For years I have proudly proclaimed the strategy of sitting underneath the table of feasting giants and eating the scraps and crumbs that fall from the table. A bootstrapper’s dream is to get into that little market segment that isn’t being addressed by several large players, exactly.
In Bootstrap Business I go so far as to outline a landscape matrix that actually shows how to very deliberately get between several large companies and make sure you don’t infringe on their territory, while still eking out that little crack of opportunity.
I have deployed this countless times. There is; however, one danger. When the market starts to mature, sometimes the giants reaches down and pick up the scrap, and in the process–squish you like an ant.
Indeed, this happened to my team this week. Google released a new algorithm update and indeed it dramatically changed our channel. Simultaneously, another giant that we work with got up from the table. When the two big fat giant bellies hit each other we got squished in between. Needless to say, it’s very painful when that occurs, and it can actually be life threatening to the business.
In this situation, I believe we will recover, but it’s caused me to outline three distinct things that you need to do when deploying this type of opportunistic strategy.
1. Understand the giants eating patterns. How long do they eat? When is it time for them to move? In the case of Google, they release algorithm updates every so often. So, when you see the signs of movement you better get out from underneath their feet as they get up from the table.
2. Give yourself cushion either to the left or to the right. This means, have the ability to either push to your supply side or push to the customer side. If you get squished right between two giants with no place to move, you end up getting your margin squeezed, squeezed, squeezed.
Transactional businesses are wonderful, because they provide a repetitive income flow, but if you are not careful you can end up getting squeezed right to death. Either own the customer and control it, or make sure that you can control the supply cycle. I have discussed this principle many times and I have always stated:
- Never maintain only one supplier.
- Never rely on only one customer.
Well now I need to kick myself in the pants, because in the businesses currently getting squished, we basically have one supplier and one customer. That is always a precarious situation to be in.
3. Move from the table as quickly as you can. Once you get profitable, make sure you can then quickly move and transition to a place or a pocket where the giants aren’t quite as likely to rumble over the top of you. Once you’ve filled your belly, look for the exit door as quickly as you can.
I still contend that finding a really hot sector that is on a wave, where there are giants pounding the table, and where money and scraps are falling onto the floor–is a great strategy. Just beware there is a downside. I’m personally committed to using these opportunistic businesses to leverage and become viable quickly. Then I rapidly move in to more value transactional, longer-term engagement types of businesses. I encourage you to try it too.
The moral of the story is…keep your head up and your eyes open when you are sitting next to giants.
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Keep Your System Simple
It’s important to not overcomplicate your system of goals and rewards. In one of my early ventures, I created a chart that had eighteen different targets to hit and a simple “REWARD” written across the top. My employees were unclear as to what the priorities were and what the reward would be. I have found it’s best to have three or four target goals to hit, with a very specific reward at the end. The goals we typically fail to achieve are the ones that are complex and unclear.
Employees should also feel free to devise their own systems (within reason, of course). My son and his friends came up with their own motivating reward. They had a Burger King crown they kept in the office. They were all highly competitive, and they would have contests to see which one could create the most web links on a given day. The winner then got to wear the crown. The reward didn’t cost me anything, and it was fun to see these seventeen-year-old boys engage in an all-out push to optimize their web sites, just for the reward of wearing a paper crown.
One of the benefits of having a team set its own goals and rewards is that the members learn to govern their own behavior. That way I don’t have to micromanage my teams.
Avoid the Entitlement Mentality
When I was managing Mitsubishi Electric, I was still young and not completely financially stable myself. I had an awesome killer team that was also young and hungry. I began the practice of taking them out to lunch every Friday. I would pay for their lunch myself because I didn’t feel the company should have that expense. This was my personal way of showing my appreciation. A few months into this, I ended up in a tough stretch where I was traveling almost nonstop. As a result, there were a few Fridays where we didn’t make it to lunch. Soon, there was muttering and complaining. Morale dropped. These employees had become so accustomed to going to lunch each Friday that they felt they were entitled to this perk. What started as a good intention led to my being the bad guy because I did not consistently provide them with their expected lunch.
