Becoming a Category of One

How Extraordinary Companies Transcend Commodity and Defy Comparison

Joe Calloway

• Publisher: Wiley
• Year: 2009
• Print ISBN: 9780470496350
• eBook ISBN: 9780470529355
• Edition: 2
• Topic: Business
• Subtopic: Business General
• Index: Business

A revised and updated edition of the bestselling "no-nonsense guide to beating the competition."-Publisher's Weekly

Becoming a Category of One reveals how extraordinary companies do what they do so well and gives you the tools and ideas to help your business emulate their success. Packed with real case studies and personal reflections from successful business leaders, it helps you apply the best practices of the best companies to set yourself apart from your competitors and turn your business into a market leader.

Whether you run a multinational corporation or a two-person start-up company, the lessons you'll find here apply to any business. This Second Edition includes a new chapter on "tie breakers," updated examples of today's category of one companies, and special contributions from business experts, bestselling authors, and CEOs on the future category of one business.

• Revised and updated to remain relevant to today's market conditions and new innovations
• A new edition of the bestselling title from the author of Indispensable and Work Like You're Showing Off
• Today's struggling economy puts even greater importance on the theory and practice of business differentiation
• This edition includes 20 percent new material; if you liked the original edition, you'll love this new Second Edition
• Reliable, proven advice that works for businesses of any size in any industry

Now more than ever, you have to differentiate your business from the competition to succeed. Becoming a Category of One gives you the blueprint for building your own extraordinary business.

1

We Just Decided to Go

It’s Not a Miracle

The movie Apollo 13 opens with a gathering of astronauts at the home of Jim and Marilyn Lovell to watch the live television broadcast of an incredible event. Their fellow astronaut, Neal Armstrong, is about to become the first human being to set foot on the moon. There is a light-hearted, party atmosphere among the group. But as newsman Walter Cronkite announces the event, and we hear Armstrong’s immortal words, “One small step for man; one giant leap for mankind,” the mood becomes quiet, almost reverential. Even Cronkite, the veteran newsman with years of covering historic world events, seems nearly overwhelmed with the magnitude of the moment.

Shortly after the broadcast, the party breaks up and everyone goes their separate ways. Jim Lovell, who is played by Tom Hanks, is now alone with his wife Marilyn in their backyard. Looking up at the moon, Lovell says, “From now on, we live in a world where man has walked on the moon. It’s not a miracle. We just decided to go.”

Deciding to go is the first step on the journey to becoming a Category of One. Unfortunately, it’s also the step usually not taken. Most companies never decide to go. They never make the decision to become extraordinary. The decision they make is to talk about becoming extraordinary or to have meetings about becoming extraordinary or to write mission statements about becoming extraordinary. But they never decide to go, that is, make the commitment that takes hold, becomes real, and creates a new level of success.

A Deliberate Decision

One of the common threads I’ve observed among extraordinary companies is that they make very deliberate decisions to go in terms of pursuing greatness. The decision can take many forms. It might be a decision that is initially made by one person, maybe the CEO of the company. It could be a group decision reached over a period of years, culminating with someone in a meeting saying, “Let’s do this thing. Let’s see how far we can go, how much fun we can have, how much money we can make.” But at some point, most extraordinary companies make a clearly defined decision to go. It literally comes down to a moment of truth. Then, to sustain their success, they must recommit to that decision again and again.

Turning Points

Category of One companies can almost always point to a very specific time when they made a decision to go. When asked if there was a turning point for their company, I’ve had company CEOs tell me things like “In 2002, we were face to face with a real crisis.

That’s when everything changed, and we started taking things in the right direction,” or “It was at the annual company convention in 2007. One night some of us were talking at dinner about the future and what we hoped to achieve, and, all of a sudden, we just looked at each other and decided to do things differently.”

Sometimes the seeds for the decision to pursue greatness are planted from the bottom up, rather than from the top down. Rather than the top people in an organization making the decision to go, their job might best be seen as creating a culture and an environment that leads everyone in the organization to see opportunities for growth and then act on them. When a major decision to go comes from the top down, then it must be thoughtfully communicated within the organization and given the chance to gain the support of the employees. Almost every extraordinary company can point to a very specific moment when the decision was made to be great. The implementation of that decision is a continuing process, but the decision itself is a very clearly defined and identifiable event.

Don’t Waste a Perfectly Good Crisis

Very often, great companies become even greater when a crisis forces the decision to go. There’s a tremendous sense of clarity and urgency that can come from facing disaster. It’s in these moments of truth that the true Category of One company rises to the top. For extraordinary companies, a crisis can thin the herd and force the competition to find another line of work.

The historic economic meltdown of 2008 gave us an almost limitless supply of practical business lessons. Perhaps the most impactful of those lessons is that there can be tremendous value in a crisis. When taking action is just an option, it’s easy to continue having meetings about it. But when the banks stop making loans, customers are canceling orders, revenue is plummeting, and your cash flow is slowing down to a trickle, you begin to realize that more meetings aren’t the answer. You have to do something and do it now.

