Human Scale Business

Jala Smith-Huys is an experienced digital marketing and social media strategist who recently launched her own consumer product brand. Dave Bayless spoke with her about using social media to build a human scale business.

Jim Gregory is the owner of Bikes at Work in Ames, Iowa. The company manufactures heavy-duty cargo trailers for bicycles. That wasn't always the case. I had the opportunity to speak with Jim about building a sustainable business that has evolved with the market over 25 years.

The Value of Adaptability

Jim Gregory, Founder of Bikes at Work

Time and time again, Jim has demonstrated his capacity to learn and adapt. He believes two factors are key to his company's longevity:

* Empathy with his customers – Jim asks, "How would I like to be treated in their shoes?"

* Responding to customers' needs flexibly – By focusing on customers' problems rather than his ready-made solutions, Jim discovers new opportunities.

Jim had always loved bicycling and values the health and environmental benefits of riding bikes. After seeing his first bike messenger on a trip to St. Louis, Jim knew that he wanted to create a bicycle-based business. And so he has – although the form of the business has evolved considerably:

* The business started as a grocery delivery service in 1991.

* Although the demand for grocery delivery wasn't sufficient, Jim and his company branched out into curbside recycling pick-up, bulk newspaper and periodical delivery, and a pedicab service. At one point, he had more than 20 employees making deliveries in Ames.

* Because available bike trailers were not up to the task, Jim started making his own. Soon, he started selling heavy-duty bike trailers to others. To reach his market niche profitably, Bikes at Work began to sell direct-to-consumers using then nascent ecommerce technologies.

* Today, making and selling bike trailers is the company's primary business. It does maintain a limited roster of local delivery clients so Jim can walk in his customer's shoes (or at least ride on their bike seat).

Move by Bike, Malmo, Sweden

To be clear, Bikes at Work trailers aren't just repurposed kiddie carriers. People move furniture with these things. The market might not be large, but it has very specific needs. Because he's immersed in that world, Jim can develop innovations that truly respond to the unique needs of his customers.

The Evolution of Content Marketing

According to Google Trends, the phrase "content marketing" didn't really take off until 2012. Nevertheless, Jim was engaged in content marketing back in 2000. That's when he wrote his book, "Cycling for Profit: How to Make a Living with Your Bicycle."

BUY CYCLING FOR PROFIT

By authoring the book, Jim sought to establish himself as a domain expert. He figured that some portion of his readers would launch a bike-based business, and some of those might want to purchase one of his trailers.

THE HISTORY OF SOCIAL MEDIA

Well before the advent of Facebook and Twitter, Jim engaged with his community through the social media of the day: Usenet and the Bulletin Board System (BBS). Rather than push his product, Jim made a concerted, sustained effort to answer questions. He also told people about what he was doing and learning in his bicycle-based business. By providing genuinely useful information, Jim built a rapport and trust with potential customers. Some, undoubtedly, became customers over time. The tools are different today, but the tactics and techniques of 15 years ago are still recognizable today.

Making Your Own Product

Dave Bayless speaks with Jim Gregory, the founder of Bikes at Work in Ames, Iowa. BAW makes specialty bike trailers. In various guises, Jim has been making a living as a provider of niche products and services for 25 or so years. We spoke about what it takes to sustain a human scale business.

A conventional business education may inhibit the learning essential to carving out a successful niche. In contrast, consider the case of Ryan Barr, the founder of Whipping Post – a remarkably successful maker of leather goods. Ryan is a musician, has a deep interest in design, and was an education major in college. Ironically, Ryan is almost apologetic about his lack of a conventional business education. However, I suspect Ryan’s humility, curiosity, and experimental approach are sources of advantage. Those attributes enable him to quickly develop compelling products. The assumptions embedded in conventional business education, on the other hand, may preclude the kind of learning key to the success of Whipping Post…to this point.

Ryan Barr, Creator of the Whipping Post Brand

Types of Business

Let’s take a step back to consider the business landscape. More than ever, businesses can be sorted into one of three types:

* Infrastructure providers build and manage facilities for repetitive operational tasks such as logistics, storage, manufacturing, and communications. They benefit from economies of scale.* Customer relationship businesses work to find customers and build relationships with them. These businesses benefit from economies of scope.* Niche operators conceive of attractive new products and services and then figure out how best to bring them to market. These businesses benefit from their ability to understand specific customer wants and needs and act upon them quickly. The inertia of size means these businesses face diseconomies of scale and scope.

