My Business Grows 300 Percent Every Fall. Here’s What that Has Taught Me.
[A note from Tugboat Institute: Please note the postscript at the end of this article, in which the author comments on the connection of this topic to the impact of the COVID-19 pandemic.]
As a manufacturer of industrial heating and cooling technology, our business, Cambridge Air Solutions, surges 300-400 percent each fall. Everyone generally wants to have those systems installed in new construction before winter, and if you’re replacing your system, you typically do so in the last few months of the year. To meet that cyclical demand, we hire a large number of seasonal employees.
Hiring, training, and integrating a seasonal workforce can present challenges, but we have developed an approach that is guided by our Purpose, which is to enrich every life we touch. We don’t want to simply hire temporary workers without considering the long-term. We want to enrich their lives and behave toward them as we do toward all of our employees, customers, and suppliers: with unconditional love and high expectations.
This approach toward our seasonal employees led to the creation of Cambridge Unleashed, a 4-6-month seasonal work program developed by our Vice President of Human Resources, Meg Brown. The goal was to provide opportunities for seasonal employees to develop hands-on lean manufacturing skills and experience that will help them either progress into a full-time position at Cambridge Air Solutions or, if we don’t have a position for them, launch a career at another firm.
A central pillar of the Cambridge Unleashed program is a video series that we developed to showcase our seasonal employees’ experiences and expertise as they grow and develop in their role—and specifically their innovations related to the principles of lean manufacturing.
Every seasonal (and long-term) employee is required to read Paul Aker’s book 2 Second Lean: How to Grow People and Build a Fun Lean Culture. This book lays the foundational understanding of lean and describes the simple, “fix what bugs you” approach to waste reduction. Alongside the skills training they undergo, this education in lean allows seasonal employees (who we refer to as “unleashers”) to step into the rhythm of our operation and their specific roles ready for success—and primed to offer insight into continuous improvement.
Our daily schedule includes a 15-minute morning meeting, which all unleashers attend, which includes a review of revenue and other milestones and highlights process improvements. After the morning meeting, we dedicate 30 minutes to non-production time, during which we don't want employees producing a product or jumping into their functional roles. Instead, we ask them to focus on how they can make their job easier, better, safer, cleaner, or a help somebody else solve a problem—and make a video sharing their improvement.
Each day, we highlight the improvements and innovations that our employees, including the unleashers, develop during this period in our daily Morning Meeting. Each video shares an employee’s lean innovation, showcasing employees’ creativity and skills.
The videos ultimately provide several important benefits to the employees and to Cambridge Air Solutions. First, if we do not have a position for the seasonal employee after their temporary position ends, their improvement videos are compiled in a playlist they can use to promote their skill sets and innovations to prospective employers. In addition to helping unleashers share their skills and innovations, the daily habits and continuous improvement mindset that these videos reflect, and which are central to our culture, serve to attract unprecedented numbers of candidates when we have open positions. This past year, we were seeking to hire 20 unleashers to fill seasonal roles, and we had 574 applications. And that was with a four percent unemployment rate.
Beyond the video series, the broader Cambridge Unleashed program provides seasonal employees opportunities to fully engage in our culture, take on short-term leadership roles, and connect with long-term employees. The additional focus on training and engagement for these employees has resulted in tremendous improvements to our safety record and production capacity and throughput. And, we've seen the morale of the plant grow across the board as unleashers and full-time employees connect and increasingly recognize that we’re all pushing toward the same common goals. Now, we train together, we innovate together, and we celebrate together.
Personally, watching the Cambridge Unleashed program develop and seeing the benefit to the individuals and to our Evergreen company has been extremely rewarding. When we help people tap into their creativity to solve problems at work, it not only benefits our process and productivity, it enriches and enhances lives beyond our plant. Whether they are working with us for six months or for many years, we want our people to go home at the end of the day knowing they have created valuable solutions because when they do, they bring the confidence and fulfillment of that experience into their relationships with their families and their engagement in their communities.
John Kramer is the CEO of Cambridge Air Solutions.
Postscript 09.11.2020
In the wake of the COVID-19 pandemic, our company shifted all of our daily rhythms to a virtual format, which was an early practical step to ensure safety. In a broader sense, we have seen a significant impact to our ability to attract applicants, resulting in a lower volume in our Unleashed recruiting pipelines than prior years. However, we are able to close the candidates who do apply and get them onto the team, which I believe points to our ability to demonstrate safe work practices even during COVID. In addition, the “Protect This House” rallying cry, which we embraced in the early days of the pandemic, has been a key step toward preparing for the busy season. Our team members are motivated to bring in Q1 of FY21 and willing to do what it takes to keep themselves safe while also continuing to make product for our customers.
From Venture to Growth Company
[A note from Tugboat Institute: Please note the postscript at the end of this article, in which the author comments on the connection of this topic to the impact of the COVID-19 pandemic.]
Kenny Rosenblatt and I started Arkadium in 2001 out of our apartment. Like many bootstrapped start-ups, we initially had no titles or processes—we just did what we had to do to make great games. But as our company grew, so did our scale of distribution and our number of employees.
Over the course of 15 years, we became great at building an inclusive, exciting culture alongside standout products. In 2016, we were recognized as Inc. Magazine’s “Best place to Work” in the U.S. By 2018, we had over 100 employees distributed between offices in New York and Russia. Our business was humming in many ways, but there was one thing that wasn’t quite right.
Kenny and I were so busy with our business strategy over the years that we didn’t put much thought into our organizational strategy. Our organizational structure just evolved over time. We knew that it wasn’t optimal. As we had grown, the “machine” driving our success started to show signs of strain. Kenny and I recognized that our organizational structure was becoming a constraint to further growth.
Specific Problems
To validate our concerns and expand our understanding of the issues, we surveyed our leadership team. And we got an “earful” of problems, the root cause of which was our organizational structure!
Authorities and accountabilities: One common theme was a lack of clear authorities and accountabilities. Key initiatives, like an update to our game platform, had no “owners.” Within multi-departmental project teams, it wasn’t understood who was in charge. This confusion sometimes led to finger pointing, despite our tightly knit culture. And it often fell to Kenny and me to resolve problems, make technical decisions, and coordinate the teams.
Misaligned priorities: Another common concern was misaligned priorities. Engineering teams independently decided the balance between R&D, new development, and maintenance of current products. Even though they were often interdependent, their priorities differed. So, when they went to look for help from others, their needs often fell to the bottom of others’ “to do” lists.
Silos: These difficulties with the team caused people to avoid teamwork, and instead work as independent “silos.” Some kinds of expertise were replicated in each silo, and there was no standardization across departments, which further impeded sharing and synergies.
Disempowerment: It wasn’t clear who had the authority to make decisions. Everyone had a say in everything, and the multiple voices often drowned out the advice of the real experts. No one was empowered with all the authorities and accountabilities to run each internal line of business.
