Gennaro Cuofano's Blog, page 112

What Is The GROW Model? The GROW Model In A Nutshell

Though no single individual can claim to have created the GROW model, writers Graham Alexander and Alan Fine together with racing car champion John Whitmore played a significant part in developing the framework during the 80s and 90s. The GROW model is a simple way to set goals and solve problems during coaching sessions through four stages: goal, reality, options, and will (way forward).

Understanding the GROW model

The GROW model helps leaders and managers develop their subordinates or institute behavioral change. Through feedback and positive reinforcement, the simple-to-use model encourages the learner to bridge the gap between their current state and a desired, future state.

Such is the success of the coaching framework that it forms the basis of similar approaches such as the ACHIEVE model and A3 problem-solving.

The four stages of a GROW model coaching session

GROW is an acronym of four stages the teacher must guide the learner through in a conversation. Collectively, the stages signify a metaphorical journey:

Stage 1 – Goal

To begin the journey, a goal must first dictate where the learner is going. These include short-term goals for every session and longer-term goals that define central themes. 

Clarity on goal setting can be enhanced by asking:

What is important to the learner with respect to the overarching theme?What will reaching the goal give them or enable them to do?How will they know when the goal has been achieved? Alternatively, how will they know when the problem has been solved?Stage 2 – Reality

During the second stage, the instructor needs to encourage the student to consider obstacles that have been holding them back. This phase is important because it can unearth hidden fears or convictions the student may have been unable to previously verbalize. Furthermore, cognitive biases can be debunked using objective evidence or feedback.

Exploratory questions include:

What is happening (to the learner) now?What, when, with whom, and how often?Why is the theme a problem? Include concrete examples as supporting evidence.Is the theme continually a problem, or are there situations where the learner succeeds?What are the defining factors? That is, what are the factors capable of making a difference?Stage 3 – Options

At this point, the coach must determine how the student can bridge the gap between the current and desired state. Students ought to be encouraged to think positively about their goals and list multiple ways for achieving them.

In other words:

What options does the learner have?Who could help them achieve their goals?How can they become enthused or motivated to achieve their goals?What might their friends, colleagues, superiors, or significant other suggest?Stage 4 – Will (Way Forward)

In the final stage, the coach helps the student identify a specific set of actions and importantly, commit to them. Commitment and success can be increased by the pair working together to accommodate busy schedules or make the tasks more exciting and engaging. Ideally, the student should leave every session with at least one goal.

Stage 4 questions can be adapted from those asked in the previous stage. That is, the teacher can ask the student what they will do instead of what they could do. 

Other helpful conversation starters include:

What could the learner do as a first step to get the ball rolling?What actions are non-negotiable and need to be taken?How does the learner feel about their actions? What would it take to get excited?How might commitment be measured and monitored? How will the commitment be maintained during periods of low motivation or distraction?What are three things the learner is willing to do to support themselves?How would they like to be held accountable for their actions?How might the learners sabotage themselves, unintentionally or otherwise?GROW coaching model examples

In the introduction, we mentioned that the GROW coaching model was used as a personal development tool for subordinates in collaboration with their superiors. In truth, however, the model can be used in many other contexts. Some of these are listed in this section.

Individual goals

The model can be used by individuals outside the workplace to explore their motivation towards more private goals. For example, someone who has difficulty saving money may use it to help them become enthused and motivated enough to save for a new house. 

Similarly, an individual who has made numerous attempts to lose weight in the past can use the GROW model to commit to an exercise plan and overcome certain self-imposed obstacles.

Groups and teams

The model also works for groups and teams and helps, whether that be teams of employees in an office or a team of professional sports players. Whatever the context, it is very simple to adapt the individual-centric nature of the GROW model to multiple individuals. 

This builds teamwork, collaboration, and improves morale since each member is striving toward the same goal and understands their role in helping the team achieve that goal.

Parents and teachers

While teachers must earn various forms of accreditation before they are qualified, parents often find themselves looking after their children with very little experience in coaching or assisting them in realizing their potential. 

To help children identify their values and strive toward meaningful goals, parents can use the GROW model in conjunction with the Socratic questioning technique. This is a form of guided inquiry that encourages parents to ask questions without a personal agenda. Socratic questioning can also be used by teachers in the classroom to better understand their students’ perspectives.

GROW coaching model adaptations

Two further examples of the CROW coaching model can be provided by looking at how the original model has been adapted. 

TGROW model

The TGROW model is very similar to the GROW model but with one key difference. Before the coachee identifies where they are heading in the goal stage, they are first called upon to define a broad topic (T) they would like to address.

This initial phase is important because it enables the coachee and indeed the coacher to better understand the scale of the topic and why it is important to the coachee’s long-term vision. In some instances, unrelated issues may surface that the coachee did not anticipate and the focus of the entire process may be adapted to suit.

GROWTH model

The GROWTH model adds Tactics (T) and Habits (H) to the standard GROW model. As you may have guessed, these extra steps increase the likelihood of goal attainment.

Tactics deal with the specific steps the client will need to undertake while habits clarify how success will be maintained and help the coachee avoid complacency. In the best-case scenario, tactics and habits increase buy-in and commitment as the resultant plan is specific, precise, and clarifies incremental actions that help the coachee stay on track.

Key takeaways:The GROW model is a simple yet reflective way for students to set goals and solve problems during coaching sessions.The GROW model is used by managerial staff to develop subordinates and institute behavioral change through positive reinforcement.The GROW model is based on four stages that comprise a metaphorical journey of learning: goal, reality, options, and will. Each works together to help the student determine their future desired state, plan how they will get there, and navigate obstacles. 

Main Free Guides:

Business ModelsBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsTech Business Model

The post What Is The GROW Model? The GROW Model In A Nutshell appeared first on FourWeekMBA.

What happened to Hotmail?

Hotmail was an email service that was launched in 1996 by Sabeer Bhatia and Jack Smith and was one of the first such services on the internet. It was a revolutionary product at a time when users were forced to use email addresses provided by their ISP. What’s more, Hotmail’s inbox was marketed as freely accessible from anywhere in the world provided there was an internet connection. With a sizeable 2MB storage limit, Hotmail was an instant hit with users. The service attracted over 100,000 users in the first month with around 8.5 million by the end of 1997. Despite the overwhelming success of the platform, however, the Hotmail brand was officially retired in October 2011.

Microsoft acquisition

The near-instant success of Hotmail in 1997 had not gone unnoticed. When Hotmail reached 10 million subscribers and controlled around 25% of the webmail market, the company entered into talks with Microsoft over a possible acquisition. 

Bhatia was initially wary of Microsoft’s intentions because of a prevailing industry belief that the company was monopolistic. But in the end, Bhatia was not afraid of being perceived as just another Microsoft victim and considered the deal as validation of his and Smith’s vision.

Money may also have been a motivating factor. When Microsoft acquired Hotmail for $400 million, the co-founders became millionaires. 

MSN Hotmail

Post-acquisition, Hotmail was incorporated under the MSN banner and customized for various markets around the world. In early 1999, the service was adding as many as 150,000 users per day as email became the predominant form of online communication.

With few serious competitors and a fast, free, and intuitive interface, Hotmail had no difficulty surpassing 30 million users before the turn of the millennium.

Security issues

However, in 1999, hackers exploited a vulnerability in Hotmail and noted that a user’s private emails could be accessed by entering the password “eh”. Microsoft played down the issue, but Wired called it the most widespread security issue on the web to date.

Two years later, it was discovered that users could access someone else’s account by creating a URL with that account’s username and a valid message number. The number itself could be discovered using software that brute-force guessed the correct sequence.

In addition to the browser wars with Netscape and an impending anticompetitive lawsuit, these security issues distracted Microsoft from a new entrant that was about to emerge.

Gmail

Google’s Gmail launched in 2004 with 1 GB of free storage which made Hotmail’s 2 MB instantly uncompetitive. Microsoft eventually upped the limit to 250 MB, but Google had gained critical early momentum which would prove impossible to arrest.

MSN Hotmail became Windows Live Hotmail in 2007 with subsequent improvements in speed and security implemented over the next few years. However, it took three years for the service to roll out of beta and several more for it to be fully functional. This no doubt helped Gmail start to be considered the preferred email provider. 

Migration to Outlook

As we noted in the introduction, the Hotmail name was retired in October 2011. Microsoft believed Hotmail had earned a poor reputation because of its association with hackers and spammers – particularly among the younger and more tech-savvy generation that was starting to become influential at the end of the 2000s decade. 

The beta version of Outlook was launched in July 2012 with a cleaner and more modern interface. Hotmail users were given the chance to keep the @hotmail.com extension or use @outlook.com instead.

In May of 2013, Microsoft successfully migrated 300 million active Hotmail users to Outlook.com. Over 150 petabytes of data were added to Outlook’s servers over a period of six weeks. Two years later, Outlook was incorporated into the Office 365 infrastructure. 

Today, Hotmail users can still use the @hotmail.com extension to send and receive emails using the Outlook platform if they so prefer. 

