Paul Orfalea Story: A Process, Not a Plan
of my favorite entrepreneurs is a guy named Paul Orfalea. Paul
is brilliant and quite successful, but hes unbelievably
modest and also very honest about his shortcomings. Paul
is profoundly dyslexic. He didnt learn how to read until
he was well into elementary school and did nothing in high school
that would be associated with the idea of success. He went to
college but didnt care an awful lot about his classes. It
was the perfect background for an entrepreneur.
started a little copy shop (so little he had to wheel the machine
outside to make room for customers) on his college campus. He
sold pens and paper and made copies. That store grew to become
Kinkos, a chain with more than one thousand outlets that
he was able to sell for more than two hundred million dollars
to an investment group.
secret to Kinkos success is disarmingly straightforward.
"My reading was still poor and I had no mechanical ability,
so I thought that anybody who worked for me could do the job better,"
Paul explains. He set up a unique co-ownership structure that
let him grow the business with more flexibility than a franchise
could offer. The end result is that for years, Kinkos stores
were partly owned by someone local.
described his job to me this way, "I just go from store to
store, see what theyre doing right and then tell all the
other stores about it."
allowing local entrepreneurs to make millions of low-cost experiments
every year (just three per day per store gets you to that level)
and then communicating the successful ones to the other stores,
he was able to set the process in motion that led to
all-night store I found in Cleveland. The Cleveland store wasnt
part of a specific plan, but it was very much the outcome of a
little specialized knowledge is required to open a copy shop.
Yet Kinkos dramatically outpaced every other competitor
by reinventing what a copy shop was, every single day. Kinkos
did not have a patented new technology. Instead, it had a posture
about change that treated innovations and chaos as good things,
more successful Kinkos got, the more likely it was to get
job applications and co-venture deals with people who made the
company even more successful. The more Kinkos stores there
were, the more likely it was that people would seek one out. The
better Kinkos did, the more successful it became.
became a success. Working there was fun because the company attracted
people who could compound its growth. Kinkos stopped worrying
about surviving and enjoyed the ride.
interesting to see that since the takeover of Kinkos by
an investor group, new management has bought out the individual
owners and installed a command and control system. Kinkos.com
is regrouping and the entire chain is experiencing slower growth,
despite external economic and technical conditions that should
have allowed it to grow even faster.
was right. All of us are smarter than any one of us.
arent organized for change. Theyve never needed to
be. Growing and profiting from stable times was a terrific strategy.
into an era of rapid change, the response of companies organized
for a stable environment is to ask managers and employees to act
as a buffer between the company and the changing outside world.
Alas, its not working.
you working longer hours than you used to? Most people do. And
along with the long days, it often feels as if your day is filled
with one emergency after another. We spend so much time putting
out fires and nervously anticipating the next crisis that theres
almost no time left to do our real jobs.
its easy to find the reserves to deal with a temporary crisis
(in fact, you might even enjoy the adrenaline rush that comes
with a deadline) we cant keep this up forever. Accountants
can deal with April 15 because they know it only comes around
once a year. Its a temporary emergency. Unfortunately, being
frantic at work is no longer a temporary phenomenon. Change is
now constant, and the fundamental ideas we have built our companies
and our careers upon are going out of style fast. Theyre
disappearing so fast that for the first time, you have to deal
with the implications of change instead of waiting for a retirement,
a promotion or a new job. The world is changing on your watch,
and its not fun.
along the way, it was decided that it was our job to absorb the
stresses that come with change. Our job to work longer hours,
take more personal risks, absorb more stress. Your frustration
and stress arent atypical. They are, however, unnecessary.
cant work more hours. We cant absorb more stress or
endure more anxiety at work. We can, on the other hand, radically
redefine what we do at work and create organizations that are
designed to succeed regardless of what our ever-changing future
job shouldnt be to stand between your companys old
rules and the new rules of the outside world. Instead, your company
needs to change from the inside out. Your company needs to learn
company that zooms embraces change as a competitive opportunity,
not a threat. A company that zooms is responsive to new opportunities
and doesnt freeze in the face of an uncertain future.
company zoomed when it was young. But success has spoiled most
organizations, and theyre now too fat, too stuck and too
afraid to zoom again. If your company is under stress, it only
has two choices. Either it changes or it requires people like
you to absorb the stress. The first is productive, energizing
and profitable. The second leads to an unhappy frenzy.
the chaos were facing came to us gradually, its easy
to believe that we can gradually adapt in the way we deal with
it. Its not true. The way we used to do businessdependent
on highly profitable physical goods and manageable cycles of changeis
I wrote about a major shift in the power between consumers and
marketers. In the old days, marketers were in charge. They controlled
how and when they communicated with consumers. We built our entire
consumer culture around the idea that repeated television and
print advertisements could profitably entice consumers to spend
money. Businesses that invested in interrupting people became
incredibly profitable. Marketers were in charge. They controlled
the marketplace and consumers were sheep. Those days are over.
