Friday, April 29, 2011

When hiring a marketer, "I didn't insist on being heard"

Marcia Pledger's "My Biggest Mistake" feature from The Cleveland Plain Dealer remains one of the best resources of mistake learning you will find. This story is from Rachel Friedman, founder of A Better Pet.

My biggest mistake was not trusting my gut instinct in hiring someone for an area of running a business that was not my area of expertise....

I hired someone to help market my product based on a referral from someone whose opinion I respected. The problem was, it didn't occur to me at the time, the degree to which familiarity of my industry was key to marketing.

When I hired the marketer, I brought up my concern. Their response was, you don't need to be an expert in an industry to market a product. It didn't feel right. Even though the person was a qualified and experienced marketer, I ignored my gut instinct....

I ended up spending about a third of my entire budget on marketing but got what I felt to be very little return on the investment. For instance, a big chunk of money went toward preparing for and participating in a tradeshow at a dog training conference.

The product has evolved to include companion and working dogs, ranging from urban strollers on leashes to off-leash hikers. But early on, the first people who embraced it were people using service dogs, who knew what else was out there - less versatile and less functional vests.
You never know how any marketing campaign is going to go, or even who will be your end-user for sure. But I firmly believe it's best to aim for your target market when you're starting out. Even though my product fits any dog, I invented it for the working dog industry. My work in training service dogs was the inspiration for the product. Service and therapy dog organizations were first to embrace the product, not pet dog trainers.

If I had hired someone familiar with my industry, I would have been able to communicate with them in shorthand and not have to reinvent the wheel. It costs time and money to educate people about your industry. We weren't on the same wavelength.

I learned from the experience. Even though I don't mind hurting a pet owner's feelings to help them get their desired results from training, I used to be a wimp in dealing with professionals I hired to help build my business. I didn't insist on being heard.

Thursday, April 28, 2011

Steve Jobs admits Apple mistakes with location data... or does he?

I read this New York Times article with significant interest: "Jobs Concedes Apple Mistakes." The article refers to the issue of iPhone users discovering that a large file of their past locations was stored on the handset.

It's notable whenever a high-profile CEO, confronted with a public-relations issue, comes out and takes accountability for mistakes.

When I read through the article, and the AllThingsD interview Q+A that inspired it, I was hard-pressed to find a real expression of remorse or even of admitting mistakes. Here's the closest thing I read:

[Interviewer:] Is there anything that you guys have learned over the last week or so and take away from this?

[Apple SVP Scott] Forstall: One thing I think we have learned is that the cache we had on the system–the point of that cache, is we do all the location calculations on the phone itself so no location calculations are done separately. You can imagine in an ideal world the entire crowdsourced database is on the phone and it just never has to talk to a server to do these calculations (or) to even get the cache.

What we do is we cache a subset of that. We picked a size, around 2MB, which is less than half a song. It turns out it was fairly large and could hold items for a long time.

We had that protected on the system. It had root protection and was sandboxed from any other application. But if someone hacks their phone and jailbreaks it, they can get to this and misunderstand the point of that.

It’s all anonymous and cannot be traced back to any individual phone or person. But we need to be even more careful about what files are on the phone, even if they are protected.

Also, there was a hell of a lot of pushback. For example:

[Interviewer]: A bunch of folks on the regulatory side, both in the U.S. and elsewhere, said they are going to look into this. Do you guys plan on testifying before Congress? How active do you personally and does Apple want to be?

Jobs: I think Apple will be testifying. They have asked us to come and we will honor their request, of course. I think it is great that they are investigating this and I think it will be interesting to see how agressive or lazy the press is on this in terms of investigating the rest of the participants in the industry and finding out what they do. Some of them don’t do what we do. That’s for sure.

In fact, the closest thing to a mistake discussed was iPhone users' mistakes:

[Jobs]: We build a crowdsourced database of Wi-Fi and cell tower hot spots, but those can be over 100 miles away from where you are. Those are not telling you anything abut your location. That’s what people saw on the phone and mistook it for location.

So, in summary: Jobs didn't concede any mistakes, and his lieutenant made the hedgiest-possible admission that the location cache stored far more data than was needed.

This is more a lesson in good PR than in CEO candor and learning from mistakes. Jobs and his team admitted 5-10% culpability and defended the remainder, blaming users, competitors and the press for the issue. And they did it so smoothly that they convinced the NYT headline writer that Jobs himself had "conceded" location mistakes--in fact, getting credit for candor and remorse while not showing any.

