In this third and final episode on fabled merchandiser, Ron Johnson, we discuss the startup Enjoy.com, which turned $500M of invested capital and goodwill into nothing. This was Johnson's second attempt as a CEO. What did he learn from that failure? How did it shape his new company?
Your co-hosts, Dan Dickson and Dan Greening, bring perspectives of traditional and agile management, finance and technology, retail and service. We think our analysis demonstrates how you can make better choices in your own projects, big and small, for much greater levels of success.
We examine this company from the lens of Mindful Agility:
And finally, we armchair quarterback what we might have done as execs at Enjoy.com.
[00:00:00] Cold Open
[00:00:00] Dan Dickson: I've got this great idea. I know it's going to work. Let's just light the fuse and get out of the way. There were negative reviews. They started coming in from both customers and employees. And there was some troubling data. There were numerous reports of missed schedules and fumbled deliveries.
[00:00:15] Daniel Greening: Welcome to the Mindful Agility podcast. In this third and final episode on fabled merchandiser, Ron Johnson. Dan Dickson and I discuss enjoy.com, the startup Johnson founded immediately after leaving the CEO role at JC Penney. Unlike the two previous Ron Johnson episodes in this one, we're detailing how mindfulness and agility are equally important in failure analysis.
[00:00:41] If we are mindful, we pay attention to everything and everyone around us, we can avoid risk, but it doesn't help us get things done. If we are agile, we can get more things done faster, but it might not be aligned with the world around us. When these two concepts are used together, whether in failure analysis, or in corporate operations, we get alignment and results. You should try it.
[00:01:06] Dan Dickson, remind us what we did.
[00:01:09] Dan Dickson: Well remember in the first episode we talked about how Ron Johnson's previous successes at, Target and Apple may have actually contributed to his failure at JC Penney. In the second episode, we went ahead to discuss how agile management could have prevented this failure, or at least certainly have managed it better. In this episode, we'll show that Ron Johnson evidently didn't learn from his JC Penney failure and suffered another failure at enjoy.com, his follow on company. And then you and I can play armchair CEO, which we are so good at doing and discuss how mindfulness and agile practices could have made Enjoy a success, or at least have avoided blowing through a half a billion dollars with not very much to show for it.
[00:01:50] Daniel Greening: Ron Johnson's new startup. enjoy.com had an appealing, achievable dream to help people buy and use technology products in their homes. It had a merchandising genius as its CEO. It attracted lots of funding. What could go wrong?
[00:02:08] I'm your host, Dan Greening. My cohost today is Dan Dickson. Dan Dickson is a Harvard business school graduate, corporate executive, and management consultant. I'm a PhD computer scientist, serial entrepreneur, and agile coach.
[00:02:24] Dan and I are both interested in what makes companies succeed and fail. We've both had executive successes and failures. We think anybody who describes their past as a succession of wins, isn't likely telling you the whole truth.
[00:02:39] People don't succeed with nonstop wins, unless they are very, very lucky. Instead we learn best when the unexpected happens. We fail when we think we should have won, or we succeed when we were sure we would fail. If we have the strength to look at our own surprises, we could learn important truths that produce later success. Sometimes huge success.
[00:03:05] Our main goal is to help others, including you, reach greater fulfillment faster. The journey is half the fun, for us at least. And for you hopefully too.
[00:03:17] Enjoy Founding
[00:03:17] Daniel Greening: Let's set the stage here. This episode is on enjoy.com dot com founded by Ron Johnson in 2014. A couple of months ago while Dan Dickson and I were researching Ron Johnson, the company declared bankruptcy. Over 500 million of investor dollars were lost. Honestly, we didn't expect that.
[00:03:41] Ron Johnson had everything going for him. He graduated from Harvard Business School. He joined Target department stores in a staff position. And during his 15 year tenure, he led the transformation of Target from its humble roots to its present place, as Tarjay the upper middle class department store, many Americans know well.
[00:04:04] He was recruited by Steve Jobs to create Apple Stores worldwide. And he's largely credited with its amazing success. Ron Johnson was then recruited for CEO of JC Penney, another US department store chain that served middle class moms. If you want to know the details, check out our previous two episodes, but it didn't end well.
[00:04:28] On the heels of his JC Penney failure, Ron Johnson founded Enjoy. Enjoy.com was a new concept in high touch retailing. When you ordered products online for home delivery. Retailers could fulfill those deliveries through Enjoy. A representative from enjoy would come to your home, armed with your product and knowledge of how to set it up. They would ask you if they could come into your home and help you.
[00:04:55] If you said yes, they would do the setup in your living room and then they would show you accessories and other products you might want to add to your order. You could buy them on the spot.
[00:05:06] Enjoy made money from the delivery fee it charged the retailer, and the upsell margin from those ad-ons you bought.
[00:05:14] Enjoy History to Present
[00:05:14] Dan Dickson: OK, so let's look at Ron Johnson's experience at enjoy.com in this context. While the JC penny meltdown might have humbled, some people, it doesn't seem to have that effect on Johnson. After all, one of his assertions after leaving penny was that the board should have continued to follow his strategy to reinvent the company.
