Welcome back. You've got your three things written down, I hope. Lets move to the Dave Lindsey case, the Defender Direct. It is a wonderful case, because it has so many teaching points in it. And let me, I'm also going to to get the case, because, you know, I like to read from the case, because reading from the case gives you the exact comments and words that Dave used and told me. All right? It's his story. Interesting story. 1998. Dave starts his own business, uses $30,000 of his personal savings, and he goes through a process, over the last 23 years, of building a business today, which this year will do $400 million of revenue. Lets make sure we understand. US dollars, 400 million. I think we can learn from Dave. I think we can learn from Dave. Now, Dave has learned along the way, and as you read the case, you saw that during this growth period, the business went through change and transformation, and Dave personally went through change. And Dave concluded, as he looks back on it all, that businesses don't grow unless the people grow. And Dave also concluded, a business doesn't grow unless the entrepreneur grows. What do i mean by that? Well, the entrepreneur start out with a vision, a love of a product, a love of a service, and basically, an entrepreneur does everything, like Susan Feller. But ultimately, as you grow, you've learned. Growth takes more people. More people takes processes and controls. It sort of builds upon each other, okay? And when you have more people, then the entrepreuer has to delegate. As one entrepreneur said, delegation is not a natural act. It's hard to give your baby to someone else, and that's what a business is to an entrepreneur, because what the entrepreneur usually wants is, if you're that employee, for you to do it the same way he or she would do it. Well, guess what? You're not going to do that all the time, because you're different. You think different. And also, you sort of want to add, just human nature. You got ideas how to improve it. So the entrepreneur has to learn how to manage people. Then the bigger you get, then you need managers to manage employees. Then entrepreneur has to learn how to manage managers. That's what we call leadership. So I go from entrepreneur, to manager, to leader, and ultimately, you get to where Dave is now, is you get to be coach and mentor. And if you think about it, at the biggest the size Dave's company is today, Dave's not on the front lines that much. What's Dave worried about? Culture, processes, continued education, as he said, we're in the business of growing people. And he focuses on his culture, because he says in the case, build a culture on purpose, not by accident. Now, you found out in the case that Dave was very influenced by two books And they're both outstanding books. They're both outstanding books. Okay? Michael Gerber's book, The E-Myth: Why Most Businesses Don't Work and What to Do About It. And out of that, okay, Dave learned basically, the principle, alright, of wow, I need to have a repeatable system, that Dave called McDonaldized. It's a hard word to say. Okay? But, what does that mean? Any of you ever been into a McDonald's? Probably. Or any big fast-food chain? Do the french fries look the same and taste the same in San Francisco as they do in London? They should. Does the hamburger the same size and cooked the same way in Milwaukee as it is in Mexico City? Yes. That just doesn't happen, folks. How does that occur? Because what McDonald's does, is they got a cookbook, a process book, and it says, if I'm hired to be the french fry cooker in the Charlottesville McDonalds, right down the street here from the school, I go in, and I open up the book and it tells me, okay, take the french fries out of the freezer. [NOISE] Open up it, the french fries this way, so they can be resealed. Dump so many french fries into the fryer. Have the fryer temperature this degrees when you dump them in. Fry them for this many minutes and set the timer. When the timer goes off, immediately lift 'em up. Shake 'em so many times. Dump 'em in the pan. Immediately salt. Let them cool a few minutes, and then put so many in those little cartons and stack the cartons this way. Every McDonalds in the world, it's done the same way. What, what are, what are they trying to do with that? They're trying to get standardized, high quality delivery of a product across all their locations. Well, Dave was trying to do the same thing, right? Dave was, started out putting in locks and secure, basically, locks to secure houses. And then he got lucky. He hit, he hit a, he hit a movement. The home alarm movement took off in the United States. And he then basically became an ADT. Okay? Which is a home alarm system distributor. And he put in alarm systems in house. Well, if you put an alarm system in a house, although, my house may differ from Kyle's house, or Chris' house, or Fred's house, my team here, basically, when the, when the installer comes to put it in, it's the same process. Alright? He or she hooks it up to the same thing, it's suppose to do the same result, that when somebody opens my door or window, and is not the right person, all the alarms and bells and whistles goes off and it immediately calls the police. So it's gotta be screwed in the same way, and it's gotta be screwed in to the same