Dain Dunston

The Language of Leadership

Dain Dunston

Archive for May, 2013

Why do we treat our computers as if they’re people?

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students_at_computerHere’s an interesting article by Alex Mayyasi on the ways in which our brains apply human characteristics to the electronic devices in our lives. Based on research by cognitive scientists Dr. Clifford Nass of Stanford and Dr. Youngme Moon of Harvard, he tracks examples of how our brains force us to interact with computers as if they have feelings.

People also bring norms of politeness and reciprocity to human-computer interactions. Just as a mediocre teacher who asks his or her students for feedback will get sugarcoated responses, Nass and Moon found that people were too polite to give honest feedback in the form of an on screen evaluation to a mediocrely helpful computer. But when they evaluated the computer’s helpfulness on another computer, people proved as forthcoming as students privately complaining about their terrible teacher. And just as we will generally go to greater lengths to help people that have helped us, Nass and Moon found that participants asked to “help” a computer spent much more time doing so with computers that had provided helpful search responses than computers that returned bad search results.

happymacandfriends_20070608175116I remember the first Mac I had and the little face that would appear on screen and the little sounds it made. It seemed to give it a personality you didn’t find on the non-graphical interfaces of the IBM PCs and other engineering oriented computers. And I confess that I have more than once talked to my computers.

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On the Creation of Wealth and Building a Better World

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(Continuing live-blogging my next book in progress, Branded to the Bone.)

Trading Floor_1; Trading Floor 1Imagine a business that has no purpose other than the “manufacture” of money. Such businesses do exist. Certain hedge funds employ small armies of Ph.D.s who use principles of quantitative analysis to predict minute market movements. They nurse esoteric algorithms that calculate spreads on stock movements and jump in and out of equity or option positions as stock prices fluctuate. They turn what is a theoretical asset—a minute and temporary fluctuation in the “paper” price of an asset—into real money. By running mathematical bets on millions of microscopic stock movements, the hedge fund makes a couple of million dollars on a good day; real money that, at the end of the day, is sitting in their bank account. They can lose, of course, and they have lost big from time to time. But these are smart people who tend to win more than they lose.

You can imagine that, if you were good at that sort of thing, it would be fun to be in that business. It would be a little like being paid to play a fascinating game. It would be thrilling when your bets were winning, terrifying when your positions were upside down and perhaps somewhat technical and dry most of the rest of the time. And as you accumulated billions of assets in your accounts around the world, what a warm and pleasant feeling that would be.

Such a business has no customers, just investors. Sure, some investors might want to convince you that they should be treated like customers, but they’ve brought you their money purely as earlier investors might have taken their money to the East India Company to invest in a load of spices coming from Asia. And there’s nothing wrong with a business that does that, assuming they’re not doing things which would cause the world banking system to collapse. Creating money out of thin air and then putting it in banks or investing it in the market would certainly seem to have a positive effect on the world’s economy.

Now imagine a business at the opposite end of the spectrum, a business that is entirely focused on the purpose of social welfare and has zero interest in profit. One example would be Grameen Bank, which its founder, Nobel Laureate Muhammad Yunus, describes as “social business.”

“Capitalism has been interpreted as an exclusively profit-centric human engagement,” Yunus told David Bornstein of the New York Times as he explained the concept of social business. “Some have been saying to bring people and planet into the picture. This can be a good change, but it is still not fully operationalized. Are you putting people, planet and profit at the same level?

“What I have been trying to promote is different. I dismiss personal profit, and focus exclusively on people and planet. That’s what I call social business: a non-dividend company dedicated to solving human problems. You can go all the way, forgetting about personal profit, being single-minded about solving problems. The company makes profit, but profit stays with the company. The owner will only get back the original investment. Nothing more.

“I’m not saying to get away from profit-making businesses. I’m saying keep these separate, run them in parallel. There is a toolbox to solve the problems of poverty, unemployment, the environment. All I’m doing is adding one more tool to the box. It’s simply enhancing the capability of people to express themselves in another way to address the problems we have.”

60-yunus-w-members3
In a social business, such as Grameen Bank or other Grameen business, like GrameenPhone in Bangladesh or health services in Ghana, the only purpose of the business is to raise people out of poverty. Just like the hedge fund, it does this with microscopic investments that amount to huge numbers over time. And, like the hedge fund, the customers are also the investors. When a woman in a village in Asia uses Grameen funding to start a small business, she repays the principal and interest and also becomes a member in the bank. She saves a little money and keeps it in the bank and the bank uses those funds to help others start businesses (don’t worry, Grameen loans have a 98% repayment rate, much better than U.S. bank loans). The benefits of social business are incremental: unlike the hedge fund, no one is going to get rich borrowing five dollars with which to buy a chicken and selling the eggs and chicks. But over time, the benefits to society can be extensive.

There are 8.5 million borrowers in Grameen Bank and that means that, at an average of five members per family, 40 million people have benefitted from the bank’s microfinance operations. Two of the key benefits have been increased access to education and health care for the borrowers’ children. And now those children are a second generation of borrowers: better educated than their parents and able build bigger and better businesses in Bangladesh, along with bigger and better social support programs.

The profit orientation is only one orientation of a person. The same people who are interested in profit making are also selfless. I am not saying that capitalist theory is wrong. I am saying that it has not been interpreted and practiced fully. The selfless part of human beings has not been allowed to play out. As a result, we created a concept of business based on money-centric, one-dimensional human beings. But real human beings are multidimensional.

Muhammad Yunus

As Yunus points out, the profit motive is only one orientation of a person. A leader of a company that focuses solely on generating billions of dollars from stock trading methods that require a Ph.D. to understand will almost certainly look for ways do something good with his or her share of those profits. They’ll build hospitals or endow universities. They’ll seek to add value to the world but they’ll have to do it outside the business, since there’s no way to do it inside the business framework they’ve created. Similarly, the person who creates a social business can’t live on warm and fuzzy feelings alone. He or she will need to feed and shelter a family. And, unless they’re independently wealthy, they’ll need to either find a way for the business to pay them something for their time or they’ll need to get a second job.

But what if there was a middle way? And what of that middle way could not only generate massive global profits but could also help people rise out of poverty? What if it’s not an either or proposition? What if, instead of saying that companies can “do well by doing good,” it turned out that some companies can actually do better by doing good?

 

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If you know a company that’s Branded to the Bone, leave a comment and let me know about them.

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Blockbuster: The customer owns your purpose.

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DSC_0239
(Continuing live-blogging the new book as I write it. Please remember this is a first draft, with lots of rewriting in its future.)

The man who turned down Sumner Redstone’s invitation to talk. His name was John Antioco, who had earned a reputation as a turnaround expert for troubled brands. He had been in his early forties and was the COO of 7-Eleven when he had been hired away to rescue the troubled convenience store chain, Circle K. He helped take it public for a big profit, making investors seven times their money and making himself a wealthy man. And then he took the top job at Taco Bell, turning the Mexican food chain around just ten months. If there was anyone out there who could rescue Blockbuster, Redstone believed, Antioco had to be the guy.

Ironically, John Antioco had been on the original short list of possible candidates to run Blockbuster when Bill Fields was hired. But he’d been in the closing stages of the Circle K deal at that time and declined to be considered.

Was he declining again?

“No,” Antioco remembers. “My daughter was in a school play that weekend and I needed to stay home. There was nothing more to it than that.”

In fact, John was interested. Although, he hadn’t been available the year before, the fact that he’d been asked piqued his interest and he followed Blockbuster’s progress. And just three weeks after he’d said no the first time, the headhunter called back to tell him that Redstone had tapped Bill Fields.