[00:05:30] Given enough time. He seemed to think that would've succeeded. but those are not the words of someone who has learned from a failure. JC penny and I, yeah, I got, I suppose I can understand where he was coming from. I after all, prior to penny Johnson had two spectacular successes at target and apple, but this is what sets us up for enjoy.com
[00:05:48] Given Johnson's mindset, I can see how he would've viewed JC Penney as an aberration. someone else's fault the board didn't stick with his vision. It didn't give it a chance to work. This, view seems to have been shared by at least a few other people because in 2014, Johnson was able to raise $30 million from some well known venture capitalist to launch this new company.
[00:06:07] Enjoy.com was a big idea. I mean, Johnson didn't wanna just reinvent a company. He wanted to the entire retail model by effectively bringing the store into the consumer's home. But the approach still followed the same pattern as his failed JC Penney turnaround.
[00:06:23] "I've got this great idea. I know it's going to work. Let's just light the fuse and get out of the way. "There was no thought of experimentation or testing and not even a hint of the possibility of failure. But anyways, the company took shape. It appears that there was little of any attention given to information that was coming in that might challenge, Johnson's premise.
[00:06:42] There were negative reviews. They started coming in from both customers and employees. And there was some troubling data.
[00:06:47] from the customers side, it seems that enjoy.com couldn't even get its basic delivery system straightened out. mean, there were numerous reports of missed schedules and fumbled deliveries.
[00:06:57] and I mean, this is the single most important gating feature of the entire business model If the enjoy.com rep can't even show up when promised you can forget about any kind of positive, in home retail experience, but Johnson forged ahead and continued the expansion opening sites as far afield as the UK.
[00:07:13] failure's not an option, right? It wasn't just Johnson. It was also. the investors during the same period, he raised another 370 million in venture funding.
[00:07:22] Daniel Greening: Wow.
[00:07:23] Dan Dickson: And then in 2019, yet another 115 million when he took the company, public through a SPAC.
[00:07:29] And you know, it's interesting in the middle of this, I got to believe that there were at least some members of Johnson's staff who were aware of the problems they were encountering, and perhaps were troubled by them. But my bet is that they were facing the same group-think that haunted JC Penney. Even if somebody had the temerity to bring these concerns to Johnson, the JC Penney pattern suggests it would've been ignored and the individual very well might have been dismissed. I mean, this brings us to the end of the story. How did things end up in, June, 2022 enjoy.com after burning through more than half a billion in cash filed for chapter 11 and that marks its legacy, a ton of wasted money, a ton of wasted energy, and, not much to show for it.
[00:08:07] Reflection (SC Take 1)
[00:08:07] Daniel Greening: Let's try to put ourselves in Ron Johnson shoes. It reassures us to find approaches that have worked in previous situations. But that confidence can lead us to overlook key differences and those hidden differences can trip us up. We can fail when it seemed like everything was lined up.
[00:08:26] It was so obvious that we would succeed.
[00:08:30] Dan Dickson, has this happened to you?
[00:08:32] Dan Dickson: it makes me think about my very first startup. I had, come out of, Harvard Business School with my MBA and went to GE and I was all, full of myself. but then, it got involved in a startup, which is, I'm not sure if you're familiar with the red box, DVD rental system.
[00:08:45] but anyway, this was a precursor to that. It was back in the days of VCRs and, Intel 3 86 chips and so forth. So the technology was somewhat challenging. I, yeah, tell me about it, but the concept was the same. In other words, you basically have effectively, a vending machine.
[00:09:01] you've got a number of 'em you've got real time inventory management. And the video cassette rental, model, if you will, was a definitely an 80 20,
[00:09:09] Daniel Greening: The Pareto rule, that 80% of the value is in 20% of the inventory.
[00:09:15] Dan Dickson: There was a certain select group of very popular titles. And so the thought was, okay, we can get this very convenient means of renting a video cassette to people and have a much better chance of having the title they wanted, than you would expect normally.
[00:09:30] So this all made sense. The problem is that, and I shared, this issue with the, president who came outta Proctor and Gamble, who's a brilliant manager, but neither one of us had startup experience. Rather than thinking about a situation where you've got limited resources and how can we intelligently approach this?
[00:09:47] We said, okay, fine. We're gonna build a machine, which was really stupid because the test was not whether we could build a machine. The test is whether the consumer would use the machine. But you're looking at your background is basically you do a project, you have, resources assigned to it and off you go.
[00:10:04] we did, raise a fair amount of funding. We actually took like a mini IPO, so we had some money to fool with, but it certainly wasn't like the kind of money you would see with a General Electric or Proctor and Gamble.
[00:10:15] Using the, approaches that had previously worked in General Electric or Proctor and Gamble, we just forged ahead. it didn't work. If we had experimented and I say this tongue in cheek, but not really build a big box and put somebody in there with a bunch of video cassette tape
[00:10:30] Daniel Greening: Like a five year old.
