Defender Direct Case Study

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En provenance du cours de University of Virginia

Grow to Greatness: Smart Growth for Private Businesses, Part I

431 notes

University of Virginia

Grow to Greatness: Smart Growth for Private Businesses, Part I

431 notes

This course focuses on the common growth challenges faced by existing private businesses when they attempt to grow substantially.

À partir de la leçon

The 4 P's

This module presents the four P's of growing a business: planning, prioritization, pace and processes. The four ways to grow your business are improvements, innovations, scaling, and strategic acquisitions. The required reading is Edward D. Hess, "Defender Direct, Inc.: A Business of Growing Leaders," Case Study.

The Infrastructure of Growing a Business: Planning, Prioritization, Pace and Processes21:26

Defender Direct Case Study22:37

Defender Direct: Planning, Prioritization, Pace and Processes 10:18

Prioritization: What, Whom, and Why? Where is the biggest fire?9:37

Rencontrer les enseignants

Edward D. Hess
Professor of Business Administration
Darden School of Business

Welcome back. You've got your three things written

down, I hope. Lets move to the Dave Lindsey case, the

Defender Direct. It is a wonderful case, because it has so

many teaching points in it. And let me, I'm also going to to get the

case, because, you know, I like to read from the case, because reading from the

case gives you the exact comments and words that Dave used and told me. All

right? It's his story.

Interesting story. 1998. Dave starts his own business, uses $30,000 of his

personal savings, and he goes through a process, over the last 23 years, of

building a business today, which this year will do $400 million of revenue.

Lets make sure we understand. US dollars, 400 million.

I think we can learn from Dave. I think we can learn from Dave.

Now, Dave has learned along the way, and as you read the case, you saw that during

this growth period, the business went through change and transformation, and

Dave personally went through change. And Dave concluded, as he looks back on

it all, that businesses don't grow unless the people grow.

And Dave also concluded, a business doesn't grow unless the entrepreneur

grows. What do i mean by that? Well, the

entrepreneur start out with a vision, a love of a product, a love of a service,

and basically, an entrepreneur does everything, like Susan Feller.

But ultimately, as you grow, you've learned.

Growth takes more people. More people takes processes and controls.

It sort of builds upon each other, okay? And when you have more people, then the

entrepreuer has to delegate. As one entrepreneur said, delegation is

not a natural act. It's hard to give your baby to someone

else, and that's what a business is to an entrepreneur,

because what the entrepreneur usually wants is, if you're that employee, for

you to do it the same way he or she would do it.

Well, guess what? You're not going to do that all the time, because you're

different. You think different.

And also, you sort of want to add, just human nature.

You got ideas how to improve it. So the entrepreneur has to learn how to

manage people. Then the bigger you get,

then you need managers to manage employees.

Then entrepreneur has to learn how to manage managers. That's what we call

leadership. So I go from entrepreneur, to manager, to

leader, and ultimately, you get to where Dave is now,

is you get to be coach and mentor. And if you think about it, at the biggest

the size Dave's company is today, Dave's not on the front lines that much.

What's Dave worried about? Culture, processes, continued education, as he

said, we're in the business of growing people.

And he focuses on his culture, because he says in the case, build a culture on

purpose, not by accident. Now, you found out in the case that Dave

was very influenced by two books And they're both outstanding books.

They're both outstanding books. Okay? Michael Gerber's book, The E-Myth:

Why Most Businesses Don't Work and What to Do About It.

And out of that, okay, Dave learned basically, the principle, alright, of

wow, I need to have a repeatable system, that Dave called McDonaldized.

It's a hard word to say. Okay? But, what does that mean? Any of

you ever been into a McDonald's? Probably.

Or any big fast-food chain? Do the french fries look the same and

taste the same in San Francisco as they do in London? They should.

Does the hamburger the same size and cooked the same way in Milwaukee as it is

in Mexico City? Yes.

That just doesn't happen, folks. How does that occur? Because what

McDonald's does, is they got a cookbook, a process book, and it says, if I'm hired

to be the french fry cooker in the Charlottesville McDonalds, right down the

street here from the school, I go in, and I open up the book and it

tells me, okay, take the french fries out of the

freezer. [NOISE] Open up it, the french fries this

way, so they can be resealed. Dump so many french fries into the fryer.

Have the fryer temperature this degrees when you dump them in.

Fry them for this many minutes and set the timer.

When the timer goes off, immediately lift 'em up. Shake 'em so many times.

Dump 'em in the pan. Immediately salt.

Let them cool a few minutes, and then put so many in those little cartons and stack

the cartons this way. Every McDonalds in the world, it's done

the same way. What, what are, what are they trying to

do with that? They're trying to get standardized, high

quality delivery of a product across all their locations.

