The Cumulative Effect of Little Things

Customers quit all the time. Many entrepreneurs work extremely hard to prevent the big screw-ups that alienate and enrage customers. Yet, even with this effort, there are still customers that leave and don’t come back. What’s up with this?

Consider this scenario. An entrepreneur has opened a new restaurant and works 24/7 to develop a loyal clientele. Over time the restaurant grows and enjoys success – it’s even profitable! But then its trajectory levels off. It’s not growing like it was and some of the regular faces aren’t there anymore. The entrepreneur studies his operation but can’t find anything glaring that is causing this trend. His puzzlement and frustration grow. Why isn’t he winning like he used to?

Had the entrepreneur taken a much closer and more granular look, he might have discovered the root cause of his problem. Had he followed one of his oldest customers – we’ll be original and call him Mr. Smith – he might have observed the following occurrences. On one occasion, Mr. Smith made a reservation in advance, but when he arrived the time was wrong. The hostess apologized profusely, but it did cause minor inconvenience to the customer. In another instance Mr. Smith’s credit card was declined. After an embarrassing moment for Mr. Smith, the server found that the credit card terminal was on the fritz. A few weeks later Mr. Smith was in a hurry to leave for a business appointment and his lunch was delayed due to a mix-up in the kitchen. Another time his steak wasn’t properly prepared. In still another instance, one of the side dishes he ordered was forgotten.

These seemingly small and inconsequential issues continued to occur over a period of months. Mr. Smith did not encounter problems every time he ate at the restaurant. But they happened often enough that he began to feel as though this eatery wasn’t the bright and shiny object that it had once appeared to be. Gradually Mr. Smith came to the restaurant with less frequency. The final straw came on a day when Mr. Smith noticed he had been charged for an appetizer he hadn’t ordered. The bill was corrected, but that was the last time Mr. Smith ever patronized the restaurant.

I call what happened here The Cumulative Effect of Little Things. The entrepreneur who owned the restaurant was prone to look at each minor problem on a stand-alone basis. And when viewed in this manner, it’s a mystery to see how a slightly undercooked steak here or a credit card snafu there could be enough to chase away a customer. He was looking for and trying to prevent, much larger issues. What he failed to understand is that the small stuff contributes to an overall customer experience. If Mr. Smith had visited the restaurant only once, he probably wouldn’t have given much thought to the fact that his meal arrived four minutes before that of his dining companion. But Mr. Smith was a regular customer and his impression of the restaurant was driven by an accumulation of experiences.

We can keep The Cumulative Effect of Little Things from causing our customers to quit. How? There are two ways. First, we must be sticklers for the small details. With the right systems, processes and team member training, we can eliminate the small mistakes that seemingly happen every day and yet are excused as too minor to matter. Second, we must be joined at the hip with our customers. It’s crucial that we know what they are experiencing at all times. Continuing with the restaurant example, when the owner or general manager shows up at my table at some point during the meal; chats briefly with me and asks (genuinely) what can be done to make my dining experience better, then I know I’m dealing with someone who really cares about me as a customer. I generally don’t ever encounter problems in those restaurants.

Customers leave more often than not as a result of The Cumulative Effect of Little Things rather than a major malfunction. Caring about the little details AND the customer will go a long way to creating a loyal following.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The “Fired” Entrepreneur

Nathan is an entrepreneur who started a medical device company four years ago. The enterprise is really beginning to scale with 47 employees and top-line revenues that exceed $10 million. His gross margin is steadily improving and serious profitability is within sight. With all of his success however, Nathan is finding each day to be more and more frustrating. He is pushed and pulled in many directions and is constantly being hounded by members of his team to make a myriad of decisions. He worries about whether things are beginning to spin out of control, and the go-go nature of his organization is beginning to take its toll.

What Nathan is experiencing is very common for entrepreneurs with companies at this stage of growth. Often, Nathan finds himself enmeshed in the tiniest of details. While it may be satisfying for him to have such a thorough understanding of every aspect of his business, something in the back of his mind tells him that this practice is not sustainable. In the final diagnosis Nathan is spending too much time working IN his business and not enough working ON it.

I know many entrepreneurs who suffer this condition. I’ve certainly been there myself. We reach a degree of early success in our business by paying close attention to detail. Our focus is laser-like. All of this becomes one of our primary points of differentiation. But maintaining this level of focus on tactics and granularity does not allow us to scale if we continue to be in the center of it all. By the time we are starting to scale on a regular and significant basis, our energies need to shift toward becoming more strategic – that is, working ON our business. Many entrepreneurs want to lead by example. They are proud of the fact that they can go onto the plant floor and operate a machine that produces a thingamajig. In Nathan’s case, he considers it a badge of honor that he has the uncanny ability to design a state-of-the-art medical device from start-to-finish.

Here’s the problem with Nathan’s approach. He may be sending a signal to his team that they are inadequate as product designers even though this may not be true. The team may also develop a tendency to sit back and wait for Nathan to “make his move.” They are thinking, “Why bother, Nathan is going to jump in any way!” Further, there are other pressing issues that Nathan may be leaving unattended – or he may be intentionally avoiding them altogether. Eventually the lack of strategic direction will trap the company in a perpetual state of go-go where everyone feels as though they are on an endless hamster wheel and not getting anywhere.