[00:10:32] Dan Dickson: and simulated the experience. We could have figured out what was going on at a fraction of the cost. So that was a major, situation where I was relying on my past experience. Intellectually, both this guy, Dick Smith was his name and I, realized, okay, we're in a startup now, but it took us a while to understand that the levers that you could push at a General Electric or a Proctor and Gamble just didn't work in a startup.
[00:10:56] Daniel Greening: You learned from that, right? Like you tried it, it didn't really work, and you pivoted, if i remember correctly.
[00:11:03] Dan Dickson: What happened to us, actually it went through stages because at first, the original manufacturer we contracted with was a defense contractor. and this stupid machine had titanium parts in it. it was just ridiculous. So we figured out, okay, this is stupid. in parallel, a company named Debold, which you may have heard that builds safes and ATMs had actually developed a video cassette rental machine. So we talked to them and said, Hey, you're trying to figure out what to do with this. We're looking at marketing this.
[00:11:33] So we teamed up with them, used their product to launch the concept in the Baltimore Washington area. And that's when we realized that it just didn't work.
[00:11:41] Daniel Greening: You mean it didn't work in the market but of course the product worked.
[00:11:45] Dan Dickson: And there's another analogy to Ron Johnson here, because if you look at the JC Penney pricing model that he introduced, I think on a strictly analytical basis, you could argue that the consumer was actually getting a better deal, but the consumer didn't believe that.
[00:11:59] In our situation, the consumer would have a better chance of finding the video title that they were looking for.
[00:12:06] we came up with, different systems we had a video monitor on the machine, so you could scroll through titles. You. had displays of, cassette covers and things like that, but it wasn't the same. you're contrasting this with standing in front of a machine, as opposed to walking into a blockbuster and being surrounded by thousands of titles, so the perception didn't match the analytical reality.
[00:12:26] So there are a couple of parallels here. This is interesting.
[00:12:30] Daniel Greening: So one of the things that we see with Ron Johnson is he was averse to failure. And that can happen to us too, when we are in a situation where we face a challenge and then the challenge turns out to be more mighty than we are. then we start blaming other people rather than looking at ourselves. So Ron Johnson with JC Penney. You know, after he left JC Penney, he complained that the company should have stuck to his plan and they would've succeeded. And I just think definitely not humble it's crazy, right?
[00:13:13] Did he not analyze his decisions and go like, well, I could have done this better. but that doesn't seem to have been a discussion topic
[00:13:22] Dan Dickson: He may have been partially right. the new JC Penney model never was completely fleshed out. it was moving forward. had he taken an individual market and gone through the entire execution of the plan, pricing, product, appearance, and tried it out there. He may have found elements that might have worked,
[00:13:43] Daniel Greening: But he never said that. He didn't say my idea was right all along, but I should have approached it in a different way. He just said my idea was right all along.
[00:13:55] Dan Dickson: You're absolutely correct.
[00:13:56] Daniel Greening: Folks that say failure is not an option, really set themselves up. If it does fail, they have to point the finger at somebody else. Otherwise their credibility is shot. So Ron Johnson blamed his JC Penney failure on his board, saying they should have spent even more money.
[00:14:15] Dan Dickson: That was his position
[00:14:17] Daniel Greening: And as a result, there were people that, are starting to get a bad taste in their mouth.
[00:14:23] Dan Dickson: Well, you know, I bring it back to my experience there. as said, okay, this isn't gonna work. We took the cash we had remaining. We bought a video chain in Philadelphia. It was doing fine.
[00:14:32] And I really wanted to basically just saturate Philadelphia and own the market and then get bought by Blockbuster. But the CFO and I think this may have still been a legacy of, unlimited resources, AKA, Proctor and Gamble, General Electric, is that no, we're gonna roll out all over the place.
[00:14:51] And they were signing leases just everywhere. And I kept on objecting and things just did not go the right way. became time for me to separate from the company. in, in retrospect you can say, oh gee, I was so smart because I saw this thing, but who knows it's whatever,
[00:15:06] Daniel Greening: So what happened to the company
[00:15:08] Dan Dickson: it overextended.
[00:15:09] it was counting on, this one individual, this, money guy to, to raise the money. I've been in this situation before. I'm sure you have, is that okay? You go do this. we'll fund the next step. Until you go do this. And then suddenly they changed their mind.
[00:15:23] and that's exactly what happened to this company. And they had all of these signed, real estate contracts all over the place. they got in all kinds of legal trouble because, there were reprisals against the signed leases, I was long gone by then. but I can't say that my idea of saturating a market and getting bought by blockbuster, would've worked either. I don't know, but it was the way I looked at it.
[00:15:41] Daniel Greening: Yeah, these are just experiences that we're having and we're learning from everyone. We think we hope. I thought about Ron Johnson's JC Penney experience and thinking about team players and thinking well, blaming folks instead of yourself makes you not a team player.