I had a similar experience with my crew of teenagers. I would stock the fridge with food and soda pops so they could grab something to eat after they finished school and before they started to work. A few times we got so busy I failed to replenish the quickly consumed food items. Almost immediately, some of the boys started murmuring, “I can’t believe it, there aren’t any burritos or Hot Pockets in the fridge.” If I have erred, it is because sometimes I have rewarded too quickly or too often.
Allow For Some Flexibility
Situations change, and sometimes you need to change with them. I’ve lived through shifts in markets where even though my team gave an incredible effort, they fell a bit short of the original goal. In those situations I still gave the reward so the team didn’t lose steam. However, be careful not to reward when the reward is not merited.
I employ a group of mothers who work for me from their homes. They are motivated and hard working. I told them once that if they had ten consecutive days of making $500 in profit, I would give each of them a large bonus. These women worked their hearts out. At the end of the period, I saw that while they were only clearing $300 to $400 on the weekdays, on the weekend their profits were $800 to $1,000. Even though they did not have the ten consecutive days, on an average they were well over the target I had set. I told them that in this instance, average really does count for something, and they earned their reward.
Last night my wife and I had a rotten guacamole, terrible night. I had been traveling all week long doing lectures and I was dead tired. I got home at 9:30 or 10:00 p.m., spent a little time with the family, and finally made it to bed about 11:30 p.m. At midnight someone began banging at our door, the dogs started yipping, and come to find out our second son had forgotten his key and was banging on the door to get in. We painted smiles on our faces, went out to let him in, spent a few minutes talking with him, and then crawled back into bed.
At 1:00 in the morning we heard the shower running and couldn’t figure out what was going on. The dogs start barking again, and at this point I almost didn’t dare go back to sleep.
We were again woken up at 4:30 a.m. when in stomped our 3rd son, ready to go to Drivers Ed at 5:00 in the morning. Again at 7:00 a.m. the 4th son headed to school and finally at 8:00 a.m. our final son departed. By the time we get him to school, needless to say, very little sleep had actually taken place.
My wife and I did eventually get a hearty laugh out of it when we figured out who had been showering in the middle of the night. We discovered that Nathan (Drivers Ed son) had looked at the clock wrong, got up at 1:00 a.m., showered, got dressed and completely ready, and then realized that the clock had said 1:00 a.m., not 4:00 a.m. I still chuckle thinking of it now.
This pretty much sums up the counsel that I gave in three of the lectures this week. The sequence of Zigging and Zagging is critically important. There is a reason why Zig #1 is Drive to Profitability, Zag #2 is Add Resources, and Zig #3 is Add a Scale Element.
Indeed the timing is critical.
So frequently people attempt to jump directly to Zig #3, which is a scale element. This is exactly what Nathan did this morning—causing havoc to our entire family. It of course is the perfect thing to do…have a shower and get dressed…but 1:00 in the morning is not the perfect time to take the action. The same thing is true with scale and so many other aspects of your business.
You see, when you are making cookies–how you put the ingredients in, and the order in which you put them in, is as important as the ingredients themselves. The sequencing and timing of how we build our businesses and how we take action is actually the trickiest part of making a perfect batch of business cookies…or getting a good nights sleep…or getting dressed properly and appropriately.
Remember when you are zigging and zagging: Zig #1 Drive to Profitability, Zag #2 Add Resources, followed by Zig #3 which is a Scale Element. Don’t get tempted to jump directly to Zig #3. Always nail it before you scale it.
What Will Motivate Your People?
Before developing your system of rewards, remember that what motivates one person may not motivate the next. When I was general manager of About.com’s web services division, I had a highly talented engineer named Earl who worked for me. He was, without question, one of our brightest engineers, but I continually struggled to figure out how to motivate this guy. I regularly gave out bonuses, rewards, and incentives that everyone else loved, but Earl did not seem to care. Nothing I offered seemed to motivate him, and I knew his contributions were affected by his apathy toward my rewards system.
As we were planning our first Christmas party, I finally figured out what motivated Earl. During a planning session, he asked if he could play a piano number for the entertainment. I didn’t think much about it, but told him that would be fine. The night of the Christmas party, Earl walked in, all decked out in a tuxedo, complete with flowing tails. When he sat down to play the piano, it was clear he cared deeply about his performance, and he delivered his delightful number with the flare of a concert pianist. Everyone cheered and clapped for him, and then he stood up and gave an overly exaggerated bow. From that point forward, I knew what motivated him. He didn’t care about things or money. He loved recognition and any opportunity to perform and take a bow.
