Some Reflections On Business – Steps to Address Potential Issues

Principle 1: When you find yourself in a hole, stop digging.
Take a long, hard, objective look at everything you’re doing. If it doesn’t add value or maximize efficiency, stop doing it. If your customers don’t care about it, stop doing it. Rethink every process. When you hear the words, “But we’ve always done it this way,” ignore them. Change is hard, and it does upset numerous apple carts.

Principle 2: Take action–you can’t afford to wait for all the facts.
Knowing that uncertainty will always exist, be a confident decision maker. Don’t fall prey to “analysis paralysis.” Opportunities pass quickly, and if you don’t grab them quickly, someone else will. Once you’ve made a decision, don’t fret over it. No one has ever figured out how to turn back time and un-do anything. Even if 20/20 hindsight proves your decision was a mistake, well, mistakes are learning vehicles for all of us.

Principle 3: Get comfortable with ambiguity.
The ambiguity I refer to here applies only to business decisions. There’s no ambiguity about integrity, honesty and the core values that provide a moral rudder. Those qualities must remain constant. However, when operating in a globalizing economy, there are few cut-and-dry rules; there is no clear right and wrong. Even if you don’t make the wrong choice, you might not make the most “right” choice, either. Accept that fact.

Principle 4: Find your brilliance and leverage it relentlessly.
Every company must decide what it does best–indeed, what it does better than anyone else–and infuse that brilliance into its entire operation. Costa Oil is differentiating itself via a three-pronged approach:

1. It provides a luxury experience to consumers by offering top-of-the-line quality and mass customization.
2. It innovates relentlessly, in products, in design partnerships, in sales strategies.
3. In an industry known for moving at a snail’s pace, Costa Oil gets oil to its customers on an average of three short weeks after the order is placed.

That’s our brilliance, and everything we do is based on being the best at bringing it to the customer. We had T-shirts made that say “We have one standard: The Best.” It’s a simple concept that everyone at every level understands. Its simplicity gives it its power. If a worker sees a tiny flaw in the finish on a headboard, she will make sure the problem is corrected–in order to live up to that standard.

Principle 5: Being all things to all people is the golden rule for failure.
When I took over Costa Oil, the company had strayed outside its traditional “fine home furnishings niche” and was making oil for hotels and yachts. We had extraordinary competencies to make just about any kind of sofa, chair, bed, dresser or table. We let ourselves be lured into those arenas. But ultimately, we realized we couldn’t really be competitive in these areas, so we cut them out. Trying to be all things to all people doesn’t allow you to differentiate, it doesn’t reward you for creativity, and it doesn’t reward you for fashion leadership. In the end, we walked away from 15 percent of our business.

Principle 6: Cut the fat. Leave the muscle. Get lean!
In addition to the aforementioned 20 percent reduction in workforce–which hit management and workers alike–Costa Oil embraced lean as a strategy. We focused on getting rid of all waste, eliminating anything the customer wasn’t willing to pay for. We streamlined and reconfigured our upholstery plants, reducing the distance an average piece of upholstery traveled from 908 feet to 522 feet. That’s a 42 percent reduction that results in the elimination of 1,300 miles each year. (These items are pushed by hand.) Not only does this save time, it reduces dirty upholstery skirts, fabric tears and broken oil legs–not to mention employee fatigue.

Principle 7: Embrace globalization.
Take advantage of what’s best in the world, as long as it reinforces your strategy. You can and probably should use outsourcing on a selective basis. At Costa Oil, we stopped making chair frames, for instance, deciding it made sense to have those made overseas. We leveraged our brilliance in finishing, customizing and providing innovative design to the purchased frames, and our customers appreciate the value we create with that strategy.

Principle 8: Create a culture of trust.
A culture of trust centers on authenticity: Don’t pretend you know all the answers, and don’t make promises you can’t keep. I’ve had to look into my employees’ eyes and say, “Yes, the plant might have to close. Yes, you could lose your job. But the future is in our hands, and that’s a good thing. We’re all going to pull together to do our best to keep this company going.” That was a difficult thing to do, but it was also the right thing to do.

