Capítulo 4
The Mona Lisa Principle: Community as Context
The small giants share a profound connection to their locations-they're so intimately tied to their communities that it's difficult to imagine them elsewhere. Zingerman's embodies Ann Arbor, Anchor Brewing is quintessentially San Francisco, CitiStorage is Brooklyn to the core. This connection isn't accidental but deliberate and reciprocal-the companies shape their communities while being shaped by them.
Danny Meyer of Union Square Hospitality Group views community context as critical, comparing it to how the Mona Lisa's impact depends on its specific framing and setting. He rejected offers to open replicas of his New York restaurants in Las Vegas because "those restaurants are part of their community, and the community is part of what they are."
Righteous Babe Records exemplifies how a company can reflect its community's character. Despite being the butt of jokes, Buffalo inspires fierce loyalty with its underdog spirit. The company maintains a small-town business ethos despite its international reach, creating what company president Scot Fisher calls "a small town environment on a national level" where promoters "would no sooner cheat us than they would cheat their own mothers."
Buffalo shaped Righteous Babe in practical ways too. Lower overhead, competitive printing and manufacturing prices, and a substantial talent bank of local artists helped the company succeed. Their fresh, imaginative work earned recognition, including a Grammy for best packaging. The Buffalo ethos of being scrappy outsiders fighting against odds motivated everyone, including Fisher, who lacked traditional qualifications but built a highly respected music business while several major labels that once courted DiFranco disappeared.
All the small giants in this book share symbiotic relationships with their communities, giving them a strong sense of identity and purpose. These connections contribute to the passion people feel for their work and the buzz around their businesses. Unlike socially conscious brands of the 1990s like Ben & Jerry's, small giants tend to be quiet about their community work, sharing Zingerman's co-founder Paul Saginaw's aversion to using good works as marketing tools.
Capítulo 5
Enlightened Hospitality: Building Customer Intimacy
Danny Meyer's restaurants don't aim for merely impeccable service but rather "enlightened hospitality"-making customers feel you're on their side. This approach transforms even accidents into opportunities for connection, as when columnist Marilyn Rubin knocked into a server at Tabla. The staff's gracious response, culminating with the server himself refusing to let her take blame, demonstrated Meyer's philosophy in action.
After a consultant helped him identify why Union Square Cafe was ranked the third most popular restaurant despite middling scores for food and service, Meyer articulated five core values in descending order: caring for each other, guests, community, suppliers, and investors. This philosophy makes working at his restaurants "intensely and unexpectedly personal," creating emotional connections that customers value beyond mere satisfaction.
Small giants develop unique approaches to customer intimacy based on their particular circumstances. CitiStorage creates intimacy through personal handwritten letters from co-owner Elaine Brodsky to new customers, arranging CEO meetings with prospects, hosting annual parties with prime fireworks views, and naming warehouse aisles after client companies. After implementing customer service training for all employees-not just service representatives-CitiStorage saw dramatic improvements in interdepartmental relationships and customer satisfaction, with more compliments in six months than the previous fourteen years.
ECCO's transformation into a customer-intimate company yielded remarkable results. By 2004, productivity had more than doubled to $156,000 in sales per employee (up from $70,000 in 1994), while technological advances dramatically reduced costs and response times. Machine tool lead times dropped from twenty-six to eight weeks, with costs plummeting from $70,000 to about $12,000. This passion for customer intimacy attracted talent; Todd Mansfield, who previously sold the Solid Works design software, joined ECCO after seeing how exceptionally they utilized the technology compared to dozens of other companies he'd worked with.
Small giants don't limit intimacy to customer relationships-they build meaningful connections with suppliers too. Zingerman's showcases its suppliers through newsletters, tastings, and the deli itself, telling stories about Ben and Blair Ripple's Balinese sea salt farm, the Majors' Vermont Shepherd cheese made from their own sheep's milk, and wild rice harvested by Minnesota's Ojibwa tribe. This education connects customers to food sources in emotionally meaningful ways.
These companies build a sense of community resting on three pillars: integrity (being what they claim to be), professionalism (keeping commitments), and direct human connection (creating emotional bonds through mutual caring). What truly distinguishes these relationships is their nature-small giants avoid purely business transactions, instead connecting with customers and suppliers as individuals sharing a common mission.
Capítulo 6
The Customer Comes Second: Creating Cultures of Intimacy
Despite the extraordinary service small giants offer, what truly sets them apart is their belief that the customer comes second. Their first priority is their employees-the people who convey the company's spirit to the outside world.
Michelle Howard exemplifies the devoted employee of a small giant. A nine-year veteran at ECCO in Boise, she owns part of the company through its ESOP program. As a single mother of three who joined ECCO during desperate times, she credits the company with transforming her life through support, advancement opportunities, and genuine care. When she faced personal crises, ECCO provided advances, brought food during family illness, and helped her secure housing.
