Book Report – The Founder’s Mentality by Chris Zook

Favorite Quotes

“We either disrupt ourselves or leave it to others.” – Xuanning Zhong, founder of Yonghui Grocery Store

The great leaders of scale insurgents ingest a huge amount of their time in recruiting talent, mentoring talent, promoting talent, and trying to retain talent. They see clearly that their ability to grow as a company requires the ability to grow their people. – Chris Zook

“When you stop to smell the roses is when you get hit by a truck. Success does not naturally beget success. The hardest thing to do is to keep your edge and stay on your game as you succeed and grow. I refuse to accept that I am mature or the business is mature. As soon as you accept that you begin to die – Leslie Wexler – CEO of L Brands

AB Inbev – “We are a company of owners. Owners take results personally.”

Key Takeaways 

An Insurgent Mission. Some of the most successful founders have likened the start-up phase to waging war against the industry on behalf of underserved customers. All great companies must have an insurgent mission. This has been scribed as a purpose of redefining the rules of their industry or creating completely new markets. Great founders and companies focus relentlessly on the essence of their insurgency as they’ve grown and pay special attention to what differentiates them.

Powerful Insurgencies have three things in common.
1.) Bold Mission
2.) Spikiness – constant emphasis on what differentiates the company and what makes it unique
3.) Limitless Horizon – The idea that a company if massively successful, can intelligently extend the boundaries of its core further and further outward.

Obsession with front line is fundamental to founder’s mentality. Most founders were the company first salesperson, product developer, etc.

Oberoi Hotel Group. To maintain personal connection with each guest, the staff members meet nightly to go over next day’s arrival list and review guests history and preferences. They also get special training on emotional intelligence with two aims: listening with empathy and understanding each guests unique needs.

THE OWNERS MINDSET – Three Ingredients
1.) Strong Cost Focus – Treating both expenses and and investments as they are their own money
2.) Bias to Action – Speed to make decisions and take action on them
3.) Aversion to Bureaucracy – eliminating layers of organization and complex decision making

AB Inbev – “We are a company of owners. Owners take results personally.” – Company’s Statement of Principles.
“We create restaurant owners, not waiters. – AB Inbev manager. “If you’re a restaurant owner and a new restaurant opens across the street serving the same food, how do you feel? You feel like someone is putting your livelihood at risk, threatening you, threatening your family. It’s personal because the restaurant is your dream. But if you are a waiter and a new restaurant opens across the street, how do you feel. At best, indifferent.

Managers at AB Inbev had defend every budget. They set aggressive goals around key profit drivers. They challenge key managers to dream up threats that could disrupt their business. They pressure test the people they hire to make sure they embrace big risky, targets. We want everyone to feel like entrepreneurs and we push people with big targets.

AB Inbev CEO, Charles Brito, “The way we’ve built our company has always been with this constant dissatisfaction about our results and our achievements. We’re never happy with where we are. We always think we can do more.”

FIVE TECHNIQUES TO EMBED OWNERS MINDSET
1.) Dream Big at Every Level
2.) Unfailing embrace the principles of meritocracy. Do it openly without apology. Promote fast, honest feedback.
3.) Promote from within as much as possible. Ensure the senior leaders invest massively in the people around them.
4.) Set big but simple targets for the units of value creation in the company and empower the leaders to act like entrepreneurs.
5.) Have a zero base mentality for everything, from yearly budgets to the future of the business model itself.

Front Line Obsession.
1.) Relentless experimentation – We innovate and experiment a lot in the field, this drives our learning and is a competitive advantage
2.) Front line empowerment – We treat our front line people as heroes of our business and do whatever is needed to support them
3.) Customer advocacy – the voice of the customer is fully represented in all important meetings.

Home Depot Corporate Mantra – “Whatever it takes.”

Story of Charles Schwab.
Schwab lanced his company with a powerful and incredibly urself insurgent mission. “Chuck started the firm out of a deep sense of personal outrage that the brokerage industry systematically exploited its customers” – John Kador – autos of Charles Schwab: How one company beat Wall Street and reinvented the brokerage industry.
The company brought the interns to the independent investor for the fist time and had the lowest rates in the industry.

But then the company started creating a bureaucracy. The had numerous customer segments with different offers and different services. Became a nightmare of complexity. The culture shifted to avoiding downside. “People became more concerned with keeping their job than with doing it right. They had to simply and go back to their roots of what’s best for the customer.

Ability to grow always comes back to the inside. Problems that inhabited the company’s ability to adapt, to decide and act quickly, to embrace new ideas, to keep costs down or to scale its ability to serve customers. You have to win internally first.

When company’s slow down they have a lot in common. Lose touch with customers. Become too bureaucratic. Everything’s complicated. Everyone’s tired. We can’e make decisions quick enough. A good day at the office use to involve making decisions and taking action, not it means attending a big meeting of department heads. We no longer know where were are going beyond the annual budget, nor do we know where the growth will come from.

Great companies practice kaizen/continuous improvement and gather ideas from the front line on how to improve and streamline operations and all process within the organization. They involve employees on how to ship products out faster.

Develop incubators for innovation. Yonghui Grocery Stories – developed red stores and green stores. Green stores test everything and are dramatically different.

Front Line Obsession. Oberoi Hotel Group – everything is designed to make employees feel a sense of long term commitment. Within three months of hiring, employees are invited individually to a special meal with management in the hotel restaurant. After six months, they receive their confirmation, a rite of passage that includes photos with their team sent to their family to celebrate their progress.

