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Book Marks
High-flying local CEOs share secrets of their success — and then some
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Business New Haven
10/15/2001
By: Michael C. Bingham
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Sometimes it's hard to figure out exactly why big-time CEOs feel the need to write books.
Is it to show the world how smart they are? Well, we probably already knew that - after all, they're not sitting atop large, successful organizations for no reason.
Is the motivation to altruistically share some profound, hard-earned lessons from the trenches. Maybe that's what moved recently retired GE chairman Jack Welch, Fortune magazine's “Manager of the [20th] Century,” to pen (with ghoster John A. Byrne) Jack: Straight from the Gut.
Maybe it's ego, which, like it or not, seems to be an essential characteristic of most successful CEOs.
Or maybe it's all three.
Actually, Subway co-founder and chairman Fred DeLuca doesn't come across in person as an egomaniac at all. He's tremendously driven and focused, obviously, but one-on-one he projects a soft-spoken, thoughtful air.
But ambition - that he's always had in spades. Even before he opened his first sandwich shop on August 28, 1965 in Bridgeport, he planned on having 32 stores within ten years. Having attained that goal in 1976 (a year late - so shoot him), it took him only two more years to get to 100 Subways, and by 1982 he had doubled his network again, to 200 units.
That year, fishing for a new goal, he devised a doozy - 5,000 stores by 1994.
His timetable was a little off, though. He passed 5,000 three years early, in 1991, and six years later his franchise business counted more than 10,000 outlets - second only to McDonald's worldwide.
This year Subway will open its 15,000th store. Actually, 15 is a good number for DeLuca - it's the number of principles for success he outlines in his book (co-authored by John P. Hayes, Start Small, Finish Big (Warner Books, 400 pp., $25.95 hardcover).
In it DeLuca outlines 15 essential steps to entrepreneurial success. These he illustrates with real-life stories of entrepreneurs who started with little or nothing but an idea - and the bulldog-like tenacity to see it through.
Some of those lessons:
• Start small. “Some people have the idea that a small business doesn't amount to much unless it delivers a sizable income or it expands into an international enterprise,” writes DeLuca. “I don't agree.” While a business is small, the entrepreneur has time to learn the lessons essential to future success. “If you want to finish big, starting small is the best way to begin.”
• Earn a few pennies. DeLuca says he first learned this lesson at age seven when he began collecting discarded soda bottles and returning them for the deposit. “It's not how much you earn at first; it's learning to earn something, even a few pennies,” he says. Exchanging bottles for pennies, he says, taught him the value of the transaction in business
• Begin with an idea. DeLuca recalls the story of Tomina Edmark, inventor of the “TopsyTail,” a simple device that allows women to fashion their hair in a variety of styles. Edmark's idea came from standing in line to buy a ticket to the movie When Harry Met Sally in 1989. In front of her in the line was a women wearing her hair in a French twist. “I wonder if you can turn a ponytail inside out?” Edmark asked herself. After the movie she went home and began experiment with a circular knitting needle and some masking tape to create different hairstyles. (It is worth noting that Edmark is dyslexic.) Thus was born the TopsyTail, which went on to generate more than $100 million in sales worldwide.
• Keep the faith. A Hobart College student named Ian Leopold wrote a business plan for a company later called Campus Concepts, which published by-students-for-students college guides chock full of ads from local businesses. The business plan was Leopold's senior economics thesis, and he needed a passing grade to graduate. The professor gave it an F. Leopold turned it into a $10 million company.
• Ready, fire, aim. DeLuca started Subway without any experience or even a business plan. In his case, he concludes, “It's better to fire in the general direction of where you want to end up and then adjust your aim, than never [to] fire at all,” he writes. “Get started. Move in the general direction of where you want to go. Make course adjustments along the way.”
• Profit or perish. In early 1973 DeLuca met with his accountant to discuss Subway's financial statement and results for 1972. “I have good news and bad news,” the accountant said. The good news was that the company had surpassed the $1 million figure in sales for the year. The bad news was that it had lost $100,000 on those sales. In DeLuca's case, the solution turned out to be more detailed - and more frequent - financial tracking. Entrepreneurs, he writes, “need to learn how to look at the business from 30,000 feet.” Many entrepreneurs enter business with good selling and people skills, so increasing sales comes more naturally than the Big Picture view that helps them see how and where costs may be trimmed or eliminated.