[00:16:00] And it's not very often that we talk about CEOs not being team player. It's usually them who are complaining about their employees not being team players. But I think the CEO is a model for, everybody else. So I think there was some potential burning of bridges
[00:16:21] Dan Dickson: Yeah. I'm gonna use my same experience as another example. We'd have these, meetings with the four primary executives and effectively just have, I would say knock down, drag out fights, but certainly have animated discussions, shall we say?
[00:16:34] and then at the end of the conversation. It was like, okay, I've heard everybody, here's what we're gonna do. And, I had a great deal of respect for this guy as everybody else did. one of those conversations was do we just focus on Philadelphia or do we go all over the place?
[00:16:48] And I was effectively outvoted three to one. So the guy wasn't ignoring my input It was considered and I felt it was considered, it was a conscious decision that I didn't agree with.
[00:17:00] I don't know if you're familiar with, the chain Ikea.
[00:17:03] Daniel Greening: Yeah, of course,
[00:17:04] Dan Dickson: okay. There was a chain that started in Southern California called store S T O R. And the, what's the double dot over in O it's an umlet. Is that what it's called?
[00:17:12] Daniel Greening: Yeah.
[00:17:13] Dan Dickson: but it was a Ikea twin other than the fact that instead of blue, it was red but everything else was almost identical.
[00:17:20] Daniel Greening: four
[00:17:21] Dan Dickson: Yeah, exactly. Four letters too.
[00:17:23] Daniel Greening: Swedish.
[00:17:24] Dan Dickson: And and they, and their strategy was obvious and they basically just focused on LA and, I, I can't remember exactly what their market area goes around there and just dug in and sure enough, Ikea came along and bought 'em and, yeah. Yeah, exactly. And that's what I wanted to, again, is basically take this video store concept in Philadelphia, do Blockbuster clones, even down to the operating systems and get bought, but it just didn't go that way.
[00:17:47] Daniel Greening: Okay. Interesting. So back to Ron Johnson, because we are talking about enjoy.com one of the things that he did was he was the failure is not an option, dude. people who hung out with him who were contradicting his world view were marginalized at best.
[00:18:07] And in some cases we think at least one or two people were fired. if people are sticking around, they are seeing that happening. So one of the things that they will likely do is that they won't raise information that's contradictory to the worldview of the CEO, Ron Johnson.
[00:18:28] but It's not just. Ron Johnson's getting biased information from his employees and therefore plowing ahead, oblivious to problems that are gonna certainly, reach him. But then in addition, the people around him are talking to each other, but they've learned not to talk about contradictory information.
[00:18:51] So they're even creating their own cognitive bias in a sense. So they're excluding information too.
[00:18:58] Dan Dickson: Exactly right.
[00:18:59] Let's say that you're in a situation where, you don't think things are going in the right direction, but everybody else thinks differently you've got a couple of options here.
[00:19:07] You've got one is that, oh, okay. I am really confident that my position is right. I've gone through this and therefore I need to do something about it, but it's not gonna work here because nobody's gonna listen to me. The other side of that is say, gee, I must be wrong. and effectively stop thinking in that experimental, innovative type of mode, and become part of the group think, and I don't think it's a conscious process necessarily, but it's something people do. I caught myself doing it. I remember once at GE I was slam dunk in the middle of that, where I was sitting there saying this does not make sense, but was just basically overwhelmed by the rest of the people from the general manager of this division I was in on down. And so after a while I said, gee, they must know something I don't know.
[00:19:51] Daniel Greening: Yeah, I had similar things happen too. I'm the kind of person that sticks with an organization through thick and thin. And I became completely miserable for over a year. that was a lesson that, when challenges like that appear. At least, if it becomes obvious to me that the organization is not going in the right direction and I don't have the control to help make it go in a better direction.
[00:20:20] I probably need to leave now rather
[00:20:22] than later.
[00:20:23] Dan Dickson: I think a lot of it has to do with, perhaps self-confidence and experience.
[00:20:27] think about the situation at general electric, I was talking about, newly out of business school. After a, while you become a little bit humbled in terms of, Hey, this is the real world and stuff like that.
[00:20:36] I put up with things and I accepted things at that stage of my career that I certainly would not have accepted now.
[00:20:42] Daniel Greening: Okay. So Ron Johnson walks into JC Penney with this attachment to success and his failure is not an option attitude. And then he walks out and he still has that attitude. So there's only certain investors who will get involved with him. And there's only certain constraints that people will have on him to do this work.
[00:21:06] So do we see any of that? when we see the enjoy.com story
[00:21:12] Dan Dickson: think about it. really it was another situation about aha. I've got this great idea and the great idea. I'm gonna bring the store into the home. I'm sure this is gonna work. And then you've got, investors we talked earlier about the glass floor, once somebody's gotten to a certain level, they must know what they're doing. And especially in Ron Johnson's situation, he's got Apple and Target to point to.. So he's got a certain amount of credibility. And so you could argue that, okay, JC Penney was an aberration and this guy still got it. He can still do it. And therefore I'm gonna give him a bunch of money, which is what happened.
[00:21:46] Daniel Greening: but the people that are now giving him a bunch of money are dumber money in a way. there's a term of art, you know, in venture capital called dumb money. Right.