“They hired the wrong guy,” the recruiter told him. “This will be a disaster.”

And so Antioco spent his year at Taco Bell watching the ensuing debacle at Blockbuster with interest, even fascination. And when Redstone saw Antioco’s name come up the second time, he flagged it. When Sumner had first heard his name, Antioco was simply a guy in the process of turning around Circle K, which didn’t seem like that big a deal. Now, just a year later, suddenly here was a guy who had done miraculous turnarounds at two troubled brands in two years.

And so it was, on a sunny spring Sunday in May, 1997, that John Antioco knocked on the door of Bungalow 8 in the gardens of the Beverly Hills Hotel.

The two men got on well. Both came from similar backgrounds: Sumner started life in a tenement in Boston, John in an apartment in the Red Hook section of Brooklyn, where his father was a milkman.

“From the time I was 8 years old, I was working with him on his truck, doing various tasks. So I always had a business—call it retail—orientation. From a really early age, I had someone saying to me, “Look at that customer, here’s what she needs.”
Sumner nodded. He had watched his own father load his truck with rolls of linoleum to sell door-to-door around the neighborhood.

John talked about what he had learned about business from his father.

“He tried to be a value-oriented service provider,” John explained. “Most of the milkmen there would just deliver white homogenized milk. But you could get anything you wanted from Big John: butter, eggs, cheese, which was kind of a pain, by the way, because there wasn’t a lot of margin in it and you had to sort it out through various parts of the truck, but that’s what they wanted.”

“I think that’s what Bill Fields was trying to do with Blockbuster,” Sumner pointed out. “Load the truck up with everything a customer might want.”

John shrugged. He wasn’t going to start off criticizing his predecessor.

“I’ll tell you, in all sincerity,” John said, leaning in to Sumner as if sharing a confidentiality, “fortunately for me, Fields tried everything I might have tried, given my background.”

“You mean, in convenience stores?”

“Turning those stores into a kind of entertainment convenience store, I would have agonized over that, too, I guess, thinking about what I could put in there that would make an extra buck. So now we’ve got a great roadmap of things that won’t work.”
Redstone was particularly impressed at the level of homework John had done on the stores.

“I wanted to update my database about Blockbuster so, after my daughter’s play, I went around some of the stores in our neighborhood and looked around. It confirmed all my instincts around the issues.”

“Which are?”

“You’ve got a hundred people a night coming in to rent Jerry McGuire, but you’ve only got 20 copies. So you actually have a business model based on giving the customer their second or third choice. In any business I ever ran, there’s nothing worse than being out of stock. If every time you went into a 7-Eleven looking for Bud Light they expected you to walk out with something else, you’d quit going back.

“And I realized that’s why I’d kind of quit being a Blockbuster customer, myself. I mean, from a consumer perspective, I’d pretty much taken myself out of going to a video store on a Friday or Saturday night because I didn’t believe there was any way I’d get the hot new movie I wanted to see. Maybe I’d go in on a Tuesday or Wednesday if there was something I wanted to see, but mostly I gave up as a customer.”

Sumner didn’t see the problem. “Well, if you go to a movie theater and they’re sold out, you go see another movie. That’s the way it is sometimes.”

“I think it’s a different problem in retail. It’s worked so far because people were so hungry for the home video experience, they’d put up with a lot to get their hands on a movie.”

There had also been a pent-up demand to see old movies that hadn’t been seen for a long time. In the eighties, the idea of having a library of movies in your neighborhood was a novelty, a very new and exciting thing. It meant you could introduce your children to movies you loved as a child.

“But how long can this work? You’ve already got people saying the Internet is going to take your business away anyway. How long can the video rental industry survive if your model is based on “managed dissatisfaction?” As they talked through the afternoon, the feeling in the room was strong that Blockbuster and John Antioco would be a good fit.

Sumner and his team pushed for an answer and John pushed back. He still had his problem with the golden handcuffs at Taco Bell.

“We told you, John, money is not an issue.” And so they sketched out a deal offer that made John Antioco whole against his losses at Taco Bell, doubled his current cash compensation, gave him options on Viacom stock plus added significant bonuses based on performance targets, so that he would benefit handsomely if he turned the company around.

And they needed him to turn it around. At this point, Redstone would have paid almost anything for a sure bet to save his empire and John Antioco, with his history of saving brands, was about as sure a bet as you could get.

A comedy is a struggle with a happy ending, and that was the story at Blockbuster from the middle of 1997 to the middle of 2007. Within a year, Antioco and his team had turned customer traffic around and restored the brand’s luster with Wall Street.

When I asked John Antioco how he had been able to turn three companies around so fast—Circle K, Taco Bell and Blockbuster—he said it was pretty simple. He just asked the people in the stores what they needed to make customers happy again.

They began by attacking the problem of product availability and “managed dissatisfaction.” They launched a new marketing campaign—“Go Home Happy”—anchored by “The Blockbuster Guarantee.” Guaranteed In Stock meant that if you came in the store for a hit movie the company had advertised and couldn’t get it, you got it free the next time you came in. but that was just the beginning, getting to the root of the problem required Blockbuster to disrupt the industry. Antioco, who a decade earlier had investigated getting 7-Eleven into the video rental game, came up with an innovation in the business model that literally turned the entire industry on its ear: revenue sharing. Profits at Blockbuster soared. And because revenue sharing allowed Blockbuster to put as many copies of a movie on the shelves as customers wanted, customer satisfaction soared, too.

Antioco and his team, including Brits Nick Shepherd and Bryan Bevin, identified Late Fees as a major source of customer dissatisfaction. But because late fees brought in more than $400 million in revenues, no one had dared touch them. Antioco and Shepherd took the leap and customer satisfaction drove revenues up so high they covered the lost revenue in the first year.

It wasn’t always easy and they didn’t always make the right choices. They were slow to shift from tapes to DVDs and they were slow to establish a meaningful web strategy. As competition increased, movie rentals stagnated and they found themselves fighting for market share in a slowly declining market.

By 2000, consumers had many more choices: cable and satellite channels were offering dozens of all movie channels; the Internet siphoned off customers who were content to surf the web instead of watch a movie; Wal-Mart and other stores were selling DVDs at discounts; rival movie rental chains emerged; and then came Netflix.

And there were internal issues that diverted attention and resources. First the IPO as Blockbuster was spun off from Viacom, then a takeover battle as Blockbuster tried to take over rival Hollywood Video. In both cases, capital that might have been invested in innovation was diverted to deal making.

Enter another major character, Carl Icahn. During the Hollywood Video battle, corporate raider Icahn bought heavily in the stock of both sides and when the deal failed to go through, began a proxy fight to gain control of the Blockbuster board. From 2005 to 2007, he battled the management team at every turn.

But, in spite of these distractions, the Blockbuster team found the winning formula in a program they called Blockbuster Total Access. Total Access allowed customers to do business both on line and in stores. If you rented a movie on line and wanted to see something else, you simply dropped by the nearest store and exchanged it. If you couldn’t wait for a movie to be mailed to you, you could go to the store. And if the store didn’t have what you were looking for, you could order it on line.

Total Access was the 800-pound gorilla of the industry for a brief, glorious time. Hollywood Video had no way to respond—they didn’t have the capital to build an Internet infrastructure—and Netflix had no response either. They certainly couldn’t build 5,000 stores. With a base of 4 million customers (against Blockbuster’s 50 million) they began losing a million customers a year to Blockbuster. It was, for all intents and purposes, game over.

