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How one company grew to $60 Million in Annual Revenue by creating a Community of Businesses in their Hometown

I have been working with companies to combine purpose and profits for over 15 years.

Throughout that time, there has been one thing that I have consistently seen lead to the most innovation, creativity and growth.

But we’ll come back to that in a minute.

 

For now let’s go back to 1992, when Paul Saginaw and Ari Weinzweig sat on a bench outside their already successful Deli.

They knew that they wanted to expand beyond their $5 million a year in revenue and single building.

But they weren’t sure how.

They had to address what felt like a hard question:

Where did they want their business to go from here?

It seemed like they faced a binary choice.

Either they could stay with their singular successful location or replicate their model through franchising or additional stores.

The problem was neither option to growth seemed right for them and their business.

Here’s the story of where they went from there.

Part 1: Saw a Problem with the Options in front of them

Lots of businesses follow the two options Paul and Ari had been considering.

In fact, there has been heavy growth of the franchise model starting in the 80’s and continuing on an upward trajectory.

But the model has downsides.

In particular, it can be hard to control your brand and even harder, as a purpose-driven Entrepreneur, to ensure that the values you’ve baked into your business will follow into the franchises.

This is not only true for small and mid-sized businesses.

Here’s what Howard Shultz had to say to Harvard Business Review about what it was like when he returned to the CEO role at Starbucks,

“The marketplace was saying, “Starbucks needs to undo all these company-owned stores and franchise the system.”

That would have given us a war chest of cash and significantly increased return on capital.

It’s a good argument economically.
It’s a good argument for shareholder value.

But it would have fractured the culture of the company.

You can’t get out of this by trying to navigate with a different road map, one that isn’t true to yourself.

You have to be authentic, you have to be true, and you have to believe in your heart that this is going to work.”

Howard Shultz

Starbucks

Just like for Mr. Shultz, opening more locations didn’t  seem like a better option for Zingerman’s Deli.

While opening more locations would have allowed them to grow in alignment with their culture it would have:

  • Not given them substantial diversification in their offerings (or risks!)
  • Required geographic expansion to enter new markets
  • No opportunity to let employees grow their own business

DOWNSIDES of Traditional EXPANSION

Faced with these options, they started to consider if there was another way to grow their business.

Could they grow it without experiencing the downsides of either traditional expansion or franchising?

Part 2: Refused to accept the normal answers, Asked “what if”? And came up with a novel solution

Remember how I spoke at the beginning about the one thing that really moves the needle in creating growth businesses with purpose at their core?

The next step in this story starts to show what that is because what makes their story exceptional is that they found another way.  

A new way.

They didn’t accept that the paths that most businesses took were the only paths available to them.

Instead, Paul and Ari started thinking along the lines of “What if we built a community of businesses?”

Over two years they began to envision this united but unique “Community of Businesses”.

The businesses would be united not just by the Zingerman’s name but also by:

  • shared guiding principles
  • triple bottom line approach
  • sustainability practices
  • transparency practices
  • location
  • food
  • and a sense of togetherness!

This was uncharted territory.

The first step was to get really clear on the vision.

Screen Shot 2017-05-19 at 12.49.11 PM

In 1994 they did just that. They laid out a vision for where they wanted to go by 2009.

We envision a Community in which each member business shares with Zingerman’s a common vision, a common road map toward the year 2009, a common set of guiding principles.

Each is committed to the success of the other, committed to working in the best interests of the entire organization, linked financially, and emotionally.

Each is committed to the success of its staff, and beyond all else, the satisfaction of our customers.

But significantly, each of these businesses will be owned and managed by a someone who has chosen to be our partner in that particular venture.

A partner with a passion for a particular food or service.

A passion for creating an exceptional business that has a personality of its own, yet is grounded in the principles that have been such an important part of making Zingerman’s what it is

Zingerman’s 2009

Zingerman’s 2009: A Food Odyssey

 

That document became the North Star that would guide them forward as they created the new community.

Part 2: Pilot the Idea

In that same year – 1994 – that they finalized their vision for 2009, they also launched the first new business.

They encouraged employees to share business ideas.

They also lay the groundwork for making this ideas relevant to their approach by using their “secret sauce”: sharing.