Businesses can no longer manage consumer attention, consumer attention
this book, Im making a much broader argument. In the old
days, companies were in charge. Good managers managed change.
They controlled how and when a company would respond to the outside
world. Those days are over. You cant manage change. Change
youre unhappy, stressed, tapped out and/or losing money
in our chaotic world, perhaps its time to consider a radically
different approach. Its possible to build a company that
embraces change instead of fighting it. A company that attracts
people who want to move fast, not slow. A company that changes
faster than its environment, creating one landslide hit after
Problem with Factories
since we got serious about farming and factories, businesspeople
have embraced the idea that investments in physical plant will
pay off. Go to a meeting at Universal Pictures and theyll
happily show you the back lot. Visit my dads hospital crib
factory and youll see punch presses and paint lines. Harvard
University has stately ivy-covered buildings. Random House is
erecting a huge skyscraper in midtown Manhattan.
the very heart of capitalism is the idea that an entrepreneur
can take money from investors and spend it on infrastructure that
will pay dividends for years to come. Having a bigger, better
factory was always the best way to get rich.
are two big problems with factories, though. The first is that
in times of rapid change, infrastructure ceases to be an advantage
and begins to be a drag. Keeping those factories busy and paying
dividends often forces a company to hold back on innovation.
second problem is that the really profitable companies no longer
rely on factories. Since 1970, the average weight of a dollars
worth (inflation adjusted) of exports from the United States has
dropped by 50 percent. In other words, were shipping ideas,
a factory doesnt need to be near the end user (because of
cheap shipping) and doesnt need to be near the client (because
of the ease of long-distance communication), then location is
not really a competitive advantage. A factory owner often finds
himself in the commodity business.
I write this, Im enjoying music from a group called Timbuk
3, based in Atlanta. The CD was manufactured by a Japanese company,
in Indiana, and is being played on a Korean CD player through
an amplifier made in Washington state. Finally, the music comes
out of 150-pound solid-marble stereo speakers made in Thailand
(which have tweeters that were made in Denmark). My guess is that
at every step along the way, the "manufacturer" had
a choice of factories he could use to make each component. And
he probably didnt own them.
we still need factories? Of course we do. How else are we going
to make all this stuff? My point is that while the world still
needs factories, that doesnt mean you have to own them.
Owning a factory will probably become a profitable niche business,
a way to make a nice living. But fast-moving, high-growth, zooming
companies dont need to own them.
factories are no longer local, because the ultimate provider is
no longer the manufacturer, the model that was factory-centric
is dead. Being factory-centric doesnt increase your profits,
it decreases them. Being factory-centric doesnt decrease
your time to market, it increases it.
with Broken Windows
Tipping Point, Malcolm
Gladwell writes about the precipitous decline in crime in certain
parts of New York City. He points out that by fixing broken windows
and cleaning up graffiti, the police department created a new
atmosphere. Studies have shown that when small vandalism isnt
present, the rates of murder and robbery go down.
reason seems pretty simpleif the neighborhood feels well
cared for, its harder to take actions that are against the
law. If, on the other hand, youre living in the Wild West
or a crumbling slum, all bets are off.
what does this have to do with Verizon?
you live in the northeastern United States, youve probably
had to call Verizon about your phone service. When you do, youre
greeted with a voice processing system that asks a number of questions
and then says, "Please type in your phone number." So
you type in the ten digits and then wait on hold for a while.
next part of the process amazes me. Every single time Ive
been connected to someone over the last three years (perhaps twenty
incidents), the operator says, "Whats your phone number?"
And then I say, "You mean the phone number the system just
asked me to type in?"
this point, the operator heaves a deep sigh, tells me that everyone
says that and explains that the system doesnt work. (Remember,
this is the PHONE company!)
the years, a few brave phone operators have surely forwarded this
common source of frustration to the powers that be. And over the
years, the engineers have always had something better to do than
fix a system that annoys tens of thousands of people every day.
Thats a prioritization decision that I cant make for
I can tell you that Verizon is making it very clear to the people
who answer the phones (the folks who deal with their customers)
that improving systems is not part of their job.
ten Verizon operators to go to a brainstorming session about how
to improve customer service and Im sure youll come
up with a thousand great ideas. And Im just as sure that
Verizon doesnt zoom enough to have sessions like this. By
leaving broken windows on their voice mail, they remind their
operators and their customers of this every day.
