Small Giants

1. Small giants prioritize greatness over size

"If you'd asked me what I wanted back then, I'd have told you right away, a $100-million company... I never thought about the why. It was just my goal."

Redefining success. Small giants are companies that choose to be great instead of big. They reject the conventional wisdom that businesses must grow or die, focusing instead on excellence in their chosen niche. These companies prioritize quality, customer satisfaction, and employee well-being over rapid expansion or maximizing shareholder value.

Intentional growth. Small giants carefully consider each growth opportunity, asking whether it aligns with their core values and vision. They often turn down chances to expand geographically or diversify their product lines if doing so would compromise their ability to maintain high standards or preserve their unique company culture.

Examples of small giants:

• Anchor Brewing (craft beer)
• Zingerman's Community of Businesses (gourmet food)
• Clif Bar & Co. (energy bars)
• Union Square Hospitality Group (restaurants)

2. Mojo: The intangible quality that sets small giants apart

"It was a quality that you could apparently lose by negligence. In his wonderfully engaging book, Raising the Bar, Erickson said he thought Clif Bar's mojo was 'something about the brand, product, and way of being in the world that was different.'"

Defining mojo. Mojo is the special sauce that makes small giants stand out. It's a combination of factors including passionate leadership, a clear sense of purpose, strong company culture, and deep connections with customers, employees, and the community. This intangible quality creates a buzz around the business, attracting loyal customers and talented employees.

Cultivating mojo. Small giants actively work to maintain their mojo by:

• Staying true to their core values and mission
• Fostering close relationships with all stakeholders
• Continuously innovating and improving their products or services
• Creating a positive and engaging work environment
• Giving back to their local communities

3. Intimate customer relationships drive success

"Let them know you're on their side. It's as simple as that."

Beyond customer service. Small giants go beyond traditional customer service to develop deep, personal relationships with their clients. They strive to understand and anticipate customer needs, often tailoring their products or services to meet specific requirements. This level of intimacy creates fierce loyalty and turns customers into brand advocates.

Building connections. Strategies for fostering intimate customer relationships include:

• Personalized communication and interactions
• Transparency and honesty in all dealings
• Actively seeking and implementing customer feedback
• Creating unique, memorable experiences
• Empowering employees to make decisions that benefit customers

4. Preserving company culture requires conscious effort

"We tweaked it. We didn't want to touch the core values—the integrity, the commitment to continuous improvement, the customer intimacy."

Culture as a competitive advantage. Small giants recognize that their unique company culture is a key differentiator and source of competitive advantage. They invest significant time and resources in defining, nurturing, and preserving their culture, even as the business grows and evolves.

Intentional culture-building. Techniques for maintaining a strong company culture include:

• Clearly articulating and regularly reinforcing core values
• Hiring for cultural fit as well as skills and experience
• Providing extensive training and development opportunities
• Creating rituals and traditions that reinforce company values
• Empowering employees to make decisions aligned with the culture
• Leading by example, with founders and executives embodying the desired culture

5. Financial discipline is crucial for long-term survival

"Sales are nice. Profits are nicer. But you live or die on cash flow."

Beyond growth metrics. While small giants may prioritize factors other than rapid growth, they recognize the importance of financial stability. Successful small giants maintain strict financial discipline, focusing on profitability, cash flow management, and sustainable growth rather than top-line revenue alone.

Key financial principles:

• Protect gross margins to ensure profitability
• Maintain a healthy balance sheet with manageable debt levels
• Develop a sound business model that delivers consistent value
• Invest in growth cautiously, using internally generated funds when possible
• Build cash reserves to weather economic downturns or unexpected challenges

6. Leadership transitions pose unique challenges for small giants

"I sometimes reflect that the essence of O.C. Tanner Company's work, expressed in symbolic terms, is putting a drop of oil on the bearings of the free enterprise system."

Preserving the vision. Leadership transitions are particularly challenging for small giants, as the founder's vision and values are often deeply ingrained in the company's DNA. Successful transitions require careful planning and a commitment to maintaining the company's unique culture and approach.

Succession strategies:

• Identify and groom potential successors from within the company
• Consider employee ownership models (e.g., ESOPs) to maintain independence
• Clearly articulate the company's values and vision for future leaders
• Develop a formal succession plan well in advance of leadership changes
• Engage external advisors to help navigate the transition process

7. Adapting to change while maintaining core values is essential

"We are wary of our success. We know that new problems and opportunities arise every day, and that our best hope is to move forward with humility and courage."

Balancing stability and flexibility. Small giants must navigate the tension between preserving their unique identity and adapting to changing market conditions. Successful companies find ways to evolve their products, services, and operations while staying true to their core values and mission.

Strategies for adaptive growth:

• Regularly reassess market conditions and customer needs
• Invest in innovation and new technologies
• Diversify revenue streams while staying focused on core competencies
• Foster a culture of continuous learning and improvement
• Remain open to new ideas and approaches, even if they challenge existing norms

8. The art of business: Balancing passion and practicality

"I sometimes tell Ani that business is my art, my canvas, my instrument."

Business as creative expression. Small giants view their businesses as a form of creative expression, blending passion for their craft with practical business acumen. This approach allows them to find fulfillment in their work while building sustainable, profitable enterprises.

Cultivating the art of business:

• Pursue excellence in both product/service quality and business operations
• Encourage creativity and innovation throughout the organization
• Balance financial goals with other measures of success (e.g., customer satisfaction, employee well-being)
• Seek opportunities for personal and professional growth
• Find joy and meaning in the day-to-day challenges of running a business

Last updated: July 22, 2024