Another example is Righteous Babe, the music company founded by singer-songwriter Ani DiFranco. (See "Don't Call Her an Entrepreneur," September 2004.) She had been wooed by numerous record producers, who saw her star potential early on, but she turned them down and stuck with Righteous Babe because she didn't want to be part of a giant corporation. Starting with a few audiotapes of herself playing her songs, DiFranco and her partner, Scot Fisher, built a diversified music business, including a music publisher, a touring company, a retail operation, a real estate developer, a foundation, and a concert hall, not to mention one of the few successful artist-created labels around, with offerings from more than a dozen musicians.
What is most striking about Righteous Babe are the extraordinarily close relationships it has with the people it touches--its employees, distributors, concert promoters, publicist, booking agent, CD manufacturer, cover designers, printer, and, above all, customers. Staff members, for example, respond with handwritten notes to thousands of letters the company gets from DiFranco's fans. The result is a powerful sense of community and a level of devotion seldom seen in any business, particularly one that can be as cutthroat as the music business. "Sometimes I think what we're doing here is creating our own little utopia," says Fisher. "Ani and I joke that we live in a fantasyland of honest people who treat each other with respect. Our promoters would no more cheat us than they would cheat their own mothers."
Or consider Anchor Brewing, the San Francisco company that transformed the beer industry with its pioneer microbrew, Anchor Steam Beer. The beer itself had been around for almost 70 years when Fritz Maytag (yes, one of the washing-machine Maytags) arrived on the scene in 1965, just in time to save the brewery, whose bank balance was down to $128. Maytag bought the company for a few thousand dollars and began to educate himself in the art of beer-making, over time producing a new, improved Anchor Steam that became so popular the brewery ran out of capacity and had to begin rationing what it made. Eventually, the operation moved to a larger building, where it produced a variety of handcrafted, high-quality beers.
That was the beginning of a revolution in the industry. As other microbrews began to appear around the country, the demand for Anchor's products continued to soar. With another capacity crisis looming in the early 1990s, Maytag made plans to raise capital for expansion by taking the company public, but he pulled back at the last moment. "I realized we were doing the IPO out of desperation--because we thought we had to grow," Maytag recalls. "It occurred to me that you could have a small prestigious, profitable business, and it would be all right. Like a restaurant. Just because it's the best around doesn't mean you have to franchise or even expand. You can stay as you are and have a business that's profitable and rewarding and a source of great pride. So we made a decision not to grow. This was not going to be a giant company--not on my watch."
After spending time around these extraordinary companies and talking with the people who built them, I couldn't help thinking about what they have in common. Or, to put it another way, what are the characteristics and practices that allow someone to create a Small Giant? In the end, I came up with five imperatives:
Know yourself and what you want out of business. The Small Giants' owners and leaders are remarkable, first and foremost, for the clarity they have about their goals in business. They can decide not to go for maximum growth because they know what else they are looking for and why.
Love your business. The Small Giants' leaders are unusual for the passion they bring to their companies. They absolutely love whatever it is that the company does, and they care deeply about doing it as well as it can be done.
Be rooted in a community. Each of the Small Giants has a close connection with the local city, town, or county in which it does business--a relationship that goes beyond the usual concept of "giving back." While all of these companies are model corporate citizens, the relationship is very much a two-way street. The community also helps to mold the character of the business.
Cultivate relationships with employees, customers, and suppliers. With customers and suppliers, the Small Giants emphasize personal contact, one-on-one interaction, and mutual commitment to delivering on promises. The effect is to create a sense of community and common purpose. The companies treat their employees in the way that the owners think people ought to be treated--with respect, dignity, integrity, fairness, kindness, and generosity.
Stay private and closely held. Finally, the owners are keenly aware of the need to keep ownership inside the company. If you have outside investors, you are both legally and morally obligated to try to give them what they want in exchange for their investments, and what they generally want is the best possible return. Of course, the Small Giants' owners also want a return, but it's not their paramount purpose. By keeping the stock inside the company, they're free to pursue other goals.
Businesses are the building blocks not just of an economy but of a way of life. What they do and how they do it has an impact beyond the economic sphere. They shape the communities we live in, the values we live by, and the quality of the lives we lead. If businesses don't hold themselves to a high standard, society suffers. There are no businesses that hold themselves to higher standards than do the Small Giants.
