Inc. editor profiles 14 great companies that chose to stay small
December 29, 2005
"Small Giants: Companies That Choose to Be Great Instead of Big," by Bo Burlingham (Portfolio, 256 pages, $24.95)
Conventional wisdom holds that a business must grow or die, but, in the words of Sportin' Life in "Porgy and Bess," that "ain't necessarily so."
The 14 companies that Bo Burlingham, editor-at-large of Inc. magazine, features in his new book "Small Giants" demonstrate conclusively that a company can resist the temptation to keep getting bigger and bigger _ and wind up better for it.
Burlingham's "small giants" are not little companies. They are highly successful businesses that are small only in comparison to some of the giant corporations that wanted to acquire some of them or in relation to the large giants they might have become themselves had they chosen to go public or embark on ambitious programs of expansion and acquisition.
For example, Fritz Maytag, founder of Anchor Brewing in San Francisco, was on the verge of taking his company public because he felt he needed the financing that an IPO would provide to expand and avoid a capacity crisis.
But Maytag, great-grandson of the founder of the giant appliance company, conferred with three of his top people, and they concluded that they might not be able to live with the kind of changes new investors might demand. They liked the company the way it was and they feared that if it got bigger they would lose the things they liked most about it.
Burlingham quotes Maytag:
"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 expand. You can stay as you are and have a business that's profitable and rewarding and a source of great pride."
Burlingham concludes that Maytag made the right decision because the capacity crisis he feared didn't materialize. In the 1990s, microbreweries like the one Maytag pioneered sprang up across the nation. Maytag was relieved to see that happen.
"Rather than resist them, he helped fledgling rivals develop their brewing skills. Their presence in the market left him free to build a company that he enjoyed and was proud of, that would give him a sense of accomplishment and fulfillment he sought, and that would allow him to lead the kind of life he wanted," Burlingham writes.
Similarly, Gary Erickson changed his mind at the 11th hour and decided against selling his $39 million company, Clif Bar, for $120 million to a Midwestern food conglomerate, which some say was Quaker Oats. This seemed like a great deal because Erickson had been led to believe that he and his partner would remain in control and that being a part of a large corporation would protect Clif Bar and its employees from its two largest competitors, Nestle and Kraft.
But Erickson changed his mind when the buyer informed him that within a few months after the acquisition Clif Bar would be moved from Berkeley, Calif., to the Midwest and put under new management. Clif Bar survived and increased its sales from $39 million in 1999 to $92 million in 2004 without outside investors or significantly enlarging its work force.
The other 12 companies spotlighted by Burlingham as small giants are: CitiStorage Inc. of Brooklyn, N.Y.; ECCO of Boise, Idaho; Hammerhead Productions of Studio City, Calif.; O.C. Tanner Co. of Salt Lake City, Utah; Reel Precision Manufacturing of St. Paul, Minn.; Rhythm & Hues Studios of Los Angeles; Righteous Babe Records of Buffalo, N.Y.; Selima Inc. of Miami Beach, Fla.; The Goltz Group of Chicago; Union Square Hospitality Group of New York City; W.L. Butler Construction of Redwood City, Calif.; and Zingerman's Community of Businesses of Ann Arbor, Mich.
All those companies have mojo, Burlingham says. Their founders and leaders exhibit passion for the work they do and the products and services they provide; concern for their customers and employees; a sense of obligation to their community and an attachment to their locations.
Just as the Mona Lisa wouldn't look right anywhere but the Louvre in Paris, those small giants, Burlingham suggests, wouldn't be the same anywhere but where they are.
That analogy is in line with Burlingham's assertion that a real entrepreneur is an artist.
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