PRINCIPLE 13
If It Ain’t Broke—Break It.
Don’t Be Complacent.
Always Improve. Always Get Better.
The advice in the title doesn’t immediately win me friends among people who’ve built successful companies. If you imagine yourself in their position, you’ll understand why.
There you are, finally making money—maybe even a great deal of money—after putting in eighty- ninety- or hundred-hour weeks for years trying to get your company up and running. You’d like to slow down a bit, maybe only work sixty or seventy hours a week, and have the chance to sneak away on the occasional Friday afternoon to play golf. And here I am saying, “Your company can’t afford to become lax. You need to be constantly working to stay ahead of the competition and making sure you’re anticipating your customers’ needs.”
Sheesh.
Well the fact of the matter is, you can never become complacent. Sure, things are fine now, but:
Things change. The economy gets hot, or cools off, and your company has to respond accordingly.
Not only do new competitors enter the marketplace, but existing competitors get better.
Computers and apps now allow the business world to operate at “warp speed.” As a result, new products and new ways of disseminating information are being created faster than ever before.
Customers’ needs and wants evolve as well—invariably they want more and better, and to pay less. (If you ask them if they want higher quality and/or lower prices, they’re always going to say “yes.”)
The result of all this requires you to change and evolve—quickly. Otherwise, someone—maybe one of my students—is going to come and take away everything you’ve earned with a cheaper, faster, and/or improved version of what you’re offering today. (In other words, they’re going to do to you what you did to someone else when you were first getting under way.)
You should always anticipate what your customers’ future needs will be before they ask for it.
There’s another important reason you need to keep evolving rapidly. Many of our nation’s schools, including some business schools (not Babson), teach that the world is a predictable place. So they assume that studying what worked in the past will prepare you for the future. That’s simply not the case, as a quick glance at the papers will prove. Traditional formal planning just doesn’t work. The world—especially the business world for entrepreneurs—is just not that predictable.
If you assume that tomorrow things will be pretty much like today, you will end up reacting to changes in the marketplace and playing “catch-up.” Conversely, if you’re always trying to figure out how to get better, you’ll stay on offense instead of constantly playing defense. All this explains why your company has to be continually scanning for weaknesses and threats and looking for places where you can build on your strengths and take advantage of opportunities.
But just because your company has to do this, it doesn’t mean you have to be the one doing it. You can delegate this task of staying ahead of the competition, provided you truly empower your people to take advantage of what they learn through constantly doing the SWOT analysis we talked about in the last chapter.
You are entitled to slow down a bit. In fact, I think it’s a good idea. It’s not that you can’t keep putting in those seventy-, eighty-, and ninety-hour weeks. You could, physically; but mentally, especially if you have achieved some success, it begins to wear on you and then you begin (if only subconsciously) longing to take it a bit easier. Then, you do (at least subconsciously), and things begin to fall through the cracks, as you start saying for the first time, “I’ll deal with that tomorrow [or next week].” You lose your edge . . . and your company does as well.
People who don’t watch the competition get complacent.
The graveyards are filled with complacent companies.
So, by all means, start easing up a bit. Just make sure someone else is keeping an eye on the competition and making sure that your company is constantly improving.
WHAT WE ARE TALKING ABOUT BREAKING
It has always surprised me: when I tell people, “If it ain’t broke, break it,” they think I’m suggesting blowing up every part of their organization on a regular basis. I’m not. In fact, what I’m advocating could keep you from having to do that.
The only time you completely want to revamp your entire company is when you have no choice—like when it is threatened and may go out of business.
If you’re constantly improving and constantly getting better, you can avoid this situation, unless there’s a radical shift in technology or in the way business is done. (You could’ve been making the world’s best manual typewriters and doing everything right when it came to constantly improving, but once word processers came along you were in a lot of trouble.) Unless you are upended by that kind of seismic change, continuous improvement should hold you in good stead.
