Why it makes sense to bake “good” into your business

Here’s an insightful snippet from Paul Graham, one of the partners at Y Combinator, on the dangers of excluding the good gene from your business:

“When you’re small, you can’t bully customers, so you have to charm them. Whereas when you’re big you can maltreat them at will, and you tend to, because it’s easier than satisfying them.”

The implication is that companies without the good gene baked in end up losing focus and abusing customers.

Instead, Mr. Graham suggests that by wiring benevolence into a company from day 1, a business can get big while staying friendly, customer-focused and successful (like Google, who’s tag is “don’t be evil”).

I think this is a nice idea, and a good one as well.

It also helps address the omni-present indie dilemma: at what point are we selling out? The neat answer is: never, as long as you stay benevolent and keep adding value for customers.

I would add that this works only if “being good” (in some form) is undertaken in a genuine way - in other words, one of 3-4 core values embraced by leadership and infused across the organization in a manner that fosters a healthy, benevolent culture.

I think it’s virtually impossible to reel good back into a business, once it starts slipping away (Starbucks, Jetblue), or to bake it in after the fact (Chase), so the advice here is to get started on baking good into your business, but only if it’s heartfelt.

Q&A with Matthew Malin of Malin+Goetz

I’m delighted to run a little Q&A with one of my favorite emerging brands, Malin+Goetz. I first met the founders at a Women’s Wear Daily conference in Miami three or four years ago… we shared notes on PR firms, suppliers and industry trends. And then they kindly offered me a ride back to the airport. Be sure to check out the promo for IBC readers at the end of the Q&A!

Q. Hello, Matthew. So I guess we only got 1/2 of the “M&G” combo today? Never mind, let’s dig in. In essence, what’s M&G all about?

Making skin care uncomplicated and modern, starting with sensitive skin first.

Q. You make it sound so easy! Take us back to the genesis, that moment you both decided to commit your lives to this “project”.

There are two starting points: first, when Kiehl’s was sold to L’Oreal in ‘99 during my six-year tenure there overseeing global sales (as Nars was sold to Shiseido, Stila to Estee Lauder, Bliss to LVMH, etc). Then, two years later, after lots of research and planning (which was a rewarding process), we took the plunge. We wanted to establish a family business with a soul.

Q&A with Angel Chang (Angel Chang)

Hi Angel. OK, let’s roll… Who are you? Give us a little narrative please.
I am a fashion designer merging womenswear with new materials and innovative technology. I am also a freelance journalist, a trend consultant, and what some might call a futurist. Before launching my own label, I trained in the design studios of Donna Karan Collection, Viktor & Rolf, Marc Jacobs and Anna Sui. I also freelanced and wrote for fashion magazines (W Magazine, Vogue.com France, Vogue Hommes) and started up my own art & culture quarterly (Me Magazine).

You’re ambidextrous, it seems…
To a limit: fashion is a business, and successful fashion designers need a solid business partner to ensure the longevity of their line. Yves Saint Laurent has Pierre Berge; Tom Ford has Domenico de Sole; Marc Jacobs has Robert Duffy. But design and commerce interact like oil and water in fashion companies, so it was only after starting my own line that I learned the numbers and sales side because I had to. While I ended up winning an international business plan competition (Cartier Women’s Initiative Award), numbers are definitely not my forte. I am still looking for a business partner so I can concentrate on the creative.

Wired to innovate

Merriam-Webster defines innovation as: “the introduction of something new… a new idea, method, or device”.

Really? New for new’s sake sounds like novelty to me, not something to build a company around.

Anyway, I define innovation as creating incremental value for the end-user, using the same or fewer resources.

Not surprisingly, the best indies are good innovators:

• they’re passionate about what they do
• they’re close to their customers, often deeply immersed in the sub-culture (software development, coffee roasting, barbering, etc)
• they have a clear, compelling vision
• they’re cohesive and aligned

Q&A with John McDonald (CITY, E-BOOST, etc)

Welcome, John. Let’s dive right in. What was it like growing up? How did you end up in NYC? Born and raised in Phoenix, AZ where the temperate hits 115 degrees in the summer. Back then all I did was play sports which is probably the root of my competitive nature. After high school I did two years of college in San Diego but basically lived on the beach and played two-man beach volleyball. I woke up one day and realized I could do this for the rest of my life or get out now. My older sister was modeling for Ford at the time and because of her encouragement I moved to NYC to finish school and as you can see, never left. I can only exist here.

