At first glance, Alex Zhardanvosky and Joe Speiser don’t practice the “stick to your core competencies” mantra they preach. After selling a major share of Azoogle (now part of Epic Media Group), the online advertising business they founded in 2000, they started selling… pet food.
“In 2002 we had $2.1 million in sales at Azoogle,” Alex says. “By 2005 we had grown to $64 million. We sold a chunk of the company and started looking for another business we could start from scratch.”
In spite of the Pets.com debacle—in fact, partly due to the highly public failure of Pets.com—the two launched PetFlow.com, a scheduled online pet food business, in March 2010.
“We love pets, and as pet owners we knew there was no way for a customer to buy pet food online easily,” Alex says. “The industry had been largely devoid of investment after Pets.com failed, and we saw that as a definite opportunity.” After less than four months PetFlow.com took its first orders and has since grown at a 10-15% monthly pace, with November sales reaching nearly $1.5 million.
Alex has started several successful businesses—and has made angel investments in a number of companies founded by previous partners and employees—so I asked him to share a few lessons learned from multiple start-ups. Here’s what he said, in his own words:
Never try to act “big.” Red tape starts playing a big factor when a start-up reaches a certain size. Small companies try to act really big, sometimes just because a few employees came from larger companies and they feel the organization needs to become more “corporate.” For example, frequent meetings aren’t a productive way to spend time. In big corporations you have Monday sales meetings, Wednesday management meetings, Thursday operations meetings… but if you create a naturally open forum, you don’t need all that. We set up open office layouts so we don’t need to discuss things as a team; everyone is already in everyone’s business, so to speak, in a really good way. Joe and I share an office and we almost never close our door.
“New” doesn’t have to mean “complicated.” Most products are wants, not needs. You don’t have to buy an iPod, but if you have a dog you have to feed your dog. We wanted to provide a solution to an ongoing need. The pet category is completely recession-proof and it isn’t based on fads or fashion. Plus it’s non-cyclical: Dogs don’t eat more at Christmas than they do in July, so we don’t have to ramp up for the holiday season. As long as we execute well our customers naturally become long-term customers.
What others do is irrelevant. On the Internet it’s all about deals, but when you create a valuable product and service proposition you don’t have to give it away. We don’t offer sales or discounts. While we provide pet food, we really sell a service and the elimination of a chore. In essence, we sell time—our customers’ time. To feed your pet you have to go to the store, walk down the aisle, stand in line, lug the heavy bag home… and do it over and over. That’s a chore. Customers love us because we eliminate that chore, and brands love us because we don’t discount their products and dilute the value of their brand. Most online retailers focus solely on being the low-cost provider, but providing the best overall value—in cost, convenience, and making life better for your customers—matters a lot more.
Stick to your core competency. We learned this the hard way. When we started our online advertising network we focused on cost-per-action (CPA), performance-based advertising. Then we spent a year trying to start a cost-per-impression (CPM) network and eventually realized our customers didn’t want it. We diverted lots of smart people and spent lots of money on a glittery opportunity that was a complete loss of time and revenue. Now we like to say, “Never bend over a dollar to pick up a quarter.”
Of course you could argue that PetFlow.com wasn’t in our core competency, but while the category itself is different we knew the model inside out. In our online advertising business we worked with Netflix, Blockbuster, Columbia House, and other major subscription-based services. We knew how to land and develop long-term customers. So we stuck to our core competency, at least until we had to…
Take over when you have to. We started out using a third-party logistics (3PL) provider to handle fulfillment. The problem is that once you reach a certain growth rate it’s tough for a 3PL to grow with you. When our 3PL started to struggle—missing ship dates, shipping orders incorrectly, shipping to wrong addresses, etc.—we knew we were in trouble, because from a business owner’s standpoint there are only two things that matter: How many customers you have and how long you keep them. So we stopped advertising in June, leased our own facilities, and jumped headfirst into warehousing and logistics, even though it’s something we knew nothing about. We thought we could use others to handle critical tasks but we were wrong.
As daunting it seemed, we got really smart people to help us. We found the best in breed software, found a staffing agency to help us hire great people, and already we’re more efficient than our 3PL had been.
Our business is highly dependent on scale and growth, and it’s really important that we deliver consistently... so core competency or not, we had to take over.
Delegate—and then delegate some more. Our employees typically don’t need to ask for permission. We give employees a specific task and trust them to make the right decisions; if they don’t, together we’ll figure out what to do better next time—and then everyone will know what to do. Then, after we delegate we...
Don’t micromanage. I ask people to only copy me on emails when they want me to know about something, not because I have to know. When employees feel they have the authority to take action and generate revenue for the company, they’re a lot more productive.
Find what matters and then excel. We don’t try to make PetFlow.com a pet food “discovery” site. And we don’t try to educate our customers about pets or pet foods because they’re already extremely knowledgeable. Our goal is to make it easy for customers to purchase what they already know they want, so we focus our energy on making our shopping cart and checkout system as simple and easy as possible. “More” isn’t always better. Sometimes "more" is just distracting.
