Chapter 2: Thank Goodness You’re Small
While many businesses are madly chasing growth, I want to take a moment to convince you that the size you’re at is quite possibly perfect. You have agility, speed, and a personal touch that large companies would kill for. Are you ready to sacrifice that just to say that your company has more people on the payroll?
Let me tell you about my mom
Believe it or not, cross-country skiing in North America (circa 1983) wasn’t as big a deal as major league baseball. I know… I know… given how we’re riveted by the sport today, it’s hard to believe this, but I assure you it’s true. My dad was one of those rare few who really liked skiing; he even raced competitively. At the time, spandex had just come to market, and a few one-piece suits (like those seen on speed skaters or in bobsledding events) had become available. These were lighter, breathable, and more flexible than other garments, helping skiers achieve a wider range of movement. As you can imagine, my dad wanted one of these.
For Christmas, my mom put one on order. It was shipped from Finland and one of very few you’d see at ski races. Given the hassle involved, my mom saw an opportunity and toyed with the idea of creating her own. I can’t stress how much I respect the way she went about doing this. Today it would be much simpler. We have the internet, which can help us locate clients, suppliers, plans, and resources on legal matters, taxation, and business advice. In 1983 it was all quite different. My mom went down to Fabricland and bought a few bolts of fabric, and then had skiers like Dave Wood (now the head coach of the Canadian National Team) come over and help her figure out the sizing. She’d bribe skiers with homemade lasagna, and they’d be guinea pigs who’d help her test out her most recent iterations.
Mom had grown up with an interest in starting businesses; she was also handy at sewing. In addition to some night classes in accounting, this formed her business “toolkit” when she started Lumi. It wasn’t exactly easy for her. I still remember how hard she had to work to get things off the ground. She put everything into that business and toiled into the wee hours many nights to fulfill orders.
She did quite well for herself. Over the years she adapted and grew, building systems to help manufacture more efficiently and better service clients. For a while she rode a small wave when spandex tights became a fashionable item for women; later, she worked directly with figure skating clubs whose members needed warm up suits. Mom and I have talked about business a lot, and I watched as she worked through many different struggles that first-time entrepreneurs face: hiring issues, workflow challenges, and clients who went into receivership and were unable to pay.
Lumi didn’t have an IPO, nor is it a household name. For twenty years, though, it ran in the black, making a good product (I still see the odd person wearing one of her jackets from fifteen years ago). The revenues from that business in part allowed my parents to invest, send their kids to college, and even retire a little early. We all like to hear about the riches found in business, but unfortunately most companies fold within the first year. This leaves founders with either a nasty loan that takes years to pay off, or bad debt resulting in bankruptcy. We rarely talk about all of those little companies that pay their bills and generate reasonable returns, but they are a really big deal. (They’re the ones that keep most of us employed.)
Aside: If you call smashLAB, my mom might pick up the phone. She’s our bookkeeper now and lends a hand every here and there.
Temptations of success
I remember a drive to Edmonton when my mom had a meeting with a chain of sports retailers. She was so thrilled I thought she might pass out. The trip resulted in a substantial order, so there was some deal of excitement for her. Such instances weren’t uncommon, and each time they resulted in discussion around how she could make the most of the opportunity. Our dinnertime conversations often revolved around the orders at hand and ever-looming delivery dates. Such demands brought on issues of hiring and the associated challenges given the seasonal nature of her business. I made all kinds of simplistic suggestions for how to address such issues. I now know first hand how challenging it is to balance staff and workflow.
With each of these opportunities came a real thrill and opportunity for advancement. I know the exhilaration of this rush and how it leads you to think about growth. “If I get three more orders like this, I can hire another person to do X, which will allow us to take on that many more orders…” and it goes on. It’s awfully difficult to not get sucked up by the possibility of growth and the promise it may hold. The notion—not always accurate—that added staff will allow you to fill out certain roles and have individuals specialize on key tasks is incredibly seductive. Many of us start to grow our companies before we’ve determined whether that’s what we actually want.