Well, Dave was trying to do the same thing, right? Dave was, started out

putting in locks and secure, basically, locks to secure houses.

And then he got lucky. He hit, he hit a, he hit a movement.

The home alarm movement took off in the United States.

And he then basically became an ADT. Okay? Which is a home alarm system

distributor. And he put in alarm systems in house.

Well, if you put an alarm system in a house,

although, my house may differ from Kyle's house, or Chris' house, or Fred's house,

my team here, basically, when the, when the installer

comes to put it in, it's the same process.

Alright? He or she hooks it up to the same thing, it's suppose to do the same

result, that when somebody opens my door or window, and is not the right person,

all the alarms and bells and whistles goes off and it immediately calls the

police. So it's gotta be screwed in the same way,

and it's gotta be screwed in to the same place.

And it's gotta be hooked into this and hooked into that.

And as Dave said, I need a repeatable system.

I need a repeatable process, because, and this is a process case,

repeatable processes do what? Give you standardized high probability, high

quality product or delivery. Why is that important? Because all

customers want the same thing. I want what I expect, and what you told

me you're going to deliver. I want it on time.

I want it not to have problems, and if it does have problems, I want you to fix it

quickly, caringly, and make me feel like you're truly sorry.

because, this customer part, don't lose it as we go through the process part

here. See, it all fits together.

Building a business is like a giant jigsaw puzzle.

I gotta have the right processes. I gotta have the right employees.

I gotta have the right attitude about customers.

I gotta care about customers. You know, in thinking about this session

this morning, I thought about a little restaurant right down the street here, in

the shopping center near the school, and sometimes I go to that restaurant once a

week. Sometimes I don't go for two three

months. But if I've got to take a guest or

something, I go there, because the food is very good, you know?

And every time I walk into the restaurant, the owner comes up to me and

greets me like a long lost friend. Shakes, puts his hand out and shakes

mine, and says, welcome back, professor. Shakes my hand, pats me on the arm, so

glad to have you here. Anything I can do to make your visit

better, let me know, and walks me to the table.

I mean, how do I feel? Loved, needed and wanted.

I've just been, what did he tell me? You're going to be taken care of.

You don't have to worry. You're in good hands.

That's what all this process is about. Because he's trained his people in the

kitchen, and he's trained his waiters and waitresses, what are the critical things

to say and do with every customer. So when they leave they feel that way,

that's why this process stuff's important.

We call it in business school, operations.

Because it all comes in to play about how your costumer feels and whether your

customer keeps coming back. All right.

Let's go back to Dave, okay? And, let me give a, give you a quote from

Gerber's book that Dave said was so important.

I'm on page five of the case. We kept in mind Gerber's three roles,

three, in a business. The entrepreneur's job is to create the

process. The manager's job is to ensure the

process is used, and used correctly. And the technician, the doer, the

employee, the installer in this case, job is to follow the process and use it.

So if you think about that, your job, as the entrepreneur, is to put in place the

process, to teach the process, so your employees use the process.

Okay? And, ultimately, when you get big enough, and if you are big enough, you've

got managers. The manager's job is oversight to make

sure that the process is being used. So, it's very, very critical, okay?

Another quote on page five. I love this quote.

Dave said, we lived, and still do, by Gerber's tenet.

Big business is just a small business that thought big.

We always remind ourselves, it's not okay to put in place a mom and pop system in

place, because that's just going to keep us

small forever. What's he saying to us? What did he

learn? Think about that. I'm going to read it again.

A big business is just a small business that got big.

What's that mean to you? There's some truths there, isn't there? Every big

business was small. And Dave is saying, put in place the

processes that are going to allow you to grow if you choose to grow.

Put in good processes, and you're constantly improving processes.

And who is the person that will most likely come up with the ideas of how to

improve the process and make it better? Your employees.

So make it part of their job descriptions, not only to use the process

but to constantly improve the process. Because if you're constantly getting

better, faster, and more efficient, you will outrun the bear.

Okay. The next thing Dave had to do,

was he reached the point where he had to start prioritizing.

He had to define his business. He had to define his business.

What business was he in? Why is this important? Because when you define who

you are, that helps you determine what to focus on, and most importantly, what not

to do. The purpose of defining yourself, what

business I'm in, allows me to keep my focus. My focus.

Focus is critical in it all. So he had to define himself, so his employees knew,

and he defined himself as a home installation product company.

Now what was the big focus on the word home? By defining himself as the home

installation, he said, I'm not going to do commercial or business installations.