Royal Little: the $1 million net worth mistake

Another story from Textron founder Royal Little (1896-1989), author of "How to Lose $100,000,000 and Other Valuable Advice." In spite of his wealth of mistake stories, Little was one of the most successful US businessmen of the mid-1900s.


Camcar Screw and Manufacturing Corporation was privately owned by Bob Campbell, Ray Carlson, and Bob's brother, who was head of sales. Their principal operations were in Rockford, Illinois, and the company had been very successful in supplying small metal fasteners of various types to the automobile and aircraft industries and to other users of such parts. They showed me their balance sheet whith a complete disclosure of net worth as they had computed it in the past, and, of course, we had their sales and earnings for many years to determine the steadiness of their past earnings record. We bought Camcar on October 1, 1955.

The contract was drawn by the lawyers, without our auditors being present, on the basis of determining the net worth under sound accounting principles, but when the joint audit was made at closing both their auditors and ours added $1 million to the net worth figures that had been shown to me. They claimed that the company had been incorrect in the past in writing off over $1 million worth of dies and tools, which both auditors claimed should have been capitalized. While we had assumed the net worth would be as shown to us during negotiations, Textron had to put up $1 million more than we had anticipated.

In spite of this mistake on my part, Camcar has been an excellent acquisition for Textron.

ADVICE: Never let your lawyers prepare a purchase and sales agreement for an acquisition without having auditors representing both sides present to prevent a misunderstanding of this sort.

[pp. 152-153]

Excerpted from How to Lose $100,000,000 and Other Valuable Advice, by Royal Little, (c) 1979 by Royal Little and the Harvard University Graduate School of Business Administration.

Wednesday, April 27, 2011

Would you like to contribute to the Mistake Bank?

If you've been enjoying the stories on this site, you might be interested in helping grow the site's contents. I am looking for folks to spend thirty minutes on the phone being interviewed about their business mistakes for posting right here. Believe me, it doesn't hurt a bit!

Please email me at if you'd like to be part of this project.

Tuesday, April 26, 2011

Monica Gould audio story - learning to work with subcontractors

Monica Gould is the president of Strategic Consulting Partners. She discusses bringing on a subcontractor to help with a big project, and how she felt when she saw the sub doing things much differently from how she would have done them herself. This story came from our longer interview with Monica from 2010.

Download the story here (3min 43sec).

Friday, April 22, 2011

On collections: "that doesn't mean our customers pay us every week"

Marcia Pledger's "My Biggest Mistake" feature from The Cleveland Plain Dealer remains one of the best resources of mistake learning you will find. This story is from Aaron Grossman of Alliance Staffing Solutions.

[A year after we opened] we picked up what we thought was a monster client. It was a famous restaurant chain opening a location in Michigan. We were so excited that we didn't pay attention to important details, like making sure we had a plan to manage accounts receivable.
My biggest mistake was not caring when or how I got paid. I cared only about closing the deal.

We were fortunate to have a strong credit line, which allowed us to concentrate more on growing our business and less on cash flow to operate our business. But our systems were not tight.
An accountant checked our books once a month, and that was it. Manage our receivables? Who needed to do that, right? Our business was growing and our investor significantly expanded our credit line, so we didn't spend time worrying whether people were going to pay us. We were so wrong.

The deal with the Michigan restaurant started out small, handling payroll for just three managers. We eventually persuaded the company to let us handle the payroll for all the staff. Part of our pitch was that we would be responsible for outsourcing all payroll services, including payroll taxes and workers' compensation, for all 160 employees.

Landing this deal meant doubling our business overnight to nearly $5 million in sales that year. Again, our focus was on sales. What we didn't know then is that most new businesses fail within the first five years. Restaurants fail at a higher rate.

We also didn't realize that sometimes companies use staffing agencies as if they were banks, to float their payroll costs. We pay our people every week. But that doesn't mean our customers pay us every week.

As we didn't have an in-house accountant, and no one was managing our receivables, by the time we realized what was happening, the restaurant owed us more than $400,000. The company's payroll costs were about $100,000 a month.

When we tried to collect on the money, we learned the restaurant was having problems and needed to make installment payments. They paid us $20,000, then filed for bankruptcy protection. We never saw another dime from them.

We were in trouble. Thankfully, our investor still believed in our potential and helped us work through this horrible mistake. The first thing we did was hire the best accountant we could find -- a former CFO of a $100 million company. Our receivables had to be managed appropriately if we wanted to be a growth company. It worked. Sales are a big part of building a business, but collecting is a close second.

