RUN YOUR MEETINGS LIKE A CEO

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      Welcome to Episode 98 of Building My Legacy.

      In this podcast we talk with Dr. James Richardson, founder of Premium Growth Solutions, a strategic planning consultancy for early-stage consumer-packaged goods brands. With a background in cultural anthropology, Dr. Richardson left academia to pursue a career in market research where he has done a great deal of work with consumer product development. He shares with us unique insights into why people buy certain items and what it takes to grow a new consumer brand exponentially.

      Dr. Richardson is a specialist in best practices for growing early stage brands, which he considers the cutting edge of entrepreneurial innovation right now. In our discussion, he looks at the most common problems many start-up entrepreneurs face. He also talks about how now may be the best time to assess your strengths and use them to build your own business — and, as a result, build your legacy.

      So if you want to know:

      • Why firing yourself is the best way to leave a company
      • How other people influence your buying decisions — and how you don’t want to admit it
      • Why, for many research purposes, focus groups can be the wrong choice
      • Who’s most interested in sustainability and why it may be the number one zone of hypocrisy
      • What’s happening with legacy brands and premium-priced products — and why

       

      About Dr. James Richardson

      Dr. James Richardson is the founder of Premium Growth Solutions, which consults primarily with early-stage consumer-packaged goods (CPG) brands. He has helped more than 75 CPG brands with their strategic planning, including brands owned by Coca-Cola, The Hershey Company, General Mills, ConAgra Brands and Frito-Lay as well as emerging brands such as Once Upon a Farm, Peatos, Ithaca Hummus, Mother Kombucha and others. He is the author of Ramping Your Brand: How to Ride the Killer CPG Growth Curve, the #1 best-seller in business consulting on Amazon. He also hosts his own podcast — Startup Confidential — and his thoughts appear regularly in industry publications such as Foodnavigator. He can be found on LinkedIn, YouTube and at his website, premiumgrowthsolutions.com

      About Lois Sonstegard, PhD

      Working with business leaders for more than 30 years, Lois has learned that successful leaders have a passion to leave a meaningful legacy.  Leaders often ask: When does one begin to think about legacy?  Is there a “best” approach?  Is there a process or steps one should follow?

      Lois is dedicated not only to developing leaders but to helping them build a meaningful legacy. Learn more about how Lois can help your organization with Leadership Consulting and Executive Coaching:
      https://build2morrow.com/

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      Transcript



      – Welcome everybody to today’s Building My Legacy podcast. I have with me today, Dr. James Richardson, he is company founder and author of a podcast, and he works a great deal with consumer product development. He works with startups, he works with large companies. And so he has a fascinating background because he comes at this as a cultural anthropologist. So just to give you a sense as to whom he has worked with he has worked with companies like Coca-Cola, he’s worked with Hershey company, General Mills, Kraft Foods, ConAgra brands. Frito-Lay, he’s also looked at emerging brands such as Once Upon a Farm, Peatos, Ithaca Hummus, Mother Kombucha… Oh, Kombucha and others. So he has a fast Friday of background and I’m fascinated by what it is that you bring. But part of it, James is you have an interesting perspective because you started as a cultural anthropologist. So how do you get from there, for being a Margaret Mead to doing what you’re doing?


      – That’s an excellent question. I get it regularly and I’ll try to be succinct.


      – Okay.