In addition, Blockbuster was moving ahead with the digital future, packaging Blockbuster-branded on-demand movie flows for cable companies.

And so, as the calendar turned to the spring of 2007, it was like a movie scene; gripping and grinning in closing moments of the fiscal year as the credits ran on a ten year Blockbuster saga of success. And that brings us back to the defining moment in Blockbuster’s history, when they had Netflix on the ropes and their future seemed secure.

Every happy ending is just the beginning of the next story, and it’s not always a good one. Here’s what happened to Blockbuster: when the numbers were in for 2006, all the executive team were due full bonuses. And because of the deal Sumner Redstone had offered him a decade before, John Antioco’s bonus was particularly large: more than $5 million. For Carl Icahn, who had used the CEO’s compensation as a cause célèbre in his proxy battle, this was a chance to take a stand. He instructed the board not to pay the bonus and informed Antioco that he could take $2 million or nothing. When the dust cleared from the ensuing fur fight, Icahn was holding Antioco’s resignation and a contract requiring him to pay $24 million in severance.

In the search for a new CEO, Carl Icahn was uncharacteristically hesitant. Instead of tapping then-COO Nick Shepherd (who as much as anyone was the architect of the turnaround), Icahn demurred and thus lost the next leader in management.

During this period, a board member was approached by Jim Keyes, the recently retired CEO of 7-Eleven. Keyes had an unusual offer: if they would make him CEO, he would invest $2 million of his own money in the company. He said he knew how to make Blockbuster a retail powerhouse and Icahn, noting the irony that Antioco had been COO of the convenience store chain a dozen years earlier, must have imagined he was getting a bargain-basement Antioco clone, without what he saw as the onerous contract.

Here begins one of the most curious stories in business history, led by a CEO with the timing and people skills of Richard the Third. Keyes’ first act as CEO was to call a meeting of the Blockbuster executive committee at his private airplane hangar. With his Aston Martin parked in front and his private jet parked downstairs, the message as they met in his upstairs “man cave” was apparently intended to be one of intimidation.

His first actions were exactly those of Bill Fields a decade earlier. He told them that everything they were doing was wrong. He told them they didn’t understand merchandising. He told them he didn’t want to hear about the past or what any of them thought.

Then he dropped the first of several bombs. “The Internet is worthless,” he told them, “and we’re getting out of it.” He explained his belief that no one wanted to rent movies on line. What people wanted was an entertainment convenience store, an “entertainment 7-11.”
He told them he would show them how to maximize revenue per square foot in the stores and he would show them what retailing was all about.

Sound familiar? It was the same strategy that had failed twice before.

Shane Evangelist, the VP of Blockbuster Online, protested but was told to shut up. In a later meeting, Evangelist tried to explain that they could sell their membership list for more than a billion dollars and, again was told to shut up, that the list was worthless. In fact, an astonished Reed Hasting, who could hardly believe his luck at what he was hearing out of Blockbuster, had already obtained permission from his board to pay $1.4 billion for Blockbuster’s on line customer list.

Evangelist left the company, as did Bryan Bevin, the head of stores. The VP of Marketing left, too, and behind them the entire leadership team. Within 90 days, everyone at Blockbuster who had put Netflix on the ropes had resigned. And Keyes continued to run the company from his airplane hangar, alone and increasingly isolated from reality. In the months that followed, the press releases were exactly the same as those put forward a decade before by Bill Fields, but this time the rate of failure was dramatically sharper. Employees left as fast as customer and, as the company went into free fall, Keyes filled the stores with merchandise that bore little relation to the core customer need of a “family movie night.” As a result, Blockbuster went into a death spiral from which it never recovered.

In eighteen months, Blockbuster Inc. lost 85% of its market capitalization, an amount that totaled billions of dollars of shareholder value. Keyes tried desperate moves, including reinstating late fees and trying to merge with the failing Circuit City chain, but nothing could save the company by that point. Consumers had moved on to other options and were not coming back in the stores.

In early 2010, Icahn resigned from the board. At the time, his stock, much of which he had purchased at $10 a share, was trading at 45 cents. Keyes resigned in May of that year and Blockbuster was soon delisted by the New York Stock Exchange. By September, the once proud brand was in bankruptcy.

Once upon a time, Blockbuster was a brand that held enormous power in the heart of millions of people, a brand a generation of young people grew up loving for its promise of movie night. Family life and date nights were centered around the brand.

How did it all go so wrong? If Antioco, Shepherd, Bevin and Evangelist had remained at the controls, what would have happened to Netflix and what would the movie rental or subscription business look like today? Would Blockbuster have stumbled in the same ways as Netflix has in the past few months? Or would they have straddled markets and grown in ways we can’t see?

We’ll never know, but it’s possible that, with a leadership culture forged in the struggles the company went through from 1997 to 2007, they would have continued to make the right deals and followed the right strategy. And that belief is supported by the one true thing that can be said about Blockbuster: when they had clarity of purpose; when they understood what business they were really in and focused on what was right for the customer, the customer always rewarded them.

 

Read the next segment here.

And if you’ve got a story of a company that’s branded to the bone, let me know!

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Blockbuster: Losing the plot

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Beverly-Hills-Hotel-entrance-red-carpet(Ongoing live-blogging my new book in progress.)
When the billionaire entertainment mogul, Sumner Redstone, hung up the phone in Bungalow 8 at the Beverly Hills Hotel, he was worried and he was pissed. Pissed, because a CEO he desperately wanted to recruit had turned down an invitation to come to talk to him; worried, because, in that month of May of 1997, the stock of Viacom, the giant entertainment conglomerate he had built up from a chain of drive-in theaters, was tanking. From a high of $63 a share, it had tumbled to less than $26 and everyone on Wall Street was blaming him. Blaming him for the performance of just one company in his empire.

Blockbuster.

The acquisition of Blockbuster Entertainment Group, in September of 1994, was supposed to be one of the jewels in the Viacom crown, the cash-rich ATM machine of a company that helped him acquire Paramount and cement his rightful place in the Hollywood firmament. Now, Wall Street analysts were saying that Blockbuster, for which he had paid $8.4 billion three years before, should be valued at zero.

Zero!

It was insane. It was galling. It was unfair, as far as Redstone could see. But the press was piling on in what he felt was a feeding frenzy of bad reporting and ill-will, all questioning his reason, his ability to lead and his advancing age.

How did it get so crazy?

When Redstone first thought about adding Blockbuster to the Viacom roster of acquisitions, it seemed a no-brainer. The company had a tremendous history, having grown from a single store in Dallas in 1985 to a regional chain of 19 stores when Florida trash mogul Wayne Huizenga took control in 1987. Just six years later, Huizenga and his team had grown Blockbuster into a, well, blockbuster success, with 3,200 stores in the United States and Europe.

Their growth was phenomenal. By 1989, they were opening a new store every 17 hours. In England, they opened 1,000 stores in just one year.

People were crazy for videos. The baby boomer generation had grown up sitting on the living room floor, staring at the test pattern and waiting for the three channels to start broadcasting at noon. They’d grown up dreaming of being able to show movies in their own house, free of commercial breaks, whenever and however they wanted. The video cassette recorder gave them that freedom.

By 1985, more than a quarter of U.S. households had VCRs hooked up to their televisions, and the number was rising fast. All they needed was a library of movies to dive into.

And then along came Blockbuster.

