This last week, I was on a much, much (MUCH!) needed solo vacation. No client, staff, or family responsibilities. No email, no phones, no computer. Instead, I packed the normal trashy magazines so I could read about shoes and frivolity. Then I packed a few business books I’ve been meaning to read. Nothing really mind-numbing mind you as I planned (and did) read in hammocks, swings and by the lakeside of alpine mountains.
As summer is over and it’s time to head back to work reinvigorated…so in the spirit of “what I read this summer”, here’s a perspective on one book I read…
Alpha Dogs: How your Small Business Can become a Leader of a Pack
By Donna Fenn, former Inc writer.
The premise is simple: Entrepreneurship is key to this era. Baby boomers came of age, and have a general distrust of large, established companies. Generation C also believes individuals can have impact. Those two beliefs drive smaller companies. CEOS are now executing what they consider to ‘ordinary’ or ‘mundane’ ideas. Survey done in ‘97 says 94% of founders and CEOs of the Inc 500 stated reason for success was superior execution. Compare that to 1982 statistic of 75% hot, novel, proprietary idea. Thus, author defines this time as an era of “entrepreneurial execution” where the only true source of competitive advantage is one’s entrepreneurial know-how. Entrepreneurship is defined as getting something new and significant done in an environment characterized by resource scarcity. It is the substitution of human capital — imagination, invention, resourcefulness — for financial capital.
Themes for alpha dog companies are ideas conceived and developed in the marketplace but focus on known pieces:
Over the top customer service
Leveraging your brand
Use of technology
Chose companies that are low-tech (could find them anywhere), were bootstrapped, with less than $100M in revenues, impeccable industry reputations as innovators or leaders, companies that were great places to work, regardless of the strategy they were illustrating, and companies that had been around for 10 years because wanted them to have both good and bad cycles.
Interesting lessons I got from the book:
Lesson #1: Experience vs. transaction wins ever time.
Consumers can buy stuff at an independent pharmacy or at a CVS. Relatively similar product, even a similar price, but entirely different experiences.
“The offering of experiences occurs whenever a company intentionally uses services as the stage and good as props to engage an individual”
While commodities are fungible, goods tangibles, services intangible, experiences are memorable. Zane’s bikes in Connecticut did this. Offered 90 day warranties then lifetime warranties and traded in kids bicycles towards purchase of new one. Was one of the first to identify “lifetime value of customer”. Anyone can sell a Trek bike, but to a Valentine’s day customer, you might say he sold an expression of love. To a father of a six year old, it’s a rite of passage. To a well-heeled baby boomer client, the bike is a symbol of success. He’s selling an experience rather than just a product and that vastly changes how he thinks about customers. He’s not just executing transactions. He’s now running a 15 people, $5.6M company. Gave a story of an employee who wrote a check to the boss for $450 after missing a detail of a sales experience and the employee knew the LTV enough to write a check for the right amount. Zane never did cash the check but uses it to illustrate the example: Values for the company need to be instilled in people. When he speaks of customer serice at business conferences, he uses a large bowl of quarter to illustrate his point. He walks around the room inviting people to help themselves to coins. Most people take a few quarters and some grab a handful, but rarely does anyone demand the entire bowl. The point: people generally self-regulate their desires.
Lesson #2: Create emotional ownership of the company.
Whole Foods uses the company newsletter to celebrate customer service within the community. Group entertainment is done where they close stores and have a staff party with spouses and they give away stuff. Holds community events. Perks for all. Investing in professional development and impart your values and mission to employees in every way possible. But also tailor incentives to people. Lowering turnover for a small firm is key.
Lesson #3: Use technology wisely but especially to focus on customer service.
Things like building an online community. The King Arthur Flour Company in Vermont created an online community called the Baking Circle, where members post messages, trade recipes, get coupons, and purchase online. There are now 100,000 members who drive demand for the brand and provide the $35M company with a focus group at all times for new products. Also, use technology to collect information about customers. The more you know, the more you can service them. So know everything you can. And then harness it. Use the web as a competitive advantage.
Lesson #4: Build a local reputation.
Amy’s Ice Cream… Gave away products and services at most community events. The freebies attracted crowds, but they build goodwill. She networked also with local businessman, academics, etc. And then had them focus on building a local presence (shop locally) that benefited everyone. Slow growth was key to make sure she and her management team could handle growth. Focusing on experience allows them to see that employees uniforms, music, etc are just as (maybe more important than) the ice cream. … She views her job to entertain and engage customers as a reason why they choose the company (not the product!).
Lesson #5: Don’t play the commodity game.
Thorlo (the sock company) found a way to stop competing for commodity stuff (which would put them in competition with products from China) and focused on finding a niche or rather creating one… Then focused on making sure it was served and serving it well. Don’t think volume, think margin. Look for trouble spots in your product or service and then innovate there.
Lesson #6: Democratize innovation.
Amy’s Ice Creams come from restaurants, employees, customers. Everyone plays and contributes. Avocado flopped. But Midnight Snack (Ritz peanut butter crackers crushed into peanut butter ice cream won). I think I could have predicted that one.
Lesson #7: Market your brand, all the time.
Dancing Deer Baking company has 44 people and $5.8M in revenues. The DNA of their brand was natural, kosher, baked from scratch goodies without preservatives; whimsical and environmentally friendly packaging. A culture that refers to its employees as “deer” and whose motto is “when people are happy, it shows in the food”. Created jobs in Boston’s economically depressed neighborhood of Roxbury and then pledged to donate 35% of one product line to charity. Branding the cause was important because post-9-11, consumers are more eager to embrace and reward good corporate citizenship, and employees are demanding more meaning from work. They turned away a deal with Williams Sonoma that would have taken away from the brand only to have another (right) deal come back. It’s the personality of the brand that helped them demand a price premium and grow.
Lesson #8: Align from inside out.
Applegate Farms had established their brand as something soccer moms could trust. But then wanted to do the same to employees. So he redesigned building. There’s now a meditation room, a vision room, a play room, a boat room (the team building room) and a project room. Have the internal profile match the external profile. Interesting, this has me thinking of what we do in our physical spaces to show what we care about.
Lesson #9: Have a chief global strategist.
This enables reinvention. Starbucks has Howard Schultz focus on this and now they are doing music in addition to coffee both extending the brand and supporting the brand so no one else slips into their market.
Lesson #10. Focus on working on the business, not in the business.
Almost all the CEOs started as proprietors meaning they worked in the business, not on the business. But at some point all of them realized they needed to change not only what they do, but how they did it. Because what got them to their current state of success wasn’t necessary the architectures of systems and processes that would get them forward… The business then (not the product, or the service) creates experiences and thus is the alpha dog. It was the business they needed to focus on growing so the business could be responsive, dynamic and sustainable.
Okay, that concludes my summer reading report. Hope it inspires goodness in whatever you’re doing this week.