Clockwork: Design Your Business to Run Itself

by Mike Michalowicz

  With this new knowledge, Gary took a fresh swipe at identifying a community. He asked himself what distinct elements about his favorite customer were also something that people formed communities around. She owned a successful bakery. That was one piece. She was overwhelmed with work. That was a second piece. She was a single mom entrepreneur. That was another. She also hated her mom. There was yet another.

  With the four pieces identified, Gary asked himself, what elements spoke to his interests the most? Big G really enjoyed the bakery business aspect, because he loved manufacturing and that is what this basically was. He also felt he could empathize and support the single mom entrepreneur better than most vendors, since he was raised by a single mom entrepreneur and is a single parent himself. The other elements were not areas where he had interest or could contribute.

  With the two elements identified, he ran the big test. Were there congregation points? With the power of Google, the answer was easy to find. Gary searched “bakery associations.” Simple enough, right? Sure enough, he found the American Bakers Association, the American Society of Baking, the Independent Bakers Association, and more. He found online forums. He found Facebook groups. All of this meant that this was an established community, and that they congregate. That is opportunity!

  When he searched for “single mom entrepreneur association,” he found nothing. When he searched for “single mom entrepreneur group,” he found one meetup group with twelve members. There is no question this is an important group of entrepreneurs, but it is not an opportunity for Big G to serve. The congregation points are not established, so breaking into the community will be very hard.

  Gary decided to go after bakeries. He spoke with his best client, who was already a member of one of the associations, to get some suggestions on how to get involved. With that, Gary was off to going where his best prospects congregated. And like a good yeasty bread, his business started to rise.

  Other people identify niches too broadly. They want to work with “rich people” or “small businesses.” Those are broad communities, and while they may have congregation points, the knowledge shared is general and their needs are all over the place.

  You need to identify a community that meets repeatedly at one or more congregation points to address their specific needs and wants. This is an area where you see the same prospects, vendors, and influencers appearing over and over. It doesn’t need to be a physical meetup. It could be a Facebook group. It could be subscribers to a podcast or magazine. Ideally, there is a combination of ways for them to connect and learn. When you see this repetition of gathering and learning for a specific community, it means that you can gain access to the community and build a reputation for being the provider of the specific solution they need.

  So let’s find your whom. What follows is a super-short and complimentary version of the method I detailed in The Pumpkin Plan. If you haven’t read that book, the next exercise will be enough to get the clarity you need to Make the Commitment. If you’ve already “Pumpkin-Planned” your business for explosive growth, please do this exercise anyway. The congregation point qualifier will give you new insights about your Top Clients.

  First, evaluate your existing customer list. Sort them by revenue from most to least. This is important because the people who spend most on your product or service, particularly if they repeat purchases, are demonstrating through their behavior that they value you the most. Don’t trust people’s words; trust their wallets. In other words, people can say how much they love you until they are blue in the face, but it is the action of spending money with you, or not spending money with you, that points to their true feelings.

  Next, evaluate for the crush or cringe factor for each customer on the list. In other words, do you love them (crush), hate them (cringe), or feel somewhere in between (you know, a crunge)? You will automatically provide great service to the customers you love the most because it comes naturally to you. Conversely, you will find yourself avoiding or delaying work for the customers you hate, and the people in between will get hit-or-miss service from you.

  Then, document the community each customer is in (industry, vocation, consumer group, or transition point).

  Finally, determine all the congregation points. These are all the places where they hang out together in an organized group.

  CRUSH / CRINGE ANALYSIS

  CUSTOMER

  CRUSH/CRINGE

  COMMUNITY

  CONGREGATION POINTS

  I need to make a critical point to you. It is your interest in the community and the fact they have congregation points that is the most important thing. This is more important than how much you love your current customers. Having a great customer to clone is extremely helpful, but you can access a community even without a single client in that community. Further, a crush or cringe client may not represent the nature of their community.

  The same is true for the customers you love. Realize that they represent a shortcut to the industry and possibly other great prospects. (Good people hang out with other good people.) Also realize that you may have bad customers within a great community, and that your jack-wad of a client is just not representative of that community and may not be the best way in.

  The first lesson is to judge the viability of a market based on its congregation points. If it has many of them, and the community is active in multiple, that is proof that they are sharing with one another through established channels. Channels that you can access. Channels that you can market through. Channels where you can easily get a reputation for excellence. If you can’t identify any congregation points, or if the points you do locate are few, scattered, and unestablished, you are in for a long slog. It is hard to be discovered when the community can’t even find itself.