By 1986, there were 19,000 video stores across the country, mostly mom-and-pop stores with mom-and-pop attitudes and retail environments that ranged from seedy to smaltzy. There was a clear opportunity for someone to create a master brand—the McDonald’s of video—and take control of the marketplace.

But it was not so obvious at the time.

When one of his business partners first suggested Huizenga look at investing in the fledgling Blockbuster chain, he thought the idea was ludicrous. He was being offered dozens of sweet deals a week. Video stores? Those sleazy shops with the porno movies in the corner? Gimme a break.

But his partner persisted and, when they were on a business trip to Chicago, he agreed to go look at a store.
Touring the Blockbuster store on Lombard Street in Chicago was a revelation to Huizenga. The blue and yellow décor, the clean, well-lighted aisles; the families with children browsing the shelves, looking for a movie to take home that night. And most impressive of all, people standing in lines ten deep, patiently waiting to check out a movie for a brand new American tradition: family movie night.
“Wow, what a difference!” Huizenga said to his colleagues. It was a phrase that became their advertising slogan and it was the focus of Blockbuster’s business strategy through the rest of the Eighties and into the early ‘90s. There was a difference and it was enough to convince Huizenga to buy sixty percent of the company and take the reins.

Wayne Huizenga was not a guy who watched a lot of movies. He didn’t own a VCR and would rather be making deals than sitting in a theater or in front of a TV screen. And he was not a guy who had much experience in retail. He’d never run stores. But, standing in that first store—and in subsequent visits to other Blockbuster stores—Huizenga had an insight that was to become fundamental to the success and also to the failure of the Blockbuster brand.

He saw that Blockbuster was in the entertainment business.

Those moms and dads standing in line with their kids were there in search of a vision of a future event: they saw themselves sitting happily on their sofas with their families while they watched a movie. They saw themselves having a night off, catching a movie they’d missed in the theaters or sharing an old favorite with their kids. Huizenga understood, as did David and Sandy Cook, the founders of Blockbuster, that selling an entertainment experience was fundamentally different from selling clothes or groceries or household goods. Entertainment tapped into something that was a fundamental human need, the need to immerse oneself in a story.

In the years that followed, when the company was clear that they were in the entertainment business, the company thrived. And in the periods when they decided they were in the retail business, the customers vanished.

The dynamic between those who believed Blockbuster was an entertainment company and those who believed it was a retail company was a tension that would follow the company throughout all the ups and downs of its history. And in the end, it was making the wrong call on this issue that finally doomed the company to bankruptcy.

If there is a central theme to this story, a guiding principal, an “author’s message,” this is it: Know what business you are in.

After merging Blockbuster into the Viacom empire and discovering there was no place for him in Redstone’s world, Wayne Huizenga had taken his marbles and gone home to Florida. He left a very able lieutenant behind, Steve Berrard, who had largely run the company through the growth period, but it was a temporary solution and uncomfortable for both Berrard and Redstone. Within a year, Berrard knew he had to move on and Redstone knew he had to get his own man in the driver’s seat.

So, in the fall of 1995 Redstone prepared to move Berrard out and ordered a search for a new leader for Blockbuster. He wanted the best man he could find. And, tragically, he decided he wanted a “retailer.”

In March of 1996, Redstone announced the appointment of one of the pre-eminent big box retailers in America to run Blockbuster: Bill Fields, then the number two man at Wal-Mart. Fields had been recruited out of college by Sam Walton himself and was said to be, in many ways, more like Sam’s son than Rob Walton was. He had learned the Wal-Mart system from the bottom up, almost by rote. But he was passed over for the top job at Wal-Mart and he believed David Glass, Sam’s successor, was not about to move over (in fact he did, just four years later). For Fields, the chance to make his mark as a CEO may have looked like a good choice. And for Redstone, the opportunity looked equally golden.

Bill Fields didn’t ask questions when he arrived. He didn’t make a lot of changes in the first few months as he built his own leadership team. Behind closed doors, they spent six months developing a new strategy for Blockbuster. It was based around the idea of maximizing sales per square foot in each store, turning them into merchandising machines offering everything one could associate with the entertainment experience. They would sell videos, not just rent them. They would sell you the popcorn and Coke to eat and drink while you watched and they would sell you t-shirts and even jeans to wear while you watched them.

Field’s team launched a new marketing campaign, closely tied to the company’s new direction, and unveiled the somewhat confusing slogan, “One World, One Word: Blockbuster.” The Kansas City ad agency, Bernstein-Rein was behind the new campaign. Led by legendary ad man, Bob Bernstein, the company had pioneered advertising for MacDonald’s and Wal-Mart, inventing the “Happy Meal” and Wal-Mart’s “Made in America” campaign. They also had been a big part of Blockbuster’s history, coming on board in 1988 to develop the brilliant, “Make It A Blockbuster Night” campaign, which helped define the brand and the customer experience. They had lost the Blockbuster account in 1993 but, because of their relationship with Wal-Mart (the only ad agency Bill Fields had ever worked with at that time) they were back.

In press releases, Fields explained the campaign this way: “We’re evolving to be the one-stop, convenient neighborhood source for the newest and latest entertainment goods and services for everyone in the family, whether they want to rent or buy movies, listen to music, read books and magazines, play video and computer games, surf the Net, purchase entertainment related toys and apparel, or just want to tear into a snack and a soda pop.”

The idea was to consolidate Blockbuster’s video and music stores into one general entertainment retailing brand, a sort of 7-11 of the mind, a convenience store for amusement options, a one-stop shop for things you might take home as an alternative to cable TV. He didn’t say it, but Fields might have added the ultimate roadside attraction: “Clean Restrooms.”
Customers hated the new direction and voted with their feet and their wallets. They rejected the confusing marketing campaign and started walking out of stores empty handed. Not only weren’t they buying the “entertainment convenience store” concept, they weren’t even renting movies. By December of 1996, just eight months after he took the job, it was clear that Fields’ his ideas weren’t working. He told Redstone he wanted out.

It couldn’t have come at a worse time for Redstone and Viacom and, as he put the phone down in Bungalow 8 of the Beverly Hills Hotel and stared out the window, he would have been thinking about the disaster Blockbuster had become. In January, they had taken a $100 million charge off to pre-tax earnings; in February, they had announced store closures; March they announced that EBITDA was down 15 to 20% compared to a year earlier and that they were cutting back future store openings. Analysts reading between the lines decided Redstone was trying to get debt down and the stock price up in anticipation of a sale.

It took just 13 months for the CEO Redstone had hired to drive the company to the brink of failure and for Redstone and Viacom to drop from Wall Street darlings to the laughing stock of the business press. Redstone had to be wondering what had gone so terribly wrong.
Here’s the irony: five years before – almost to the month, Wayne Huizenga had trumpeted to the world the triumphant appointment of Joe Baczko, then the number two man at Toys R Us, to be the President and COO of Blockbuster. And what had Baczko done? He had boldly announced that, from that day forward all the problems of Blockbuster would be solved by turning the company into a retailing powerhouse and merchandising their way to success.

Sound familiar?

He also told everyone who was there before him to shut up. He didn’t want to hear anything they had to say.
It took Baczko 23 months to fail, having refused to listen to anyone in the company and having gone through 12 vice-presidents and having watched customers turn their backs on Blockbuster. On the Monday morning following the announcement of Baczko’s resignation, Wayne Huizenga called a company meeting and announced, in no uncertain terms, that Blockbuster was a not and never would be a retail company.

“We’re an entertainment company,” he told the troops, “and we always will be.”

