Illustrations by Mark Matcho/The Globe and Mail
Put your boots on the ground
Jim Treliving
Chairman and owner of Treliving Management and Boston Pizza International, and long-time Dragon on CBC’s Dragons’ Den
The first time we tried to open Boston Pizza in Toronto in the ’80s, we weren’t prepared. I thought we could do anything, go anywhere. But what you’ve got to remember—more than anything—is that when you expand to another side of the country, it’s a whole world of difference. It’s not just a time change. You’ve got to go in and look at the area first and find out what you should be doing. I should have made sure I had all my ducks in line, and I didn’t.
I didn’t realize many people were working in factories. They were going to work at seven in the morning, getting off at three, picking their kids up at four, and the next thing they knew, they were going for dinner at five o’clock. We never saw that in Vancouver; there, people didn’t come till eight o’clock. So, my franchisees didn’t have enough staff at five. We had some of the wrong equipment, too—we couldn’t get our food out fast enough because of our ovens, but people were on a tight schedule. Another thing we found is that staying open late at night, which we did in the West, didn’t work in the East.
We actually ended up closing some stores because we weren’t prepared. I remember flying from Vancouver thinking, My God, our franchisees don’t know what they’re doing. I thought it was their fault more than it was mine. And I realized on the way back that I hadn’t taken any time to analyze that market. It was not anybody else’s fault. It was my fault. It felt awful.
We pulled right out of the market, and I thought, Well, I’ll never go east again. Five years later, we did. I knew it wasn’t a mistake to go east—it was how we’d done it.
The lesson I learned was this: Analyze your market before you do anything. The second time, we were prepared. We built a store that could handle high volume at different times. And we were on the ground. The first time around, I thought I could run the Ontario operations from Vancouver. The second time, I moved and set up an office in Mississauga. If there was a problem in a store, I could have a guy there in less than 40 minutes.
Somebody once told me we’d never have more than a couple of stores in Ontario—and we’ve got more than 110. And we have great franchisees from Newfoundland to Vancouver Island to the Yukon and Northwest Territories. I think the one thing people don’t tend to understand about failure is that failure makes you stronger. /Stacy Lee Kong
Solutions are for suckers
Simon De Baene
CEO and co-founder of GSoft, the Montreal tech company behind Officevibe and ShareGate.
ShareGate was the first product we launched, about 10 years ago. It’s a tool IT professionals use to move data to cloud-based services, and we worked on it for two years and invested all the money we had. It was my life. But after two years, we realized we had maybe four customers, and two of them were our friends. We decided to pull the plug.
I managed to convince my partner we had to reinvent the product, even though pulling the plug and trying to build it again went against everyone’s advice. But three months later, we put ShareGate on the market. A month after that, we had sold more licences than we’d sold in the first two years.
We built ShareGate ourselves. The original had so many features, but most of them didn’t work well. The product wasn’t really addressing the problems customers were facing. I think that’s a common trap: falling in love with the solution instead of the problem. You lose track of the problem you’re trying to solve.
When we rebuilt ShareGate, we fell in love with the problem. We talked with customers and listened to what they had to say, and then we tried to build a simple solution to fix it. We transformed a product with 100 features into a product with one feature.
Two years after that, we launched another product called Officevibe, which helps managers stay connected to their workers. A year and a half after the launch, we pulled the plug again and completely rebuilt it for almost the exact same reason. This time it was after a year and a half, not two years, and we had 16 customers, not four. But we could have learned much faster.
It’s tough to accept that you need to pivot. You always feel like the next month will be the right month, the next feature will be the right feature. And what was really tough for us was that we never raised any money. Everything we do here is from our own pockets. It’s very different when you fail with your money, not other people’s money.
To date, GSoft has built between 20 and 25 products, but it is defined by Officevibe and ShareGate. It just happened that the two mistakes we made became our best-known products. It’s almost a sign that mistakes are unavoidable. You have to fail a few times before you succeed—it’s just part of building a company. /S.L.K.
