CHAPTER SIX – Continuous Optimization
“Sunshine, when you
care about your customers and
care about your employees and
care about your suppliers and
care about your investors,
you can build a rocket ship while you’re flying it.”
“Is caring the fuel that lets you fly?”
“Caring is the fuel.”
The younger man spoke a sudden realization. “Continuous optimization is a by-product of caring.”
The old man nodded. “When you really care, you never quit trying to make things better.”
The young man reached into his laptop bag, found his sunglasses and put them on. “Now dazzle me.”
The old man took the chair across from him. “A guy named Richard Kessler had a little jewelry store in a strip mall on a side-street in a town you never heard of.”
“You’re right, never heard of it.”
“It’s north of Milwaukee.”
“How did Kessler build his rocket ship?”
“Okay, but how did he care, specifically?”
“The first thing he did was put the real price on his jewelry.”
“What do you mean, ‘the real price?'”
“Jewelers usually put an inflated price on their diamonds so they can offer a big discount or let customers negotiate. But Kessler believed everyone deserved the best price he could give them, even if they didn’t negotiate.”
“That’s customer centric, but his profit margins would be too small to ever offer anyone a discount.”
“He’s never offered a discount. Never. Not even to his closest friends. Everyone gets the lowest price that will allow him to stay in business. You don’t have to negotiate. You don’t have to wait for a sale.”
“I’ll bet customers love that.”
“Yeah, but they love his ‘Miraculous No-Loopholes Guarantee’ even more.”
The younger man waited for the old man to continue.
“Everything at Kesslers is guaranteed for life and all maintenance is free. Even if you lose the center diamond, Kesslers will replace it. They take complete responsibility for everything they sell. Forever.”
“Wow. That’s hard-core customer centric.”
“Kess gives new employees 8 weeks of training before they’re ever allowed to speak to a customer. Then on Graduation Day he says, ‘When you’re talking to a customer and there is a decision to make, make it. The price is the price, but customers are going to ask you for a thousand other things. Sometimes they’ll ask for something small. Sometimes they’ll ask for something impossible. You are the company. Don’t check with anyone. You’re not an intermediary. Just make a decision. Figure out how to make your customer happy.”
“Do his employees always make the right decision?”
“Of course not. And Richard knows they won’t. The very last part of his speech to them is this, ‘Out of every ten decisions you make, there is going to be one decision that I’m going to wish you had made a little differently. But I’m happy to pay that price to get the other nine decisions out of you.”
“He really puts himself at the mercy of his employees?”
The old man chuckled. “I remember this one time after he opened his second store, it was on the south side of Milwaukee, his people said, ‘Richard, we’d like to fix up the bathroom to make it more cozy, like the kind of bathroom people have in their own home.’ Richard said, ‘Sounds great! Do it!’ They said, ‘Give us a budget.’ He said, ‘Nope. No budget. When in doubt, just do the right thing.'”
The younger man smiled in anticipation of a punch line. “So how did it turn out?”
“A few days later Richard drove down to see what they had done. It was fabulous. I’ve seen it. Wallpaper, a rug, paintings, candles, a make-up mirror. Really nice.”
“You’ve seen it? You know this guy?”
“We’ve been friends since before you were born.”
“How much did they spend?”
“Four hundred dollars.”
The younger man rolled his eyes. “So a guy in Milwaukee let his people spend $400 on a bathroom? I don’t need sunglasses for that.”
The old man continued. “Just before that new bathroom came together in the south store, the north store in Menomonee Falls moved from the strip center into a stand-alone building that used to be a bank. Red brick, colonial columns, big lawn, nice landscaping…”
The younger man pantomimed a yawn as though he was getting sleepy.
“Upon hearing what the team at the south store had done, one of the staff in Menomonee Falls said, ‘Richard, I’d like to hang some lights and other decorations and really make this store a showplace at Christmastime.’ And Richard, of course, said, ‘Do it.'”