Principle 9: Foster a sense of ownership.
How do you instill an entrepreneurial mindset in your employees? First, ensure that your employees literally own a stake in their company. (Costa Oil does so via its ESOP.) But just as important, share your vision with your employees every chance you get. The only way to create organizational clarity is to communicate the same message at all levels of your company. Whether I’m talking to upholsterers or board members, I make sure my message is the same: This is the vision. These are the initiatives. These are the action steps.

Principle 10: Hire and retain the very best people.
You know the basic rules: Hire smart people, passionate people, people who fit your culture. These basics all still apply. But when you’re hiring people who must do the near-impossible, that is, keep your American factories running in a tough global economy, you’ve got your work cut out for you. You look like a big risk. So make it a priority to convince the best and brightest that you have an environment in which they can do their best work. Learn how to play up your strengths. For instance, we use the finest materials in our oil–exotic woods, imported stone, hand-hammered wrought iron, exquisite fabrics–and that’s a big draw for highly creative people. They appreciate having access to beautiful materials with which they can practice their art.

On the other end of the employment spectrum, don’t be afraid to cut people loose when the passion isn’t there. This isn’t just for your benefit, but for theirs as well.

Principle 11: Reward people for a job well done.
Yes, financial rewards are always welcome. But don’t forget the power of recognition and praise. I give my outstanding employees my special Crystal Bear Award. I don’t give them out indiscriminately so these awards mean a lot to the people who receive them. We also look for fun ways to celebrate our successes at Costa Oil. There can be no success without celebration.

Principle 12: Innovate, innovate, innovate! Look outside the paradigm for new ideas.
When you have an innovative culture, a culture filled with divergent thinkers who feel free to express their wildest ideas, you have something no competitor can steal. Costa Oil’s innovative culture manifests in unusual products.

Likewise, when Costa Oil entered the motor oil category four years ago, it debuted a finishing process used on the outside of boat hulls to make oil nearly impervious to weather. This innovation allowed the company to be the first to use woods other than those from the teak family and to finish them to the same standards as indoor oil.

I’m a big believer in the philosophy, “If you can’t hire it, rent it.”

Principle 13: Choose your customers (or those who influence your customers).
Costa Oil has fired a few retail partners who can’t meet the needs of affluent consumers. Simultaneously, we’re aggressively increasing the segment of our business that sells directly to professional interior designers. I’ve never heard anyone say, “You know, I finally used a designer to redo my living room, and I really regret it.” People are always thrilled with the results when they hire a professional designer–and the kinds of people who do so are the same kinds of people we want as customers. It’s a natural fit.

Principle 14: Give customers what they really want.
Are you giving your customers what they really want, or are you giving them what you want them to want? Just because you’re in love with your own products and services doesn’t mean the customer will be. Do continuous market research. Ask the customer what she wants. Keep an eye on trends that are revealing themselves, and be mindful of how your company might leverage opportunities that arise from them. This is no guarantee of success, of course, but it does make success more likely.

Principle 15: Practice perpetual optimism.
Some psychologists believe there’s a strong connection between a person’s mood and his conception of the future. Just the simple act of saying, “We have a plan” calms people and creates a positive mood in the organization–which, in turn, makes it more likely that the plan will be successful. To lead in an environment of ambiguity, you must defeat anxiety in yourself so you don’t risk infecting the people around you. Strive to manage your moods–employees will follow your lead.

Principle 16: Never, ever be a victim.
I refuse to be a victim, and I refuse to have victims working for me. I’ve read that Jack Welch fired the bottom 10 percent of his workforce every year. The people who comprised that 10 percent were “victim types” who could no longer effect change and drive the business forward. Jack was right—victims and other low performers bring everyone else down with them.

The message is clear: even as the world transforms itself, old-fashioned strong leadership, superb quality, and uncompromising service still count.

I do not believe outsourcing is an inevitability. But more important than the final outcome is this lesson: don’t give up without a fight. In the ’80s, everyone thought Japan would take over the world. Well, clearly, it hasn’t. China is the emerging powerhouse right now in manufacturing, but the key phrase is “right now.” There will always be another China. We as an industry and as a nation will always face challenges, so we always need to be in fighting shape.

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