Collections is a major learning area for every small businessperson; it should probably be the same for anyone involved in any business. I can tell you that from experience!

Thursday, April 21, 2011

Kathryn Schulz explains how believing we're right, even if we're not - makes us humans

Kathryn Schulz, author of "Being Wrong: Adventures in the Margin of Error," discusses how our propensity to create explanations for things, most of which turn out to be incorrect, is not a disability, but rather the source of our human uniqueness.

My favorite line is when Schulz quotes from Ira Glass, describing the theme of his show, "This American Life": "I thought this one thing was going to happen, and something else happened instead."

Wednesday, April 20, 2011

Monica Gould audio story - can chasing a large customer simply be a time drain?

I love this story, recorded during our longer interview with Monica from 2010. It felt to me, as she was relating it, that she was discovering and analyze this situation in the moment; as if, in fact, she was coming to terms with her feelings about it just as we were talking. She argues with herself a bit: "I'm not sure it was a mistake... [but] it's just not a fruitful use of time..." just like we do when we are evaluating something that isn't working out as we'd planned. Magic!

Download "Monica Gould - realizing a strategic opportunity is actually a waste of time" (2:21)


I don't know that it was a mistake, I just... strategically I've invested a significant amount of time in garnering state government contracts. And it's just not a fruitful use of time. I say it's a mistake because I should have realized how closed that market is and perhaps not invested as much time and energy in it.

Because it's an opportunity lost. I'm spending time marketing in this arena, and there's another whole business arena that's a whole lot more accepting of bringing in new people and networking and meeting people.

I guess the big lesson is, once you go into a marketing strategy, test the waters, give it some time to work, but don't waste too much time in it. I've retracted my time and resource from doing that. Not because I don't think there's business out there, but I don't think they're willing to bring new people in. They're entrenched with the contractors they have. It doesn't matter how good you are, unless you have worked for PennDOT for 15 years, they're not just going to take a new firm. I'm not the only person who's experienced that. It's really not worth my time and energy to bid on that stuff. I learned, don't waste too much time in one area. You're going to lose opportunities to get work elsewhere.

Tuesday, April 19, 2011

From "Think Again," an example of self-interest clouding judgment

"Think Again" is a great book in which authors Sydney Finkelstein of Dartmouth University and Jo Whitehead and Andrew Campbell of Ashbridge Business School describe research in cognitive science and behavioral economics to explain how the decisionmaking process goes awry and, even more importantly, how our minds obscure the mistakes we make and keep us from understanding the weaknesses in our decision processes. [The authors also have a website for the book, including pointers to some of the underlying research and other goodies.]

The book is full of great storytelling, and this one in particular, about an executive named Marc, seemed very appropriate for this site:

Marc was the managing director of the French subsidiary of an international manufacturer of packaging machinery. He was considering whether or not to acquire a company that had a near-monopoly on manufacturing a specialized type of food packaging machine. While the company had a strong position in the market, there were several warning signs that it was a risky investment. The business was highly dependent on sales to one large meat processing company. Because the machinery was a form of capital investment, sales tended to be highly cyclical. The management team had recently lost some of its more talented designers and marketers, and performance was flagging. The current owners of the business were keen to sell.

These risks were particularly an issue because Marc had committed to his head office that he would deliver relatively stable performance. The previous year, Marc had personally persuaded the head office to provide additional investment to his subsidiary for low-risk acquisitions, and so his reputation was at stake.

As the transaction progressed, some members of Marc's supervisory board voiced their concerns about the proposed acquisition. Despte this, Marc went ahead. A few months later, following the discovery of bovine spongiform encephalopathy (BSE), or mad cow disease, in French cattle, the meat-processing customer announced that it was putting discretionary capital expenditure, including the packaging machines manufactured by Marc's company, on hold. The management team was unable to deal with the dramatic drop-off in demand. Profits plunged into the red. Marc's superiors were shocked, and Marc's career received a large black mark.

Marc described why he thought he had made a flawed decision. "I was under pressure to do this deal for my own interest. If I went ahead, then the costs incurred in auditing and due diligence of the company would be capitalized and added to the cost of the investment. If I backed out, then they would all be charged to my office as an expense. Because we had been pursuing this company for a while, those costs were quite significant--and I guess I was influenced by that. I had an annual target to hit--and the charge-off would occur at the end of the financial year, leaving me no time to find a way to avoid a big loss. Of course, in the end, doing a bad deal was much worse for my position. I guess self-interest clouded my judgment."

Reprinted with permission from Harvard Business Press. Copyright 2008 Sydney Finkelstein, Jo Whitehead, and Andrew Campbell. All Rights Reserved.

