Business leaders face increasing pressure to act quickly to respond to the changing times, but small businesses are oftentimes challenged by limited resources, which impede their ability to pursue big ideas. One way to overcome this challenge, writes Peter Sims in his book Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, is to make a series of “little bets” versus a few big, costly ones. From comedian Chris Rock to Amazon.com CEO Jeff Bezos, the world’s most successful people use low-risk actions to innovate all the time.
But what types of little bets would actually work for business owners? To find out, we asked three members of Vistage, a peer group organization for business owners and senior executives, to shed some light on the types of little bets that typically yield big results.
Re-framing your approach to a problem
In 1999, Bill Lanigan’s company, Chamberlin Rubber Company, lost money—a lot of it—for the first time in his tenure.
That summer, Lanigan heard an intriguing talk by Vistage speaker and negotiation expert Ron Fleisher, who described a bonus plan in which all employees shared in the company’s profits (and losses) through cash bonuses. Re-framing his approach to one that included compensation was a little bet Lanigan was willing to make.
“I have strong faith that for the most part, people want to do a good job, they want to work hard," says Lanigan, "but American business hasn't been great at giving them the opportunity to show what they can do.”
He decided to put 75 percent of the business’s profits into his own version of Fleisher’s plan. “People said I was nuts,” he remembers.
After a year of losses, Chamberlin Rubber Company made a $3,000 profit in the first month the plan was in effect—and the company gave 75 percent of that cash to its staff. It wasn’t much, “but the fact that right out of the chute they did get something made them believe,” Lanigan says.
Accountability quickly skyrocketed; managers reported that their jobs were easier than ever, with employees actively making quality improvements.
Today, the company has nearly quintupled its annual bottom line. In 2008, about $800,000 was paid in bonuses—to approximately 30 employees.
“Our turnover is virtually nil,” says Lanigan. “The last time we let anybody go was in 2004. Hiring and firing are very expensive. We’ve virtually eliminated that, because people don’t want to leave.”
Some people still call him crazy, but Lanigan doesn’t mind. “I pretty much just smile and walk away.”
Testing new initiatives in “micro-environments” first
“If you want to take a big leap, you have to figure out how to test it in some kind of a micro-environment,” says Craig Coleman, president of ForwardLine, a company that provides small business financing and payment processing. “Folks at our size don’t have the resources to just throw tons of money and people at a particular idea until they’ve tested it and validated it.”
To serve applicants who didn’t meet ForwardLine’s credit standards, Coleman and his team proposed an outbound referral program. It was a resource-intensive project, requiring time, people, and business relationships with third-party finance sources.
Rather than forge ahead, they created a 60-day trial first. They negotiated with just one third-party company and asked their sales manager to lead the project (with the incentive that if it were successful, it would become part of his compensation). An administrative employee who had expressed interest in a sales-oriented position was enlisted to run the syndication desk—for just two hours a day.
Reports Coleman, “We performed about a 60-day test, pretty much costless, and it turned into a success. We’ve now referred out hundreds of deals and it’s become a significant source of revenue for us.”
Today, the outbound referral program is a core part of ForwardLine’s business model.
Using low-cost strategies to spur growth
“It’s always hard to grow your biggest segment by a decent amount,” explains Rick Olson, president of Olson Visual, a large-format printing company for the entertainment, museum and retail industries.
Rather than throw dollars away, Olson accelerated the growth of his own largest business segment by improving his company’s visibility (literally)—for almost no cost at all. With an entertainment industry event on the horizon, Olson made a little bet: if he could barter graphics for sponsorship, he could potentially make a big splash with a core market that was difficult to grow otherwise.
“We provided some services for the show management as well as [to] people [who] went to the show. We make graphics, so we covered graphics all over the place of this convention area,” says Olson. “People saw us in a different light, and it improved our sales with all our core customers in the entertainment community.”
The company had never sponsored such an event before, but the investment was so minimal it made sense to gamble. Not only was the effort well received, but the big visibility of this otherwise “little bet” had immediate financial results.
It was a simple and cost-effective strategy; Olson saw a significant uptick in sales in a core market—without spending a dime.