Years ago, an acquaintance of mine was living in Canada's Far North. He spent some time in a tiny community that was only accessible by plane.
Needless to say, the sub-zero temperatures and snow up there aren't the best setting for farming. So food has to travel a long way to get to this town, and ends up being very expensive. Eggs are $8 a dozen. Soft drinks are a luxury.
One day, an unexpected item showed up at the town's tiny grocery store: a big, juicy watermelon. The day it arrived, the store put it out on the shelf at a price of $85. Locals had gotten used to high prices for their groceries, but this was out of reach for most. So community members came up with a logical fix: They asked the grocer to cut it up and sell the watermelon as slices. At the end of the day, the store would still make just as much money (if not more), and everyone could afford to try a piece.
But the store wouldn't budge. For whatever reason, it wouldn't slice up the melon. Residents tried to convince the manager otherwise, but to no avail. Days trickled by. Yet, no one was willing to pay for the whole watermelon. And the store wasn't backing down.
So in the end — believe it or not — the rare and precious fruit was left to rot on the shelf, unbought and uneaten.
What does this story have to do with running a tech company (or any business, for that matter)? A lot, actually. It's in fact a perfect cautionary tale for so many entrepreneurs. In the case of the rotten watermelon, we see three of the worst entrepreneurial bad habits converge: inertia, ego and fear.
I'm not exactly sure why the store wouldn't slice the melon. But part of it had to be simple inertia. They had a system place and they were sticking with it. Their approach had worked up until then, so there was no reason to change course. Inertia is equal parts laziness and complacency … and in the end it's a surefire way to kill your business.
The past is no predictor of the future, after all. Successful companies are constantly questioning their processes. They're always gathering customer feedback and finding ways to tweak their offering to better meet demand. Yes, this requires more work and sometimes means going back to the drawing board — but that's the nature of growing a business.
But this isn't always easy. I've experienced the pull of inertia firsthand at my company, Hootsuite. From the beginning, we offered an "enterprise-level" version of our social media management platform to large companies, with a price tag to match. For smaller companies, we offered a pro plan, with fewer features and a much lower price tag. The problem was that lots of companies were stuck in the middle. We'd get requests all the time for a mid-level offering that straddled the two plans.
But we ignored them. We refused to slice up our watermelon, so to speak, to meet customer demand. We were stuck in our ways and, as a result, we were missing out on a big chunk of business. Fortunately, we pivoted just in time to save our melon from rotting. Recently, we essentially cut our enterprise product into slices and introduced a new "business" plan that includes social media training, advanced functions for big teams and other asked-for features, at a more modest price tag. And it's quickly become a very in-demand product.
I imagine the grocery store's inertia was compounded by another factor: ego. The store was essentially the only game in town, and it had been for a while. Because it had been so dominant for so long, a degree of arrogance had crept in. Like it or not, residents had to buy from them.
This kind of arrogance has been the beginning of the end for countless promising companies. For years, BlackBerry executives insisted that they had a lock on the smartphone market. They got in early, had a huge head start on technology and had secured contracts with every big business out there. So what if some users complained that the buttons were too small or the software was clunky. RIM had practically invented the modern smartphone and could afford to ignore a few naysayers.
Of course, we know how that story ended. Even loyal customers will only put up with so much. If there's a better or cheaper (or just friendlier) option out there, people will jump ship.
In the case of the grocery store, there had been a long history of high prices that seemed unfair. The $85 watermelon was the tipping point. Behind the scenes, I'm told, residents got together and made a pact to boycott the melon. They did have another option, after all: not buying anything.
But maybe I'm being too hard on this Yukon grocery store. Inertia and ego aside, a big part of the reason the store wouldn't slice up the watermelon was probably simple risk-aversion. They had spent a lot of money flying the melon in, and they wanted to be sure they recouped their investment. Keeping the watermelon whole meant a longer shelf life and a surer chance of one big payout.
This kind of fear, however, can backfire when taken too far. Business is never a sure thing. The perfect opportunity — one with all upside and no downside — is rare. In fact, the essence of being an entrepreneur is the willingness to bear extra risks and uncertainties in exchange for the prospect of an outsized return. If you're not OK with that, then maybe you're better suited for another career path.
Sometimes, this means making the wrong bet and swallowing a significant loss. In my early days, when I was running a small digital agency, I landed a big contract to design and implement software for a food franchise with hundreds of locations. To meet the demand, I hired 15 people, nearly doubling the size of the company. This was early 2008. Then the recession hit and that huge franchise went down the tubes … and I had to clean house at my company.
But that experience didn't stop me from taking a gamble just a few months later on another untested idea: a nifty tool my agency developed to manage multiple social networks at once. It wasn't bringing in any revenue, but social media was just taking off and I thought the potential was huge. So I assigned seven full-time team members to the project, paying their salaries with my personal credit card. Long story short, that tool became Hootsuite, which now has more than 10 million users, including more than 800 of the Fortune 1000 companies. With any entrepreneurial venture, there will always be trade-offs and risks. The biggest mistake is to let this fear of the unknown become paralyzing.
As for the watermelon saga, the drama actually didn't end there. Soon after, the local community pooled their resources and started its own co-op, with cheaper produce. So it turns out the rotting melon fiasco was in fact the beginning of the end for the small town grocery store — and a tale of caution for entrepreneurs everywhere.
Ryan Holmes is the founder and CEO of Hootsuite, a social media management tool for businesses.
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