It’s been said that a recession is a reallocation of money from the scared to the bold. The reaction of many people to a crisis is to hunker down, play defense, and protect what they’ve got. They’re scared. They’re like a squirrel in the middle of the road with a fast-moving car heading straight for it. They turn left, then right, then freeze. Only the fast reflexes of the car driver can save the day. But a crisis doesn’t care. It won’t swerve to miss you. Survival requires action.

Hard times bring out the motivational slogans. One of the most popular slogans in times of recession is “Recession? What recession? I refuse to participate in the recession.” I understand the idea behind that line of thinking. The problem is that if you don’t recognize the existence of a recession, you’ll likely miss the extraordinary opportunity it presents. Not participating in a recession means that it’s business as usual. But it’s most definitely not business as usual. Everything’s different, and you have to take advantage of the changes. You should not only participate in a recession but do it with the pedal to the medal. Don’t pretend that it doesn’t exist—use it.

In January 2009, I was working with a company at their World Leadership Conference. Six hundred of the top leaders of this company had gathered to plot their course of action in the face of a monumental economic downturn. The company was, fortunately, in a position of strength, with a strong balance sheet, talented employees, and great products. They were, however, not the leader in many of their markets.

One of the division presidents made an impassioned plea to the attendees. “This recession won’t last forever,” he said. “We can’t make the mistake of letting it pass us by. We can’t find ourselves waking up one day having let this incredible opportunity slip away. Please don’t waste a perfectly good crisis!”

When the Lead Changes Hands

Marathon runners and long-distance bicycle racers will tell you that the moments of greatest opportunity are found in the uphill stages of the race. It’s during the uphill parts of the course that leads are most often either extended or lost.

It’s the same in business. The uphill stages are when the strong and the bold overtake the vulnerable. When’s the best time to take market share from your competition? Surely not when the market is easy. The best time to overtake your competition or to extend your lead is when the market is tough. In tough times customers move toward strength and leadership. A crisis can be the time that you actually accelerate your business plan and make a decisive move.

If your competitors are pulling back and cutting budgets, then this may be the time to do everything you can to connect with customers—not just your customers, but their customers, as well. Think about what customers need right now. What is their response to a down economy? How can you help them create opportunity? Customers are hurting, and you have the opportunity to help stop the pain. Help them save money. Help them create their own new customers. Help them be more effective.

In the aftermath of the September 11, 2001, terrorist attacks, my industry was decimated. Most of my work takes place at corporate events. In the months following 9/11, few companies were willing to put their employees on planes to fly to meetings. The market for guys like me made a shrinking sound that could be heard across the land. I knew that this was no time to curl up in a fetal position and wait for things to blow over and get back to normal. Instead of pulling back, I pulled out all the stops.

I called to mind the words of the owner of the real estate company where I worked in 1980, when the prime lending rate soared to over 20 percent. It was devastating to the real estate business. And yet my perception of that crisis changed 180 degrees when the owner said, “Sometimes this business gets too easy. People get in it that don’t know what they’re doing because anybody can do it. Well, just anybody can’t do it in a market like this. What’s happening now is that God is giving our competition the opportunity to find another line of work. It’s our job to help them in that effort.”

Inspired by my memory of our success in 1980 by adopting an aggressive strategy, my strategy in 2002 consisted of two major courses of action. I repositioned myself in the market by dramatically improving the strength of my value proposition, and I got face to face with as many potential clients as possible. While many of my competitors were looking for ways to save every nickel and dime possible, I was looking for ways to capture every big contract possible. The result was that, in a time of absolute crisis for my industry, 2002 was the biggest revenue year I had ever had up to that point.

Moments of Truth

Larry Keener, CEO of Palm Harbor Homes, one of the nation’s largest producers of manufactured homes, says that they have had two critical moments of truth in the company’s 24-year history. The first occurred in the late 1980s when the industry was experiencing a cyclical downturn. “Downturns are wonderful validators of core strategies,” Keener says.

“What we learned during the 1980s moment of truth was twofold. First, that just hiring good people would not produce high-quality homes, satisfied customers, and high associate retention. We needed a well-defined quality system supported with broad-based training consistent with our mission. The system we installed was a customized version of Philip Crosby’s Quality Improvements Process (QIP). It has become our ‘religion’ and nearly a universal answer to any ‘how’ questions of performance improvement.”

Palm Harbor also discovered, during the 1980s downturn, that their independent retailers, as a group, did not share the company’s vision or commitment. As a result, their efforts were only as effective as their least effective retailer. To control their future and the integrity of their brand, they got into the retail business.

“These two decisions were outside the mainstream of our industry,” Keener says. “They both required enormous investments and patience. However, today our ability to control our processes within defined quality tolerances and our ability to uniformly deliver to every customer the value and quality they want, is our greatest separator versus our competitors.”