[00:21:55] Dan Dickson: yeah,
[00:21:56] Daniel Greening: and dumb money is, friends who look at your past experience and say, we're gonna put money into you. We don't know what we're doing. Actually dumb money is also silent money.
[00:22:11] Dan Dickson: that might be the better way to to it.
[00:22:13] Daniel Greening: So it's silent money. You're limited partner in a venture capital firm. And you write, 'em a check for a million bucks and you go Hey, I hope you earn us some money. What I think of here with people investing in Ron Johnson after the big JC Penney failure is like everybody in investing, they're motivated by greed, but they may or may not have, some intelligence or nuance in their greed. right. So they just throw money at what looks to be a great investment, but it's not, what do I wanna say? It's not deeply analytical.
[00:22:50] and yet this was some smart guys that put money here. This was Andreessen Horowitz.
[00:22:55] Dan Dickson: mark. Andreson exactly. I bet that he was betting on Ron Johnson and not on the concept.
[00:23:01] Daniel Greening: and actually I mentioned this to some friends and they go oh, Andreesen Horowitz. Oh yeah, this is so typical. They throw in lots of money and. Some things succeed, but a lot of things explode
[00:23:13] Dan Dickson: well, that's the VC model. I mean, face
[00:23:15] Daniel Greening: Yeah,
[00:23:16] Yeah, I suppose that's true. anyway, so he walks in with this capital. I'm curious what the capital terms were, but I guess that stuff isn't public. because if you were investing in Ron Johnson and there was this prior problem with JC Penney, You might be fearful as a venture capitalist that you might not get your money back. And that's when venture capitalists start imposing, ratchet, terms and , they might require the CEO to put some money of their own in which I think this actually did happen with enjoy.com right.
[00:23:50] Dan Dickson: Yeah. Johnson put in, I can't remember the exact amount.
[00:23:52] Daniel Greening: We know it was some portion of the initial $30 million. So Ron Johnson not only was required to put some capital in by Andreeson Horowitz, but my guess is he also had a personal need to have a success.
[00:24:06] He was a CEO at JC Penney and that didn't work. That was his dream though. He left Apple because he didn't get the CEO job. So he continued this attachment with his dream and created enjoy.com. And unfortunately the results were not so great.
[00:24:25] Analysis with Mindfulness, Agility
[00:24:25] Daniel Greening: (high-return/low-risk experimentation iteration sequence of experiments that could have been done) (looking at previous consumer sales channel disruption efforts:WebVan) (deep awareness of ecosystem Interdependencies risk analysis and mitigation : customers [providers and consumers], employees [drivers, tech savvy, sales savvy], investors, countries, competitors/adjacents) To wrap this up. We wanna tie it back to mindfulness and agility. From the mindfulness side, we wanna look at. How aware enjoy.com was of its ecosystem. The interdependencies in it and the potential risks.
[00:24:39] Dan Dickson: Yeah. And I think the better way to phrase it would be how unaware they were
[00:24:43] Dan Dickson: you saw those reviews coming in from customers, which were, missed deliveries and things like that, which destroyed the, whole promise of the business model before it could even get going. But also, reviews were coming in from, employees that, they felt they weren't getting paid enough. They were being asked to do too much. They were being put in uncomfortable situations, things like that.
[00:25:02] normally you look at reviews like that and you say, okay, know, people are gonna complain. The customers gonna complain and so forth, but this was 94 and 96% negative. And, that's on trust pilot. And that speaks volumes.
[00:25:13] Daniel Greening: That's true. And I remember you and I saw a video of an employee in. enjoy.com talking about how excited he was and how the net promoter score was something like. 70 or 80%, which is super high, right? as if people are loving them everywhere.
[00:25:34] But then when we actually looked at the raw data that was available online, it looked abysmal right. Really bad reviews. So they were not aware or they at least weren't acknowledging to other people that they were aware
[00:25:52] they were keeping it quiet.
[00:25:53] Dan Dickson: it could have, been they were selectively aware. I don't doubt that they actually saw that score somewhere, but it could have been an isolated example. It could have been early on. There's all kinds of factors that could have fed into it. But when we did our research, we certainly couldn't replicate it.
[00:26:08] Daniel Greening: Yeah. Yeah, exactly. Exactly. deep awareness is characteristic of mindfulness and equanimity, this idea that both negative reviews and positive reviews are very important to understand, and you can use that information to improve, but it seemed like they were just, looking on the sunny side of life all the time over there.
[00:26:29] And so they were probably not taking care of business as much as they could have.
[00:26:35] Dan Dickson: Yeah, plunging ahead with the basic idea again, it's like we, we said the same, mindset as JC Penney.
[00:26:41] Daniel Greening: the other thing that we have looked at was companies that previously tried to disrupt consumer sales channels, and one of those was web van. So that was a very expensive, startup that you and I perhaps experienced in, I wanna say late nineties or early two thousands,
[00:27:02] Dan Dickson: I think it was late nineties. I know I was in San Francisco at the time. So that would be about right?