Gaps: Some critical functions were just plain missing. For example, there was no reliable channel of communication from customers back to developers. No one was focused on understanding our customers’ industries. No one was responsible for planning (other than Kenny and me).
Lack of focus: Staff cried out for clear boundaries: “owners” of every initiative; bosses who understood their disciplines; elimination of the obstacles to teamwork; more empowerment; and viable career paths.
No Bureaucracy!
All these problems added up to a clear message: Organizational issues were getting in the way of team performance and the company’s growth. The time had come to address our organizational structure, but Kenny and I didn’t want to create a rigid bureaucracy. Our entrepreneurial culture was (and is) essential to our success.
This seemed to us to be a conundrum: How do we mature as a company and define accountabilities and authorities (clear boundaries) while maintaining our culture, engendering cross-boundary teamwork, and empowering our talented staff?
We also knew we needed a scalable organization—a structure that would not just grow as the company grew, but one that would drive that growth. We had no interest in restructuring every few years as the company grew.
We had one more concern: Our culture is collegial. We wanted to engage our leadership team in any structural change process. But how could we avoid endless debates over opinions or a political free-for-all?
Picking the Right Approach
I knew it would be a bad idea for Kenny and me to simply sketch a new organization chart, or to gather our leadership team to make something up. There had to be other companies that had dealt with these growth challenges. There had to be some sort of science of organizational design.
I began reading up on organizational theories. Most of what I found was unsatisfying. Finally, I came across a book that resonated with me: N. Dean Meyer’s Principle-Based Organizational Structure. Meyer described an organization where every group was defined as a business-within-a-business—just the sort of entrepreneurial culture we intended to cultivate. His framework of lines of business within organizations provided a map for identifying what goes where, what’s missing, and how the different functions work together.
He laid out clear design principles, modeling an engineering approach to structure that I knew my team would appreciate. These principles, Meyer said, provided a basis for a fact-based, participative process.
Beyond just the organization chart, Meyer also defined a method of forming cross-boundary teams with clear individual accountabilities and a clear chain of command within each team. I was never a fan of rigid “business process engineering.” We needed to be flexible and dynamic in combining our various skills on teams. So, his teamwork method really made sense for us.
And like the icing on a cake, he described a step-by-step design and implementation process that was well thought out and tested. It looked like a lot of work; but every step made sense and was necessary. It was almost a cookbook.
I contacted Meyer and spent a day with him, studying his approach and brainstorming how it could apply to Arkadium. The more I understood Meyer’s approach, the more convinced I became that this was just what Kenny and I were looking for.
The Change Process
Under Meyer’s guidance, we engaged our entire leadership team throughout the change process.
The first step was his “Rainbow Workshop” wherein the leadership team studied Meyer’s definitions of the lines of business that exist within organizations and how those definitions applied to us. Then we color-coded our existing organization chart to indicate which lines of business were under each leader.
The chart ended up being a little too colorful and revealing. The causes of our concerns quickly became evident. Teams were pursuing multiple, and often conflicting, lines of business. Accountabilities for many lines of business were scattered all over. And a number of lines of business were missing.
Then, Meyer led the team through a collaborative process of designing a new organization chart. In addition to the firm principles and clear language, our leaders really liked the notion that every group is an empowered entrepreneurship, chartered to serve customers elsewhere in the company or externally (or both). And the open, participative approach was really motivational, and fit well within our culture.
Of course, putting names into the resulting boxes was up to Kenny and me. But even there, Meyer encouraged team participation. Everybody had a chance to discuss their careers with us and tell us their preferences. Having some say in their destiny added to the team’s commitment and enthusiasm.
Meyer’s process doesn’t stop with a new organization chart. As he points out, if our processes of teamwork are not working really well, we’d just revert back into independent silos of generalists rather than teams of just the right specialists. And if accountabilities for results within teams aren’t clear, teamwork will just create more confusion and tension.
So, the next phase of the process focused on what Meyer calls “walk-throughs.” We looked at example after example of our projects and services. And for each, we used Meyer’s principles to decide which group was the “prime contractor” accountable for the entire result, and which other groups would serve as “sub-contractors” delivering components or supporting services to the prime.
This businesslike approach to teamwork further reinforced our entrepreneurial culture. And as a method of team formation, it allows us to be very clear about individual accountabilities and the chain of command within every team.
Meyer encouraged us to openly communicate with all our staff at each phase of the process. This, too, fit well with our collaborative, respectful culture. And it really helped with change management.
When the leadership team had practiced enough walk-throughs to really understand how the new organization chart would work, we were ready to “go live.” Meyer guided us through the myriad details necessary to prepare for the big day, including assigning all our staff and vendors to groups (again done collaboratively with the leadership team).
From the first workshop to go-live took us around 10 months. I know this sounds like a long time to be working on a restructuring. But all the planning paid off. Every leader understood his/her new job as running a small business within a business, and they all had a common understanding of how actual work would get done in the new structure.
After go-live, Meyer’s approach included a meticulous migration process which ensured that we moved all accountabilities to the right groups in the new organization, with no “dump and run” or missed commitments.
Results to Date
Since we deployed our new structure, we’re already seeing dramatic benefits: projects are taking less time to complete, employees are reporting a much greater understanding of both their responsibilities and professional growth path, and groups are much more regularly utilizing each other’s strengths
Bottom Line
This restructuring was a big investment for us—mostly consisting of the amount of leadership time we put into the process. But it was truly transformational. Before, everybody had an entrepreneurial mindset, as is appropriate in a venture like ours. Now, everybody really is an entrepreneur running their own small business within our business.
Now, teamwork across structural and geographic boundaries is working great. And Kenny and I rarely have to step in to resolve issues. Also, the design is completely scalable as we continue to grow and diversify. I don’t expect we’ll need another restructuring for a very long time.
For all these reasons, Kenny and I are confident we now have an organization that will drive growth for decades to come.
By the way, I think that Kenny and I have grown as leaders as a result of this process. We’ve always been very conscious of our culture. But now we understand organizational dynamics, and we see our role as creating a great company where everybody (not just us) drives our strategies, our operational excellence, and our growth.
Jessica Rovello is CEO and Co-Founder of Arkadium.
Postscript 09.29.2020
When I hear that a company is “re-orging,” I tend to roll my eyes. So, it was with deep skepticism that we entered into our own company re-organization two years ago. Reflecting back post-COVID, I‘m even more grateful that we took the time and attention to thoughtfully contemplate our organizational structure when we did. Having clear roles, accountability, and alignment company-wide was not only a lifesaver for us as we navigated working from home, but it has proven to be a catalyst for our business. Our teams are working smarter and more efficiently than they ever have before, and we have our restructuring to thank for a lot of that success.
Why My Software Company No Longer Accepts Resumés
My path to becoming owner and CEO of 8th Light, an Evergreen® software development business, did not follow what might be viewed as a traditional trajectory. I didn’t go straight to college to get a degree in computer science or math or engineering. I didn’t actually graduate from a mainstream high school but instead earned my GED and first attended a vocational school.
