In Search of Small Giants

Looking for companies that choose to be great instead of big.

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The term "small giants" was not in my vocabulary two and half years ago, when I began looking into the phenomenon of companies that turn down growth opportunities because they have higher ambitions. Frankly, I wasn't even sure that it was a phenomenon, let alone that my research would lead me to label such companies Small Giants, as my new book is called. All I had to go on was one example, Zingerman's Community of Businesses, about which I had just written an article. (See "The Coolest Small Company in America," January 2003.)

That company had started out in 1982 as Zingerman's Delicatessen, located in Ann Arbor, Mich., and had been extremely successful. Within 10 years, it had a global reputation and a devoted following around the country. Its two owners had had the opportunity to roll the concept out nationally, either by selling franchises or by spinning off clones in other college towns around the country, but one of the owners, Ari Weinzweig, decided he wanted nothing to do with such a plan, which he felt would lead to mediocrity. Instead, he and his business partner, Paul Saginaw, came up with the idea of creating a local network of food-related businesses, all of them committed to Zingerman's goals of "great food, great service, and great finance," and all deeply rooted in the Ann Arbor community. In the course of implementing the plan, the company developed an extraordinary culture that proved irresistible to people who normally wouldn't consider working in a business of Zingerman's size, including successful entrepreneurs, M.B.A.'s from top-tier accounting firms, and erstwhile big-company executives.

My experience with Zingerman's made me wonder how many other companies had made similar choices. I'd run into a few during my 21 years at Inc., and I suspected that, if I looked hard enough, I could find more. But I had no idea how many there were, how difficult they would be to identify, where they would be located, which industries they would be in, or even what exactly they would have in common with one another that would distinguish them from other companies.

I began by spreading my net as widely as possible. I asked everybody I knew to recommend companies. I searched the Internet. I looked in magazine and newspaper databases for profiles of businesses that might qualify. Inevitably, there was a subjective element in my decisions about which companies to include. In an attempt to minimize the subjectivity, I added some criteria as I went along. First, I decided to restrict myself to companies started or owned by people who had actually been faced with a decision and made a choice. Second, I focused on companies that were admired and emulated in their own industries. Third, I looked for companies that had been singled out for their extraordinary achievements by other independent observers. Finally, I looked only at private, closely held companies--that is, companies whose owners were in a position to choose the path they wanted to take. Unlike the leaders of public companies, they had the ability to decide that they would forgo earning the biggest possible return on their investments in order to pursue other goals.

It didn't take long for me to discover that there were many more companies fitting my criteria than I had imagined. They were in every corner of the country and in almost every industry. (The exceptions were industries in which companies have to achieve certain economies of scale rapidly to compete effectively.) There were retailers, wholesalers, manufacturers, service companies, professional service firms, and artisanal businesses.

Because there were so many companies to choose from, I had the luxury of focusing on those I thought would give me the broadest and deepest sense of the phenomenon. I looked for diversity in terms of size, age, location, and type of business, but I also looked for companies led by people who had taken the greatest advantage of the freedom they'd been given as a result of their decision to limit growth and to remain private and closely held. That's the real payoff here. When you're hell-bent on maximizing growth, or when you bring in a lot of outside capital, or when you take your company public, you give away much of your freedom. As the head of a public or venture-backed company, you're responsible to outside shareholders whose interests you must always consider. As the head of a very fast-growing company, you're a slave to the business, which has tremendous needs. People who choose to keep their companies private and closely held and to place other goals ahead of growth get two things back in return: control and time. The combination equals freedom--or, more precisely, the opportunity for freedom. I wanted to include those who had made the most creative use of it.

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