I work in (naturally) fast food. And so I have been looking at the home of fast food, the US of A, and asking ‘what makes companies work or fail’ there? There is, I have concluded, one over-riding theme: businesses where the founder has stuck around succeed, and by and large where the founder, or their zeal, is gone, the businesses fail.
The success stories (Steve Els at Chipotle, Ron Shaich at Panera Bread) each have a comparable unsuccessful competitor who has had a revolving door of CEOs (Baja Fresh was at one time a competitor to Chipotle, Cosi a challenger to Panera Bread). And Starbucks is a good example of a brand where the founder had to come back to turn it around.
I found echoes of this in the turnaround of Scotch whiskey business Whyte & Mackay, which I was part of, between 2003 and 2007. An essential part of its return to success was re-instilling (distilling even) the entrepreneurial ethos of the founders Mr Whyte and Mr Mackay. And in each case where we successfully turned around the brands we owned (including Jura and The Dalmore) it was a case of rediscovering and buffing up the ideas, identities and philosophies of those who had started them.
In my own hippy way I had been concluding that there was an ‘energy’ of founders that needed to be tuned back into, in the case of turnarounds, and continued, in the case of growth businesses. Chris Zook and James Allen have done a fine job of putting this theory into words. Their book, The Founder’s Mentality is the product of a lot of research, and thousands of hours of experience by these two senior Bain partners.
Before I tell you the rest of the story, a disclosure: I love Jimmy (James) Allen. He was my boss when I was myself at Bain, and an inspiring, smart and kind one. He is now a close advisor to me at LEON and I have included him on all of our head office (aka support team) emails for the last two years so he can experience relatively first hand my attempts to lead a business. If you think that will stop me being honest about this book, you don’t know Bain culture (a blunt ‘tell it like we see it’ approach) or me. So let’s resume.
What does the book say? Jimmy and Chris Zook believe there are three big ingredients to what they call the founder’s mentality. In my words they are: 1) A big, motivating, sexy mission, 2) Everyone acting like they own the joint and 3) Making sure it’s all about the point and the people where your team and customers meet. Or in their language ‘an obsession with the front line’.
The promise on the front of the book is that the founder’s mentality will help you ‘overcome the predictable crises of growth’. They are ‘Overload’ (once the business gets to a point where the founders and their colleagues find they can’t get their arms around the business like they used to), Stall Out (where the accelerator peddle doesn’t seem to do what it used to) and Free-fall (where the CEO is heard to say ‘brace, brace’ but not in an optimistic tone).
The book is rich in examples, and from companies that are not always the usual suspects. Like the Chinese retailer Yonghui Superstores whose founders Zhang Xuangsong and Zhang Xuanning have shown a commitment to stay doggedly close to their suppliers, team and customer, and who have differentiated between stores that drive repeatable growth and those stores (quasi sand-pits) where the founders innovate and experiment.
Given the single-minded and all-consuming growth of InBev, the story of this incredible company is difficult not to be intrigued by. Their growth seems to have been driven mostly by everyone in the company having an owner’s mind-set and knowing that they will not be employed unless they perform. At the same time there are new stories from big household names – like the turnaround of Ebay, and the example of a Walmart depot manager who has shown that leadership can, and needs to, come from everyone within the business.
What of how Zook and Allen tell this story? The book is neatly and clearly structured, and broken into enough lean bite-size chunks to keep people like me (with slight attention challenges) involved with the story. There is no bloat, there are no cul-de-sacs and despite being well-researched and full of authority it is written with great modesty.
If I were to set a challenge to Zook and Allen for their next book (recognising they may not care what I think) it would be to create one without any graphs and without any corporate phrases at all, and to really unleash their story-telling even more. At times there are some great turns of phrase (‘The difference between employees who operate with the owner’s mindset and those who don’t can be as great as the difference between devoted parents and restless babysitters’). But at other times the book slips back into consulting / business jargon with headlines like ‘Codify Best practices’.
I have been mulling over the fact that there is one other Bain Partner who has for a good number of years been arguing that the single biggest driver of profitability is loyalty. Reicheld has written a series of books, starting with the Loyalty Effect, that explains the role of customer and employee loyalty and how to create it. His books showed that in many industries loyalty of attractive customer segments matters more than scale. In financial services why be big and have lots of marginally profitable or even unprofitable customers where you can attract and keep the profitable ones? This is true of other markets too where the cost of acquiring customers can be higher than the money you will make from them.
In some ways the Founder’s Mentality is the bridge between, or a marriage of, the scale argument and the loyalty argument. Arguably the culture of a Founder’s Mentality is a proxy for how to create loyalty and buy-in from employees and customers as one starts and grows a business. Indeed (and I confess I know this from one of their graphs) the single biggest phase of value creation in any business is during the growth years, so to some degree one can argue that the path to scale is more enriching financially than the years after one has achieved it.
Founder’s Mentality maintains that scale is critical, but now argues that it is insufficient. So it adds a second dimension, the extent of the Founder’s Mentality, or rather the strength of culture. So the new goal is not just to be number one or number two and achieve scale but to be a ‘scale insurgent’ with the clout AND sustained spirit of Apple or Google.
With many books I am happy if I have one idea, or one or two actions for how to do a better job at LEON. With this book I have filled a whole page. I have resolved to spend even more time in restaurants (I already spend most Mondays working in one of our restaurants). To invite everyone to lunch or dinner with me after they have been with LEON three months. To create red and green stores (stores where I replicate my repeatable model and others where I play and innovate). To make sure that everyone in the support team (head office) can operate a till or make any dish if asked. To name just a few.
This book has reassured me that I have not been going mad. I have long felt that a culture of resilience and positivity is at the same time both massively valuable and also wildly under-measured and under-appreciated. It makes me want to redouble my efforts to put culture at the top of my to-do list at LEON. An HR friend once said to me ‘Culture eats strategy’. This book has started to help me make sense of what he meant.
John Vincent is the CEO & co-founder of Leon
The Founder’s Mentality: How to Overcome the Predictable Crises of Growth by Chris Zook and James Allen is published by Harvard Business Review Press, £19.99