Key takeaways:Hotmail was an email service that was launched in 1996 by Sabeer Bhatia and Jack Smith and was one of the first such services on the internet. It was a revolutionary product at a time when users were forced to use an email address provided by their ISP. Hotmail secured 10 million users in little more than a year before it was acquired by Microsoft. The platform continued to be popular until security issues and slow beta development caused Hotmail to become less attractive. When Gmail was launched in 2004, it gained critical early momentum that was never arrested.The Hotmail brand was officially retired in 2011 because Microsoft believed a name change would restore some of the reputational damage that had been inflicted by hackers and spammers. Today, Hotmail users can still use the @hotmail.com extension in Outlook.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What happened to Hotmail? appeared first on FourWeekMBA.

What happened to Sean Parker?

Sean Parker is an American entrepreneur whom most associate with the music-sharing platform Napster. Parker founded Napster with childhood friend Shawn Fanning and the service was launched in June 1999 while the pair were still teenagers. Napster’s ultimate demise in 2001 is well documented. Parker was forced to step down as Facebook president in 2005 after an arrest for drug possession in North Carolina, but he nonetheless retained a significant shareholding and informal involvement with the company. He then worked with Peter Thiel at his venture capital firm for a time and then moved into philanthropic efforts.

Plaxo

Parker founded address book and social networking service Plaxo in 2002. The service, which was integrated with Microsoft Outlook, was a forerunner to companies such as Facebook, Zynga, and LinkedIn. It was also one of the first companies to incorporate viral marketing into a product launch, securing 5 million users in the first three years of operation.

Parker was fired from his own company just two years later by Sequoia Capital and Indian-American investor Ram Shriram. The reasons for his ousting have never been fully disclosed. Some posit that it was due to the dot-com bubble downturn, while others believe Parker had a sporadic or erratic interest in Plaxo itself.

Facebook

Whatever the reasons for his exit, Parker maintained an interest in social networking and joined a fledgling company called Facebook later in 2004. The company was in those days confined to college students, but as the social platform’s founding president, Parker was one of the main drivers of transforming Facebook into a viable company.

For example, he hired former Napster employee Aaron Sittig to design the Facebook website that most recognize today. He was also responsible for working hard to purchase the Facebook.com domain name and secured Peter Thiel as the company’s first investor.

Parker was forced to step down as Facebook president in 2005 after an arrest for drug possession in North Carolina. He retained a minority stake in Facebook that was worth hundreds of millions of dollars and continued to be informally involved with the company.

Founders Fund

Parker then joined the venture capital firm Founders Fund as a managing partner. There he once more crossed paths with co-founder Peter Thiel, who afforded Parker free reign to invest in any company he saw fit.

Parker stepped down from his role in 2014 to focus on other projects. During his tenure at the company, he made a $15 million investment in Spotify because of a personal desire to see Napster’s music-sharing heritage continue. 

Philanthropy

The Parker Foundation was then established in June 2015, with Parker himself making a $600 million donation to the philanthropic organization that focuses on the areas of art, civic engagement, public health, and life sciences.

He donated a further $250 million to the Parker Institute for Cancer Immunotherapy in April 2016, with the funds disbursed to over 300 scientists across 40 laboratories. The institute has recently found a link between skin cancer and microbial diversity in the gut and has conducted immunotherapy clinical trials for melanoma patients.

Key takeaways:Sean Parker is an American entrepreneur whom most associate with the music-sharing platform Napster. After Napster was shut down, he founded address book and social networking service Plaxo in 2002.Parker then became the founding president of Facebook in 2004 after an acrimonious departure from Plaxo. He was instrumental in transitioning the young social media platform into a viable company.Parker was forced to step down as Facebook president in 2005 after an arrest for drug possession in North Carolina, but he nonetheless retained a significant shareholding and informal involvement with the company. He then worked with Peter Thiel at his venture capital firm for a time and then moved into philanthropic efforts.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What happened to Sean Parker? appeared first on FourWeekMBA.

What Is The Dunning-Kruger effect In Business

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Understanding the Dunning-Kruger effect

The Dunning-Kruger effect was first coined by psychologists David Dunning and Justin Kruger in 1999. They argued that the scope of a person’s ignorance is often invisible to them – particularly in fields where they are underqualified. Dunning and Kruger called this meta-ignorance, or ignorance of ignorance, which can lead to individuals overestimating their abilities.

This ignorance also extends to other people. A person who is ignorant of their shortcomings may simultaneously believe their ability is superior to others. This is in direct contrast to a person with true ability in their chosen field. With increased knowledge, they are humbled by how much they are yet to learn. Indeed, the only way that an ignorant person will acknowledge their lack of ability is when they are alerted to the fact through education.

The Dunning-Kruger effect in business

The Dunning-Kruger effect can also affect businesses, particularly when new products or concepts are introduced into the market. For example, the introduction of digital currency and blockchain technology resulted in the rapid formation of many new entrepreneurial companies. Unfortunately, many lacked the required knowledge and awareness to understand their mistakes before they impacted their viability.

This initial overconfidence can also affect businesses that are unwilling to take the educated advice of other professionals. Legal representation, accounting, and financial planning are tasks that some businesses attempt to save money on because they genuinely believe they have the required skills. Of course, the consequences of doing so are often financially disastrous.

Addressing the Dunning-Kruger effect in practice

Since individuals and businesses are largely ignorant of the Dunning-Kruger effect, it can be helpful to pause and reflect during day-to-day decision-making. The following points may help stop the effect before it inflicts further damage.

Evaluate all company processes critically. In other words, is there a better, more efficient, or more economical way of doing things? Would a change in supply chain management yield higher profits? What about a change in payroll systems?Consider workplace culture. Managers should put themselves in their employee’s shoes and assess what kind of leadership they provide. Are they approachable, reasonable, fair, and open to solving problems? Would a leadership course broaden their leadership skills?Evaluate the business-to-consumer relationship. Businesses should ask themselves what they are like to work with from the customer’s perspective. Is online and offline communication professional and attentive? Does the business listen to and implement customer recommendations?

Ultimately, the Dunning-Kruger effect can be overcome with humility and critical thinking. Businesses and individuals who challenge their assumptions will at worst come away better equipped to improve themselves and their processes.

Dunning-Kruger effect examples

Here are some more examples of the Dunning-Kruger effect in action.

Leadership

Earlier we noted that the effect caused some individuals to believe their performance was superior to others when the opposite was true. This tends to be most associated with one or two employees in a work environment who believe they are better than everyone else.

However, the effect can also impact leadership and cause those in senior positions to misjudge employee performance or their ability to lead. Indeed, in a University of Nebraska study, it was found that 68% of the faculty rated themselves in the top 25% in terms of teaching ability while 90% believed their ability was above average. These mathematical impossibilities demonstrate the power and prevalence of the Dunning-Kruger effect.

Consumer finance

Consumers also tend to overestimate their financial nous and ignore obvious discrepancies between their actual and perceived financial performance.

In a National Financial Capability Study conducted in 2012, the United States Treasury found that 23% of the 25,000 participants were recently declared bankrupts who believed they possessed superior financial knowledge.

Productivity

The Dunning-Kruger effect also impacts employee productivity. Some individuals create daily task lists that are beyond their capabilities and cannot possibly be completed in a single day.

This is caused by the employee overestimating their abilities with a general belief that they need less time to finish their tasks than they actually do. Productivity then decreases as they become disheartened and overwhelmed by their perceived predicament.

Emotional intelligence

Various studies have also investigated the link between emotional intelligence and the Dunning-Kruger effect. In a 2013 study published in the Journal of Applied Psychology, Dunning together with Oliver J. Sheldon and Daniel R. Ames analyzed emotional intelligence across three studies involving professional students.

The researchers found that the least-skilled students had limited knowledge of deficits in their performance. They were also the most likely to criticize the accuracy or relevance of feedback that could help them improve. The top performers in the studies were the individuals most motivated to improve their emotional intelligence after receiving feedback.

Humour, logical reasoning, and English grammar

Dunning’s original study in 1999 focused on 84 Cornell University students and how they perceived their abilities in humor, logical reasoning, and English grammar.

To assess grammar ability, for example, the students completed a test to assess their knowledge of American Standard Written English (AWSE). Those who scored lowest tended to overestimate their ability to use grammar correctly. They also overestimated their final test score. On the other hand, those who scored the highest in the grammar test tended to underestimate their ability and test score. These results, as we have learned in the prior examples, have been replicated many times over subsequent years.

