PhaseTwo Strategies for growing business

Great story on opportunity from OUTLIERS by Malcolm Gladwell

I am about half way through Malcolm Gladwell's OUTLIERS.  First of all, let me say that, thus far, I am finding this book fascinating.  So far, it's my favorite Gladwell book to date.  But this post isn't meant to be a review of the book (I will right one once I'm finished).  However, I wanted to offer one story that I found fun and relevant to all of those current and aspiring entrepreneurs looking for and shaping opportunities.  In chapter five, Gladwell tells the story of Louis Borgenicht, a "off-the-boat Jewish immigrant living in NYC in the early 1900's.  The story recounts the start of Mr. Borgenicht's (ultimately) successful women's and children's apparel business.  This part of the story recounts his search for an opportunity after the birth of his second child.  At the time, he was making $13/week selling fish from a street cart.  He needed a way to make more money.  Here is the excerpt from the book:

The answer came to him after five long days of walking up and down the streets of the Lower East Side, just as he was about to give up hope.  He was sitting on an over-turned box, eating a late lunch of the sandwiches his wife had made for him.  It was clothes.  Everywhere around him stores were opening -- suits, dresses, overalls, shirts, skirts, blouses, trousers, all made and ready to be worn.  Coming from a world where clothing was sewn at home by hand or made to order by tailors, this was a revelation.  

"To me, the greatest wonder in this was not the mere quantity of garments -- although that was a miracle in itself --" he would write five years later, after he became a prosperous manufacturer of women's and children's clothing, "but the fact that in America even poor people could save all the dreary, time consuming labor of making their own clothes simply by going into a store and walking out with what they needed.  There was a field to go into, a field to thrill to."  

Borgenicht took out a small notebook.  Everywhere he went, he wrote down what people were wearing and what was for sale -- menswear, women's wear, children's wear.  he wanted to find a "novel" item, something that people would wear that was not being sold in the stores.  For four more days, he walked the streets.  On the evening of the final day, as he walked toward home, he saw a half dozen girls playing hopscotch.  One of the girls was wearing a tiny embroidered apron over her dress, cut low in the front with a tie in the back, and it struck him, suddenly, that in his previous days of relentlessly inventorying the clothing shops of the Lower East Side, he had never seen one of those aprons for sale.  

And this was the start of his garment business.  It's a simple story, but a good one.  The lesson here is DIFFERENTIATION.  Someone once said that the goal of any business strategy is to ensure differentiation.  While I would argue that the goal of any business strategy is to design a method for achieving your ultimate business goals, I would agree that every business goal should be firmly rooted in differentiation.   

Fun stuff...

DS

find this book fantastic.  

Quote of the Day -- From Ret. Major General Don Loranger

I heard a great quote today from an interview filmed at the Democratic National Convention.  The interview feartured a seasoned, retired airforce general by the name of Don Loranger (I hadn't heard of him before this interview) who was a Republican and retired military general in support of Barack Obama.  When asked for his thoughts on Barack's experience (or lack thereof), he had a line that I really liked:

"Wild E. Coyote had experience.  The Road Runner had judgement.  Experience doesn't do you a lot of good if you don't have good judgement."  

- Major General Don Loranger

I just loved this quote (especially coming from a guy like General Loranger) and really thought it applies to any area of life which involves leadership -- from politics to sports to business.  Obviously, for this blog I will address to topic as it relates to business...

For a long time, I have been a believer in the idea that experience is very much overrated in the business world -- especially in the wonderful world of start-ups.  I'm not saying experience has no value.  I'm just saying it doesn't have as much value as many people attribute to it.  I call hiring for experience, "hiring a resume."  I see far too many "resume hires" in my travels.  

Actually, I think the biggest culprits of "hiring a resume" are institutional investors (ie - VCs).  They look to fill the leadership positions of their companies with people with the best resumes.  Those who have worked at companies exactly like the one they are funding.  Especially those who have had "success" (I put success in quotes because its definition varies widely when it comes to VCs and their investments -- a successful investment is often quite different than a successful company and vice-versa).   The VCs believe that a team with strong experience greatly reduces the risk of their investment.  Actually...a VC would probably argue that last statement.  He would probably say that a great management team lowers the risk of their investment.  But when push comes to shove, they define "greatness" by experience more than any other factor.  They may not admit it, but they hire resumes.  

The problems with "hiring resumes" include:  

1. A resume tells you NOTHING about how well a person will operate within your organization and/or culture.  I know this may sound too "soft and fuzzy" for some readers, but I promise you -- it's VERY important.  Companies have a personality and people that aren't compatible with that personality simply won't be able to reach their potential and succeed.  The Great White shark may rule the seven seas, but how well would he do in Lake Michigan?  Not too well.  The point is, environment matters.  Someone with all the experience in the world won't be able to succeed in a culture which doesn't fit his skills, talents and personality.  At the same time, a bad fit will hurt the productivity of your existing staff.  None of the important information to gauge a person's fit in your company can be derived from a resume.
2. The best predictor of  future failure is past success.  I don't have any scientific data to back this up, but it's funny how true it seems to be.  Many serial entrepreneurs will tell you that their biggest successes were their earlier endeavors.  Past success usually builds two things -- a bigger bank account and a bigger ego.  Both are detrimental to future success.  When you don't need money, you don't work as hard to get it.  When you believe that you are God's gift to a business, you have nothing more to prove, so you don't work as hard to achieve success.  Also, people who have had past success tend to think they have all the answers.  They think all they need to do is repeat what they did in the past in order to achieve future success.  This limits their flexibility and their ability to innovate.  They lose the curiosity and the willingness to experiment that most likely led to their past success.  They seem to think that success is easy and formulaic.  The problem is that every new business operates with a new model, in a new market, with a new group of individuals, and a whole new batch of challenges.  A rigid, myopic leader will doom this business for failure.     
3. Sometimes...many times, ignorance is bliss.  This is a theme that chimes loudly through the entrepreneurial world.  Ignorance leads to innovation.  Ignorance leads to better collaboration.  A leader who doesn't know the answer to a particular issue asks more questions.   Asking questions leads to better solutions (and a more motivated staff).  An ignorant leader takes risks and experiments more.  Over time, these leaders will drive more success than not.    
4. Resumes don't speak to a person's talents and strengths.  I would argue that more important than relevant experiences, are a person's relevant talents (or as Marcus Buckingham refers to them - strengths).  A person's strengths are a much better predictor of his or her future success than his or her experience.  

In our society, experience gives you credibility.  But it doesn't give you judgement.  And it doesn't make you a leader.  So I urge all of you investors and executives (and voters!) -- when deciding on a leadership team, it's ok to consider experience, just don't base your entire decision on it.  

But you don't have to take my opinion on this issue -- just listen to Retired Major General Don Loranger.  After all, he's got plenty of experience to back it up... 

DS