Bo Burlingham: An interview by Bob Morris

Posted on: November 23rd, 2010 by bobmorris

Bo Burlingham

Burlingham joined Inc. magazine in January 1983 as a senior editor and became executive editor six months later, a position he held for the next seven years. In 1990, he resigned and became editor-at-large. He subsequently wrote two books with Jack Stack, the co-founder and CEO of Springfield Remanufacturing Corp. and the pioneer of open-book management. One of the books, The Great Game of Business, has sold more than 300,000 copies. Another, A Stake in the Outcome, has also done well and gotten great reviews. (It’s a book you should read if you want to know what it really takes to run an employee-owned company.) “From 1992 to 1997, I served on the board of The Body Shop Inc., the U.S. subsidiary of the international cosmetics company. I was also a founder, with Tom Peters, of PAC World, a weird international networking group that gave me a chance to meet a lot of zany—and brilliant—people from around the globe…Let’s just say I’m always at large.”

In fact, Burlingham is currently an editor-at-large of Inc. magazine, co-founder of the Small Giant Community with Paul Spiegelman, author of Small Giants: Companies That Choose To Be Great Instead of Big, and co-author with Norm Brodsky of The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up.

Morris: During one of GE’s annual meetings, Jack Welch explained the reasons why he admired “small, sleek” companies: “For one, they communicate better. Without the din and prattle of bureaucracy, people listen as well as talk; and since there are fewer of them they generally know and understand each other. Second, small companies move faster. They know the penalties for hesitation in the marketplace. Third, in small companies, with fewer layers and less camouflage, the leaders show up very clearly on the screen. Their performance and its impact are clear to everyone. And, finally, smaller companies waste less. They spend less time in endless reviews and approvals and politics and paper drills. They have fewer people; therefore they can only do the important things. Their people are free to direct their energy and attention toward the marketplace rather than fighting bureaucracy.”

Morris: He seems to be describing the “small giants” that you discuss in your book.

Burlingham: Yes, he does, although I would hasten to add that most small giants aren’t run the way Jack Welch ran General Electric. They certainly don’t share Welch’s philosophy that—if you aren’t first or second in your market niche—you should get out of the business. Most would also shrink from the idea of regularly lopping off the bottom 10% of their employees. But maybe that’s just the difference between running a human-scale company and a “financial-scale” company, to use the terminology of my friend Doug Tatum.

Morris: In your book Small Giants, you examine seven “common threads” among 14 quite different companies. For those who have not as yet read the book, what are these “threads”?

Burlingham: I found, first, that the leaders of these companies had a very clear understanding of who they were, what they wanted out of business, and why, and they were aware of the full range of choices they had in deciding how to grow. Second, they had overcome the enormous pressure to grow fast, get big, and take paths they had not chosen and did not necessarily want to follow. Third, the companies were all deeply  rooted in the communities in which they did business—not only giving a lot back to those communities but also being molded by them, to the point where it was hard to imagine any of the companies being located somewhere else. Fourth, they enjoyed extremely close relationships with their customers and suppliers, based on one-on-one contacts and personal ties. Fifth, the companies had created what I call “cultures of intimacy” internally—that is, workplace environments built around “caring for people in the totality of their lives,” to use Herb Kelleher’s phrase. Sixth, the companies were unusually creative in the development of their corporate structures and modes of governance, taking advantage of their freedom as privately owned businesses to experiment. Finally, I was struck by the passion that the leaders brought to whatever business their companies were engaged in—be it music, hospitality, safety lighting, beer-making, movie special effects, or the engineering of constant torque hinges.

Morris: Here’s a related question. Since the book’s publication in 2005, to what extent (if any) have you observed any significant changes in any of these “threads” among companies you characterize as “small giants”?

Burlingham: I think they all still apply, but—if I were writing the book today—I would add another characteristic that I’ve come to see is extremely important to these companies; indeed, that has made it possible for them to do all the other stuff. I’m talking about having sound business models and being in control of their gross margins, which are generally high for the industries they’re in. In fact, when I look back, I  should have had a whole chapter on the financial aspects of being a small giant. I realized how important that was when I investigated the sad case of Reell Precision Manufacturing, one of the companies in the book, which lost its mojo for reasons I wrote about in an article I did for Inc. It was called “Paradise Lost,” and it ran in the February 2008 issue. You can find it here: www.inc.com/magazine/20080201/paradise-lost.html. In a nutshell, Reell lost control of its gross margins, which shrank to zero in its main line of business, pretty much destroying a culture that had taken 20 years to build.

Morris: You suggest that all of the 14 companies have “the magic of mojo.” What does that mean and how is it evident?

