The Chicago Cubs are my idea of a quasi-family business. That phrase, “quasi-family business,” is one I invented decades ago, when I represented businesses founded by multiple people who weren’t related by blood or marriage, yet whose children grew up calling each of the other partners “uncle.” Continue reading
Just before my mother’s 90th birthday, I went to the drugstore to find a card for her. Alas, there was no “Happy 90th Birthday” card. How could that be, I wondered, at a time when centenarians have become so common in the US that the NBC TV’s Today Show no longer features Willard Scott’s celebration of 100th birthdays (Scott himself retired from the show in December 2015)? What I did find in the card section, however, was a broad selection of cards for celebrating one’s “special birthday.”
Now I understood: The use of “special birthday” designations made good business sense, as it eliminated the need to maintain inventory of cards for every possible adult age. In fact, “special” birthdays, as I’d come to understand them even before that drugstore visit, are often used to describe birthdays ending with a five or a zero. This custom began as a politically correct way to avoid specifying the exact birthday of people who might be sensitive about their age.
More recently, it has become customary to wish someone a “happy special birthday,” regardless of their age shyness. But doing so can have multiple negative consequences in certain situations. In general, after one reaches a certain age, say 60 or 65, every year becomes more precious, making the five and zero “special birthday” designations less meaningful—and less appropriate.
More specifically, my observation is that this innocent custom can have an adverse effect on leadership successions within family businesses. An impending “special birthday,” for instance, often prompts related thoughts among the birthday-holder and the wisher. The phrase may connote: “I know a secret about you—your exact age,” or “I’m not getting any younger,” or even “You’re a ‘has-been’ and it’s time to step down.” In this context, a family business leader may feel that it is too late for him or her to initiate new programs within the firm and thus might assume a posture as a steward or placeholder seeking preservation of status quo until a successor assumes the leadership position.
Here’s an example. I consulted with a family firm whose founder had built a spectacularly successful business that seemed capable of running forever on auto-pilot. His eldest son had worked in the business for over two decades and was the natural choice as successor CEO. When he ascended to the role, his four siblings were not actively involved in the business, as two were practicing attorneys, one was an investment banker, and the fourth was a high school English teacher. The second-generation CEO grew the business even more than his father had. Then, in his 60s, he suddenly became highly conservative about business strategy and finances. The shift was likely prompted by a combination of his age and respect for his siblings, who owned 80% of the company’s stock and had three children working there as executives. The CEO himself had no children. Late in his tenure, he simply stopped being a leader and positioned himself as a placeholder, waiting for one of the third-generation family executives to take the helm.
When family business leaders take that stance, no one wins. One effect is that the business becomes less able to make innovative changes under the current leader. Then, when a successor is selected and ultimately given power, it may take them years to create an environment that once again fosters innovation. Their struggles could have been eliminated and their prospects enhanced had their predecessor continued positioning the company for meaningful reinvention, including through:
- Spending more on R&D to identify the best new opportunities and the challenges to avoid;
- Enhancing governance, such that the board is better able to set and influence long-term strategy, regardless of who is CEO; and
- Improving communications among shareholders such that family voice is as unified as possible and amplified, to be better heard by all stakeholders.
It would be ideal if wishes of “happy special birthday”could create a clarion call signaling it’s time for the family business leader to prepare for succession. There is so much planning and effort that goes into effecting a successful transition to next generation leadership, so an early wakeup call could be extremely helpful. Such wishes needn’t be a threat.
Of course, ultimately it takes more than a simple birthday wish to create a positive or negative leadership situation in a family business. But little things can reflect and influence familial, business, and cultural dynamics like those discussed here.
So the next time you are tempted to wish a family business leader a “happy special birthday,” think carefully about all the possible implications.
Tom Stemberg, the founder of Staples, the first big box office products stores, passed away on Friday, after a long, brave battle with stomach cancer.
Tom was not only a successful entrepreneur and venture capitalist, he was truly a good guy, who remembered those who had helped him and not only gave back to them directly but to other unrelated people, because he was thankful for what he had received from others.
Tom willingly gave back to the community, including those who he hoped would contribute to our country, to our business community and to the overall economy. He believed entrepreneurs would be the basis for better lives for all Americans.