1997, my company was doing a mailing to two hundred thousand of
our users. Our goal was to get as many people as possible to open
the e-mail as a first step toward getting them to actually respond.
of the marketers in our brain trust came up with the wacky idea
of using the following subject line in the e-mail: How many Microsoft
engineers does it take to change a light bulb?
most companies, a suggestion like this would get you thrown out
the door. But we had a farming mindset, so my response was very
different. I said, "Hey, lets test it." And so
we sent it to ten thousand of the two hundred thousand people
who got the mail.
what? The Microsoft e-mail got twice the response rate of the
other one. We discovered that without using focus groups or hiring
expensive consulting firms. We did it through testing.
cant overhaul the first floor of their store in New York
City without spending millions of dollars and then taking a huge
revenue hit if theyre wrong. Amazon, on the other hand,
can change things on their home page in an hour and revert to
the original in five minutes if they guessed wrong.
seems like an easy and obvious strategy for dot-com companies.
Now, though, thanks to a wide range of technological innovations,
just about any job held by a serf can be approached with the posture
of a farmer instead.
the cashiers at McDonalds see a running total of how many
of their customers ordered dessert? What if they did? What if
they could see, right there on the cash register, what percentage
of their customers were buying an apple pie compared to the other
cashiers in the store or compared to the other stores in that
a goal, "sell 20 percent more apple pies," and a reward,
"and win a free bike," as well as the freedom to improvise,
my bet is that they could make the number soar. Imagine ten thousand
cash register folks at McDonalds, all trying various smiles,
come-ons and invitations just so they could win a bike. Sounds
a lot like natural selection to me.
gets even better. Once McDonalds discovers a few cashiers
who seem to have a knack for this sort of thing, they can videotape
them and share that approach with the other cashiers. A farming
posture turns these ten thousand serfs into farmers, or at the
very least, farmers apprentices.
change in mindset, a new posture, is a fundamental building block
in creating a zooming organization. I pitched an idea to someone
I know in publishing. Instead of saying, "How much will it
cost to find out if it works, how long will it take and how much
damage will be done if were wrong?" she said, "That
will never work and the publisher will never go for it."
End of discussion. Shes a serf, not a farmer. Her old rules
have gotten her this far and shes in no hurry to discover
my work with AOL, it seemed to me that they never learned how
to farm. They were so busy with hunting and wizardry that they
never bothered to test. For example, at one point AOL was one
of the largest sellers of computer books in the world. In addition
to selling computer books online, AOL operators would call users
at home (during dinner) and sell them packages of books by phone.
like a direct marketer, the obvious thing to do was to test every
possible script (for the phone) and online presentation that made
sense. Along those lines, stealing a technique from the great
direct marketers of our time, the other smart strategy was to
test books before you wrote them. Call a thousand people or run
a thousand online ads and see if the book you had in mind was
going to sell. If it did, hurry up and write it. If not, go on
to the next idea.
the economics of this idea are obvious, AOL staffers didnt
think like farmers. They wrote the books first and sold them later.
Chaos Outside Mean Chaos Inside?
may appear that the best way to deal with the turbulence of change
is to encourage your company to enter a state of anarchy. I dont
believe thats true. While there is no invisible hand guiding
nature away from dead ends (like the platypus), its pretty
clear that intelligent leadership is the critical distinction
between a company that zooms to success and one that just fades
are four ways to keep an evolving company from devolving into
a maddening mass of dumb projects while still permitting the easy
adaptation of successful test results.
keep your projects cheap. Experiments that lead to natural selection
or mutation are essential, but cheap experiments can give you
almost as much data as expensive ones. Cheap, by the way, also
means fast. If theres a fast, cheap way to discover a better
winning strategy, do it!
vigilance is required to keep fearful employees from building
all sorts of guarantees and assurances into their experiments.
If youre going to fail, fail quickly and cheaply. Dont
let people build task forces and contingency plans and buffers
around their efforts. Shoot first, ask questions later.
hold people accountable. Not the sort of life-and-death accountability
that passes for accountability at most companies. That sort of
proposition all but guarantees that only an idiot would volunteer
to test somethingits a sure way to lose your job.
The kind of accountability you need is quick and direct. If someone
promises a test will be done by Thursday, ask him on Thursday
for the results. If theyre a week behind on a two-week test,
cancel it. Nature isnt kind and neither are evolving companies.
you still need to lead. Successful companies defeat unsuccessful
companies when a smart boss makes smart choices. No, this isnt
genetics. Someone is in charge, at some level, and its you.
You decide which projects to authorize, which resources to allocate,
which company to work for, what job to do.
owners make better decisions. When Hard Manufacturing gave its
factory workers a piece of the profits, a hundred experiments
spontaneously occurred. Almost all of them were smart, and most
of them translated into successful improvements in efficiency.
cannot abdicate all decision-making to the market. I dont
believe that management can dictate the future by fiat, but I
also know that having no position at all is an abdication of your
responsibility. We make bets every day, and making many bets is
smart. Making successful bets is brilliant.