As the New Year began, I implemented what I dubbed “Lunch and Learn with Earl.” Twice each month, we’d have a Lunch and Learn where the company would buy lunch and the junior engineers could visit with this master engineer. They would ask him questions, he would impart his wisdom, and at the end they would all clap and Earl would beam. The junior engineers learned a great deal from Earl, and Earl loved the recognition. Productivity went through the roof.
I had another employee who would always get really excited about the rewards I proposed, but before she achieved her goal, she would simply go out and buy the same thing she was going to be rewarded with. And while she did good work, I knew she could be doing far more. This pattern caused me immense frustration, but I finally found out that what she really wanted was for us to pay for her tuition at school and call it a scholarship. By listening carefully to things she said, I learned that her parents had plenty of money, but they had always drilled into their children how they had gone through college on scholarships. This young woman had good grades, but because she had no real financial need, she hadn’t been able to get a scholarship. So, I developed a reward system that provided her with the scholarship she so desperately wanted.
It’s also important to figure out what the people you are trying to motivate do not want. I’ve learned that a reward for one person may actually feel like a punishment for another. A few years ago, we established a reward for the young men who were working for CastleWave to go to Las Vegas and see the Blue Man Group. We set up a very specific goal and also very specific rewards, which included going to the Stratosphere and riding on a roller coaster set atop of one of the tallest hotels that juts out over the city. These boys, with one exception, worked extra hard because they loved the idea of this trip. When they weren’t focused on the work, it was all they talked about. The exception happened to be a different personality type. He was one of our key engineers who was a little shy and did not like big crowds. In fact, the thought of going to Las Vegas with a bunch of loud teenagers couldn’t have been less motivating.
Gratefully, he came to me and let me know that he really did not want to go on this trip. So, I found something else that motivated this engineer, and took the other boys when they reached their goal. If I had ignored his needs, the outcome might have been tragic. He was a key member of the team, and he could have subconsciously tried to sabotage the goal for the rest of the group because he did not want to go on the trip.
For the past 25 years I have been a strong supporter of a large, not for profit, youth organization that helps young men become strong, valiant adults. I have contributed financially, but more importantly—I’ve contributed endless time and personal resources.
Thursday I had occasion to go into the regional offices for some administrative approvals on behalf of a young man attempting to do a service project. As I walked in I actually bristled, expecting a negative exchange. Regretfully the very negative exchange I was hoping not to encounter, did in fact occur. As I approached the high desk, a smug woman peered over her glasses at me in a condescending manner, before any words were spoken. The following exchange was caustic, demeaning, and completely inappropriate. In the end I was denied both verbally and emotionally. The organization refused to discuss this young man and his project.
As I drove home I not only felt a bit of sadness, but a little bit of right indignation. I came to the conclusion that I would not be able to support this organization any longer.
The woman behind the desk had no idea who I was, my background, or the level of contribution that I have made to the organization through the years. Sadly most of my peers and influential colleagues have privately expressed this same level of frustration with the organization.
Although very powerful in its values, the organization does not espouse to live and operate by these same values. Instead the leadership conducting the bureaucratic portion of the business reflects values that are the exact opposite of helpful, friendly, courteous, kind, and cheerful.
When I think of failed businesses I know some met their demise because of these kinds of rough exchanges.
The reality is—as we treat our customers poorly, as we exchange caustically or negatively—very seldom do we get the luxury of having someone come out and vocally make a proclamation like I have just made. We live in a world of social media, and tweets and like buttons. Therefore what happens is word spreads, customers vote with their dollars, and they quietly vanish.
In your business, remember to take care to be respectful, to listen, and to treat your clients kindly. You never know who will be walking through the doors or standing across the desk from you. It is now easier than ever to share bad customer service stories.
Repeatedly mistreating an individual has a huge negative impact. Each interaction has social consequences that can literally make or break your business.