I always loved to learn, but the standard academic track was never the right place for me. When I was counseled to attend vocational school, because my grades wouldn’t get me into a four-year college, my interest in computers led me to learn programming. I got a lot of joy out of solving the really hard problems it presented. My intellectual curiosity was piqued, and I fell in love with the craft, ultimately earning enough credits to apply to a four-year degree program. That experience revealed to me a path to professional success that was fueled by passion and practical application.
In that same period, my dad introduced me to a local computer programming company in suburban Chicago, and I got a part-time job that evolved to become a five-year apprenticeship. That opportunity provided me access to really smart people, thought leaders and experts in the field, and an individual mentor. I was ultimately offered a full-time position as a consultant with that company at a fairly young age.
That was the genesis of the belief, which I still hold today, that fulfilling technical careers can start in non-traditional ways. I saw firsthand that the company’s investment in me as an apprentice paid off for them when I was able to do top tier work early in my career. When I left that consulting position to launch 8th Light, my co-founder—who had been my mentor—and I decided to develop an apprenticeship program for the company that would allow us to train people to our quality standards and programming philosophy.
In the early years, most of our apprentices had computer science degrees. As the company and the program grew, we increasingly brought in people with less conventional backgrounds—people who were making a mid-life career change, parents returning to the workforce, those who may not have had conventional academic training but had the aptitude and a passion to learn the craft, or those who had excelled in other fields and exhibited potential to thrive.
Today, we have almost entirely phased out computer science degrees from our hires. We don't even accept resumés any longer, so we don't actually know if somebody has a computer science degree or not when they apply. Our hiring process requires an aptitude test and several behavioral interviews. We want to know that a person understands the commitment it takes to master a craft, is committed to learning—and, later, to mentoring—and has the personal characteristics that will make them a good consultant. That process aligns with our three core values, which are humanity, education, and ownership.
Once they have been hired, apprentices spend on average the first six months training with a variety of mentors with a range of experience and seniority throughout the company. After that, over the next year, they begin working on client projects but continue to train and learn from mentors. Throughout, they benefit from the connections and community of their cohort group, which averages around 20-25 apprentices each cycle.
For our company—which now numbers 164 employees, including 19 apprentices, in six locations in the US and London—the apprenticeship program drives a culture of curiosity and education. Learning continues throughout a team member’s career, through unstructured learning opportunities, as well as dedicated learning periods and the opportunity to apply for more extensive education and development programs. This is critical in our field because the path to mastery is one of life-long learning.
It’s rewarding to have experienced the benefits of the apprenticeship path as an apprentice myself, and now to see the positive impact from the angle of an employer. The program has created a skilled, loyal team that is inclusive and rich in diversity of thought and experience.
That said, the model is not without its challenges. There is considerable cost to the organization when senior team members take time to mentor apprentices. In the six months that an apprentice is focused on training, they are not engaged in any billable work, so the up-front investment is significant. In addition, the diversity of the team’s background and experiences can create conflict, and we were forced to address issues of inclusivity earlier in our growth than many companies. But for us, both the cost of the program and the work to support inclusivity have allowed us to develop a team with a very high level of expertise and to foster a culture that is marked by deep connections, both of which serve our company and our clients.
I know that our apprenticeship program will continue to evolve and adapt—it’s an ongoing experiment. As we learn and continue to grow from the talent and energy the program creates for our company, I hope to be able to share what we’ve learned with other businesses that can similarly benefit from the apprenticeship model. As the cost of higher education continues to rise, there is a significant opportunity for companies to provide training and grow talent in non-traditional ways. I’ve certainly seen the value of this approach, and I’m excited to see where it will continue to lead us.
Paul Pagel is CEO of 8th Light.
Design for Sustainability Requires a Broader Scope
[A note from Tugboat Institute: Please note the author’s postscript at the end of this article, in which he comments on the connection of this topic to the impact of the COVID-19 pandemic.]
We are POWER Engineers, an Evergreen® company, committed to continuous employee-ownership. We are also a global engineering and consulting firm serving the energy, facilities, federal, and environmental markets.
POWER is involved in projects that span both renewables and fossil fuels, as well as the upstream and downstream parts of the energy supply chain that these projects create. That experience has provided us a broad and deep understanding of sustainability, offering what I think is a unique perspective on the many angles of this issue.
In our industry, we see a lot of misinformation propagated about sustainability from all sides. Against this backdrop, our approach as engineers and environmental scientists is to design and integrate sustainability into each project. Because the reality is that every project—even those ostensibly creating “clean energy”—has an impact on the environment.
For instance, while wind turbines symbolize sustainable energy for many, if you review the entire life cycle of that project—taking into account the upstream materials extraction, construction, manufacturing, operation, maintenance, and decommissioning and dismantling—the impact looks different as all of these activities have a certain carbon footprint.
The scope of our work allows us to see this entire arc, and, as a result, we have opportunities to integrate sustainability at every stage of every project. Of course, as consulting engineers, this is what we are hired to do. We innovate and create solutions for our clients within constraints that might be technical, land use-related, economic, regulatory, or some combination of all of the above. Innovation is part of our DNA.
That core drive, fueled by our commitment to sustainability, led us to partner with the Institute for Sustainable Infrastructure (ISI) and the Harvard University Graduate School of Design to develop a tool for our industry to evaluate sustainability of infrastructure projects. Using ISI’s EnvisionTM rating system, we created “SustainEval,” a web-based calculator that allows a designer, planner, or owner to evaluate how a transmission line facility rates for environmental, social, and economic impacts and compares that rating to other similar projects.
As engineers and environmental scientists, we understand our work can have a profound impact on the world in terms of sustainability. But we are also very aware of our obligation to walk the talk within our own company. That awareness led to us to evolve sustainability efforts within operations at POWER Engineers.
In recent years, we've installed a solar power system on our headquarters that includes instrumentation that evaluates our reduction in electricity and thereby our reduction in greenhouse gas emissions. We've also purchased electric vehicles for employee use in commuting between our offices, and we engage in recycling and other waste reduction efforts. While these steps may seem minor when compared with our large-scale, global projects, we feel these efforts are critical for signaling the sustainable behavior we support.
As an Evergreen business, the concept of sustainability also has a deeper meaning beyond the context of the environmental impact of our work. We’re an employee-owned company. We feel lucky to have inherited this endowment from the prior generation, and we feel that we have a duty and an obligation to do that for the next generation too.
So, sustainability means we’re doing our very best to help meet the world’s present needs without compromising the ability of future generations to do the same. But it also means we’re continuing to pay our success forward so that the next generation of owners has equal or even more opportunities than we have today.
Bret Moffett is CEO of POWER Engineers.