Friday, April 15, 2011

"Accountants, attorneys, and bankers advised me to hire people with lots of experience"

Another business mistake story reported by Marcia Pledger of The Cleveland Plain Dealer. This story is from Ratanjit Sondhe. He emigrated from India to the U.S. in 1968 with $8 in his pocket and two Master’s degrees to pursue post-graduate studies in Advanced Polymer Chemistry at the University of Akron. He soon became an American entrepreneur, founding Poly-Carb, Inc., where he served as CEO and Chairman for 34 years. Poly-Carb was sold to DOW Chemical in 2007.

I came to America in 1968 with several degrees and spent years studying chemical research before I started the former company with two friends.

When I started Poly-Carb, accountants, attorneys and bankers advised me to hire people with lots of experience.

My adviser said that because I didn’t know anything about business I should hire people who were knowledgeable about marketing and sales. It wasn’t bad advice. But it didn’t work for this company.

The people I hired wanted bigger cars, titles, offices and salaries. We had seven secretaries at that time and yet we still couldn’t get a letter typed. Suddenly, there were 55 people working at a company with less than a $1 million in sales.

The rude awakening came when my accountant told me that for all practical purposes I was broke. In that same meeting, my attorney advised me to file bankruptcy. He said, “We can file for Chapter 11, and I can settle your accounts for 10 cents on a dollar. We can do it very quickly without you losing your name or the business or accounts.”

For the fist time in my life I couldn’t sleep. I didn’t want to cheat people. Instead, I took a hard look at my business. I still had good orders, and realized that I was responsible for 90 percent of the company’s sales.

I decided I had to let go of my entire staff. I realized we didn’t need seven secretaries; just energetic, intelligent people who wanted to add value and work together as a team.

But even though I had good orders, I still needed raw material to fulfill them, and I did not have any money. I contacted my largest supplier and said I needed to visit them in New York. I owed them $500 million, and they told me there was no need to visit – just send a check. Somehow, I persuaded the senior vice president of finance to see me.

I told him that I had legitimate orders from contractors backed by the Department of Transportation. He said, “You didn’t make money before. How are you going to make money now?” He was right. But I showed him the cash flow that had been calculated for my company. I said that people were making those large salaries were no longer on my payroll. I have people who will work about one-fourth of what I was paying.

He said,” Your know, either you are the biggest con artist that I have ever met or you are a really honest person.”

I said, “It takes a con to recognize a con. But it also takes an honest person to recognize and honest person. You tell me who I am."

He game me the money, and we were able to pay off all of our debts within a year in 1980. We’ve been profitable every year since then and now have a second facility in Georgia.

Related post: John Bliss: hiring experienced people is riskier than growing your own

Thursday, April 14, 2011

Dennis Quaid on kicking a drug habit

This site is about business mistakes, not personal issues. Yet there were two important points in Dennis Quaid's story about kicking his cocaine addiction as told in Newsweek's "My Favorite Mistake" that are useful for all of us trying to learn from our mistakes. They are encapsulated in this brief excerpt:

By the time I was doing The Big Easy, in the late 1980s, I was a mess. I was getting an hour of sleep a night. I had a reputation for being a “bad boy,” which seemed like a good thing, but basically I just had my head stuck up my ass. I’d wake up, snort a line, and swear I wasn’t going to do it again that day. But then 4 o’clock rolled around, and I’d be right back down the same road like a little squirrel on one of those treadmills. The lack of sleep made it so my focus wasn’t really there, which affected my acting. Addiction just keeps you from living; you’re basically hiding from life. I had a band then, called the Eclectics. One night we played a show at the China Club in L.A., and the band broke up, just like in the movie The Commitments, because it all got too crazy. I had one of those white-light experiences that night where I kind of realized I was going to be dead in five years if I didn’t change my ways. The next day I was in rehab.

It was one of those times when you think, “Well, if I do the right thing and clean up my life, it’ll get better.” No, it got worse! In 1990 I did Wilder Napalm, which came out and went down the tubes. But that time in my life—those years in the ’90s recovering—actually chiseled me into a person. It gave me the resolve and a resilience to persevere in life. If I hadn’t gone through that period, I don’t know if I’d still be acting. In the end, it taught me humility. I really learned to appreciate what I have in this life.

Point #1 is that the recovery from an error or a failure is not guaranteed to be immediately better - the benefits may show up very slowly. Point #2 is the long-term impact of encountering and obstacle and surmounting it, developing, as Quaid writes, "the resolve and resilience to persevere in life." Fall down 7 times, get up 8, indeed!