As John Hagel and his colleagues at the Center for the Edge have noted, the business landscape is shifting toward an ecology characterized by simultaneous concentration and fragmentation. Very large companies provide infrastructure and customer relationship services that enable a swarm of product innovation companies. Each depends on the other.

The Future of Business Landscape

Whipping Post is a Niche Operator

Ryan’s business is a perfect example of a niche operator. Whipping Post leverages the capacity of large collaborators to commercialize products at a remarkably small scale in a very short period of time.

The Picker's Wallet by Whipping Post

Initially, Ryan’s insight “from years of playing” as a guitarist resulted in the launch of his first hit product, The Picker’s Wallet. He was able to produce an initial batch of just 50 wallets, offer them for sale online via his Shopify e-commerce site, and attract the attention of a handful of major online media outlets to build awareness. As a consequence, the wallet sold out in 30 minutes. Today, five years later, the company offers a variety of rugged leather goods that reflect Ryan’s unique design aesthetic.

The growth of Whipping Post has followed a pattern of rapid, iterative, experimental learning:

* Ryan’s immersion in his niche stimulates insights about potentially commercializable products.* He has a relatively small number of new products manufactured to his design specifications.* Ryan offers the new product to subscribers to his email newsletter.* Direct feedback from his customer-fans determines whether the product is added to the Whipping Post catalog.

People unencumbered by a business education will find nothing remarkable about the preceding.

When Bill Collins asked to join our online Human Scale Business Network, I was uncertain of the fit. After all, Bill is the founder of Sealant Technologies, which makes and sells devices and systems used primarily by commercial contractors to apply insulating polyurethane foam to buildings. We focus on consumer products sold online. However, when I learned that Bill was in the process of creating a direct e-commerce channel, I was intrigued. It turns out that Bill's motivations and challenges have a lot in common with our community of business owners.

What is Air Sealant Spray Foam?

Polyurethane Foam Sealant Applied Around a Door Frame

Polyurethane foam is applied as a liquid and (through the magic of chemistry) expands to fill a lot of space. It's commonly used to fill chinks around doors, pipes, and other parts of a building that would otherwise allow drafts. It's handy.

In the past, spray foam applicators came in a couple of different forms. For $20 you can buy an aerosol can of the stuff at any Home Depot or Lowe's. Cans are good for quick, do-it-yourself projects, but they are not an effective way to apply foam to an entire building. At the other end of the spectrum are commercial systems that can cost tens of thousands of dollars. They are too expensive, cumbersome, and complex for most contractors, much less ambitious DIY-ers.

Bill's company has developed a third way. His products appear to fit in a zone between the traditional consumer and commercial markets. I'll let Bill explain:

https://youtu.be/V6-KBwxBX4g

Selling Innovation

Innovation can be a tough sell. Most people need to be persuaded that they can trust an alternative to familiar ways of doing things (however imperfect). Bill considered – and rejected – regular wholesale channels such as Lowe's for a couple of reasons:

* He wanted to be able to offer his new products at an attractive price point and still make a good gross margin. Selling direct offers that possibility.

* Bill felt he needed a platform from which to tell the product story directly to the end user. Big box stores are good for moving familiar product in volume, but they aren't going to tell your story for you.

In other words, Bill's motivations for launching a direct, e-commerce channel are very similar to those of makers of consumer products. His intimate familiarity with users' needs and Bill's attempt to connect at a personal level through his use of video in which he speaks directly to the audience are also characteristics and techniques I tend to associate with business-to-consumer marketing.

Even so, if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. Notwithstanding my initial skepticism, Bill Collins is a founder of a human scale business after all.

Dave Bayless speaks with Ryan Barr, the founder of leather goods maker Whipping Post, about the process of learning how to be successful at business.

Jennifer Rohleder, Attorney and Investor

Jennifer Rohleder is busy. In addition to her environmental technology law practice, she is General Counsel at daGROUP and is involved with LifeCycle VC and the Piranha Tank investment show.