      – I think I have a long version on my YouTube channel if anyone’s really curious. So I was on the academic track quite honestly for about a decade and I thought that’s where I was going to wind up, and I’m not the only gen X white colored person who thought that. I would say there was an unprecedented amount of people chasing some pretty lofty dreams during the 90s and I was one of them. So I went to graduate school, I was fascinated with human behavior, I was fascinated particularly by various topics. One of them was hypocrisy in sort of moral and ethical values and why that persists. And so I got involved in studying how people perform their social identities to display messages to the external world, right? If those of you who went to college, listening, who went to college in the 60s and 70s probably were assigned books by Irvin Goffman, who’s a famous social psychologist. And he’s one of my theoretical muses when I was in graduate school. So the things that interested me there were how people perform their social identities essentially and how they make sense of the ones that don’t get along with each other, right? For example, my dissertation was on a small community in Southern India which was composed of what should be totally impossible college educated untouchables. So that shouldn’t happen in Indian society because it rarely does, but this was a group that managed to pull this off. And so I explored why this was, why did this strange permutation happen? So those are the kinds of things that fascinated me when I was in school and when I was in graduate school. But the tenure track I made a decision was just not for me in my field and I won’t go into why, but it simply wasn’t going to make me happy. Now I was 29 when I had to make that decision. And I wasn’t really ready to make a decision that big at all, to be honest with you, maybe I should have been, but it wasn’t. So it was a painful process, but I left academia of my own volition, I fired myself, as what I like to call it. And I encourage people listening that, firing yourself is the best way to leave a company because you’re in control. It’s also the best way to leave a career. So I decided that I needed to find a non-academic route and then I didn’t know what to do. So I wound up in market research, Lois, which is sort of where a lot of my colleagues wound up, some wound up in advertising, some wound up in market research, some wound up in development work abroad. They just liked living abroad, didn’t want to come home, basically. I wasn’t one of those, I had my… India was great, it was fascinating, but I was done after three years. So I went into market research and that’s where I had to learn that basically a whole new industry which was marketing and innovation. And what I found was that anthropology was actually pretty useful because something as basic as an interview with a consumer, and the company I worked at specialized in extremely in depth at home research. Like we would spend hours in their houses, which requires a certain kind of rapport building to even get that to happen. So what I found was that something as simple as an interview… And we’d listened to interviews on CNN and MSNBC and all these shows all the time. An interview seems pretty simple to the viewer, but an interview that’s really trying to get at buried truths behind human behavior that people can’t articulate is actually very complicated. And so anthropology and specifically sociologists too are very well-trained at getting behind… Getting past what I call stock narratives about why we do what we do. And we give those to people all over the place in our lives. Someone might ask you, why did you buy that car? You’ll tend to give a stock narrative, and that stock narrative is, it’s not your own opinion. It’s something you learned to say in that kind of situation to put on a specific impression. In other words, it’s a shared explanation. It isn’t really yours, it’ll feel like your opinion when it comes out of your mouth, but it really isn’t yours because you learned it from other people, observing them. Ah, well, when you buy a BMW, you downplay it, right. If you’re talking to someone who can’t afford a BMW.


      – Right.


