What Seth Godin Did on His Summer Vacation
For many Inc. readers, Seth Godin needs no introduction. The marketing guru has written twelve bestsellers and his latest book, Linchpin, hit the Amazon top 10 list on the first day it was published and later became a New York Times bestseller.
As an entrepreneur, he has founded dozens of companies, some of which flopped. But one, Yoyodyne popped and was ultimately acquired by Yahoo! in 1998. Yoyodyne pioneered the use of ethical direct mail online, something Godin calls 'permission marketing' – also the name of his classic book, which Fortune ranked as the year's best business book in 1999. His latest company, Squidoo.com, is ranked among the top 125 sites in the U.S. by traffic.
So where was one of the world's most prolific writers, entrepreneurs, and social commentators this summer?
Stuck in traffic just north of Toronto. Godin was on his way to Algonquin Park, which is where our conversation about building a valuable business without losing your soul begins.
Warrillow: What took you to Ontario this summer?
Godin: I've been teaching canoeing at Camp Arowhon in Algonquin Park each summer for the last 20 years. I've taken some inspiration from the businesses along highway 11 just north of Toronto.
For example, look at Rita from The Candy Shoppe. She has an amazing business, all Rita does is sell candy so you can get everything from salted liquorice to Bassetts Sherbet Lemons to Turkish Delight -- all kinds of stuff you can't get at the average gas station.
Warrillow: Sounds like Rita is following the advice of Linchpin to become indispensable for the cottage-going candy lover.
Godin: Rita is smart; she has made her store indispensable, not just herself personally, which is an important part of growing a valuable company.
Warrillow: You write about something called 'The Dip' which I assume The Candy Shoppe has gotten past?
Godin: The Dip is the trough you go through on the path to becoming the best in the world at something. When you start a business you begin with all kinds of passion and energy. Then somewhere along the line you have to tackle the less interesting parts of running a business and your motivation wanes. In The Dip, progress is slow and you're tempted to give up and that's what most people do.
Some people press through The Dip and they end up becoming among the best in the world in their field. Rita at The Candy Shoppe is among the best at selling candy. She is not tempted to sell doughnuts or propane or wild blueberries, which is what the other forgettable retailers on the same highway have done. All she does is sell a lot of candy. Her average customer spends $60 each time they visit, which puts her among the best candy retailers in the world.
Warrillow: I think a lot of business owners might feel like they have been in The Dip over the last few years given the overall state of the economy. How do you know if you're in The Dip or just struggling through The Great Recession like everyone else?
Godin: I think it is important to understand we're in the midst of two recessions right now: one is temporary and the other is permanent.
The first recession is the typical cyclical downturn the economy goes through every once and a while. We'll recover and the cycle will repeat itself.
The second recession is the end of the industrial age and it is permanent. The industrial age was a time when you could be located a little closer to your customers or be a little friendlier than your competitor and customers would choose to do business with you. Now that the internet has all but eliminated geography as a point of differentiation and buyers have virtually any option they could imagine available to them a few clicks away, businesses have to compete on more than location and smiles; they need to become among the best in the world at one thing.
In the industrial age, Ford used to own flocks of sheep so they could sheer their wool to make the upholstery for the seats that go into their cars. That kind of vertical integration -- and indeed the industrial age itself – is over.
Warrillow: OK, assuming you're focused on becoming the best in the world at one thing and you still feel like you're banging your head against the wall, how do you know when to quit and when you are just in The Dip and about to emerge on the other side?
Godin: First, I would say don't start a business unless you have the emotional commitment to stick it out through The Dip. Every business goes through it. I used to own a directory of law firms and I quit when it got hard and tedious. In retrospect, it was a big mistake.
Assuming you have the emotional commitment to stick it out, look for two things that will give you confidence that you will make it past The Dip: Ask yourself, 'Has anyone else succeeded at what you're attempting.?' For example, when biochemistry gets really hard, an aspiring doctor needs to take solace in the fact that every practicing doctor eventually got through.
Second, although your overall business may not be where you want it, look for other sign posts that say you're moving in the right direction. For example at Yoyodyne, despite a couple of cash-flow crunches, our average contract size kept growing. We started doing ten thousand dollar contracts and eventually we got a couple of one hundred thousand dollar projects, which ultimately led to million dollar contracts. Our average contract size was a good indicator that we were moving in the right direction and needed to keep pushing through The Dip.
Warrillow: I'm glad you brought up Yoyodyne which was a company dedicated to bringing a sense of ethical behavior to internet marketing. You sold it to Yahoo! in 1998 and stayed on as a VP with Yahoo! for a year. Is it possible to sell your business without losing your soul?
Godin: I think you need to understand that the moment you take outside investment for your company, you've sold your business and the only question is when you will exit. Your investors will want their money back so it's just a matter of time.
As to whether you can keep the soul of your company intact through an acquisition, I think it depends on who you sell to. If the new owners answer to the same constituency as you, it's possible to keep your soul intact. However, if you sell to someone who answers to a different constituency, you're going to struggle to nurture your culture.
For example, the founders of JetBlue started their airline to create a better experience for travelers. They answered to their customers – not a venture fund or a private equity outfit. They decided to differentiate by having the very best people and instead of having training and marketing as two separate departments, they put both functions under one vice president of marketing and training, Amy Curtis-McIntyre. If you're going to differentiate on the customer experience, then training your people has to be a function that lives with marketing. That's the kind of decision you can make – you have to make – when you answer to customers as your one and only constituency.
JetBlue's new owners try to please customers so that they can please their shareholders. It's a subtle but important difference. Now when you fly JetBlue, there is big difference between staff who were trained by Amy and those that came after.
Warrillow: What's next for Seth Godin?
Godin: Since writing Linchpin I'm focused on encouraging people to do work that matters. I wake up every morning trying to provide something worthy of the platform I've been fortunate enough to be given. In fifty years, do you want your grand kids to know you filled out forms all day or that you did something that mattered?
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