Wednesday, April 13, 2011

"But that's not what we agreed"

This story from Tim Berry was originally titled "Goliath's Revenge, Part 1" and appeared in Tim's blog Planning, Startups, Stories.

I had a nice time in Bend (Oregon) last weekend, including a conversation after dinner with some friends, a nice summer night, staying light late; the subject of large companies screwing small companies came up. I had something to add — from experience. More of the "mistakes I’ve made" categories. They’re easier to talk about at the end of a good day, looking at the river, feeling at peace with things.
Before I get into this, I should point out that I’ve also had some very good deals and long-term relationships with large companies. For example, I consulted with Apple Computer almost steadily from 1982 until 1994; it was a large company, but I had no complaints. My company, Palo Alto Software, has had good long-term relationships with Inc Magazine, Prentice Hall, Entrepreneur, and several others. It’s not like all big companies are bad. But here’s a story, and maybe a lesson.
The Contract That Meant What it Said
We (two of us) sat in a conference room with eight managers of a very large company, wrapping up weeks of negotiations on a deal bundling a version of our software with a version of theirs. It was a tough negotiation. When we were very close, all the major points agreed, we flew to their location to do this final session. We had to go through things we thought had already been settled.  Finally, at the end, with everything supposedly settled, we signed a contract with a couple clauses we didn’t like.
One of them seemed to give them far broader rights than what we’d agreed. The word "unlimited" was there on the page.
"Don’t worry," they said, "that paragraph on page two is just for the disk duplicators, we have to have those rights or they won’t manufacture the disks. And you’re covered with the paragraph on page three, that limits our rights to exactly what we’ve agreed."
So we signed. Dumb. This belongs in the mistake bank for sure. But we did.
Three years later, our software appeared in a completely different context, way outside of what was agreed upon. I called the guy we’d negotiated with: no longer with the company. I called his assistant: no longer with the company. I called two others who’d been there: not longer with the company
Finally we took it to their corporate counsel. Actually to a person who was one of their legion of corporate counsels. We told him they didn’t have the right to do that.
"What do you mean," he answered. "Can’t you see it right there on page two? It says unlimited rights."
"But that’s not what we agreed," I said.

Tuesday, April 12, 2011

Katie Couric says she was "overly ambitious" changing the CBS Evening News right away

When trying to change the culture of a venerable institution, you want to move slowly. That would be unsurprising advice unless it came from one of the most powerful media figures in the country, Katie Couric, who answered a question by Andrew Goldman in the New York Times magazine's "Talk" column like this:

When you started hosting the “CBS Evening News” in 2006, there was a lot of talk about mold-breaking. Now the show looks very much like the other network broadcasts. 

In retrospect I would have given people what they were used to, a traditional newscast. And then as they got to know me and got more comfortable, then I would’ve started toying with the format and trying new things. I think we were overly ambitious. We probably would have been better off playing it a little safer.

So: culture, especially a media audience's culture, is stronger than personality.

Innovation "Catalysts" view making mistakes as an essential part of the process

In 2009, I read a book called "The Catalyst," which describes the mindsets of people who've successfully built new businesses inside established companies. Renewing organic growth is a difficult task, and "The Catalyst" is a very useful book for anyone working in new business development.

One point that comes out quickly in the book is the necessity to experiment, "fail fast," learn and iterate. These points were also brought out in another excellent new book, "Discovery-Driven Growth." I see these two books as companion volumes. Both address growing new businesses within companies. "The Catalyst" focuses on mindset, "Discovery-Driven Growth" describes the methodology.

Here is one of the "Catalysts" profiled in the book discussing mistakes. John Haugh was hired by Mars Inc. and put in charge of growing its specialty chocolate line, Ethel M.

Haugh decided to focus on creating retail "lounges" where customers could buy and enjoy the chocolates, rather than relying on the fiercely-competitive grocery channel. Haugh also carefully listened to lots of voices--customers, suppliers and partners--to learn as much as he could, fast.


[Haugh] elected to launch with four different kinds of lounges: "We're not going to go out and have one perfected prototype," he explained, "because we don't even know what that would look like." The team checked in with consumers throughout the design process to determine the best color palettes, types of furniture, and overall ambience for the stores. They also asked suppliers, partners, and the vendors of their chocolate-making equipment for input. Their intent was to refine the new business as they went along:
We'd know within three days if a store was working. Are people coming in, are they sitting where you think they will, are they ordering what you think they will? You know very soon. And we'd test a slightly different design and layout for the next one to open. We did make errors--we knew we would. But we were prepared to react quickly and to fix them.
Indeed, Haugh viewed making mistakes as part of the process:
You know what? You're going to make a bunch of mistakes. What you want to do is to try and correct them. When you're younger, you don't like to make mistakes. You think that's the thing that is going to knock you off the track. You get a little bit older and get some gray in your hair, and then you realize it's OK to make mistakes. It's how you learn the most.