Key takeaways:The Dunning-Kruger Effect describes the phenomenon in which low competence individuals or businesses cannot recognize such incompetence.A core component of the Dunning-Kruger effect is meta-ignorance, or ignorance of one’s ignorance. This leads to an overestimation of ability and in some cases, an underestimation of the abilities of others.Critical thinking with the goal of improving is the best way to overcome the Dunning-Kruger effect.Connected Business FrameworksAnsoff MatrixYou can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.Five Product LevelsMarketing consultant Philip Kotler developed the Five Product Levels model. He asserted that a product was not just a physical object but also something that satisfied a wide range of consumer needs. According to that Kotler identified five types of products: core product, generic product, expected product, augmented product, and potential product.Growth-Share MatrixIn the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.Read also: Business Strategy, Examples, Case Studies, And ToolsAnsoff MatrixYou can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.Blitzscaling CanvasThe Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.Business Analysis FrameworkBusiness analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.Gap AnalysisA gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.Business Model CanvasThe business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.Lean Startup CanvasThe lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.Digital Marketing CircleA digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.Blue Ocean StrategyA blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.Balanced Scorecard First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Read: Balanced Scorecard

PEST Analysis The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

Read: Pestel Analysis

Scenario Planning Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

Read: Scenario Planning

SWOT AnalysisA SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

Read: SWOT Analysis In A Nutshell

Growth MatrixIn the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Read: Growth Matrix In A Nutshell

Comparable Analysis FrameworkA comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.

Read: Comparable Analysis Framework In A Nutshell

Learn also:

Bounded RationalityWhat Are Biases

Lear more:

Types of Business Models You Need to KnowBusiness Strategy: Definition, Examples, And Case StudiesMarketing Strategy: Definition, Types, And ExamplesPlatform Business Models In A NutshellNetwork Effects In A NutshellGross Margin In A Nutshell

The post What Is The Dunning-Kruger effect In Business appeared first on FourWeekMBA.

Cost Structure Business Model Canvas

The Cost Structure building block of the Business Model Canvas details the monetary cost of operating as a business. Cost structure represents all the costs a business will incur under a specific business model, especially those costs to maintain the key resources that make up the core business model.

Understanding cost structure in the Business Model Canvas

This is an important building block in the BMC, with 90% of businesses failing in under three years because they underestimate the cost of creating the goods and services outlined in their value proposition.

Operational costs encompass expenditure related to employees, infrastructure, activities, and partnerships. These costs are defined by three other BMC building blocks: value proposition, revenue streams, and long-term customer relationships. To gain clarity on the exact cost structure, however, it is important businesses also detail key resources, activities, and partnerships. 

These are a few of the questions a business must consider when creating its cost structure:

What are the fundamental costs of the business model?Which key activities cost the most to perform? Which key resources cost the most to perform?How do the key activities drive costs?Are key activities matched to the value proposition?Do costs become variable or remain fixed by considering other structures?Cost structure types

While minimizing cost is fundamental to good business, organizations nonetheless employ different cost structure strategies. Some are on a dogged mission to reduce costs as much as possible, while others pride themselves on their luxury or bespoke product ranges. In truth, most organizations are somewhere in between.

Various strategies occupy opposite ends of a cost structure spectrum, with a cost-driven structure at one end and a value-driven structure at the other.

With all that said, let’s take a look at both types in more detail:

Value-driven structure – a strategy where there is a complete focus on customer value at the expense of cost. Value is created by customizing the product or service to individual preferences. Hyatt Hotel repeat customers are on a first-name basis with hotel staff and are provided with a personalized room before they arrive.Cost-driven structure – which focuses on minimizing the cost of a product or service wherever possible. Businesses focus on creating a lean cost structure through cheap pricing, automation, and the outsourcing of costly activities. Walmart uses immense economies of scale to reduce costs to a point where other retailers cannot compete. Most budget airlines reduce costs by increasing seat capacity, not offering meals, and limiting luggage size.Cost structure attributes

A typical cost structure, regardless of strategy or type, has one or more of the following attributes:

Economies of scale – where a company with a high output quota benefits from a lower cost per unit amount. This occurs because large volume orders spread fixed costs more evenly than smaller orders. Economies of scale are common in large organizations that make bulk purchases from a supplier.Economies of scope – here, costs are reduced when an organization expands its operational scope or invests in multiple markets. To derive maximum benefit from economies of scope, each product should require similar marketing messages or utilize the same distribution channel. Fixed costs – or business expenses that remain constant irrespective of volume. Fixed costs can be time-bound, such as a fortnightly employee salary or monthly rent for an office space. Manufacturing companies are also subject to fixed costs such as equipment and facility rental. Fixed costs do not remain fixed indefinitely and will change over time while remaining relatively stable.Variable costs – these are costs that are heavily dependent on volume output and are influenced by supply and demand. In a production scenario, variable costs may be associated with sourcing raw materials, utility bills, and employee labor. Cost structure examples

In the final section, let’s take a look at a few cost structure examples from some notable companies.

Netflix

The cost structure of Netflix was significant enough in the company’s early days to impact cash flow and growth. Some of these costs include:

The acquisition, production, delivery, and licensing of streaming content. These are likely to be the largest costs for the company today.Platform maintenance.Software development.Research and patents.Amazon Web Services (AWS) for database, analytics, recommendation engines, and video transcoding, to name a few functions.Data centers to provide streaming content.Marketing, human resources, and related infrastructure.

Netflix has also benefitted from economies of scope and key activities that match its value proposition.

Nike

The cost structure of Nike is such that the company pockets a relatively small amount of profit from each item it sells. Costs associated with the sale of a pair of sneakers, for example, include:

Retail markup – this is as high as 50% of the total purchase price in some cases.Sea freight and insurance.Free on Board (FOB) costs, which cover the cost of shipping from the factory.Selling, general, and administrative expenses.Customs duties and taxes.

In addition to these costs, Nike spends billions on advertising, marketing, sponsorships, brand presentation, and other promotional costs. In 2021, this amounted to $3.11 billion.

Tesla

Tesla’s cost structure is characterized by fixed manufacturing costs. For each vehicle that rolls off the production line, these include equipment (20%), body (12%), chassis (7%), drive system (15%), battery (35%), and other (11%).

In addition, Tesla has the following costs:

Research and development – consisting of personnel costs related to engineering, research, prototyping, contract and professional services, and costs from amortized equipment.Selling, general and administrative expenses – personal and facilities related costs such as stores, sales, finances, human resources, information technology, and any fees related to legal or contract services and litigation settlements.Restructuring and others – including employee termination costs, disposal of tangible assets, facility sub-leasing losses, and impairment losses.Interest and taxes.Airbnb

Airbnb has a relatively simple cost structure when compared to some of its competitors in the hotel industry. This is because the company does not own the accommodation listed on its website and as a result, avoids the many costs associated with hospitality staff and hotel upkeep. 

The company’s cost structure consists of the following:

Cost of revenue – which includes online payment processing fees that are paid to Visa and Mastercard. Cost of revenue also encompasses insurance. In the rare event that a guest, host, or cleaner is injured or has their personal property damaged or stolen, Airbnb is responsible for paying out insurance claims.Sales and marketing – such as customer acquisition, customer retention, discounts, promotions, referral fees, and refunds.Research and development – there are also costs associated with ensuring the Airbnb platform is functional, on-trend, intuitive, and streamlined. Other research and development costs include engineering and product development.General and administration – this includes costs related to administration and employees such as HR and finance, legal fees, executives, general managers, and professional services such as freelance photography.Key takeaways:The Cost Structure building block of the Business Model Canvas details the monetary cost of operating as a business. This block is important to get right since many businesses fail due to misunderstanding or underestimating their costs.Cost-structures may be value-driven or cost-driven. As the name suggests, value-driven structures focus on delivering customer value at the expense of minimizing cost. In a cost-driven structure, the opposite is true.Regardless of type, most cost-structure have one or more of the following attributes: economies of scale, economies of scope, fixed costs, and variable costs.Alternatives to the Business Model Canvas FourWeekMBA Squared Triangle Business Model

This framework has been thought for any type of business model, be it digital or not. It’s a framework to start mind mapping the key components of your business or how it might look as it grows. Here, as usual, what matters is not the framework itself (let’s prevent to fall trap of the Maslow’s Hammer), what matters is to have a framework that enables you to hold the key components of your business in your mind, and execute fast to prevent running the business on too many untested assumptions, especially about what customers really want. Any framework that helps us test fast, it’s welcomed in our business strategy.

An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run. FourWeekMBA VTDF Framework For Tech Business Models

This framework is well suited for all these cases where technology plays a key role in enhancing the value proposition for the users and customers. In short, when the company you’re building, analyzing, or looking at is a tech or platform business model, the template below is perfect for the job.

A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Download The VTDF Framework Template Here

FourWeekMBA VBDE Framework For Blockchain Business Models

This framework is well suited to analyze and understand blockchain-based business models. Here, the underlying blockchain protocol, and the token economics behind it play a key role in aligning incentives and also in creating disincentives for the community of developers, individual contributors, entrepreneurs, and investors that enable the whole business model. The blockchain-based model is similar to a platform-based business model, but with an important twist, decentralization should be the key element enabling both decision-making and how incentives are distributed across the network.

[image error]A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Download The VBDE Framework Template Here

Main Free Guides:

Business ModelsBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post Cost Structure Business Model Canvas appeared first on FourWeekMBA.

