MPI Insight sat down with MPI CEO John Brandt to talk about the challenges and opportunities for small business owners right now, and to spotlight case studies in performance improvement excellence with a small team.
MPI Insight: In your writing, you always make a point to use case studies from small businesses, often with 20 employees or fewer. Why do you make a habit of focusing on small business?
John: Many times if you’re learning about a business concept or how a business can get better, you’ll go online or read a magazine to find examples, but they’re almost always huge companies — and often they’re sanitized case studies. It’s quite hard to find case studies for smaller companies.
Yet 85% of all businesses in the United States have fewer than 20 employees. The idea that what you could do in a multi-billion dollar firm, that you’re going to be able to replicate that in the same way in a small business — it’s just crazy.
I confess that the first draft I did of Nincompoopery did NOT have small business examples. I showed it to a friend of mine who had a small business, and after she read it, she said, “This is terrific, but where are the businesses like mine?” And she was absolutely right – I had to go back and re-report everything I had done so far, to include small business examples.
MPI Insight: What are some of the challenges particular to small businesses?
John: If you’re the owner of even a mid-size firm, you’re typically wearing five, six, maybe seven hats in a day: you’re running the operation, but you’re also HR…and finance…AND sales, etc. So when we see smaller firms lagging in the adoption of new best practices or new technologies, it’s not because they aren’t smart, it’s not because they don’t know how; it’s just that typically they don’t have time, or they don’t have the money, to invest in everything they want or need. They have harder choices in this realm than larger businesses – figuring out the ONE thing they’re going to do RIGHT NOW with the resources they DO HAVE is essential.
Years ago, I co-chaired the Northeast Ohio Product Innovation Initiative, and we did a survey of smaller companies about their innovation needs. Our working assumption at the time was, “Oh, well, if they need new technologies, we just need to improve access to universities and their labs.”
But what we heard from these small companies instead was: “No, that’s NOT what we need.” They actually already had the five or six new product ideas they needed, but they didn’t know which one they should invest in first. These small firms, with limited resources, said what they really needed was help in analyzing their opportunities, and knowing which product to start with. They just didn’t have time or expertise to do that market analysis.
MPI Insight: It seems like understanding what’s going on in the market you’re in and how you might compete, is part of the challenge for small businesses. They might have this sense of, okay, there’s this new technology or new best practice, but how is it going to help me?
John: What’s interesting is that while that’s true – market analysis and sorting out competing priorities is one of their biggest challenges – there’s also an incredible advantage that small businesses have in this area: they’re often closer to their markets because they’re closer to their customers, maybe because of a passion that the founder has, or because leadership is actually selling and doing customer service. And so they can respond to market trends much more nimbly.
There’s this company called “Wool and the Gang.” They sell high-end knitting supplies and they do finished goods as well. And one of the co-founders said that they wanted to change the way knitting was perceived from something sort of grandma-ish, to being cool and sexy. So they started promoting a new view of knitting, throwing knitting parties at bars, and signing designers to create amazing patterns.
And while they did that, they also reinvented their supply chain. They have limited finished goods and meet demand, when they get a spike in orders, through what they call “gang makers.” These are several thousand knitters who purchase materials – at full price – from the company, and then receive 78% of the finished good’s final price. And: these are high-end products, as much as $700 for one piece. The year they started doing this, I think they increased sales 300%, something like that. And what I love about it is that this is a small company, able to be very nimble because of the way they’ve structured it – they can respond quickly to changes in demand. It’s an example of the lean concept of “pull” in that they don’t make more than their customers require.
MPI Insight: Do you have a favorite story about a small business from your research?
John: There are many great stories, but one I’m really fond of is a company called, “A Yard & A Half Landscaping” (which is just a great name, too). Just 15 employees at the time, but they conducted meetings where the founder of the firm reviewed the P&L statement in detail every month with all employees in Spanish and in English. Honestly, if more businesses did something like that, there’s no telling how successful they could be.
But Yard & A Half went further: after employees review the P&L, they talked about how to improve efficiency, how to improve profits. And the company gave a bonus to anybody who suggested something in one of these meetings that improved things. If you do this, not only does the business get better— Yard & A Half was named a top small company workplace — but employees’ lives get better; in this instance, the company eventually became an employee-owned cooperative. What I love about this example is that it demonstrates that there’s no firm too small to get employees involved in process improvement, or to have incentives for engagement. Because: whether a firm is large or small, the people there always want their work to be meaningful, and to go well. And the only way to make that happen — whether a firm has 100,000 employees or 5 — is to listen to and TRUST the people who are actually doing the work.