[00:27:07] Daniel Greening: Did you ever get grocery deliveries from web van?
[00:27:10] Dan Dickson: No, I I never did.
[00:27:11] Daniel Greening: So we did a couple of them, just to try it out, see how it was. they invested hugely in distribution centers, in trucks and all sorts of stuff. they wanted to be what Amazon is today with all the delivery that they provide directly.
[00:27:29] But those guys did it back in the nineties. When you know, nobody was trying to do everything distribution to the consumer directly with their own vans, distribution centers with their own automation, groceries. they reinvented everything and it looks like enjoy.com was pretty close to that too.
[00:27:49] Every one of their representatives had to be a commercial driver. Also had to be a salesperson, also had to be technically savvy so that they could go into someone's home and install products for them, but also upsell in a friendly
[00:28:07] Dan Dickson: Mm-hmm
[00:28:07] Daniel Greening: that's not the most common combination of skills,
[00:28:12] Dan Dickson: Yeah, and that's a very good observation. I hadn't really thought about that, but you're absolutely right. finding somebody with that combination, the commercial, license plus the, pleasant appearance, shall we say, and ability to upsell and, friendly, demeanor. all of these things, melded together must have made it incredibly hard to find
[00:28:28] people that could really fill this role. they were certainly hiring people. So the question is, were they able to find this combination of skill sets or were they just taking people and hoping for the best
[00:28:38] Daniel Greening: It seems like the ratings are showing that it was the latter, right?
[00:28:43] Dan Dickson: you would think? I, but it's again, it's remember a lot of the negative ratings just had to do with the fundamental ability to get a product to somebody's house, when they said they would get it there.
[00:28:53] Daniel Greening: So not only did they have to be able to drive, they had to do upselling. They had to have a friendly demeanor. They had to be able to do tech savvy stuff, but they had to show up on time.
[00:29:04] Dan Dickson: My bet is that the, not showing up on time was not the, fault of the individual drivers? my bet is it was a system issue.
[00:29:11] Daniel Greening: Okay If enjoy.com dot com was Mindful, it would have a broad, deep awareness of its ecosystem. And Ron Johnson particularly would be aware of all this. Researchers in organizational mindfulness, look for a preoccupation with failures, including little failures, because those little failures can grow into big problems. They should be crystal clear about the dependencies they have to deal with. They should be actively mitigating risk
[00:29:42] Dan Dickson: they had an idea. They moved forward. They apparently did not do, check-ins on the way to see if, okay, is this theory really holding up or not?
[00:29:50] Daniel Greening: And that leads us to the agile side of enjoy.com. We wanted to look at experimentation. There's customer experimentation. Find out if the customer really wants this, if they're gonna respond positively. Operations experimentation. Can they actually do it? did they test their assumptions inexpensively?
[00:30:11] I think this is one thing that we've discovered with Ron Johnson is he tests his assumptions, after he's built all this stuff. So it was super expensive to perform this test, right?
[00:30:24] Dan Dickson: I guess you could call that a test I JC Penney was a test too, but it was just a, you basically spent all of this money and, lost all of this money and oh, the test didn't come out the way I thought it would.
[00:30:34] Daniel Greening: I guess we have to prefix that. So Agility is a sequence of inexpensive short term tests. So customer tests, what did we see from enjoy.com?
[00:30:45] Dan Dickson: I saw no evidence of that happening. there was some anecdotal stuff on the website, and there were these, delighted customers, but again, that was on the website.
[00:30:52] did they really test it on any kind of cross section of consumer? maybe they did, but I certainly saw no evidence.
[00:30:58] Daniel Greening: And then, when we looked at operations, we didn't see it, but there was probably some of that going on, but by the time they started testing operations, they were broadly distributing.
[00:31:11] Dan Dickson: If enjoy.com had taken a market and just built it out and stopped there until they got everything right. As opposed to expanding. I'm trying to think how you could experiment with this short of doing that short of building out a market.
[00:31:25] especially when you're talking about a systems test, you can do it somewhat incrementally. maybe you could do submarkets portions of a market, but, the overall thought is to do a full buildup and make it controllable so that if things do not go the way you plan, they did, it's not gonna take the company down
[00:31:40] Daniel Greening: You mean full build out with their backend software and their distribution mechanisms and things like that?
[00:31:47] Dan Dickson: yeah. But again, using agile
[00:31:49] to the system design and so forth.
[00:31:51] Daniel Greening: so you and I inherit this project for some reason, Ron Johnson back in 2014 says, I really need to bring the Dans in so what would we do?
[00:32:01] So how would we proceed so that it was safe, but thoughtful
[00:32:05] Dan Dickson: I think the, it's the, the company rolled out in San Francisco. I think that the mode would be okay, let's stick with this one market until we are sure. Number one, that we have got a product the consumer wants, and number two, that we have the systems to deliver against it.
[00:32:20] Daniel Greening: Initially, I guess we could do it in a very narrow way. You or I could drive the trucks to them. We could help them install their iPhone or Android or whatever it is. And then we could try upselling products to them. We're outlandishly priced executives, but nevertheless, it's good for a first test to find out if it really will work and then we'll get some insight directly, you and I.