Burlingham: I define mojo as the organizational equivalent of charisma. When a leader has charisma, you want to follow him or her. When a business has mojo, you want to be associated with the company. You want to buy from it, sell to it, work for it, wear its t-shirts and caps, read articles and books about it, go hear its leaders speak, and so on. I think of it as the feeling you get when you’re in presence of greatness in business. But I admit it’s a little like Justice Potter Stewart’s definition of pornography: It’s hard to define, but you know it when you see it.

Morris: Several large companies, Southwest Airlines for example, also seem to have “mojo.” Is it the same? Please explain.

Burlingham: Well, yes and no. There’s no question that large companies can have mojo as I’ve defined it—the organizational equivalent of charisma. But a company inevitably winds up having to make trade-offs as it grows. I know people who worked at Whole Foods when it was still relatively small, and CEO John Mackey was someone they actually ran into from time to time. There was a tremendous esprit de corps and a fanatical commitment to the quality of the products the company sold—especially the prepared products. People felt very close to one another, to the company’s leaders, and to customers and suppliers. You clearly can’t have that kind of intimacy in a company the size of Whole Foods today. But does it have mojo? I think so, although it probably varies from store to store. I suspect the same is true of Southwest Airlines. What it had when it was a small airline flying out of Love Field is different from what it has now. Not necessarily better or worse. Just different. Of course, Southwest and Whole Foods also have a lot more influence now than they had when they were very small. Southwest has revolutionized the airline industry and set a new standard for excellence in commercial aviation. Whole Foods has helped change the eating habits of millions of people, not to mention the way our food is produced. Could it have done that if Mackey had decided to keep it a small giant, with one fabulous store in Austin? Probably not.

Morris: Once a company has “mojo” (however defined), what must it do to keep it?

Burlingham: Well, it must protect its gross margins, as the Reell example shows. Beyond that, it must focus on the relationships it has with all the groups of people it comes in contact with. If you think about it, that’s the overriding message of the small giants: They have great relationships with customers, suppliers, employees, neighbors, and other community members. If you want to hold onto your mojo, you need to keep nurturing those relationships, doing all the things you did to build them in the first place.

Morris: Do the challenges that a CEO of a “small giant” faces differ significantly from those that a CEO of, let’s say, a “Fortune 100” company faces?

Burlingham: The business challenges are obviously quite different, but if you’re talking about the challenge of developing and holding on to mojo, my answer would again be, Yes and no. There’s no difference in the sense that both have to pay attention to keeping those relationships strong. There’s a big difference, however, in the difficulty of doing that. That’s because the vitality of the relationships depends on a level of mutual trust and respect that’s easy to lose. All it takes is a little neglect. If you allow yourself to get distracted, if you stop working on what ties you to all those different groups of people, you’ll lose what took you so long to build. I mean, the intimacy will vanish, the trust will dissipate, and the bonds will erode. The challenge of staying focused on the relationships is much more difficult in a large public one, or even a small private one with outside investors, than in a privately owned, closely held business. When you take other people’s money, you make promises. In most cases, the promises are about delivering a good return on investment. The investors will put a lot of pressure on you to keep those promises. Under the circumstances, it’s very easy to get distracted.

Morris: What is the “Mona Lisa Principle”?

Burlingham: That’s a phrase I took from Danny Meyer, the founder and CEO of Union Square Hospitality Group in New York. He said to me, “I don’t know a lot about museums or hanging art, but I do know that if the Mona Lisa were in another museum, in another city, in another country, the experience of going to see it would be very different. The same is true of my restaurants.” His point was that a restaurant’s mojo—or soul, as he calls it—comes in part from its relationship with the community in which it is located. I found that to be true of all the companies I looked at.

Morris: In your book, you devote substantial attention to Danny Meyer. Why?

Burlingham: He’s an exceptionally smart, interesting, creative, thoughtful, humble guy who has built one of the great restaurant companies in the world. When I was looking for people and companies to include in the book, I heard he had a rule that he wouldn’t open any restaurant he couldn’t walk to in five minutes from his house. Meanwhile, his first two restaurants—Union Square Café and Gramercy Tavern—had been the two most popular restaurants in the entire city of New York for years and years, according to Zagat. That sounded like a small giant to me, although I didn’t have the term at that point. So I contacted him, and he was kind enough to talk to me even though he was in the midst of writing his own business book at the time. That book was Setting the Table and came out a little after mine. I highly recommend it.

Morris: What do you mean by “intimacy” in business and why do you think it is so important?

Burlingham: I’m referring to the closeness of the relationships, whether they’re with employees, customers, suppliers, or the community. It’s important for the same reason that intimacy is important in our personal lives. It has to do with our nature as human beings. It’s in our genes. There’s a kind of strength, not to mention pleasure, that comes from having close relationships with like-minded people who have similar values to yours. That sort of intimacy helps build mutual trust and respect, which is the fuel that allows businesses to excel.

Morris: In your opinion, what are the most common problems with succession among “small giant” companies?