For the many reasons there are to grow, I argue that there are just as many to stay small. Increased size means added bureaucracy, management, office politics, and training—not to mention the need for additional equipment, space, health plans, phone lines, insurance packages, and so on. From the outside, running a business may seem like a license to print money. On the inside it often feels quite the opposite. Some may think I’m being whiny about this, but I have to say that after costs are paid out, many find that there’s little left over.
When you’re small…
With all of the attention the Googles, Nikes, and Cokes get in the press, we often think the only measure of an operation relates to its size. This is changing and I think that we in part have technology to thank, in conjunction with the buzz we see around startup culture.
Consider the venture capitalist Paul Graham. He’s one of the key people in Y Combinator: a venture firm that funds early stage startups. Although their investments typically amount to less than $20,000 of actual funding, participants find benefit in having access to the team’s connections and collective expertise. In the past such a sum might have seemed offensive but this is no longer the case. As a result of the low barrier to entry for today’s startups, many eagerly apply to the Y Combinator program. Paul espouses starting companies from the standpoint of “smaller, cheaper, faster.”17
As a small company, you can turn on a dime. That’s a good thing as it allows you to correct course easily while larger companies are still trying to get their bearings. Let’s say you have a little software company that competes with one of Microsoft’s products. Along comes a new innovation that you choose to implement in your application. All you have to do is get down to work. Sure, Microsoft has nearly 90,000 people to do the same, but do you think it’s really that easy?18 How many meetings, proposals, surveys, and assessments need to happen before a single line of code is written? It’s like arranging a get-together: a dinner for two is easy, a gathering of 12 friends is no big deal, but planning a wedding for 100? That’s a kind of torture.
Another great thing about small companies is that they can be highly focused. This doesn’t mean that all are, but for the most part, they should be. Without all those hundreds or thousands of staff members to keep paid, you don’t need quite as much cash coming in. See where I’m going with this? Lower operating costs mean that you also don’t need as many customers. This allows you to concentrate on just a few great customers in a more lucrative market. While a large department store might need to service many different customers with varied needs, your small company might be able to make a single product the core of its business.
For example: hats. I’m bald you see, so covering my noggin has become a bit of a thing for me. Instead of going to a massive department store for this sort of purchase, wouldn’t it be nicer to find a little shop where hats are all they sell? These people know the product better, have the nicest hats before they’re available in the chain stores, and tend to have a greater selection.
Minimum wage passion
Small companies are often fueled by passion. To best contextualize this, I think we have to begin by looking at what most companies have instead. While she was in high school, my wife Amea worked in a location of the Canadian Tire franchise. If you’re not Canadian, you’d likely be led astray by the name. It’s a cross between a car parts shop and hardware store, which also sells yard items, camping gear, household essentials, insurance, and pretty much anything else you can think of. The thing is, that’s a lot of stuff to know about, and Canadian Tire tends to mostly hire students who don’t know that much about any of these products. Amea sometimes recounts how angry customers were with her for not being able to help them better. Believe me, I understand their complaints. Service at Canadian Tire makes me want to scream, too.
But is this realistic? She was a teenager making minimum wage who had received hardly any training. There’s typically little passion in big companies because the people there aren’t invested in the product. You, with your small company—did you start it just to make money? Maybe, but most don’t. It seems to me that those who go into business for themselves do so in an area they love. This shows, and customers enjoy buying from people who are excited and knowledgeable about what they do. Teaching passion to a staff of thousands isn’t easy though. In a way it’s like trying to force love en masse. Most times it’s there or it’s not—case closed.
Although I don’t intend to touch upon every advantage a small company has, I do think it’s important to hit a few of the high points. The one that I haven’t addressed yet relates to the sub-title of this book and it’s my favorite: being personal. When you’re singing to an audience of thirty, you can hang out with everyone and grab a beer once the show’s wrapped up. What about The Beatles? How personal could they get with their fans? Right—not very. Everyone was crazy about those guys, so it didn’t matter too much. How about General Electric? Do you think they can get personal with their customers? I don’t think so either, and unlike the Beatles, I’m less excited to invest much of my own enthusiasm in GE.
