so simple, that Luoko, CEO of Footbalance North America, says most of the training of retail store personnel deals with teaching them how to make sales, as opposed to instruction on how to make the inserts.

The company first took its technology from its original medical setting to a retail setting late in 2004 with a deal to test the product in three Intersport stores. Finnish-based Intersport is the largest sporting goods chain in Europe, with outlets across that continent and as well as inroads in Asia and other outposts across the globe. The initial Footbalance trial was a such a success for Intersport, the company decided to expand the concept to every store in the chain. The company then decided to take the product into the essential United State market.

Enter GAP
It's an understatement to say that Louko is bullish on Anderson's Global Access Program. When company founder Hakkala first approached UCLA Anderson Prof. Elwin Svenson, (who is, along with Prof. Bob Foster (‘65) one of the key contacts and recruiters of companies participating in the program), Svenson felt they were not yet ready for what GAP could offer. A year later, Footbalance again requested consideration and this time they were accepted.

The Global Access Program is the field study portion of the FEMBA curriculum, providing students with a real world opportunity to apply the tools and lessons learned at Anderson. Students perform extensive primary and secondary research and work closely to develop an investment quality strategic business plan for their client companies. In addition, as students who are also gainfully employed, GAP team members bring their own professional expertise to their projects adding a secondary level of benefit to GAP company participants.

Footbalance's GAP team - Bryan Banta, Renato D'Angelo, Howard Kwon, Thai Le and Scott Lem (all members of the 2009 FEMBA class) - were given two tasks. Lem, currently the chief accounting officer for Ares Capital Corporation recalls that the team "was charged with developing a U.S. market strategy" along with writing a business plan. As it happened, among his contacts at his investment company was the president of Road Runner Sports, a retail chain specializing in running shoes and apparel.

"Our participation in GAP landed us a multi-million dollar deal with Road Runner Sports and that's been an awesome partnership for us," Louko said. "That was a huge thing (for the evolution of our company) and without being in GAP it never would have happened. The actual, concrete deliverables (provided by the GAP team) which included a world-class business plan) really helped us attract attention from some of the leading investors in the world."

"We were doing fact finding and information gathering and the investment firm where I worked had contacts at Road Runner," Lem said. "Although we had looked at it as a potential investment, nothing ever materialized, but we kept in contact. Through that connection, we scheduled a meeting with the president and founder of Road Runner, just to look at the feasibility of what Footbalance was trying to do. We weren't trying to sell them on the idea. But before the meeting was even finished, they were interested in testing the product. It turns out they were looking for something exactly like what Footbalance offered and had already looked at some alternatives."

After what Louko described as a quick meeting, Footbalance and Road Runner entered into an agreement and just days after the team delivered their final GAP presentations, Road Runner installed a Footbalance unit in its number one store. Less than a month after the December 2008 final GAP presentations the units were in all 20 Road Runner outlets. Getting the deal with Road Runner had far-reaching impact on Footbalance. As a result of its successful entrée into the crucial U.S. market, the company's value increased.

"The GAP team's plan and the research that went into it - I really want to emphasize that a lot of different elements really helped our a (case for the company)," Louko said. "The value of our company and the potential of our company was made very convincing and these were key elements that helped us raise $10 million in financing in January 2010. Because we got Road Runner Sports, the value of the company skyrocketed and our product was proven because we were suddenly successful in the United States."

Today, Footbalance has over 350 points of sale, selling custom orthotics on three continents in twelve countries. They are on track to quadruple sales this year while selling eight times as many insoles in North America. And once again they'll be participating in the GAP program.

According to Louko, they will ask their new GAP team to look at the more complex medical segment, where there are many more moving parts than the sports segment. "We don't have an understanding of the space yet and we need to understand how medical and podiatrists buy their products," Louko said. "One of the most interesting questions for us is how can we be a product covered by insurance and with the GAP team we hope to figure out how that can be done," Louko said. "I'm sure there are different options in the medical space and we need to find a way where we can enter quickly and scale very fast."

Every GAP team does features high-caliber students able to bring to bear their individual expertise. FEMBA students bring a wide-range of experience to their GAP experience and this know-how consistently makes real world-impact on the participating companies. "In last three years, I have bought a million Euros worth of consulting, so I understand the value of consultants," Louko said, comparing his GAP experience with working with Anderson students. "Working with GAP students was really good experience. They are all really motivated. It's not like when you have a consultant and in many cases you are not his only or best customer. The GAP team was really interested and motivated and wanted to get the best outcome for the company instead of getting the best outcome for billing."

Even years later, Louko speaks with fondness about his GAP team. "We had a great team. I don't know if we could find this diverse expertise at any consultancy. We had someone from finance, an auditor, a mechanical engineer who designs fighter planes, one person from marketing, a VP of sales at Fox, then one person from pharmaceuticals," Louko continued. "The combination was just incredible and wellrounded, all the aspects of business operations were covered. In terms of return on investment, the GAP program has been nearly infinite, like nearly 10,000 times the return on investment to the owners of Footbalance."

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