Photo Credit: Makis Siderakis, Mountain Air
Postscript 08.25.2020
The energy industry has shifted, but not drastically contracted, in the wake of the COVID-19 pandemic. From a sustainability standpoint, we’re likely to see more interest in distributed energy resources—small, often renewable, sources of power that are located near the communities that need energy, rather than large centralized power plants. These resources can be placed in residential areas, where energy use has risen while energy use in commercial areas declined. We remain flexible and innovative, ready to serve our clients’ needs even as those needs shift.
POWER was also well-positioned to adapt to remote work. As a employee-owned company, we were able to act quickly and eliminated all nonessential business travel in mid-March and moved entirely to work from home a week later. This move has cut down our emissions from travel and commuting in the short term. In the long-term, our exploration of remote collaboration tools could allow us to continue active client support while reducing our travel-related emissions permanently.
Grace and Grit at Tugboat Institute Summit 2020
In many ways, Tugboat Institute Summit looked different this year. In the wake of the pandemic, the annual gathering of Evergreen® CEOs, held for the last eight years as an in-person experience over two-and-a-half days in Sun Valley, Idaho, transitioned to a virtual experience.
In a year marked by the loss of so many beloved traditions and milestones, it was a hard decision to make. Our community of leaders treasures the days spent together each year in the mountains. For many, the opportunity to hear the experiences, best practices, and personal stories of peers and thought leaders equally committed to growing purpose-driven companies for the long-term—and to process the content in a setting so conducive to reflection—provides a welcome annual reset and inspirational fuel for the year ahead.
Understanding the unique value of the experience, we knew we needed to shake off our disappointment and start creating something incredible for the Evergreen leaders we are proud to serve. With that commitment as our guide, we set about developing a two-and-a-half-day virtual experience that would offer the same spirit of sharing, learning, and authentic connection members have come to expect. Members, exhibiting characteristic grace and gratitude, adapted with us and rallied behind the team as we got to work.
The result of those efforts was indeed different than our traditional Tugboat Institute Summit, but in essential ways, it was beautifully the same: members gathered and spent time with their peers; they laughed; they felt deeply; they made new connections; they gained innovative insights and practical takeaways. They were inspired.
The first opportunity to connect came through a gathering of leaders of large, multi-generational companies, led by Dr. Tom Epperson, President of InnerWill; Tugboat Forum leader training, led by Tugboat Chairman Jeff Snipes; and, First-Year Orientation. The spirit of generosity shown by the leaders of these sessions and the clear desire to learn and grow among participants set the tone for engagement in the virtual experience.
Following those focused pre-meetings, the livestream event was launched with a welcome from the stage of The Argyros Performing Arts Center, followed by Zoom breakout sessions for all attendees to conclude the first day’s programming.
The next morning, the agenda of live and pre-recorded talks included Dr. Gary Kunkle, who shared insight into academic research around sustained-growth companies through an interview with Tugboat Institute Founder Dave Whorton, and Dr. Tom Epperson, who spoke to the transformative impact of values-based leadership.
During a period when the food and beverage business has been hard hit, talks by Brian Canlis, President/Owner of Canlis restaurant, and Alissa Leinonen, CEO and Founder of catering company Gourmondo Co., reflected the powerful role of the Evergreen 7Ps™ principles of Perseverance and Pragmatic Innovation in this period. Perseverance was also a guiding light in the talk that Vicki LaRose, President of Civil Design Inc., shared. Her story of learning to trust her own voice and her leadership ability through a life and career marked by personal and professional challenge was inspiring and heartfelt.
Another clear theme of the day was the commitment of Evergreen leaders to be of service—to their employees, their customers, their suppliers, and their communities. Talks by Bill Roark, CEO and Founder of Torch Technologies, and Chris Mittelstaedt, CEO and Co-Founder of The FruitGuys, offered insight into how these leaders integrate their orientation toward service into everything they do.
Sharing a commitment to Evergreen 7Ps principles was the goal for Dave Thrasher, President of Supportworks, who spoke to his decision to guide his company to become Certified Evergreen®. Dave shared a powerful video that he and his team created, describing the importance of being an Evergreen company, which he in turn gifted to other Certified Evergreen companies.
Day two began with a topic relevant to all businesses and leaders today: Power. In a live interview with Dave Whorton, Jack Hand, Chairman of POWER Engineers, shared wisdom from his 19 years as CEO of the global consulting engineering firm. The conversation offered insight into current dynamics and long-term trends in power generation, distribution, and consumption.
Leadership emerged as a through line of several of the talks that followed that day. Allen Serfas, Co-Founder and President of Assistance Home Care, and Kevin Switick, President and CEO of Avian Inc., both spoke to formative lessons they each draw on as leaders of their Evergreen businesses. Bruce Williams, CEO of US Tool Group, shared the impact of a particularly eye-opening experience that sparked a now decades-long journey of leadership and business transformation.
Executive coach Kaley Klemp provided a valuable leadership tool through her talk, “Curiosity and 100% Responsibility,” in which she described the concept of being “above or below the line” in relationships and the three unproductive roles of the “drama triangle,” which can stifle clear communication, creativity, and problem solving. Mac Harman, CEO of Balsam Brands, encouraged his peers to recognize the role they can play as leaders of business policy and legislation through lobbying efforts. And, Jeff Patterson, CEO of Gaggle, encouraged parents and employers of parents to be particularly attentive to the mental health and well-being of children in this unsettling season as they face the loss of school and all-important social connections. He offered the idea that parents might view this academic year as a “gap year,” modifying expectations for academic achievement and prioritizing safe opportunities for socialization and wellness.
Very personal stories of key learnings in leadership emerged through talks by Carl Erickson, Founder and Chairman of Atomic Object, and Ingrid Carney, Founder and CEO of Ingrid & Isabel. Carl described the benefit of a sabbatical experience on self and business, encouraging other leaders to embrace the opportunity. Ingrid reflected on the idea of bravery and the way she has come to redefine that quality as she has grown as a leader and a parent.
It was fitting to end Tugboat Institute Summit 2020 with the theme of bravery. Ingrid is right: Evergreen leaders exhibit bravery every day as they serve their families, their companies, and their communities. In a year that continues to offer up surprises and challenges, we’re inspired by the abiding character, grace, and grit that this tribe exhibits. We look forward to welcoming members back to the mountains, and we can’t wait to continue to learn and grow together.
Diana Price is Content Director at Tugboat Institute.
Building a 290-Year-Old Global Evergreen Family Business
[A note from Tugboat Institute: Please note the author’s postscript at the end of this article, in which he comments on the connection of this topic to the impact of the COVID-19 pandemic.]
When I joined our Evergreen® family business, Hollingsworth & Vose Co. (H&V) in the mid-nineteen seventies, we operated four plants in the U.S. Northeast. The company’s roots go back to the 1728 founding of a paper company in the colonial Province of Massachusetts Bay. The enterprise has continually evolved over seven generations. Today, we are a leading global producer of advanced materials for filtration and battery applications, operating thirteen plants in six countries.
