PART ONE: SMALL IS BEAUTIFUL
Bigger is better—well, that used to be the case. The game is changing, with power shifting to small companies like yours. In this section, we’ll reflect on how you can make these changes work for you and consider what can be learned from tiny startups: like the 10 year old sneaker shop that sold a billion dollars of product last year. Along the way, you’ll learn how marketing is being shaken up, and why this makes advertising way less important. (Let’s begin with Starbucks: a big, famous company that’s getting tripped up by its size.)
Chapter 1: Big Isn't the Only Option
Every company starts with a dream. Some of these dreams are about making a great product. Others signify liberation from an unfulfilling day job. And a few are solely about generating wealth. Whatever the dreams are, they tend to be infectious. I think we all admire entrepreneurs for breaking from the status quo and embarking on a riskier path… just because they believe in something.
The dream goes awry
Espresso is a treat I’ve grown to love. That and scotch bookend many of my days, and I could likely fill a chapter detailing my likes, dislikes, and general preferences when it comes to these two distinct liquids.
I don’t know many espresso drinkers—most seem to prefer brewed coffee, or one of those froofy coffee and milk concoctions that have hazelnut or cinnamon added. I think they’re missing out. I’m of the opinion that espresso is the essence of coffee. It’s strong, condensed, and rich. It’s the coffee and nothing else. Something about that really appeals to me.
I thank Starbucks for opening me up to the pleasure of espresso. Without them, I doubt that our general knowledge and standards regarding coffee would be where they are. Sadly Starbucks’ success has compromised its core product, and there’s little they can do to combat this.
“Expresso”
Howard Schultz was the Director of Marketing at Starbucks when he traveled to Italy and fell in love with espresso. At the time, Starbucks didn’t sell any coffee beverages on site and Schultz became committed to bringing the espresso experience to America. Despite positive early indicators, the owners were unwilling to grow and take on the debt associated with such an addition. This led Schultz to forge out on his own and start a shop called Il Giornale. (In time, Schultz acquired Starbucks, and his startup became the precursor to the Starbucks shops that are now seemingly everywhere.)
A visit to Il Giornale in April of 1986 would have likely been a little messy. Howard and his staff were just getting started with their new shop and had lots to work out. What’s particularly notable is the purist sensibility found amongst them. Schultz says, “We didn’t want to do anything to dilute the integrity of the espresso and the Italian coffee bar experience in Seattle. For music, we played only Italian opera. The baristas wore white shirts and bow ties. All service was stand up, with no seating. We hung national and international newspapers on rods on the wall. The menu was covered with Italian words. Even the decor was Italian.”1
Later he notes the troublesome logistics found in doing some of this; what’s interesting is how committed he was to preserving an experience he held dear. I never sampled an espresso at Il Giornale but I feel pretty safe in presuming that they served up a rather good cup. With only one shop, the founder present, and a deep desire to create the most authentic espresso possible, it must have been impressive.
Given a problem, they could fix it and adapt their methods on the fly. All of the “knobs” were in their hands, ready to be tweaked at a moment’s notice. Clearly they were on to something, as they subsequently experienced enormous success. Love them or hate them, you have to admire how Starbucks has redefined a category and scaled to meet the demands. That said, with growth comes dilution. As each new store opened, piece of equipment added, and employee hired, the distance from Howard to those knobs lengthened. It shows. Today’s Starbucks runs efficiently, but the love of craft doesn’t appear to be what it once was.
Not long ago I went to a Starbucks and ordered a double espresso in a ceramic cup. I do this from an environmental standpoint, and I also prefer this to a paper cup. When the order was up, the barista called out my “expresso,” presenting me a cold, oversized mug with a dribble of espresso at its bottom. This seemed like a pale shadow of the promise I had learned to associate with Starbucks.
This may sound like a lot of fuss around something rather unimportant, and that’s not entirely inaccurate. It is also a symptom of greater challenges. First of all, you have to understand that espresso comes in small quantities, and it cools off very quickly. In all probability, the barista had little sense of any of this. My guess is that he was a university student who needed a part-time job, but had little personal interest in coffee. This is all understandable enough: why would he care about coffee as much as the founder of the company?
My thought is that at Il Giornale, this wouldn’t have happened, though. My cup would have been heated and sized correctly to maintain the integrity of the espresso. The barista would have known the characteristics of the drink and perhaps even had experience in roasting coffee beans. At very least, he would have known how to pronounce the name of the drink upon which the franchise was founded.