“Several weeks later Richard came to work and it looked like the circus had come to town. There was an 18-wheeler in his parking lot with 10 guys hanging Christmas lights from bucket trucks and 6 guys positioning a big sleigh piled high with gifts and teams of 2 were carrying 8 life-size reindeer. And they had only just begun to empty the truck.”
The younger man started laughing and slapped the table, “That’ll teach him.”
“Richard knew if he reacted the wrong way it was going to destroy the courage and confidence of his people.”
“So what did he do?”
“He walked in, got a cup of coffee and went down to his office in the basement and started working, just like always.”
“Yep. Richard says he’d been working for about 2 hours when a young man came down and asked if he had a moment to walk outside. ‘Sure thing!’ Richard said, ‘Let’s see what you’ve got happening!’ His young associate took him outside, walked him around and explained how everything was going to look when it was finished. After awhile, Richard casually asked, ‘How much are spending on all this?’ And the fellow replied, ‘About $36 thousand.'”
The younger man whipped off his sunglasses as his jaw dropped open and his eyebrows went to the top of his forehead.
The old man said, “Yeah. And this was back when $36 thousand was a lot more money than it is today.”
“Poobah, I’m not dazzled, I’m dumbfounded.”
“Put your sunglasses back on, Sunshine. This is where it gets dazzling. Richard said it was the best money he ever spent.”
“Every television station in Milwaukee sent reporters with camera crews to Kesslers Diamonds to show the never-ending line of cars driving slowly past the store each night after dark. The newspaper published a big feature-story about the display and the mayor gave Kesslers Diamonds a City Beautification Award. Richard says it took less than 24 hours for those lights to pay for themselves. Loading up the family and driving past Kesslers became a Milwaukee Christmas tradition.”
“But it doesn’t always turn out that way.”
“No, but the big wins more than pay for the losses.”
“Bezos said something like that.” The younger man looked down at his laptop. “Here it is. ‘Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments…'”
The old man sipped his Venti and nodded. “Kesslers isn’t just customer-centric, they’ve got corporate agility and a culture of innovation.”
The younger man said, “Do you know any other Kesslers?”
“Sure. There’s Ramsey’s in New Orleans, Shreve in San Francisco, Reis-Nichols in Indianapolis, Barnes in Amarillo, Occasions in Midland, Miner’s North in Traverse City, Schiffman’s in Greensboro…”
“Yeah, and just down the road in Charlotte is Dewey Jenkins. But he’s not in a sexy business like jewelry.”
“What does Dewey do?”
“He does whatever it takes to make the customer smile and say good things about his company. Whatever it takes.”
“I mean, what business is he in?”
“Heating and Air Conditioning.”
The younger man took off his sunglasses and smiled a crooked smile. “I’m not seeing much of a possibility for dazzlement.”
“I told you to prepare to be amazed.”
The younger man put his sunglasses back on and the old man continued talking. “The crown jewel of Charlotte is the Levine Children’s Hospital. It’s kind of like the Mayo Clinic for kids. Several of America’s top A-List celebrities support it and Ryan Seacrest built a broadcast studio in the lobby. So who do you think the hospital asked to be their spokesperson on TV?”
“The air conditioning guy?”
“One year the city fathers asked him to lead the Labor Day parade and a record crowd showed up to wave at Dewey and shake his hand.”
“The air conditioning guy?”
“People call the TV stations in Charlotte to ask when Dewey’s next ad is going to air. I’m not making this up.”
“How did he get to be so famous?”
The old man said, “ONE. Customer Centricity.
TWO. Continuous Optimization.
THREE. Culture of Innovation.
FOUR. Corporate Agility.”
“The Four Pillars of Amazon.”
The old man nodded his head. The younger man said, “Keep talking.”
“Do you know what the customers of home service companies hate more than anything?”
The younger man growled, then said, “Sitting at home all day waiting for the repair guy.”