place. And it's gotta be hooked into this and hooked into that. And as Dave said, I need a repeatable system. I need a repeatable process, because, and this is a process case, repeatable processes do what? Give you standardized high probability, high quality product or delivery. Why is that important? Because all customers want the same thing. I want what I expect, and what you told me you're going to deliver. I want it on time. I want it not to have problems, and if it does have problems, I want you to fix it quickly, caringly, and make me feel like you're truly sorry. because, this customer part, don't lose it as we go through the process part here. See, it all fits together. Building a business is like a giant jigsaw puzzle. I gotta have the right processes. I gotta have the right employees. I gotta have the right attitude about customers. I gotta care about customers. You know, in thinking about this session this morning, I thought about a little restaurant right down the street here, in the shopping center near the school, and sometimes I go to that restaurant once a week. Sometimes I don't go for two three months. But if I've got to take a guest or something, I go there, because the food is very good, you know? And every time I walk into the restaurant, the owner comes up to me and greets me like a long lost friend. Shakes, puts his hand out and shakes mine, and says, welcome back, professor. Shakes my hand, pats me on the arm, so glad to have you here. Anything I can do to make your visit better, let me know, and walks me to the table. I mean, how do I feel? Loved, needed and wanted. I've just been, what did he tell me? You're going to be taken care of. You don't have to worry. You're in good hands. That's what all this process is about. Because he's trained his people in the kitchen, and he's trained his waiters and waitresses, what are the critical things to say and do with every customer. So when they leave they feel that way, that's why this process stuff's important. We call it in business school, operations. Because it all comes in to play about how your costumer feels and whether your customer keeps coming back. All right. Let's go back to Dave, okay? And, let me give a, give you a quote from Gerber's book that Dave said was so important. I'm on page five of the case. We kept in mind Gerber's three roles, three, in a business. The entrepreneur's job is to create the process. The manager's job is to ensure the process is used, and used correctly. And the technician, the doer, the employee, the installer in this case, job is to follow the process and use it. So if you think about that, your job, as the entrepreneur, is to put in place the process, to teach the process, so your employees use the process. Okay? And, ultimately, when you get big enough, and if you are big enough, you've got managers. The manager's job is oversight to make sure that the process is being used. So, it's very, very critical, okay? Another quote on page five. I love this quote. Dave said, we lived, and still do, by Gerber's tenet. Big business is just a small business that thought big. We always remind ourselves, it's not okay to put in place a mom and pop system in place, because that's just going to keep us small forever. What's he saying to us? What did he learn? Think about that. I'm going to read it again. A big business is just a small business that got big. What's that mean to you? There's some truths there, isn't there? Every big business was small. And Dave is saying, put in place the processes that are going to allow you to grow if you choose to grow. Put in good processes, and you're constantly improving processes. And who is the person that will most likely come up with the ideas of how to improve the process and make it better? Your employees. So make it part of their job descriptions, not only to use the process but to constantly improve the process. Because if you're constantly getting better, faster, and more efficient, you will outrun the bear. Okay. The next thing Dave had to do, was he reached the point where he had to start prioritizing. He had to define his business. He had to define his business. What business was he in? Why is this important? Because when you define who you are, that helps you determine what to focus on, and most importantly, what not to do. The purpose of defining yourself, what business I'm in, allows me to keep my focus. My focus. Focus is critical in it all. So he had to define himself, so his employees knew, and he defined himself as a home installation product company. Now what was the big focus on the word home? By defining himself as the home installation, he said, I'm not going to do commercial or business installations. I'm going to the residential home owner. And that allowed him, as you read in the case to limit his products, to his limit his spare parts, to limit what his installers had to learn, so that they became very, very good. And wasn't it fascinating? Page five. Today we still have only 13 part numbers in our inventory room, the same 13 we had ten years ago. We have not added things. Wee kept doing more of the same, better, trying to McDonaldize it. We understood focus as the goal early on, constantly using an A, B, C format to prioritize. I coach all of our new leaders, we don't pay you to get everything