What happened
Starbucks announced a massive closure of 600 stores in July 2008.2 The following year, they closed another 300 locations noting that they had all been underperforming.3 A slow economy could certainly be what forced the closures at Starbucks. One could ask if there might be another consideration: could Starbucks’ growth and streamlining have resulted in their stores feeling a little less special and personal to their customers?
In early 2007, Howard Schultz released a now infamous memo titled: “The Commoditization of the Starbucks Experience.”4 He discussed the challenges the organization faced as it raced to meet demand. He also made special note of how the more tactile and sensory experiences had been compromised in their shops. Streamlining operations had changed the retailer, and it showed. This thought led to him addressing how some had referenced the stores as “sterile” and “cookie cutter”—personally admitting that there was little evidence to visitors that they even roasted their own coffee.
So the brand’s crop was thinned, and a set of measures were put in place to get back to basics. They worked to reinstate simple gestures like “grinding and brewing fresh batches of coffee more frequently throughout the day.” Perhaps more telling is Starbucks’ recent experimenting with new “stealth” shops.5 The 15th Avenue Coffee & Tea and the Roy Street Coffee & Tea in Seattle subtly note that they are “Inspired by Starbucks” but other than that appear to be deliberately divorced from the mother ship. While many license big names to help sell their products, Starbucks seems to perceive some value in breaking away from the behemoth.
The issue of dilution
Although some of the comments I make regarding espresso may seem like small details, they quintessentially change the experience for the espresso drinker. Then, of course, Starbucks isn’t really in the espresso business any longer; they’re in the growth business. In order to do this well, they just have to forego some troublesome details. Every barista can’t be a coffee aficionado when you have more than 175,000 employees,6 over 15,000 locations, and annual revenues approaching $10 billion.7
Starbucks’ growth has been the stuff of legend, and something that most all of us can admire in one way or another. They’ve created a business success that few of us will ever achieve. They also seem to understand the inherent challenges that their growth presents. Howard Schultz himself has noted, “The battle within the company is making sure growth doesn’t dilute our culture.”
A comment like this seems almost counterintuitive, doesn’t it? Here’s a famous brand that seems to have the Midas touch. Most of us would reason that such a position would be absolutely dreamy. What do these guys really have to worry about? Well, it turns out that too much of anything can prove a problem.
As companies grow, their promise is diluted, and it’s very difficult—perhaps impossible—to counteract this. If your company fares well, this is a problem you too may have to face. Growth always comes with some form of compromise, and for most people this is an acceptable trade off. Starbucks offers consistency, so we frequent them as we would any other large, convenience based, fast food provider. My point is that scaling as they did comes with a price. To some, this isn’t a concern. For the small provider, a window of opportunity is opened.
You used to have to be big
Some of us look at this scenario and find ourselves asking why so many are so obsessed with size. For a long time growth seemed like one of the few business rules universally agreed upon. In part, the thinking behind this can be defended as simple pragmatism. As industrialization took hold, vast fortunes were amassed by those who applied principles of centralized manufacturing to their businesses. The efficiency and economies of scale made growth a sensible choice.
Such processes afforded greater quality control, as is evidenced in Ford’s Rouge Factory. In it, Ford brought together every aspect of manufacturing that it could, in order to control the process and maintain quality. Journalist Charles C. Mann explains, “Initially, the complex was Ford’s attempt to solve a manufacturing problem; in the days before networked communication, coordinating precisely with small suppliers was impossible, which meant that he couldn’t ensure that all parts for his cars would be ready at the right time and in the proper condition. Ford’s answer: total control. By trusting as little as possible to outside entities, he was able to guarantee that his factories got what they needed when they needed it.” Ford went as far as purchasing an Amazonian rubber plantation, in an attempt to make their own tires.8
In the past, size was a prerequisite for operating at a certain level. More people creating products, faster (and sometimes better) than an individual could, became the predominant model. We therefore saw this take hold almost everywhere as assembly lines became a standard of efficiency even applied to the preparation of food products. There were few operations that didn’t have something to gain by being bigger than the other guys.
This carries through to advertising as well. Reaching customers was a big company’s game until very recently. Running ads in major media came with very high associated costs, making it the domain of only those with substantial resources. So without size you probably didn’t have ample funds; and without funds, your message was likely left unheard.
We love a challenge
I ask if the desire to be big isn’t fueled by pragmatism alone; moreover, I posit that it is deep rooted in the human condition. Why do people climb Everest, race performance cars, or play video games? We want to challenge ourselves and see how we rank amongst those around us. Such competitions allow us to measure where we fit, and provide an opportunity to potentially feel good about ourselves.
Tell me that this isn’t the case for many of us who run businesses. Who wants to say that they’re a partner in a company of three people? Alternately, I’ll bet you’d feel pretty proud to say that you’ve built a company of 500.
