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I Am American Business

Jeff Grady

Producer Notes

Our contact at Digital Lifestyle Outfitters warned us, she'd never seen CEO Jeff Grady without his baseball cap on. Would that be OK for the interview? Jeff Grady moved his company to Charleston, South Carolina for the casual lifestyle. For a very hard-working guy, he believes in relaxing... at work, on his boat, whenever. But he's not relaxed about his brand. He keeps a watchful eye on every aspect of every product. He's also very serious about enjoying his music. DLO is now sponsoring a local music festival, and Jeff is very happy about that. When his work and his music come together, that seems to be the perfect combination for him. What is remarkable about this fast-growing, privately-held company is not just the story of its one-man start-up, or its recent sale to Philips, it's the fact that this little brand, one of the very first to make a case for a digital music player remains a leader in the field 7 years later.

Video Interview

I Picked Up the Phone
I Didn't Have Any Money
The Only Site
A Small Fast Fish

The "I Am" Q&A


What kind of car do you drive?
I have a collection of cars. And I drive them all equally. My favorite? I have a 1971 Mercedes Benz 280-SL. It's mint. That's my favorite. It's beautiful.

What's your favorite place to go?
Home. I love Charleston. I travel a lot and I'm always glad to come home.

What website do you like to visit?
My favorite website, hands down, is Wikipedia. I'm constantly visiting Wikipedia to find, you know, whether it's resolving a bet or just information that I want. I have a question to ask. And so Wikipedia is my favorite website.

What was your worst moment in business?
That's a tough question. My worst moment in business was our first call to Best Buy and getting kicked out of the door ten minutes into our sales pitch.

What's your favorite drink?
Crown and ginger ale.

What is your favorite food?
Pizza.

What's your idea of fun?
Being with my friends and family.

And at work?
Coming up with new great ideas that when you do you know that it just changes everything.

What personal weaknesses do you forgive in someone?
That's a good question. You know, I forgive all of people's personal weaknesses. Part of my job as a CEO is to be a coach. So you have to forgive their weaknesses but identify them and help them overcome them and become better where they have weaknesses. But you have to forgive them all.

And business weaknesses?
Well, I have to answer the same. No one's perfect. And weaknesses take different forms. So, you know, again, it's identifying them, and then trying to make them better.

What movie star do you like?
I like Russell Crowe a lot. He's great. Jack Black's great.

Who's a business hero of yours?
Mark Cuban.

What personal qualities do you admire in business?
I like people who aren't afraid to say what they think. As long as they are well grounded with their principle and back that up. And people who aren't afraid to step outside of the box, and say things that might be controversial or do things that are controversial, as long as they have good intention and consistent principle.

Are you doing anything green, anything for the environment?
I recycle. And then definitely from a business standpoint, when we look at our packaging, there's definitely a huge push toward being green with your packaging. So every time we have an opportunity to rev our packaging we become more and more green at each step.

What was your greatest moment in business?
Selling my company.

And in life, your greatest moment in your life?
Having a child.

What is your dream?
My dream? You know, my dream just keeps evolving. I think spending more time with my family and watching my child grow up and being a big part of that is my dream.

Do you have a motto?
Where there's light, there's shade. My nickname's Shady, so that's my motto.

What is your present state of mind?
I'm just glad to be home and off the road, coming off vacation. So I'm relaxed and I'm glad to be home and also amazed at home much stuff you guys brought with you and, and this setup. I didn't know I was going to walk into this, this morning.

Transcript

CNBC:
Have you always been a gadget person? Were you always into gadgets?

JEFF GRADY:
I've always been a computer person. Since I was a little kid, dating back to the Atari. And I'm a self-taught computer programmer. So I've always had a fascination and love for computers. And that really has led me to where I am now, with gadgets being basically small computers that you can take with you everywhere.

CNBC:
What about music? Are you a big music lover?

JEFF GRADY:
I’m a huge music lover. And I probably go to see maybe a dozen live shows a year.