Our successes and mistakes with global expansion have taught us a lot about what it takes to build successful manufacturing operations in other countries. This began with our first foreign plant in Apizaco, Mexico in 1981 and has continued throughout our expansion to the U.K., Germany, China, and, most recently, India. We found that our family company culture, values and long term, Evergreen perspective have helped us on this journey.
When our Suzhou, China plant was recently recognized as a “Best Place to Work” in the Greater Suzhou area (of about 10 million people), it provided the opportunity to reflect on the 15-year journey of building that team and the significant steps and consistent effort that have led to our long-term success in China.
We had been exporting to Asia for years and had numerous customer relationships, but we realized that we needed local operations and a strong local team to have long-term success. We explored acquiring or partnering with a Chinese business, but we were unsuccessful in finding the right opportunity and fit. By the early 2000s laws had changed in China to allow foreign companies to have wholly owned operations. So, we decided to build a greenfield factory in China with the objective of firmly establishing our company culture from the beginning.
Once we had made the decision to open in China, an early, important step was to tap one of our long-term, U.S.-based operating leaders to spearhead early recruitment and development efforts. A veteran employee with a deep understanding of our culture, Ken Fausnacht (now our VP of Global Operations) made over 50 trips to China in those early years, identifying and hiring key leaders who seemed most aligned to the long-term perspective and family culture that define our company. Ken also personifies the qualities of commitment and a genuine concern for people that is at the heart of the family oriented culture we wanted to establish and continually strengthen.
Our prior experience in China had shown us that our family-oriented culture provided a powerful advantage in recruiting value-aligned team members. The concept of family and heritage is really powerful in China. We knew that if we could tap into that by sharing our history and values as 270+ year-old, seventh-generation enterprise, committed to building close relationships founded on trust and open communication for the long-term, we could recruit a core team that would set the foundation of our culture.
It was critical to recruit employees committed for the long-term because the markets that we serve require deep, specialized knowledge and experience; if you don't have people who are experts in the technology and application, it's really hard to win the confidence of the end users. Sharing our history, our family ownership structure, and the culture that reflects this heritage was very helpful in attracting quality people who met our exacting criteria from the beginning.
A critical early hire, John Zhang, came as plant manager. He naturally understood and was aligned with the culture we wanted to build. He undertook hiring the original operations team and starting up the plant, which he continued to run as we added multiple production lines over the years. (He has since moved up to be the regional Managing Director for our overall Asia-Pacific business.) We were also really fortunate recruit a phenomenal HR director, Kathy Zhang, who still serves in the role today. John and Kathy understood the culture of H&V and worked to build the local version of it that would feel right in China and that they and their team would feel was their own.
Establishing that core Chinese team was important, as was our decision to bring in people from our U.S. operations, as well as some from Europe, many of whom committed to moving to China for several years to help launch the plant and establish our culture.
Having built that team, we worked to create strong lateral connections between China-based employees and their counterparts in our other global facilities. Phone and video conferencing, as well as a heavy travel and visitation schedule, consistently connected team members. Our finance people in the U.S., for instance, developed personal relationships with the finance people in Asia, and our technology people had similar lateral relationships. Over time, some Chinese employees applied for jobs in our U.S. plants, as well, creating additional ties. Those connections were, and remain, important to our success.
The work of creating a long-term, value-aligned team in a foreign country takes perseverance and patience. It does not happen overnight. For us, across all of our geographies, it remains a work in progress. But in the case of our Chinese plant, we have seen the result of that effort in the culture that has become imbedded and in our ability to continue to grow that value-aligned team.
I’m able to see our progress during regular trips to Suzhou, but our annual Chinese New Year celebration really highlights the culture the local team has created. The evening includes skits and costumes, and everyone—including me—participates. The first year we held the event, we gathered as one table of eight. Last year, the team filled almost 40 tables, and we had employees celebrating five-, ten-, and 15-year anniversaries. Last year, as I stood with John and Kathy, who were there from the early days, I found myself marveling at how far we’d come. It felt like family.
08.11.20 Postscript
Since the time of this article, the Covid pandemic has changed a lot for just about all of us. In addition to the challenges of the pandemic, H&V and our Asia Pacific Team suffered a very great loss. John Zhang, who is featured in the original article, suffered a fatal heart attack a short time ago. John was the Managing Director of H&V APAC and was one of the founders of that organization. A wonderful leader, he was instrumental in establishing a Chinese version of H&V’s family-oriented culture in China. He built a very strong team that, despite this great loss, will surely continue his good work.
For the overall company, our people have done well responding to the pandemic. Our teams have worked hard to keep our people safe while more than doubling the output of several critical products. In addition to all the normal protocols, we developed internal sources of face masks and hand sanitizer for our people, their families, and our retirees.
H&V is a major producer of the filtration materials used in N95 masks, surgical masks, medical breathing devices, test kits, HVAC, and Hepa filters. Our teams have expedited the commercialization of new mask and gown materials. We have also received government grants to help us further increase production of some of these critical products. As with most companies, this has been a very difficult time, with lots of worries and challenges, but also a time when we see many people doing their very best to help us all get through.
Valentine Hollingsworth is President and CEO of Hollingsworth & Vose.
Defying Conventional Wisdom 17 Years Ago Put Our Evergreen Business Ahead
[A note from Tugboat Institute: This week, we are publishing an article written before the COVID pandemic. Please note the author’s postscript at the end of this article, in which he comments on the connection of this topic to the impact of the pandemic.]
When we launched our Evergreen® business, SmugMug, an online, subscription-based photo sharing and hosting service, we had no idea our business model was innovative. We knew it was logical, that it felt like the right thing to do, and that it solved a problem for our customers. For us, those were the key factors. We only realized later that the idea was a Pragmatic Innovation that would make us the first online consumer subscription service.
Really, this innovation was born of necessity. From day one, we had an uncompromising commitment to our customers, and we didn’t see another model that would allow us to put their needs first.
When we launched SmugMug in 2002, existing photo-sharing services were ad-based: they provided storage and sharing capabilities for their customers for free, but photos were presented alongside advertising. In this scenario, the customer might be viewing his or her family photos from a recent trip to Disneyland alongside ads for any variety of products or services that didn’t necessarily shout “family-friendly.” They had no control over how their photos were positioned. And, because that “free” storage was often supported by sales of prints or other products, customers found that if they didn’t purchase prints or use other services offered by the provider, their photos could be taken down and lost forever.
In fact, one of these “free” services lost some of our family photos. As avid photographers, this felt personal. We didn’t like ads presented against our photos, and we didn’t like the idea that our irreplaceable photos that created a treasured timeline of our lives were held hostage and could be erased forever at any time.
We got to thinking about an alternative model. How could we create a sustainable business that prioritized our customers and their photos? Ultimately, we landed on the only solution that seemed it could work: We would ask customers to actually pay what it cost to put their photos online.
Today, that concept hardly seems revolutionary. But in 2002, the mantra was, “it’s all about the eyeballs,” and no one paid for any online service. The dogma of the day was that everything online should be free to attract the greatest number of users, and it would be more than a decade before that really shifted in online consumer services.