[00:32:44] Dan Dickson: Yeah. And, but also think about the, elements of scalability that we're talking about here is that let's say for the sake of argument, we do this one micro zip code test. and you and I are driving trucks and, we can stumble through up selling and things like that. Then you go to the next step and it's you put your finger on it.
[00:33:00] Okay. You gotta find people that can do all this stuff.
[00:33:03] Daniel Greening: You might put job postings out that say you want someone that has a commercial driver's license that has the ability to sell that is really excited about technology and is really friendly and see what kind of responses you get from that?
[00:33:20] Dan Dickson: when I took over, the best sellers wine chain, one of the first things that we did was that rather than focus on wine knowledge, we focused on customer service experience. And with the thought that we can teach the wine knowledge to them. best sellers was a different situation in the wine world because it was a limited number of SKUs, but I'm thinking the analogy here is okay, who cares if you have a commercial driver's license, we can train you to get that, but is the more important qualification here at the, ability to upsell and so forth.
[00:33:47] Daniel Greening: So we would put out job postings. We might even hire some of these people hourly and then send them out in our little micro zip code market test and see how it goes. we're gonna call up the customer and ask them how it went. Were they happy, get some really detailed information and that will help us decide what kind of training to do for our new employees one of the most important things is decide whether further investment in this project makes sense.
[00:34:20] Dan Dickson: that's the whole thing. even if we put this whole test together and, found the right employees and the right system and all that kind of stuff, it still hasn't demonstrated that the customer wants this.
[00:34:29] Daniel Greening: That's right. We have to figure out were there any upsells and if there were upsells, if you and I were doing it and we're supposedly the experts at this, we will upsell to perhaps the limit that a customer. actually go to,
[00:34:47] okay. so now we hire. A few of these people that seem to qualify, we send them out. we surveyed the customers directly to find out what their experience was, what they liked, what they didn't like. We measure how much they can actually sell.
[00:35:06] And we are looking to see, can we achieve a margin that will actually pay for the back office, as well as the people going out and talking to customers. So if we can't get that, then that's a no go at that point because you have the very best people at this point, doing that sale, the very best people in terms of technology understanding, and you're working with a captive market that you understand really well.
[00:35:39] So before you expand your market beyond for us, probably the, Silicon valley area, which both of us know really well. we wanna see that we were able to achieve a margin that would support the company.
[00:35:53] Yeah. that would be nice to know. Then you can go to investors and you can say, you know what, we've proved this margin works if we get the right people. And we realize that it's gonna take a while to figure out the training and do all that stuff internally. So we'd like a whole pile of money, but what that's gonna go for is training. We know we need to do to achieve the margins, but we have proven that the margins are sufficient to support this company.
[00:36:24] Dan Dickson: you've proven it in one market.
[00:36:26] Okay. Now what does that prove when you wanna try to get to Chicago or Atlanta? So you almost have to, this almost may be an incremental test as you roll out because different markets may respond differently because of cultural differences and in the case of, geographical, you got a lower population density, your delivery costs are gonna be higher.
[00:36:46] Daniel Greening: that's true. So what you also could do in talking to investors is say, we spent, Half a million dollars checking out the Silicon Valley. And now we want a couple more million dollars to actually explore Chicago.
[00:37:01] Dan Dickson: Yeah.
[00:37:02] Daniel Greening: Seattle or something. and then you just keep incrementally going.
[00:37:06] Even if you got a big pile of money up front, these guys did 30 million,
[00:37:10] you can still husband your resources carefully. In the same way. You can start out and say, we're just gonna spend a half a million dollars, understand San Francisco. Then once we understand that well, and we've tuned our internal organization, our expectations we've discovered that margin is sufficient to support the company.
[00:37:32] Then we can go to these other markets, spend a little bit more money and so forth. Now, when you go back to investors, you actually have data. You can prove that this is gonna work and you can. Just give us some more money. we gotta build out the plant, but we are getting lots of data showing that this really works.
[00:37:51] So it's possible that they did that. We don't have any data, but it sure doesn't look like it.
[00:37:58] Dan Dickson: no, it, it doesn't appear that way.
[00:37:59] Daniel Greening: yeah.
[00:38:00] Dan Dickson: and what you're talking about, I it goes back to that magic VC word called trench that, okay. You hit certain milestones. you get some more. and even if you had the whole pile up front, you could do that internally. I'm going to manage my resources, such that I am not gonna bet the entire pile, on day one.
[00:38:18] Daniel Greening: It's funny, you and I have experienced tranches from venture, capitalists, and so forth, and they don't usually tie it to an experiment actually. they tie it to achievement of some internal, product milestone.
[00:38:32] Dan Dickson: Yeah, it's a sales level or something.
[00:38:35] Daniel Greening: but it doesn't prove that the market's there. You would think that they would be a little more thoughtful in that area.