  The second lesson is to go narrow and build toward broad. Most business owners try to start with a broad community and narrow their way down, and it doesn’t work. For example, you may say your niche is the wine industry. But that could include vineyards, wine stores, wine distributors, importers, and exporters. The list goes on and on. Within the wine industry there surely are congregation points, but the same people don’t go to all of them. That is key to finding a narrow niche—where the same people go to the same congregation points.

  When you serve a broad niche—which is another oxymoron, like “act natural,” “unbiased opinion,” or “Kim Jong Un’s hairstyle”—you may have to deliver variations of your product or service. What vineyards need may be different than what wine stores do. But the biggest problem is that the broader you go, the more expensive—both in time and in money—it becomes to be in front of the same group. They don’t cross talk to one another, either, which makes scouting new prospects difficult and referrals almost impossible. It is less likely that a vineyard will be sharing best practices with a wine store, because they are in dissimilar businesses. It is more likely that vineyards will share with other vineyards and wine stores will share with other wine stores.

  The problem amplifies, in that if you try to narrow your niche, you will be abandoning some established customers. Say you decide that wine stores are your best opportunity after all. Now you will need to take more and more attention away from vineyards, distributors, etc., and, by default, decrease your offering quality for them. Most business owners decide to start with a broad niche (which, I want to remind you, is not really a niche) so they have diversity and can get more opportunities. The result is they are actually diluting the quality of their offering and they will incur more expense in both time and money trying to break into the market.

  SAMPLE CRUSH / CRINGE ANALYSIS

  CUSTOMER

  CRUSH/CRINGE

  COMMUN
ITY

  CONGREGATION POINTS

  Example Customer

  Crush

  Flooring Tile

  The National Tile Association

  ABC Company

  Cringe

  Vineyard Owner

  Winetime Podcast Winecon

  XYZ Inc

  Crush

  Long-Haul Trucking

  Freight Carrier Association

  The Carco Conference

  Take a lesson from Brian Smith, the founder of UGG. Years back, I spent a day talking to him about the stratospheric success of UGG, which I documented in my book Surge. I asked him, of all the things he did, what was the most impactful on his business success? “It’s the niche, Mike,” he said instantly, with an Australian accent: neesh.

  The achievement of UGG’s household brand recognition is due to its first ten years of niche concentration. UGG sold to the surfing community. The product was mastered for surfers—the material, the height of the boot, and the overall design were all created with surfers’ needs in mind. Specifically, needing warm, dry feet. (The ocean is frigid in winter.)

  By targeting a narrow niche, you master the next part of the Commitment. When you know whom you are serving, you align your QBR to best serve them. UGG figured out that surfers were the whom. Brian’s QBR was the delivery of functional footwear. Of all the communities in the world, Brian loved the surfing community. That is who he is. He quickly determined the whom, then spent the necessary time (years, in fact) in improving and improving how he served them. He improved the design. He built and strengthened the relationships with the influencers. He became world famous for his perfect product, in a tiny world. That needs to be your aspiration, too: to become world famous in a select, small world. That small world will then carry you on its shoulders to the bigger world.

  THE HOW

  So how do you service your whom? What do you do that benefits them more than anyone else can benefit them? The core concept is to refine your offering to your best customers until you get something they are ecstatically buying and recommending. And do this the whole time while ensuring you are delivering what is aligned with your QBR.

  The QBR is what your company thrives (or dies) by. The how is the way you piece together the QBR, and all of the other elements of your business to deliver what you do, to your clients.

  The underwear company Nation Up North (NUN for short) did this. They found a community to serve: chefs. They tested their product, changing the materials and the shape to suit chefs’ needs. They discovered the problem that needed fixing more than anything—a little problem called “waiter butt.” (I know. It makes the food sound real tasty, right?) Waiters, chefs, and staff sweat a lot. Restaurant kitchens, as a rule, are not air-conditioned well or at all. There is just no effective way to cool a kitchen that is throwing off way more heat than air conditioning could ever handle. So kitchens can be 15 to 20 degrees Fahrenheit hotter than the ambient temperature. The NUN undies, with their design being loose where it needs to be loose and wicking sweat where wicking is critical, resolved “waiter butt.”

  It took NUN a lot of iterations to get its “waiter butt” undies right. Once it mastered the product, the chef community talked about it. Undies moved off the shelves and onto people’s bottoms. NUN was quickly acquired.

  Know your QBR first. That is your and your company’s heart. Then know the whom. And pair it with the how. You now have your Commitment, and your ability to run a Clockwork business depends on you honoring that commitment.

