They Might Not Be Giants
Staying small is an unconventional business strategy -- but for some Microsoft partners, it's exactly the right choice.
- By Anne Stuart
- May 01, 2006
Grow or die.
That motto may not be carved into your company's cornerstone or embossed
on your business cards, but if you're like most organizations, it's your
real mission statement.
After all, it's a given that just about every company -- regardless of
age, industry and current size -- wants to get bigger. You could reasonably
argue that, in most cases, it's the executive team's duty to expand the
company as much and as quickly as possible.
But as business journalist Bo Burlingham describes in his new book, Small
Giants (see "To Grow or Not To Grow"),
many companies are getting off the growth treadmill. In some cases, they
simply postpone or slow down their expansion plans for a while; in others,
they decide to stay at a certain level indefinitely. Whatever the timeline,
such companies typically adopt the strategy so they can focus on other
business goals such as developing new products, creating an ideal work
environment or deepening their relationships with their existing customers.
While the slow-growth (or no-growth) strategy may initially seem seriously
out of whack with Microsoft's own aggressively expansion-oriented culture,
some Microsoft partners say the approach works just fine for them. Following
are insights from several successful small partners who have consciously
chosen goals other than growth for growth's sake.
Mark Mulvany, Swifttrain, Ireland
For Mark Mulvany of County Meath, Ireland, staying small is a matter of
Mulvany left a Dublin-area IT firm to start his own business in 2001.
His one-man company, Swifttrain, offers IT training and network consulting
for small and midsize businesses, primarily other Microsoft partners.
Although he's regularly offered more business than he can handle, Mulvany
doesn't want to staff up or outsource any work. "Fifty percent of
my business is training, and that's very hard to replicate with a junior
employee because you're relying on your own reputation," says Mulvany,
a Microsoft Registered Member. "The other 50 percent is consulting.
On that side, if I sent a junior [technician] in to resolve a customer's
problem, I'd get into a lot of trouble because their own techs probably
would have already done anything that my junior employee would do."
is the Information Age and knowledge is power. You can be
a small company and still have a lot of large companies coming
-- Michael Klein, Computer Directions
He also enjoys his niche: working with other Microsoft partners, who,
he says, are generally knowledgeable enough to qualify as a consultant's
delight. "I get really good partners telling me exactly what the
problem is, where it is and what they've done," Mulvany says. "It's
not just, 'Oh, our system crashed.' I'm dealing with people who know what
this business is like, and it's spoiled me."
The downside to keeping a governor on his company's growth? "The
work-life balance is hard to get right," says Mulvany, who runs Swifttrain
from a converted garage next to his home. "It's very hard to close
the door on the business." When a customer has a middle-of-the-night
IT crisis, he can't delegate the work. "I always answer their phone
calls," he says. "I can't close the door on that, either."
Still, he doesn't see adding any employees in the foreseeable future,
especially because his wife has taken over some of the accounting and
administrative work. "I'm looking all the time to see if there's
a part of my business that I can delegate off," he says. "I
haven't been able to see any so far." As for partnering with somebody:
"I've had discussions with people -- but I haven't found the right
match," he says. So for now, Mulvany will continue to choose to accept
the jobs he wants and pass on the rest.
Michael Klein, Computer Directions
Inc., Searingtown, N.Y.
As a long-time student of martial arts, Michael Klein knows
that a smaller competitor can use leverage and strategy to overcome a
much larger opponent. "You try to do the same thing with business,"
says Klein, president of Computer Directions Inc. of Searingtown, N.Y.,
another Microsoft Registered Member. "You're not going to be taking
on big companies on their own terms. It's unrealistic. You don't have
the resources. So you use their size against them."
For that reason, he's kept his 19-year-old IT and management consulting
firm small so that it can remain nimble enough to run circles around larger,
Just one example: When clients call a large company's help desk, "they
talk to the least qualified person" -- typically, whoever answers
the phone, Klein says. That person may well be someone across the country
or overseas who knows nothing about a particular customer and who's evaluated
on the number of calls processed per day. When customers call back, they're
unlikely to reach the same rep twice. When customers call Computer Directions,
they'll talk to Klein or one of his three employees. "Our people
not only know the technology, they know the client's business and they
know the people at the business," says Klein, interviewed while driving
to a customer's headquarters.