Among those fortunate recipients were hundreds of students in my class “Successful Entrepreneurship,” which I created and taught at the Kellogg School. He eagerly appeared in my class each year and willingly accepted subsequent contacts by students who sought more of his invaluable advice. Continue reading
When consumers step into any retail store these days, they’re looking for more than the products on the shelf or even the quality of the service they receive. Increasingly, they expect an engaging, entertaining experience, and will reward the same with their spending dollars. Multiple stories in my book INVENT REINVENT THRIVE (McGraw-Hill, 2014) illustrate how retail entrepreneurs have succeeded by building businesses that deliver an entertaining experience to their target customers.
Here, we consider three massive retail successes (Build-a-Bear Workshop, Costco, and Starbucks) and the entrepreneurs behind them (Maxine Clark, Jim Sinegal, and Howard Schultz), as profiled in my book, along with Abt Electronics, a Chicago-based retailer, which, though not detailed in my book, is the subject of a Kellogg School case study I authored. All are great examples of the retail-is-entertainment concept across sectors.
Build-a-Bear Workshop: When Maxine Clark came up with the idea of a retail store where customers could create their own teddy bears, she knew she was selling much more than teddy bears, even more than a stuff-your-own-animals experience. She aimed to provide an entertainment venue where all family members—children, parents, grandparents, and others—could be part of a process that tied them to the product, the process, the experience, and the company. That meant creating a bright, whimsical, colorful space with different stations, the ability to customize and personalize the products in multiple ways (such as a recorded message built into the stuffed animal), and windows through which customers could view the entire process. By the time people received their personalized products fresh off the “assembly line,” they had bonded closely with the brand through the engaging, entertaining experience.
Costco: Jim Sinegal’s approach to keeping his company Costco engaging evolved over time. Beyond offering a smaller number of SKUs (stock-keeping units, or different product types) and larger unit sizes than traditional discount retailers, he changed the product lineup and added multiple departments over the decades to keep customers interested. That meant the addition of bakery items, seafood, gasoline, pharmacy, and many other products. The company also introduced customizable products such as liquor bottles onto which customers could engrave gift messages. Costco’s famous cornucopia of free samples in almost every aisle and outsized café items (a hot dog and a soda is still $1.50, the same price as when Costco first opened in 1983!) only add to the festive atmosphere. Again, the business’s ability to engage customers has contributed greatly to its success.
Starbucks: Howard Schultz’s vision for Starbucks included providing a warm, inviting atmosphere for people to enjoy on their way to or from work. The combination of premium coffee products, comfortable furniture, and relaxing music—including jazz and other compilations made specifically for the company—has made it a place where many people come to work and socialize, a “third place” between work and home. So much so that many communities provide sufficient demand for multiple Starbucks stores in close proximity. While Starbucks may not offer entertainment per se, the business provides a master class in how to engage customers and keep them coming back again and again, daily in many cases.
Abt Electronics: Another business that embodies the retail-as-entertainment concept is Abt Electronics, a family-owned retailer in the Chicago area. Bob Abt, who passed away recently, built the company over several decades from a small store his mother started into an extraordinarily successful retail phenomenon. The warehouse-sized store sells appliances, TVs, sound systems, vacuum cleaners, fitness equipment, watches, phones, furniture and much more, all out of a large, single location. There are interactive displays for family members of every age, and even free chocolate chip cookies available daily. Bob Abt was inspired to offer such a large-scale, engaging, entertaining experience by Las Vegas casino mogul Steve Wynn, of whom Abt was a big fan. Not surprisingly, many customers report feeling like they are in an upscale Vegas casino while shopping at the store.
INVENT REINVENT THRIVE offers many more details of the first three retail superstars above, along with examples of other entrepreneurs who understand that retail is entertainment. The message is clear: to thrive as a retailer, you need to engage your customers by creating an environment and experience that engages them fully, connecting them on multiple levels with your products and company. That translates into long-term customer value, and market-beating profits.
Entrepreneurs tend to be so busy doing things that are visible in the external world—conceiving and developing products, lining up suppliers, acquiring customers—that they may overlook some of the more invisible, interior work that is part of success. I’m talking specifically about introspection, or the observation and examination of one’s own mental and emotional state and its implications. “I don’t have time for that kind of thing,” many an entrepreneur or family business leader has told me when I raise this issue. I always counter that it’s important to make time for meaningful introspection—and then to apply what you learn—as it can have a huge impact on your business, family, and well-being.