And here’s another irony: ten years and two months after a frustrated Sumner Redstone put down that phone, the Blockbuster board would write the final act of the Blockbuster story and turn it irreversibly into a tragedy by installing another “retailer” as CEO. That retailer – who never knew and never asked about the two historic failures before him – would announce to the world that Blockbuster was a retail company—a 7-Eleven of the mind—and would send the company spiraling into bankruptcy, losing virtually all its stock value in just 18 months. Three times, Blockbuster lost the plot and installed leaders who fundamentally misunderstood the business the company was in. Three times, the company collapsed in a matter of months. And the third time, it couldn’t recover.

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When Blockbuster Forgot What Business They Were In

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(Ongoing live-blogging my new book in progress.)
Ask anyone you know why the Blockbuster empire collapsed and they’ll tell you in one word: Netflix. Blockbuster, with its thousands of stores was a dinosaur that was unable to adapt to changing technologies and market dynamics. But the truth is very different. And this is the untold true story of what really happened to one of America’s most beloved brands and why it’s a lesson every business leader should read.

Here’s the real story: in 2006 and 2007, Blockbuster had Netflix on the ropes and Netflix CEO Reed Hastings was asking them to acquire his company. No, Blockbuster didn’t fail because of the competition; it failed because of boardroom infighting and one of the most disastrous CEO changes in American business history. At a conference call with analysts in 2007, Netflix CEO Reed Hastings mentioned Blockbuster 22 times. He admitted they had not yet formulated a plan to stop Blockbuster stealing their customers at the rate of a million a year. He said Blockbuster had thrown everything at them but the kitchen sink. The next day a large box arrived in Hasting’s office: a kitchen sink with a note from Blockbuster COO Nick Shepherd: “Here’s your sink.”

Netflix Awards $1 Million Netflix Prize & Announce 2nd $1 Million ChallengeBy 2007, unable to fight any longer, Hastings received permission from his board to begin merger talks with Blockbuster. In the end, Blockbuster decided they didn’t need Netflix, their growth was that strong. Netflix was on their way down. They had nowhere left to go.

And then something astonishing happened. Blockbuster blinked. A boardroom dispute resulted in a change of CEO. The new man didn’t understand what business Blockbuster was really in. He started changing the game plan, including pulling out of their Internet efforts. Within 18 months, he had lost 85% of the capital value of the company. Within two years, he lost it all.

When a once successful company loses touch with the purpose that made it great, disaster follows. if you want a proof that purpose matters, look at what happened to Apple between 1985 and 1997. Jobs and Wozniak had built Apple up as a company that made super high quality, high margin products noted for their elegant design and noted for their ability to help normal people like me do elegant work. But after the board booted Jobs out of the company in ’85, Apple went through a series of CEOs who really didn’t get it. They lost sight of the purpose of the company.

John Sculley was a very smart man, no doubt. And he seems to have been inspired by Jobs’ call to spend his life doing more than selling “sugared water.” But he brought the same consumer product marketing mind to Apple that he had used at Pepsi. He began to commoditize Apple products, and Apple’s loyal brand fanatics left them in droves. When that didn’t work out, he was replaced by a new CEO, Michael Spindler, who continued to find a way to restore Apple’s sales and even began takeover talks with IBM, Sun, and Phillips. When that didn’t work either, he was replaced by a third CEO, Dr. Gil Amelio. Amelio had been successful at cost-cutting and restoring National Semiconductor to profitability. But he didn’t understand the purpose of Apple, either.

Apple didn’t exist to sell commodity products that were just as good as or slightly better than PC clones. Apple existed to provide “the creative class” with elegantly designed tools that would help them become “insanely great.” Like Nike’s “Just Do It” challenge, Apple’s purpose was customer-focused: it was focused on what the customers needed Apple to be. And what is today one of the world’s most valuable companies was practically insolvent because they lost sight of their purpose. It got so bad that Amelio lasted only 500 days on the job. And in his last gasp, he was running a company that was just one quarter away from total insolvency.

Jobs came back, reestablished the sense of purpose with the Apple team, and the company took off again. Customers flocked back because they were drawn by the clarity of the brand purpose.

The story at Blockbuster was very similar. In its 20 year blaze of glory, from the time Wayne Huizenga took control of the tiny Dallas chain to the 3 year death spiral that lead to bankruptcy and the sale of assets, Blockbuster essentially had six CEOs. Three insisted Blockbuster was an entertainment company, three insisted it was a retail company. The retailers all failed, each in less than two years, each bringing the company to its knees and, finally, its death. Each of the failed “retail” CEOs presented the same business plan, virtually word for word, that had failed the company before. And each was entirely ignorant of their plan’s prior history of failure, as was the Board.

At its height in 2007, Blockbuster had more than 50 million members worldwide, people who had turned over their credit card information for the privilege of renting a movie in their local store or on line. 50 million people who wonder what happened. Millions of older people who saw their lives change when they walked into their first Blockbuster and found they had access to an entire library of movies to take home and watch. Millions of younger people who came into this life with Blockbuster as the brand that meant family fun, that meant movie night, that meant their first journey into the world of the story. Millions of people for whom the words “Make it a Blockbuster Night” still ring with profound resonance. Or would, if the company was still around.

The story is worth telling here and in the following sections because there are so many wonderful lessons to be learned. But let’s not start at the end or at the beginning: let’s start in the middle when the second of Blockbuster’s three failed CEO’s had just resigned in disgrace.

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What went wrong with the Nano?

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Denise Yohn interviews me about what went wrong with the Nano. Why have they only sold about 250,000 when everyone was predicting (including us) that they could sell twice that every year?

“Fast forward today, though, and the company has sold under 250,000 Nanos since deliveries began in 2009, and sales in March were off by 86% from a year earlier, according to a recent Bloomberg BusinessWeek article. The piece, entitled “Tata’s Nano, the World’s Cheapest Car, Is Sputtering,” blamed the lackluster sales to the car being “too cheap—at least for consumers who don’t want to be associated with a low-end ride.” It explained that the company is planning to add improvements including innovative doors, automatic transmission, and a diesel engine to try to invigorate interest in the model. These moves would also increase the price to be comparable to rival cars.”

You can read my comments on the matter. In 2008, “Nano” was the most searched word on Google. But in the end, the market voted with their feet and the Nano is an interesting device, like the Segway. Cool, no doubt, but who actually buys it? Well, the guy above did and he was pretty excited. But not enough guys like him put their money down.

But that’s not to say that there were no payoffs for Tata. They were the most respected company in India and the Nano made them even more so. Most everyone admired what they did and why they did it. Employees were extremely proud of the project and Tata continues to be the employer of choice in India. What they learned about cost innovation has driven change behind the scenes throughout Tata and throughout the global auto industry. Tata Motors (and that includes Jaguar Land Rover) are the best in the business at cost and process innovation. It’s no surprise that the just released Range Rover is 20% lighter than the previous model. And the Nano drove Suzuki out of the low end of the car market in India, where they had held monster market share for 25 years. So, while the results of the project were a disappointment, the company is a better company for having taken it on.

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The Korean Edition of Nanovation Just Arrived

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I came home from New York yesterday and found this waiting on my desk. None of us had any idea our publisher had sold the Korean rights. Can China be far behind? And is there a check? These are the questions authors learn to ask.

It’s interesting to look inside and see a book you spent so long on now completely unintelligible. Sorry, can’t read any Korean. I can only look at the pictures. But then I see pictures that were never in the book and wonder at the idea that someone else took this project on and put their creative mind in gear to make this work for the Korean reader. That’s a nice idea.

