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Small Giants: Companies that Choose to Be Great Instead of Big by Bo Burlingham

Small Giants

RATING: 8/10…READ: April 24, 2012

A Book that profiles companies that choose to remain small, despite the external pressures to become big. I found this book most useful for an alternate angle on what it means to be an entrepreneur and how you can create happiness for yourself & the world through entrepreneurship without losing your mojo.

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When you’re hell bent on maximizing growth, or when you bring in a lot of outside capital, or when you take your company public, you have very little freedom. As the head of a very fast growing company, you’re a slave to the business, which has tremendous needs. Either way, you’re constantly hiring, selling, training, negotiating, hand holding, cajoling, mollifying warning, pleading, coaxing, and on and on.

“I’ve made much more money by choosing the right things to say no to than by choosing to say yes to,” said restaurateur Danny Meyer of Union Square Hospitality Group. “I measure it by the money I haven’t lost and the quality I haven’t scarified.”

When you launce a business, your job as the entrepreneur is to say, “Here’s a value proposition that I believe in. Here’s where I’m coming from. This is my point of view.’ At first, it’s a monologue. Gradually it becomes a dialogue and then a real conversation.

Unlike most entrepreneurs their founders and leaders had recognized the full range of choices they had about the type of company they could create. They hadn’t accepted the standard menu of options as a given. They had allowed themselves to question the usual definitions of success in business and to imagine possibilities other than the ones all of us are familiar with.

The leaders had overcome the enormous pressures on successful companies to take paths they had not chosen and did not necessarily want to follow. The people in charge had remained in control, or had regained control, by doing a lot of soul searching, rejecting a lot of well0-intentioned advice, charting their own course and building the kind of businesses they wanted to live in, rather than accommodating themselves to a business shaped by outside forces.

Each company had an extraordinary intimate relationship with the local city, town, or county in which it did business—a relationship that went well beyond the usual concept of “giving back.”

They cultivated exceptionally intimate relationships with their customers and suppliers, based on personal contact, one-on-one interaction, and mutual commitment to delivering on promises.

I noticed the passion that the leaders brought to what the company did. They loved the subject matter, whether it be music, safety, lighting, food, special effects, constant torque hinges, beer, records storage, construction, dining, or fashion. Though they were consummate businesspeople, they were anything but professional managers. Indeed, they were the opposite of professional managers. They had deep emotional attachments to the business, to the people who worked in it, and to its customers and suppliers—the sort of feelings that are the bane of professional management.

“We’ve been in business for twenty years, and I look forward to coming ot work even more now than I did in the beginning. I’m having more fun, and I’m more at peace with the realities of life. Success means you’re going to have better problems. I’m very happy with the problems I have now.”

Wasn’t it better to have a highly profitable $10-million company than a $100-million company that didn’t make any money? Wasn’t it better to have a business with a great reputation in its community and its industry—a company known and respected for its fabulous service, its unstinting generosity, and its happy, dedicated workforce rather than its size?

You can’t build a small giant if you’re in a n industry where your success depends on how big your company becomes. In that case, the pressure to grow fast will be irresistible, as it was for TriNet, and sooner or later you’ll have to look for outside financing, no matter how much capital you start with.

“Let’s say you’re in a capital intensive business, selling a hundred untis of something for $100, and you earn $3 after taxes. To grow 10 percent, you need to make ten additional units. If you have to invest $2 for every new unit of growth, you’ll need $20 to grow 10 percent. You can’t finance that out of after-tax profit. Using your after tax profit of $3, you can only pay for one and a half additional units, meaning you can only grow 1 ½ percent—unless you get the additional capital somewhere else.

Like many entrepreneurs who feel driven to grow their companies, he suffered form a major disability, namely, his own blindness to what he had accomplished. He was haunted by a sense of inadequacy, of not measuring up. He would compare himself with the most famous entrepreneurs in the world and wonder what they had that he lacked. He was so focused on his shortcomings that he couldn’t see—or give himself credit for—the real contributions he had made to his community and the positive impacts he had had on all the lives of people around him. It was as though all that counted fro nothing if he hadn’t achieved what the world considered the pinnacle of success as measured by the size of his company or his personal fortune.