After you arrived here, how did you find your toehold in the city? What have you been up to since? Arrived here in 1988. Finished at college at Columbia in 91-92 and leveraged personal connections that made it possible to open MercBar in 1993. I was friends with Andre Balazs who at the time was parking his cars in the space (his office for Mercer was next door) which is how I came to know about the location. I was naïve and simply thought, “open a bar.” As it turns out the timing was right, the design has tested time and it was the one thing that kept me from having to get a real job and with that came Canteen, Lure, Lever House, Chinatown Brasserie, CITY and now E-Boost.

Swobo’s well-meaning swagger

Here’s a zinger Q&A from Cool Hunting with the founder of Swobo, Tim Parr. A little excerpt:

“Our apparel line tows the company vision as well, it uses 100% USDA organic cotton, recycled polyester, water based inks, Merino wool, etc. because it’s just the way it should be done. We also donate 1% of gross revenue (the big number, the not so easy to hide behind number) to environmental groups. Business has the ability to change a lot of this environmental mess (because business started most of these enviro problems), and people have the ability to change business.

Q&A with Sarah Kugelman of Skyn ICELAND

IBC: OK, let’s get started. We’ve been watching your little business with interest. What’s Skyn all about?
Sarah: Skyn ICELAND is the first and only skincare line that addresses the effects of stress on skin. Since stressed skin is damaged skin, it needs to be soothed, healed, repaired and put back into balance. We create great skin from the outside in as well as the inside out.

IBC: You’re not a first-time entrepreneur. What key “lessons learned” did you bring to Skyn?
Sarah: Since this is my second company, I learned quite a lot. I learned not to sell a huge % of your company upfront to investors, as it diminishes your control and decision-making power. Try to fund as much as your business yourself or with friends and family money; in the long run, it will enable you to run your business as you see fit. I learned to start with a good strategic and financial plan in place. Don’t figure it out as you go. Know where you’re headed and how you are going to get there. Hire the very best people. You are only as good as your team. Don’t go into business with friends. Trust your instinct.

IBC: Spoken like a pro. Why did you start Skyn?
Sarah: I really wanted to start a business I felt passionate about, something that combined a personal interest with my professional background. I had a serious health crisis 12 years ago and it taught me to take better care of myself. I learned that there is a big difference between not being sick and being “well.” You only have one body and when it goes, that’s it. I became really interested in health and wellness (yoga, nutrition, herbal medicine, acupuncture, massage, etc) and it has become a way of life for me. I wanted to figure out how to combine that experience and knowledge with what I do for a living. I ended up spending a year and a half researching the connection between stress and skin. When I discovered that there was a distinct and direct link between the two and understood that I could treat that problem topically, I decided to create a skincare line that could make people look better, feel better and teach them about wellness.

IBC: I like that… I’m becoming a bit of a wellbeing nut myself. How do you find balance in your own life as an entrepreneur and a mother?
Sarah: It’s really hard. I used to work 24/7. Now, I go into my office three days a week and work the other days from home. It means squeezing a lot of meetings into three days and still working like crazy from home, but I get to see my daughter four days a week and that makes it all worthwhile. I also take a lot of time off in the summer. I have a house out at the beach and I spend a lot of time there in the summer regenerating. I do a lot of yoga, eat lots of organic food, bike to the beach, swim and sleep late. It is great for the body as well as the mind. I find that it gives me the energy I need to get through the rest of the year and it also gives me some time to think about my business and plan for the future (you can’t do that when you are sledging through the daily grind).

IBC: I see… walking the talk! Beauty keeps being redefined. How do you define it?
Sarah: A writer just asked me that question. This is how I answered: “Beauty is the perfect balance between inner and outer beauty. Inner beauty is a combination of good health, good intentions, integrity, intelligence, a sense of humor and kindness. Outer beauty is about making the most of what you have, taking care of your body through exercise and good nutrition and then projecting confidence and grace. Of course it doesn’t hurt to have flawless skin, captivating eyes and a contagious smile!”

IBC: How would you describe your management style?
Sarah: Informal, fair, strategic and creative. I am resourceful, I think out-of the box and I like to work as a team. I do bring good “big company” experience with me so even though we are a small start-up, we function in many ways like a big company (which gives us the best of both worlds). I think I bring that structure and process.