QuoteSecretSauce

If an employee had a business idea, there was already an understanding – starting from day 1 – of how Zingermans business worked.

That gives Employees a leg up in starting new ventures.

The Community of Business approach provided other kinds of support too.

An employee typically only puts up 10-15% of the capital needed for the enterprise.

Plus they get the benefit of the Zingerman’s brand power, industry and community knowledge.

With this powerful infrastructure in place, the model took off.

Part 3: Expanded the Model and Built the Community of Businesses

Today, there are ten businesses in the Zingerman’s Community.

Collectively they are doing more than $60 million in annual revenue.

All are located within the Ann Arbor area.

Map of Zing Biz

Each one is an independent business that none the less benefits from the Zingerman’s brand and expertise.

Each has a logical connection to their industry expertise.

For example there’s a bakery, a creamery and a catering service.

Zingbake

Each of the businesses are also lead by a managing partner who has often worked their way up through one of the businesses in the Community and now has an ownership stake in the new enterprise.

This structure has allowed Zingerman’s to attract and retain talent even as people move into positions of business ownership.

The Community has a common thread of culture that is about much more than food – it’s about a shared experience.

 

 

Equally important, they haven’t stopped visioning. They’ve now published a Vision 2020 that they began in 2006.

They built it in collaboration with all of the Managing Partners, and input from hundreds of staff.  The vision articulates a next level of commitment to their values:

We have a strategy for growth that is about the long-term economic health of our Community of Businesses and our local economy.

When we talk about “great service” we refer not only to our customers, our community and each other, but also to our planet; we push ourselves to go beyond basic compliance on environmental issues.

We must be profitable in order to survive but our primary purpose is to contribute to a better life for everyone we touch.

We do this by providing meaningful work, dignified employment, beneficial goods and services, and relationships of trust and caring that are the foundations of a healthy community.

Through this work we have helped to create true prosperity, economic security and democracy in our larger community.

It also articulates that they will aim to create up to 18 businesses, each unique and continuing to stay in the Ann Arbor area and offering “radically better food” and becoming an educational destination.

The thing that is truly amazing about Zingerman’s Community of Businesses is that they have managed to achieve as much, or possibly even more growth than they would have if they taken either of the traditional paths that they had been considering.

Back in 1992, they were getting requests to franchise. They were in a single cramped building and unclear on how they could grow without compromising their values.

They found not only a new path, and a path that aligned with their values, but also recognized that in order to achieve their mission they needed to continue to profitable and grow.

And that’s what I’ve seen, over and over again – Values Based Vision – that’s the one thing that will drive purposeful businesses to growth


The path they created could offer more jobs, have a bigger impact on the community. I think when you read their vision 2020, you see that reflected.

The purpose is so deeply baked in. The uniqueness is part of what they want to support and what they are celebrating in the Community of Businesses.

They may not have envisioned back in the early 90’s exactly how it would work.

Yet, they saw clearly that there was a pathway that could really meet their true intention and fulfill that intention in the world.

And this way of doing it  had so much more benefit for the community that they were a part of, for the employees they wanted to have different opportunities for and for their own businesses and growth.

I hope if you ever go to Ann Arbor you’ll go and visit them and have the experience for yourself!

Even more importantly, I hope you’ll find inspiration in their model of non-traditional business growth as you seek to expand your own business in line with your purpose.

Part 4: Find Your Own Path to Growth in Line with Your Values

Lots of people think that the traditional path to business growth is the only one.

In fact there are lots of ways to define growth on your own terms and leave a legacy you’ll feel great about.

I’ve seen it time and time again – values based vision is the critical ingredient to another path to success. Mix that with a healthy dose of fact-based decision making and you are on the road!

I’ve shared lots of tips about finding that path in the past, and here are a few of my favorite articles on the topic to help you out:

I’d love to hear about what non-traditional approaches to your own business growth you are considering or putting into practice!

 

CYNTHIA JAGGI, CEO of Gatherwell

In the mid-2000’s I made Partner at the Inc 5000 Management Consulting firm Fitzgerald Analytics, where results included helping a division of a Fortune 500 company achieve profit growth of 59%, and 100% of our clients gave us repeat business. I advised both for and non-profits, including members of the Fortune 500 and New Profit portfolio social innovators.

