By: Alastair Dryburgh
Sometimes there is an obvious path to growth, but it may be a trap. Follow that path and your strength may become your weakness. Growing value, and not focusing on price and volume will help prevent you from becoming a commodity. For this to happen, you will need to be more transformative in your approach. I talk to Rocky Romanella, former President of Retail Services at UPS, about one such transition.
Alastair Dryburgh: Great, let’s get started. When you were in southern California, you led the district to become the first UPS district to reach one billion dollars in revenue. Then you went on to become Vice President of retail sales in Atlanta, where you launched one of the largest rebranding initiatives in franchising history revolutionizing a nine-billion-dollar shipping and business services market by growing the infrastructure from 3,300 stores to the over 5,000 stores today. That’s dramatic growth, so tell me a little bit more about that and how you did it.
Rocky Romanella: For me, one of the keys to growth is not allowing your strengths to become your weaknesses. It’s important to use these strengths as appropriate, but not rely on them to the point of complacency. Sometimes when you overplay that hand, what ends up happening is that you stop at the first right answer. You must challenge yourself and your people to not stop at the first right answer even though it may be a right answer and in your strength and comfort zone. You must push through that first right answer to get breakthrough thinking.
Dryburgh: Give me an example?
Romanella: For example, we purchased Mail Boxes Etc., we rebranded the stores as The UPS Store and it certainly was a great model. One of our strengths was our density with over 3,000 stores. We had great locations and a model that entrepreneurs wanted to own, so that was a strength. But we were careful to not solely focus on chasing new stores. We began to look at non-traditional stores, (universities, hotels etc.,) to supplement the growth of traditional stores because we did not want to grow for growth’s sake. We had to push through the current successful growth model, the first right answer.
Dryburgh: Okay, yes.
Romanella: We needed to understand the foundation of our core set of strengths – to understand what differentiated us. We had a great brand. People understood who we were, but not what made us better than the competition. We knew strategically we wanted to do more things, like copies. But the differentiator was that we wanted to be small business owners working for small businesses.
We could easily have said, “Hey we’re getting into the copy space because everyone needs copies and small businesses, especially, need copies.” Instead, we said that we were going to be small business owners that helped small businesses. With that strategy and subsequent branding, customers could view us as the small business hub, their trusted small business advisor vs a pack and ship location. They could have a mailbox there and that could be their home or remote office. They could use the fax machines, make copies. If they needed a notary for signature we could offer that. The result was that we started to build a portfolio that was more about small businesses helping small businesses than it was a product that we were selling. Value always help to move the discussion from price, which will help you to move from a commodity to a value-added product or service.
Dryburgh: Yes, yes that’s the theme I’ve heard from one or two other people as well. I think most noticeably recently from a mobile phone operator is stop thinking about specific products and start thinking about the customer.
Romanella: I think one of the things that happens when we do that, which I think is the transformative piece, is that you start to think of yourself as a solutions provider not an order taker. When you’re a solutions provider you address your customers differently. You now ask them, “What keeps you awake at night? What differentiates you from your competitors.? What does good look like for you.?” And they might say, “Well, there’s a presentation that I’m doing.” Then we could suggest, “Let’s see how we can help you make this presentation different.” As a solutions provider, you start to offer more products and services and now you’re no longer a commodity. So, for us, when we started to look at The UPS Store business model we said, “We need to be a solution provider.” We are small businesses helping small businesses and whatever transactional things happen, happen as a result of a solution. The transaction happens because we developed a solution.
Dryburgh: Yes, because it’s not that we decide today, “Right we’ve got to really push copying or we’re going to push binding or shipping” or whatever else you’ve got in the stores.
Romanella: That’s correct. I think the other thing is when you’re looking at growth, sometimes especially on the small business entrepreneurial side, you sometimes get caught up in the transaction. But I think the key is the lifetime value of a customer.
Romanella: What’s the lifetime value of that customer? Think about a food franchise. Tonight, a customer might just buy a Coke. As an owner, I may not be happy about the fact that you only bought a Coke, but if I treat you right and understand your lifetime value, tomorrow you may come in and buy dinner. If you come back tomorrow, depends on the experience you had today. When you look at the lifetime value of a customer you start to think, “This is more than just a transaction. I’m going to become a trusted provider or advisor for this customer. They consider my business beyond just the latest transaction.”
Dryburgh: Yes, this is making a lot of sense. What I find interesting is that I’ve had similar discussions with professional service firms where you’ve got a couple of hundred people, and sometimes even then it can be quite hard to convey exactly what the change of mindset is when you move from a product focus to a customer focus. I would imagine that helping people get that change when you’ve got more than 4,000 stores, with tens of thousands of employees interacting with customers, would be one hell of a job.
Romanella: Yes, that’s the key in any business, whether it’s a franchise or a small business, or even in a large corporation like UPS. The key is to drive the vision down to the lowest level possible. Because the front-line employee really is carrying your brand promise. They’re the ones that are interacting every day with your customer. Being closest to your customers, they carry the brand. They’re your brand ambassadors. You know we don’t always think of it that way, we think about a salesperson potentially or the senior management person that may be on a Bloomberg TV program being the best brand ambassador and we get excited, but they are merely amplifying the brand that your front-line people create with their daily customer interactions.
Romanella: If you keep in mind that your brand is really carried by that front-line person who interacts daily with your customers, then your view of them in your organization will change. They are part of your solution and not the problem. They are the ones who determine the degree to which you can drive the vision and the strategy of your company to your customers. They are your brand identity. They are critical to achieving where you are trying to go and what you’re trying to accomplish as an organization, no matter how large the organization is. If the person you interact with conducts themselves in a professional manner, understands the products and services, and is a solution provider to you as a customer, that’s the best reflection of the company’s brand.
Dryburgh: So, tell me, what were the main things you did to transmit that vision to all these people out there having all their daily actions and interactions with customers?
Romanella: I was very fortunate that my view of business, which I write about it in my book, Tighten The Lug Nuts: The Principles of Balanced Leadership served me very well as the head of Retail Operation which the franchise network was the cornerstone. It doesn’t matter who you are or what your job and level, as a leader you are responsible for balancing the needs of your three constituent groups: your people, your customers and your stakeholders. If you make decisions with those three constituents in mind, you generally make a good decision.
Romanella: If you think about a small business situation or in this case a franchise situation, carefully consider who’s your customer, what the solutions provided to them are, and whether your people feel valued. How do you strike this balance, let’s consider this example: We’re all excited that we have a new product, we’ve done all the research on this product, everyone agrees it’s the right product to be added into our product or solutions portfolio? The CFO has done the required work analysis and said this is going to be a very good product. In most organizations, they would believe they are good to go! As balanced leaders before we launch, the question has the be asked, “Did we communicate and train our people to understand the role they play in this new product. As Balanced Leaders, all three constituents must be represented before we make our final decision. We train our people so they understand why we’re doing it? They understand if there’s a service disconnect how you remedy it. If you don’t keep all three constituents balanced, you may have a great product, great marketing, great advertising, and the proof you can make money on it, but you may have a service disconnect because your people weren’t involved in the roll out or don’t understand what roles they play. I can’t emphasize enough the importance of being a Balanced Leader – thinking like a customer, feeling like a valued individual, and acting like an owner in all the things you do.