the
innovative LEDGER
An e-Newsletter from The Innovative Edge™ Inc.
Vol.
8, No. 8 - August 2008
* * * * * * * * * * * * * * * * * * * *
Of Tofu and Tupperware
By Jeff Govendo
In
a recent interview with Time Magazine, CEO’s John Mackey of Whole
Foods Market and Kip Tindell of The Container Store spoke about the
reasons behind their respective companies’ success.
First,
a little background. Mssrs. Mackey and Tindell shared a rented house
with several other University of Texas undergraduates in the mid-1970’s,
before both dropped out of school. After going their separate ways,
they each started businesses which eventually became what they are
now: the number one retailers in their respective niches: natural
foods and storage containers.
Whole
Foods, of course, currently faces a number of challenges, not the
least of which is how to keep customers coming in for its high quality
but pricey offerings in a tough economy. Yet it remains the standard
against which others in this field are measured. The Container Store,
to my knowledge, has no direct competitors of any significance; they
essentially own their niche.
What
came as a surprise in this interview was a shared business philosophy
of NOT focusing on shareholder value as a first priority.
Say
that again? Don’t business majors learn on Day 1 exactly the
opposite? (Perhaps this shows their lack of a formal business education.)
Aren’t the leaders in any privately-held, for-profit company
supposed to cater to those most heavily invested in it?
Not
according to Mackey and Tindell. For them, the key entry point
in the stakeholder chain is the employee. Says Tindell: “We
actually say that we put the employee first and then the customer.
If you put the employee first, they’ll take care of the customer
better than anybody else in the marketplace. If both of them are
ecstatic, then the shareholders are going to do better than if you
just myopically pay attention to the shareholder.”
It’s
an echo of the 80’s TQ concept of satisfying your “internal
customers,” and it’s worked quite well for these two leading
companies. What I would add to their comments is that it’s
also a strategy for long-term sustainability through innovation. The
problem with putting shareholders first is that, except for those
relatively few who are sufficiently farsighted to see the “big
picture,” the primary goal of investors is ROI. The bigger and
sooner the return, the better.
To
be sure, a company cannot succeed without them, and ultimately shareholders
have to prosper in order for the company to even exist. But exercising
a shareholder-first mentality, treating it as the company’s
raison d’etre, often results in planning and executing for
the short term; making those numbers for the quarterly or annual
report. This is not the best environment for innovation, where creative
ideas take time to percolate, develop, test out, re-work and re-test
before ever commercializing them. Innovation requires time and patience,
two things the average shareholder does not display in abundance.
And,
it requires buy-in and enthusiasm from the ones who will actually
be executing any innovation strategies: your employees.
Come
to think of it, the last time I was in a Whole Foods store, there
were a lot of smiling employees.
I
thought it had something to do with the tofu.
*This
title was chosen for its attempted cleverness and alliterative qualities.
The Container Store does not carry Tupperware. Whole Foods, however,
does carry tofu, and plenty of it.