Now I only work 4 days a week, take a minimum of six weeks off a year, and only work with business leaders I enjoy being friends with, balancing my work transforming the economy with time with my daughter and family.

I’m on a mission to push humanity forward through regenerative approaches to business, working with business owners that want to do good and feel good about their legacy, and who want their social impact to work with their bottom line.

 

 

The New Model of Growth

Seven generations from now I can imagine two distinct realities.

In one, if people are still here on earth we are in a constant state of terror, plagued by inequality. The richest few have great luxuries like clean water and healthy food. Everyone else is in a desperate grab for arable land, drinking water and survival. Flash flooding, fires and living in waste are a norm. Despair is a norm.

But there is another vision.

In this vision we have harnessed the power of technology to create regenerative systems. These are systems with built in renewal, growth and restoration. People have their needs met while replenishing natural resources. People thrive within an economy that is no longer the “sustainable economy” or the “green economy” but the only economy. The conditions of ordinary life allow for a focus on lifelong education and growth. We remember the shortness of our time here on earth. Each person focuses on contributing the most to creating an ever more harmonious balance.

In one world you would walk out your door to meet neighbors you know and do work you love. You would see vertical gardens and hydroponically grown vegetables. In another it’s likely you would not have a door.

Where would you rather live?

Seven generations ago was the industrial revolution. How might we see ahead and plan with the clarity we wish those revolutionaries had? Now the stakes are higher. Now we might not exist as a species if we do not install the innovations we have created. But we live in a conflict between these limits to growth and the possibility of abundance that has come with technology. A conflict that, if unresolved, leads us down the darker path.

Limits to Growth

1972 saw the publication of the seminal work Limits to Growth. With it the idea began to penetrate society that perhaps these resources we had taken as endless, these massive woods and waters, glorious mountains and fields, were limited.

Cover from the First Edition Source: Wikipedia

Limits to Growth began a long line of research and discovery of the impact our way of life was and is having. The few saying we faced limits met with huge resistance, almost ridicule. Over time though most people began to realize this truth. People began to see that the way we were extracting resources could not go on without end.

We started to make changes. We recycle. Eat less meat. Ride bikes more often.

Yet we still hear that we are doomed. Not just that we as individuals face death, but that our line of decedents face it too. And not just at some distant time. It is measurable doom. We can calculate it as 350 parts per million of an atmospheric compound that we neither see nor can touch. Is it surprising that this creates feelings of disempowerment? In the face of such an outcome, one so dramatic, on such a large scale and in a way abstract, it is hard to shift our actions. It is hard to be clear on what shifts really matter.

The Promise of Abundance

With the rise of technology there is another reality we have collectively experienced. We have collectively experienced the possibility of rapid change of our outward situation. Millionaires made, it seems, in minutes. The possibility of abundance without many of the traditional trappings like college degrees or decades of toil. The “in the garage” start-up.

The acceleration of technology has been exponential. Each new technology outpacing the last in its rate of adoption and scaling.

http://miovision.com/wp-content/uploads/2013/07/technology-growth.png

In 1991 Paul Zane Pilzer published Unlimited Wealth: The Theory and Practice of Economic Alchemy. In it he argues that because of this rapid advancement and acceleration of technology, we actually live in a world of unlimited physical resources. With the possibilities of technology, the pie will expand endlessly. We will constantly invent ourselves out of any limits. Many of our modern technological heros agree.

Reframe

So we live with two narratives. One describes a fundamentally scarce reality. The other promises endless abundance. Living with both creates cognitive dissonance.

What if we reframe the situation as a single whole? From this view the outcome for our planet and for our decedents, the possibilities of technology and the realities of our current challenges, are all parts of a single body with a shared fate.

From this perspective we might ask:

What would it take to leverage the possibility of abundance as swiftly as possible against the alternative impending doom?

Here, everyone can contribute — because we need to shift the entire economy to a regenerative model.

An economy where every product manufactured is from cradle to cradle. One where every need we have — for infrastructure, energy, roads, homes, medical care — is rethought. We redesign each so that it returns to the earth and to us a greater capacity for growth then was there before.

