Approximately six months ago, three top-rated consulting companies, ROI, GPS and ABS, compiled a list of extraordinary people with extraordinary stories. From that list, we selected the individuals we thought were most inspirational. The Mark Cuban story is as inspirational as it is fascinating. We wanted to offer our entrepreneurial readership the opportunity to peer into the mind of an exceptionally successful, achievement-driven individual.
As an investor I find these long form articles on business practices fascinating.
Introduction & Excerpts (Via Beth Kowitt @ CNN)
Apple’s retail stores aren’t the only place where lines form these days. It’s 7:30 on a July morning, and already a crowd has gathered for the opening of Trader Joe’s newest outpost, in Manhattan’s Chelsea neighborhood. The waiting shoppers chat about their favorite Trader Joe’s foods, and a woman in line launches into a monologue comparing the retailer’s West Coast and East Coast locations. Another customer suggests that the chain will be good for Chelsea, even though the area is already brimming with places to buy groceries, including Whole Foods and several upscale food boutiques.
But Trader Joe’s is no ordinary grocery chain. It’s an offbeat, fun discovery zone that elevates food shopping from a chore to a cultural experience. It stocks its shelves with a winning combination of low-cost, yuppie-friendly staples (cage-free eggs and organic blue agave sweetener) and exotic, affordable luxuries — Belgian butter waffle cookies or Thai lime-and-chili cashews — that you simply can’t find anyplace else.
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The privately held company’s sales last year were roughly $8 billion, the same size as Whole Foods’ (WFMI, Fortune 500) and bigger than those of Bed Bath & Beyond, No. 314 on the Fortune 500 list. Unlike those massive shopping emporiums, Trader Joe’s has a deliberately scaled-down strategy: It is opening just five more locations this year. The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe’s sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe’s brand.) The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods’. The company has no debt and funds all growth from its own coffers.
You’d think Trader Joe’s would be eager to trumpet its success, but management is obsessively secretive. There are no signs with the company’s name or logo at headquarters in Monrovia, about 25 miles east of downtown Los Angeles. Few customers realize the chain is owned by Germany’s ultra-private Albrecht family, the people behind the Aldi Nord supermarket empire. (A different branch of the family controls Aldi Süd, parent of the U.S. Aldi grocery chain.) Famous in Germany for not talking to the press, the Albrechts have passed their tightlipped ways on to their U.S. business: Trader Joe’s and its CEO, Dan Bane, declined repeated requests to speak to Fortune, and the company has never participated in a major story about its business operations.
Pretty interesting article for analysts, industry nuts, etc….
Introduction (via Harvard)
Whether you sell widgets, designer fashions, or life-saving drugs, mastering the art and science of better analytics can set you ahead of your competitors, according to HBS professor Ananth Raman and Wharton professor Marshall Fisher.
Raman explains how in an e-mail interview about their new book, The New Science of Retailing: How Analytics Are Transforming the Supply Chain and Improving Performance (Harvard Business Press).
As a practical guide, The New Science of Retailing helps retailers mine their sales data to identify and pursue missing opportunities; improve store-level execution; unite partners’ objectives for creating a flexible supply chain; benchmark performance against other retailers; and evaluate and manage new technologies. Raman and Fisher provide specific, detailed metrics and techniques that can be used by retailers to benchmark their performance. The book also describes how investors can—and do—pay closer attention to retailers’ inventory levels.
Excerpts I Enjoyed Reading (via Harvard)
Q: Your book notes that typical stores experience staff turnover of 100 percent each year. How do you see successful retailers retain and empower employees?
A: Successful retailers empower their workers to improve processes at the store and also give them the tools and training needed to use the empowerment appropriately. Enlightened retailers also realize the importance of not overloading their store employees with too many tasks. Finally, we do see a number of retailers that are paying careful attention to the hiring, training, and rewarding of store employees.
Our favorite example of a retailer that has used labor successfully is the online retailer Zappos.com. The company pays very careful attention to hiring and training. It reduces turnover by providing employees with a career and seeks to find employees who are looking for one, too. In fact, during the training period, all trainees are offered $2,000 to quit Zappos: Most decline the offer. Zappos’s approach to managing its employees results in very satisfied employees, which has translated into very high customer satisfaction and sales growth.
Bored in school, failing classes, at odds with peers: This child might be an entrepreneur, says Cameron Herold. At TEDxEdmonton, he makes the case for parenting and education that helps would-be entrepreneurs flourish — as kids and as adults.
About Cameron Herold
An entrepreneur since childhood, Cameron Herold wants parents and teachers to recognize — and foster — entrepreneurial talent in kids
“Innovation is overrated. It’s time to appreciate the power of the copycat.”
-This article reminded me of the Dhando Investor, by Mohnish Pabrai. Pabrai comments on the value of good imitators vs innovators. I rather agree….its much lower risk/amount of reward to be an imitator.
Favorite excerpt (via Boston.com)
“Out there in some garage is an entrepreneur who’s forging a bullet with your company’s name on it,” Gary Hamel, a leading business strategy writer and consultant, has written. “You’ve got one option now — to shoot first. You’ve got to out-innovate the innovators.”