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On Purpose and Watching Paint Dry

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(Continuing live blogging my next business book!)
Companies like BlueBell and USAA make purpose easy to understand because it’s such a strong and clear purpose. Who wouldn’t be moved by thinking that your purpose is to provide a moment of wonder and joy to a five-year old or to protect our men and women in uniform? But what if you business is, well, boring? What if your organization is engaged in providing products or services that more or less stay in the background.

If the kinds of purpose we’ve talked about can be described as “strong purpose” – saving lives, making a better world – then let us introduce the idea of “mild purpose,” which could be described as providing the basics upon which building our world relies. Not necessarily emotionally moving, but vital nonetheless.

In the story of the three stonemasons, it’s easy to get distracted by the idea that they’re building a cathedral. Important work, no doubt, and surely prestigious. But does it change the point of the story if the masons are building a town hall? Or a home? What if they were building a stone wall along a country lane? Does that devalue the lesson of the story? Is the value of their work any less? No. The first mason still takes pride and meaning in the quality of impeccable work. The second mason still finds dignity in making a living he can be proud of. And the third mason still looks at the bigger picture of what he is building and sees that wall’s important place in world. It may not be a grand purpose like a cathedral that will stand for centuries, but there are plenty of stone walls in the countryside that have stood just as long as Notre Dame. And kept livestock in place for centuries.

One great example of an industry with “mild” purpose is paint. What could be more boring? In fact, the phrase, “like watching paint dry” is the quintessential metaphor for dullness. How could anyone get excited about or feel a sense of purpose through selling paint?

Chris Connor of the Sherwin-Williams Company sees it differently. He’s been CEO of the nearly 150-year old paint company since 1999. “Paint is about making things last. Protecting the things we make. Our building and bridges. Our furniture and equipment. Our homes and all the things inside them. Paint is about sustainability.” As a purpose, that’s not bad. Making sure the products you manufacture and sell do the job you’ve promised they’ll do is something all three stonemasons could get behind. But, as you might expect, when a company is 150 years old, you can get a few wrinkles in your purpose.

In 1866, Henry Sherwin had an idea. At the time, he was a young man living in Cleveland, Ohio, and a partner in a company that sold linseed oil and pigments to painters so that they could blend their own paint. It was a good business at a time when many other good businesses were trying to get started. The United States was just coming out of the Civil War and was deep in an economic winter, a kind of long-cycle winter just like what we’ve been experiencing the last few years. In those days, painters were craftsmen who made their own coatings following often-secret recipes they’d been taught in their apprenticeships. It was a proud guild, and very protective of their right to own the formulas for paints, polishes, varnishes and all the varieties of coatings people put on their products which in 1866 were primarily made of wood. Henry Sherwin’s bright idea seems simple to us but it was a big deal back then: to put pre-mixed paint in a can.

The science of canning had come into its own during the war as companies like Hormel, Swift and Heinz found markets for tinned meats and other foodstuffs. Sherwin reasoned that if you could put beans in a can, you could put paint in one. He thought the reason was obvious: it would save painters the time of having to mix intricate paint formulas.

It was the Industrial Age and everyone else was looking for industrial efficiency. Why wouldn’t painters?

Sherwin presented his idea to his partners, who were horrified at the idea. Why would he want to alienate their customers? If you could put paint in a can, anyone could buy it and paint their house. Well, exactly, cried Sherwin. What’s wrong with that?

What was wrong with the idea was that it was disruptive. It would change the industry, although neither Sherwin nor his partners could have imagined just how much. It would certainly not appeal to painters, who prided themselves on their own formulas for a quality product. And it would cost them their customer base. The argument became so vehement and the shouting so loud that, by the end of that fateful day, Sherwin had been drummed out of the partnership and was out on the street.

He found a partner in Edward Williams and they soon founded the Sherwin-Williams Company. It wasn’t easy. It took them ten years to develop a marketable product, because developing a reliable formula that would provide a good quality paint when you opened the can turned about not to be as easy as we today might think it would be. Sherwin knew two things: if painters opened the can and found an inferior product, it would be all the proof anyone would need that paint in a can was a bad idea. On the other hand, he knew that if they could a product of consistently high quality at a reasonable price, there would be no reason not to buy it. But it had to be right.

When Sherwin-Williams released their first product, the response was overwhelmingly enthusiastic. But the enthusiasm didn’t come from the expected customer base. Painters were underwhelmed and reluctant to change. But homeowners thought paint in a can was one of the greatest ideas of the exciting new Industrial Revolution. Suddenly, an enterprising husband could spruce up his own kitchen or brighten up the nursery. Soon, Americans were painting everything that wasn’t moving, just because they could. They painted their houses inside and out. They stripped off wallpaper and painted plaster. They painted marble mantelpieces. They painted elaborately carved hardwood ceilings. And as the new gas and electric lighting became available in the bigger cities, sooty interiors became bright with color and light.

Many a person restoring a vintage home has stripped layers of paint off a fireplace only to find something like white Travertine marble underneath and asked themselves, “Why would anyone paint this?!!”

Because they could, that’s why. And they could thanks to Mr. Sherwin and Mr. Williams.
Providing a product that not only protected and preserved but also reduced labor was the first wrinkle in the purpose of Sherwin-Williams. Over time, there were other wrinkles.

During the First World War, Britain and her allies placed a world wide embargo on German goods. At the time, Germany had a monopoly on the manufacture of pigments. No other country in the world had the keys to the production of pigments on a global scale. So, out of necessity and perhaps out of a little bit of patriotic pride, Sherwin-Williams reverse-engineered the pigment production process and developed an American pigment industry that soon came to dominate world production. Then, in World War II, when all lead supplies were commandeered by the military for both the painting of military equipment and the manufacture of bullets, paint manufacturers had to find a new process for making paint. Sherwin-Williams was the first to invent a process for water-based, latex paint which now dominates paint production.

Wrinkle after wrinkle.

But perhaps the biggest wrinkle came over time. Painters, over the years, grew tired of mixing their own paint and came to see the value of buying manufactured paint. It was easier and the results were more consistent. And, particularly in the building-boom years following the Second World War, painters became Sherwin-Williams biggest customer base. Even in their thousands of urban and suburban stores, more than 80% of their customer base are painting contractors. And in their non-retail business, selling coatings for manufacturing applications in markets as diverse as furniture, high-tech, automotive, military equipment and kitchen cabinets.

Along the way, Sherwin-Williams found a new wrinkle in their purpose: to support the hundreds of thousands of contractors they served and to help each of them be more successful in their business. Whether it’s a store manager opening his doors before dawn and greeting his pot-and-brush contractors with donuts and coffee, or it’s a technical team showing a plant in China how they can get the interior coating right on the inside of a white iPhone, they’re dedicated to making their customer processes more successful (we’ll look carefully at Sherwin-Williams processes later in the book and at the payoff that process integrity has given them).

Does integrity of purpose change anything at Sherwin-Williams? You bet. In the time Chris Connor has been running the company, they’ve tripled in size and, most impressively, they’ve outperformed the Dow Jones Industrial Average by a factor of six to one. There are a lot of reasons for this, but one important reason is that the men and women of Sherwin-Williams—just like the men and women of Blue Bell Creameries or USAA—are very clear about what business they’re in. Whether it’s selling a moment of joy, protecting our military service people, or making contractors more successful, clarity of purpose helps people define the business they’re really in.

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On Purpose in the Face of Tragedy and Death

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(Continuing live blogging my next business book!)
Maybe it’s easier to grasp the purpose of a business when your job is to sell moments of joy and delight. What would it be like if your business was based on moments of tragedy and loss?