Grab opportunity by the handshake
ISSY SHARP
Co-founder of Four Seasons Hotels & Resorts
Back in the mid-1970s, I was still trying to make a living as a developer, and I was still building and owning hotels. I had put under option a site in Vancouver called Coal Harbour, which was on the water next to Stanley Park. I had worked on the deal with the CN pension fund, which was putting up the money. We had the permits and approvals to build 1,000 apartments and a 250-room hotel. But as we were ready to start construction, the city council decided the project was too close to the park. Would we move it 100 feet? I thought, Stanley Park is 2,000 acres, so what difference is 100 feet going to make? But the mayor—who was very supportive of the project—said that if we didn’t agree, the council would put together a proposal to expropriate the land. I didn’t take it very seriously, and they expropriated the land, and it was a disaster.
The day it was announced that the deal had fallen apart, I got a call from Eph Diamond at Cadillac Fairview. “We’re building the Pacific Centre,” he said, “so why don’t you put your hotel there?” We’d just completed a hotel in Calgary, which was very successful, so we took the exact same deal in Vancouver: We’d be responsible for the cost of construction and for leasing the building CF would build.
Unfortunately, inflation kicked in, construction costs skyrocketed, and we were on the hook. The project became an impossibility. We didn’t have financing or money, so I went to my partners—TD Bank, the Eaton Centre and CF—and said, “This deal is not going to work.” It would’ve pushed the company into bankruptcy—I could go broke lowering costs, or I could go broke finishing the hotel as intended.
They said, “Look, borrow the money, do what you have to do, then we’ll talk.” On a handshake, I borrowed money I could never repay. After the hotel was built, they lived up to the handshake—we renegotiated the deal so we could all go forward. The hotel became a great success, and we’ve been running it for more than 40 years.
But the experience taught me a lesson: I could no longer build and own hotels, because the cost of owning real estate was too much of a financial risk. Thereafter, we would become a management company, only taking a minor equity position—between 5% and 15%—that would not put the company into a financial bind if there was a cost overrun on construction or an operating loss. That remains the Four Seasons business model today.
If I had built Coal Harbour, I might never have gone into the hotel business. Today, we operate over 120 hotels in 45 countries, with another 60-plus under one form of development or another.
My advice is that any deal is only as good as the partnership you’re going into. Look at the people before you make a judgment on whether a business is going to be worthwhile. People first, business relations second. And never take a risk you can’t afford to lose. /Dawn Calleja
Fight to win
Kristen Gale
CEO and founder of The Ten Spot, which has more than 20 locations across North America
It’s very simple to get into franchising. Basically, you pay a lawyer to create an agreement for you that says, “Now you’re a franchisor. You are legally allowed to sell your business model.” But it’s one thing to have your lawyer create this document. It’s a whole other thing to be a great franchisor.
I didn’t realize I had just created a new business. At my corporate stores, my customers were people coming in for manicures, pedicures and waxing services. When I started franchising, my customers became my franchise partners, and my job was not to operate beauty bars; it was to curate a business-in-a-box experience. As a franchisor, I have to provide mentoring and tools for someone who has never run a business before. I’m on the hook for that experience going seamlessly, from signing on that dotted line to getting their email accounts set up to finding contractors to all the marketing programs and training for them and their staff, right up to the grand opening party. Even once they’re operational, I have to continue that support, because franchisees pay royalties.
But I didn’t realize that at the beginning. We had a tight system for each location. Every protocol and policy you could think of in the beauty bar was done. But we had nothing for the franchising arm of the business. I was always just one step ahead of my franchise partners. It would be like, “You need to find a space? Okay, let me write up the specs for how to find space right now and send them to you.”
Soon, we heard from a lawyer. Our first two franchise partners sent us a letter saying, essentially, “This isn’t going well.” My first reaction was, Oh my God, I can’t believe that this is happening. Clearly we had failed on communication, because they didn’t feel like they could come to us to express their dissatisfaction.
But then it was like, “Okay, put on your big-boy pants, ’cause you’ve got to fix this.”
The actual business of franchising is about relationships. It’s an interesting dynamic that doesn’t exist in any other model. We’re not their boss, and they’re not our boss. We’re not their employees, and they’re not our employees. And we’re not 50-50 business partners. It’s their own business, but they have to follow certain procedures. It has the capacity for a lot of tension and conflict.
So, I called up each of our franchisees and invited them for coffee. I knew they didn’t want this to be the start of our 10-year contractual relationship, and I sure as hell didn’t want it to start like this. So, I accepted that I messed up. Besides, perception is reality. If you think I’m not doing a good job and I think I am, who cares? Let’s default to, “I’m not doing a good enough job, and how can I get better for you?” It’s almost like, would you rather be right, or would you rather win? I want to win, so I don’t need to have my ego wrapped up in this.