So what exactly does working ON the business mean? For Nathan, he needs to create a clear vision for his enterprise and communicate it in an understandable fashion to all 47 of his team members. He needs to work with his senior leaders to establish Key Performance Indicators (KPIs) that he monitors collaboratively with them. Nathan needs to have a deep understanding of his industry, its trends and how he should tweak and refine his operation to take advantage of this knowledge. He will also work with his senior team to develop specific strategies that are designed to deliver on his multi-year vision. Perhaps he’ll call on different customers periodically to learn more about what they think of his company and the products it provides. Nathan should “fly” between 50,000 and 100,000 feet most of the time. But there may be special situations where he swoops down to 500 feet to verify something he’s been told or to share domain expertise for training purposes.

I’ve known (and mentored) entrepreneurs who simply don’t want to move to a model of spending 75% or more of their time working ON their business. Working IN their business is where their heart is and where they are most comfortable. Not only that, they are really, really good at what they do. My advice has been to “fire” themselves from their CEO roles and hire someone to handle this function. When they finally get past their ego, they realize that they still own the business and make the final decisions. In Nathan’s case, if he’s truly a superstar medical device designer – and if this is where his passion lies – he’ll be happier (and richer) by hiring someone to work ON his business while he works IN it.

Spending the majority of our time working ON our business will yield positive results. But if doing so isn’t appealing, we should look in the mirror and say, “You’re fired!” Then we can hire a professional to handle this important function and devote our time and energy to that which we do best.

You can also listen to a weekly audio podcast of my blog. What you hear will be different than what you read in this blog. Subscribe on iTunes or wherever you get your podcasts. You can also click on this link – Click here to listen to Audio Episode 12 – Second Place.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

Little Steps to Sweet Success

A friend of mine has a company he started several years ago and he’s on an unbelievable roll. If he’s not there already it won’t be long before his top line revenues exceed nine figures. When I first met him his business was grossing nearly $10 million. Not only has he seen a gigantic increase in his sales, but his profitability is off the charts. I fully expect to read about him in Forbes one of these days. How has he done it?

My friend is not a particularly flashy guy. He didn’t design fancy strategies or engage in crazy risks. Instead, he concentrated on taking little steps. You or I might see them individually as pretty mundane. But when viewed collectively these small steps have become giant leaps, propelling his organization to dizzying heights. What have I learned over the years about how my friend has built such a successful company?

In the early days my friend was the classic bootstrapper. He literally did everything. He and one key associate were the “executive” level management. They paid attention to the little details and obsessed over their customers. I remember urging my friend to spend more time working “on” his business than “in” it. Over time he took this to heart and began to be more strategic. But initially he was the chief cook and bottle washer as well as the CEO.

Also in the beginning, this man was allergic to debt. He re-invested his profits and made sacrifices to get through the leaner times. I suggested that he procure a line of credit to which he responded, “Why? I don’t need it.” I explained that at some point in the future he would need a lending relationship with a bank and that he should establish it sooner rather than later. He could borrow against it and then pay it right back if that would make him feel better. Ultimately he did obtain a line of credit and it was eventually quite helpful in accelerating his growth.

My friend was very particular about the business he would take. There were opportunities abound, but he showed great discipline in staying in his lane. He did not set out to be the biggest company in his industry, nor did he care if he developed a national footprint. By only taking assignments that he knew he could handle, he avoided the pitfalls that many entrepreneurs have made (including yours truly) by gobbling up every piece of business they could. At first I thought he might have an affliction of limited thinking. But I was wrong. Though it wasn’t articulated, it was obvious that he had a winning formula that was taking shape as a result of his intuition.

Over time, my friend learned how to scale his company. He gradually created the infrastructure necessary to meet the needs of more and more customers. Today he hires more than 50,000 people a year to staff the industrial operations of his customers. He attributes his continued growth to his ability to identify and value talent. The “value” part is especially intriguing. He genuinely cares about the team he has assembled. It would be easy to view 50,000 workers as a commodity. But he doesn’t. My friend goes to great lengths to make certain that everyone is treated fairly and with respect.

Above all, he’s played it straight as long as I’ve known him. He makes certain that he only hires team members who are legal and I’ve never seen him cut corners. Over many breakfast meetings and other encounters, I’ve observed this man to be grounded in principle and integrity. We’ve all heard about high-flying businesses that came crashing down when it was revealed that they had been involved in some form of cheating. My friend is Mr. Straight Arrow and has marched to that tune from Day One.

Overall, I think I can ascribe his level of success to his ability to execute. Some leaders are born to perform – my friend seems to do so effortlessly. I’m sure he’s stubbed his toe along the way. But I’m not aware that he’s made any major mistakes that would have jeopardized his future. I can’t say that he was studious about creating strategic plans and organizational charts or subscribed to the Harvard Business Review. Maybe he did. My guess is that he simply exercised a great deal of common sense and had an amazingly deep understanding of his industry.

My friend is a living example of how taking little steps can lead to sweet success. What he has done can be instructive for the rest of us as we grow and flourish as entrepreneurs.

You can also listen to a weekly audio podcast of my blog. What you hear will be different than what you read in this blog. Subscribe on iTunes or wherever you get your podcasts. You can also click on this link – Click here to listen to Audio Episode 79 – The Disneyland Story.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.