Wrong. It probably wouldn't mean any extra sales to end-users. What it would mean is less revenue per unit -- 5% less -- and, more important, it would mean you lied. All your customers are concerned that they have the best deal, and when we say, "Nobody gets a better price than this," that's got to be true. If we trim prices for certain accounts, we're lying. It's common, but ultimately it will hurt you.
Some customers are always looking for you to bend your rules, but if you hold out, the benefits can be enormous -- and not just financially. Recently we pitched a hot, exclusive promotion idea to a large wholesale distributor. We were going to offer a special version of a product if the consumer bought other software at the same time -- a dealer-created bundle.
The wholesaler turned us down, so we offered it to a second wholesaler, who took it. Soon dealers started changing wholesalers to get this special product, and the first wholesaler was livid. Its reps screamed at our director of sales that we had to offer the same deal to them.
We arranged a Saturday conference call with this wholesaler's chairman, and he was angry. He threatened to stop promoting our products, start pushing our competitors' products -- nothing illegal, but things that would hurt our business. I need to get this same promotion, he said; what are you going to do for me?
And we said, "No, we offered the promotion to you first. You turned it down. The other wholesaler bought it on the agreement that it was an exclusive for them. For us to give it to you would mean going back on our word." He said, "So don't give me the promotion. Give me a million dollars in cash and I'll simulate it." And I said we couldn't do that; it was ethically wrong. The call ended when we agreed to disagree, and we said we'd talk a few days later. We went away really nervous.
Monday morning the wholesaler's reps called and said they understood our point of view, they respected it, they knew we had come to them with other good ideas, and in fact they thought our ideas were so good they wanted to elevate us into their top rank of vendors. They'd compensate for this promotion problem in another way.
It came totally out of the blue. We thought we'd have a year of really hard sliding with that account, because once an account is pissed at you, it tends to stay pissed. But not at all; our stand enhanced our relationship.
What's clear is that if that wholesaler's management had pushed us around and succeeded, we would have lost their respect. And there was great temptation. I mean, it was really tempting to do something that would have been against our word.
And this is the point: while a lot of bootstrapping companies think about the consequences of failure -- "Gee, if I don't fib about this, I'm going to fail, and if I fail, I'll lose all my money, and my wife and kids, and my self-respect" -- I don't think they consider the consequences of success. What happens if you lie, and are successful? Your customers may know you lied, and employees will definitely know you've lied, and you've set up a culture in which lying's OK -- or worse, in which lying is linked with success.
The things that help make a company successful become the elements of its foundation, the stories through which new employees learn what's right and what's expected of them, and how they can succeed. Do you want those cultural legends to be about tricking others? You've got your choice.
If you create the right culture, people will do the right thing. I remember when we were working on one ad, our graphic designer came to see me, and she seemed hesitant about it. I said, "What do your guts tell you?" She said, "I just don't think we're being straight with people." If her guts told her that, she was probably onto something. She talked to the marketing vice-president about it, and we never ran the ad.
You have to realize that as a CEO, you're a role model and an example. People learn from your actions more than you ever believe. Now, we're not perfect; there are tough judgment calls every day, by people at every level in the company, and we don't always get it right. But I know that our chances of getting it right are highest only if our culture demonstrates the right values for people. The underpinnings of how you run the company give people rules they live by, and people will really believe in them and hold them dear.
It's a rare thing, this opportunity to create a culture; there's almost no place in our world where you can do that. Normally, you take culture as a given. American culture is American culture; we lament that politicians can't lead us better, that kids don't study harder, that too many people are crooks.
But when you create a company, you can create a culture -- not in wide variance with what surrounds you, but you can move values, subtly and not so subtly, in the direction you want. It's the most powerful thing you can do, to seed that culture the right way, because ultimately, that will become more important to the success or failure of your company than you are. The culture you establish will guide and teach all your people in all their decisions. And if you've got a choice about the culture you create, why build it on a foundation of fraud?