As you’ve already guessed, what I’m advocating is constantly making small tweaks.
Here’s how it works in my companies. Because this approach is so engrained, we begin this process each year in September. We sit down and examine which of our products are selling well and which aren’t.
When it comes to the laggards, we identify the bottom 25%, the quarter of our products that have the slowest sales growth, lowest margins, or both. Then, since we have said throughout that there are no real failures if you learn from them, we look to see why the products underperformed. In some cases, improvements are relatively easy to come by: better packaging might do the trick, improving the offering, or repositioning it as “new and improved” could be the way to go.
In some instances, about 10% to 15% of the time, it’s time for the product to be retired. Consumers have grown tired of it, or the competition has a better version that we just can’t match.
However, this represents a huge opportunity, because we already have the shelf space and distribution to handle our products. Let’s say we have a hundred products. By cutting ten to fifteen, we have opened up ten to fifteen slots that we can fill.
Constantly performing a SWOT analysis keeps someone from sneaking up on you.
In fact, continually improving is similar to the Act. Learn. Build. Repeat. model that we discussed in Principle 4.
You’ll remember, the key component of step one—Act—is taking a small smart step toward your goals. It’s no different here. You begin with small steps. Maybe you begin at the edges. You try a new product or service on a limited scale, in a test market, and learn from the market reaction. Or maybe you decide you’ll start at your core, with an “add-on” product or service, and see what people think. For example, you aren’t risking much, and you aren’t in danger of confusing people, if you offer a diet version of the soft drink you’re currently selling, or the “professional” version of your software.
As you can see, what we’re doing here is tying the Act. Learn. Build. Repeat. model directly to the strategy you want to employ and the financial results you’re looking for. Let me end our discussion at this point by stressing this: you’re not changing your core products—the regular version of the soft drink or the existing version of the software; you’re coming out with additional (enhanced) versions (diet, in the case of the soft drinks; professional, in the case of the software).
If you constantly do this incrementally and do it in anticipation of what customers will want, you’re going to make it tougher and tougher for the competition to catch up with you, let alone pass you by. You’ll remain relevant—and profitable.
ATTACK ON TWO FRONTS SIMULTANEOUSLY
As you’re tweaking what you have, you want to be doing line extensions—diet, new flavors, new diet flavors, bigger portions, smaller portions, etc.—and new products as well. This just makes sense. Building off what you have lets you pick the proverbial low-hanging fruit. Adding new products/services allows you to grow.
Remember how I said we’re always trying to upgrade our staff, getting rid of the bottom-performing 10% each year. It’s the same thing here. As you’re upgrading your product line, you always want to be getting rid of the worst performers.
There’s no template for doing any of this. You keep making small, incremental improvements; pause to see how the market reacts; build off that learning by making another small change and so on, upgrading your overall offerings as you go.
Should you concentrate in one area—improving the core—at the expense of another (i.e., introducing new products)? There is no formula. You generate as many good ideas as you can in both areas and winnow your list down to the absolute best. If it turns out that one year all your best ideas involve improving your core business, that’s great. If the next year every promising concept revolves around new products, that’s fine, too. You should have no bias in one direction or the other.
COLUMBIA RESTAURANTS
If there were ever a case of where “if it ain’t broke, don’t fix it” would seem to apply, it would be the Columbia Restaurants in Florida that we mentioned earlier. Famous for their Cuban and Spanish food, the places are always packed with locals, snowbirds, and tourists. Columbia is run by an exceptional entrepreneur, Richard Gonzmart, who has all the qualities I admire in a successful entrepreneur: He is smart, hardworking, innovative, a calculated risk-taker, and extremely charitable.
As of this writing, Richard, a fourth-generation owner, is planning to open even more restaurants. Each of the new locations has a chance to energize and improve what’s already in place.