A few of us—who are also rather competitive—have started to ask whether we are playing the right game. If that business owner runs a company of 500, but operates consistently in the red, should we really champion his success? Some of us think the answer may be found by measuring this differently. In considering it, perhaps a lower head count in favor of a bigger pay day would be more admirable. I’m getting ahead of myself. Forgive me—I do that sort of thing.
Growing pains
If you’ve started your own company, the first memories are likely ones held dear. The liberation and excitement felt in taking direct control of your fate is hard to match. Yet while many of us are thrilled by starting new ventures, new companies have their share of rough edges. They can’t handle too many customers and often fumble because they don’t quite have things figured out. Most times we forgive this, knowing that it comes with the territory, but the patience of most customers is finite.
Those companies who survive tend to get pretty smart about how they operate, and in doing so find ways to be as consistent as possible. By establishing systems and processes, they’re better able to run efficiently and offer service that their customers can depend on. Such steps are essential for any company to take, but can easily go too far. Many of us have experienced the challenges associated with getting even the simplest things done when a company becomes overly bureaucratic in nature. Those same systems that began with the hope of streamlining can at times start to feel like an anchor.
This becomes particularly evident in marketing. A small company with clear purpose can implement a plan rather quickly. Sure, these plans might suffer from a lack of exhaustive strategy or limited resources; nevertheless, implementing a plan and gauging success can be both rapid and direct. As companies become larger, such efforts become more cumbersome as the pool of stakeholders grows and gets harder to manage. So we find multiple department managers who seem more intent on battling for space on the company’s home page than conveying a singular message, even though doing so might best suit the whole organization’s needs.
Youth and bravery
Just out of college, the world seemed a little like a playground. Most of us didn’t have many responsibilities, so we didn’t think there was much to lose. This made it the perfect time to go exploring and see what we might find. Some of us saw wildly exciting things, and a few of us had some scares. For the most part we went a little outside of our comfort zone because the risk/reward ratio seemed worthwhile.
Most of us returned, happy to sleep in our own beds again, wondering what our next adventure might be. It’s so much fun to meet different people and see new places; why wouldn’t you do so all the time? Upon returning, some find that fate has other plans. One might start to work in order to save money and pay down student loans. Perhaps the new job requires a car, resulting in monthly payments. Along the way, a relationship might evolve, necessitating the purchase of a home. With time, friendships form and life settles into a pattern. Who knows? Perhaps kids enter the picture as well.
All of these are fine things, and pattern is comforting. The one thing it does typically tend to limit is one’s proclivity for risk. With a mortgage, car payment, work responsibilities, and a couple of toddlers running around the house, one rarely thinks, “Hmmm... I wonder if I should take a few months off to visit Borneo’s Valley of the Headhunters and get an authentic tattoo?” Nope, as we become entrenched in these patterns, that risk/reward ratio starts to look quite different, and most of us seek out stability.
This shift isn’t altogether that different for companies. Ones that previously embraced risk and disruptive thinking find that they can’t quite do the same as they grow. There’s now a responsibility to all of the people involved. Employees have families, mortgages, and bills; suppliers need to be paid consistently; and clients need to know that our companies are dependable and here to stay. As a result, growing organizations often find themselves in a straightjacket within which movement is slow, painful, and sometimes seemingly impossible.
So many voices
In no way do I mean to suggest that growing a company isn’t without challenges and rewards. I’m just trying to illustrate that making changes becomes more difficult as a company gains mass, because of the increasing number of goals and needs to be considered. Surely this can be combated by having a crystal clear purpose, brand strategy, and marketing plan. These sorts of things do require discipline to stick with, though. As more voices clamor to be heard, the company’s core messaging goals can become abandoned, replaced by erratic seeming gestures.
Almost everyone in a company believes that their message is the most important. To mitigate stress and try to keep everyone happy, we sometimes respond by just putting everything in the pot. This leaves us with a big pile of marketing soup: lots of messages get mixed together, limiting any of them from making a direct connection with the audience. With so many people wanting to say so many different things, the message gets lost. As that erodes, so does the organization’s voice.
Most small companies have a voice that’s largely an extension of the founder’s personality. When I go down the street to The Revel Room—which has a rather wicked veggie burger—I get the real deal. The owner talks about what they’re doing to build up the business and jokes about how I order the same thing almost every time. Yet when I call my bank, it’s unlikely I’ll speak with the same person twice. Although the operator today may be helpful, the next one might not be. In an effort to manage this, companies institute policies and procedures for dealing with customers. As laudable as these efforts may be, they tend to feel forced. As a result, niceties are thrown about with abandon, but most customers are left feeling as though they’re being read a script.