The story of the Bronfman business family is a clear example of the power of introspection and its application—or lack thereof. As detailed at length in my book Invent Reinvent Thrive (McGraw-Hill, 2014), the three Bronfman generations faced multiple challenges that would have been mitigated by careful introspection and consequent action.
Sam Bronfman built Seagram into a highly successful business including spirits and other consumer products; based in Canada, it was once the world’s largest distillery. But the father cast a long and dominant shadow on his son Edgar, who had also joined the business. Had Sam been able to introspect and understand the danger of his approach to Edgar, he may have helped his son develop a more sound and effective internal state himself.
This became especially important when Edgar had to assess the judgment of his son (Sam’s grandson), Edgar Jr., who succeeded his father as CEO. Though Edgar Sr. probably recognized that his son was making questionable business decisions, especially with regard to considering sale of Seagram’s core business, he was overly careful about dominating the next generation. He wished to avoid doing to Edgar Jr. what his father had done to him. Had Edgar Sr. used introspection to understand more fully the source of his reluctance to act, he may have been able to separate the personal from the professional and stepped in to intervene on the deal Edgar Jr. ultimately made with Vivendi—a transaction that ultimately cost the family billions, halving their wealth.
Introspection and its application also figured into the role of Edgar Sr.’s younger brother Charles in this situation. Charles clearly observed what was going wrong with the Vivendi deal and had serious doubts about ending the Bronfman Family’s control of Seagram. However, his “younger brother syndrome” prevented him from saying what needed to be said to Edgar Sr. He understood the business problem but, like his brother, failed to understand fully the role of his internal state in preventing his intervention. Deeper introspection would have helped. Thus Sam, Edgar Sr., and Charles all would have benefited from more thoughtful introspection, which would in turn have helped the business and the family assets that depended on it.
In fact, Charles proved he was fully capable of engaging in the necessary introspection and then applying it effectively when he did so with Michael Steinhart with respect to the charitable foundation they formed, Operation Birthright. The organization aimed to enable any young Jewish person to visit Israel at no cost. Though Charles and Michael agreed on the big picture, they clashed over details (e.g., whether it had to be the person’s first trip to Israel). Charles’s wife gave him simple but profound advice about having a frank discussion with Michael: “You have everything to gain and nothing to lose” was the essence of what she said. Charles followed her advice, and the better understanding he achieved with Michael helped make Operation Birthright immensely successful.
Had Charles followed the same advice in dealing with Edgar Sr., his brother, the family’s wealth might still be fully intact. Here, however, deep emotional issues made it seem there was indeed much to lose. With introspection, that could have been gauged more realistically. Eventually, after serious and difficult introspection, Charles did have a conversation with Edgar. Though it was too late to save the fortune, it was a well-timed interaction, happening shortly before Edgar Sr.’s death.
Introspection and application are obviously easier in a non-family situation such as the one related to Operation Birthright—although even that one was facilitated by Charles’s wife’s advice. Overall, anyone in business—entrepreneurship, family business, or otherwise—can benefit deeply from introspection. Open your mind for exploration, assess your motives and their potential sources, then develop a thoughtful plan to put what you’ve learned into action. You won’t regret it.
Most students complain about homework. When my MBA students at the Kellogg School of Management grumble about assignments, I tell them that what they’ve called “homework” from elementary school through graduate school isn’t actually homework. It was merely practice to develop tools for them to learn to do real homework. Real homework is the work you do when no one gives you the assignment, tells you how much work is enough, or establishes a deadline. Ultimately real homework is what you have to do yourself to succeed. Real homework really counts.
Successful businesspeople—entrepreneurs, family business founders and managers, and corporate managers—all do high-quality, appropriate amounts of homework. When they stop short on the homework, they almost always come up short on results. If you’re not sure how to do real homework, take a look at my recent book,
Invent Reinvent Thrive (McGraw-Hill 2014), which has many excellent examples of the kind of homework that breeds success. In this three-part blog, I present multiple stories of real homework from the book, grouped by the principle they exemplify best. Continue reading
New article by Lloyd Shefsky published in The European Business Review, Issue Mar/Apr 2015, pp. 25-28 | on-line March 12, 2015.