And it ended up being a great story. One of the franchise partners is still with us—she’s had her location for six or seven years now. And the other partner ended up getting a second location with us within the year.” /S.L.K.
Bet big—but be careful
Stephen Smith
Chair, CEO and co-founder of First National Financial Corp., and namesake of Queen’s University’s Smith School of Business
Failure is something I’ve had experience with, and it came up for me again in 2015, when I was looking to give $50 million to the Queen’s University School of Business. I’d gone personally bankrupt in 1984, and I was embarrassed about someone finding out. But my sister said to me, “Look, you should make it really clear that you went bankrupt so people don’t think you inherited all your money or had some sort of silver spoon. If they hear your story, they’ll know you earned it.” So I’ve come to embrace my failure, and I find it resonates with people.
My sister remembered that time in my life well because I ended up having to live in her basement. I had an entrepreneurial streak. I’d bought and flipped a few triplexes and thought I could do more in the real estate market, which was pretty hot in the 1980s. So I bought some lots and built some houses in Toronto’s Cabbagetown neighbourhood. But interest rates started going up fast—they went up to 21%—and we ended up in a real estate recession. I had trouble selling the houses, and I lost all my equity. I lost everything I had.
I was 33 at the time, just when people feel they should be accomplishing something in their careers, and it was shattering. Looking back now, I probably went into a minor depression—I remember breaking down in tears once or twice. I felt like a complete failure. It was really tough.
It took three or four years for my confidence to recover, and there were a lot of lessons in it for me. I was over-leveraged, not really understanding the market and probably overpaying for land. When I got my career started again—I got a job at a boutique investment dealer—I became more risk-averse. People think entrepreneurs are business types who like to roll the dice—big risk takers. I don’t think that’s true. I think entrepreneurs are measured risk takers. They’re willing to make big bets, but they’re careful about them.
Because of that failure, I think I analyze things more now. I think, What happens if I lose everything? What can go wrong here? It matured me a bit.
In Canada, we’re still very averse to talking about failure. I’m still a little embarrassed about my own experience with it, but I’ve tried to embrace it. And for new graduates, it’s an important message to hear. I think they look at me and think, If Stephen Smith can recover from bankruptcy, I’ll be okay. /Carol Toller
Hire slow, fire fast
Bobby Umar
CEO of Raeallan, a training and leadership consulting firm
There was someone I was very excited to hire. I gave him a senior role and started working with him on a big project. There were a few hiccups early on, but then it started to escalate to the point where I was spending all my time trying to please him and answer his suggestions and complaints. We spent three or four months butting heads, which caused a delay in our timeline. It affected morale, too—the whole team felt frustrated because we weren’t moving forward. I was frustrated, and I’m the CEO! My mistake was not saying, “If you’re not aligned with where we’re going, then you need to exit.” But I wasn’t willing to make the decision to let him go—I’d known him personally for 15 years.
Finally, it got to the point where he decided to leave. It had been building up for at least a month, so when he booked the meeting, I just sat there and didn’t say anything. I didn’t complain. I wanted to make sure the relationship was healthy and to let him know I was happy to support him.
After he left, there was some relief that we didn’t have to go through those “yeah, but” discussions all the time. Plus, we found someone to take his place quite quickly, and we moved more quickly than we had in the previous four to six months. It reinvigorated us a little bit.
For the most part, hiring swiftly has worked well in lots of areas. Most of the time, it’s been successful. But the 20% of times when I haven’t been successful, it’s been a huge drain on growth and the culture and everything we do.
So now, instead of having one conversation before hiring someone, I have two or three—if not more. Also, either in a contract or an email, I lay out clear roles, responsibilities and expectations. That can go a long way. I’m also big on trials—let’s try this for a month or three, and then we’ll evaluate how’s it going. And if it’s not working out, we’re going to let it go. /S.L.K.
Embrace embarrassment
Ilana Ben-Ari
Toy designer, social entrepreneur and CEO of Twenty One Toys, maker of the Empathy Toy and Failure Toy
Designing a toy that teaches failure is the hardest thing I’ve ever had to do. I had a ton of research into what failure actually means to everyone. I knew I needed a game that created stress and caused people to buy in really quickly. I knew from the beginning that the game would be a game of balance. I knew that it would be played collaboratively and offer insight into how people deal with blame, risks and the expectations of others. But that made the design process really intimidating and difficult.