What are Kroger subsidiaries?

Kroger is an American retail and multi-department store company that operates in the United States. The company was founded in 1883 by Bernard Kroger who used his life savings to open a small grocery store in downtown Cincinnati, Ohio. Over its long and successful history, Kroger has inherited various subsidiaries via mergers and acquisitions. Today, Kroger is the largest true supermarket operator in the United States with over 2,750 stores across 35 states. The company also owns fuel centers, pharmacies, department stores, jewelry stores, and in-store medical clinics.

City Market

City Market is a supermarket brand that was founded in 1924 by Paul, Frank, Leo, and Clarence Prinster. There are 35 City Market stores in the United States at the time of writing in the states of Colorado, Utah, Wyoming, and New Mexico.

City Market was acquired by the Dillon Companies in 1981, which then became part of Kroger when the two companies merged in 1983.

QFC

Quality Food Centers (QFC) is another supermarket chain with a strong presence in Washington state. The company was founded by Jack Croco, a former Albertson’s employee who opened his own grocery store in Bellevue.

Over the 70s, 80s, and 90s, QFC expanded into surrounding counties and states with multiple acquisitions. The company was acquired by Fred Meyer in 1997 that was itself acquired by Kroger the following year.

Smith’s Food and Drug

Smith’s Food and Drug, affectionately known as Smith’s, is a regional supermarket chain that was founded in 1911 by Lorenzo Smith.

Smith’s was acquired by Kroger at the same time as QFC as part of the Fred Meyer deal. This deal was the one that elevated Kroger to the largest supermarket chain in the country and also the nation’s largest supplier of milk and eggs. It was estimated that the deal would result in $43 billion in revenue or around $67 billion in today’s money.

Mariano’s

Mariano’s is a grocery store chain that was founded relatively recently in 2010. The chain sells items such as smoked ribs, oysters, liquor, cheese, sushi, gelato, and smoothies.

Mariano’s expanded quickly in the Chicago area with 34 stores opening in the first five years of operation. When Kroger acquired Milwaukee-based supermarket chain Roundy’s in 2015, it also took control of Mariano’s in a deal worth around $800 million.

Food 4 Less (Foods Co)

Food 4 Less and Foods Co are no-frills grocery store chains operating in Illinois, Indiana, and Southern California where customers must bag their own items.

There are also other stores scattered around the country as part of franchise deals with different wholesale food companies.

Home Chef

Home Chef is a meal kit and food delivery that provides ingredients and recipes to customers in the United States every week. Each delivery contains fresh and pre-portioned items in recyclable packages that are ready to cook.

In May 2018, Kroger announced the acquisition of Home Chef for $200 million.

Key takeaways:Kroger is an American retail and multi-department store company that operates in the United States. Kroger is the largest true supermarket operator in the United States.Kroger subsidiaries include supermarket chains QFC, City Market, and Smith’s Food and Drug, with all three moving under the Kroger brand after acquisitions of other companies.Kroger also acquired Chicago-centric grocery store chain Mariano’s in 2015 when it purchased Milwaukee-based chain Roundy’s. Kroger also owns discount chain Food 4 Less and food delivery service Home Chef.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What are Kroger subsidiaries? appeared first on FourWeekMBA.

What are the LVMH subsidiaries?

LVMH is a French multinational corporation and conglomerate with a focus on luxury goods. The company, which is officially known as LVMH Moët Hennessy Louis Vuitton, was founded in 1987 by Bernard Arnault, Alain Chevalier, and Henry Racamier.  Arnault, a French investor, had the idea to create a luxury brand group from the outset. To realize this vision, he collaborated with the CEO of Moët Hennessy Alain Chevalier and the president of Louis Vuitton Henry Racamier. The integration of these aspirational brands was ultimately successful and has been replicated by other companies in the industry. At the time of writing, LVMH operates 75 subsidiaries which it calls houses across six core sectors: wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, selective retailing, and other activities.

Parfums Christian Dior

Parfums Christian Dior is the perfumery, makeup, and skincare line of French fashion house Christian Dior SE which was founded in 1946 and is now chaired by Bernard Arnault.

The first product to be released was a women’s perfume, but in more recent times the subsidiary has started selling men’s fragrances and a greater variety of cosmetics. These include foundations, concealers, mascara, brushes, and lipstick.

Dom Pérignon

Dom Pérignon is a vintage champagne brand that was named after the Benedictine monk and cellar master who was a pioneer of blending grapes to improve wine quality.

The quality and pedigree of Dom Pérignon are such that the wine will not be produced in years considered to be poor vintages. LMVH assumed control over the company when it acquired fellow wines and spirits house Moët & Chandon.

Chaumet

Chaumet is a luxury jeweler and watchmaker that was founded in 1780 by Marie-Étienne Nitot. With over 240 years of craftsmanship experience and an impressive list of clientele, the company has seen expansion into Asia with a particular focus on the Chinese market.

LVMH acquired Chaumet in 2012.

DFS

One of the less well-known LVMH subsidiaries is luxury product travel retailer DFS. 

The company, which was founded in Hong Kong in 1960, operates over 400 duty-free stores across 15 major airports and 18 popular travel destinations.

In addition to high-end products, DFS also sells premium services such as a beauty concierge and exclusive airport lounge access.

Royal Van Lent

Royal Van Lent is a Dutch manufacturer of luxury yachts that was founded as an association of families to revive the industry after World War II. One of these families was the Van Lent family, who owned a shipyard many years beforehand and consistently produced fast yachts that won speed races.

The company was awarded its royal charter in 2001, with LVMH acquiring it seven years later. Royal Van Lent’s signature Feadship Tango superyacht was released in 2011 and retailed for approximately $120 million.

Key takeaways:LVMH is a French multinational corporation and conglomerate with a focus on luxury goods. At the time of writing, LVMH operates 75 subsidiaries which it calls houses across six core sectors.Parfums Christian Dior is a men’s and women’s cosmetic company owned by LVMH, while the famous champagne brand Dom Pérignon also came under the company umbrella after it acquired fellow wines and spirits brand Moët & Chandon.Some lesser-known LVMH subsidiaries include luxury watch and jewelry maker Chaumet, premium duty-free product and service provider DFS, and Dutch yacht manufacturer Royal Van Lent.

Read Next: LVMH Business Model, Kering Business Model, Prada Business Model.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What are the LVMH subsidiaries? appeared first on FourWeekMBA.

What is intermodal freight?

Intermodal freight involves the transport of freight in a single unit using two or more forms of transportation. There are two types of intermodal freight: international and domestic. In the former, goods stay in 20 or 40-foot containers for the duration of transportation. In the latter, goods are transferred to larger containers and transported inland to domestic locations. The standardization of shipping containers means intermodal freight has various advantages such as reduced costs, faster delivery times, and safer and more secure transportation of goods.

Understanding intermodal freight

Intermodal freight involves the transport of freight in a single unit using two or more forms of transportation.

Intermodal freight utilizes a combination of two or more transportation modes such as road, rail, air, or sea. In this form of shipping, the goods are sealed in cargo transport units (CTUs) whose dimensions are standardized to allow the goods to remain in the same unit across multiple modes of transportation. 

This means that when a CTU is moved from one form of transport to another, it is the CTU itself that is handled and not the goods that are contained within. However, as we will explain later, there are some exceptions to this rule. Transfers occur in an intermodal station or terminal which contains specialized equipment. 

It’s also worth noting the difference between the intermodal form of transportation and two related concepts in transloading and multimodal freight:

In general, intermodal transportation does not involve the handling of goods until they arrive at a final destination. During transloading, however, goods are routinely consolidated or reconsolidated as required.In intermodal transportation, there are multiple contracts for each separate carrier. Conversely, multimodal transportation is characterized by a single contract where the same carrier is responsible for moving goods across different transportation modes.

According to research conducted by Technavio, the intermodal freight transportation market is expected to grow by $46.55 billion in the four years to 2025.

The two categories of intermodal freight

There are two categories of intermodal freight:

International intermodal – these shipments travel in 20 or 40-foot containers between bulk carriers, trains, and trucks. Note that the products stay in the container for the entirety of the process.Domestic intermodal – these are shipments that arrive at a port in the same 20 or 40-foot containers which are then transferred into 53-foot domestic containers. This occurs at a transload facility, cross-dock facility, or distribution center. From there, the goods travel inland to a “domestic” location.Advantages of intermodal freight

The standardization of shipping container dimensions has clear benefits for companies and the industry as a whole:

Rapid service – containers result in the more efficient transfer of goods from one transport mode to another. Delivery times are reduced since the shipping company needs to spend less time loading and unloading.Lower and more predictable costs – with less time spent on handling, costs tend to be lower. Many shipping companies also utilize rail transport for the longest distances to further reduce costs, with railroads in the United States able to move one tonne of freight more than 470 miles on a single gallon of fuel. Rail transport also tends to make costs more predictable as there are fewer unforeseen delays when compared to transporting goods by road.Safety and security – intermodal rail freight tends to be a safer option for transporting flammable or hazardous materials because there is less chance of an accident. This also contributes to faster delivery as there are fewer restrictions that dictate how these materials can be transported. Intermodal freight is also inherently more secure than some other types. Since there is no requirement to handle individual items, there is less chance for opportunistic theft. What’s more, containers that are loaded onto railway cars are dropped into a well which makes them impossible to open.