Success is often interpreted as an indication of intelligence. It brings to mind the lyrics of “If I were a Rich Man” from Fiddler on the Roof: “When you’re rich, they think you really know.” Highly successful entrepreneurs tend to be quite smart. Some have a good sense of self-approval; others less so. It turns out that the quality of self-approval is likely an important factor for success.
Being able to gauge your capabilities, including raw intellectual horsepower, and understanding that while you may not be the smartest person in the room, there are things you can do about that, namely, get smarter and/or change rooms. Rather than bemoaning deficits, the most successful entrepreneurs learn to focus on areas in which they do show more aptitude and interest, and to take steps to shore up their capabilities in other areas, whether by building new skills or the right team.
Below I present several lessons related to understanding your intelligence and how to use it. I illustrate the lessons with stories of entrepreneurs from my recent book Invent Reinvent Thrive (McGraw-Hill, 2014).
Find the right “classroom”—and the right brains to pick. Mike Krasny did both. “I wasn’t one of the smartest kids on the block,” he told me during our interview for the book. “I was not a good student, I was a C student, probably in the lower quartile.” Had Mike continued to use academic grades as the only measure of his talent, he may not have discovered and indulged his deep interest in computers, at a time when most of his peers knew nothing about the field. He took his first computer class in 1971 at the University of Illinois and—though it took him some time to get over the lack of confidence bred largely by his early academic experience—eventually launched computer distributor CDW. As an entrepreneur he learned as much as he could from businesses he admired and the people behind them—including HP, IBM, Microsoft, Intel, Fel-Pro, and Walmart. As head of CDW, he found the right people for his management team, further building the firm’s capabilities. By stepping into the right “classroom” in which to excel and identifying the right brains to pick, the former C-student earned an A+ in creating shareholder value.
Don’t put them on a pedestal. Everyone establishes their own standards for “smart,” generally pointing to someone else whom they consider very smart. It’s fine to have business mentors or others you admire for their intelligence. But some entrepreneurs make the mistake of putting their sources of inspiration on sky-high pedestals, which may diminish their sense of their own capabilities. This was the case with Jim Sinegal, founder of Costco. Prior to starting Costco, Jim worked for Price Club for over two decades, He always revered that company’s founder, Sol Price. “He taught me everything I know,” Sinegal said of Sol. Jim truly believed that Sol was the smartest man he’d ever met, and as a result Jim never presumed to be able to do what Sol had done, even as Costco grew steadily. Of course, at the time Jim launched Costco, Sol’s experience was infinitely greater than Jim’s, who started at Price Club “schlepping mattresses out to the customers’ cars’ rooftops.” Twenty five years later, as Price Club’s second in command, Jim felt Sol remained far smarter and more capable than Jim. It wasn’t until years later, after Costco had been operating for a while, when Jim found that Price Club was having problems, that he began to believe in his own capabilities more deeply, and made strategic moves including expanding Costco’s product lines significantly. Ultimately, Jim motivated Costco’s purchase of Price Club. Sol and Jim remained friends until Sol’s death. And while Jim still reveres Sol, the former mentee’s story illustrates that sometimes actual results displace pedestals. Removing his longtime mentor from the pedestal helped Jim make Costco into the $100 billion business it is today.
Recognize your blind-spots, Although he is not an entrepreneur but a leader of a prominent family business, Tom Pritzker’s situation is worth noting. Unlike CDW’s Mike Krasny, Tom was an excellent student, and he rose to become a third-generation leader of the highly successful Pritzker family, which held assets including the Hyatt hotel chain. Tom learned a great deal both within the classroom and outside it, especially from his father, Jay, whom I consider one of the smartest people I’ve known, and Jay’s father, A.N. Observing them helped Tom understand how to find, select, motivate and defer to strong professional managers for the family’s many businesses. But Tom also inherited a large blind-spot: While the previous generations had excellent business acumen and skills, they had failed to prepare for the “cousins stage” of the business; the many protective measures they had implemented—including granting decision-making rights and knowledge about the family business to very few family members—backfired when the business passed into the third generation’s hands. Tom was a smart businessman, but he tried to play the hand he was dealt instead of replacing a few cards. He continued with all that his ancestors had invented, instead of reinventing it to fit the family/business situation. The ensuing legal battles made the highly private Pritzkers front-page news for years. Being the smartest businesspeople in the room had made the family blind to the governance/ownership measures they needed to take. Eventually, Tom recognized the shortcoming and took steps to remedy the problems, but only after significant, undesirable public exposure of family discord.