I discovered her via social media and learned that we share several interests including the potential for businesses to have positive social and environmental impacts, sourcing appropriate capital, demystifying the investment process, and taking a systems approach to understanding business dynamics. Jennifer was gracious enough to speak with me recently about the myriad ways in which she is supporting not-just-for-profit business in her community.

A Comprehensive Perspective on Sustainable Business

From a financial perspective, profit is required. But when you look at the second layer of what a business is producing versus what it's extracting, the business should be providing some greater environmental or societal value.

A friend of mine once told me, "Making a profit means you get to continue working." My co-founder, Laura Black, long ago concluded that profit isn't the purpose of business; it's a requirement for business. Profit is a constraint. The valid purpose of business is to make our lives better. It's for that reason we organized Human Scale Business as a benefit corporation. Our social purpose – Business Education for the Rest of Us – is baked into our articles of incorporation. So, it should come as no surprise that we applaud Jennifer's focus on businesses that contribute beyond their responsibility to turn a profit.

Jennifer Rohleder

Sensible Sharing of Equity Ownership

I was intrigued to learn that Jennifer was a "Slicing Pie Friendly" attorney. I had no what that meant, but it sounded different and cool.

She explained that Slicing Pie is a method for sharing ownership in a bootstrapped startup dynamically and, as a consequence, equitably. The method was developed by Mike Moyer, an entrepreneur who teaches at Northwestern University and the University of Chicago. Jennifer helps young companies implement the system.

The premise is straightforward: different people make different contributions to a new company over time. Sometimes that is cash; sometimes it is time, relationships, ideas, or the use of assets. Here's how Moyer explains it:

https://youtu.be/sqUHmlFPpkY

I've no personal experience with how well the Slicing Pie method works. However, I'm very familiar with the challenges of conventional equity allocations. Establishing equity shares upfront in fixed proportions can cause friction unless there is a good mechanism for adjusting shares over time.

The only thing we do know at the beginning is that nothing is going to look the way we think it's going to look once we get to a more mature business.

Learn More About Slicing Pie

Piranha Tank

I'm not a fan of the Shark Tank show. For starters, it conflates successful fundraising with business success. I'm not bashing investors. After all, I spent the first part of my career as an LBO lender and private equity investor. Most businesses need external capital at some point to support their growth. That's no reason to romanticize the investment process – or make it opaque for the purposes of creating reality show drama. Consequently, I was more than a bit suspicious of Jennifer's involvement with a show called Piranha Tank.

When I checked out the Piranha Tank website prior to my conversation with Jennifer, I experienced cognitive dissonance.

Patrick Rauland, "Holistic Optimizer"

Until recently, Patrick Rauland was the product manager for WooCommerce. It's the WordPress plugin that, according to BuiltWith, powers 39% of e-commerce stores globally. So when he agreed to be my guest for our "Quick Takes" podcast series, I expected an informative conversation regarding the puts and calls of WooCommerce and Shopify for human scale businesses. As it turned out, Patrick also had much to share regarding the benefits of being small, his role as a "holistic optimizer" for his e-commerce clients, the value of continuous experimentation, and creating data through action.

I learned of Patrick when I was implementing WooCommerce for this website. His "WooCommerce Cookbook" was, and remains, a valued resource.

Patrick has an infectious enthusiasm for web technologies and the opportunities e-commerce creates. He also appreciates that technology is a tool that can only be as good as our strategies. Building and maintaining a successful online business is hard work. He warns against simplistic thinking and the allure of "silver bullet" strategies.

Choosing an Ecommerce Platform

You might think that Patrick would have an overwhelming bias toward WooCommerce. In fact, it remains a favorite. However, he advises that you pick the platform that reflects your need for customization (and your capacity to maintain the system):

* Gumroad offers "buy now" functionality that's perfect for the seller who offers just one or two products.

* Shopify is a reliable, full-featured platform that offers outstanding integrations with leading social media channels.

* WooCommerce offers unparalleled flexibility and is built on WordPress, which is a boon for content marketers. It's also less stable than Shopify. That means WooCommerce requires much more administrative attention to maintain.