      – You don’t lead with, “Well, I’ve got a BMW seven series, and man it’s tricked out,” right? If you’re talking to your colleague, your high school roommate who makes $65,000 a year and keeps getting fired and has had… You know, their kid had cancer and it’s just… So you don’t do that. You refer to the car obliquely, right? So that’s just one example of how people learn to present themselves and why they buy things based on sort of who they’re talking to and what’s going on. That includes the interviewer, right? So one of the things that I found out early on in my transition was that people in traditional market research, in the consumer packaged goods industry were really bad at asking questions of consumers. My favorite, I think some of you who might be near that industry or have ever done a focus group will appreciate this but focus groups are one of the worst research techniques I’ve ever encountered as a professional. Unless you’re just researching language and meaning, right? Like if you flash up a word and you just tell them to say what comes to mind, it’s really good for that. Because you’re getting sort of raw associations, but it’s like the worst place, Louis to go and ask somebody, so why do you buy organic food in a room full of people? So now the answer you get is a performance, right? Designed to either make you look good, make you fit in with that group, not offend anybody, but it’s rarely very interesting and it’s rarely getting at the real drivers. So for example, people will often say, you know bio organic food because it’s healthier for me. But I happen to know that a lot of people understand it’s healthy, right, symbolically and they don’t buy it at all, right, because it’s too expensive. So what you’ll find is that people will buy organic food because it’s healthy but it also makes them feel more modern, more with it their own social network, right? Because they’re learning, they’re seeing other people buy it and then they’re asking themselves, maybe I should buy this. But the first explanation you’ll get out of their mouth is not that well, everybody in my street is eating organic food, so I kind of had to start, right? That’s not an explanation that people give of their… People don’t like to admit how influenced they are by other people when they make decision about what they buy. And so that was one of the things that got me more interested in the consumer packaged goods world that I sort of threw myself in randomly. It was trying to understand these decisions, but what actually ended up happening was that I focused and the company had focused on becoming experts in why natural organic products were gaining enormous amounts of market share and categories that they shouldn’t have attained that kind of market share in like yogurt is a great example. And it’s one, we’ve all seen unfold in the last 15 years at the supermarket shelves. So, how do you explain these transformations that are very rapid, that where half of a category is selling at a high unit price and traditional marketers in the industry that I used to do consulting for they couldn’t explain it. They couldn’t explain why someone would pay two times the price of Yoplait, not just one cup at a time, but they would buy five to 10 at that price, right? It just didn’t make any sense to traditional marketer because before say the 1990s, most people just bought the mainstream brands in every category and the price slowly crept up with inflation that’s sort of how the industry were, it was pretty simple. It was a sleepy industry, it just grew. Now you’d had insurgent brands coming in doing things that weren’t supposed to be possible to a classically trained marketer at Kraft or General Mills or Coca-Cola. And so my career ended up at riding this wave of sort of trying to explain what is going on here. Not only from a behavioral perspective but also from the perspective of business, right? How do you run Coca-Cola if this is where the market’s going, how do you run General Mills from the very top? How do you make big decisions based on these shifts in behavior that is starting to really affect your profits and your ability to grow your company? So what ended up being sort of bizarre transition from being the skeptical social scientist who wanted to understand why do people do things for reasons they won’t disclose right away. And then why do they not… Why do they say they believe in things, and then don’t act on them in their most mundane purchasing? So for example, like sustainability is the number one like zone of hypocrisy, right now in American consumption. What people don’t realize is that the kind of person demographically or lifestyle wise who’s the most likely to be passionately in support defending the climate and defending the environment is a highly educated affluent, genuinely white and married household. And they don’t look that much different than me, right? But those are also the people who waste… They have more food waste, they have more packaging waste. They waste more money every year on consumable items than any other group in society. So the most wasteful group in society is the one that’s most interested in sustainability. And so when you start to unpack these things, it’s fascinating because you realize, oh, they’re not trying to actually be more sustainable. They’re just incredibly guilt-ridden about what they’re doing. But their behavior is showing really very little movement in terms of actually… And part of it is because it’s actually really hard when you get in a social world where consuming things is sort of normal then you get also get into a habit of doing it, it’s part of your lifestyle. You know, don’t repair the car, don’t repair the bike just junk it and get a new one, right? So there’s a whole economy built on this and its economy that makes it very hard to actually be honest in your life with values as aspirational and sustainability. Anyway, so that was a bit of a tangent but the point is there are some ideals that are so removed from behavior, Lois that I don’t know it could take decades of generations or honestly federal regulatory change to actually get the behavior to align with where people want to be. Then there’s other things like organic food where the consumer did it themselves, before the FDA decided that there was an issue with how milk was produced in the United States for example. So those are the things that bridged my social science background and the business world explaining why premium price products do remarkably well maybe with specifically segments of the population and why people have walked away from legacy brands in food, beverage, health, beauty, you name it. Pretty much anything in a box. And that journey it was not smooth, but it sounded a lot smoother telling it, but that’s sort of what happened, I ended up becoming a specialist Lois in best practices for growing early stage brands. And the basis of that expertise is not the traditional MBA knowledge of case study knowledge. Although, I’ve done that work as well, it was the behavioral understanding about how to deconstruct the drivers behind why two or 3 million consumers, for example will decide to start paying two to three X more for Greek yogurt instead of Yoplait. And being able to get that out of them, understand the symbolism, and then take those sort of laws which I write about in my book, and be able to deploy them with other folks proactively so that you can make growth happen. And that’s pretty much all I do right now, and that’s what fascinates me is how can you co-innovate premium products that grow really fast by essentially completing them with the consumer in the marketplace? And that’s pretty much the cutting edge of entrepreneurial innovation right now.


      – It is, isn’t it? Just so everybody is aware of your book it’s called Ramping Your Brand and it talks about some of these issues, so it’s available on Amazon and elsewhere too, I’m sure. But I want to go into this with exponential growth because that is everybody’s goal with the product, you introduce a product, and then you go, okay, how fast can we grow it, how fast can we blow it up? And what does that really mean? So you talk about the pros and cons of that, if you would just go into that a little bit.