Read Next: Transloading, Break-Bulk, Cross-Docking, Supply Chain, AI Supply Chain, Metaverse Supply Chain, Costco Business Model.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What is intermodal freight? appeared first on FourWeekMBA.

What is transloading?

Transloading is the process of moving freight from one form of transportation to another as a shipment moves down the supply chain. Transloading facilities are staged areas where freight is swapped from one mode of transportation to another. This may be indoors or outdoors, depending on the transportation modes involved. Deconsolidation and reconsolidation are two key concepts in transloading, where larger freight units are broken down into smaller pieces and vice versa. These processes attract fees that a company pays to maintain the smooth operation of its supply chain and avoid per diem fees.

Understanding transloading

Transloading is the process of moving freight from one form of transportation to another as a shipment moves down the supply chain.

Transloading is a term that describes the transfer of freight from one form of transportation to another while it is en route to its final destination.

The process is used when one transportation mode cannot be used over the entire route. Consider the example of iron ore that needs to be shipped from an inland mine in Brazil to a foundry in China. The iron ore must first be transported to a port by train where it is then transferred to a ship. Once the ship arrives at the Chinese port, it is transferred back to a train where it is taken to the foundry to be processed.

Transloading also encompasses international freight transported by a ship that is transferred to waiting trucks which then transport it to warehouses and distribution centers. In some other instances, freight that is moved by rail for most of the trip is then transferred to trucks for the last-mile delivery. While the process of transloading may seem convoluted, it is important to note that trucks are usually the only form of transportation that can arrive at the final destination. Therefore, it makes sense for truck transport to take over from rail, air, or sea transport no matter how near the final destination may be.

Transloading facilities

Transloading facilities are staged areas where freight is swapped from one mode of transportation to another. For train and truck transport, these facilities are located in railyards that are themselves near major highways. Railyards are also used for train-to-train transloading where a change in railway gauge makes it impossible for one train to continue to complete the entire journey.

Transloading areas can also be located inside a warehouse or distribution facility – particularly if rail infrastructure is absent or unsuitable. Indoor facilities are also used to unload the contents of a shipping container into a truck for final delivery. 

Deconsolidation, reconsolidation, and transload fees

Deconsolidation and reconsolidation are two key concepts in transloading:

Deconsolidation

The process of separating a unit of freight into smaller units, can occur right down to the individual component level.

Reconsolidation

The opposite process of combining smaller units into larger units. Shipping companies tend to reconsolidate freight into trucks that are headed to the same or similar destination or region. 

If there are multiple final delivery destinations, transload fees apply to cover the cost of deconsolidating the container and then palletizing the freight ready before it is loaded. Similar fees apply to reconsolidation.

Companies are willing to pay these fees to keep their supply chains operational and avoid per diem fees that are charged by the shipping company to rent a container. These fees, which can range anywhere between $50 and $100 per day, apply to containers that sit idle and exceed their allotted rental time. Essentially, per diem fees are charged because the shipping company’s efficiency is reduced when its containers are out of circulation.

Read Next: Break-Bulk, Cross-Docking, Supply Chain, AI Supply Chain, Metaverse Supply Chain, Costco Business Model.

Main Free Guides:

Business ModelsBusiness CompetitionBusiness StrategyBusiness DevelopmentDigital Business ModelsDistribution ChannelsMarketing StrategyPlatform Business ModelsRevenue ModelsTech Business ModelsBlockchain Business Models Framework

The post What is transloading? appeared first on FourWeekMBA.

What Is Trader Joe’s? The History of Trader Joe’s With Patty Civalleri [FourWeekMBA Podcast]

For this episode, I interviewed Patty Civalleri, author at 1-TAKE Publishing LLC. She authored many incredible travel guides. And she made sure the memoir of Joe Coulombe could come to life:

Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Can we get a little bit into the story and the context of how you got into this book and the initial years of Trader Joe’s as a company?

Patty Civalleri:

Yes. I got involved in the stories socially and Joe had written a journal about the founding of Trader Joe’s and he held onto it and made changes over the years, and one day he found it in a box and didn’t know what to do with it, so he gave it to his first employee Mr. Leroy Watson, who is a very close friend of my husband. And because we’ve been friends with Mr. Watson for many, many years, I have met Joe socially, gosh, many times over the last couple decades. So when Joe asked Leroy to do something with this book, Leroy came to me and he said, “Patty, you have published many books, can you help us do something with this book?” And I had written many books about Italy for travelers being a historian and Italy has the coolest history in the world.

I took a look at the manuscript and I fell in love with Joe’s story, what a great story. So I looked at it it was very raw, it needed a lot of work, so I spent many months bringing the manuscript, cleaning it up and making it work and rearranging everything. And I sat down with my agent and said, “Paul, can we sell this manuscript?” And we got several bids for the manuscript, but the winning bid was from HarperCollins, one of the largest American publishers in the world and that’s how we got the story published.

And as soon as we signed the contract with HarperCollins, the following week Joe passed away, which was a very sad event, and left me wondering how on earth I was going to promote this book without Joe, because he is clearly the center pin of all of this. But I realized that since Joe’s passing it’s much more important now to get his story out and get his history out, so that his story is not lost to history and doesn’t get lost. So the book was published late last summer and it’s gone global, we’re so extremely happy with it and it looks like a book that’s going to be around for a long time, so we’re quite happy.

Gennaro:

Yeah. As I was telling you I’m very glad that the book came to life because it’s an evergreen, the story it’s very compelling, it’s contemporary, the way it is written it’s very practical. For a digital entrepreneur as well, looking at the story behind how you create such a valuable brand, it’s incredible, so thanks for putting this together. How were the first and early years before we get to Trader Joe’s because the story before Trader Joe’s would come to life there is an evolution to that? 

What’s the story behind Trader Joe’s, especially the story of the man who founded the company. Joe Coulombe?

Patty Civalleri:

Joe was born in Southern California on an avocado farm, avocados grow very well here in Southern California, but Joe went to Stanford University and got an MBA at Stanford. And right out of school Joe got his first job with Rexall Drugs, which was a large pharmaceutical retail company here in the United States at the time. And Joe was very bright and had quite a compelling personality, and he got the attention of the executives at Rexall very early when he was working there, and they adopted Joe and took him under their wing and groomed him for executive management, which is incredible because you learn a lot more in real life than you could ever learn in school, in a classroom, and every entrepreneur knows that. Joe was called into the executive offices one day and they said, “Listen, Joe, we have funding for six stores and we don’t know what to do with these six stores, so we want to send you around the United States to go find a model that doesn’t exist here in California, but that could work here in California.”

So Joe set off for a couple of months on a road trip and visited many different types of retail stores. When he finally got to Texas he found a chain of variety stores that were all over Texas and doing very well. For those that don’t know the American definition for a variety store is sort of a small footprint store, that you can just run in real quick and run back out, that you could buy anything from paper towels and toilet paper, to cereal, to olives, to beer, dog food, everything all in one small store, they’re convenience stores basically. And California didn’t have that kind of convenience variety store, so he brought that idea back to Rexall and Rexall said, “Okay, Joe, we can open six stores. We’re going to give you 49%, we’re going to retain 51%, and you open and run and manage and grow those stores.”

So it took Joe a couple of years, but he managed to open all of them and he opened another one, a seventh store, which was 100%, his own store. Those stores were called Pronto markets, pronto meaning fast. And it’s a place you could just run in and get something that you need very quickly and run back out again, so Joe started and ran those, and by 1958, they were open, they were doing well, and Joe had a good plan for them. So Joe went back to Rexall and said, “Hey guys, if you let me buy out your 51% at market cost, I would like to be the owner of 100% of Pronto Markets.” And Pronto responded, “You pay us 10% over the market and they’re yours.” Well, now Joe really didn’t have any money, he didn’t have two nickels to rub together at the time.

And so he went to his employees, he used very creative financing, he got some loans for part of it, bank loans, part of it, he got from his employees where Joe had created tremendous loyalty with his employees. So when Joe went back to his employees and said, “Hey guys, we have the ability to maybe own this company, all of these stores, would you guys like to buy in as my partners?” And he got a lot of partners to step up and put up the money and it was wonderful, because creative financing and employee loyalty is huge. He also got money from a company, a dairy called Adohr Farms. Adohr Farms was a dairy company. Back then the dairy companies had milk trucks and the milk trucks would come to your home and deliver all the dairy products, milk, eggs, cheeses, those kinds of things, and they would deliver them to your home once a week or however often you wanted them to deliver.

