YOU GET THE INVESTORS YOU DESERVE

[Originally posted June 15, 2010 on the Huffington Post]

That’s paraphrasing a wisdom Warren Buffett once uttered (by the way, Warren Buffett’s lunch auction sold for a record $2.63 million last weekend in the annual charity fundraiser for Glide Memorial Church in San Francisco; this is the highest winning bid in this 11th annual event so maybe the economy is coming back!) Bill George, former CEO for Medtronic when that medical instruments company experienced the largest capitalization growth of any New York Stock Exchange company in the 90s, takes this headline one step further, “Do your shareholders choose you or do you choose them? Sophisticated CEO’s choose their investors by defining their particular business approach and strategy and assuring their investors are aligned with that program.”

This was a bell-ringing week for me … literally. A week ago, I got the honor of standing at the podium of the New York Stock Exchange to open trading on Monday morning for the world’s most well-known marketplace. On that very day, the Wall Street Journal reported that I’d sold a majority share in my company to a company owned by an heir to the founders of Hyatt. After 23 years, I was no longer the sole shareholder of my company, nor necessarily in control of my company’s destiny. How did that feel? While there’s a series of mixed emotions — just like the word “surrender” has multiple meanings, both positive and negative — I have to say that I feel like a proud father who’s married his daughter off to just the right guy. Sad at the passing of an era, but satisfied that this is exactly what’s supposed to be happening and I couldn’t choose a better partner for my offspring.

There are three kinds of investors: those focused on winning the game of “Survivor,” those focused on building relationships as their means of success, and those focused on creating a legacy who put their money where their heart is. Think of a pyramid with three levels. At the base of the pyramid - the widest point on the triangle — is the vast majority of investors, those that see investing as one constant set of transactions. These investors tend to focus on optimizing the most amount of return on their money in the shortest period of time. It is the fundamental principle behind return on investment (ROI) or internal rate of return (IRR) calculations and it is part of the basic language almost all investors use to determine whether they’ve survived in their investment practice. But, there are some investors who take a little longer view of their relationship with the company they invest in. If the “survival-driven” investor is focused on obtaining as much “milk” as quickly as possible, the relationship investor in the middle of the pyramid is more focused on the “cow” because it’s the cow that creates the milk. Happy cows make more milk. Warren Buffett says most investors forget that it’s the relationship with the cow that creates the success of maximum milk, or “moolah,” and he applies this long-term perspective to the businesses he invests in.

But, then there are those few, unique investors at the peak of the pyramid for whom investing creates pride of ownership. For them, investing could even be an exercise in self-actualization. Yes, they may be interested in return on investment and relationships may be fundamental to whom they invest with, but these “legacy” investors seek to change the world by the means of how they invest. The best advice I could ever give an entrepreneur is to create a purpose that’s so compelling and has benefit to the world beyond enriching yourself and see what kind of investors pop up in your life as a result of manifesting this kind of dream.

Over the past couple of years, I’ve met with dozens of investors who’ve done their due diligence on our company. The process isn’t a whole lot different than a beauty pageant with judges measuring your body parts and asking you open-ended questions. Some judges saw us purely as a vehicle for maximizing return. They were looking for “36-24-36.” Others saw that our history of creating loyal relationships with our employees and customers drove long-term results for the hotels we manage. I guess they were looking for “Ms. Congeniality.” But, in the end, literally out of the blue, the ultimate suitor who won the contest to own a majority share of this company is someone who profoundly understands that our name — Joie de Vivre — is also our mission, creating joy of life, and this investor realizes how truly powerful that purpose is to a company in a service industry like hospitality. This investor was looking for beauty beyond our stats or our ability to smile well. They gave us the crown because they could see the halo that comes from creating a purpose that’s meant to make a better world beyond the sloganeering that often comes with those words. I feel incredibly lucky to have found a primary investor who wears this pair of glasses when they make their investments.

Add comment June 16th, 2010

STEVE OUT-GEEKS BILL

[Originally posted June 4, 2010 on the Huffington Post]

“What I can’t figure out is why he (Steve Jobs) is even trying (to be the CEO of Apple)?  He knows he can’t win.”  Bill Gates said that in a Vanity Fair interview in June 1998 with journalist Robert Cringely for a Bill vs. Steve story that was never printed (but is on tape).  At the time, Microsoft’s stock market capitalization was $250 billion and Apple’s was just $6 billion, and, in fact, Apple’s capitalization was down around $2 billion a year earlier when Steve Jobs came back as CEO and Microsoft famously made a $150 million good faith investment in Apple and pledged to develop applications for Apple’s operating system.  Bill was seen as the benevolent, wise one.  Steve was seen as the unruly maverick.