Another differentiator he fears losing to growth is his own ability to
provide up-to-date expertise. "As businesses grow, the people at
the top tend to lose touch," he says. "The technology marches
on and suddenly they're managing technologies they no longer understand.
That is a very dangerous place to be."
Grow or Not To Grow
Bo Burlingham's new book profiles successful
SMBs that no longer believe in growth for growth's sake.
Inc. magazine has always been targeted
to entrepreneurs who want to see their small businesses
become big ones as quickly as possible. For years, Inc.'s
tag line identified it as "the magazine for growing
companies," and its prestigious Inc. 500 competition
has always honored America's fastest-growing private
enterprises (with Microsoft among the early winners).
So it's quite a departure for a veteran
Inc. editor at large to profile companies that have
consciously decided not to grow. But that's just what
Bo Burlingham has done in Small
Giants: Companies That Chose to be Great Instead of
Big (Portfolio, 2006).
During his 23-year tenure with Inc., Burlingham
has written about hundreds of SMBs. For much of that
time, small-business superstars adopted what Inc.
Editor Jane Berentson recently described as "the
Microsoft model, based on fast revenue growth and geographic
expansion." Then, a few years ago, Burlingham began
running across companies whose leaders had deliberately
chosen the opposite path. These entrepreneurs remained
highly ambitious; they'd just changed their priorities
and definitions for success. Stepping off the fast track
allowed them to excel in other areas, such as innovation,
even work-life balance.
While most of Burlingham's 14 Small Giants
come from outside the technology world -- the list includes
a brewery, a recording company and an alarm manufacturer
-- their insights transcend industry boundaries, offering
valuable lessons to any SMB interested in alternatives
to relentless expansion. In this interview, Burlingham
describes the traits these companies share, including
a quality he calls "mojo."
were the criteria for the Small Giants you profiled?
I wanted companies that had reached the crossroads that
every successful business gets to sooner or later: They
have the opportunity to grow faster and get much bigger
-- but these companies decided not to do so because
they had other goals. I wanted companies that were admired
and respected in their industries and whose achievements
had been recognized by other independent observers.
I looked for companies that operate on a human scale
-- meaning that they were small enough so that people
at the top could know everyone who worked there. Finally,
I decided I needed to focus on companies that were privately
owned and closely held.
After a couple of months, I realized that
there were many more companies that fit my definition
than I ever imagined. They were in every part of the
country and in almost every industry.
What did they
have in common?
They all had a certain quality. A company when
it's hot, when it hits its stride, has a certain aura.
It's like a leader with charisma. When a business has
charisma, you want to be associated with it, you want
to buy from it, you want to work for it. I thought about
companies I knew that had had this quality but lost
it -- Apple Computer, The Body Shop, Ben & Jerry's.
What was striking about [the Small Giants] was that
they had it and kept it. [Burlingham calls this aura
What did they
do to get their mojo working?
They were all deeply rooted in the communities where
they did business. It's not just that they 'gave back'
to those communities, although they did -- it's that
it's almost impossible to imagine any of these companies
being in another place. They also had unusually close
relationships with their customers and suppliers, almost
as if they were all working together to achieve the
same thing. Their workplaces were extraordinarily intimate.
Employees were treated with respect and cared for not
just as people who were putting in their time, but as
human beings. That created an environment with an incredible
degree of loyalty and trust and mutual respect, and
that's the key to a highly productive workplace. And
[being private closely held companies], they were able
to do unconventional things, to experiment in ways that
you can't do if you're responsible [to shareholders
or investors]. It involves taking risks.
did the companies' leaders share?
First, they all knew who they were and what they wanted
out of their businesses. The second quality was that
they were really passionate about what they did. They
loved it. People always get this advice: Don't fall
in love with your business. It clouds your decisions;
you lose your objectivity. But all of these people fell
in love with their businesses,
so they're bucking that [conventional wisdom].