From The Catalyst: How YOU Can Become an Extraordinary Growth Leader, by Jeanne Liedtka, Robert Rosen, and Robert Wiltbank, published by Crown Business. Reprinted by permission. (c) 2009. All Rights Reserved

Monday, April 11, 2011

Monica Gould audio story - the importance of focus

Monica Gould is the president of Strategic Consulting Partners. In this story, she talks about her early days in consulting, when she fell prey to a common mistake of consultants (I can tell you from experience): the temptation to say you can solve any problem.

Download the story here (1min 57sec).


When I first started my business, I was dabbling, I was trying to make an income and keep abreast of what was going on in the business community. I really didn't think of it as, I was going to grow this consulting firm and make a million dollars a year. It wasn't my intent. So I don't think I had the focus of what services I could provide, why I could provide them, how I'm positioned in the market and why people need to hire me rather than someone else. I didn't really think through that.

Oh, you need some work? I can do that for you. I pretty much did anything anyone wanted me to do. Whether it was my key strength or not.

When you splinter yourself, because you're so hungry and you want the work, and you want to just move forward, you can dilute the quality of your service and dilute what you offer the market.

So what I've really learned to do, especially honing in on this in the last few years, is picking and choosing the opportunities that I go after. Making sure that it is part of the core strategic strength of the firm. That we can do the work. Not necessarily that I could do it, but our firm would have the right people in place. And that I can do the work. Not that I won't stretch, and look for opportunities that would stretch our skillset, but really trying to be strategically focused and not splintered all over the place, not confuse the market in terms of what we do.

Friday, April 8, 2011

"We didn't slow down enough to research and review"

Another business mistake story reported by Marcia Pledger of The Cleveland Plain Dealer. This story is from Nick Martello, president of ZymeAway, a small cleaning products company in Westlake, Ohio.

My company enhanced and marketed a cleaning product, and the first major test was Hurricane Katrina. We never failed a FEMA re-occupancy inspection. But people started using the floodwater and mold cleaning detergent for other purposes, and we made the mistake of marketing it.

We were expanding extremely fast, on track to hit $1.2 million in sales by our third year. Unfortunately, we didn't slow down long enough to research and review if our all-natural organic, nontoxic product had crossed over into regulatory compliance issues. The Environmental Protection Agency shut us down for nine months last year because suddenly our product was considered a non-registered pesticide.

Labeling concerns costs us over a half-million in lost revenue, legal fees and fines, virtually bankrupting our company....

We changed the product's name, label, literature and website in order to comply with the EPA.

It was a tough battle, but we're now in a position to grow in other areas, specifically targeting the hospitality industry with two new products: Bug-E-Spray and Bug-E-Dust, EPA-accepted, minimum-risk pesticides.

We learned the hard way that if you find a product has greater application than you originally intended, and it falls within regulatory agency control, stop, research and validate your product's qualification before marketing.

Thursday, April 7, 2011

Surprised by a large customer defection

The following story is excerpted from "The Knack: How Street-Smart Entrepreneurs Learn To Handle Whatever Comes Up," by Norm Brodsky and Bo Burlingham. This is a terrific book with great storytelling throughout. Brodsky uses so many examples from his storage company, CitiStorage, that by the end of the book you feel like you know that industry. To learn more about the book, visit the web site. I highly recommend it.

I still remember the moment, many years ago, when I found out we’d lost one of our biggest customers…. One of my salesmen called me in my car and told me we’d just received a fax from the customer, a major law firm, announcing its intention to move its boxes out of our facility when the contract expired three months later.

Now you have to understand that, in this business, moving your boxes is a big deal.... So it’s a real loud message when a customer leaves, and this one came completely out of the blue. I was stunned. “What are you talking about?” I said. “Man, how could we lose this account? What happened?”

The salesman didn’t have an answer, and we couldn’t get one from the customer. The people in charge at the law firm wouldn’t see us or talk to us on the telephone. Our urgent messages brought perfunctory replies: “The decision has been made, and it is final.”