There’s no doubt that we were outliers. All but one analyst told us that our concept just wouldn’t work. But we still felt the business had potential. And we felt that the only way we’d really know if customers would value our services was to ask them pay up front. We figured that it was a pretty simple test: If they weren’t willing to pull out their credit cards, then we didn’t actually have a viable business.
But they did. Without ever having used our service or even necessarily knowing what it offered, customers entered their credit card numbers on day one and signed up for SmugMug because they wanted a better photo sharing and storage service.
From that first day and that first subscription payment, we felt a profound responsibility to our customers. Given people had myriad free options—from some of the most trusted names in photography—the immediate expectation was that if SmugMug was charging a fee, they must be offering something exceptional. We accepted this higher expectation, and we made a commitment to take care of customers and their memories with unrelenting focus.
With that self-imposed mandate, we invested heavily in customer service and very quickly learned that our dedication to our customers was a differentiator. They felt they knew us personally. They trusted us, and we honored that trust by listening to them and responding to their requests. We ensured they had unlimited storage and beautiful galleries to share; we built what is now commonly known as “enterprise-level” access controls, providing customers the ability to manage their audience and secure their privacy. We grew and innovated based on our customers’ needs.
Now, 17 years later, we continue to be laser-focused on our subscribers. As a private, Evergreen business with a long-term view, we've never paid close attention to our competitors, instead, we focus on what are our customers are asking for and how we can deliver that. Rather than being distracted by the next bright, shiny object, we are committed to delivering customer value. And, we still feel that we can best deliver that value through the subscription model that, while no longer a brave new innovation in our space, remains our strength.
In fact, when we acquired photo and video sharing service Flickr in 2018, we doubled down on our commitment to the subscription model. Flickr already had some subscription models, but they were losing a lot of money. We immediately began to work on aligning and improving their model so customers would see the value and be happy to pay for our services.
While serving our customers through our subscription service remains our core offering, we have also responded to their requests for complementary products that allow them to share their photos in other ways. We developed a line of business selling prints, photo books, and gifts, thereby providing ourselves some revenue diversification and additional value to the customers. But even with that money coming in, we view ourselves as a subscription service first because the product sales come and go based on whether we have happy, paying subscribers.
As a family-owned Evergreen business, when we reflect on the company we have built over the past 17 years, there’s no better indication of the value of our subscription service than scrolling through our own SmugMug photo galleries. Like our first customers, I started storing my photos on our platform in 2002. I have photos of my first date with my wife, of our wedding, and of the births of our kids—among many, many other memories. We keenly feel our obligation to continue to put our customers first, to keep their photos safe. As we continue to grow and build our company, it is with that intimate understanding of the the memories that we are keeping that we move ahead.
And, as a final note, I should tell you that our unconventional approach had the additional benefit of not requiring that we raise outside capital. In fact, our original and only investment was $20.
Postscript: As the global economy shifted overnight with the pandemic, our decision to orient our business with our customers is continuing to prove valuable. Advertising revenue has significantly shrunk across the industry, and partnerships and sales are hard to come by while so many companies are struggling. Our customers, however, continue to demonstrate that their photos and our platforms are important in their life. We haven't escaped impact, but it's far less than many others with different business models are struggling with.
Ben MacAskill is President and COO of SmugMug + Flickr.
Photo credit: Aaron Meyers
Going Up: How an Unlikely Elevator Startup Is Changing the World
In 2007, after many years in executive roles for a global elevator company, I felt like I had hit a plateau in the organization. When the company went through a reorganization and I landed in a role that I did not feel allowed me room to grow, I knew it was time to go. I was ready for a new challenge.
My wife Tracy and I founded Genesis Elevator in the basement of our home that year—with our three sons, Joshua, Jared, and Mason, our two dogs, and our niece all under the same roof at the time. Starting a business right before the Great Recession meant that we had to fight hard and run lean from the beginning. But, from the start, we had a powerful Purpose driving our work.
When we decided to start our own company, we committed to making it a faith-based business. We did not fully understand how that would look in the beginning, but at a basic level, we knew we wanted to build a company grounded in the same core values that defined our Christian faith.
In 2012, through a transformative mission trip to Cambodia with my son Jared, I learned first-hand the need among orphans in that country. On that trip, I met a five-year-old girl named Vichika (aka Susan). My wife and I had raised three boys, and I love kids, but the connection I felt with this little girl was extraordinary. I came home from that trip and knew I had to do something for her—and for other orphans who could not be adopted.
Cambodia’s borders, like those of several other countries, are closed to adoption by U.S. citizens because of the rampant problem of human trafficking and corruption. Traditional adoption was not a possibility. Instead, we realized, the closest consistent family connection we could offer Vichika and other children would need to be delivered in a different way. If we could provide the necessary technology to orphanages, we could facilitate “virtual adoptions,” connecting families in the U.S. with orphans to build life-long familial relationships through video connections, as well as regular in-person visits by the adoptive family. We believed that by taking this kind of qualitative approach, we could impact change for generations to come.
Today, Saving Susan Ministry, the nonprofit organization we founded to do this work facilitates virtual adoptions and also funds trade school and college for orphans, providing them a path to Purpose. The organization not only provides personal purpose for myself and my family, it fuels the growth of our Evergreen® business. We always knew we were building a faith-based business, but this ministry has become our north star, the reason Genesis Elevators exists today.
Our Purpose fuels our Paced Growth and our commitment to remaining Private, propels our Profit, guides our People First programs, and has inspired us to approach this phase of life and the life of our company with newfound commitment and energy.
Here are just some of the ways our Purpose is reflected at Genesis Elevator today:
Paced Growth
Sustainable growth will allow the company and Saving Susan Ministry to exist well beyond my wife and me, on an Evergreen time frame. Our commitment to this company has nothing to do with a desire to cash out and get a big paycheck or check items of a bucket list. It’s about growing and innovating to continue to change the lives of orphans and the families who are blessed to partner with them.
In 2019, we launched a manufacturing division, Revelation Manufacturing, to produce residential elevators. Large, global elevator companies are not interested in this market, so it’s pretty fragmented and made up of small companies. Entering this new market and expanding our footprint provides the opportunity for significant growth. Growth and increased profitability will allow us to help more at-risk children.
Private
Our industry, like so many, is being inundated by private equity. In fact, the third-largest elevator company in the world, ThyssenKrupp Elevator, is about to be acquired by a consortium of private equity firms. We get calls from these firms, as I’m sure most private companies do. However, our response is clear: “This isn’t going to work. First, we’re adhere to the Evergreen 7P™ principles and are a member of Tugboat Institute—you can go look up what that means if you are interested; second, your money can't deliver what God's delivering for us unless you’re going to commit to the ministry (our purpose).” Needless to say, the conversation is over pretty quick.
