A Bigger Wheel

Chris Zane's bike shop was healthy and profitable. To grow it, though, he would have to act like a CEO.

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Growth Strategies

In Branford, Conn., Chris Zane is something of a minor celebrity among the elementary-school set. "Hey, that's Chris Zane!" gushes a 10-year-old boy who spots him one day. "Man, he is so lucky!"

And so it would appear. Zane owns the biggest bicycle shop in the area, he drives a Porsche Boxster on the weekends, and he's even shared the stage with Apollo 13 astronaut Jim Lovell. When Zane overhears the kid's comment, he smiles -- but it also rankles him. Lucky? Sure, there's an element of good fortune to his success. Not everyone, for instance, has parents who are willing to help their 16-year-old acquire the assets of a failing bike shop and then help him run it until he graduates from high school. (See " Leader of the Pack," February 1996.) But Zane, now 35, knows that no one builds a business on happy coincidence.

What luck boils down to, more often than not, is the ability to choose the right open door and walk through it, sweaty palms and all. That's difficult enough for fledgling CEOs of start-up companies, but it's even tougher for owners of established businesses who have something to lose -- and who can become so preoccupied with what's working right now, or what's not working, that they can't imagine a different future. The desire to stay with the game plan is understandable: you can become scattershot if you embrace every growth scheme that comes your way. Entrepreneurial hyperactivity can mortally overtax your resources and capabilities and jeopardize the very core of your company. Little wonder then that so many CEOs stick to their proverbial knitting, often settling for growth strategies that are linear and limiting. For Zane's Cycles, such an approach might have meant opening new retail locations or expanding the product line -- options that Chris Zane considered and rejected.

Instead, he found himself responding to a market opportunity that most bicycle dealers would have dismissed out of hand, deeming it too far removed from their core business and too risky. But the fiercely competitive, iconoclastic Zane recognized a door ajar when he saw one. What he didn't know at the time was how a move into a new market, premiums, would ultimately force him to rethink not only his own strengths and weaknesses as a company builder but also how his business was structured and what it was that Zane's Cycles was really selling in the first place. In other words, it would force him to think and act like a CEO, rather than merely like the owner of a cycle shop.

Doubling his company's revenues would be just a lucky side effect.

Recognizing opportunity
Zane came upon the door in question without warning.

Eight years ago, a marketing manager at Chesebrough-Ponds, a consumer-products company, asked Zane if he'd be interested in selling Trek mountain bikes to the company as part of an incentive program for salespeople. Zane says, "I saw the opportunity in that business, but I didn't know how to position myself to do a good job in it." Bicycle dealers generally stay away from the premiums market -- also called "special markets" -- because their suppliers, by and large, won't allow their products to be shipped directly to the consumer unassembled. It's up to the dealer to assemble and repackage the bicycles for shipment. Trek also has strict rules that prevent dealers from selling bicycles directly to consumers by means of mail order, a practice that could jeopardize dealers in other markets. It seemed at first blush as though the premiums business would be more trouble than it was worth. It would not have been surprising had Zane politely declined Chesebrough's offer.

But Zane went ahead and called John Burke, then Trek's vice-president of sales and now the company's president. Burke gave him the go-ahead but added a stern warning: if Trek bicycles ended up in other geographic regions poorly assembled, so that local dealers were compelled to fix products they hadn't sold, that would be the end of Zane's foray into special markets. Also, Burke said, Zane would need to ship every bicycle directly to the end user rather than bulk-ship to a single corporate address; that way Trek could be sure its bicycles were going to individuals and not being diverted to retailers for resale. For Zane, there were potential inventory problems. He would need to buy and store enough bicycles to accommodate Chesebrough's incentive program without knowing how many salespeople would actually reach their goals and earn bicycles. "They gave me a purchase order for up to 125 bicycles," says Zane -- a lot of bikes for a store used to stocking only 450 bikes. "If they couldn't use all of them, I'd be stuck with the inventory and have to unload it in the store."

Nonetheless, Zane believed that the probability of success with the premiums program outweighed the risks. The Chesebrough program would require him to make very few capital expenditures. He already had enough manpower in his three-person shop to handle the orders, and he was confident that the customer-service culture he had worked so hard to build would serve him well in the new market. He had made a name for himself in the industry by offering his customers lifetime free service, guaranteed lowest pricing, and a host of other perks. "I thought that if I went in with a service attitude and did my fulfillment better than anyone else, then it would be a success," says Zane. The Chesebrough deal would be his beta test.

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Donna Fenn

Inc. contributing editor Donna Fenn is the author of Upstarts! How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009). Both this blog and the book examine the ways in which GenY is changing the entrepreneurial landscape with new approaches to starting, growing, and managing their companies. Learn more at http://www.upstartsrock.com/.

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