Luckily, I have several inverse examples of this too. I am continually impressed every time I pull up to my local tire store and the individuals run out to my car to greet me. They actually run out to my car to greet me.
I’m equally impressed with the organization where I now buy all my computers. I’m basically in love with Apple. Every time I go into one of the stores the geniuses at the bar greet me appropriately. They are courteous. They go out of their way to engage and help me resolve my problems. Often they go to the point of covering things that aren’t even under warranty.
Now what is the result of that kind of behavior?
Well, I don’t have any PC computers; every computer in every one of my offices is now a Mac. That’s the result of treating a customer properly. You catch more bees with honey.
Indeed, I begin where I started. We vote with our dollars and we go silently for good or for bad.
As you have been rushing from goal to goal or from zig to zag, have you ever found yourself asking, “Why am I doing this?” If you haven’t created and implemented a system of rewards for yourself and those around you, you’re going to find yourself burning out long before you reach your beacon in the fog. Success and money alone are insufficient motivators. I have found that if I tie a reward to the successful completion of each zig, I stay far more motivated than if I never pause to enjoy some benefit specifically tied to its completion. And I find I’m much more enthused about beginning the next zag.
We humans are really not much different from Pavlov’s salivating dogs. If we catch a glimpse of a slab of meat, we will drool, salivate, and do just about anything to get to it. My family has what I view as miserable, little dog that is half-poodle and half-Chihuahua. She is the most high-maintenance little mutt I have ever met. She does not like me, and I do not like her. The problem is the rest of my family loves this dog, so she and I have put up with each other. She will have absolutely nothing to do with me, unless I have a little piece of meat in my hand. Then she views me as her best friend, and her behavior shifts dramatically. She pants and begs and pleads for that little piece of meat. And, more important, she will do anything I ask. Interestingly, she does not like just any kind of meat. She likes the little slices of cheap lunchmeat that I am sure are not healthy for dogs. Our other dog will eat anything I give her, but not this little mutt. From the day we got her, I have had to find the things that specifically work for her.
We all have things that motivate us. The legendary football coach Vince Lombardi said, “Coaches who can outline plays on a blackboard are a dime a dozen. The ones who win get inside their player and motivate.” Recognizing that reality, and then consciously and deliberately motivating yourself and your teams using rewards, is one of the most powerful tools I have found, whether it’s in my personal, family, and professional life.
When planning and executing each zig and zag, you should attach a reward to each target. If you find the right rewards for your people, once they hit their goal they will be willing and even anxious to turn toward the next goal.
Every great leader knows how to motivate people. It does not matter if you are a CEO, a coach, a school teacher, a middle manager, or a parent, a big part of your job is being the psychologist or therapist who knows how to put out little rewards that get the people around you to behave consistently in working toward the goals you’ve established. Lee Iacocca said, “Start with good people, lay out the rules, communicate with your employees, motivate them and reward them. If you do all of those things effectively, you can’t miss.” Lee Iococca (b. 1924). U.S. Businessman. Talking Straight (chapter 4, “Good Business—More in Management”)(1988).
This past week I was invited to an early morning meeting. As I was making my way up the freeway, traffic came to an abrupt stop at a point where there shouldn’t have been any slowing at all.
Frustration set in as I spent the next 20 minutes crawling, stopping, creeping along, and barely moving. When we finally got to the point of the slowdown, I was a little surprised, but still slightly amused by the ordeal.
Right there in the middle of the road, I observed that a garbage truck had dumped its entire load and the fire department was squirting out a fire that had erupted inside the heap of trash .I know it’s not funny, but the scene did cause me to chuckle a bit.
I’ve seen the same thing multiple times in my career—even in companies that I have created. I have indeed caused fires by picking up other peoples garbage.
You see, if you create an organization and then run around rescuing, picking up everyone’s garbage, and picking up their problems–then in essence you quit being the leader and you begin being the garbage man. (This same thing can happen in your own family or in your personal life.)
This garbage service does no one any good. Indeed, it creates a co-dependency in the organization and it actually robs people of accountability. In the end, you have a very non-productive environment.