Getting personal is something that some big companies try to do through their ads, marketing, staff training programs, and so on. It’s not that they shouldn’t try, but sometimes it’s like teaching a humpback whale how to do the tango.
Make it an unfair fight
My dad and I were in the car the other day, talking about small shops. He noted his belief that for most of these companies, the possibility of success is negligible given the prevalence of large box stores and mega malls. We continued to discuss this on the drive to my parents home and even had a little debate about it. I disagreed with him, and it became a pretty good discussion.
In my mind, the only thing that kills a small shop is when it tries to be something it’s not. If you’re not stronger, you have to be smarter. Head-to-head, Walmart will crush you. Let’s pretend that you sell books. If your strategy is to undercut Walmart on the price of best sellers, you are on a suicide run. First of all, they have more fire power than the rest of us. They can buy their inventory for less than anyone else because of their purchasing power, and they have no problem with loss leaders (something sold at a loss to get you into the store and presumably buy more stuff).
Most of us see the inherent problem here. To fight a bigger enemy with limitless resources on equal ground is like courting a certain death. No one ever said that business against the big guys would be a fair fight. Perhaps we need to turn this into a street fight that’s less about following rules, and more about who walks away at the end.
My friend Jim owns a book store, and it’s a great one. It’s eclectic, personal, and very much the polar opposite of a Walmart, or a big bookseller. The shelving is bric-a-brac in nature, there are no uniforms, and there’s isn’t a corporate identity system to speak of, although it certainly has a strong brand presence.
You’d go to Books & Co. (Jim’s store) on a Friday night and grab a coffee and shortbread cookie at the adjoining cafe. Then you’d settle in for an evening of local musicians playing folk music while sharing stories and enjoying a couple of laughs. Or you’d be one of the parents who brings their kids in on the weekend for story time, allowing you to grab a bowl of soup, magazine, and maybe even chat with a friend. You might talk with one of the staff members who’d suggest a good book to bring home for your mom.
I met Jim when I was working as a painter. I asked him if I could use some of his space for an exhibit of my artwork. I noted that I could bring in paperwork, a portfolio, and contracts if he wished. Really, I was willing to do whatever I needed to gain access to that space. Jim just paused for a moment and said, “OK.”
I was surprised by how casual he was about it. I offered to come back with the papers I had promised. He explained that it was entirely unnecessary and noted again that the space was mine for the exhibit.
Compare this to Walmart. Would they be able to put on these fun community nights? I suppose, but I can’t imagine anyone going. Are you interested in a night of folk music at a box store? I didn’t think so. Could they offer suggestions on other books? I doubt it. My guess is that most of the people working there don’t care about books that much. Would they know their customers by name? Maybe, but the number of customers would certainly make doing so more difficult. Might they special order that book you were looking for but couldn’t find anywhere? Um...
I could go on, but I don’t think I have to. In this fight of Walmart vs. Books & Co., the only clear advantage Walmart has is price. For some people this is enough, but the rest of us want more than to just save a few dollars on a purchase.
I’ve come to feel like Jim’s brand is directly related to the community. I could easily buy my books online, but I instead pay more to get them from Jim. It’s not that I have to, and I’m not trying to be nice. It’s that Jim supported me, and I know how important his store is. It makes the community better, and I also believe that my purchases help support something that I believe in. (Really, I’d feel like an ass to buy a book anywhere else.)
No more pointing fingers
When you get bruised in business, it’s easy to point the finger and blame the big guy. This often feels comforting and there’s very little possibility of an actual altercation ensuing. We can all blame a big company for being “stupid” as they’re (at least in an abstract sense) so far from us. You’ll often hear small retailers singing the blues about how a big box ruined their business. Don’t get me wrong, I’ve been there, and it sucks, but if you weren’t ready for a bit of a fight, you were never cut out for business in the first place.
Keep in mind, big companies are so far from their customers that you have countless opportunities to get in there and fight for the business. Maybe you take your loyal customers out for lunch to thank them for working with you. Or, how about this? You could just make a vastly superior product. (Those big boxes often offer a low price, but at the cost of other nice things like personal service and lasting quality.)
