Is Constant Reinvention the Key to Success?
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Leadership Aug 4, 2014

Is Con­stant Rein­ven­tion the Key to Success?

An inter­view with Lloyd Shef­sky about Invent, Rein­vent, Thrive.

Based on the research of

Lloyd Shefsky

Listening: Interview with Lloyd Shefsky on the Importance of Reinvention

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In busi­ness, past achieve­ments in no way guar­an­tee future suc­cess. Endur­ing com­pa­nies — and even indi­vid­ual entre­pre­neurs — earn their longevi­ty through near con­stant rein­ven­tion. Lloyd Shef­sky, a clin­i­cal pro­fes­sor of man­age­r­i­al eco­nom­ics and deci­sion sci­ences at the Kel­logg School, as well as the founder and co-direc­tor of the Cen­ter for Fam­i­ly Enter­prise, takes on this top­ic in his new book, Invent, Rein­vent, Thrive.

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Lloyd sat down with Kel­logg Insight to dis­cuss how entre­pre­neurs, com­pa­nies, and espe­cial­ly fam­i­ly busi­ness­es can thrive in today’s mar­ket. (This inter­view has been edit­ed for length and clar­i­ty. For a longer ver­sion of our con­ver­sa­tion, check out the accom­pa­ny­ing pod­cast. You can also read an excerpt from the book — about Lar­ry Levy’s rein­ven­tion from real estate mogul to sta­di­um cater­er—here.)

Kel­logg Insight: In your book you inter­view a num­ber of CEOs and entre­pre­neurs about how they’ve rein­vent­ed them­selves and their com­pa­nies. What made you decide a book like this was necessary?

Lloyd Shef­sky: I’ve spent the last 20 years try­ing to find out what it is that makes some peo­ple suc­ceed and some peo­ple not suc­ceed, both in entre­pre­neur­ship and fam­i­ly busi­ness. What real­ly trig­gered the book was watch­ing clients who suc­ceed­ed because they rein­vent­ed them­selves — first of all, to become entre­pre­neurs, but then they rein­vent­ed their busi­ness peri­od­i­cal­ly. The length of time between rein­ven­tions var­ied — by busi­ness, by indi­vid­ual — but they were all doing it. And so I decid­ed to go out and inter­view peo­ple and find out if rein­ven­tion is real. 

KI: What are some exam­ples of rein­ven­tions that can help illus­trate their importance?

Shef­sky: The most famous exam­ple would prob­a­bly be Howard Schultz. Howard Schultz nev­er ran a restau­rant, nev­er made cof­fee for a liv­ing. He had lived in Europe and under­stood what cof­fee hous­es in Europe were about. But he had a lot of trou­ble explain­ing it.

Now, he’s a great sales­man, but he could not sell peo­ple on invest­ing in Star­bucks. He was, as he jokes, try­ing to con­vince the Amer­i­can pub­lic — who were used to bad cof­fee — that they should pay a for­tune to get some kind of dif­fer­ent cof­fee that they’d nev­er tast­ed in a paper cup and be happy.”

But that wasn’t what he was sell­ing at all. I think he was sell­ing mem­ber­ship in a club. I think the fact that you get a Doppio — you don’t get a dou­ble espres­so — was like the secret code words we used as kids when we had a club. It was a place where every­body knows your name.” It was the atmos­phere, and the con­cept of going some­where else, that made it successful.

Every busi­ness that rein­vents has a set of goals and a method­ol­o­gy for what­ev­er their rein­ven­tion it is.

The sec­ond part of Star­bucks’ rein­ven­tion began in 2008 when the world was going to hell. Star­bucks vol­ume and prof­its went down. Peo­ple thought, In this reces­sion, nobody will be able to afford to buy expen­sive cof­fee.” And simul­ta­ne­ous­ly, of course, Dunkin Donuts, McDonald’s, and every­one else were say­ing, We’re just as good as they are and we’re cheap.” So he had a mas­sive prob­lem. Howard went out and did an analy­sis. All he had to do was say, Well, the whole world is say­ing it’s a price prob­lem. Fix the price and I’ve got a solu­tion.” Instead he went out and went from store to store, and what he real­ized was that the essence of Star­bucks had changed.

And the change came down to some­thing so sim­ple: In order to get more effi­cient flow-through of prod­uct, they bought a new kind of cof­feemak­er that did three things: it elim­i­nat­ed the noise, it elim­i­nat­ed the aro­ma, and it was tall, so it blocked the customer’s view of the barista. It was no longer a place where every­body knows your name” — you couldn’t even see the per­son. By chang­ing those three expe­ri­en­tial things he res­ur­rect­ed Star­bucks. That’s a rein­ven­tion that’s going back to what you were, not going to some­thing new.

KI: A large por­tion of your book focus­es on fam­i­ly busi­ness­es, an area in which you have par­tic­u­lar exper­tise. What’s spe­cial about these fam­i­ly busi­ness­es? What unique chal­lenges do fam­i­ly busi­ness­es face when it comes to this reinvention?

Shef­sky: So, every busi­ness that rein­vents has a set of goals and a method­ol­o­gy for what­ev­er their rein­ven­tion it is. Every fam­i­ly that rein­vents also has a set of goals and a method­ol­o­gy. They’re rarely the same. It’s like play­ing chess ver­sus play­ing three-dimen­sion­al chess: You have this over­lay of emo­tion­al rules over a very sci­en­tif­ic or log­i­cal set of busi­ness rules, and the like­li­hood that both sets of rules are going to blend eas­i­ly is pret­ty remote. And the sta­tis­tics are awful. Nine­ty per­cent of fam­i­ly busi­ness­es will not make it suc­cess­ful­ly into the third generation.

So let’s assume Grand­pa starts a busi­ness and hands it on to Mom, who builds the busi­ness tremen­dous­ly. And now we come to the third gen­er­a­tion. The expec­ta­tion has to be that some­one in that third gen­er­a­tion, at a rather young age, is going to have the abil­i­ty to run a busi­ness so exten­sive that Mom and Grand­pa prob­a­bly couldn’t even run it today. These expec­ta­tions are pret­ty arti­fi­cial. What are the odds that the third gen­er­a­tion is going to go out into the indus­try and learn on some­body else’s dime and then come back and run the com­pa­ny? It takes an extra­or­di­nary tal­ent to be able to do that.

The alter­na­tive is that the fam­i­ly can hire a pro­fes­sion­al. Well, then you get into a whole set of oth­er com­pli­ca­tions. Often fam­i­ly busi­ness­es just can’t tol­er­ate that out­sider com­ing in.

KI: What do you want read­ers to take away from your book?

Shef­sky: The first thing is, rein­ven­tion is real­ly crit­i­cal. Yes, it takes con­fi­dence. Yes, it takes guts. Yes, it takes skill. But you real­ly have to fig­ure out how you’re going to reinvent.

A lot of peo­ple are afraid to rein­vent because of naysay­ers. Some say ignor­ing the naysay­ers is the answer. I don’t think that is the answer. You just have to become smarter about the prod­uct or the ser­vice or the busi­ness so that you know what part of the naysay­ing to ignore and what part to take as a warning.

I’d also say, rec­og­nize that even the best suc­cess sto­ries you can imag­ine miss things and mess up things. So that’s anoth­er kind of rein­ven­tion: After you mess up how do you rein­vent it to put it back together?

Featured Faculty

Lloyd Shefsky

Clinical Professor of Family Enterprise, Co-Director of the Center for Family Enterprises

About the Research

Shefsky, Lloyd. Invent, Reinvent, Thrive. New York, NY: McGraw-Hill, 2014.

Read the original

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