Obviously, we had screwed up. The guy who had closed the account had left us five years before, and we hadn’t stayed as close to the customer as we should have been. A week or so after receiving the fax, I came up with a proposal that finally got us a meeting with the firm’s managing partner—to no avail. The situation was too far gone. We could offer good financial terms, but we couldn’t fix problems that had been festering for years. Our competitor matched the terms and got the account.

So I called my managers and salespeople together and said, “What did we learn from this? What do we have to do differently in the future?” The real lesson, I knew, was not that we had made mistakes. You always make mistakes. We failed because we’d waited too long to find out about them. We decided that, from then on, we’d go to each customer eighteen months before the end of the contract and offer to negotiate a new one. If the customer hesitated, we’d know right away that we had a problem—while there was still time to fix it.

As soon as we began implementing the new policy, we made a very important discovery. We had unhappy customers and didn’t know it. One customer was upset about our system for providing information; we fixed it. Another customer felt it deserved a lower rate because its volume had increased dramatically; the customer was right, and we made amends. A third customer didn’t like a particular aspect of our inventory system; we changed it. A fourth customer was miffed that we hadn’t been sending regular monthly reports; we started sending them.

So, in four months with the new policy, we made four improvements, pleased four customers, and locked up four accounts, and all these benefits came from one failure. In the long run, that failure proved to be one of the best things that ever happened to the company.

(c) 2008 Norm Brodsky and Bo Burlingham. Used by permission.

Wednesday, April 6, 2011

Sue Pera video story: the perils of opening a second store

Sue Pera is the owner of the Cornerstone Coffeehouse in Camp Hill, PA. Visit them on the web at (Disclosure: I've been a customer there for over 10 years. It's a great place; if you happen to find yourself in Camp Hill, you must stop by.)


I've owned my own business for almost 20 years, and I've made several mistakes along the way. The one that truly affected us more than anything was when we decided to open up another coffeehouse. Instead of one Cornerstone Coffeehouse, my husband and I, who is my business partner with me, he and I decided that we would open up a second coffeehouse, about 15 minutes away from here. It's in a different area, and we were hoping that it would attract different people.

What I discovered, on the upside, is that I am much better at running one place. That's my strength in running a business - getting to know people personally. Making them feel welcome as though they're here in my home. I'm here to entertain them. To have the best food, the best service, the best baristas. What I found out when I opened the second coffeehouse, I was now dividing my time between two. And instead of making both of them do fantastically well, I was making both of them pretty mediocre.

Because I didn't have enough time during the day. Nor did I have the, maybe, business savvy that many people have, who can open up multiple locations. And so it wasn't really something that I took to heart, so much as I took financially to heart. It was a very large financial investment that we made in the new business. And I'll probably be paying that off for the next 5 or 6 years. It certainly was something, that knowing myself better, running my business now... It's something I'll never be able to do again.

I'm back to running one shop. Running one business is my forte.

Tuesday, April 5, 2011

VC Ed Sim reflects on investments he passed over

This post on logging and reflecting on mistakes was originally posted nearly two years ago, but, by coincidence, today VC and blogger Ed Sim published a similar idea - "Reflecting on Passed Investments" - looking back, after the fact, on investments that weren't made. How had they turned out?

Every 3 months I dig through my "passed company" folder to look at what investment opportunities we passed on and why. Inevitably, there are a few companies that are near-misses, but we end up passing on for whatever reason. Did we pass because we didn't think the team was great or because we didn't believe that they could get a product launched? Did we pass because of lack of traction in the beta release or because of concerns on valuation? Looking at my "passed company" folder gives me an opportunity to test our reasons on passing and to see 3 months later if the entrepreneurs could actually execute or prove our concerns wrong.

While many times I find doing this reflection further confirms our reasons for passing, I also find myself from time-to-time sending up a follow up note to check in on these near-misses or doing a quick Google search to see how the company has progressed since our last communication. Inevitably, there will be a few that "got away" and seem to be doing quite well. No one is perfect and looking back every quarter gives me an opportunity to better hone my investing acumen and further refine my understanding on what separates a potential winner from a loser.

Related Post: To learn better, keep and review a mistake log

To learn better, keep & review a mistake log

Working for the last two years on The Mistake Bank, I've become a bit of a connoisseur of mistake stories and literature on learning from mistakes. This has meant scrutinizing my own mistakes and trying to learn better from them.

I've made one significant realization: Sometimes errors are one-off oversights, other times they reflect weaknesses we need to work on (at still other times they are serendipitous events, but that's another story). How does one tell the difference?