CNBC:
Are you sponsoring shows in South Carolina?

JEFF GRADY:
We are. There's an event here that I’m very excited about called Chazz Fest. And it's the second year running and it is a festival that brings in a wide variety of music genres. And that’s here in Charleston. And we are the presenting sponsor of that event.

CNBC:
Do you get to pick the bands?

JEFF GRADY:
No, I wish. But someone else, who is much more qualified, does that. But I get to pick which friends of mine get, get to go with me.

CNBC:
What were your personal circumstances and how did this start?

JEFF GRADY:
When I started Digital Lifestyle Outfitters it was a dot.com casualty. I had been working for a dot.com startup, and had gotten laid off. My wife had left me, so it was pretty dire straits for me. I had a mortgage. And this is post-9/11. This was November when the iPod came out. And being a music lover and a computer person, I was spending my days looking for jobs on Monster.com and ripping my CD collection. But with all of this digitized music I needed a player and was in the market for a player. And being an Apple user, when the Apple came out with the iPod and announced on headline news – I was at lunch – and I caught just the blurb about the product announcement. And I literally jumped off the sofa and said, "that's the device that I’ve been waiting for." And it didn’t surprise me that it came from Apple, because I always assume that they just have superior products. But I said I had to have one. And I had another MP3 player at the time. It held twelve songs. But that had become a part of my life. I used it everywhere I went, but I really needed something that was larger. So, I purchased probably one of the first iPods produced, that I still keep here in my office. And it came without a case. It came with a wall charger and a cable to transfer the data on to the device. So it needed a case. And I had plenty of spare time. I had a MAC. I knew how to use basic illustration programs and designed a case that I then went and had manufactured. Then using my dot.com experience in electronic commerce, where I had built order management and customer service management systems, I could start selling products to people over the internet direct out of my house. So I started running a mail order business for the iPod.

CNBC:
Were you feeling comfortable about buying a new toy without having much money to spend?

JEFF GRADY:
You know, I didn't think much about it and I guess that’s kind of the way entrepreneurs think. It's not the money involved. It's just kind of what you need. Not for one second did I stop and think that I couldn’t spend four hundred dollars on this device. I just knew that I used it every day and it was very much a part of my life.

CNBC:
You actually designed the case on your computer?

JEFF GRADY:
I did. It was a very elementary but, you know, exact design that I created. It was just to create a case for the iPod.

CNBC:
Had you designed other stuff on the computer before?

JEFF GRADY:
I had. Being a MAC user, I really was doing website design. And that was part of my job when I worked for the startup company. So, yeah, I was very familiar with the Photoshop and Illustrator and the programs on the MAC that people would use to design websites, etcetera.

CNBC:
How did you know about making a prototype? How did you go about that?

JEFF GRADY:
Well, I really didn’t know about how to get a prototype made but I thought I'd pick up the phone and I'd call some people and ask some questions. So, the only company that I could think of that made products similar to what I wanted to have made was a company called Case Logic. So I went to the website first and researched the company a little bit and found out that they had a custom products division where they would make anything for you. And that was exactly what I was looking for. So I picked up the phone and I called their custom products group and told them that I had a product that I wanted them to make and I e-mailed them the diagram and they opened it up and said, "Sure, we can make this." But I didn’t tell them what it was for. I just said, "Here are the specifications." Make it to my specification, and that's kind of what they did. They started to do that for me but they were very slow in responding to me. But they did send me some prototypes along the way that were just good enough to photograph for a website so that I could start taking orders for the product.

CNBC:
And so you didn’t even have it in your hands before you put it on the web?

JEFF GRADY:
I did. They sent me, I guess, their first version prototype to see if they were moving in the right direction. And it was just good enough for me to put it on my iPod and take a picture of it. And I took that picture and put it on a website that I built to sell iPod accessories. Then a month went by and I, the company that I was working with, they weren't moving fast enough. Orders were mounting and out of the blue. I got an e-mail from a gentleman in Taiwan who has a factory who tells me that his friend had bought him an iPod. He needed a case. He found my website and he had a company that could make the case for me. So being in a tight situation, I told him if he could have five thousand units to me in two weeks, the business was his. Two days later I had pictures of prototype product that he mailed to me and they are perfect, they worked. About two weeks later I had the five thousand units that I needed to fill all my orders.

