So often when people talk about businesses and startups, there is a great deal of high level talk about strategy, broad vision, and so forth. When these things sound compelling, especially to the industry outsider, the business idea can be exciting.
In entrepreneurial businesses, especially new ventures, investors often focus on these broad, strategic themes. They would like businesses solving “big hairy problems” of real value to the customer. These are robust, growing markets. Coupled with a proprietary advantage, they often present compelling investment opportunities.
Years ago, a friend of mine was the founder of one of the geo-demographic data companies in the US. These were the companies that began the whole consumer segmentation system based on census data and often combined with credit scores, etc. (Remember consumer segments like “ranches and pickups?”)
We used that information for a lot of our customers. The joke around the office was always that the systems that performed the worst had the best customer service and the best performers provided customer service that was terrible. I think we thought that the good product guys could get away with it because the detail of good customer service was unimportant with strong IP.
Of course, they were wrong. People eventually gravitated to the less than good product because the company helped the customer use the data while the really good stuff got relegated only to the people who knew exactly what they wanted to do. They got acquired by one of the other guys as I recall.
The detail got them.
In another example, I saw a catalog company the other day that had tried to smooth its cash flow by purchasing a week at a time. In theory this kept inventory moving in regularly and spaced out payments to vendors. At the same time, the company would take advantage of specials and discounts within the range of the amount they allocated each week.
The supply chain didn’t work. It seems that the weekly budget would not allow the company to buy as much as it needed as quickly as it could be sold. So, they were frequently out of stock on the fastest moving orders, usually at the end of the week. (They would get behind on the fast moving items. When they arrived a larger percentage would go to fill backorders. Then their days out of stock would grow.)
By listening to orders come in on the phone, it became apparent to the president that people were canceling whole orders rather than backordering. Sales started to decline.
They had insufficient command of the details to really understand what was happening until it had been going on for a long time.
In another company, the finance manger decided to cancel the software maintenance fee for the company management system since the company never called the help desk. He saved $5,500. What he didn’t investigate was that the software company uploaded new shipper pricing (FedEx and UPS and so forth) regularly. That pricing drove the system that assigned a shipping cost to each order. Net result at the end of the year – a $75,000 loss on under billed shipping. Not much of an ROI on a $5500 savings.
They had no command of the details of their actions.
A major manufacturer of X-Ray tubes once lost the secret formula for making the glass tubes. How? Retirement in the manufacturing area combined with turnover in purchasing. Losses? Millions in premature failures under warranty. They had insufficient command of the details required for success.
It seems to me that these examples may also point to an underlying attitude of insufficient respect for the concept of command of the details. And yet, they are what make up the real value of the business – in the execution.
God is in the details.