Story of the girl throwing a starfish into the ocean: “An old man comes along and says to her, ‘Don’t bother. There’s millions of them out here. You can’t save them. What you’re doing won’t make a difference. She looks at the starfish in her hand and says, ‘It makes a difference to this one.’ And she throws it into the ocean.”

I want to live in a world where one can and odes choose to go to the local drugstore on the corner—that old chemist who’s been there with his wife behind the counter for thirty years—instead of going to the Rite Aid or Kmart.

Enlightened hospitality is showing your customers you are on their side. You don’t want them just to be satisfied; you want them to be happy. It’s a step beyond service, and it requires the company to develop an emotional connection with customers through individual, one-on-one, person-to-person contacts.

Building a community with your company:

++The first is integrity—the knowledge that the company is what it appears, and claims, to be. It does not project a false image to the world.

++The second pillar is professionalism—the company does what it says it’s going to do. It can be counted on to make good on its commitments.

++The third pillar is the human connection, the effect of which is to create an emotional bond, based on mutual caring.

They were as careful about tone as about voice, and about language as about tone. Certain words they strived to avoid. For example, they always referred to “opening artists” rather than “opening acts,” and “customers” or “friends” rather than “fans,” because DiFranco wanted to discourage a cult of personality.

“There really was no conscious effort to sell Ani or Righteous Babe, more than to just present them,” he said. “They weren’t trying to trick people into buying a record. The idea was to make something worth buying and then put it out there so that people could be attracted—or not.

It’s generally not the people at the top of the organization who create the intimate bonds. It’s the managers and employees who do the work of the business day in and day out. They are the ones who convey the spirit of the company to the outside world.

The relationship between the employees and the company is the entire basis for the mojo they exude. You can’t have the second without the first. Unless a significant majority of the company’s people love the place where they work; unless they feel valued, appreciated, supported, and empowered; unless they see a future full of opportunities for them to learn and grow—unless that is, they feel great about what they do, whom they do it with, and where they’re going—mojo is simply not in the cards.

“That’s the way my father raised our family, from the earliest moment. Lots of responsibility. We’re counting on you. We trust you. And if you screw it up, just tell us about it; don’t worry about it. We’re not encouraging you to screw up, but for heaven’s sake, if you do, don’t worry. We’re all in this together, and we don’t know what we’re doing either, so come on and join in. And I always liked the idea of a small number of people. I just don’t like what happens in large groups.”

I have never encountered angrier and more cynical employees than those I’ve met in socially responsible companies that have been so focused on saving the world they neglected to do what was necessary to save themselves. Some of them were famous for their mojo early on, but they lost it, in part because they didn’t take care of the basics.

And the idea of not earning a profit because you want to do what’s “right”? Don’t get him started. “You should really feel worried if you’re not profitable,” he said. “If you have an established company and you don’t have profits, you’re doing something wrong. There’s a hold somewhere.

Profits are not optional in business. If you don’t have them, you’re dangerously close to going broke. It’s not responsible to your employees. They might not have a job. As the guy in charge, it’s your duty to make sure you have a profit. We all need a little accountant inside of us, saying, “Hey asshole, what are you doing?”

At least one of the founders of CitiStorage, is not particularly concerned about succession. He thinks it’s less important whether or not his company outlives him that it set an example and provide a role model for other businesses to emulate. He hopes that the people who have worked at CitiStorage will take its principles and practices with them wherever they go.

Survival rates of family business: Only about 30 percent make it through the second generation, and 3 percent to 5 percent through the fourth generation.

I don’t believe it’s possible for a company to have mojo without leaders who feel that way about what companies do. If they don’t love the business, if they don’t feel that what the business does is vitally important, if they don’t care deeply about being both great and unique in providing whatever product or service they offer, nobody else will care either.

If you allow yourself to get distracted, if you stop working on whatever it is that ties you to the people you do business with, the intimacy will vanish, the trust will dissipate, and the bonds will erode.

It’s worth noting, moreover, that what they love is not limited to the products their companies make or the services their companies provide. Those products and services are obviously important. Just as a great composer must have a passion for music, a great brewery must be built around a passion for brewing, and a great special effects company around a passion for computer graphics, and a great manufacturer of torque control products around a passion for solving torque-related engineering problems. But in much the same way that a symphony is the end result of a composing process, any great product or service is the end result of its own particular creative process, and whoever is doing the creating must love the process as much as the end result.