And one of the major brands back then was called Adohr Farms, which was run by a guy named Merritt Adamson Jr. And Merritt had been trying to get Joe’s business for several years, he wanted the Pronto Market business, he wanted Joe to carry Adohr Farms on the shelves in Pronto Markets. So when Joe needed this money to buy out Rexall for the Pronto Markets, he went to Merritt and said, “Hey, I need some extra money. I’ll tell you what, let’s make a deal. If you give me a loan I will carry all of your dairy products, so that we can grow together. As my company grows, I’ll be paying back the loans and I’ll be buying your milk products from you.”

And they shook on it, they shook hands and made a deal. And so Joe was able through these various ways to bring the money in to buy out Rexall, which was really great. So now Joe has seven stores. He has seven Pronto Markets, they’re healthy and they’re young and he has a plan. So over the next few years he grows them and grows them more, and in the 1960s he now has 16 stores, this is the late 1960s. He’s up to 16 stores and he’s got a lot of his own blood, sweat, and tears invested in the growth of the company. One day he and Merritt were sitting down having a cocktail and Merritt told Joe that he had bad news for Joe, that the company in Texas that had all of those variety stores found a way to change their policy to be able to open stores in California.

Well, that brought a chill up Joe’s spine because he knew that that company had a giant, giant bank account and a giant marketing budget. And that this company was going to come to California and roll over Joe like a truck and Joe didn’t know what to do, he knew with his little 16 stores that there was no way he could stand up to those stores. So he felt he had two choices, he could either try to stand up to those stores but eventually die a slow, painful death, or he could close his business on Monday morning and call it a day.

Gennaro:

Yeah. And that would’ve been an easy solution also because just to remind the audience, the company that you’re talking about was 7-Eleven, which at the time-

Patty Civalleri:

Yes.

Gennaro:

7-Eleven was a giant. Compared to the Pronto Markets, which was just a bunch of stores, a few stores that of course were successful, and they had grown into also successful customer clients for the company owned by Merritt, which was the first real partnership that Trader Joe… actually Joe Coulombe had in place. But what happened next? Because, okay, as you said we went from the ’50s to the ’60s, there was this idea of Joe Coulombe to start a set of markets based on the idea of 7-Eleven, which was in Texas and other states, but was not yet in California.

Also, it’s important to remember the context we are in after a Second World War period, where there were still a lot of regulations that limited the supply of some of the goods that many retail would be able to sell. So there were a lot of barriers to entering this industry, and this definitely helped initially Joe to get started. 

But what was the evolution from Pronto Markets to Trader Joe’s? And What happened next and how did he eventually manage to succeed, even though he experienced many near-death and bankruptcies in the company?

Patty Civalleri:

It’s funny, Joe is a very visual man, when you would sit down to have a conversation with Joe, you can see him, he would always look up and you can see that he was envisioning whatever topic you were talking about, you could see that he was watching it in his head, he was a very visual human being and so he would always see pictures and images in his head. Well, this particular weekend when he just didn’t know what to do, and he felt very threatened, and should he close down or die a slow lingering death, he felt those were his two choices. He gathered his wife and children and they got in the car and drove up to a mountain in Southern California for the weekend, and he just closed the door just to think, he just wanted to think.

He was scared to death. He knew he was going to leave everything and he was going to lose his loyal employees, he was going to lose his vendors, he was going to lose everything that he worked so hard for over the last 10, 12, 15 years, and so he was very scared. And as he sat there, he started thinking about a ride that he took at Disneyland with his family. And it was a Pirates of the Caribbean ride, for anybody that’s ever been to Disneyland I’m sure you might have experienced that ride. But that memory came back into his head and he started to think about a movie that he had recently seen about these old ships, these old sailing ships from the 1700s that would travel around the world with their big beautiful sales.

And they would go from port to port buying goods and selling goods and trading food and goods everywhere that they went. And he looked down at the drink that he had in his hand, his wife had made him a Mai Tai and back then Mai Tai’s were very popular, they were this little tropical drink with an umbrella in it. He started thinking that these drinks, which were very popular and everybody was drinking them in the United States, but were created by a bar called Trader Vic’s. But all of these images were floating through the air in his head when it hit him, it hit him like a shopping basket in a parking lot, it hit him hard. He got this idea and he went running back down the mountain and gathered all of his troops together in the stores and said, “Guys, I know we talked about two options,” he said, “but I have a third option. So the two options we discussed on Friday were either to stay alive and fight it out and die a long slow, bloody death or to close down on Monday morning.”

He said, “I came up with a third option. Here’s what we’re going to do.” He said, “We’re going to change everything. We’re just going to change all the rules, that’s what we’re going to do, we’re going to change the playing field, and we’re going to change our name to Trader Joe’s. All of our employees, we’re going to act like those old trading ships, that go around the world and buy and sell foods and groceries and items from all the different countries in the world. We’re going to dress like Hawaiian shirts, and we’re going to adopt a Tiki Polynesian theme in all of our stores.”

And he said, “We’re going to change our name to Trader Joe’s, and we’re going to completely go away from the variety store model and we’re going to go into a Trader Joe model, and we’re going to create our own model as we go.” And that’s what they did, they did it. So with the 17th store, which was going to become the 17th Pronto Market, that became the first Trader Joe’s. And then one by one, he converted the old 16 stores, one by one, the old Pronto stores into Trader Joe’s and that’s how that part of the story happened.

Gennaro:

Yeah. And he managed eventually to buy out his first partner, which as you would account in the book actually inherited such an incredible piece of land in California that would eventually be Malibu in Los Angeles, so the whole story seems like a movie. Trader Joe went through a few phases that made the company evolve, this was not… The whole period for a little bit of context, we’re in a time where there are not really private brands in the retail space, and we are in a time in which both radio and TV are actually gaining traction, and therefore they’re becoming a sort of mass media, which for the first time enables companies to communicate at scale and produce a single message for many people, and gives the ability to whoever can leverage this message to build a brand which before was something that didn’t exist. 

What were those phases that Trader Joe went through and how did the company evolve throughout the years?

Patty Civalleri:

Oh, okay. Trader Joe’s went through several phases, but as you said, radio and television in the ’50s and ’60s were really coming online strong. And most of the major brands owned a lot of the advertising space, which allowed them to grow to phenomenal, phenomenal brand sizes, just huge. Well, that was again a huge obstacle for Joe because he didn’t have that kind of budget. So he had to come up with a philosophy of how can he compete with these giant grocery brands and product brands? How could he compete against them with no advertising budget? How could he be the little guy and how can he attract people and gain trust, to get people to come in his door rather than going into the large trusted brands on the corners, the large supermarkets that were popping up everywhere at the time and that was a huge question.

And what he realized very early on in the process was that he needed to come up with a strategy of differentiation. In other words, he thought, “People are not going to come into my store because I’m going to carry all the same products that the large supermarkets carry. People are going to come into my store because I’m different, but how can I take that concept and make it truly different?” And he came up with what he called his pillars of differentiation. And so this is the underlying philosophy that happened behind the three phases that you were talking about, so if you don’t mind for one second, I’d like to go into those pillars of differentiation-

… that sort of underlies all the phases. He says, “Okay, how can you differentiate your products from somebody else? If I have to carry milk, how can my milk be different? Or if I have to carry eggs or cheese or bread, how can I make my products different to make people come into my store rather than go to the supermarket, the major brand supermarkets.” So he came up with these pillars of differentiation, he decided that you can differentiate your products, assuming you’re carrying similar lines of products, you can differentiate based on price, that’s the most obvious one, you can just lower your price.

Well, that’s all fine and good, but Joe didn’t become known as the cheap store brand, the discount cheap store brand, he wanted to still be able to… He wanted customers, consumers to perceive a quality about him, so how could he lower his prices and still have quality? So his next area of differentiation is about packaging, you can change the packaging. And by changing packaging, it’s not just about changing the labels which he did, but also by changing quantity. See back then most of the stores carried 50-pound bags of flour. Well, a lot of people at this point were moving into apartments, post World War II college graduates were moving into apartments, they weren’t buying homes. So they didn’t have room for things like 50-pound bag of potatoes and a 50-pound bag of flour and a 50-pound bag of rice, they needed to buy things in smaller quantities. So Joe got the idea of taking a lot of the staples that the grocery stores carried and creating small packages for them so that people would come back to his store often, but they were able to buy smaller more manageable quantities.

Another area is ingredients, so what if he was able to slightly change the ingredients of some of the products, maybe make them a little bit more wholesome, a little bit more natural. He had an advantage in that back in the ’70s, ’60s, and ’70s, the big brands were touting science as being the reason why people should buy their products. And there were large companies like Monsanto and huge giant brands like Swanson frozen TV dinners, which were just horrible, my mother would never buy them, but these were the big brands. The Big Swanson frozen food brands, the Del Monte canned vegetable brands with hormones and preservatives, all of these big brands were scientifically created, and those in America at the time were considered the trusted brand.