  * * *

  After I wrote and published my first book, I discovered my authentic whom: mom entrepreneurs who were entering or reentering the workforce after their children reached an age that gave them enough freedom to run their own business part-time. Many people suggested my niche was small business owners, but I knew it was all about mom entrepreneurs as I was building my business. Did other people read my book? Absolutely. And I love them for it. (Shout-out to the dudes slogging their way through entrepreneur-land. I see ya, my brothas.) But had I focused on the broader community of small business owners right out of the gate, I wouldn’t have been noticed. I lived the lesson Brian Smith taught us: If you want big success, you need to first focus on a small community, and then empower that community to carry you to bigger markets.

  Choosing my community affected how I wrote my books, and how I marketed and sold them. When I found where the mom entrepreneurs congregated and showed up—at conferences and retreats hosted by other mom entrepreneurs, like Angela Jia Kim, who were achieving impressive business growth—that community carried me not only to other mom entrepreneurs, but also to other niche groups within the broader community of small business owners. And the best part of all of that strategy was that I grew my audience, and my business, with minimal effort. See how that works?

  CLOCKWORK IN ACTION

  Fill in the whom and the how: Our commitment is to serve [whom] by [how]. Then post this statement on your desk for you to see, and somewhere in your office where everyone can see it.

  Now that you know how to balance your team, consider who on your team has the right traits or instincts to serve your customer community. Based on this assessment, are they in the right role?

  CHAPTER EIGHT

  STEP SEVEN: KEEP AN EYE ON YOUR BUSINESS

  I know an entrepreneur who, once he reached a point where he could stop doing the “grunt work” and focus on managing his staff, said, “Screw doing the work, all I want to do is move the pieces on the chessboard.” I didn’t like the way he stated that, because it sounded manipulative. He saw people as pawns, and that’s total bull. He saw himself as the king and his colleagues as simply part of his fiefdom. Controlling or dictating others does not jibe with me. So don’t you dare see your people as pawns on a chessboard. I’ve got my eye on you.

  But what I did like about the chessboard metaphor was the idea of putting the right people in the right roles and guiding them to the right results. A chessboard has different pieces with different capabilities, just as a business has different people and different technologies and different systems, all with different capabilities. A master chess player moves the pieces strategically to achieve the victory. Your job is to put the different pieces in your business in the best places to move your company forward. But a more apt visual is of a dashboard that allows you to keep your thumb on the pulse of your business. A dashboard has simple gauges that show you how you are progressing. Similar to a dashboard in your car—or, if you’re feeling fancy, the control panel in an airplane.

  In chapter six, you learned how to balance your team so that the right people are doing the right things, in the right portions, right. Your team and their roles, tasks, and 4Ds can be part of your dashboard, for sure. Over the years, I’ve added metrics to my dashboard and taken others away. Getting your business to run like clockwork is more than just putting people in the right roles; it’s about measuring the right aspects of your business so that you’ll be able to spot a problem from outside the business when something needs tweaking.

  If the idea of metrics is getting your undies in a bunch, don’t sweat. It is not nearly as daunting as it sounds. You don’t need to be a mathematician or engineer. You simply need to pick the critical things you want to measure.

  KEEP IT SIMPLE

  The simplicity of it all can be shocking. I connected with Kevin Fox, the founder of Viable Vision, a company that specializes in manufacturing efficiency. At the end of the day, every business is a manufacturer, meaning we start with raw goods (or in service-based business, raw ideas) and then assemble those goods to deliver an end product. Manufacturers go through a sequence of steps to make th
ose goods. In short, there is a lot to learn from manufacturers, in particular, manufacturing efficiency. As I spoke with Kevin, he shared powerful stories on how to find the bottlenecks in a business—the points where the business slows down.

  Just like a chain, only one link can be the weakest. Once you strengthen that link, another link by default will become the weakest. We need to focus our attention there. But how do you know the weak link is fixed?

  “With a metric,” explained Kevin. “It doesn’t need to be some fancy computer system reporting a flashing number to a flat panel screen in the manager’s office. In fact, I recommend simple measurements, things that you can see and evaluate in the moment without the need for calculations or computer algorithms. Something like the blue light measurement.”

  When Kevin said this, my mind instantly went to the Kmart bluelight specials. Blue lights flashing and people flocking to the racks for the specials being offered. Turns out, I wasn’t that far off. Kevin shared a story of a car bumper manufacturer that hired Viable Vision to improve the company’s efficiency. Kevin and his team went to the manufacturer to seek out bottlenecks where things were waiting to get done. Sure enough, right in front of the welding station, inventory was piling up, sitting there . . . waiting. Your business’s bottlenecks will reveal themselves in the same way. Right before the bottleneck, things will pile up and wait. Time just wastes away.