Here are some examples. Up until now, all of Columbia’s eateries were destination restaurants where you could plan on spending an hour or two dining. Richard opened a fast-service place in Tampa International Airport, called Columbia Restaurant Café. Not only will this remind visitors to the area of the Columbia brand as they’re coming and going, the most popular offerings from all his other restaurants could find their way onto the lunch menus under a special section for people looking for “a quick lunch.” (Not everyone gets a full hour to eat in the middle of the day.)
One of his projects that has now come to fruition is a restaurant in St. Petersburg. It has a gorgeous view of the water, and a huge bar—far bigger than what exists in any of his other places—that serves tapas. Not only are the margins higher on liquor than food, but the focus on alcohol and snacks attracts a younger crowd. The demographics of the traditional Columbia Restaurants tend to skew older.
While proving that he’s not abandoning his roots, Gonzmart has opened a unique riverside restaurant in a newly developed area of Tampa. Once the home of many Native Americans, Tampa is the city where the first Columbia Restaurant opened. The restaurant, called Ulele (pronounced You-lay-lee) is named for the daughter of a legendary Native American chief. The menu includes native and local foods and it has its own brewery. He has also acquired the rights to the restaurant Goody Goody Burgers—a place Richard enjoyed eating at when he was young and living in Tampa. The restaurant had closed in 2005. Richard recently brought it back to life.
When asked why he is doing all this, Richard reacts exactly as you would expect, saying that if you’re not growing, you’re dying, and you need to stay ahead of the competition. He adds, “Sometimes, it’s just fun to try new things.”
Is there an alternative to doing all this?
After I run through everything we have talked about so far, some people respond, “It sure sounds like a lot of work. Are you certain I have to do all this?”
The answer is: you don’t.
“What will happen if I don’t?” is always the follow-up question.
You’ll end up looking a lot like Xerox PARC.
Most of you know the history. Xerox, once the dominant player in photocopying, set up the Palo Alto Research Center (PARC) in 1970 to spur innovation in the company. It certainly did. Its scientists and engineers created many of the products and ideas that serve as the backbone of computing today, everything from Ethernet to the mouse.
However, the company wasn’t much interested in capitalizing on those literally revolutionary concepts and let others—notably Apple—run with them. Not surprisingly, Xerox then fell on hard times as other companies cut into their core market.
You can go the route of staying exactly the way you are, but I would not recommend it.
YOU CAN TEACH YOUR PEOPLE TO DO THIS
I’m always surprised that organizations don’t introduce this approach company-wide, don’t insist that employees at all levels employ the “if it ain’t broke, break it” model. On second thought, maybe I shouldn’t be surprised, because when they try to do it, invariably they take the wrong approach and botch it.
You know the route they take. They summon everyone with the title of middle manager and above to an “all-hands meeting where we’ll discuss the future of our organization.” At the meeting, people are encouraged to suggest ideas on “how we can reinvent our company.”
I have found that, in many cases, the middle-and senior-level managers sitting there consider this meeting to be a serious waste of time. They have no authority to change anything this sweeping, so they suggest a couple of things off the top of their heads and go back to what they consider to be their real jobs.
No wonder this never works.
A far better approach is to explain to everyone in the company what the specific objective is. “Five years from now, one-third of our sales needs to be coming from products and services we do not offer today.”
Then, since you never want to turn down a good idea, you tell everyone: “If you have ideas for overarching things you think the company can do to reach that goal, please tell us. It might be easier—and more effective—for you to concentrate on telling us what your department can do to help us get there. (Of course, we’ll be sharing with you the positive results that come from your suggestions.)”
I have found this approach gets everyone engaged.
FOUR TAKEAWAYS FROM THIS CHAPTER
1. Waiting until you have to change is not good. You never want things to get to that point.
2. You want to be constantly making incremental improvements to stay ahead of the competition and giving customers what they want (hopefully, before they even know they want it).
3. The best way of creating and implementing changes is by constantly performing SWOT analyses.
4. Do it as a team. The whole really is greater than the sum of the parts.