But invaluable though innovation may be, our relentless focus on it may be obscuring the value of its much-maligned relative, imitation. Imitation has always had a faintly disreputable ring to it — presidents do not normally give speeches extolling the virtues of the copycat. But where innovation brings new things into the world, imitation spreads them; where innovators break the old mold, imitators perfect the new one; and while innovators can win big, imitators often win bigger. Indeed, what looks like innovation is often actually artful imitation — tech-savvy observers see Apple’s real genius not in how it creates new technologies (which it rarely does) but in how it synthesizes and packages existing ones
William R. Kerr, Josh Lerner, and Antoinette Schoar
Executive Summary:
What difference do angel investors make for the success and growth of new ventures? William R. Kerr and Josh Lerner of HBS and Antoinette Schoar of MIT provide fresh evidence to address this crucial question in entrepreneurial finance, quantifying the positive impact that angel investors make to the companies they fund. Angel investors as research subjects have received much less attention than venture capitalists, even though some estimates suggest that these investors are as significant a force for high-potential start-up investments as venture capitalists, and are even more significant as investors elsewhere. This study demonstrates the importance of angel investments to the success and survival of entrepreneurial firms. It also offers an empirical foothold for analyzing many other important questions in entrepreneurial finance. Key concepts include:
Angel-funded firms are significantly more likely to survive at least four years (or until 2010) and to raise additional financing outside the angel group.
Angel-funded firms are also more likely to show improved venture performance and growth as measured through growth in Web site traffic and Web site rankings. The improvement gains typically range between 30 and 50 percent.
Investment success is highly predicated by the interest level of angels during the entrepreneur’s initial presentation and by the angels’ subsequent due diligence.
Access to capital per se may not be the most important value-added that angel groups bring. Some of the “softer” features, such as angels’ mentoring or business contacts, may help new ventures the most.
Howard Lee Morgan – Dr. Howard Morgan is a Partner at First Round Capital, a seed stage venture fund. He began working with Idealab in 1996 and serves on their board. Howard is also President and Founder of the Arca Group, Inc., specializing in the areas of computer and communications technologies. He has more than 25 years of experience with more than thirty high-tech entrepreneurial ventures.
He is Chairman of Internet Brands (NASD:INET). Howard was Professor of Decision Sciences at the Whart on School of the University of Pennsylvania and Professor of Computer Science at the Moore School at the University of Pennsylvania for almost 15 years. He serves on the boards of a number of companies and is a respected author. He received the Entrepreneur of the Year Award in 1997.
I’m hoping that serious analysts and investors are mindful of the effects of price wars. Furthermore, this is exactly why you should be doing scuttlebutt research you need to understand long term pricing power, industry dynamics, and pricing problems.
Although retail price wars have received much business press and some research attention, it is unclear how they affect consumer purchase behavior. This article studies an unprecedented price war in Dutch grocery retailing that started in fall 2003, initiated by the market leader to halt its sliding market share. The authors investigate the short- and long-term effects of the price war on store visits, on spending, and on the sensitivity of these decisions to weekly prices and price image. They use a unique data set with consumer hand-scan and perceptual data for a national panel of 1821 households, covering two years before and two years after the price war started. Although the price war initially entailed more shopping around and increased spending, spending per visit ultimately dropped because consumers redistributed their purchases across stores. The price war made consumers more sensitive to weekly prices and price image, which helped both the chain that showed an improvement in price image (the price war initiator) and the chains that already had a favorable price image (hard discounters). The price war initiator managed to halt the slide in its market share, and its stock price improved. The losers were the rival mid-level and high-end chains. Unlike the initiator, their price image did not improve, and they suffered from increased price image sensitivity. The authors provide managerial implications for firms that are (or about to be) involved in a price war.
Soldiers who’ve lost limbs in service face a daily struggle unimaginable to most of us. At TEDMED, Dean Kamen talks about the profound people and stories that motivated his work to give parts of their lives back with his design for a remarkable prosthetic arm.
About Dean Kamen (via Ted)
Dean Kamen landed in the limelight with the Segway, but he has been innovating since high school, with more than 150 patents under his belt. Recent projects include portable energy and water
One of my favorite papers of the year.” It’s not that talent, luck, or experience is irrelevant, but the impact of those things can be overshadowed by hard work.”
Most new ventures fail, but a few prosper and attain rapid growth. Many factors contribute to such outcomes, but we propose that among these are mechanisms identified by cognitive science research on the origins of expert performance. Literature on this topic indicates that across many fields (e.g., medicine, science, sports, music), outstanding performance derives largely from participation in intense, prolonged, and highly focused efforts to improve current performance - a process known as deliberate practice. By comparison, mere experience in a field and individual talent play smaller roles in generating expert performance. Additional evidence indicates that participation in deliberate practice does not simply expand domain-specific knowledge and skills; it also generates actual enhancements to basic cognitive resources (e.g., memory, perception, metacognition). We suggest that to the extent entrepreneurs acquire enhanced cognitive resources through current or past deliberate practice, their capacity to perform tasks related to new venture success (e.g., accurate identification and evaluation of business opportunities) is enhanced and, hence, the performance of their new ventures, too, is augmented. Specific ways in which entrepreneurs can gain enhanced cognitive resources are described, and implications for entrepreneurship theory and practice are considered.
Important Findings (Via Phys Org)
Entrepreneurs can acquire new capacities that can assist them in starting or running a new venture, or allow them to adapt to unforeseen circumstances, such as a drop in the economy, or PR crisis. These capacities include an ability to zero in on the most important information in a given situation, and more easily access valuable information stored in the long-term memory, or by increasing the capacity of short-term working memory. These factors also help secure a positive outcome: preparation, repetition, self-observation, self-reflection, and continuous feedback on results. These efforts lead to a healthy self-efficacy, or an individual’s confidence in their ability and what is known as mature intuition.
Fortunately, the authors point out, the enhanced cognitive capacities that contribute to expertise in one domain can transfer to another. Therefore, entrepreneurs who have acquired the capacity to perform at expert levels in sports, music, art, or science, can transfer these skills and capacities to their business goals. Baron explains, “Our study shows that most successes belong not to those who are gifted, experienced, or lucky—but rather to those who are willing to work hard, long, and diligently to attain it. It’s not that talent, luck, or experience is irrelevant, but the impact of those things can be overshadowed by hard work.”