IBC: How do you feel about trading on the Iceland image? Is it authentic?
Sarah: It’s authentic because we never try to be anything we’re not. I never claim to be from Iceland and I would never claim that our products are made there. The story is that I went there and fell in love with it. I felt like it epitomized all of the things I was talking about with skyn ICELAND: a low stress, clean, healthy place. Somewhere we would all want to live if we could exist in a pure, stress-free environment. What’s also interesting is that the waters there are super nurturing and curative to the skin, so I decided to import them and incorporate them into all of our products. It’s become our “secret ingredient” in addition to various Icelandic botanicals and medicinal herbs. Because of the climate, they are super potent. So really Iceland is an image we convey and we are connected to Iceland through our ingredient story.

IBC: Your business is growing. What have you done well on the sales and marketing side?
Sarah: We have been backstage the past three seasons at NY Fashion Week. We have built great relationships with designers such as Charlotte Ronson and Susan Ciancolo. We also have a great group of makeup artists that now use our products. We’ve been asked to sample VIPs at some great celeb events because people just loved our products - i.e. Showtime VIP’s for the Golden Globes, Women in Film’s Crystal and Lucy Awards, George Lopez’s Kidney Foundation dinner, MTV Movie Awards and more… we’ve also aligned with a group of stress experts and Icelandic companies (as well as the Icelandic Chamber of Commerce). As for Sales, we built a great relationship with Sephora and they have nurtured us every step of the way. We’d be nowhere without them.

IBC: What keeps you up at night?
Sarah: Running out of money.

IBC: Yes, I know the feeling. OK, in addition to the “lessons learned” up above, any pointers for first-time beauty entrepreneurs?
Sarah: Don’t listen to naysayers and never give up.

IBC: Yes, I call that tenacity - a key ingredient for any successful indie. Thanks, Sarah. It’ll be exciting to watch Skyn evolve and grow. I’m curious to see what you have in store for ‘08.

Supercenters and big brands get long-tailed as power shifts to human beings

The Wall Street Journal published an article yesterday titled ‘Wal-Mart Era Wanes Amid Big Shift in Retail’. Bang-smack in the middle are two paragraphs that get to the heart of the matter:

“In some ways, Wal-Mart’s loss of clout is a reflection of a more fragmented world. Retailing is a mirror to how we live and work. Big-box stores thrived by selling highly recognizable national brands, which themselves were fed by two phenomena: the growth of mass media and freeways, which encouraged large stores in remote areas. Stores and brands together achieved scale efficiencies that allowed them to overwhelm local chain stores and regional brands.

But the Internet is transforming the retail definition of scale. The once-stunning compilation of 142,000 items found in a Wal-Mart supercenter doesn’t seem so vast alongside the millions of products available on the Internet. At the same time, the cost of creating and sustaining a national brand is rising because of media fragmentation. Niche brands, created by Internet word of mouth, are winning shelf space and sapping profits required to fund big brands’ advertising. Manufacturers such as Apple Inc. and Phillips-Van Heusen Corp., lacking the retail distribution or presentation they crave, are opening their own stores.”

Here’s the full article (subscription may be required).

A fashion king gives us hope

Giorgio Armani just had a $346 million payday.

Bankers structured the deal via a $126 million dividend and a $220 million stock buy-back.

According to WWD, “the fashion house bought the shares from the designer to reduce some of the company’s excess liquidity. The transaction is a first for the group”.

Did you catch that? Excess liquidity.

Oh, the power of fashion working on all cylinders amidst rip-roaring consumption levels worldwide. And the beauty of not being beholden to outside investors.

Whole Foods, the patron

I note with interest Whole Foods’ recently announced Local Producer Loan Program, which provides up to $10 million annually in low-interest, long-term loans to small agricultural producers and food artisans.

According the the WFM web site, “as of August 2007, 18 producers had received a total of $809,500 through the program.” The two most recent recipients include two organic farms in the New York area. According to John Mackay, co-founder & CEO:

“It is WFM’s intention to help finance local agriculture all over the US. We are going to ‘walk our talk’ with financial support for local, small-scale agriculture. We believe this financial assistance can make a very significant difference in helping small growers flourish across the US.”

Seems benevolent enough…

Globalization supporting growth of indiginous “third-world” brands

On some days, I wonder why I write this blog… inevitably, just at that moment, I’ll get a nice spike in traffic or an encouraging email out of left field that keeps me going. Or I’ll discover some little brand I’ve never heard of with a fascinating back-story.

This happened a few days ago after I posted my story on Alaffia Sustainable Skin Care, Indiginous Brands Rise Up. An hour or two later, Rob Walker, a friend who blogs at murketing.com among other things, tipped me off to another African brand called soleRebels.

soleRebels uses ex-soldiers (many unemployable in Ethiopia, the brand’s home turf) to make sandals from used tires. Apparently the company recently shipped its first overseas wholesale order, to Urban Outfitters.

