Monday, November 20, 2006

How Failed Business Can Lead To Success

Chuck Newman Story

In the late 1980s, Chuck Newman and some partners invested millions in a business centered on leasing cell phones. When the price of cell phones took a dive in the early 1990s, that suddenly became a very bad business model. But that business has evolved into ReCellular, whose 250 employees in Dexter, Michigan, recycle or reuse 75,000 phones per week. Is that a lot of phones? Yes and no. No other company keeps as many cell phones--and their heavy metals, including cadmium and lead--out of landfills. On the other hand, the EPA estimates that as many as 125 million cell phones will be retired this year in the United States alone, and most of them will simply be thrown out.

ReCellular has partnerships with wireless giants like Verizon and T-Mobile and retailers like Best Buy and Wal-Mart, all of which collect used cell phones and send them along to ReCellular, which either recycles them or rebuilds and resells them. About half of the rebuilt phones end up with domestic resellers, the other half in developing countries in Africa, South America, and Asia. They typically sell for $16 to $18, of which ReCellular's partners receive as much as $5 to $10 per phone for charities of their choosing.

Never mind that ReCellular has to maintain relationships with giant bureaucratic companies, with nonprofits, and with buyers all over the developing world. The most demanding part of this business is figuring out 500 to 600 different phone models. First, workers must identify which phone they are working with. They then identify the software the cell phone operates on, test the phone, and remove things such as personal information, photos, and wireless company logos.

Finally, they offer to reprogram the phone to its client's specifications. Of course, new phone models enter the stream all the time. "There isn't an effective blueprint to follow," says Mike Newman, Chuck Newman's son and ReCellular's vice president. Adds Chuck Newman: "I'm a big believer in the learning curve. We've had to be in the business long enough where we could execute this business model with efficiency and quality. We've processed more than 15 million so far, and we're getting really good at it."

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