Profit
About a year after our initial trip to Cambodia and the launch of our ministry, we held a company board meeting. We were finally breaking through the lean years that followed the Great Recession, and we were looking forward to celebrating our numbers and being able to breathe a bit easier. At the meeting, one of our board members said, “Well, Jay, as a faith-based company, your priority for the first profits should be to direct them to your ministry.” That was not what I necessarily wanted to hear, but as I let the idea settle, I knew he was right.
That first year of profitability, we committed 15 percent of our profits to Saving Susan Ministry. We have raised our annual commitment by one percent each year since. Last year, 19 percent of our profit went to the ministry. Seeing the fruits of our labor dedicated in this way is powerful and drives us to continually work toward increased profitability.
People First
Our Purpose fuels the culture of family at Genesis Elevator and guides our People First practices. We're constantly evaluating our culture to better understand how we can help our team prioritize family and maintain healthy connections. We say “Family matters to everybody. It matters to us. It matters to you. It's more important than this business.”
One benefit we have implemented to help family well-being is to make mental health professionals available to any team member or their family members when they have difficult situations that they need help with, free of charge. We know that life's tough. You don't get through life without difficulties, and we want our people to know that we are there for them and that they can have a resource for confidential support when needed.
Personal Transformation
I have been in the elevator business since I graduated from college, all of my professional life. But elevators don’t get me up in the morning. I have always loved the people I have worked with, across all the roles I’ve had, which kept me in the field, but I never felt a deeply held purpose in my work other than to take care of my family.
Now, I get up in the morning to serve the people in our company and the ministry. In the end, it is our team, sustainable profit, and manageable growth that will allow us to continue to have a positive impact on at-risk kids. With 140 million orphans in the world, we won’t run out of opportunity in my lifetime. Vichika is 12 now, and our relationship with her grows every year. We also support her brother, Mesa, who is 16, as well as another young girl, Grace, who’s six. These children may not live with us physically, but be assured they are our kids—just like our three boys. They are part of the Arntzen tribe, and they have blessed our family beyond measure.
Jay Arntzen is President of Genesis Elevator Company and Revelation Manufacturing; his wife, Tracy, serves as President of Saving Susan Ministry.
First, Take Care of Each Other
[A note from Tugboat Institute: Please note the author’s postscript at the end of this article, in which he comments on the connection of this topic to the impact of the COVID-19 pandemic.]
In 2011, when I stepped into my role as President of Maritz Global Events, our company culture had been negatively impacted by the Great Recession. The meetings and events industry generally had been hit hard, and our company was no exception. Focused on doing their jobs and avoiding fallout, employees were hunkered down, and the culture reflected a widespread sense of trepidation.
As an incoming leader, the situation presented an interesting opportunity for me to establish a more open and engaged culture. Early on in my career, I had the great fortune to work for a company called Conferon, which believed in the power of culture and what it can mean to the performance of an organization and its people. At Conferon, the core value—“First, take care of each other”—had been the north star and foundational principle for a powerfully positive culture.
Conferon’s founder believed that if you take care of your employees and ensure their satisfaction to the greatest extent possible, everything else will fall into place—including, but not limited to, financial performance, customer satisfaction, and retention of both existing and new talent. This core value, shared among all employees, drove the actions, decisions, and behaviors of the company.
With that experience, I knew that prioritizing culture would be my first initiative in my new role. Fortunately, while the company was emerging from difficult times, it had, since its founding in 1958, defined itself as a “people-based culture.” The core commitment to people was there—however there was little formal structure upon which to build out culture.
Over the next year, we began a phased initiative to craft a framework for our culture. We first embarked on a learning journey, taking advantage of a local training group, Barry Wehmiller Leadership Institute. From that learning experience, our leadership team went off-site for a three-day strategic planning session, during which we tore the company down to the studs, and then rebuilt the vision, the mission, and the core values together.
Central to our new framework was the value we had embraced at Conferon, which had been so formative to my leadership development—“First, take care of each other.” We reframed that value to include Maritz Global Events employees, clients, suppliers, and our communities. Having crafted our vision, mission, and core values, we then worked to articulate our Purpose, or “why,” engaging not just company leadership but our entire team. The result of those months of effort—clearly defined vision, mission, core values, and Purpose—provided the framework for the culture that has been developing since that time.
From that place, within the year that followed, several essential programs and practices were implemented to operationalize culture. First, we embraced the ethos of the dual bottom line—measuring our success in terms of fiscal performance and people performance.
Second, we eliminated traditional, annual employee reviews and replaced them with an aspirational coaching model, which is a continuous 360° conversation between manager and employee. We created the model and then trained extensively across the organization to drive a different type of accountability. Making that change has been instrumental in bringing our culture to life.
Third, we committed to creating an opportunity for our people to embrace a broader purpose beyond the walls of our company. We formed a grassroots committee of employees to support ECPAT-USA — part of a global organization dedicated to eliminating human trafficking with a focus on children. We felt it was critically important for us to get involved in this cause because our industry—built upon transportation hubs, convention centers, and hotels—is one of the main conduits through which human trafficking occurs. The decision to come together around this cause has broadened our cultural initiative beyond company and industry walls, allowing our people to embrace a Purpose that really makes a difference everywhere we go and has become an important connection point.
In 2012, having taken these significant steps to create a framework and build out our culture, we had the opportunity to challenge ourselves by acquiring and integrating a new company. This was an especially meaningful experience for me because the company we acquired was Experient—formerly known as Conferon—where I had first come to understand the true power of culture.
In my view, integrating culture is the most important piece of M&A (and often overlooked). In this case, I had a lot of confidence in the process because I knew we had done the prerequisite culture work on our side and were already on the right journey and that, together, the two cultures would not only complement on another but actually help grow and accelerate a positive culture across the whole organization.
In retrospect, an early step in this process that I think contributed to our success was to tap a leader of Maritz Travel and a leader at Experient to head up what we called an “optimization initiative,” which included 10 different work streams that were identified as critical to that acquisition, culture being one of them. Those two leaders then created teams made up of members of both organizations and they worked in collaboration to craft what our new combined organization would look like. They asked, “What needs to be combined? What needs to be kept separate? What needs to evolve?” That allowed the Experient team to understand our culture as it was reflected in the thoughtful integration process and connected our teams right away.
Today, our focus on prioritizing culture has led to Maritz Global Events being recognized as one of the best places to work in the events industry, based on direct employee survey results, providing us external indicators of the strength of our culture. Beyond the external validation, I see the strength of our culture reflected in the high level of participation company-wide in key initiatives linked to culture, like our fight against human trafficking and the aspirational coaching model. And, our turnover is in the single digits. Maybe more important, if you were to walk around our offices today and ask employees what our core value is, they would be able to tell you that it’s “First take care of each other.”
All that said, we’re not perfect. Developing culture is a journey, but we know we have an Evergreen time horizon to continue to grow and improve.