Be honest with yourself. Honesty and self-awareness don’t always accompany intelligence, as the Pritzker story illustrates. Tom Stemberg, founder of office-supply giant Staples, provides a nice counter-example. Upon arriving at Harvard, Stemberg found himself somewhat unprepared, in part because he had completed high school in Austria after his mother moved him there following his father’s death. Speaking of Harvard, Stemberg told me, “You had to accept the fact that you’re not only not the smartest person in the room, you may not be in the top ten. You have to get comfortable with that and move forward.”That attitude helped him move forward in a big way, as he sharpened his idea of a large-scale office-supply chain, learning by observing local stationery stores and companies such as United Stationers and Quill, always admitting when he lacked knowledge, but also feeling comfortable when he thought he was right. Stemberg’s healthy self-awareness helped him build Staples into a multibillion-dollar retail chain with over 2000 stores in 26 countries.
Intelligence is only one factor in success, and certainly not the most important one in many cases. The “smartest” entrepreneurs may not be the smartest people in the room, but they have found the right space in which to compete (like Krasny), worked hard to be honest with themselves about what they don’t know (like Stemberg), avoided being intimidated by successful peers and mentors (like Sinegal did eventually), and assessed their blind-spots carefully (like the Pritzkers eventually did). I hope you can do the same.
How do you become a successful leader?
To answer that question, consultants worldwide charge princely sums, educators offer boatloads of courses, military organizations teach, train, and mentor relentlessly, and countless books offer their take. Some of these sources help. Some don’t.
My recent book, Invent Reinvent Thrive: The Keys to Success for Any Start-up, Entrepreneur, or Family Business (McGraw-Hill, 2014), discusses how leaders drive personal and professional success through reinvention.
One of the stories in the book is of the current Mayor of Jerusalem, who has reinvented himself several times, including as the principal early backer of Checkpoint, a highly successful computer firewall security company.
This week, Mayor Barkat made worldwide news by providing a different kind of security: He tackled and detained a terrorist who had just stabbed a man on the streets of Jerusalem. The incident made news—and even led to people posting pictures of Barkat dressed as Batman and other superheroes on social media—because such behavior is unexpected of political officeholders, who are generally the objects, rather than providers, of protection.
But if you’d read my book and the story I tell there about Barkat, you wouldn’t have been surprised by his actions this week. Indeed, you’d have more insight into how he and other successful people in business, politics, and other domains reinvent themselves incrementally and continually to achieve ever-greater success—and how you can do the same.
“A tolerance for ambiguity” or even the ability to thrive amidst ambiguity is on everyone’s list of key traits for entrepreneurs. So how do successful entrepreneurs develop that trait? One might develop a tolerance for pain by continually enduring pain; but there must be a better way. Successful entrepreneurs don’t just strengthen their tolerance—they reduce the ambiguity. In many instances, founders gain insights and learn best practices by observing people and practices carefully across sectors, applying what they learn to great effect. The entrepreneurs below, all profiled extensively in my book Invent Reinvent Thrive (McGraw-Hill, 2014), are excellent examples of the power of watching and listening.
Maxine Clark expanded her vision of a store where people could customize teddy bears into the 400 Build-a-Bear Workshops in existence today. Part of Maxine’s early success was her ability to negotiate leases in malls on behalf of her start-up in an unproven business. To succeed, she used what she’d learned previously as president of mall staple Payless Shoes. “Even though I’d never negotiated a lease before . . . I had listened to our legal department talking about them,” she told me in our interview for the book. “I didn’t have to know everything about them, but I did need to know enough not to be dangerous.” The insights Maxine gained from observing lease negotiations helped Build-a-Bear thrive. Continue reading