It all sounded so simple and so true.

"Grow or die." "You must be virtual." "Go global." "Capital is easy." "Everybody is an entrepreneur." "Technology makes life easier." "You must be on the Web in a big way."

The New Economy of the '90s buzzed with such mantras of the moment. A chorus of business gurus proclaimed, "Everything you know is wrong." Seasoned company owners and artless upstarts alike were persuaded to set aside experience and common sense in favor of the trend du jour.

If you were swept off your feet by the catchy slogans above . . . well, let's just say you were not alone. Some of the smartest CEOs around were also caught up by the hype swirling around these new business imperatives.

How did it happen? One entrepreneur shares his experience with Inc. senior writer Susan Greco.


Myth: "Grow or Die"
The CEO: Mike Sinyard
The company: Specialized Bicycle Components
The buy-in: "Build critical mass or be left behind"

Mountain bike pioneer Mike Sinyard thought he saw the future rolling toward him.

Specialized Bicycle Components--the company Sinyard founded in 1974--had always catered to a hard core of cross-country racers and "enduro" riders like Sinyard himself. But the builder of mountain bikes knew there were only so many enthusiasts out there.

"The market was consolidating and we decided we needed critical mass," recalls Sinyard. To compete, he figured he had better grow the company into a big, national brand.

Sinyard realized he needed to enter the mass marketplace if he wanted to really grow. So in the fall of 1995, Specialized rolled out a separate brand, FullForce, and placed it in numerous discount sporting goods chains.

"We thought we'd have a niche brand and a mass market brand," he says.

But the new strategy aroused the wrath of the company's core customer: the independent bicycle shop dealers. Their only competitive advantage in the war against the Wal-Marts of the world was to serve the enthusiast with better products that were unavailable elsewhere. With Specialized cropping up in the aisles of the enemy, they felt betrayed.

"We were hell bent on growing, and we went away from our root value of 'don't be bigger, be better," Sinyard says. "Our customers became very hot with us and told us point blank they didn't like what we were doing."

It didn't go over well with employees, either; they felt it went counter to the culture that Sinyard had created. Even Sinyard himself was troubled when he went into a superstore one day and saw his product lumped in with an aisle of alcoholic beverages.

So just eight months after getting into the mass market, Sinyard and Specialized got out. The experience proved a costly one for the Morgan Hill, Calif., company.

"It was a huge loss and a big lesson," says Sinyard. The company ended up losing several million dollars in developing the brand, ramping up, and registering the logo.

But Sinyard immediately applied the lesson. In his new mission statement he committed to serving "full-service dealers and discerning cyclists." Specialized's CEO also personally composed a letter to dealers that was printed in the trade press--an embarrassing but healing public atonement.

"Competitors called it 'Mike's mea culpa letter," Sinyard recalls.

Specialized has since regrouped and even grown within its niche: sales have gone from $150 million in 1995 to approximately $170 million today.

No longer worried about being consumed by someone bigger, Sinyard is confident in the power of his small but agile company: "I say, bring 'em on, we're ready."

(For 15 more examples of entrepreneurs led astray by myths they thought were truths, read "I Was Seduced By the New Economy," from the February 1999 issue of Inc.)

Susan Greco is a senior writer for Inc. magazine.