CNBC:
Could any of this have happened without the web?

JEFF GRADY:
No. None of this could have happened without the web.

CNBC:
Do you know how to set up the website so that people would get to you if they're looking for iPod accessories?

JEFF GRADY:
Well, this was so early in the life of the iPod that there was a content site or really a community site at the time. It was a lot of people buying iPods talking to each other. And I called the person that was running that site and said, I've got a site where I’m selling things that work with your iPod and I’d like to advertise it. And you’re the first and only site and you’re doing a good job. And I want the upper right hand location permanently. So I contacted them and started running advertising on their website. And that really was the driving force behind that website that I had built.

CNBC:
How much did you invest in this? How much money of your own did you put up in this idea?

JEFF GRADY:
Zero. The prototype was free. I basically kind of guaranteed how many units I wanted to order but I wasn’t going to order until the product was right. So I had no up front costs there. I wrote all the software that was running the website and still runs eighty per cent of our company. So that was free. And I had credit card numbers and orders waiting in the wings so once the product came in I ran the credit cards and then had cash to basically buy the boxes, get the UPS account and all the things that I needed to really get the business running.

CNBC:
So what were you thinking at this time? What did you think you had going here?

JEFF GRADY:
I didn’t really know what I had. I had an income source that I didn’t have before, because I was unemployed. So that was all I was worried about, I was at the end of my six-month unemployment check period. So, I needed to do something. And I really didn’t know how large this was going to be. And, I remember taking a walk after Thanksgiving dinner with my family and my mom, knowing my situation, pulls me aside and says, "How are you doing financially?" And I said, "Well, I’ve got this little website in an iPod case and I got about ten thousand dollars in orders so I think I’ll be okay." Last year we had a hundred million dollars in business. So that's a huge cap.

CNBC:
So in the process of the failed dot.com you were a part of, what did you learn about getting the business started?

JEFF GRADY:
I learned a lot about how not to do things, which is really important –learning from other people's mistakes. And I also learned about and saw a lot of gross excess, where people had raised lots and lots of money but so quickly they just really didn’t know or have time to build a plan of how to spend that money, in a way that would provide return back to the company.

CNBC:
When did you realize that it was going to be something big?

JEFF GRADY:
When you start to get to year four and year five in my business, now we’re talking big. Years one and two, they were nice but they weren't big. So as soon as Best Buy got on board to sell the iPod we knew that we were going to move to the next level. It’s the world's largest consumer electronics retailer with six hundred, seven hundred stores. That represents a huge jump in the business as far as the customers that we were working with. Once they took on the iPod we started calling on them. And it took us eighteen months to close that business. But once we did, the business really took off.

CNBC:
Talk a little bit about how you came to the idea and also how that's influenced your thinking right now.

JEFF GRADY:
Whenever we sit down at the table as a team during product development and create a product we really think about the customer or the end user first. We like to say that we make products for people, not for devices. So we always put the person first and what their need is first. And then build it for the device.

CNBC:
How are you handling the competition and what’s going to keep you ahead of the game?

JEFF GRADY:
Well, at the time I didn’t know what I was doing but I essentially invented the space of iPod accessories. Since then it’s become a fiercely competitive marketplace. There are a couple of things that have kept us ahead of the game and that's speed to market and innovation. So we take these great ideas for accessories that are for people. And as the devices change we'll have to change the feature sets. But being first to do that and getting the really cool new products on the shelf first is definitely a key to our success. And in that it is innovation. So what’s the feature that really sets the product apart from everyone else?

CNBC:
Where did you learn about this concept of speed? Where did that come from?