Insurgent company’s have unblocking meetings. They meet as a steam to unblock any obstacles that is preventing key players from doing their jobs. It works to keep cycle of solving problems short.

Develop Franchise Players. Identify employees who have a disproportionate impact on performance of the company and its delivery to customers. Example could be account manager who represents 25% off all sales, or lead product developer. Create a council of these franchise players that work together. For us, this is our leadership team.

Complexity is the single most common cause of stall-out. Stay simple, stay clear. Cut back on bureaucracy and invest more in core.

Play the innovation and differentiation game to win. Make Innovation the Key to our Core. Innovation and Changing the Game and in the Industry is everything. What are we doing on a daily, weekly, monthly and annual basis to change the industry. How many experiments have we tested?

Davita – Job candidates were rated on how well they seemed to align with the core values. They rewarded “Davita moments”

Michael Dell. We changed our focus – to cash flow from quarterly earnings, to the longer term from the short term and to investing heavily in new capabilities . It has caused us all to think about business totally differently. We are in a change or die business that has to continually evolve.

Say No to more things. “Many of the most significant strategic decisions we’ve made have been the decisions to say no to things.” Bill McNabb CEO of Vanguard. One idea to make this happen is to kill products at the same rate that you add them. Start decision making process by saying no to everything, through zero-based budgeting.

Continue to ask the different question over and over again. What makes you different? How do you do that uniquely and keep going. That’s how you find your secret sauce.

IMPORTANCE OF SPEED. Speed has been a factor in almost every section of the book. Speed to decide. Speed to deliver. Speed to market. Speed to restock inventory. Speed to solve customer problems. Speed to get to the root cause. Speed to adapt. Speed to acquire and integrate. Speed to see crises coming. Speed to prepare. Speed to act. Speed to grow. But speed isn’t enough. Leaders need to be guardians of agility, too.

Walmart Executive – “Lets start from today to act as an insurgent. Let’s take risks. Let’s have fun again. I don’t need to wait for someone else to act differently. Let’s just start, let’s challenge each other and let’s do thing differently.”

What Will I Implement? 

1.) ELIMINATE COMPLEXITY. When Steve Jobs came back to Apple, he eliminated 70% of the product line. He cut supply chain and supplies from one hundred to twenty-four. He simplified design, research and consolidated departments. With the Bananas, we need to continue to simplify offerings and prices. Possibly finally making every ticket all you can eat and one price. Simplifying the pay for people at certain levels. Simplifying the core offerings of each department.

David Packard – HP Way – More companies die from indigestion than starvation.

2.) RECOGNIZE OWNERS MINDSET – Celebrating and Recognizing Team Members Who Practice the Owner’s Mindset. Develop an award or recognition for someone who does something to solve a problem like an Owner. Treats money like it’s their own and takes action and makes thing happen without adding layers of complexity. Hero Awards for people who do what it takes to get things done for customers.

3.) VISION MANIFESTO – Write a long form piece on what we stand for and how the business should be run. This needs to be from my point of view. When people join the organization they may have a lot of different views and biases but knowing how the founder feels about the business and the direction it should go is of utmost importance. Harsh Mariwala, founder of Marico realized that to manage properly he had to define what he stands for. So he started to codify it on how people ought to treat each other in the company and what the culture should be. The document was 40 pages and covered people, products, strategy, customers, view on markets and how we look at profits. They then broke it down to three sections. People, Products and Profits. This created ownership and drove a clear understanding of how we want to run the business.

This serves as our compass to where we are going.

4.) Develop Franchise Players and Criteria for Future Franchise Players – Identify employees who have a disproportionate impact on performance of the company and its delivery to customers. What makes someone a franchise player for our team? What do they do differently? How do they deploy the Owners mindset. Ideas include how the identify immediate actions to speed up their ability to serve customers. They decide how ben tto design and test next-generation business models to respond to new insurgents. They are obsessed with experimentation and testing new ideas. They are obsessed with front line and serving our people and customers.

5.) DEDICATE MORE TIME TO THINK AND DREAM – Not just for me but for our leadership team/franchise players and for our team. We have to take more time out of the business to think about how we will grow the business.

6.) ESTABLISH NET PROMOTE SYSTEM FOR FANS. Measure what matters, .

7.) CONNECT MORE WITH FRONT LINE – Get out on front line and connect more with our teammates who interact most with our fans. Make sure we all participate in Front-Line fan where we work the different stations at ballpark and interact with fans directly. Give my cell phone and email to all game day teammates and encourage calls from them. Possibly set up weekly call – What’s going on with the business and anyone can tune in. Similar to Jared’s weekly message to our team. Send an email to all game day staff asking for ideas on how we can better serve our fans. Respond to every idea and every teammate.

 

How does it fit with Fans First Way

“You have to think of all the creative talents when you make a movie, like designers, actors, producers, directors, costume designers, musicians. Yet when you see a great movie, it’s cohesive, as if one person did it all. Great brands have the cohesive point of personality and require attention to coherent detail.” – Leslie Wexner, founder of the Limited.

Being clear on our mission and vision is essential to developed founders mentality and owner’s mindset within our company. I’ve been clear and repetitive on Fans First since we started but now need to go in more depth on our vision and insurgent drive to challenge and reinvent the industry. Establishing a clear vision that everyone can read and take part in will help speed up growth and decision making. Then directly drive more franchise players that will have more of the Owners mindset. Starts from the top with clarity and purpose as always.