Handcrafted versus mass-produced
In a world in which experiences are increasingly streamlined, processed and even virtual, we often find ourselves turned off by mechanical interactions. I’m of the mind that what we really crave are tactile, human, and personal touchpoints. These add color to our lives, particularly when details seem to be commonly glazed over in favor of operational efficiency.
Some of us are quite disinterested in a Kindle or digital reader, as we’d rather hold a real book. Most of us pay greater attention to a handcrafted card than some corny sentiment mass-produced by Hallmark. Likewise, some prefer the idiosyncrasies of the local sandwich shop owner over that of the pimply, bored teenager lumping mayonnaise on our Cold Cut Combo at Subway. While the logistical advantages for mass-production are clear, it can come at the cost of delighting customers.
For most large companies, this is a manageable compromise. Given the choice of being more personal with customers or building a bigger company, the latter will almost always win out. But as Starbucks’ recent closures evidence: getting too big can come with its own perils. This becomes a challenge for many growing operations: how do you maintain the personal connection with your customers when there are so many of them? How do you maintain the personal touch? How do you remind customers that there’s a little soul in your company and that it’s not just a machine?
Small is powerful
For all of the thrills that must come with growing a large business, I have to say that small ones are closest to my heart. Typically I find the people within them closer to the action, and that’s almost always more fun than being around middle managers who seem more interested in office hockey pools. I like it when the dream is alive, and the people in the room are engrossed in the work at hand. That’s where the magic is, and I feel like these are my people.
Small businesses in the United States alone “produce 13 times more patents per employee than large patenting firms” and “create more than half of nonfarm private gross domestic product.”9 They’re a huge economic driver, and they add to the cultural fabric and diversity of our communities. But for some reason we tend to think they should all try to get bigger. Systemize, grow, franchise, retire, and get a boat somewhere; is this really all there is to business? Grow as fast as you can and push everything else in your life aside in order to be rich in retirement? I don’t know, it all seems so… hopeless. Do we really benefit by sacrificing all the great things we have today just for financial wealth in our old age? Clearly, there’s more to living a rich life than a large number attached to one’s bank balance.
I’m of the mind that small businesses are actually much better equipped to excel than many of their larger counterparts. (I’ve likely made that pretty clear.) I’ll come back to this several times, as I think it’s something you need to ask. What’s the perfect size for you? What do you want out of your company? Given any option, what would you prefer to actually do all day?
If you’re in it for the rush of growing the biggest thing you can, great. I think you should do it, and I appreciate the rush you’ll experience. On the other hand, if you want some balance, or simply enjoy the work and the people you get to do it with, size may not be the only thing to concern yourself with. More than that, there are advantages to being small; let me get to those.
The new deal
Thankfully, you’re still small, and this leaves you with a huge advantage when it comes down to getting personal. Plus, in recent years, the tools have changed drastically. As a result, your size becomes a little like a superpower you didn’t even know you had. (Personally, I would have asked for x-ray vision, but this ain’t bad either.)
Every once in a while something changes and reorders the landscape completely. It wouldn’t be an overstatement to say the advent of the internet is precisely one of those changes. What’s curious about this development is how it has played out to date. While many thought the web would replace traditional shops, we’ve found that the opposite has happened. Instead of the predicted Borg-like assimilation of all products and services, we’ve witnessed the emergence of a new era. Today’s web brings us an increasing number of unique offerings, cottage industries, and easier methods for everyone to promote and distribute their wares.
What they’re doing
Rob Kalin, Chris Maguire, Haim Schoppik, and Jared Tarbell started the website Etsy in 2005, with a mission to “enable people to make a living making things, and to reconnect makers with buyers.”10 Or, said otherwise: four friends got together to make a web-based craft fair. In 2008, over $100 million of goods were sold through Etsy—not too bad, eh? Curiously, I’ve never even seen an advertisement for their company. Hmmm...
When I was a kid, getting in the newspaper or on TV was sort of a big deal. You know, you might even call a friend and congratulate her if you spotted her in a background shot on the nightly news. So the notion of making it in Hollywood always seemed to me like a fool’s mission, but don’t tell Mario Armando Lavandeira that. In 2004 he had been fired by Star Magazine, and was having “the worst year of his life.”11
While visiting an internet cafe, he stumbled upon some personal blogs and decided that he too might have something to say. He created a site on Blogger (for free) and started to create an online persona. In time he became known as Perez Hilton. By 2008, his site was averaging 198 million page views a month and ads on his homepage were earning up to $54,000 a day. By October 2009, Quantcast ranked his site the 212th most popular on the internet.12 Star Magazine (his former employer) ranks #4,236.13 To my knowledge, he has never employed an ad agency to help connect with customers or build his brand.