JEFF GRADY:
When I worked at the dot.com – I had a previous company that I sold to the dot.com that I went to work for. And that company was selling license and logo, collegiate merchandise, on the Internet. And I was the first person to start doing that. I lived in the Raleigh-Durham area and there are four universities. So that’s a big deal. And I, at the time, was teaching myself how to program for the Internet and saw a couple of areas that I thought would really change industries – the Internet would. One was mail order business. The largest expense when you’re a mail order company is your catalog and catalog distribution. It’s easily your largest expense. Well, with the Internet, you got rid of your largest expense. It probably went from your largest to your least, as far as production’s concerned. So I got very interested in that and then found a product line that I thought was perfect for the Internet. And it was license and logo collegiate merchandise.

CNBC:
The idea of quick tools, what is it about being fast?

JEFF GRADY:
It’s really key in a competitive space to be fast. If you work and your competition is big and slow, it’s really, kind of, a disadvantage to them. But you can play that to your advantage. A small fast fish is going to outrun the big slow fish. So that’s the analogy that I like to use. But it’s being small and first that really can give you an advantage over the nine hundred pound gorilla.

CNBC:
What do you do in your company to make sure that your products are at the cutting edge?

JEFF GRADY:
We’re all users of the products so we spend a lot of time talking about them, "Hey, this past weekend, you know, I had this experience. And this is what I did. And I solved a problem. " And that, because we’re such users of the products that’s really where the innovation comes from, is being put in situations. And, you know, living in a place like in Charleston where, hey, I had my iPod on the boat this weekend. I really needed this and there were all these other people with iPods on their boats. And they did, too.

CNBC:
Do you think it was things that you learned from the failures you’ve been involved with that really helped you?

JEFF GRADY:
I think that every experience that I've had in my life leads up to where I am today. You know, back to childhood. So I can’t say it's one thing. It’s the culmination of everything that's happened in my life.

CNBC:
If you had to summarize the lessons you have learned - financial management - what were some of the other things you learned?

JEFF GRADY:
I learned a lot of what not to do. I learned about being resourceful, and also finding a great team of people who are also resourceful. When you’re an entrepreneur you’re not in the business of managing people. You're in the business of managing the growth of the company. So that’s very key, is finding the right people who manage themselves and who really flourish in an environment where they self-manage.

CNBC:
How would you describe the vision of DLO?

JEFF GRADY:
I think that our mission is very closely tied to our product philosophy. We make products for people to enhance their lifestyle.

CNBC:
If you see people around using your products, how do you feel?

JEFF GRADY:
I'm still amazed. When I travel home every day, I cross the Ravenel Bridge, here in Charleston, and there’s a running lane. And I must see a half a dozen people, every day on my way home from work, using my company's products. And I always just get a kick out of seeing people using our products. And I know that that product has changed their life. And I will say that to people and they'll laugh at me. But when I see people using the product I know that it has changed their life.

CNBC:
Let's talk about how fast the company has grown.

JEFF GRADY:
Well, my company has experienced really explosive growth in the five years that we’ve been around. For two years running we've been the fastest growing privately held consumer products company in the nation, according to Inc. magazine. And in fact, last year we were the third fastest growing privately held company in the nation, period. So it's been quite a ride and I don't think that there's any real slow down in the area where we work. Personally for me, I just enjoy what I’m doing. I enjoy gadgets. I still love music. And I still have a lot of great ideas for new products.

CNBC:
So where are you in your growth curve?

JEFF GRADY:
Our growth curve is flattened but we’re really tied to devices, and consumer spending. So as new devices come out, such as the iPod, the iPhone, we will continue to follow those devices with accessories that enhance people’s lives.

CNBC:
So you think the market is still growing?

JEFF GRADY:
Absolutely. The market is still growing. Now, I have an iPhone and it’s an amazing product. And, you know, we do kind of follow Apple. They’re a consumer electronics company. They’ve dropped the word computer from their name and I think that's just a really good indication of where they're positioning themselves in the marketplace. And we're right there with them, with their products. But we also work with all the other companies that are working in this space and creating whole new classes of devices that are combining Internet technology, with cell phone technology. So it's a really exciting place to work right now.