And Joe was thinking, “No, what if I came up with a way to can corn without hormones and preservatives. And what if I came up with a way to flash freeze products so that they didn’t have a lot of preservatives and would be just really disgusting foods in the freezer.” And so over time, he came up with these, so again, his pillars of differentiation were pricing, packaging, ingredients, and of course uniqueness. And that’s where he would send his buyers around the world to find you unique products that Americans had not seen yet, so those were Joe’s pillars of differentiation, pricing, packaging, ingredients, uniqueness. Now talking about the three phases, the growth phases that he went through, he first went through something that he called his Good Time Charlie phase, which was the original phase of Trader Joe’s.

And originally coming out of Pronto, he was thinking in terms of he’d like this to be where every man could go to the grocery store, where back then grocery stores were really for women, so he wanted to carry things that would attract men into the store. Things like girly magazines or bullets for guns, or cigarettes, whatever, things that guys would buy, in addition to all the groceries. And then the phase in the United States came in the late ’60s and early ’70s, we sort of call it the hippy-dippy period, where everybody went back… they started to realize they didn’t want to eat these preserved foods, they didn’t want to have hormones and chemicals in their foods, they felt it was important to go back to the earth.

And so going from the first phase, which Joe called his Good Time Charlie phase, that was the story that he wanted to attract men, it sort of evolved into the second phase, which he called his Whole earth Harry phase, and this was Joe’s hippie-dippy phase. So Joe started growing squash and pumpkins in his backyard, and he started creating relationships with farmers around California. Now California is a very similar ecosystem to Italy, so California and Italy have a fresh farmed environments in common.

And California was bursting with freshness and fresh fruits and vegetables and meat and produce and dairy products that Americans weren’t used to eating, they were used to buying the convenient frozen preserved foods from the big major “trusted brands.” So Joe felt that no, no, no, no, he wanted to create what he called his Whole Earth Harry phase, which would introduce the public to much more natural brands and more fresh farm to table philosophy and products. At the time it didn’t go well, most of America looked at this philosophy as being the hippy sandal-wearing store down on the corner, this Trader Joe’s that never carried the big trust in brands. But Joe stuck to it, he was on the right track, slowly over time people started getting educated about what they were eating on the scientific side and started wanting to feed their family more natural foods, and that really did help Joe grow his Whole Earth Harry phase.

As he grew through the ’70s, Joe sort of got older and sort of outgrew his own Whole Earth Harry phase and grew more into his business phase. Now, this is the phase that Joe really started taking a close look at the bottom line where every product on the shelf had to earn its own profit, each product on the shelf had to be profitable. He refused to carry products because the vendors were telling him that they were the big brands and they could dictate to him what to carry like grocery stores did. If he said, “Hey, I only want one product. I’m going to carry only one product. I’m not going to carry 30 products or 40 products that aren’t profitable to me. I want every square inch on my shelves to be profitable.”

And that’s where he sharpened his pencil, and that’s the phase of his store that he called Mac the Knife, it was a very aggressive business approach to groceries, now that he had defined his market, defined his customer base. Now his pencil was sharp, this was called Mac the Knife and that was his real sharp business phase of Trader Joe’s.

Gennaro:

Wow. And this is so contemporary also because a few like a couple of key points based on what you said so far. First of all, of course, there was this evolution where Trader Joe’s started to invest a lot on creating a new category of retail, which was completely opposite with what existed at the time where you had those huge brands, which were completely let’s say artificial and they leveraged primarily mass media extremely well, and they had a huge budget and they can reach a lot of people. And then there was the Trader Joe side where Joe said, “Okay, I want to create something which is based on quality, where I’m going to be able to create my own also brands within my offering.” And he actually started from a niche that eventually would end up becoming quite a huge market, which was what he called over educated and underpaid.

Can you tell us a little bit more about the target market of Trader Joe’s what Joe Coulombe called overeducated and underpaid?

Patty Civalleri:

Yes. Going back again to the early days, we were coming out of World War II, the United States had a veteran’s plan where if you were a veteran, a military veteran in the United States, one of your benefits would be that you were able to get a college education, very, very inexpensively. And for the first time, the education level in the United States, if you look back to the 1930s during the Great Depression, the education, the number of people that were getting college degrees was very low, it was under 10%. And because of this what was called the GI Bill, the veterans were able and their families were able to get a much higher education and get college degrees. What this meant was now in the ’60s, you now had 70%, 80% of Americans with the ability to get college degrees, which was it changed everything.

And it created a whole new brand of consumers as a direct result and these consumers because they were educated, they were getting better jobs, they were getting better pay, they were traveling now, it created the first line of travelers. During this period, Boeing, the airplane manufacturer, Boeing was releasing it’s 747, and with that, they were severely dropping the price of international travel. Well, guess who was the first crowd to be able to step aboard the 747s to travel the world, it was these educated people. And Joe had a term for these people, he called them the over-educated and underpaid because all these people were getting an education, but the United States wasn’t set up yet to accept… they didn’t have a lot of high-paying jobs for educated people yet.

So you had all these people that could be orchestra conductors or college professors or teachers or executives, but they weren’t getting paid a lot of money, but they had great taste, they were experimenters, they wanted to know more, they read about what people were eating and doing and how they were living in other parts of the world, they didn’t want these preservatives that Americans were eating and all of this today we call junk food, they wanted getter foods, they had a better appetite.

Joe saw this group as a growing group that he identified as his overeducated and underpaid, and these were the people that Joe decided he wanted to create Trader Joe’s for. He didn’t care much about families that had kids, he didn’t care much about pets, he didn’t care much about anything. What he cared about is he wanted this educated group of people to be the ones that walk into his store, because they were dissatisfied with what they were getting in the major grocery brand stores on the corner and that was his market. And what a great choice, because what he was identifying was what we now call the middle class. Well, back then there was very little middle class, and as you know it was that burgeoning middle class that grew into a giant that was America in the 20th century, so he was right on when he saw that.

Gennaro:

Wow, so for a bit of context, as we said, the evolution of Trader Joe’s was quite interesting because he eventually managed to actually target a market that initially was niche, which was the market of the overeducated and the underpaid, which as you explained, that this would become the U.S. middle class. But going forward what happened next? I think there is an interesting aspect actually, which is an evergreen aspect that I found in the book also as a digital entrepreneur. There’s one thing that Trader Joe’s used over the years to grow its own brand, which was the Fearless Flyer, which was sort of a publication or a newsletter if you wish that Trader Joe’s was sending out to its audience. 

What were some of the things and the main things that made Trader Joe’s unique and differentiated on the market?

Patty Civalleri:

Oh gosh, those are some great stories. I’ll tell you some of my favorites, how to differentiate, these are great examples when you have to carry something that somebody else is carrying, how to make it different. So eggs, we’re going to take eggs because eggs are one of those items that are impossible to differentiate because an egg is an egg. But Joe being Joe, see Joe see the world differently, he had to still find a way to make an egg different. And of course, he did consider square eggs, but he couldn’t get the chickens to cooperate. Hi there. And so he did consider square eggs. But what he did is he realized that at the time eggs were regulated by the government, by the dairy consortiums. And so being regulated meant that all stores had to sell eggs of a certain size, they had to be packaged in cartons a certain way, and they were priced at a certain price and that’s what regulation is.

Well, Joe is thinking, how can I get out of that because my customers need me to carry eggs. So he found a farmer that had different eggs of all things, not square eggs, but eggs that were a different size of eggs. And because they were a different size, they were not regulated, they didn’t have to be regulated. And there was not enough volume of these eggs to supply the entire grocery industry, but there was certainly plenty enough to provide for Trader Joe’s. Well, guess what that allowed Joe to carry eggs differently. And the eggs, what was different is they were not what’s called medium size eggs that the rest of the grocery industry was carrying, these were extra-large eggs. And Joe was able to negotiate such a price that he could sell extra-large eggs for the same price that the rest of the grocery industry was selling regular-sized eggs, or medium-sized eggs.

And that was enough to get moms to step foot in his door, but again, that was Joe thinking a little bit differently. Another area was cheese, his customers wanted cheese, everybody wants cheese, but again, the dairy industry had regulated cheese. So you would carry a cheddar cheese and maybe a Jack cheese, a Swiss cheese, but how do you make those different, when the dairy industry is telling you what cheese you can carry, how to package them, how to price them, where to get them from, et cetera. So again, Joe had to think of this differently, so he sent his buyer, Mr. Leroy Watson to Europe to go find cheese and Leroy found Brie in France and brought it back to the United States. And what they did is they negotiated Brie at such a wonderful price and it came by the trainloads out to California.