Perhaps you’ve heard of Zappos? They sell sneakers online—a business few would have bothered to start. Most would (wrongly) assume that such a market was too small, and that customers wouldn’t actually want to buy shoes they hadn’t tried on. In 2008, Zappos definitively proved any naysayers wrong. In less than ten years they became a company with annual revenues of $1 billion. In the summer of 2009 Amazon announced the acquisition of Zappos, in a deal valued at approximately $928 million.14 Along the way, they have advertised a little, but not really that much. As CEO Tony Hsieh notes, “We actually take a lot of the money that we would have normally spent on paid advertising and put it back into customer experience.”15
You can do it too
These examples are amongst the most remarkable in this new landscape. Nevertheless, there are countless other stories of companies who started small and used the new tools to gain success. As you may have noticed, I’ve harped on one other point I believe to be particularly important: they hardly used any traditional media to spread their messages. They’ve (rather quickly) created powerful brands, in ways that were almost unheard of ten years ago.
I don’t suggest that everyone who starts a company using the web will fare as handsomely. In truth, I suspect that the ratio of companies that fail to those that succeed on the web likely isn’t all that different than we’d see amongst less wired businesses. What I do feel is important to note, is just how different these sorts of enterprises are from the factory model that we used to think of as the only option. Each of these organizations started small and used digital methods to help amplify their voices and better connect with their respective audiences.
Twenty years ago, small companies had limited access to the tools employed by multinational brands. There were fewer advertising venues and the cost to access them was terribly prohibitive. Some advertising is still very expensive, but it’s no longer the only way to spread one’s message. The tools that have become available in recent years are as readily accessible to a small organization like yours as they are to any major corporation. Better yet, you might be able to use them far more effectively than your larger counterparts—more on that later.
We can get personal
In recent years, most of the discussion surrounding the web has concentrated on social media. If you’re not familiar with this subject, it can be effectively encapsulated as, “media designed to be disseminated through social interaction, created using highly accessible and scalable publishing techniques.”16 The important part of that definition relates to the words “social interaction.” With social media we find ourselves better able to communicate than we ever were with advertising, because two-way discussion is enabled.
For big companies, this might be seen as a drag. They’re likely already burdened by an inordinate amount of email, regular mail and incoming calls. As new methods of communication open up, the big guys find themselves with an even greater number of messages to contend with. Some of this can be worked around, but I bet some of the folks in these companies are rather wary of giving their customers even more ways to call in and complain.
For small operations like yours, this is—in a word—awesome. The battle for many small organizations is in building trust with customers in order to become a “known quantity.” Few will buy from a stranger if they can instead work with someone they know on a first name basis. The reason some of us get so excited about social media is that it can help erase the lines between our companies and our customers. This allows them to get to know us and perhaps love what we do.
Are you playing the same game?
As you work your way through this book, you might wonder if my suggestions are conflicting. In one section I’ll tell you to openly experiment and embrace change; in the next I’ll caution that doing unnecessarily wild things is not the best course of action. There’s little actual confusion here—just different sides of the same coin. My argument is that while many conventions exist for a reason, some are actually just bad habits. We need to carefully examine the things we do as well as the standards that we work with. In doing so we can best determine what should be maintained and what we’d be better off to rethink or perhaps abandon.
One thing that demands special attention is our dangerous fixation on what everyone else is doing. It’s my firmly-held belief that by imitating how others market and do business, we miss out on opportunities. On countless occasions, I’ve met with great small companies who were so obsessed with being like someone else that they missed all of the possibilities right under their noses.
If you aren’t a big company, don’t act like one. You’re probably better off to do the exact opposite of what they do. They’re big, so they probably need to concentrate on being professional and (sorry) boring. This means they’ve left you with plenty of room to differentiate and connect more personally with clients—most likely at a significantly lower cost than they’re able to achieve.
Plans
The means by which you’ll connect with customers—more effectively than the big guys do—are well within your reach. Although sheer brawn was previously a determining factor in a company’s marketing success, the new landscape seems to favor those who act more intelligently. Having access to new tools is just one part of the equation; you need to use them well in order to reap the rewards.
You’ll need to craft a smart plan to outmarket the big guys. This means the alignment of your brand, the development of an appropriate voice, and a peripheral understanding of the new tools that are emerging. That’s really what this book is about: helping you clarify what your company does and says, and focusing on appropriate methods for spreading that message.
Next chapter: Thank Goodness You’re Small