Forced to Expand Our Definition

The second decision that made a difference for Palm Harbor Homes was prompted by a crisis caused by the good economic times of the 1990s. “That moment of truth concerned retail home financing,” Keener says. “Our industry is cyclical, and the cycles are driven by retail financing. During the good times of the 1990s, independent industry finance sources bought too deeply into the weaker-credit customer pool. As a result, defaults have soared, lenders have failed, and others have retrenched. There was a dearth of outside lenders to our industry.”

Demand for Palm Harbor’s homes remained high throughout the cycle because of brand-building advertising and their ever-expanding customer referral pool of prospective new homeowners. Yet, their sales were constrained to the same degree as the rest of the industry from the lending excesses created by others.

“We knew that our commitment to become ‘legendary’ and to be ‘an extraordinary company in an ordinary industry’ was dependent on our ability to provide credit to creditworthy buyers,” Keener says. “We have started a mortgage bank. It’s the first in-house mortgage bank in the industry, and we will have a full-fledged consumer lending company soon. Our philosophy is that if a customer deserves credit, they deserve a Palm Harbor home; and, if they deserve credit, Palm Harbor should provide that credit to them.”

Palm Harbor’s moments of truth when they decided to go were spawned by industry crises. They were forced to expand their definition of themselves and their commitments. “We have had to evolve and expand our span of control to keep our commitment to our customers and ourselves,” Keener says. “We have always wanted to be a great company. Circumstances keep redefining the requirements of ‘great.’ We view these circumstances as opportunities to separate ourselves from the competition.”

Go Big or Go Home

Quill is a subsidiary of Staples, Inc., and is a leading direct marketer of office supplies. In the mid-1980s, the three original owners of Quill realized that the business had grown beyond them. They wanted Quill to sustain its history of growth, exceptional customer service, and operational excellence, and they knew that doing so would require taking the company to the next level of performance. A decision was made to bring in three experienced executives from outside the company. This was Quill’s specific moment in time that changed everything about their future. From that point, the company was able to challenge its old ways and become more aggressive. They stopped doing initiatives and tasks only in a linear fashion.

The second moment of decision came when Staples, Inc. purchased Quill. A mandate came from the new corporate parent to grow the business faster. Larry Morse, president of Quill, describes the decision-making process. “Our whole senior management team met off-site for two days and decided that we needed to become a high-performance organization in every way possible,” Morse says. “We committed ourselves to driving for excellence in everything we did, especially in the area of customer service, and that became our mantra. In fact, we came out of that meeting with a slogan that depicted our new approach to business, ‘Go big or go home.’” This off-site meeting was Quill’s second critical turning point.

In both cases, the decision to go was made by senior leadership teams. In the first case, the owners did a lot of soul searching together and decided that they were not going to hang up the “gone fishing” sign, but rather ignite their company to reach new levels of growth and success.

The senior leaders were imbued in the Quill culture, and that group was anxious to put their mark on the company and drive for success. While the chief executive rallied this group, it was easy to get them to take the plunge.

Most companies never get beyond the talking stage of the decision to go. Even though they think they’ve committed to doing something different and significant, what they’ve really done is just commit to talk about doing something different and significant. Quill’s commitments included much more than just talk. They developed five strategic imperatives that provided the framework for their planning:

1. Maximize our customer base.

2. Develop a contact and relationship model that enables Quill to sell and service more effectively.

3. Deliver and promote the best service and value in the industry.

4. Drive toward deeper product and market penetration.

5. Achieve operational excellence in everything we do.

Quill didn’t just talk about taking the company to a new level of performance. They made the decision, then immediately began to implement changes in how they did virtually everything. That’s the difference between companies that go and those that don’t. The decision to go is followed by immediate and significant action. There’s a clear signal being sent within the company that there’s something big going on here, and it’s made real by action. A vision without execution is just an hallucination.

A Dangerous Assumption

Some might say, “But it goes without saying that everyone in our company wants us to be the best! Of course we all want to be great.” Well, it doesn’t go without saying. And even if they are saying it, it doesn’t necessarily mean that they believe it, or even that they want it. There are many companies that mistakenly assume that all employees not only want to be the best, but, more important, are willing to do what it takes in...

Table of contents

• Title Page
• Copyright Page
• Dedication
• Preface
• Chapter 1 - We Just Decided to Go
• Chapter 2 - What’s Your Story?
• Chapter 3 - Success Means You Know What Used to Work
• Chapter 4 - The Commodity Trap
• Chapter 5 - Your Brand Is Everything
• Chapter 6 - The Three Rules
• Chapter 7 - The New Customer Reality
• Chapter 8 - Tiebreakers
• Chapter 9 - Case Study: Tractor Supply Company
• Chapter 10 - The Future Category of One
• Index
• About the Author