      – So I think people want to grow fast, generally. I think the desire for that is more heightened than ever in the current cohort of entrepreneurs out there. But I distinguish between what you’re reading about in the media in terms of the big, big brand growth stories…


      – How is that?


      – And exponential growth. So most of what you’re reading in the media if you look really closely are actually unicorns stories those are the ones that capture the headlines the most. I think the biggest one that in the food industry recently was CAULIPOWER pizza which went to 100 million dollars in almost 18 months and that just never happens. You had Chobani do something awfully similar in about two years, and then it kept growing. You have direct to consumer brands like Harry’s, which are growing that fast. So these unicorn brands are growing. They’re growing just mathematically making things concrete they’re growing 1,000%, 3,000%, 4,000% a year off a pretty fast out of the gate million or $2 million in the first year of sales. And it just doesn’t happen, so I’ve done the research, Lois, the reason it gets written about is because it’s rare, right? And you’re a media savvy person Lois, so you know that the mainstream media is obsessed with weird stories of weird things, especially dangerous ones, right? Anything that’s fear-driven, right? So we’ll have daily coverage of homicides in the U.S. even though, the average person has no experience with one because we’re afraid of them, but they’re actually very rare, if they’re happening all the time, it wouldn’t be a news story. That’d mean no one would even talk about it. And the same thing with these fast growing unicorn brands. Exponential growth though, is something different. It’s actually growth off a much smaller base of sales.


      – Okay, let’s pick that.


      – And that base is usually in my industry, it’s less than a million dollars in the first year and often it’s half a million. And mathematically exponential growth basically occurs somewhere between 75% and 200% year over year growth. And investments work the same way, although, they rarely grow that fast. But in a business, the kind of business that I’m in it’s possible to generate that growth. What’s interesting about the curve that’s generated when you do that, if you were to open up an Excel file and even if you just put like half a million in and then doubled it, every cell going to the right and then you did a line chart, you’ll get this beautiful curve, it looks like a quarter pipe ramp at the skate park which is the metaphor in my book. But if you look at that curve, there isn’t a lot of scale being created in the first couple of years, Lois. I mean, you might start a half a million, then you’re a million, then you’re 2 million, then you’re 4 million. But to somebody who’s trying to get really big you’re looking at those numbers as the entrepreneur like nothing’s happening. Like I’m not scaling, but you’re actually succeeding phenomenally well, the question is, how is that happening and how do you make it continue? And that doubling every year, Lois is actually also rare. It’s just not as rare as that unicorn, which is just going straight up pretty much. It just got an insane growth trajectory. So they’re much more common, it’s about 10% in consumer packaged goods at any given time.


      – Where you have the doubling…


      – The doubling year over year, right. And what it does is it leads to scale relatively quickly but it’s all generated on that back half of that curve, so say it’s like a five to six year journey. Most of the revenue creation will be in the year five and six in absolute dollars. The first two, three four, again, it’s going to be that shallow part of that skate park ramp, where it’s not going up very much and then suddenly it goes whoop. And the difference between that and just shooting up like a rocket, with a unicorn on top to mix my metaphors is you actually have time to learn in the market, Lois when you’re doubling off a small base deliberately, and you’re not trying to overreach with customer acquisition scale, whatever it is, or in my industry, it tends to be signing up way too many national chains with brokers, which if you’re well-connected and you have cash it can be done much quicker now than 30 years ago for a small emerging brand. I will say the pandemic has slowed down onboarding a fair amount, so this is not the ideal circumstance to do that. But my point is that learning time when you’re going from say, half a million to 4 million, 5 million and you’re doing that over two to three years that gives you the time to engage with your consumers, the end consumer, right? Get feedback, do a little light consumer research, make sure that you understand why this thing is growing so that when you want to go and have the money to do things like paid advertising, which I pound on with some of my bigger wealthier clients to start doing you know what to do, you know what to say, you know how to actually refine the brand positioning get the marketing strategy really, really tight. If you don’t allow yourself that time to be growing fast, but that time to be growing fast in a sort of a gated way, you aren’t going to give yourself time to learn. Now you may get lucky and you just throw money at it and it becomes Harry’s or I’m happy to show you the last two case studies where people throw money at things the first year and nothing happened. And then it’s all over. Those don’t make it to the media though. If you’ve noticed this too, nobody really writes about failure in business. It’s a very strange thing, but American media doesn’t write about it, but I’ve studied it. I’ve studied why things don’t scale and then why they do. And when you look at those sets, especially in my world of early stage consumer brands, that’s how you actually can figure out this is what you need to not do, and this is how you need to run the business if you want to grow exponentially, which is fast, it’s a fast growth pace, but it’s actually as fast as you want to go. And for some people, Lois to your earlier point, it’s actually too fast because once you get…