In their amazing book, Guts: Companies That Blow the Doors Off Business as Usual, Kevin and Jackie Freiberg told this story: in the aftermath of 9/11, the switchboards at insurance companies lit up with calls from the families of those killed in the Twin Towers and the Pentagon. One of the first calls was to a crisis operations center in San Antonio, Texas. The caller was a newly widowed woman, clearly distraught, who had remembered that her husband had a life insurance policing pending with this company. What, she wanted to know, was the status of the policy?

The person taking the call looked up the customer’s file. Yes, he had applied for life insurance. Yes, he had taken the physical. And, yes, the contract had been completed. But, unfortunately, the deceased had missed a crucial step. He had not sent in his first payment. The policy was void until payment was received.

With most insurance companies, that would have been that. A contract isn’t a contract unless a payment is received. End of story. But this gutsy insurance company wasn’t going to let a detail like that stand in the way of their business goals. They asked the widow to send them a check for the first month’s premium and immediately paid off the entire $125,000 policy. Why? Because their primary business goal is to take care of American service people and their families.

That’s just one story from an amazing insurance company called USAA. Located in San Antonio, Texas, USAA does business on a 256-acre campus with a headquarters building that’s bigger than the Pentagon. Founded in 1922 by a group of Army officers and named United Services Automobile Association, USAA has a very clear purpose: they protect each other. Each other, because the company is structured as a business cooperative. The policy owners are members of the cooperative. They are the owners and they are the customers.

Jim Middleton was CEO of USAA Life at the time of this incident and he told this story to Kevin and Jackie to illustrate what matters most to the company. “We would do it again in a minute,” he told them. While most life insurance policies contain exception clauses that exempt them from paying benefits to policy holders killed in war, USAA seeks service men and women out. When the wars in Afghanistan and Iraq began and hundreds of thousands of their members shipped out to the war zones, USAA continued to cover them. But they didn’t stop there. The company reached out to every member of the armed services and offered to supplement their Serviceman’s Group Life Insurance policy, worth $250,000, with a USAA policy for the same amount. No medical exams. No questions asked.

What kind of company is this, anyway? It’s all very well to put purpose ahead of profits, but how do they manage to stay in business when they’re so apparently reckless with their assets? Don’t they care about their bottom line?

Sure they do. And when you look at the numbers, you can see that integrity of purpose can pay off.

With 9,400,000 members, USAA has $22.1 billion in net worth, which places them 62nd in net worth among Fortune 500 companies. Their revenue in 2012 exceeded $20 billion, which put them 144th in revenue on the Fortune 500. They’re on Fortune’s 100 Best Companies to Work For. They have the highest ratings from A.M. Best and Moody’s and the second highest from Standard & Poor’s. They’ve been on Ward’s 50 (the list of top-performing insurance companies) for 22 consecutive years. They’re the nation’s fifth largest homeowners insurer, sixth largest auto insurer, eight largest credit card provider and twenty-seventh largest bank.

In 2009, in the depth of the recession when other insurance companies were contracting, USAA was able to expand. From the beginning of 2008 to the end of 2012, they grew their member count by 42 percent, from 6.6 million to 9.4 members and their net worth by 57 percent.

Oh, and three more statistics: USAA has a 99% customer approval rating, 98% member retention and 95% of USAA’s members say they intend to be members for life. Apparently, purpose pays. Even in the midst of tragedy and death.

Like Blue Bell Creameries, USAA could grow a lot faster if they wanted to. During 2010 and 2011, there were lots of opportunities to buy up other insurance companies. But what would they have been buying? Certainly not companies—or cultures—that would be able to adapt to their sense of purpose first. Besides, most mergers fail. For USAA, organic growth is the best growth.

They could also grow if they changed their mission. If they didn’t limit themselves to service members and their families, they could probably double the size of their business in a year. With their reputation for customer satisfaction, who wouldn’t switch their policies to USAA.

“We could blow this thing out and bring in anybody in the world as a member if we wanted to,” a former company leader told Bill Coffin, a reporter with the National Underwriter Life & Health Magazine, “but then we would lose our way. We would forget why there was ever a USAA in the first place.”

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A Second Art

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Recently, the Financial Times ran an article by the Scottish novelist Andrew O’Hagan about novelists and the other art forms to which they feel drawn. Norman Mailer felt he could be a good actor; Vladimir Nabokov loved capturing and displaying his collection of butterflies; and Henry James loved to paint. O’Hagan believes that a passion for a second art can influence the novelist’s work on a deep level (consider James’ novel The Portrait of a Lady) and also provide a key to help readers more fully understand their work. O’Hagan notes that the novelists he knows never light up so fully as when they’re talking about their second art.

My “second art” is clearly design. My wife, Jean Compton, is a dealer of American folk art and outsider art and I am her willing assistant when she takes her travelling gallery on the road to shows. We arrive in Santa Fe each August, for instance, with a truck and trailer loaded with items as diverse as a handmade child’s rocking settle from the 1850s, a Navajo doll from the 1920s, a painting done by a man in a mental institute in the 1950s and a collection of wood carvings done by an untrained African American artist in the 1970s—carvings of birds remembered from his childhood in the woods and swamps of Louisiana. With this collection, we have a day or a day and a half to create a physical gallery display in a public hall filled with other dealers.

Three walls usually define the space we’re given. It’s not unlike a stage: in fact, it’s exactly like a stage and it’s no surprise that Jean did her graduate work in stage design or that I spent my career designing large corporate spectacles for sales and employee meetings. The idea of creating a clearly focused space out of a larger, unformed space is something that comes naturally to both of us. Coming into a giant hotel ballroom in Las Vegas or Orlando and watching a crew erect, in physical space, a stage and set that had until that day existed only in my mind and the minds of my colleagues is an exciting and satisfying experience. Once, a producer stood in the middle of a ballroom with an artist’s rendering of the staging, a drawing that had been created months before. “Look,” he showed me, as the lighting designer adjusted his lights, “it looks exactly like you said it would.” Even more satisfying was the time we created a temporary set in an Arizona hotel. The set appeared to be a sandstone arch from the Utah desert and a visitor mistook it for a permanent theatrical proscenium.

My first job in creating the temporary gallery space is usually setting up the lighting. If the walls describe the space, the lighting defines it; it gives the “stage” a sense of place. Because we have to work fast, there’s nothing fancy. Mostly, spotlights designed for a drawing table on extendable arms. We arrange those along the tops of the walls to create pools of light, particularly in the corners and in the center of each wall, where the most important items are placed.

Jean has usually spent a good deal of time designing the arrangement of items in the space. My job is to hang the art that goes on the walls or to arrange the furnishings or art objects that stand on pedestals. Sometimes, I’m able to channel my inner architect by designing display pieces, creating drawings I take to a metal shop in Comfort, Texas. They make suggestions about ways to improve the design and then, a week later, the object I designed is ready to be picked up.

Sometimes, I’m called upon to create an arrangement of objects, such as this collection of salesman sample hats from the 1940s. When Jean found a collection of antique buttons that a woman had glued to foam balls, I designed a stand—basically as set of oversized iron ‘golf tees’ on a length of flat steel—on which they can be displayed. We turn found objects into modern art.