This means transforming traditional businesses to a regenerative model. It means creating and growing businesses in the regenerative model. Both of these need a shift in the flow of capital. But businesses are only organized groups of people. To succeed, it means empowering every individual to thrive. It means there is a role for all to play and an action to take right now.

Whatever your field, whatever your interest, ask yourself — what is your source material? What kinds of resources are used and from where do they come? What kind of things does it create and where do they go?

What would each step look like if it was creating a new capacity for the growth of people and ecosystems? Turn that image into action.

Now you are on the path to the vision we all would choose for our great-great-great-great-great-great-great grandchildren.

3 Open Platforms for Combining Business Profit and Social Impact

This Post Originally Appeared on the Inter-American Development Bank

In Latin America and the Caribbean, companies like Salauno, Geekie or Raymisa have put social impact at the core of their business, while not losing sight of profit. This approach uniquely allows businesses to make contributions to their communities and the causes they believe in while growing their business at the same time.  It is about creating a more just and sustainable world while generating profit.

To begin with this approach you combine your business aims (what are you trying to achieve with your core product or service? What markets do you want to reach? What are your expansion goals?) with your impact aims (what changes would you like to see in the world? In your community? What issues resonate deeply with you?) Then, start to look for possible connections!

If you’d like to start combining your business goals with social impact, here are a few open platforms to begin with:

1

openIDEO

OpenIDEO is an open innovation platform. They partner with leading organizations to drivecollaboration, innovation and impact around the world’s toughest problems.  OpenIDEO launches challenges, programs and other tailored experiences to promote exchange between the platform’s community. The current challenge is: How might we dramatically reduce waste by transforming our relationship with food?

For example, meet Carol Lue, an openIDEO fellow from Jamaica who is turning organic waste into cash with CaribShareBiogas. Carol’s company is transforming hotel and manure waste into clean energy and organic fertilizers to support rural farmers.

In 2012, Carol won the Inter-American Development Bank’s IDEAS contest in which she was granted $200,000USD to begin her business. Today, over 50% of CaribShare surplus from biogas and fertilizer sales is exchanged with farmers for their supplying of waste. For more openIDEO business stories, you can go here.

2

GatherWell

Gatherwell is a hub for social innovators, impact investors and purpose-driven entrepreneurs. Our free and open directory allows you to find and offer aligned resources including on fellowships, accelerators, competitions and impact investing. You can also submit your own needs or services. To access the directory tools, you just have to create a free account.

Fledge, for example, is one of the accelerators in GatherWell’s directory. It helps impactful entrepreneurs take their ideas and prototype-stage companies into reality, via an intense, 10-week program of guidance, education, and mentorship, plus a large and growing network of support from past fledglings and hundreds of mentors. Their goal is to help foster a wave of companies that make not just a measurable impact in the world, but a noticeable improvement in the lives of everyone on the planet.

3

ImpactSpace

ImpactSpace is an open data initiative for companies, entrepreneurs and investors delivering social and environmental impact along with financial returns to connect with each other andshare stories and data with market participants.

By opening financial data, ImpactSpace aims to promote investments with purpose by encouraging exchange among investors to gain insights and find solutions as well as to attract new investors by showing a growing market. ImpactSpace counts with a database of over 6,000 impact companies and 2,000 impact investors that can share their funding sources, their team members, the areas where they work and impact reports. It also allows to contact over 4,000 impact people who are involved in businesses with a social impact.

Milken Institute’s PACE Briefing Series: Removing Barriers to Small Business Lending

GatherWell’s Founder Cynthia Jaggi, along with partners Greg Wendt and Mary Abad moderated the invitation-only luncheon conversations for the Milken Institute’s PACE Briefing Series: Removing Barriers to Small Business Lending, August 31, 2015, hosted by the Milken Institute California Center, the Federal Reserve Bank of San Francisco and the Small Business Administration. The conversation focused on structuring the components of a more effective Southern California small business loan fund. The Milken California Center and its partners assembled a roundtable of community leaders and policymakers to determine a proof of concept and develop a shared and scalable model for a fund that could spur small business growth.

Participants included small business and community banking leaders, Small Business Administration officials, and representatives from the Community Development Office of the Federal Reserve Bank of San Francisco, the Office of the Comptroller and the FDIC, as well as other key officials.

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