“The service techs at Morris-Jenkins come whenever it’s most convenient for you. They take service calls until midnight, 7 days a week, no extra charge for evenings and weekends. Same prices.”
The old man nodded. “Do you know what service technicians hate more than anything?”
The younger man shook his head no.
“Writing up the service ticket with all those part numbers and prices. It’s tedious.”
“Paperwork usually is.”
“And then they have to restock their trucks at the end of the day when what they really want is to go home and play with their kids.”
“It’s hard being a grown-up,” said the younger man.
“The only thing worse than restocking your truck at the end of the day is looking for the part you need only to find that you forgot to restock it.”
The younger man’s forehead wrinkled. “Now you’ve got to drive all the way back to the warehouse while the customer just sits and waits for you.”
“Dewey has his warehouse team put bar codes on every part and when a service tech takes one off the truck, he just scans it with a bar code reader. Then at the end of the job his iPad automatically creates a detailed invoice with part numbers and prices. Presto, zippo, bingo. And as the invoice is being printed, the warehouse crew is informed of what was taken off his truck, so they put one of each item in a big plastic tub that has his truck number on it.”
“When the service tech gets back to the warehouse at the end of the day, all he has to do is pick up that tub and restock his truck?”
“Nope. The technician gets in his car and drives home. The warehouse team restocks the truck. Seamless. Effortless. Elegant. No wasted motion. Continuous optimization.
The younger man said, “I can see how Dewey keeps his employees happy, but you said he does ‘whatever it takes to make the customer happy. Whatever it takes.'”
“What do you think the biggest problem is in the air conditioning business?”
“When you’re installing a new system, customers often recall something they were told by an estimator from another company and then ask if you’re planning to do it.”
“But it wasn’t part of your quote?”
“Nope. It’s something that some other company promised. But that company didn’t get the job.”
“I can see where that could lead to some pretty ticklish situations.”
“Not at Morris-Jenkins. He trains his service technicians just like the diamond consultants are trained at Kesslers.”
“They’re trained to make the customer happy?”
The old man nodded his head in an exaggerated manner.
“What if the customer says, ‘Hey, weren’t you supposed to walk my dog, paint the back fence and cook me dinner?”
“A Morris-Jenkins tech would say, ‘Where is the dog, what color would you like the back fence, and what do you want for dinner?”
The younger man laughed.
“And his TV commercials are very entertaining,” said the old man.
When the younger man finished laughing, he sat quietly and stared at the tabletop.
“Building a business on the Four Pillars of Amazon is simple, but it’s not easy,” the old man said.
“Warren Buffet said the same about the stock market.”
“Making money on stocks is dead-simple; buy low and sell high,” the old man smiled.
“Yeah. Simple, but not easy. Knowing something isn’t the same as doing it.”
The old man leaned forward and extended his forefinger toward the younger man. “Knowing something isn’t the same as doing it. Write that down, Sunshine, and put today’s date on it. I want you to always remember what you just said.”
The younger man cocked his head. “Why are you making such a big deal of it?”
“The world is full of book-smart morons, Sunshine. Jeff Bezos never said this, but I’m pretty sure he works hard at weeding those people out.”
“The book-smart morons. You’ve met them. They can plan, plan, plan, and talk, talk, talk a thing to death, but when it comes to taking action – getting things done – they haven’t got the horsepower to pull a fat kid off the toilet.”
Both men started laughing. A fart rang out like a rifle shot. Now they were gasping for air with tear-filled eyes. The old man stood up, walked out, looked up and laughed into the sky until he regained his composure. The barista and the window waitress watched with amusement from behind the counter as the younger man laughed face-down on the tabletop.
When the old man came back inside, the younger man was sitting at the table wearing his sunglasses. His chin was high and his arms were crossed. “Dazzle me with flying lemonade stands, Poobah.”
# # Next Week, Chapter 7! # #