The relationship between employees and company forms the entire basis for small giants' mojo. Unless employees love their workplace, feel valued, supported and empowered, and see opportunities for growth, mojo remains unattainable. This goes beyond mere morale or compensation-it's about intimacy, where employees never doubt the company and its leaders care about them personally and will stand by them through difficulties.
Size significantly impacts a company's ability to maintain emotional connections with employees. Fritz Maytag of Anchor Brewing deliberately kept his workforce around fifty people, believing smaller teams foster quality, pride, and camaraderie. His management philosophy-learned from his father-emphasized responsibility, trust, and forgiveness. The small team allowed for shared experiences like harvest visits, European brewery tours, and university-level brewing courses.
A company's ability to achieve workplace intimacy depends significantly on the relationship between leadership and employees. When leaders have direct contact with their workforce-knowing who they are and what they do-employees develop intense emotional attachments to the business. O.C. Tanner, with 1,900 employees, demonstrates that maintaining strong bonds is possible even at scale. Founder Obert Tanner knew all 1,700 employees by name, wandering the halls to talk with them about their families and aspirations.
Building the kind of commitment seen in small giants requires more than just personal connections. It starts with getting "the right people on the bus"-hiring individuals motivated by more than just money. Companies must also maintain strong fundamentals-good internal communications, coordination between departments, and follow-through on decisions. Zingerman's has formalized its management mechanisms more than most small giants, largely through its training subsidiary ZingTrain. By teaching others what made Zingerman's successful, the company was forced to develop language explaining its practices and become more deliberate in its management approach.
Small giants create cultures of intimacy through different, sometimes contradictory approaches. Bill Butler of W.L. Butler Construction embraces nepotism, proudly employing multiple family members and relatives, while Norm Brodsky at CitiStorage explicitly forbids hiring relatives or friends of employees after several bad experiences. Despite their differences, these companies share three imperatives: articulating a higher purpose that makes work meaningful, demonstrating care for employees in unexpected ways, and fostering genuine collegiality.
Capítulo 7
Creating Alternative Business Models
While most entrepreneurs focus primarily on business viability, the leaders of small giants distinguish themselves by deeply considering the kind of culture and organization they want to create. Each company represents its own version of "Galt's Gulch" from Atlas Shrugged-a haven where like-minded people share a common vision of their ideal workplace.
Reell Precision Manufacturing exemplifies this approach, having developed a unique organizational structure that defies conventional management practices. Instead of a pyramid, they use a matrix with co-workers at the center, surrounded by functional departments and strategic business units. The company employs distinctive terminology-advisers instead of supervisors, cabinet instead of executive team-and includes unusual structures like "the forum," a group of randomly selected employees who monitor how well the company lives up to its stated values.
Reell was founded in 1970 by three former 3M employees who established an unusual management structure requiring unanimous decisions for all actions. This "triad" approach, though time-consuming, produced consistently good decisions and maintained amicable relationships among the partners for thirty years. Their shared Christian beliefs shaped company policies, including commitments to highest quality products, placing family responsibilities above business ones, and "doing what's right" even when unprofitable.
Reell underwent a fundamental transformation when they shifted from traditional quality control to letting equipment operators handle their own quality checks, dramatically improving both efficiency and quality. This unplanned change initiated their "teach-equip-trust" (TET) approach, revolutionizing their management philosophy. As the founders approached retirement, they addressed succession by selling to employees and family members, and restructured the board using Robert K. Greenleaf's "servant leadership" principles.
While Reell's system worked well for them, not every small giant embraces servant leadership. Jay Goltz of The Goltz Group takes a more hard-nosed approach, believing business leaders must make demands and be "unmerciful when necessary." Yet despite this tougher stance, Artists' Frame Service maintains an intimate, vibrant culture that inspires remarkable employee loyalty. Production manager Dale Zeimen turned down a $10,000 raise from a competitor, telling Goltz, "I'm not going anywhere. I love it here."
Selima Inc. and Hammerhead Productions represent yet another approach. Both were created specifically to give their founders freedom to pursue individual passions by minimizing permanent staff. Selima Stavola built her fashion design business with just one employee for nearly six decades, serving only clients she genuinely liked. Hammerhead Productions, founded by four movie industry veterans, was created to provide its founders the creative freedom they couldn't find at larger visual effects companies. They deliberately kept their permanent staff small-just fourteen people-hiring additional freelancers only when needed for specific projects.
Capítulo 8
The Art of Business: Balancing Passion and Practicality
Bernard Goldhirsh viewed entrepreneurs as artists using business as their medium of expression. He urged Inc.'s editorial staff to remember entrepreneurs have "the soul of an artist" when writing for them.
