Monday, January 4, 2010

How to be a Successful Private Business

Since moving to Arizona, I've been noticing a trend, and I propose a theorem for a successful private business:

Happy Workers + (Quality Goods or Quality Services) + Benign Management = Success

Lemme 'splain. Compare this list of companies (A):
Trader Joes
Nearly Every Veterinarian we've ever had
Most Starbucks
Bed, Bath & Beyond
Fed-Ex delivery & Store personnel
South West Airlines
Small Family Owned Mexican Restaurants
Goodman this 2nd list of companies (B):
US Air
NW Airlines
American Airlines
United Air Lines
Linens & Things
Circuit City
Airborne Express

Companies listed in A and B are the Happy vs Unhappy employees. Every employee in list A that I have spoken to, enjoys their job - some more than others certainly. I've spoken to many. It's kind of a hobby of mine, to ask people "how do you like working here?" Almost every employee in company list B I have spoken to, is an unhappy worker, driver, flight attendant, clerk, etc. Many of the companies in list B no longer exist. Others, in list B, should become extinct in the future, if my theorem is true. If they do not become extinct, then they at least will not thrive. They will struggle to maintain market share, at best.

It is NOT just adequate to have happy workers who provide quality goods or awesome services. Looking at lists of companies who used to supply quality products, but who had terrible / incompetent / evil management proves this aspect of the theorem: (list C)

Chrysler, Lear Systems,
Levitz furniture,
Montgomery Ward,
Owens Corning (except for their leaky breast implants)

If the management is benign, and it nurtures the happy workers who are making quality goods or who are providing quality services, then the business is going to do well. Maybe it does not need to "nurture" but at least it should not oppress, berate, belittle, disrespect, or disenfranchise them. It does not need MBAs advising it, or marketers trying to lure in customers. It doesn't need consultants trying to optimize it, or unsustainable expansion for expansion's sake.

Really good products and helpful / effective / friendly services, sell themselves. Now a days, "word gets around", faster than ever before. If there's something that is desirable and worth paying for, people will find a way to get it. Word of mouth, word of text, the inter-tubes, proven performance, will speak more loudly than any contrived marketing campaign. If there's not some clueless upper level manager guiding his ship into an iceberg - or, as Neal Stephenson's drunken tramp steamer captain intentionally crashed into Norway in Cryptonomicon - the company will very likely thrive, or survive a rough economy to thrive another day.

Yes, every company will have its ups and downs. Different economies will surge and fall, sure. But if the product is crap, or if the workers are unhappily producing what used to be a good product (see list B), or if the management is negligent / incompetent / evil, it won't survive long (see list C). However, if you hit the trifecta (quality product, happy workers, benign management) it is much more difficult to fail.

If anyone disagrees, please let me know. I've been mulling this theorem over in my head for several months now, talking to more and more service providers, shop keepers, and observing their behaviour, and I think it's sound. Having worked with and for European based companies, large and medium sized US based companies, massive multi-nationals & small consulting firms, this theorem is easily applied in my experience, and proven true, repeatedly.

Comments are ALWAYS welcomed and encouraged.


  1. I think you have some truisms in me, there are indeed two kinds of companies: those that are actually in a business, and those that are just holding companies...hedge funds, if you will. The former are typically run by entrepreneurs (or those with that mindset) while the latter are typically run by "professional" managers or MBAs. Which brings me to my next point: your A list should include (my current employer) and your B list should include Vignette (my former employer).

    That said, you mention that great products sell themselves and I think there's some subtlety there. It's certainly true that a great product or service is easier to sell. But all products require some sort of sales professional to actually sell them. While we've come to distrust the salesman, and deservedly so, they do have their use. A good one is more of a consultant than a weasel...helping you decide whether the product is a good fit.

  2. Agreed. I do not mean to malign ALL sales persons, or ALL marketers. Good sales people are application guys at heart, seeing how their product can help/benefit/delight the customer and not just how it can meet their own inane metrics or quotas. Good marketers help to create lasting positive impressions - I just saw a Bridgestone all weather tire commercial last weekend that showed all sorts of sticky analogy graphics that was wayyy cooler and more memorable than anything Michelin or Good-for-a-year has come up with.

    What happened to the "M" Joe? =) Iphone extracted?


    see "sticky"

  4. I generally agree, although sadly there are plenty of companies with evil management that are very successful. I'd be happier if your criteria were always true.

  5. I agree, there's many evil & incompetent companies who are still very profitable - often times due to hegemony, plutocracy, rabidly aggressive IP registering and predation (market penetration), or just plain ole customer stupidity / not knowing any better.

    I am hoping that as open access to information increases, and literacy rates continue to climb in most of the world, customer knowledge will rise and informed consumers can make better choices, eroding away the strangle-hold some of the most evil companies have.

    Il faut voir.

    My theorem is definitely not an exclusion principal, but rather a general rule going forward, that would be nice if more businesses followed.

  6. Joe, I'd add to your observations that companies also take advantage of our relative lack of transparency in markets. Hidden fees, contracts of adhesion, and a complete lack of consumers' ability to negotiate contracts all add up to successful companies that suck. In fact, some of them thrive on sucking. We could have completely enlightened consumers, and our country's lack of regulation would still let companies screw people.

    Check out Gotcha Capitalism for some insight on this.

  7. Agreed completely Joe. Well put. ADM has built their entire business model around ridiculous government subsidies. Monsanto monopolizes the entire soy bean market with a narrowly interpreted genetic patent case that is destroying independent & organic small farmers. Cell phone dis-service providers are masters of the hidden fees. And don't get me started about all the massive incompetent banks who have Geithner on speed dial, to insure non-transparency vague regulations allow, no, encourage them to rape & pillage & deny while providing inept and nepotistic senior executives with un-earned lucrative compensation.


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