• Be positive. Being enrolled in the entrepreneurial School of Hard Knocks, DeLuca writes, “doesn't feed you the answers. It's more of a learn-as-you-go, trial-and-error system.” It can discourage business owners, and beat them down. DeLuca cites the example of motivational speaker and trainer Zig Ziglar, who failed 17 times as a salesman before attaining success. That's the kind of persistence that can only be sustained by a positive outlook.
• Continuously improve your business. At the end of any given year at Subway, DeLuca says, “We may have made 1,000 improvements” to the business and its processes. “But we could look back and say that only ten of them were critical…And of that number, only one was significant.” Why bother with 1,000 improvements when only ten, or even just one, really matter? Because “You can't measure results until you've made the improvements, so you're forced to do everything as quickly as possible without throwing the company into chaos.”
• Believe in your people. Like DeLuca, David Schlessinger was just a teenager when he bought a tiny Philadelphia bookstore that he would grow into a 100-unit chain known as Encore Books. He learned to treat his employees like family - because at first so many of his employees were family. Schlessinger led by example, creating and following checklists for everything in the store. “When people saw my concern and interest for doing things right, they committed themselves to the same details.” But Schlessinger wasn't a natural delegator, and it took him many years before he learned his most important lesson: “Hire good people before you need them, rather than just to survive.”
• Never run out of money. Borrow before you need to. DeLuca grew up with conservative ideas about money, and except for an initial $1,000 grubstake, never borrowed money to open his first dozen Subway stores. But to grow more rapidly, he knew he needed to borrow additional resources beyond operating profits. That, he says, is when he learned the two cardinal rules of lending: 1) If you need money, you can't have any; and 2) If you don't need money, you can have what you don't need. “The best brains in the business know that you can never risk running out of money, and that you can't even appear to need money, because if you do, you won't be able to borrow it.”
• Attract new customers every day. DeLuca breaks this process down into what he calls Awareness, Trial and Usage. Prospects must be aware of your business before they can be induced to try you product or service. If it's any good, they are likely to want to use it regularly.
• Build a brand name. DeLuca likes to explain how he learned this lesson at the supermarket, where an entire aisle is filled with cereal - cold and warm cereal, sweet and nutritious cereal, cereal with fruit, cereal that's crunchy. There's even generic cereal - and it costs less than its brand-name equivalents. But most people buy brand names. “The fact is,” he writes, “branded products sell, and they sell for more than unbranded products.” Just ask David Oglivy.
Ronald G. Shaw, né Shurowitz, believes that brands matter, too, especially when selling something as personal as a pen. Fired from his job as national sales manager at Bic Corp. to make room for the boss' kid to be groomed for the top job, Shaw went to a company with practically no U.S. presence and built a powerful brand: Pilot Pen.
In fact, Shaw believes so much in branding that he even went so far as to get the brand name into the title of his book: Pilot Your Life: Comedian Turned CEO Helps You Star in Your Career (Prentice Hall, 224 pps., $22), with Richard Krevolin.
Actually, the subtitle is a bit of a canard: Shaw's book is a lot more about him than it is about you. That's to be expected, of course, of a person who was performing in public - first as a piano player, then as a comedian - before he was old enough to shave, and who featured himself prominently in his own TV spots.
Well, hey - he's a good performer. Most CEOs are. Still, Shaw has learned some valuable lessons in taking Pilot Pen from $1 million in annual U.S. sales to a household brand name.
His chapter titles reflect a number of those lessons: “Fanatical Customer Service.” “Taking Risks in Advertising.” “Sell to the Head, Speak to the Heart.” “Are You Saying What They're Hearing?” “Publicize Your Name.”
My favorite piece of Shawian wisdom, however, is this oft-spoken but seldom-abided maxim: “If you're not going to make a commitment to your customers and employees, you'll never achieve success.”
To test the veracity of that statement, think of every crummy company you're ever done business with: They treat their employees like interchangeable commodities, and they treat their customers as though the customers need them, and not the other way around.
Most chapters of Shaw's book open with an anecdote/joke, many doubtless recycled from Shaw's days playing the Borscht Belt with the likes of Shecky Green and Milton Berle. It's gets a bit annoying after a while, though, because - as Ron Shaw finally learned for himself - he really is a better CEO than a comedian.
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