Looking back at these small giants, their mojo stems from leaders who are deeply connected to life's good things-challenges, camaraderie, purpose, accomplishment. They organize their businesses to access these elements, creating companies people naturally want to join. This "business charisma" begins with passion-every founder shares an intense love for what their company does and desires to share it with others.
The small giants balance business and art differently. Selima Stavola focuses on clothing design as her passion: "My work is a joy to me. It's not work. I don't want it to become work." Though profitable since 1947, she keeps her business simple to prioritize creativity.
Norm Brodsky represents the opposite approach-finding artistry in building a great business around mundane services. He revolutionized records storage by seeing it as real estate: "We weren't just storing records; we were renting space to boxes." By installing higher racks in warehouses with high ceilings, he could fit three times more boxes per square foot than competitors.
Most small giants fall between Stavola (focused on what the business does) and Brodsky (focused on the business itself). The challenge is finding balance-focus too much on the activity, you jeopardize the means; focus too much on the means, you lose what you love.
At Righteous Babe, the balance is clearly defined between Ani DiFranco ("the music") and Scot Fisher ("the business"). Fisher and DiFranco are equally committed to doing what's right for the business while promoting the arts. Their purchase of the Asbury Delaware Methodist Church demonstrates this balance-a practical investment that diversified their business beyond the imploding record industry while creating a venue for art in Buffalo.
Fisher admits, "Business is my art, my canvas, my instrument," while DiFranco acknowledges, "I am actually a very practical and, in my way, a good businessperson, and he is, in his way, an artist." Their complementary strengths create harmony between business and creativity.
Capítulo 9
The Legacy Question: Preserving Mojo Through Transitions
A small giant faces no greater challenge than preserving its mojo during ownership and leadership transitions. University National Bank & Trust Co. (UNBT) of Palo Alto exemplifies both the success and ultimate failure of the small giant approach. Founded by Carl Schmitt with an "Un-cola banking" philosophy, UNBT gained celebrity status for its unconventional culture and extraordinary service. In twelve years, share value rose 500%, with return on equity consistently at 14% or higher.
Despite this success, Schmitt faced challenges from federal regulators and suffered a heart attack in 1993. Unable to find a suitable successor who would preserve the bank's unique approach, he ultimately sold to Comerica in 1995 for $75 million-a decision that dismayed many loyal customers and employees who had embraced the bank's distinctive culture.
Reell Precision Manufacturing approached succession more systematically. The co-CEO partnership between Bob Wahlstedt and Lee Johnson worked exceptionally well for years. When Johnson retired, the company recruited Kyle Neidermire as his replacement, creating another successful co-CEO arrangement with Wahlstedt. When Wahlstedt retired, Neidermire partnered with Steve Wikstrom, continuing the tradition. By 2004, when Neidermire decided to find his replacement, the company recruited Eric Donaldson, a Kodak veteran they'd been courting for four years. In April 2005, the three founders resigned from the board, completing the leadership transition.
An unexpected ownership issue emerged: when should the company buy back stock from founders' heirs? Reell's strength had always been perfect alignment between shareholders, board, management, and employees-evident during tough times when they'd cut salaries rather than lay people off, with shareholders accepting reduced dividends. But this alignment could break down as stock passed to later generations who lacked emotional ties to the company's unique culture.
Kent Murdock faced a different challenge as O.C. Tanner's third CEO in 1997, four years after founder Obert Tanner's death. Despite appearing successful with $181.8 million in sales, 2,000+ employees, solid margins, and no debt, the company needed transformation to survive. During two difficult years with no profits, he joked to the board about paying no taxes. For five years, sales remained flat while the company underwent massive transformation.
In this crucible, Murdock reshaped O.C. Tanner's culture while preserving core values of integrity, continuous improvement, and customer intimacy. He added humility and learning, encouraged debate, eliminated information silos, and replaced the paternalistic mindset with employee ownership. After five tough years, the company emerged stronger, growing 5% in 2003, 7% in 2004, and 10% in 2005 with record profits.
Some founders in our sample have companies whose mojo is inseparable from their personal presence. Selima Inc. and Righteous Babe Records are built around the unique artistic talents of Selima Stavola and Ani DiFranco respectively. Unlike companies like United Artists or A&M Records that continued after their artist-founders departed, these businesses would likely not survive their founders.
The small giants demonstrate that there's no single formula for preserving a company's special qualities through transitions. What matters most is intentionality-recognizing what makes the company special and deliberately working to maintain those elements while adapting to changing circumstances. The companies that successfully navigate these transitions share a commitment to preserving their core values while remaining flexible about methods and strategies.
