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Thursday, September 10, 2009

Gary Hoover explains good business

Oracle invited me to meet Gary Hoover, who had just sold his Hoover's database company to Dun & Bradstreet. His talk had some important points. These are my notes.

A Sense Of History

Gary just sold Hoover’s database to D&B. Says he is a “serial entrepreneur. He grew up in a GM town in Michigan, 27,000 out of 60,000 residents worked for GM. He wanted to know about GM when teachers were teaching European history.Was told to pay attention to the lesson.

Bought his first subscription to Fortune when he was 7, now owns every issue ever published. Keeps them for reference. If you want new ideas about an industry go back to the 30s and see what was written about that industry in Fortune magazine.

Next fell in love with retail, He started out as a retail analyst for May department stores, and is familiar with DC as the place where May’s Hecht’s was always trying to overtake Woodward & Lothrop. Well that took care of itself.

Wanted to start his own business, interested in big box stores. In the ’50s, Charlie Lazarus started the first big box store in Adams Morgan, called Toys R Us. Toys R Us has gone through its lifecycle and isn’t so much now, but back then it was precedent breaking.

Hoover looked at the flight to the suburbs and figured his big box store would have to be in toys, automotive supply, recreation, books. Liked books, so he set up a big box store, took it national, was bought by Barnes and Noble.

Just before he started, after seven years of research, he went to a book convention to see what was coming in big box bookstores. Got into the presentation about ‘The Future of Bookselling,” and waited for an hour. They never mentioned big box stores.

After selling the books store, set up the Business Reference company, which became Hoovers. Now working on two other ideas.

His speech was on “Requirements for Entrepreneurship.”

1. Curiosity – Entrepreneurs are always asking questions, which other people think are often inappropriate. “Nothing has ever been discovered in the same place as everyone else was looking.”

Technology (def) - Any better way of doing things.

What are you curious about?

2. Gary thinks a sense of history is important. You can only trend forward as far as you have backward historical data.

The biggest change in the last 50 years was women entering the workforce. Most went to work at banks, which continued to be open 9 to 5, Monday thru Friday, not when the customers were available. People shop nights, weekends and lunch hours. The banks, who hired the women, missed that.

Market researchers are always lagging behind the customers.

Next big themes are the aging of America, the Latinization of America, and the Asianization of America.

What would Roland H. Macy do if he were alive today? Hoover has read his biography and believes his way of thinking could fix the Federated and May department store chains.

He feels that Lou Gerstner was closer to Tom Watson, Senior than how IBM insiders remembered Watson. He said the most important thing was to serve the customer, not wear a blue suit.

3. Geography - Understanding where you are in space and time, can be your most important advantage. What is the difference between an IT consulting firm in Reston in 1994, 1999, in 2004, 2009 and in 2014?

When starting a company, ask what it should look like in 10 to 20 years. To do that, you have to establish what it looked like 10 and 20 years ago.

50 years ago, ads in Fortune always said where the HQ was. “Coca Cola of Atlanta Georgia.” Web designers today say it is not important. That is bullshit and expensive bullshit. Customers want the context for the people they are dealing with. (Amen to that…I always check location - D2)

Sam Walton said, “In a store, adjacencies are more important than price.”

Vern Harnish of gazelles.com asks, “Do you have a map on the wall of your office?”

Michael Dell knows a lot about China. If California (our largest population state) were a Chinese province it would be 19th largest. We don’t even know 19 Chinese provinces. The Chinese know our states and cities. They are setting up for entering this market.

Four requirements for Vision:

1. Clear words, sentences and paragraphs that mean something. Business executives and college professors can’t do this. Need a third grade vision. Best one he ever heard was a national retail chain of hat stores, Hats, Inc. Their vision? “Sell Hats, Have Fun.”

2. Commitment - Great companies do one or two things incredibly well over time. Acquisitions aren’t the way to heaven. Be really focused on what you are doing.

In the 50’s, American car manufacturers decided to get into sports cars. They came up with two, the Corvette and the Thunderbird. The Corvette was always a red 2 seat V-8. Now I am sure they have consulting studies to get into four door, SUV add-ons. But they stayed true to a red, 2 door, V-8.

In contrast Ford took the Thunderbird and moved it to four doors killed the brand, let it lie for a couple of years, brought it back, then killed it again. Today you can’t buy a new Thunderbird.

It was not what the Thunderbird lost, it was what Ford gave away by not being true to their concept. By the way, in the ’50s Thunderbirds outsold Corvettes three to one.

Ford has bought Volvo and is doing the same thing. In the US, Volvo has never been able to sell cars. They sold two things, reliability and safety. Now Ford is selling sport Volvos and convertible Volvos.

3. Serving – Saying “we exist to make a profit” is like saying we drive a car to get good gas mileage. You drive a car to get somewhere, good gas mileage is a secondary consideration. Being measured is not why enterprises exist.

When Wal-Mart started, Sears was the king of smart retailing, knowing the most about their customers, selling the highest quality, investing in suppliers, getting the right real estate for the lowest price, having the best merchandise. How did Wal-Mart surpass them?

Turns out they didn’t. Sears took their eye off their customers and started acquiring financial service companies and other services, while Wal-Mart was fanatical about supplying what the customers wanted The bottom line is “all power is in the hands of the customer.”

When someone approached Sam Walton about investing in IT systems, he would ask, “How does that help the person in line check out faster? How does that help us keep adequate stock in each store?” Anything you buy has to directly serve the customer.

4. Unique – You have to be unique.

Hoover observes that the new rage to dominate markets consists of naming the company with a computer generated word that begins with “A.” Avaya, Agilon, etc. He doesn’t think that formula is going to work.

Steve Jobs is the master of the unique. When they brought him back to save Apple, all computers were beige. He said, “Make ours pink,” and sales took off. The next time he had to save the company, he invented the i-pod.

For the future, Hoover sees four areas to concentrate on, Healthcare and services, Financial services, Travel and Education (especially boomer education). For health care, Hoover would expand the category to include Whole Foods and Walgreens.

Large firms don’t understand differentiation. To be everything to everybody doesn’t work.

When you understand how you are differentiated, it drives the business, how you define your offer, your work environment, treat your customers and employees.

5. Passion - a successful business has to be built by people who love what they’re doing. You make fortunes doing what you love.

Question (from audience) “What is the role of quality?”

Answer - Yes, we lost it and got it back. In the sixties to nineties how could General Motors have 40 years of idiot CEOs, accountants as CEOs, accountants who didn’t love the product?

Question – I have a problem being government where I have to serve everyone

Hoover’s answer - Find some area you can love. Or some customer you can love. Check out the census website. Its ease of use beats many corporate web sites.