Spreadsheets may be the greatest tool since sliced bread for the finance wizards, but sometimes they’re totally useless. What looks black and white on a spreadsheet – achieving the economies of scale so often touted in mergers and acquisitions by streamlining costs and eliminating variations across the new company – usually doesn’t result in profitable success. Tony Hsieh of Zappos talks in this month’s Inc. magazine (and in his new book) about why he sold to Amazon: his former investors didn’t value his customer service approach thinking it was too costly – yet it’s the glue that makes Zappos what it is.
Rather, it usually dilutes a brand, alienates customers and eventually kills the business because the numbers don’t reveal the whole story. Customers don’t care about spreadsheets. They don’t care about your economies of scale. They care about a great experience. The experience they used to get before the merger. Now that you’ve destroyed what made that brand special, they’ll go elsewhere. And there’s always somewhere to go.
Such was the case with Pacific Coast Restaurants in Portland. For years they had a great formula regardless of which restaurant you went to in their portfolio: really good food, great service, nice, upbeat atmosphere and reasonable prices. Year after year. They were never cutting edge. They never followed the latest trends. But their food was consistently good. It was comfort food with class. Enter the acquisition by Restaurants Unlimited. They tried to capitalize on the economies of scale by changing the menu to match the Seattle based restaurants in the chain. They did some spiffy new logos and raised prices as well. In short, they managed their brands from a spreadsheet and failed. Customers left. Fast. Business fell by nearly 25% – far more than the impact of the economy. And longtime employees left as well.
I remember being shocked at the prices when I went to Stanford’s last year, one of their key brands, after the makeover. It’d been awhile since I was there, but their prices pushed the boundaries of what they were known for. Now it seemed to be more of a special occasion restaurant rather than a great place for business lunches or casual dinners. And that being the case, there were so many other places I’d rather go for a special occasion, that they’d never make that list.
Fortunately for Restaurants Unlimited, they brought in a new CEO who started listening to employees and customers. He started to appreciate the cultural differences between Portland and Seattle and at Stanford’s, brought back customer favorites to the menu and rolled back the prices. Then publicly apologized in an ad campaign that invited them back for what they loved about Stanford’s. Guess what? It’s working.
Pacific Coast knew how to run a successful restaurant. They executed every detail flawlessly since they began in the early 80s. They made very nice profits by paying attention to what customers responded to. And they never followed the latest fads. They did this by developing consistent processes – and measuring what’s happening in the trenches. They set high standards for their managers. The manager of each restaurant as well as head chef was always listed on the front door. They made the experience personal. As a guest, you often were asked by the managers how you liked your meal. It was management by walking around. Not by a spreadsheet.
You can’t manage a brand on a spreadsheet. Spreadsheets only display numbers. They don’t display the human qualities – the intangibles – that make a brand sticky.