A lot has changed in a dozen years.  Microsoft’s market cap is 10% less than it was in 1998 and Apple’s has grown by 40 times.  Last week, Apple officially became the most valued technology company in the world with their market capitalization surpassing Microsoft.  It wasn’t just Bill Gates who counted Steve Jobs out.  In 1997, Michael Dell suggested Apple should “just close up shop and return the money to shareholders.”  Today, Dell’s market cap is worth about 10 cents on Apple’s dollar.  Apple is worth about the same as Dell, Oracle, and HP - all put together!!!  While market cap is not the only means of judging a company’s financial health, it is a good indicator of trends and of where investors see a company is going.  Based upon Apple’s ascendancy and the trouble in big oil (likely new regulations due to the Gulf oil spill, dropping oil prices), there’s a chance that Apple - now the second most valuable American company - could surpass #1 Exxon Mobil in the next couple of years.

So, what’s to be learned from this remarkable story?  “Your Potential. Our Passion.”  That’s been Microsoft’s enormous ad campaign for years, but it really speaks to Apple’s positioning with its customers.  I give 75 speeches a year and when I talk about Maslow’s Hierarchy of Needs applied to customers such that some companies create self-actualized evangelists, I always ask my audience if they can name a few companies that have done that well.  80% of the time, the first company named is Apple, according to Fortune, the World’s Most Admired Company.  When Steve Jobs started the company, he saw the personal computer as a “bicycle for the mind” giving people the ability to “explore like never before.”  So, Apple’s purpose had a lot to do with helping their customers realize their potential through the means of technology.  It wasn’t an ad campaign.  It was the DNA of the company.

Of course, Apple’s “think different” approach to opening its retail stores in 2001 was all about bringing the brand to the people, but most analysts thought is was a huge folly at the time.  In fact, in 2001, the tech business was just in the early stages of its dot-com bust and Gateway was starting to close its stores while Dell was winning the personal computer war with its direct approach that had nothing to do with stores.  Typically, retailers that sell you products you buy infrequently (like cars, appliances, and computers) choose low rent-locations, but Apple chose to locate their stores in highly centralized locations with expensive rent.  The company designed stylish cathedrals that were a far cry from Radio Shack.  These showrooms were more sleek than geek.  And, of course, Apple hit a home run and they’ve continued to over and over again with their products that have moved more and more into the entertainment, mobile, and consumer electronics arenas.

In fact, it’s a bit of a misnomer to suggest Apple is the most valuable tech company in the world.  Heck, Apple ain’t tech.  It’s a lifestyle company, one that uses tech to enable its customers to live better lives.  I’m not sure we’re going to see Apple Hotels or Apple Autos any time soon, but don’t bet against them as they’ve truly broadened their horizons (just ask any record company that didn’t consider Apple a competitor a decade ago).  Legendary management theorist Peter Drucker’s favorite wisdom for business leaders was to suggest they continually ask themselves the question, “What business are you in?”  In fact, I suggest that people ask this question once.  Give an answer.  Then, ask it again and give a deeper answer.  And, then again, and again, and again until you uncover the true purpose, potential, and passion that’s at the heart of your relationship with your customer.  I doubt that Apple has ever had to go through this exercise, but they’re a case study for a company (as Simon Sinek suggests in “Start With Why”) that is more interested in Why they exist than What or How they do it.  I think it’s time for Microsoft to start asking why they exist.

A few years ago, I was on the computer at friend’s house and their son asked me what I was doing as I purchased a book on Amazon’s online website.  I chuckled when the kid told me, “Amazon is such a big company that they named a river in South America for them.”  I wouldn’t be surprised if our kids and our kids’ kids some day think that Steve Jobs long ago licensed the rights to his company’s name to farmers who plant trees with those shiny, red and green juicy fruits in them.  There’s no more powerful brand than Apple.

Add comment June 5th, 2010

Chip speaking in Mexico City, June 3, 2010

Chip will be the featured speaker at a conference organized by GLOBAL MANAGERS on June 3, 2010.  The conference, entitled “The Rebel Entrepreneurs: Heroes of the Business World” will be held at the prestigious Ibero-American University in the Santa Fe district of Mexico City.

Building on the business principles founded in Chip’s two most recent books “The Rebel Rules: Daring To Be Yourself In Business” and “PEAK: How Great Companies Get Their Mojo From Maslow” Chip will explain how the way of doing business has shifted over time.  Innovative companies know the key to success is to foster a sense of entrepreneurial spirit throughout their organization.  One of the most neglected facts in business is that we’re all human.  The most successful business enterprises tap into the potential of their employees and engage their whole human spirit.

Chip will explain the value and power of a healthy company culture, and will provide practical examples of ways his company, Joie de Vivre, has created an innovative engine at the property level with hotel front- and back-of-house employees.  In doing so, his company and other innovative businesses effectively create peak experiences for its employees and customers, which in turn creates peak performance for the company.

This event is open to the public. For more information, including how to register, please click here.