Here's an example. Last year, I noticed that I lost track of several conference calls over a period of months. This was unthinkable to me, since I'd always prided myself on discipline and organization :). But the pattern was worrisome. In my business, if you miss a client conference call, or worse, two or three, you may have an ex-client on your hands. What I realized was, I was getting busier, and therefore my mind was not able to manage all the data I was asking it to. This realization drew me to David Allen's book "Getting Things Done" and adopting many of its suggestions.

To learn most from your mistakes, I'd suggest this approach. When an "unplanned event" happens, jot yourself a note. What happened? What did you expect, and how did the outcome differ from your expectations? Put it in a file.

At the end of the year, or at another time when you have space and a clear mind to reflect, pull out the file. Review the notes. See if patterns emerge. Are there variations of errors happening over and over? Why? Can you make any changes to try to reduce their occurrence in the future? With hard-to-correct mistakes, the changes will be difficult. You may need tools or external help to improve--but ignore those patterns at your peril.

Another story: When I was a salesperson and sales leader, I continually undershot my forecasts. Of course, I had reasons why--the product had problems, the customers weren't ready, the macro environment had changed for the worse.

Some years after the fact, I finally realized that I was a lousy forecaster. I was too optimistic--I saw huge potential where it was limited, predicted easy wins where there was competition, trusted in the rationality of buyers. This is a hard-to-correct mistake. After a lot of thought, I came to the decision not to do sales forecasts--and if I had to do one, rely on the thinking of others to help me.

I only wish I had been tracking my forecasting mistakes and reflecting on them at that time. I would have saved myself and my companies a lot of problems.

(Photo by koalazymoney via Flickr Creative Commons)

Monday, April 4, 2011

"They basically sent us a message"

This story is from AG Lafley, the former CEO of Procter & Gamble, from Harvard Business Review's "Failure Issue."

In the 1980s P&G tried to get into the bleach business. We had a differentiated and superior product—a color-safe low-temperature bleach. We created a brand called Vibrant. We went to test-market in Portland, Maine.

We thought the test market was so far from Oakland, California, where Clorox was headquartered, that maybe we could fly under the radar there. So we went in with what we thought was a winning launch plan: full retail distribution, heavy sampling and couponing, and major TV advertising. All designed to drive high consumer awareness and trial of a new bleach brand and a better bleach product.

Do you know what Clorox did? They gave every household in Portland, Maine, a free gallon of Clorox bleach—delivered to the front door. Game, set, match to Clorox. We’d already bought all the advertising. We’d spent most of the launch money on sampling and couponing. And nobody in Portland, Maine, was going to need bleach for several months. I think they even gave consumers a $1 off coupon for the next gallon. They basically sent us a message that said, “Don’t ever think about entering the bleach category.”

We certainly learned how to defend leading brand franchises. When Clorox tried to enter the laundry detergent business a few years later, we sent them a similarly clear and direct message—and they ultimately withdrew their entry.

Friday, April 1, 2011

A CEO learns from other CEO's mistakes

A very Mistake-Banky snippet of the outstanding "CEO psychology" post from Venture Capitalist and one-time CEO Ben Horowitz:

Although it’s nearly impossible to get high quality advice on the tough decisions that you make, it is extremely useful from a psychological perspective to talk to people who have been through similarly challenging decisions. My friend Bill Campbell was a huge help to me as CEO, but interestingly it wasn’t his great success running Intuit that I found most useful; it was his disastrous experience running Go. Through that experience and his most traumatic days at Intuit (like laying off 1/3 of the company), Bill learned a tremendous amount about how to think about excruciatingly difficult decisions from a psychological perspective.

"It never occurred to me that you can't control some variables"

Another business mistake story reported by Marcia Pledger of The Cleveland Plain Dealer. This story is from Carole Richards, president of North Coast Education Services in Solon, Ohio.

You have to have passion about your product or service if you want to be successful. But I made the mistake of spending way too much emotional energy and time on one deal only.

When my company was five years old, I spent an entire year trying to close a deal that didn't happen. At the time, I was too naive to understand that politics plays a role in business. It never even occurred to me that you just can't control some variables.

At the time, revenues for my company were about $100,000. The deal would have easily tripled sales overnight. I really believed it was going to happen, and I ignored the nuances of politics because I wanted it so desperately. Funding would have come from a foundation and the school board. One person who controlled the purse strings had other plans for the money and killed the deal.

More than 20 years later, I periodically think about that experience when I'm planning new projects. Now, I put in all the energy needed to make it a worthwhile project, but I never invest emotionally until it's a reality.