TWIR: The Kickout

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Got Growth?

What happens if your business becomes wildly successful and you are overloaded? If your answer is 'no idea' you are unprepared to kick out work when the time arises.

Consider the following scenario:

Juan's Dilemma

Here's an example:

About 20 years ago in Chicago on Chicago Avenue (oddly enough) there was this taco joint that for a time became my favorite source for burritos. Of course this place was a neighborhood favorite and the word got out to downtown firms that figured a short drive on Grand Ave. to Chicago Avenue was worth the trip. The owner, we'll call him Juan, was faced with a dilemma -- the wealthy downtown customers did not want to be in the same space as the neighborhood folks. He didn't want to lose the new (lucrative) business. His solution was to partition his store with two separate entrances. One was for the locals that had no seating and was take-out only; the other had lots of seating, waitresses, swag lighting, and was essentially filled with the new downtown business clientele.

At first glance Juan had essentially segregated his customers. From my perspective if you were one of the inner-city locals you had to go through the local entrance. No seating. Get your burrito and get out. I even entered the business entrance to test this out and was kindly but briskly brought through a side entrance to the take out counter. The business-customer entrance was, well, what burrito heaven must look like. In contrast the take-out entrance was 'okay' but it was clearly segregated by walls and glass and was a lot smaller.

Don't laugh. Juan's dilemma happens to virtually every business. You try to raise your prices to slow growth only to realize that since your quality is that much better than all of the competition that even with a sizable price increase over established competititors you are still considered a bargain by the new customer base. In other words, that thing they told you in school about price and demand sometimes breaks down. Raising your prices has little effect. They just keep coming.

UGG Knows

UGG (okay, really Deckers) started back in 1978 basically selling boots to Southern Californians. The qualities that made UGG a success began to take a life of their own and in response the company grew to sell a wide variety of different products (shoes, water shoes, sneakers, etc.). Nowadays they even sell sports gear.

The point is this: when their customers wanted UGG's qualities infused into something else that they were willing to buy UGG built another brand to meet that customer's need. They didn't keep slapping 'UGG' on everything. They understood that lifestyle differences mean different clientele and that often means different venues, locations, sales strategies/tactics, etc.

People identify very closely with brands. You can only stretch a brand so far before you start confusing people, so oftentimes it is best to build a second brand when confronted with an onrush of related but essentially different business. The handover, or 'kickout' if you will, involves essentially herding your customers like cats to the new brand and with an understanding that it has all the qualities they loved about the original brand. So if you loved UGG but it is too warm out you don't look for UGG summerwear, you look for Teva.

Juan's Solution Analysis

Juan didn't effectively kickout. He tried to extend his original brand and it was too much of a stretch. No matter how good its burritos were I didn't like being treated like a second class citizen. I also felt betrayed because it was my business that kept Juan's lights on until he was 'discovered' by the downtown business crowd. Juan effectively ruined his brand.

The power of your brand resonates throughout your organization until everything you say and do is ultimately colored by it. The look of your store and it's storefront; the way your employees and customer reps talk to customers and prospects...all of these things should be caught in the gravity of your brand like satellites in orbit around the sun. Your brand represents your promise. Everything else is just executing on that promise.

Where would Juan be if that crowd decided to frequent a different haunt? Back with the locals, of course. But now his brand was so changed that I wasn't going to be there.

Lessons Learned

When large customers find that your product or service exceeds the capabilities of their regular channels you are going to wind up with some version of Juan's Dilemma. They are going to expect you to expand your operation to meet their needs or work with another organization that can.

Lots of people go into business with the intent of staying small. This can only work for several reasons: a) the larger competitors do not cover your service area for some reason b) you license the competitive advantage to them with some territorial agreement that keeps them out c) you are in such a niche/underdeveloped market that larger competitors are not interested in it (yet). Once your advantage catches the eye of a larger competitor their goal will be to replicate it and consume the market. When that proves impossible or too expensive they will try to license it (or, let's be honest -- sometimes they'll try to steal it) from you somehow.

People go into business because they have developed some advantage that other companies lack. When new companies are formed they often do not have the capital resources of the big players so they will often operate 'under the radar' with smaller customers until they intentionally increase their marketing efforts or are inadvertently discovered either by the media or by customers themselves. When the competition tries and fails to do what you do best it is the customer that forces them to try and make some form of licensing/partnership agreement with you. If that doesn't work a larger customer will try and do business with you directly only to later flood your business with orders that you cannot meet.

This type of customer will be forcing you to expand your operation and that leaves you with two ways to do it -- follow Juan's example and overstretch your existing company/brand or follow UGG and build a second company that is infused with everything that is good (and transferrable) to the new entity while preserving the original brand and customer base. Essentially you have to learn how to effectively kickout (birth) a new brand to meet emerging need(s).

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Citation: TWIR: The Kickout. (2014). Retrieved Thu Apr 19 14:57:29 2018, from;iid=readMore;go=1417799929