[00:38:41] I've often suggested to venture capitalist friends that if they were agile, they would have better outcomes. I know one venture capital group that seems to have figured this out. Back when I formed my first start. Chaco Communications, three Stanford Business School students came over to my three bedroom apartment, where we were running the company. They used Chaco as a case study.
[00:39:08] Those students ultimately formed a venture capital company called Altos Ventures, with Ho Nam as their general manager. They stumbled a few times, but they were persistent and kept trying. Altos invested very early in an online game startup called Roblox. First, they put a half a million in and it was hard for them to survive on half a million, but those guys, then gave em a million, and then gave em a couple million and.
[00:39:40] when they hit a couple million, I think they were starting to be profitable. And so they used that profit to build up the company.
[00:39:49] I remember talking to Ho Nam and he said, that. He had lots of people wanting to invest in Roblox, but for the time being, he was just gonna let it be a cash cow and grow.
[00:40:01] they did finally raise capital.
[00:40:02] And I
[00:40:02] Dan Dickson: they're public now.
[00:40:03] Daniel Greening: Yeah, they're public now, but they had a private valuation of 29.5 billion. That's like a super unicorn right there. The interesting thing was that ho Nam did that agile approach to markets.
[00:40:19] He kept asking them to prove that a market exists, to actually deliver a product that gamers were playing, that they wanted to play. . And it was really an inspiring discussion I had with him. And I really appreciated him spending time with me to talk about it.
[00:40:35] And it was very agile. I guess this is an example of a venture capitalist that is looking for experimentation on the market side.
[00:40:46] It would be great to talk to Ho Nam and ask him, at what point did he decide that he was going to get capital and what the purpose of the capital was? Because I'll bet the Roblox company had reached some level of maturity where he thought that if they did throw a pile of cash at them, they could actually exploit it.
[00:41:07] Okay. I guess our summary here is that neither enjoy.com nor its investors were Mindful. They weren't really keeping track of what was going on.
[00:41:19] They're glowing descriptions of how much customers love their stuff, didn't match the data that we saw. So that smacks of self delusion perhaps
[00:41:29] Dan Dickson: the final indication of that is the fact that they filed chapter 11.
[00:41:33] Daniel Greening: That's right. and The funny thing about their chapter 11 is that they had expanded to the UK and the United States. and prior to the chapter 11, they said, Hey, you know what, we're gonna dial back the UK. they could have not even gone into the UK. And then they would've had all that cash available to
[00:41:54] Dan Dickson: well, yeah, I and it's, and the whole thing is that, it's, we've got our data, but the fact is that the performance of the company speaks louder than that. if this model worked so well, and the consumer really wanted it. they wouldn't have ended up in chapter 11. From the agile side, we didn't see a whole lot of experimentation. Even that one thing about the UK and the United States leads me to believe that they weren't incrementalizing anything. They were going broad right away. so what we see now is another failure from Ron Johnson,
[00:42:28] Daniel Greening: He still could be a great merchandiser. It's like we would wanna pair him up with a CEO that had some mindfulness that had some Agility. And could work with him to channel that energy for great results.
[00:42:44] Dan Dickson: he is a great merchandiser. I think that we can safely say that. Okay. who knows whether the Dans would've done a better job, but we're weighing in anyway, because
[00:42:54] exactly because we can
[00:42:56] Daniel Greening: Because we're sitting in our armchairs,
[00:42:59] Dan Dickson: exactly
[00:43:00] Daniel Greening: armchair quarterbacking from the two Dans.
[00:43:05] Daniel Greening: Thanks for listening to another exploration of mindfulness and agile in real life. We've spent three episodes discussing these concepts from the perspective of whole organizations. Can a whole company be deeply aware of the state of its ecosystem. Understanding what causes success and failure in that ecosystem? And capable of mitigating problems that are likely to arise? That's what it would take for a whole company to be mindful.
[00:43:36] And can a whole organization experiment to discover hidden truths, like an untapped market, or a flexible employee base or some new way of doing things. If it can do short term, low risk experiments, we think that makes the whole organization agile.
[00:43:56] Finally, we hope you were at least amused that the Dans took on the burden of fixing enjoy.com from our comfortable, hypothetical armchairs. If it makes you feel better, we've been involved in some actual startup slogs, some with success, and then it was worth it, some not so successful. And then we wish we had all those years back.
[00:44:22] Daniel Greening: Our next couple of episodes, will be exploring individual mindfulness and individual agility. So we hope you'll tune into those.
[00:44:30] Following the close, mirella Petalli will guide a meditation about organizational mindfulness. If you'd like to use our meditations in your daily practice, we also offer them separately in the Mindful Agility meditation's podcast.
[00:44:47] Many, thanks to Dan Dickson for joining us in this episode. We are also guided by the Mindful Agility Community, a Facebook group. Recently we put together a 45 minute course on five whys. So join the community if you'd like to see that video.
[00:45:05] If you wanna help us out, our priority is building a bigger audience. If you like this episode, please pass it on with your recommendation to friends and social media.
[00:45:15] I'm Dan Greening. See you next time.