done, we pay you to get the most important things done. And, yes, it was Dave that said that, on page five We don't pay you to get everything done, we pay you to get the most important things done. And I think that's a tremendous lesson for us to learn. Now, what else did we learn about in the case? Dave had his circle of life that he used to manage the business. And the circle of life was like a clock, okay? And you saw the circle of life, on one of the appendices in the case. It is on page 12. And at the top of the circle, the circle of life starts with marketing. You gotta do marketing to get sales. Okay? Then once you have sales, you've gotta install. Once you install, you gotta bill and collect. And then you start over. In Dave's model, everything starts with marketing, and Dave used a bottle-neck priority approach to managing. Where is the bottle-neck? If it's in marketing, Dave is going into marketing, and overseeing it. Once I get marketing going, okay, I got leads. I gotta sell. What's going on in sales? If I sell a lot, if I get a bottle-neck in installation, you remember in the case, he says they knew where the bottle-neck was by where I showed up everyday. And Dave used this clock, this circle of life, which really is the circle of business life, in Dave's business, to manage the business. It was a process. It was a simple process. A simple way to visualize. A simple way to describe to his, at this time the case was written, 1,500 employees, how the business worked. So everybody understood that everybody is dependent and interdependent on each other. Sales can't sell until they have leads from marketing. Installers can't install until sales are made. Billing and accounts payable and working with the customer, can't happen until it's installed. And unless it's all working, there's no money coming in. And in order to do this, he also built an infrastructure, on the Defender Advantage, what he called, his culture. And you saw, basically, his whole cultural multi-year program of training and education. And wasn't it interesting? Okay? Wasn't it interesting that he even had time to read books in his business? And I think that's part of the interesting learnings, if you will, from Dave, if you will, this circle of life. And the point that, as the business adapted, you saw how Dave went from three different business models, okay? To telemarketing, to internet and direct marketing, and, ultimately, if you will, to a multiple channel marking. Okay? He had to reinvent himself. Now, there's another point. Think about this case. Dave talked about the fact that his business grew. Sometimes his people didn't grow, and they basically were not able to go up and manage at a higher level. And Dave introduces the concept of upgrading as a business grows, and this concept is as important as the fire exstingusher. It's as important as the growth can be good, growth can be bad concept. It's as important as the growth requires constant improvement in learning, upgrading. As a business grows you need to basically upgrade your people, processes and controls. And the sad point that Dave talks about in the case is, as you grow, sometimes your people can't take on more responsibility and they have to stay in the same position, okay? That's difficult in a business, especially when those employees are loyal employees who were there from the beginning and helped build your business, but it's one of the things you're going to have to face as you grow a business. Now, at the end of this class you're going to hear a little interview with Dave. Dave's going to come to life, through technology, with you and you're going to find Dave a very engaging man. And before going on and, and leaving this, let me tell you where Dave is today. Dave today is no longer the CEO of his company. He stepped down as CEO to become Chairman of his company, and devote 90% of his time to his charity work and his mission work, and to basically, OK, do, in his view, good outside of the company as well as good inside the company. Very interesting story. The CEO of the company today is the telemarketing woman, whose company he bought, who basically became the CEO, and she's, her main job is, is the defender of the culture. And notice what I said, defender, cause it's the Defender Direct company, and her job is to keep the culture, and the right environment, and the right processes going as this company continues to grow. Okay.I want to take a break here, take a break, want you to get out your paper and your pencil. What's the three key things you learned from reading, thinking about, answering the questions, and you and I having a conversation, and talking together about Defender Direct. What are the three things you learned, key things you learned? And it'll be different for everybody. Then after this class, go on the discussion board and share, and learn from each other. But take two, three minutes right now. A break. Write down those three key things, and then we're going to come back and come back to the key concepts, that we're going to finish up the week on. Three minutes. Three things. Again, making sense of them in your mind. Verbalizing them by writing them down, putting them in to your words. Why are we doing this? So you can learn. That's the purpose of all this. Back to you in three minutes.