Let your customers drive your business. We currently have about 4,500 SKUs and we’re expanding all the time because we let our existing customers tell us what they want. Customers will buy what they ask for, so find ways to ask. When your customers tell you what they want and you give them what they want they’ll stick with you for a long time.
Read more:
In September, social psychology
professor Diederik A. Stapel was fired by Tilburg University
after an investigation revealed he had falsified, lied and invented
data in more than 30 experiments. Prior to Stapel’s downfall, his
work had attracted highly favorable international attention
including multiple citations in the Times of New York
(which happily repeated Stapel’s bogus scientific evidence proving
that advertising works by making “women feel worse about
themselves” and that conservative politics causes hypocrisy) and
the Times of Los Angeles (which parroted an absurd study
on racism and tidiness, about which more in a moment).
True to form, Stapel made it clear that competitive pressure and
lack of regulation were to blame for his fraud. “I did not
withstand the pressure to score, to publish, the pressure to get
better in time,” Stapel told a Dutch paper. “I wanted too much, too
fast. In a system where there are few checks and balances, where
people work alone, I took the wrong turn. I want to emphasize that
the mistakes that I made were not born out of selfish ends.”
At the Weekly Standard, Andrew
Ferguson looks at the “Chump Effect” that prompts reporters to
write up dubious studies uncritically:
The silliness of social psychology doesn’t lie in its
questionable research practices but in the research practices that
no one thinks to question. The most common working premise of
social-psychology research is far-fetched all by itself: The
behavior of a statistically insignificant, self-selected number of
college students or high schoolers filling out questionnaires and
role-playing in a psych lab can reveal scientifically valid truths
about human behavior.And when the research reaches beyond the classroom, it becomes
sillier still.Consider this recent study by Stapel, demonstrating the
relationship between “disorder” and white racism and
homophobia...The experiment began after janitors at the Utrecht railroad
station went on strike. Stapel and colleagues leapt into action. As
the garbage in the station piled up, they cornered 40 white
passengers. One by one the travelers were asked to take a seat in a
row of folding chairs. They were given a questionnaire. If they
filled it out, they were told, they would get a piece of chocolate
or an apple as a reward.The questionnaire asked to what degree the travelers agreed with
stereotypes about certain types of people. (Are gays “creative and
sweet” or “strange and feminine” or “impatient and intelligent”?)
And then came the twist! Stapel had planted a person at the end of
the row of chairs—sometimes a black person, sometimes a white.
Researchers measured how far away from the person each respondent
chose to sit. Meanwhile, thanks to the questionnaire, they could
measure the degree of racism or homophobia each was feeling. On
average, the travelers sat 25 percent closer to the white man than
to the black man.In time the janitors came back to work. The
station was cleaned spick-and-span. Stapel and his gang returned
and performed the experiment again, on another 40 white travelers.
There in the tidy environment, their questionnaires showed they
were less racist and homophobic than their counterparts from the
earlier experiment. And on average, they sat the same distance from
the white person as the black person. Hence, as the headline read:
“Messy surroundings make people stereotype others.”But Stapel, as an internationally respected social psychologist,
wasn’t satisfied. So he designed another experiment to confirm his
finding. The Stapel gang went to a wealthy neighborhood. They threw
a bicycle on the ground, tore up paving stones, and, as the L.A.
Times noted, parked Stapel’s Subaru on the sidewalk. Chaos!
Disorder! Forty-seven passersby were collared, given a new
questionnaire to test their racism, and asked to donate money to
(I’m not making this up) a charity called “Money for
Minorities.”Then the bike was removed. The stones were replaced. Stapel
moved his Subaru. Now it was just a nice, rich, tidy neighborhood.
More passersby were collared, more questionnaires were filled out,
and—here’s the scientific finding—less racism and homophobia were
revealed. And the passersby in the tidy neighborhood gave more
money to minorities on average: to be precise, 0.65 euro more.Social psychologists around the world gazed on these findings
when they were published this spring. They gave their chins a good,
firm tug. “This need for order matters a lot more than we might
have thought,” a Duke psychologist told the Times.Did Stapel fake his research? Did he and his students really
make all those people fill out forms for an apple? Did Stapel
really cross-tabulate the data? Did he really park his car on the
sidewalk?Who cares? The experiments are preposterous. You’d have to be a
highly trained social psychologist, or a journalist, to think
otherwise. Just for starters, the experiments can never be repeated
or their results tested under controlled conditions. The influence
of a hundred different variables is impossible to record. The first
group of passengers may have little in common with the second
group. The groups were too small to yield statistically significant
results. The questionnaire is hopelessly imprecise, and so are the
measures of racism and homophobia. The notions of “disorder” and
“stereotype” are arbitrary—and so on and so on.
Described in this way, it does seem like there could be real
journalistic interest in this study – as a human interest story
like the three-legged rooster or the world’s largest rubber band
collection. It just doesn’t have any value as a study of abstract
truths about human behavior. The telling thing is that the dullest
part of Stapel’s work – its ideologically motivated and false
claims about sociology – got all the attention, while the spectacle
of a lunatic digging up paving stones and giving apples to unlucky
commuters at a trash-strewn train station was considered
normal.
Courtesy
of Jpod.
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