DOWNLOAD THE TRANSCRIPT

Choosing to be Small

A couple of months ago, Patrick left Automattic – the company that acquired WooThemes, the creator of WooCommerce – to launch his own e-commerce consulting practice. WooThemes developed the leading e-commerce platform in the world with fewer than 50 people, so Patrick knows that big things can come from small teams. He likes how, as a team of one, he can change direction quickly. Patrick values that ability in his clients, too. One of the benefits of working with human scale businesses is seeing the impact of your contributions.

Sometimes as small businesses, we seek the validation that comes from working with much larger companies. So, we often favor working with larger customers and bigger service providers and suppliers. Increasingly, we can develop higher quality and more relevant relationships with like-sized teams. Patrick's choice is a testament to that trend.

Holistic Optimization

Search engine optimization specialists tout the importance of SEO. Content marketers emphasize the value of writing blogs and posting YouTube videos. Business analytics gurus preach the virtue of establishing and tracking key performance indicators. All is for naught if your product is sub par and your marketing strategy misdirected.

Notwithstanding his enthusiasm for technology, Patrick makes it clear that his interest is in identifying root causes of marketing success. The right strategy drives the selection of the appropriate tacti...

After taking point on three releases of the ubiquitous WooCommerce plugin, Patrick Rauland struck out on his own to provide ecommerce consulting services to small, dynamic teams. Dave Bayless of Human Scale Business spoke with Patrick about ecommerce trends, WooCommerce versus Shopify, and his role as a "holistic optimizer" of ecommerce businesses.

Bruce Zignego

To ensure a product’s profitability, we can during the design phase reduce a product’s costs by taking the systems-thinking approach of “Design for X.” That’s what I learned when I spoke with Bruce Zignego, adjunct faculty in Montana State University’s College of Engineering and president of ZigCo,  a product development firm focused on medical and consumer products.

For founders of companies selling tangible products, achieving the functionality, aesthetics, and ease of use is only part of the story. To be profitable, products must be manufactured economically, shipped in ways that don’t damage the goods, and then offer useful lives in the hands of the consumers they’re meant for.

New product creators may not know that attention during design can preemptively address many problems on a product’s lifetime journey. The most advantageous time to ensure economic viability is before we ship the first unit, even before we initiate the first production run.

Having heard about Design for Manufacturing, I first asked Bruce about that. Design for Manufacturability considers the economics of making a product repeatably and reliably, at the same time it advances the functional performance of the product. But Design for X takes a system view of a product over its entire lifecycle.

VISIT ZIGCO PRODUCT DEVELOPMENT

Bruce explained that it all started with Design for Assembly, in the late 1970s and early 80s, with engineers Geoff Boothroyd and Peter Dewhurst, who realized that a product designed with fewer parts can be assembled faster. Moreover, parts with features indicating how they should be oriented or attached can be assembled with fewer mistakes and less rework.

From assembly, the notion extended upstream to manufacturing, and downstream to shipping—and then further into designing for cleaning, maintenance, and general serviceability by the product user. The mindset is based in Japanese practice of poka-yoke (“mistake-proofing), a term used in the 1960s by Shigeo Shingo to refer to industrial processes designed to prevent or correct human errors. It’s also consistent with engineering FMEA (Failure Mode Effects Analysis), a step-by-step approach to asking, not “how can this work?” but “how can this break?” and “what could be the consequences of its breaking?”

Thoughtful design can also afford “late-point differentiation,” or adding the special features of a product as late as possible in manufacturing and assembly. Using the example of accommodating the uneven global demand for an electrical product, Bruce described how one team changed its design from one with separate power supplies for the respective markets (110V for U.S. versus 220V for Europe) to one with an auto-ranging power supply that can function from 110V to 220V. The team further “late-point differentiated” by inserting in the product box the appropriate country power cord only right before the product shipped, for example, to a German customer or to an Italian customer. Bruce underscored the financial benefits of late-point differentiation: Founders who have large investments in inventories can more economically support multiple SKUs—with lower working capital needs—using such an approach.

Being aware of the concept—and its potential for improving product profitability—is half the battle. A wealth of information, for people at every stage of expertise, is easily found on the internet. Becoming familiar with the possibilities and then iteratively prototyping and experimenting can yield dramatic differences in profits over a product’s life.