I'm going to the residential home owner. And that allowed him, as you read in the

case to limit his products, to his limit his spare parts, to limit what his

installers had to learn, so that they became very, very good.

And wasn't it fascinating? Page five. Today we still have only 13 part numbers

in our inventory room, the same 13 we had ten years ago.

We have not added things. Wee kept doing more of the same, better, trying to

McDonaldize it. We understood focus as the goal early on,

constantly using an A, B, C format to prioritize.

I coach all of our new leaders, we don't pay you to get everything done,

we pay you to get the most important things done.

And, yes, it was Dave that said that, on page five We don't pay you to get

everything done, we pay you to get the most important things done.

And I think that's a tremendous lesson for us to learn.

Now, what else did we learn about in the case?

Dave had his circle of life that he used to manage the business.

And the circle of life was like a clock, okay?

And you saw the circle of life, on one of the appendices in the case. It is on page

12. And at the top of the circle, the circle

of life starts with marketing. You gotta do marketing to get sales.

Okay? Then once you have sales, you've gotta install.

Once you install, you gotta bill and collect.

And then you start over. In Dave's model, everything starts with

marketing, and Dave used a bottle-neck priority

approach to managing. Where is the bottle-neck? If it's in

marketing, Dave is going into marketing, and overseeing it.

Once I get marketing going, okay, I got leads.

I gotta sell. What's going on in sales? If I sell a

lot, if I get a bottle-neck in installation, you remember in the case,

he says they knew where the bottle-neck was by where I showed up everyday.

And Dave used this clock, this circle of life, which really is the

circle of business life, in Dave's business, to manage the business.

It was a process. It was a simple process.

A simple way to visualize. A simple way to describe to his, at this

time the case was written, 1,500 employees,

how the business worked. So everybody understood that everybody is

dependent and interdependent on each other.

Sales can't sell until they have leads from marketing.

Installers can't install until sales are made.

Billing and accounts payable and working with the customer,

can't happen until it's installed. And unless it's all working, there's no

money coming in. And in order to do this, he also built an

infrastructure, on the Defender Advantage,

what he called, his culture. And you saw, basically, his whole

cultural multi-year program of training and education.

And wasn't it interesting? Okay? Wasn't it interesting that he even had time to

read books in his business? And I think that's part of the

interesting learnings, if you will, from Dave, if you will, this circle of life.

And the point that, as the business adapted, you saw how Dave went from three

different business models, okay? To telemarketing, to internet and direct

marketing, and, ultimately, if you will, to a

multiple channel marking. Okay? He had to reinvent himself.

Now, there's another point. Think about this case.

Dave talked about the fact that his business grew. Sometimes his people

didn't grow, and they basically were not able to go up and manage at a higher

level. And Dave introduces the concept of

upgrading as a business grows, and this concept is as important as the

fire exstingusher. It's as important as the growth can be

good, growth can be bad concept. It's as important as the growth requires

constant improvement in learning, upgrading.

As a business grows you need to basically upgrade your people, processes and

controls. And the sad point that Dave talks about

in the case is, as you grow, sometimes your people can't take on more

responsibility and they have to stay in the same position, okay? That's difficult

in a business, especially when those employees are loyal employees who were

there from the beginning and helped build your business, but it's one of the things

you're going to have to face as you grow a business.

Now, at the end of this class you're going to hear a little interview with

Dave. Dave's going to come to life, through

technology, with you and you're going to find Dave a very engaging man.

And before going on and, and leaving this, let me tell you where Dave is

today. Dave today is no longer the CEO of his

company. He stepped down as CEO to become Chairman of his company,

and devote 90% of his time to his charity work and his mission work, and to

basically, OK, do, in his view, good outside of the company as well as good

inside the company. Very interesting story.

The CEO of the company today is the telemarketing woman, whose company he

bought, who basically became the CEO, and she's, her main job is, is the defender

of the culture. And notice what I said, defender, cause

it's the Defender Direct company, and her job is to keep the culture, and the right

environment, and the right processes going as this company continues to grow.

Okay.I want to take a break here, take a break, want you to get out your paper and

your pencil. What's the three key things you learned

from reading, thinking about, answering the questions,

and you and I having a conversation, and talking together about Defender Direct.

What are the three things you learned, key things you learned? And it'll be

different for everybody. Then after this class, go on the

discussion board and share, and learn from each other.

But take two, three minutes right now. A break.

Write down those three key things, and then we're going to come back and

come back to the key concepts, that we're going to finish up the week on.

Three minutes. Three things. Again, making sense of them in your mind.

Verbalizing them by writing them down, putting them in to your words.

Why are we doing this? So you can learn. That's the purpose of all this.

Back to you in three minutes.

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