CNBC:
What is your strategy for establishing your brand?

JEFF GRADY:
We’re a lifestyle company and we’re a premium brand. And we've worked very hard to position ourselves as a premium brand. But in order to be a premium brand you need to have the highest quality product. And so we work very hard in looking at the details, especially when you’re working alongside and attaching to Apple products. Those are premium products as well. They spend a lot of time with their design to making sure that they have a very unique look. So we’re really inspired by that and want to position ourselves in a premium space. But it is the eye for detail in the product to making sure that it is of high quality so you can stay in that position.

CNBC:
What do you think it takes to be an entrepreneur?

JEFF GRADY:
I think just to be an entrepreneur you have to be pretty willing to accept risk. To be a good entrepreneur you have to understand what your tolerance for risk is or what are the good risks to take and which ones are not. I think that really separates good entrepreneurs from bad entrepreneurs, is understanding how to manage risk.

CNBC:
If you were going to give an entrepreneur a pep talk. Let's say, it was somebody and you thought, like, that they actually did have a good idea. Well, start with that. Is the ideal fee or is it the execution?

JEFF GRADY:
I don’t believe that you can have an idea without execution and vice versa. You really need both sides of that equation. A lot of people have great ideas but that's it. That's where it ends. You have to have a way to execute. And I have people call me frequently who say, "I've got an idea." Great. But I never have anyone call me and go, "I've got execution." So you have to have both. I work with an amazing team of people who are users of the technology. That’s a big thing that I looked for in hiring them was, "Are you an user? How passionate are you about devices and electronics and computers?" And we work in an environment where people go home and they're using their device and they bring that back to the office with them. But they don't look at that as being work. So a lot of the ideas that we get are really from people within the company who have experiences, and then have needs who bring those back to the office. And we talked about it. And then we developed solutions that would help them with that need.

CNBC:
Were you feeling poor? Were you feeling strapped?

JEFF GRADY:
You know I've never ever felt like I was poor or strapped. So at the time spending four hundred dollars for an iPod wasn't anything that I really spent a lot of time thinking about. And looking back, I think that behavior is something that's pretty intrinsic in an entrepreneur, is back to risk. Was it risky for me to spend four hundred dollars on an iPod when most people would say that was a bad use of my money? But I keep that iPod on my desk and look at it every day as a reminder that that was a great risk to take. You know, we made mistakes ourselves as a company but not nearly as many. And we have a very interesting way or a space to work in where if we make a mistake it’s a product that doesn’t sell. That's usually the biggest mistake we can make. But the products that we work with are small and fairly inexpensive so we can put them on the shelf and that's our market research immediately. It's usually more cost effective for us to put a product on the shelf and see if it sells than it is for us to do an elaborate expensive market research study.

CNBC:
In terms of general business advice for other small businessmen, could you encapsulate some of your mottoes?

JEFF GRADY:
There are a couple that I use. One is, I think you need to move quickly and secure your space, and play defense. So get there, get in the space, play defense. That's a philosophy that we use that really works well for us. It's tied very closely to being first in speed the market. Another is finding the right people to help you have the same interests and passions. Again, I'm not in the business of managing people. We’re in the business of running and growing a business. So that’s a very key point, is surrounding yourself with the right people with similar interests, passions, and goals.

CNBC:
What do you mean by 'play defense'?

JEFF GRADY:
In a space where we work it’s consumer products and it’s shelf space. So it's getting that shelf space and not necessarily worrying about do you have all the features right? Is a product exactly right? You'll always have time to change that. You know, it's there's always a new computer that's faster, right? So they didn't wait to get the fastest computer before they put it on the shelf. So we really use that philosophy that's, get the product on the shelf before your competition does, then play defense. And by playing defense it’s revving the product, making it better over time. But once you get the space it’s harder to knock you off than if you didn't get it first. It’s easier to be the incumbent.

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