When I’m designing, I use physical shapes, textures and game dynamics to mimic real-life behaviours. My process involves hiding away, not talking to anyone and making really Frankenstein-like prototypes—that is part of my science, and there’s nothing to be embarrassed about. But I had set an ambitious deadline, and I was really hard on myself. I thought that if I just set that deadline, everything else would fall into place. And when it didn’t, I was embarrassed and upset.
But failure is part of the design process. It’s not called failure, though—it’s called prototyping and iteration. This process taught me that if you’re doing anything new, it will suck many times over, sometimes for long periods. And that’s good. It’s part of the process—your job is to understand your reactions to these common obstacles so you know when to push yourself and when to be kinder and gentler to yourself. Self-awareness and understanding are key to breaking through those creative ruts.
And even though I was feeling awful, I had validation from day one, because the number of people who heard the words “failure toy” and said, “I need that,” was ridiculous. We hit 50% of our fundraising goal in less than 24 hours. We have a 1,200-person waiting list based on absolutely no marketing or information. We even had a university in the U.S. buy one based on no prototype and no information. They were just like, “We need it. We want to buy it.” /S.L.K.
Just keep going
Aydin Mirzaee
Co-founder of Ottawa-based Fellow Insights Inc., whose app helps managers track goals and feedback, and lead more effective meetings
It was 2006, and I had just started out at Nortel after university. My two buddies and I figured out a way to hack Skype so you could basically call anybody in North America for free. It really caught on. Then all these other companies started doing what we were doing and raising big amounts of capital.
Everybody in Ottawa said, “Nobody’s going to give you money. Your best bet is to raise it from people in Silicon Valley.” But how would I get to people in California? I had an idea: What if we recorded a video of me pitching our idea and posted it on YouTube? I emailed the video to every venture capitalist, and a bunch of blogs started writing about it, including Valleywag, which called me Lonelydork15. They weren’t very nice. I freaked out and pulled the video. But for the longest time, if you searched my name, that Valleywag piece was the first result. I got pretty down. I had all these big dreams, and now I was Lonelydork15.
My adviser and I were talking about why people were so interested in criticizing some 20-something from Ottawa for posting a video, and we thought, What if there’s a business in criticism? We created this website called Chide.it, where people could post stuff and other people could criticize it. Maybe Coca-Cola could post a video of a commercial before it goes nationwide and people could critique it, and that could be useful. It would be the world’s first anti-social network.
We spent six months trying to build this thing, and nobody wanted to use it. People were like, “You want me to publicly embarrass myself?” In hindsight, it does sound like an awful idea, but we thought it was brilliant.
At this point, I had already left my job at Nortel, so this was not a great time. Then we started thinking, What if, instead of criticism, we called it feedback? The first thing we built was a system for business case competitions, where students could submit projects and the judges could give feedback. Later, we took that application form and made it into its own product and built a drag-and-drop form builder. But it was still the most commonplace product.
Eventually, we made our surveys meet these obscure accessibility requirements from governments. Then we started to realize people didn’t want their data in the U.S. So we went to anyone who was publicly funded and cared about data privacy—governments, colleges, universities, non-profits—and pivoted from being a government survey tool to a Canadian survey tool.
In 2014, we had just over 90 people at our company, Fluidware. That’s when we realized it made sense to join forces with SurveyMonkey, which bought the company [for reportedly more than US$50 million].
We’ve had a lot of pivots. At the beginning, it was just failure after failure after failure. I would look at my friends, and they were getting master’s degrees and PhDs and getting married. It seemed like everybody was succeeding but me. But you can’t connect the dots looking forward. You can only connect the dots looking backward, and I certainly feel that way with Fellow, which we started after leaving SurveyMonkey. The problem we’re trying to solve is how to help managers lead their teams from a productivity perspective and make them better managers.
It’s too early to look at any particular event and decide whether it’s a good thing or a bad thing. For all I know, everything in the past only happened so it could open the door for us to build Fellow. /Joe Castaldo
As seen in the Feb. 2020 issue of Report On Business magazine