Over the last year, I’ve been working on a series of dry stone walls that will eventually reach from our house to the road and give definition to the entry experience. There’s something cool about creating a wall that will last, like all such stone walls, for hundreds of years.There’s something magical about designing space and I have no doubt I could be just as happy being an architect or, probably even better, designing and building spec homes and art spaces. Don’t think I haven’t considered dropping my corporate work and doing just that. There’s a ten-acre lot down the hill from us that I’ve walked from time to time and on which I’ve designed a breathtaking modernist home with views of the western horizon from a stone terrace shaded by a line of small live oak trees. Yours for less than $750,000.

Jean and I designed—with the help of an architect—the home in which we live. And three times, we’ve designed expansions of this home. Originally conceived of as a mother-in-law house near a larger main house, then as a weekend getaway house, it’s a little small for our needs. We were nearly ready to start construction on one house plan when the markets (and the business of corporate meetings) collapsed in 2008. Then in 2012, we created a much better and more practical design and were just about to pull the trigger when, once again, the corporate production business stalled. Maybe it is time to reconsider the idea of going into the home building business.

How this work informs my writing is clear, at least to me: when I’m writing a story, I’m imagining the space in which the characters live and move. One comment I’ve gotten on my new novel, The Downside of Up, is that it’s cinematic, filled with visual imagery that makes it easy to imagine the book as a movie. It’s just the way my mind works. When I’m telling a story, whether in a novel or a business book, I’m setting a scene; a stage on which real or imagined characters will strut their stuff, with all their sound and fury.

Ernest Hemingway considered bull fighting to be an art form and spoke about the idea that a writer should approach his work the way a toreador approaches a bull. Mailer felt he inhabited his characters the way an actor would and that, in doing so, he was able to imagine them in greater depth. And it’s interesting to note how many actors—from Paul Newman and Steve McQueen to Patrick Dempsey—have made sports car racing their second art. Maybe there’s something to being on the edge of physical control at high speed that helps them take risks as actors. I’ve always admired painters who could create a work and hang it on the wall, something you can’t really do with a piece of writing. And I’ve often wished I had musical talent. I like the idea of getting together with friends after a day of solitude with my keyboard and using a different kind of keyboard to fill a honky tonk with blues piano. But mostly, I’d like to design that honky tonk, from the sign out front to the stage in the back. And maybe I will design one, if only as the setting for a story.

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On Ice Cream and the Pursuit of Happiness

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Branded to the Bone — Part One: Purpose

(Continuing live blogging my next business book!)
The first time I walked in the front door of Dunkin’ Brands headquarters in the leafy Boston suburb of Canton, I was hit by a powerful memory from childhood. In fact, I was hit by a series of them. The first hit came from Frank Griswold, the mayor of the Dunkin’ Brands lobby. The way he greeted me was just like the way shopkeepers used to greet me when I was five years old and my Mom or my Dad would walk me into a store. I remember red-faced, white haired men with ample bellies bending forward with their hands on their knees and greeting me like I was the most important little person they had seen all day.

That’s how Frank greeted me. He wasn’t bending forward, since I’m a good deal taller than he is, but in every respect that was the experience he hit me with. He wanted to know who I was and where I came from; what I wanted and how he could help me; what I liked and what we had in common. The only time he stopped cheering me up was when he interrupted himself to greet, by name, each of the employees passing through the lobby on the way to their offices.

The second hit came when I looked past Frank to the area behind the security turnstiles. On one side of the rear lobby is a Dunkin’ Donuts counter and on the other side is a Baskin Robbins ice cream counter. You can walk up to either and help yourself to a donut or an ice-cream cone any time of the day. The memory hit me hard: I was a kindergartener in Whittier, California, the first time I walked into a Dunkin’ Donuts shop. I could smell it again. I could feel it. I could remember thinking how wonderful it must be to be one of the people who worked behind those counters; what it would feel like to take that sheet of wax paper and reach for a glazed donut or one of the ones with icing and sprinkles. Moments like those are huge to someone five years old and the rush of those feelings hit me as I stood there talking to Frank and looking over his shoulder at those racks of donuts.

I remembered the first time someone took me into a Baskin Robbins store, too. The bright colors and sparkling clean white coolers seemed magical and filled with possibilities. I was used to my ice-cream choices being limited to chocolate, vanilla or strawberry and here I was faced with thirty one flavors—31!—and it was mind-blowing at the time that there could even be so many flavors in the whole world. Flavors with names like Baseball Nut, Jamoca Almond Fudge and Blueberry Cheesecake. It was the best ice-cream I’d ever tasted but, more than that, it was an experience I never forgot.

What must it feel like to work for a company that sells that experience? It feels like Frank Griswold. Your work is a gift to others.

On another day at Dunkin’ Brands, working with a group of bright vice presidents on Leadership Presence, we were talking about how important it was for leaders to be able to personalize their presentations by sharing stories that help frame their message. I called for a field trip and marched everyone down to the lobby. We each scooped some ice cream for ourselves and then trooped back up to our conference room. As we sat there, I asked everyone to share a story from their childhood, a story of a time someone took them out for ice-cream. In every case, the memories were as sweet as the ice-cream. Each memory was of a moment of delight, a moment of joy.

As a statement of purpose, that’s pretty hard to beat: Baskin Robbins exists to provide moments of joy to small children and to give adults the chance to share those moments with kids. Imagine! entire business purposed around the pursuit of happiness.

Maybe that’s why people love ice cream companies so much. People create fan sites about Ben & Jerry’s Ice Cream and make pilgrimages to their factories. Co-founder Jerry Greenfield makes it clear that he and his partner, Ben Cohen, started the business because they liked ice cream so much and wanted to be part of the revival of great quality ice cream. And for them, the business is as much about the community they’ve built—a community of people passionate about ice cream’s “little moment of joy”—as it is about the actual product. The same is true of the 108-year old Blue Bell Creameries, in Brenham, Texas. Who wouldn’t want to work in a place where they express their mission for being in the ice-cream business with the words: “We eat all we can and sell the rest!”

When they’re not busy eating ice-cream, they’re busy sharing it with others. Although their product is only for sale in 20 states in the U.S.—a regional geographic area that represents only 20% of the national market–they’re third largest selling ice-cream brand in the country. And they claim their Homemade Vanilla is the best-selling single flavor of ice cream in America. And it’s also considered the highest quality.

How’s this for clarity of purpose in the ice cream business?
“We eat all we can and sell the rest!”

On their hundredth anniversary, New York Times reporter R.W. Apple went to visit the company and try their ice cream. He wrote of Blue Bell that “with clean, vibrant flavors and a rich, luxuriant consistency achieved despite a butterfat content a little lower than some competitors, it hooks you from the first spoonful. Entirely and blessedly absent are the cloying sweetness, chalky texture, and oily, gummy aftertaste that afflict many mass-manufactured ice creams.”

And, by the way, this isn’t some boutique brand: this is supermarket ice cream. It’s not supposed to be this good and most of their competitors would try to make theirs this good. Blue Bell makes their ice cream so good because, well, that’s the point of their business.
Blue Bell’s CEO Paul Kruse admits that he and the other 3,000 employees could sell a lot more ice cream and they will, someday. But they take a very long view of their business. They’re very clear that their purpose is to be the best ice cream company in the business, not the biggest. Or the fastest growing. Or the most profitable. They clearly believe that maximizing pleasure comes before maximizing profits.

That may be easier for a company like Blue Bell, where the leaders and employees are able to reach and keep a clear consensus on the things that matter most and are able to exercise control all the way to the store shelves. It’s harder at a publically owned company like Dunkin’ Brands, with 17,000 outlets in sixty countries, nearly all of which are franchise owned.

Read the next segment here.

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