07.07.2020 Postscript
The Evergreen 7Ps™ principles are the foundation of a purpose-driven company. As Maritz Global Events has navigated the hazards of the current pandemic, leaning into the principle of People First (Maritz Global Event’s signature core value is “First, Take Good Care of Each Other”) has been a guiding light, while also an immense challenge. The face-to-face events and hospitality industry has been decimated as a result of COVID-19. In the U.S., 75 percent of hotels have been closed, gatherings of 50 or more have largely been banned, and the airlines have greatly reduced capacity. It is estimated that this pandemic will have at least nine times the negative impact on our industry than 9/11, with over $1.2 trillion in losses (and growing).
With these sobering statistics, navigating this crisis with a People First perspective front and center has been essential. Every decision we’ve made as a company is wrapped around this belief – the best way to take care of our people is to do everything we can to ensure we have a viable business to return to when the recovery comes. We’ve remained committed to viability and treating our people with empathy and respect when delivering the most difficult of all decisions – furloughing employees, eliminating positions, and reducing compensation and benefits. As a leader, maintaining a viable business with great employees is the ultimate responsibility. During times of crisis, culture is more important than ever. Staying true to one’s purpose will ensure that our Evergreen companies endure.
David Peckinpaugh is President of Maritz Global Events.
How Innovation Led to an Unforeseen Blockbuster for Cupcake Vineyards
[A note from Tugboat Institute: In mid-March, we pivoted from our scheduled Evergreen Journal publication calendar to produce COVID-related content to address the challenges and uncertainty of this unique time. This week, we are publishing an article written before the pandemic began because we feel the topic—innovation—is one that is more relevant now than ever. We will continue to publish COVID-related content in the weeks and months ahead, interspersed with general articles and videos that are relevant and timely.]
If you’ve spent time in the wine aisle of your local grocery store recently, you know that consumers have an almost endless array of choices. There are literally thousands of wine brands competing for your attention. We actually joke that the experience of picking a chardonnay is like picking a birthday card for your spouse: You find yourself standing in front of a seemingly unending wall of options, staring at the cards, waiting for something that’s just the right fit to jump out at you. It can be a daunting task.
As a 38- year-old Evergreen® wine producer based in Livermore, California, our company, The Wine Group, has a long history of searching for and developing that magical marketing differentiator that will set our product apart. Like everyone else, we are continually seeking that “lightning in a bottle,” the brand with the magical “it” factor that will drive customers to return again and again to purchase the brand.
Our experience has led us to understand that supporting an entrepreneurial mindset among our team is essential in developing and marketing the brands that have become our biggest stars. The success of one of our best-selling brands speaks to the power of our commitment to fostering innovation throughout our organization.
In 2007, Casey G., a relatively new member of our very small marketing team, proposed an idea for a brand that tapped into what was a huge trend at the time: cupcakes. I would be lying if I said we thought it was a great idea. What did cupcakes have to do with wine?
But we knew that Casey, despite her limited experience, was very tuned into trends and had valuable perspective as an actual member of the target demographic. In her view, the then current craze for cupcakes spoke to consumers’ attraction to the idea of treating yourself to a small indulgence. So, we included the idea in our innovation process, where we regularly review and evaluate a wide range of ideas developed by our team.
As the marketing team further developed the concept, the idea gained traction. The Cupcake brand proposition resonated as people recognized the popularity and broad affinity for cupcakes—everyone has likely enjoyed one at some point in time. The branding was further developed, and the brand Cupcake Vineyards, wines that “pair perfectly with your assorted collection of moments of joy,” was born.
Because there was still a thread of uncertainty about the concept—especially among the more “pragmatic” members of the leadership team, we decided to test Cupcake Chardonnay as a first-to-market item exclusive to Cost Plus World Market in late 2007. At the same time, the leadership team decided to nationally launch what was at that time our “better” idea—Swirling Dervish, a brand you’ve likely never heard of given that it failed quickly and miserably.
Meanwhile, Cupcake Chardonnay became a huge hit at Cost Plus. This success really left us no option but to expand Cupcake out of Cost Plus and into a national launch in 2009.
We sold 300,000 cases in 2009 and over one million cases in 2010. By 2011 we had 14 different wine types in Cupcake and sold 2.4 million cases. Our Cupcake Vineyards New Zealand Sauvignon Blanc became the number one Sauvignon Blanc in the U.S. that year. By 2012, we were 3 million cases, surpassing Kendall-Jackson to become the largest brand above $8 in the U.S. Our Cupcake volume remains about 3 million cases today.
If I could tell you the exact alchemy of ingredients that led to this phenomenal success, we would have five more wines that could boast the same record (and we would never have launched Swirling Dervish). But I'd be lying if I said we knew this was going to work or that we absolutely understood why. What I do know is that the brand would never have existed if we didn’t live our shared values of being “relentlessly entrepreneurial” and innovative—and fostering those values by listening to people who have good ideas, regardless of their station in the organization.
The entire organization supported what we saw as a creative idea. The winemaking team over-delivered on quality, the sales team recognized the momentum and made the brand a priority, and the operations team found ways to supply the brand even as we blew past every projection we made. Everyone went “all in” to support Cupcake.
Today, we continue to embrace the open, supportive culture of innovation that was a factor in Casey’s idea rising to the surface. We want people to be innovative and enterprising in all areas of the company. To this end, we have an intranet site, the Lightbulb, where anybody in the company can share ideas with the marketing department. The ideas from this communal brainstorm are thrown into the mix of ideas that come from more traditional sources like market research and data analytics, giving us a robust pool of ideas to consider as we look at new product innovation.
We believe one of the reasons our process is effective is our commitment to remaining open and receptive to new and different ideas, not allowing executive-level perceptions and traditional brand thinking to stifle innovation. Rather, we trust the people and the process that brought the ideas forward and then focus on efficient execution. Once committed to a project, we aim to get a very quick read on the potential for success—and to be quick to admit when it doesn't work. In the case of Cupcake, my predecessor had the wisdom to see the early response at Cost Plus and understand the potential for national distribution—and he let the organization run with it.
Now, the downside to this focus on efficiency is that sometimes we haven't shown the patience we need; but, the upside is that we try a lot of things, and we don't waste time and resources when we see early indicators that it’s not a win.
As an Evergreen company, we understand that continuous innovation like this is critical to our long-term vision. The Wine Group is management-owned, and we view ourselves as stewards of this organization. Our goal is to leave the place better than we found it, and that commitment requires continually infusing the company with new ideas and opportunities for growth. This extended horizon is shared across the business, so that at every level, team members are asking, “what is the right thing to do for the long-term?” This mentality is embedded into our culture.
Cupcake Vineyards continues to be a core brand equity for The Wine Group. The lessons we learned from Cupcake’s unlikely success continue to pay dividends. We continue to encourage innovation from all areas, and we’ve been able to successfully develop new brands like Chloe and Imagery from the same commitment to being relentlessly entrepreneurial and listening to ideas from everyone.
Brian Vos is CEO of The Wine Group.