And Joe was able to sell Brie at the same price that the grocery stores were selling, well, it wasn’t even cheese, it was called Velveeta and it was a processed cheese food, they couldn’t actually call it cheese. Today Brie is such a loved brand and Trader Joe’s became the biggest seller of Brie cheese. Another one of those stories, again, in the cheese category is Swiss cheese. Again, he was told how to carry it, how to package it, whatever, and he didn’t want to have anything to do with that, so he sends Mr. Watson back to a Swiss cheese factory. And as the guy was cooking in this big vat of cheese, the heat is coming up from the middle of the bottom of the vet, so the middle cheese in the vet was bubbling, but around the edge it wasn’t bubbling. And the man would take this bubbly cheese and he would pour it into a cold mold that would set the cheese quickly while the bubbles were still in the cheese, and that’s why Swiss cheese has holes in it.

But Leroy says, “Gee, what about the cheese that’s around the edge, what do you do with that?” And he says, “Well, we call it grade B cheese and we sell it to schools and anybody else that wants it.” And Leroy said, “Is there anything wrong with the cheese?” And the man said, “No, it’s perfectly good cheese, it just doesn’t have air bubbles in it and Americans want bubbles in there’s Swiss cheese.” So Leroy said, “Would you mind if we bought it?” And so they sent this cheese back by the tray loads to California and Trader Joe’s packaged it in small packages and they renamed it, they called it Trader Joe’s Closed Eye Baby Swiss and it sold like crazy.

But these are ways that Joe could carry the same products as everybody else, but still, be different. And if your business is a product-driven business or a service-driven business, it doesn’t matter, if you can think of ways to make each of your individual products or services slightly different than your competition, you will very quickly, if you can stick to that, that philosophy all by itself is what created Trader Joe’s because of that differentiation. And then of course he private labeled, he private-labeled because as Joe used to say, you could hide a myriad of secrets behind a private label.

His competitors couldn’t tell what the ingredients were, what the recipe was, his competitors couldn’t tell where he bought the product from, who the vendors were. So therefore they couldn’t tell him what price to put on his products, so he would have products that were equivalent, if not healthier than the grocery stores selling for less expensive and a much better variety. So he really liked the idea of private labeling because you can hide all of your company secrets behind that label.

Gennaro:

Yeah. That’s the incredible aspect of that, he managed to actually build a different kind of business, and the way it was done at the time it was completely different. And there was a way to differentiate which was much easier, which was about distribution and lowering the price, but this is not what Trader Joe’s did, he did quite the opposite. So they found ways to bring high-quality products on the U.S. market and make them very, very affordable, so there was a perspective that was not easy to build over the years, but Trader Joe’s managed to do it. So those are some of the things and the stories that you told us that are very, very interesting. And there was also another aspect of Trader Joe’s, which was intensive buying coupled with what he calls virtual distribution.

Can you tell us a little bit more about intensive buying and virtual distribution and how they shaped Trader Joe’s?

Patty Civalleri:

Yes. Intensive buying was a philosophy that Joe created and it housed several aspects, the first one is what he called honor thy vendor. And by that, instead of treating vendors badly, many stores really do treat their vendors badly and they dictate everything to the poor vendor, who’s trying to figure out how to get products and how to pay their own bills and pay their own employees. Joe felt the opposite, he felt that taking good care of your vendors, visiting them often was really a big deal. Visiting their plants, understanding their products really well. He felt that his buyers in the house should be extremely well paid, that his buyers shouldn’t be there shopping on a computer for their products, they should be out in the field testing the product, discovering the products, traveling, finding, exploring, trying things new ways was very important to Joe, that his buyers were out in the field and he paid them well to travel around the world, to find new products, new foods and build new relationships with new vendors and build small companies.

Joe never liked doing business with large vendors and large companies, he felt that they were cold and impersonal, and if he couldn’t look you in the eye and shake your hand, he wasn’t interested in doing business with you. Joe loved finding small businesses, entrepreneurs, farmers that he could build new relationships with, but he cherished watching them grow because he felt they allowed him to experiment with his business and find new avenues of differentiation, and his gratitude was expressed by helping them grow. So he felt that level of intensive buying also intensive intervention, by intervention he wanted his chefs and his buyers let’s say the product was, oh, I don’t know, cereal, come up with some product. He wanted to know every ingredient that was in it, he wanted his chefs to make sure that every product was clean, every product was pure, clean, organic, no preservatives, no processing, but be able to shift things according to maybe how Californians like things or because everybody around the world has a different palette, Joe realized this, he wanted to be able to make sure that they can shift their ingredients just a little bit.

So he called that intensive participation in the manufacturing of the products and this created really great relationships because he was also providing new products for a lot of his vendors to sell to other stores and markets as well. In terms of this virtual distribution, the classic way that products came from manufacturers back then is that manufacturers would ship products via truck or train to individual stores, Joe did not find that to be a very practical way of distributing products, because there was a lot of trucks going into a lot of different directions. He also didn’t want his store personnel to have to work with the vendors all day long, he wanted his store personnel to be dealing with the customers all day long, not the vendors.

So Joe changed things out, which made things a lot easier for the vendors and it gave Joe a lot of control over product distribution, and that was to create a centralized distribution, where he had one warehouse, where all of the goods came into one central warehouse and then Joe’s own trucks, his own truckers would then go out on established routes to each of the stores bringing the trucks and this freed up his store personnel. But that also meant that the truck drivers they were also because they were part of Trader Joe’s, they could go into the stores, they knew where to put things, they knew exactly where to put the pallets, where to put the cartons and the crates, that would make it easy for the store personnel to grab them and load them onto the shelves. So that was sort of a very fluid, very practical way to handle things within the store, and it freed up the store personnel to work directly with the customers, and that was kind of a really big deal to Joe.

Gennaro:

It’s impressive because still today, one of the given-for-granted principles of business is that over time as you go through the process of vertical integration, you sort of create a monopoly in the market and this is towards in technology or digital business. And what happens is that you squeeze out your suppliers and this was not how Joe conducted business, this is impressive because it’s so contemporary. And he was not looking to actually build a monopoly, he just wanted to build something extremely valuable for people, but he was also balancing out the value that he was creating for employees on the one side and for suppliers on the other side, which is something that today in a customer-obsessed digital business world is not very common, because as you scale you tend to focus too much on customers but then you squeeze out everyone else.

So it’s very important to highlight that Joe was against management, at least for the sake of management he was pro-management if it could help to actually improve the product, but otherwise, he was not a fan of having too many layers of management between him and the main people and all the other stores. And also he didn’t appreciate vertical integration also for the sake of it, because as you explain he added this concept of visual distribution that was one of the key elements of Trader Joe. So to get to the end of the story and thanks for taking the time you were very, very kind. Eventually, he sold the company. 

Can you give us a little bit of context as to why he sold the company and whether he had some regrets?

Patty Civalleri:

Yes. Joe saw a couple of things coming at the time he saw a… and he was very good, he was very forward-thinking, it’s almost like he could see the future at least for a couple of years, so he was always on trend and on the mark. But one of the things he saw was inflation coming and it was something that he felt was going to be almost catastrophic financially in size and he felt he needed help, that he couldn’t do it alone, that he would not be able to handle alone. And that he had had Trader Joe’s for 20 years, and he had had Pronto Markets for 10 beyond that, he was getting tired and he felt like it was time maybe he should move on a little bit and slow down and spend more time with his family.

So he found Aldi, Aldi Markets, he didn’t sell to Aldi, he sold of the Albrecht family, which owned Aldi Markets, but he sold to the Albrecht family. And Joe ended up staying with Trader Joe’s 10 years after the Albrechts purchased Trader Joe’s. And he stayed on for another 10 years as president and general manager of the company and saw it through many more changes in evolution all the way through the ’80s before he actually finally retired from Trader Joe’s. He didn’t write these memoirs until the 2000s, his journal. And as he looked back, he asked himself, he said people ask him all the time does he ever regret selling the store?

And he says, yes, looking back, he did regret it very much, but he didn’t know how to see past that big financial hill that he saw in front of him at the time. Wow. He ended up on the board of directors for many large American national retailers and influenced the way they buy, the way they sell, the way they pay their employees, the way they handle distribution. And a lot of these companies to this day, still, when you walk through the stores you could see Joe’s touches in their stores. Really neat.

Gennaro:

Nice. And I was looking at an article from last year just to see at which stage is Trader Joe’s, and of course, it’s very interesting that in 2020 most probably the company passed 16.5 billion in revenue by 2020.

Patty Civalleri:

Yes.

Gennaro:

Which is an incredible number. The scale of the company is incredible and is part of the Aldi Group, as we said, which in Europe is a giant that probably makes more than 100 billion per year or something-

Patty Civalleri:

Sure.

Gennaro:

… like that. But it was such a great story. Thanks again, for making sure that the book came to life and this is inspiring and so contemporary, so thanks for taking the time, Patty.

Patty Civalleri:

Oh, Gennaro, it’s been my pleasure, and thank you so much for inviting me, this has-

Gennaro:

Absolutely.

Read Next: Aldi Business Model.

Listen Also:

History of SpaceXHistory of AOLHistory of PayPalHistory of WeWorkHistory of Ethereum

The post What Is Trader Joe’s? The History of Trader Joe’s With Patty Civalleri [FourWeekMBA Podcast] appeared first on FourWeekMBA.