      – You can’t keep up, so…


      – Yeah, once you get to that back half of that curve you now have to grow your staff very fast. And that can be very uncomfortable for entrepreneurs who are not used to that.


      – Right. So I have a question though, relative to the early stage, because you’re talking about startups entrepreneurs, you’re talking about half a million, to a million. Generally the gross profit margin is pretty thin at that point, so the net profit that you’re left with to put back into the company is going to be smaller. So taking that time for reflection to really look at hiring a person like you to look at how do we build this, is very tough. So how does a small company really begin to weigh some of that and how do they begin to plan for it? Because I think it’s the one thing people don’t plan for. They don’t know how, or then…


      – Right. I’m still evolving how to present that on my website to people because I generate traffic mostly from people who are very small because that’s 80% in food and beverage, 80% of companies actually it’s 90% of companies for sale in the market today are selling less than half a million dollars a year. You know, and most of them never… They don’t scale, they don’t succeed, a lot of them go under but a lot of them just sort of slowly grow. And what I try to do is I try to give an enormous amount of content for free and the book is to me a marginal cost for an entrepreneur is new to give them the mental models by which they can structure their experiment and the market in those early years, so they’re collecting the data in a scrappy manner that will help them optimize what they have as early as possible. Because I think if you can optimize as early as possible, even slightly on your own, you’re going to have a better chance of making it to that million or $2 million hurdle, which is generally when I am more relevant because to your point, they will have more cash to hire a consultant like myself. But more importantly they probably will have already raised money because in my industry, Lois, the net profit is… Most companies are losing money until they’re 10 or $20 million. I know that sounds crazy, but almost all of them are, right? And so even when they raise money their net EBITDA is still negative, they’re just using the money to continue the momentum and continue investing in growth that the business can’t actually completely fund itself. So I tend to be brought in, million plus or 5 million plus when things are a little more liquid and they’ve got money to invest in things, in what I do, which is optimizing their journey, and their playbook, and their strategy. So the majority of startups though, you know, I try to give as much free content as I can so that they’re just being… I can help them avoid basic mistakes. I have a mistakes webinar for free that people take. I don’t know why that stuff hasn’t been shared more broadly but it is now. And what I found is once you get to about a million dollars in trailing sales and consumer packaged goods, at least but that number might apply to other industries, you’ve probably… You’ve most likely learned enough about the industry, you’ve made some mistakes, you’ve recovered. You’ve learned the value of getting more disciplined and professional about how you manage the business. But also you now have some sunk costs, Lois, like you could be three to four to five years in to this thing. And so the sunk costs psychologically are making you really, really want this to work now. And I’d prefer to work with those folks who feel that hunger even more, there’s another crowd Lois who get really disillusioned and just stop. And maybe that was the best decision for them professionally, because some people aren’t cut out for the industry I’m in. It’s hyper competitive, it’s very hard to pay yourself, it then tends to be populated with higher net worth founders who can afford to take those kinds of financial risks with their life. But not always, so I hope that answered your question.


      – So tell me, right now with what’s happened with COVID you see a lot of uncertainty, people there’s a fear level that we haven’t seen before not to this extent anyway. So how is that impacting your small companies that have very thin or negative margins, but have to grow if they’re going to survive?