In Seattle a few weeks ago, my wife, sons, and I walked by a little ice cream shop. It was hard to identify from outside, but it was memorable for the amazing vanilla scent that wafted through the air and the massive line up of people waiting to step inside. I pass by a Dairy Queen twice daily and have never seen a line up like that outside its doors. We were in a rush and were unable to wait. (It was a pretty long line up, after all.) Still, I’ll hazard a guess that their ice cream was available in fewer flavors than at an ice cream franchise, and that they didn’t have any kind of movie tie-in promos. They might not even have had seats or napkins with their logo on them. Really, I don’t know and I don’t care. All that sticks in my mind was a warm afternoon and a lovely fragrance that passed through the air. The next time we’re in Seattle, I’ll find that place.
You can complain perpetually about the hardship in your life, or you can do something remarkable.
Something interesting
I was just out of town for a speaking engagement. These trips aren’t particularly fun. I often find myself at odds with just finding a reliable Wi-Fi connection and a healthy meal. Although business travel comes with the promise of a getaway, it has very little in common with a holiday. Additionally, I perpetually find myself with the dubious task of finding gifts I can return home with for my wife and kids.
On this particular occasion I forged out bravely, in search of a local shop containing something unique to bring home. I finally came across a large collection of stores; unfortunately, it turned out they were all part of a large outdoor shopping mall. I’m not a fan of malls. Being a thousand miles from home, I figured there had to be something of interest there, but the mall directory proved me wrong. Bed Bath & Beyond, The GAP, Victoria’s Secret: every name on that list was familiar, in fact omnipresent. I sulked, feeling somewhat beleaguered, asking myself if this same list might be in every city around the world. I had to wonder if I’d find some variation of it in Dubai, Helsinki, or Madrid. Maybe not—I’ve never been to Dubai or Madrid, but I wouldn’t be surprised. I have yet to travel to a city these brands haven’t penetrated.
All I wanted was to find something just a little unique from the place I was visiting. Sadly, these big brands seem to have wiped out such a possibility. As a result, I temporarily gave up and instead made my way to a nice little Mexican restaurant. As I worked through my second glass of wine, I found myself asking why it had come to this, and what it all might mean.
The loss of local color
This is the power these brands have. They are everywhere, and we know precisely what to expect when we see their names. In many respects I admire them—the clarity in their messaging and their reach. No matter how boring the Banana Republic may be, I still spend at their shops and I know that I’ll generally find something suitable there.
You should likely stop me here, because I feel a rant coming on. My parents are from Finland, and we’ve traveled back on a number of occasions. The first time I was in second grade, and after that we returned every few years. By the time I was sixteen, something there had changed. My Dad and I were out for a run, when we came upon a gas station. I can’t remember which multinational brand it was, but it hardly matters. At that moment Finland felt a little less “Finland” to me. I think this gas station marked a personal tipping point at which I realized just how much this country was changing. The brands here were looking increasingly American, and that seemed sad.
Odd as it may sound, I want Finnish gas stations in Finland. I don’t want a Starbucks in the Forbidden City (others felt similarly, which seemingly influenced its closure in 2007).19 I dread the notion of boring, homogenized Budweiser being equated as the “king of beers.” Be that as it may, the convenience and awareness of big brands allow them to effectively clearcut local cultures. Soon (if not already) we’ll all know, have, and buy exactly the same things. A rational counterpoint to my argument might be that this hardly matters as shops are just one part of what one finds in a particular region. I’d argue that it’s like a virus that spreads easily. You’ll hear more about American entertainment in Finland than that crafted by locals; similarly, Canadian films are routinely sorted into the “Foreign” category, even in Canadian movie rental shops. (This isn’t a good thing.)
My fear is that we in ways court a rather gray and bland future by supporting the big brands. Many bring convenience, but at the cost of variety, color, and delight. The travesty is that the convenience and consistency of these major brands has in many respects superseded the possibility of something interesting and compelling.