If Small Giants
are so personally invested in their businesses, do the
develop exit strategies?
By and large, yes, they've thought about exit strategies
and liquidity events. All of them had, somewhere along
the way, reached a point where they could have sold
the company for a lot of money or they could have franchised
or they could have gone public -- and they chose not
to. That doesn't mean that they'll never consider that.
Sooner or later we all leave our companies -- maybe
feet first -- so somehow, some way, they're going to
have to come up with an exit strategy.
biggest myth about Small Giants?
People sometimes think that I'm saying that to be a
great company, you have to do what these companies did
[by staying small and privately held]. That's not the
case. There are obviously great public companies out
there -- Southwest Airlines, Jet Blue, Whole Foods Market.
There are companies that are bigger than those in my
book that are great within in their industries.
What I'm saying is: In business, it's
very easy to get so focused on growing and getting bigger
that you forget to stop and say 'Wait a minute: What's
going to make this company great?' I hope the book will
make a contribution, helping people realize that bigger
isn't necessarily better and getting bigger isn't going
to make you great. -- A.S.
At the same time, Klein understands that he can't specialize in everything.
So when his customers need help with issues outside his own areas of expertise,
he turns to his "black book," crammed with information on knowledgeable
contractors. "Computers these days are more specialized than medicine,"
he says. "You have to know what you know and know what you don't
know. So I bring on talent for this job here or a job there. Then you
don't worry about what you're going to do with that talent until the next
job comes along."
Why not just staff up by hiring more specialists, especially because he's already working double-time himself?
"My family was in the food business in New York for a couple of generations," he recalls. During that time, the family's company supplied many fine restaurants--and Klein saw first-hand what happened when some of those businesses expanded too quickly: "It wasn't same anymore," he says. "The quality was gone."
That's a mistake Klein doesn't intend to repeat. "This is the Information
Age and knowledge is power," he says. "You can be a small company
and still have a lot of power and influence. You can still have large
companies coming to you. You don't need to open the door and see bodies
sitting outside in cubicles to do that."
Patricia and Dennis Schumaker,
Schumaker & Co., Ann Arbor, Mich.
When Patricia Schumaker founded her eponymous IT and operations
consulting firm in 1986, the company had just two employees (the second
was her husband Dennis). They're keenly aware that they're selling their
reputations. "When you have your last name tied to the business,
people expect something different in the way of service. We're not XYZ
Corp.," says Patricia Schumaker, the company's president. "It's
much easier to control your reputation when you're a 10-person firm than
when you're a 50-person firm."
For that reason, they've kept the company relatively small. Over the
past two decades, the company, a Microsoft Certified Partner, has employed
up to 15 people; currently, eight full-time equivalents handle the firm's
Dennis Schumaker, the firm's executive vice president, calls the current
payroll the perfect size for the collaborative culture that's been a company
hallmark. "When you're all working in one big room, there's no need
to have staff meetings. You all know what's going on," he says. "As
you grow, you start to get involved in office politics."
To keep headcount low, the Schumakers require all employees to share
in administrative tasks. "Our philosophy has been that you can work
people down, but you can't work them up," Dennis Schumaker says.
"You can take consultants and have them do their own copying and
word processing, but you can't take somebody who just does word processing
and make them a consultant." They also require all employees to contribute
billable hours, he adds: "We're a consulting firm, you don't make
money when people are in the office. They have to be out at client sites."
The fastest-growing consulting firms tend to concentrate on serving just
one or two big accounts, and "if those clients go away, they crash
and burn real quickly," Dennis Schumaker says. So Schumaker &
Co. maintains a stable of customers in different industries, including
state government, utilities and telecom companies. That diversity allows
them to weather periodic downturns without cutting staff. When business
is booming, they bring in contractors.
The Schumakers haven't ruled out the possibility of increasing headcount
to 20 or even 25 employees, "but so far, we've opted not to do that,"
Patricia Schumaker says. "If we do go that route, it will be controlled