LEAVING THE CORPORATE NEST
A TECHNOLOGY GROUP FOCUSED ON LEGAL AFFAIRS BRINGS OPPORTUNITY AND CHALLENGE
BY SANDY GOLDSTEIN (BS ’81, MBA ’84)

In 2000, Sandy Goldstein (BS ’81, MBA ’84) was in his sixth year as the chief information officer at Airgas, a large industrial distributor, when he decided to leave the high-level corporate life to head up a new small, technology consulting practice at a law firm. Two years later, he bought the practice from the firm and formed Capsicum Group LLC.

With Goldstein at the helm, Capsicum has expanded its scope of services to include everything from digital forensics and investigations to security and technology management. And, he says, “We’ve been in the black every year.” Goldstein, a member of the UM President’s Council and chairman of the School’s Entrepreneurship Programs Advisory Board, shares what he’s experienced since moving to a small company.

When I left my CIO position at Airgas, I was facing a big change, going from overseeing a staff of about 1,000 and supporting a company in 700 locations to a new, unproven, four-person organization within a law firm. Some might look at that as a foolhardy move, but I saw it as the culmination of many steps I had taken over the years. In previous roles at Coopers & Lybrand and KPMG, I had built new consulting practices. That, combined with my CIO experience, made me say to myself, “I’m a guy who very much likes building businesses from scratch, and I can do this.”The new organization was focused on general technology consulting for the law firm’s clients.

We had a good, solid plan in place, but I soon saw that there were opportunities within the firm itself that we hadn’t taken into account. When I talked to the firm’s corporate lawyers, they would point their fingers down the hall to the litigation department and say, “Those are the people who really need a hand with data — they are battling every day to look through discovery documents for trials, and it’s like trying to find a needle in a haystack.” At that point, we departed from the plan and refocused the practice on litigation support and the legal community, providing services such as computer forensics, electronic discovery and testimony. Our group earned its stripes early on, in a case involving unethical practices at a technology company. There were huge amounts of the defendant company’s emails to go through, and the court was told that it would cost well over $1 million to recover them. However, we told the judge we could do it for less than $100,000. We were given the job, and found some incriminating emails from top executives — which helped lead to a settlement of more than $300 million. Eventually, I realized that if we were to keep growing, we would

have to separate ourselves from the law firm, because legal ethics issues would limit our marketing efforts as long as we remained under that umbrella. I bought the practice and became the sole owner. But we kept applying the principle of finding out what customers wanted and then being willing to take the company in new directions to give it to them.

For example, we created a hosting environment that gives attorneys easy online access to legal documents and eliminates the traditional approach of having to manage boxes and boxes of paper. This system was used in a bankruptcy case in 2006 — one of the largest bankruptcy cases ever in the U.S. — and we ended up with 28 million pages of documents online. So that got us into the hosting business, where we were suddenly providing online, realtime services and 24/7 helpdesk support to the 200 law firms involved in the case.

Being alert to new opportunities has taken us far beyond the legal field, into areas such as information security, data recovery and technology management. We are currently going through another metamorphosis and becoming more involved in helping companies with their social media issues. For example, we help clients take advantage of the “deep Internet,” which is essentially the hard-to-find data that’s online. We can analyze activity across social media sites to perform rapid market research and find out what people think about a company and its products and service, as well as uncover larger trends and issues in the marketplace. This deep Internet information can get to the personal level, so we also help companies understand how to avoid data privacy issues. Overall, this approach has taken us down paths that we did not foresee when we launched Capsicum Group. There has been no silver bullet to growing this business.

Instead, it’s been about taking many steps along the way that add up to a business and service focused on one’s customers. In a very real sense, our success has been the result of learning to “ride the wave” as opportunity arises. We have found planning to be vitally important, but we have avoided being overly attached to a plan. That is, we have not allowed our assumptions to color our view of the real situation, or limit our ability to consider different opportunities as they emerge. In doing so, we’ve exploited one of the great advantages of being a smaller company: the ability to make the quick turn, to be more nimble than large corporations.

Still, we’ve stuck to services related to our core strength, which is data. It’s always been about data finding it, understanding it and using it. And it’s always our clients that drive new services and lines of business. We’ve been careful to listen to what they have to say. It’s not about what we’re selling. It’s about what our customer wants. So if something doesn’t add value to the proposition at the end of the day, I figure it’s probably not a good idea. I know that this is a pretty basic tenet that’s taught in undergraduate management courses. But it’s also the kind of thing that I always keep in the front of my mind, so that I am always putting that basic idea into practice.

— As told to Peter Haapaniemi

Spring 2011
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