Burlingham: That’s my next book! As I’ve gone around speaking about small giants, people have raised the question of succession more often than any other subject. They note that a lot of these companies are led by charismatic, visionary people—the most difficult kind of person to replace, and not necessarily the best type of leader for a company to have as it grows. Jim Collins has written about that in Good to Great, another book I admire tremendously. I have a chapter on succession in Small Giants, and what’s striking is how few of these companies have a plan for transferring ownership and leadership to a new generation. I couldn’t help wondering why not, and what the solution might be. Right now I’m in the midst of looking for the answers. But you’ll have to wait for the next book to find out what I’ve come up with.

Morris: Bernie Goldhirsh was the founder of Inc. magazine. What did he mean when referring to entrepreneurs as “the artists of the business world”?

Burlingham: It was an expression of his appreciation for the profoundly creative nature of entrepreneurship. He used to tell the writers and editors of Inc. that we should think of our readers as artists using both sides of their brain. We weren’t just writing for the rational, numbers- and systems-oriented businessperson. We were also writing for someone with the soul of an artist whose means of expression happened to be business. That is certainly what I found with all the people I wrote about in Small Giants.

Morris: You and Norm Brodsky co-authored The Knack. To what does the title refer?

Burlingham: We’re talking about the set of mental habits successful entrepreneurs develop that allow them to deal with a wide variety of challenges and take advantage of a wide variety of opportunities. You know, there’s no formula for success in business. There’s no step-by-step process you can follow and be assured of building a successful, self-sustaining company. The world is too complicated and unpredictable. Every challenge and opportunity is different, and each calls for a different response. So the question is, how do you know what the right response will be? That’s where these mental habits come in. Most people develop them by making mistakes, falling on their faces, picking themselves up, and figuring out how not to do it again. That’s how Norm developed them. But, as we say in the introduction, a smart person learns from his or her mistakes. A wise person learns from other people’s mistakes. Norm was smart. The goal of The Knack is to help our readers become wise.

Morris: Although there is much of value in The Knack for those planning to launch or who have only recently launched a new company, I think most of your advice will also be of substantial value to managers in large corporations. Is that a fair assessment?

Burlingham: Definitely. The fundamentals of business don’t change as a company grows. Take the ins and outs of cash flow, which we discuss at considerable length in The Knack. Many years ago, Inc. ran an interview with Peter Drucker, who said that understanding and managing cash flow was the single most important part of business, and yet very few managers of large companies had any idea what it entailed. Well, they can learn a lot about it by reading The Knack.

Morris: Looking ahead, will there be more “small giant” companies, fewer, or about the same number as there is now?

Burlingham: That’s one of the big revelations I’ve had since Small Giants was published. I knew when I wrote it there were a lot more companies out there that fit my criteria and could have been included, but I barely had an inkling of just how many there actually were. Since the book’s publication, I’ve realized that there are thousands and thousands of small giants, and not just in this country. They’re all over the world. I’ve heard from quite a few of them. They read Small Giants and recognize themselves in it. They say, “That’s the kind of company we have!” They contact me and ask how they can get in touch with people and companies that share their values. Those questions have now led to the creation of the international Small Giants Community, which I’m launching with Paul Spiegelman and others. Paul has his own small giant, The Beryl Companies, in Texas. He wrote a great book, too, called Why Is Everybody Smiling? I think we’re going to be seeing more and more small giants emerging as time goes along. It helps just to have a name for them, which I didn’t come up with, the way. It was one of the people in my book, Jay Goltz of Artists Frame Service in Chicago, who suggested it. The name allows people with great small companies to understand the special role they play.

Morris: Which question do you wish you had been asked – but weren’t—and what is your response to it?

Burlingham: I guess you could have asked how the small giants are different from one another. I think that’s one of the most interesting things about them. Although, in the book, I emphasize what the companies have in common, what’s most remarkable is the diversity of the businesses, not just in terms of industry and geography, but also in culture, style, and evolution. Their leaders took very different routes and built very different companies, and yet they all wound up with the common characteristics I write about. The lesson, I suppose, is that every company has to find its own path.

I think I’d also like to say a few words about why I think the small giants phenomenon is so important. In the time I’ve been at Inc.—going on 27 years now—I’ve come to appreciate that businesses are the building blocks, not just of an economy, but of a way of life. What they do and how they do it have an impact that extends far beyond the economic sphere. Look around, and you can see that they shape the communities we live in and the values we live by and the quality of the lives we lead. In the last year, we’ve had a tough lesson in how the entire society suffers when businesses don’t hold themselves to a high standard. Well, there are no businesses that hold themselves to higher standards than do small giants. What’s more, it’s a standard that every company can aspire to, and many can achieve. I’m sure you’ll agree that having more of them can’t help but make our world a better place.

*     *     *

Burlingham invites you to check out these Web sites:

http://www.smallgiantsbook.com/

http://www.smallgiantscommunity.com/default.aspx

http://www.theknack.info/

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