The power of a community
Arguably, the most interesting street in Vancouver is Commercial Drive. Our little city has some hippy roots, and they’re most visible in this area. Calling it “The Drive” (as locals often do) is perhaps a better moniker for it, as the term “commercial” isn’t particularly accurate. In actuality, it’s a rather messy collection of shops that has captured the interest of residents by being the “anti-mall.” Dining there ranges from the Honduran place that will only accept cash payment, to the Italian cafe famous for its great coffee and tacky decor. (Interesting note: I met my wife Amea at this cafe and later proposed to her in the same spot.)
“The Drive” is a funny place—some might consider it the polar opposite of the air conditioned suburban shopping mall. Curiously, it has gotten so successful that some franchises have become attracted to it. In recent years a Starbucks and Tim Hortons (a popular Canadian coffee/donut shop) have opened on the Drive. Shops like these could threaten the nature of the community, but I doubt they’ll ever open there en masse, given how cynical many are of their presence. The fact is, those who choose to live around Commercial Drive enjoy Little Nest. It’s noisy and chaotic, and you can let your kids play while you have a delicious breakfast. Similarly, they love the energy found at the street parades, and the wildly creative costumes that are to be seen there at Halloween. There are countless vivid, real, human experiences to be found on The Drive, because it hasn’t been sanitized, regulated, and contained in a perfectly sealed box with ample parking.
There’s a lesson in this: individually, we can strike up a fight against those brands we’ve come to see as soulless, anonymous machines that do little for the communities within which we live. That being said, individual efforts often remain disconnected, making it harder to win. This makes the links we have with our neighbors even more important, as they can serve to propel our efforts much further and faster than we could otherwise.
Such movements probably won’t be the result of municipal revitalization plans, nor do they need to be limited to a physical community. Whether it’s those shops on The Drive, Seattle grunge in the early ‘90s, or technology in Silicon Valley—organically formed collectives can move mountains. Look to your neighbors; what are the common threads that can lead you to join forces?
What if my organization isn’t small?
Then you have your work cut out for you. For all the perks and resources available in large companies, these can prove hard positions for marketers. First of all, many find themselves mired in stifling bureaucracy that severely limits their ability to make bold moves. What’s worse is the difficulty such groups have in rewriting perceptions about their organizations.
While we all strive to be known for something, doing so comes at a cost. Once an idea about a company is cast, it’s very difficult to change. I can’t overstate the challenge that marketers in this spot face. I think the Korean car company Hyundai serves as a good example of this. You may very well think that Hyundais are great—I can only speak for myself here. When I hear the name Hyundai, the image that comes to mind is of a rickety old tin can that an acquaintance of mine once drove. It was poorly styled, perpetually in need of repair, and seemed to be comprised more of rust than metal. Sure, this was a “beater” and therefore not a fair example, but their struggles with quality have tainted the way some think of them.
Fast-forward fifteen or twenty years, and we find that Hyundai has addressed many of these quality issues. They established new quality control measures, reportedly investing “$6.5 billion to improve quality”20; they even started to warranty their cars for 10 years or 100,000 miles. As a result, in J.D. Power and Associates’ 2009 Initial Quality Study, Hyundai placed fourth in overall quality, only bested by Lexus, Porsche, and Cadillac.21 Meanwhile, the Genesis, their first luxury offering, “was voted car of the year by a panel of journalists at the Detroit Auto Show.”22
Still, I can’t shake that notion that Hyundai is a “cheap” brand. This is clearly an inaccurate belief, and it’s not as though they aren’t going to lengths to change it. In addition to their quality improvements and positive reviews, they market aggressively, even buying expensive ad spots during the Super Bowl. Clearly, they’re doing things right. Between 1998 and 2006 their unit sales increased by 400 percent23 and they’ve stated their goal to be one of the world’s top five automakers by 2011.
I think they will do it. Similarly, I think that in time they’ll be free of the negative associations related to their poor quality, now many years in the past. Few of us remember when the name Toyota wasn’t synonymous with dependability, but such a time did certainly exist. Negative brand associations can be rewired when the process is steered nimbly. Doing so just isn’t easy or cheap. Hyundai may come out of this on top; nevertheless, don’t you think it would have been easier if the same fleet of vehicles were to appear on the market under a wholly new and untarnished brand?
Next chapter: Startup Thinking