Here are a few (long and unedited) paragraphs from the ‘Roots’ section of the company’s web site (my color effects):

Visiting your local

Exactly one year ago the founders of The Intrepid Wine Company invited me to join their annual sourcing trip to Campania, Italy. Intrepid specializes in sourcing tasty wines from small, family-run producers.

I jumped at the chance to go. It was a wonderful trip, and my first real foray into the tantalizing world of wine and wine-making.

We visited a half-dozen producers in a week, each one more colorful than the next. Informal, semi-scheduled tastings often meandered into long, lazy lunches “en famille” (or whatever the Italian equivalent of that term is).

Indiginous brands rise up

I’m snooping around looking for little brands that value social justice, the environment and/or indiginous cultures, right up there with making a buck.

For the entrepreneurs who run these companies, profit is often the means to a deeper purpose, not the prime motivator.

Alaffia Sustainable Skin Care seems to fit the model. I recently discovered their line of shea-butter-centric skin care in a tiny little shop in Vermont of all places (chalk one up for globalization).

Here’s an excerpt from Alaffia’s founder, Olowo-n’djo Tchala (gotta love that name) via the company’s “About” page:

“Because I grew up in poverty in Togo, I feel morally responsible to dedicate my life to empowering our communities in Africa. I have chosen to promote indigenous African natural resources that are culturally, spiritually, economically and ecologically sustainable.”

That sort of puts “beauty biz” in a new context, doesn’t it?

Olowo-n’djo Tchala (say it out aloud!) seems intent on making a difference by harnessing the vast Western consumption machine to cycle tangible benefits back to the communities from whence the raw goods came.

It’s a good thing Olowo chose high-margin cosmetics as the vehicle for his noble endeavors (versus mining nickel, let’s say): 10% of sales go towards “community enhancement projects” in Africa and other parts of the world.

I haven’t tried the products, but I like the web site and this fellow seems like a character.

My guess is we’ll be seeing more indigenous brands like this. Alaffia for one can teach us a lot about “marketing” and the new role - or responsibility - of small business.

Here’s a link to the Alaffia web site - it’s good.

Hopping on the artisanal tea slide

I stumbled on a little tea brand this past weekend at Rice, one of my regular stops in Soho.

The brand, In Pursuit of Tea, purports to be the real thing, “exploring remote regions to supply the finest True Teas”.

I get the feeling - after buying some tea (Red Fujian), reading their collateral and visiting their web site - that they’re doing just that, and then some.

If you’re a tea novice (like me), check out their “About Tea” web page for a primer on what good tea is all about. (It might feel a bit like the first time you discovered real beer, coffee, chocolate, wine… ).

Here’s a snippet about why they source their tasty loose-leaf teas from the little guy:

“The alternative to small farmers is chemically grown, mechanically harvested and processed, uniform teas of low quality. They hold no interest for the connoisseur. There’s little adventure in a cup of bagged tea, blended for consistency. Cultural history and geography are lost; all mystery evaporates with them.”

What? Chemicals? Machine-harvested? Uniformity? Low quality? No adventure? No cultural history or provenance?

OK then, I guess I’ll take a few bags… and throw in a $10 strainer to boot!

Indie-friendly contemporary market

WWD published a good overview of the contemporary fashion market today, ‘Contemporary Still on a Hot Streak’. Here are some excerpts from Robert Burke of Robert Burke Associates:

“… she [the American consumer] shops across the board, she mixes designer with contemporary and mass. The American contemporary customer has become somewhat European in her approach to shopping.”

“Today, contemporary designers can set the trends just as much as higher-end designers… We have seen contemporary designers start opening their own stores and become retailers, which is the best thing for a designer to do.”

“Vera Wang is the best example of where the market is going. From designer to the most affordable price point, I see a big increasing demand for the designer name at a lower price point.”

Many buyers cited in the article expressed a clear willingness to buy young, emerging designers, preferably on an exclusive basis.

Here are some related posts on this blog:

Should You Launch a Diffusion Brand in the Mass Market?

Studying the Master of Multi-Brand, Multi-Channel

Brand Management Case Study in the Making

Getting Lift Off with a ‘Lil Place Called Home

I added a category today called “Multi-Channel, Multi-Brand” as a means to start tagging these posts, meaning I’ve got some archiving work to do. But first, it’s time for some tapas.