      – So a couple of things, I think the folks that didn’t raise money before the pandemic hit, Lois I think are in deep trouble. And I don’t want to sugar coat it because I’m a social scientist, I tend not to do that. And so that that’s a mix, right? So there’s some startups, I work on retainer, for example, for a startup in Canada that I have one, except… I don’t generally work with startups, but I have one exception which is I will work on retainer for one startup a year. I always learn some interesting things, so it’s fascinating for me, but I also can help them in a more intensive way avoid some of these mistakes. And that one startup she’s very good at raising money. She produces money out of thin air like no one I’ve ever seen, not massive checks, but money. And that’s a level of charisma that she has, which is indicative of a successful founder longterm.


      – Got it.


      – I joked with my brother about this individual and that’s what impressed me, and that’s why I made an exception to work with her. Normally I don’t because people aren’t ready for the kind of optimization, strategic planning that I coach, they literally are trying to survive and get that initial scale going so that… They basically just have repeat orders of their current customers, they’re trying to… I call it turning the engine on. And that’s something you have to focus on at CPG because it’s such a… It’s like walking a razor due to lack of profitability and just the costs to get up and running. But there was this client I have, she’s an amazing networker. And I was joking with my brother, there’s some people in a lot of successful founders in every industry seem to be like this. I know Steve jobs, the cliche example was exactly like this. There are people, human beings who for whatever reason have learned in their social environment, that’s how I explain it. They’ve learned how to be incredibly persuasive at extracting things that they need from people, even people they don’t even know well. And so the phrase I use is how does this person get people to do all this stuff for her? Because when I try to go ask somebody to do the same kind of thing, I usually get a brush off. So it’s obviously technique, but that’s the sign of a classic entrepreneur is that they can… their passion is almost in viral, it’s infectious in a way. And it causes people to want to help them. We could also call the master manipulators, it’s not the right phrase, but in a way from a sociological perspective, in a way they are. They’re very good at getting people to help them when there isn’t a lot in it for that other person, right? So those are the people that do really well in this pandemic, Lois because they already had a big network Lois, right? They already had this ability to tap network. They’d already raised money, even though they didn’t have a lot of sales. I mean, the woman I’m talking about has raised more money than she’s ever generated in the business yet, 2X.


      – That’s amazing.


      – I don’t think I could do that.


      – Yeah, it is amazing.


      – So James, we are at the end of our time. And so before we sign off I just want to know last thoughts, comments that you want to leave with the audience.


      – Last thoughts. I think given the theme of your show, one thing I would suggest to listeners who aren’t in the startup world is if you’re thinking about your own legacy as a professional, one of the things that I think often gets overlooked is the ability for people especially when they get in mid life to assess what their strengths are and to take a leap. And honestly, this is probably the perfect time right now in American history to do it because everything is in flux take your strengths and build your own business sharing those with other people because I don’t… Unless you are literally going to become a C-suite executive where your legacy will be confirmed because of the massive influence you’re going to have over that company even in three or four years, if you’re not on that track or you don’t even want to be there, it’s not that you don’t have strengths, but you can also build a legacy by going out, and sort of like I did, and going to underserved group that doesn’t get a lot of professional help. And all I can say is it’s like 1,000 times more rewarding regardless of what money you make. In my experience, than staying in a traditional corporate environment that’s not fulfilling you. Now if it is fulfilling you hallelujah, stay there.


      – Well, and for people who are in that traditional role at some point they will leave and may go with foundations or be on boards, and so really…


      – And I think those are the typical things but I don’t know that there’s fulfilling. I know people who do that.


      – Right.


      – I mean, I don’t want to sound like the typical anthropologist, but hanging out on boards with a whole bunch of other rich people, that gets old pretty fast if you do it for two or three years. Whereas where you can have this much larger audience of potential impact, that’s really… I mean, it’s rockstar infectious when you can reach those people and help them because nobody thinks of helping them.


      – Yeah. That’s very true.


      – Right.


      – Well, thank you so much, Dr. James Richardson, thank you for being with us on Building My Legacy podcast today and for those of you who would like more information about James, and his work, and his book, we will have it in the show notes for you so you can contact him or certainly can contact us, and we’ll get you in contact with him. Thank you so much for being with us today.


      – And thank you for having me Lois, it was fun.


      – Likewise.

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