I have created businesses and made the mistake of attempting to be kind and supportive of people. Every time my misplaced generosity, actually ended up destroying productivity and fostering an environment where employees are too dependent on me. I make myself a rescue agent rather than a support agent.
The fact is, everyone needs to take out his or her own garbage. Anytime you begin mixing really awkward chemicals, like that garbage truck, you end up having to call in the fire department to put out the flames. It causes a big yucky, nasty mess. Plus you end up having to clean it up again, after the fact, which ain’t fun.
Require everyone in the organization to clean up and take care of his or her own garbage while simulations providing support. Overall–don’t become the garbage collector, remain the leader.
I just read a contrary post by a friend and associate and someone I respect greatly. This man, Greg Habstritt recently interviewed Dan Kennedy–one of the world’s most trusted authorities on direct response marketing, and copywriting. Indeed Kennedy is a brilliant individual; however, I strongly disagreed with his position in the interview.
He boldly declared that content is no longer king. Indeed, he said, we already have enough information and the game is now more about:
- Developing a deeper relationship with the individual.
- Positioning the product appropriately by presenting existing information properly.
Although I agree with those two points are important—they are ancillary. The relationship and the presentation play a big role, but I completely disagree about the status of content. Content will always be king!
Some five or ten years ago, we went through a phase called the Democratization of Media. We quit relying solely on news anchors and big media agencies for information and content. Instead, we moved toward getting it directly from the source—or the closest individual to the source, including: bloggers, eye witnesses, and individuals that are actually in the trenches reporting real, raw, relevant data. These people aren’t massaging the message, or trying to build a relationship with me, instead they are simply delivering the information.
In fact, sometimes in life there are individuals that I don’t even like (both their personality and their style) but if I recognize that they speak authoritatively and truthfully…then I listen carefully to the content–regardless of how it’s presented. I usually value people who don’t spin the message, more than those who end up positioning it for me.
This reality trend is not going to stop. In fact, this isn’t a trend. It’s a revolution and it’s going to become deeper and closer still.
People desire valid, honest information and that is precisely one power of the Internet.
Of course, I agree there’s all sorts of useless fluff and incorrect blather online. Luckily our built-in BS meters are becoming quite adept at quickly sifting through this stuff. Additionally, anyone who writes or presents content that isn’t valid is quickly dismissed and disengaged from the conversation at an ever-increasing rate. At the end of the day, the information we value is truth, honesty, and hybrid thinking.
One can ask, “Do we have all the information we seek in life?” The answer is clearly, no.
To drive this point home, simply ask anyone suffering from a disease, a challenge, or personal issue if he or she has all the information that they need to triumph over their ordeal. Or consider if someone found a cure for AIDS or cancer. How important would this new content be? Would the positioning really matter? Would a relationship be necessary? The answer is no.
I punctuate this post where I started it…content will always be king.
Eating Our Own Cooking
In our current test business, Curtis and I received a request from a client that wanted to place a large order for high end, specialty products. We went to the manufacturer of these products and were able to open an account. However, when it came time to sign the contract with the vendor, it contained language prohibiting our operating a business model that was identical to our business model. The order we were trying to fill was worth a large sum of money. And the likelihood of the vendor ever figuring out we were in violation of the contract was minimal. In our zeal to land this account, Curtis and I conveniently forgot to pay close attention to this clause in the contract. However, Koral, who is one of my trusted gatekeepers, reminded us that signing the contract would run counter to our values. As lucrative as this deal would have been to our company, we passed on the order. It just seemed that if we were going to lose sleep, it would be better to lose it over the loss of revenue rather than the violation of our code of conduct.
In a previous business Curtis and I founded, we did not follow our own guardrails. We had put a financial guardrail in place stating that we would always keep a $100,000, three-month buffer in place to protect us if the business took a downturn. We also agreed that if things went south, we would reduce expenses, rather than dip into our reserve, in order to maintain a positive cash flow.
After several years of mind-blowing success, the business did suffer a downturn. It wasn’t long before we saw ourselves dipping below the $100,000 threshold. At the time we had a team we felt loyal to, and we did not want to have to cut back. So we lowered our threshold to $50,000. In making that decision, we broke our rule and crashed through our guardrail. But we felt justified in doing so because of our previous success. Before we knew it, we had crashed through the guardrail again and spent that last $50,000. At this point, instead of cutting our losses, we decided to create another business plan. Unfortunately, our team was not a good match for our new venture. Ultimately, with no cash left, we had to lay off the entire team we had been trying to protect. We also had to terminate what had been a very productive partnership and part ways.
We would have all been so much better off if we had reduced our expenses and stayed within that first guardrail. Yes, we would have had to lay off one or two employees or cut back on expenses in some other way. As painful as that sounds, it would have been so much better than having to kill the whole business. We could have saved our most valuable employees and avoided a lot of pain and heartache.
Our blunder led to Curtis and me parting ways for almost four years. Now we are working together again and building a successful business. And we’re hoping we will have the good sense not to forget our need to stay within the guardrails we’ve established.
Summary
As you are traveling toward your beacon in the fog, you will need guardrails to keep you from heading over a cliff or wandering out into the weeds. For each of your zigs, you should establish a financial number, an allocation of time, a duration of time, and a financial target to control the resources and energy you are going to put into that particular zig. You then need to create a list of the other guardrails that will keep you out of the weeds. Finally, remember the need to establish a network of trusted associates who will keep you from heading out of bounds network or drifting toward the edge of a cliff. These guardrails will grow out of and be aligned with the values you defined in Chapter 3. They will then have the power to keep you on target as you zigzag toward your beacon in the fog.
A young man named Tanner Greenwood currently works for me. He’s a fine young man—a hard worker with bright eyes and good intent. This week Tanner has had a hard, rotten, no good, very bad, good-for-nothing week.
It seemed like everything was going wrong for him. He had some car problems, and then some more car problems. The car locked up on the freeway. He had a couple personal issues that didn’t go well. He got a severe case of the flu. Just about everything this week seemed not to be going very well for Tanner. On top of all of that he wasn’t able to come into work this week, and I felt real concern for him.
Then today I pulled up in the parking lot just as Tanner arrived. I could tell from his swagger that he was down just a little bit. I also happened to know that Tanner is really a hard-core rock climber. I whimsically thought, “You know Tanner, we’re going to go up to the Outdoor Retailer Show.”
Then without much more thought, I had him jump in the car and we went up to the show. We got in and he just kind of hung out. It was a fairly good day, and then at the end of the day we went into The North Face booth, and low and behold, who was there, but Conrad Anker.
For those of you who don’t know him, he’s a world premier, high altitude, vertical-face climber. Anker is the individual who discovered Mallory’s body on Everest. He’s also the one who climbed the third step without the ladder. He’s the only one in the history of the world who has ever done that. He also just got done doing an epic climb in the Himalayas that was previously deemed impossible.
So there was Conrad. I recognized him, and went up and talked to him for a little bit and I told him about Tanner. He was so generous. He sat down and talked with Tanner, took a picture, and signed a poster. We were able to hear a couple stories, and ask him if he thought Mallory was able to make it up and over that third step on Everest before he died. (He said he didn’t believe so.)
We just talked and had a couple really delightful moments, and then as we were walking out of The North Face booth, up walks a few other very well-known climbers, including Russell Brice, the very well-known coordinator who is very good at coordinating and helping get people up Everest.
Tanner really enjoying the day and as we were driving back to the office, I heard him mumble under his breath—“The week was worth it!”
I’ve thought a lot about that statement.
I think we all get in these situations where there are horrible, miserable, rotten, good for nothing, hard days (and sometimes weeks). Often just when we get to the point of totally despair, we get these little wonderful cherry-on-top-of-the-dessert moments that end up making all of it worthwhile. Thank heavens for those little cherries that make the pain the misery that we have to go through, worth it.
The reality is that most of our business dealings and most of our day-to-day lives are somewhat mundane. There’s a lot of grinding it out.
Some people think being an entrepreneur is all sexy and hot and flashy all the time. The reality is that more often than not, it’s about slogging it out and just punching it out. Many times it’s just about enduring to those occasions where you get to have your picture taken with Conrad Anker.
My hat is off to you Tanner Greenwood. You’re a fine young man and I expect wonderful things for you in the future. I’m happy you had a wonderful day and that you had this experience.
