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Just Managing: The Need-Driven Startup

Earlier this year, venture capitalist and writer William Gurley wrote a column proposing a distinction between supply-driven and demand-driven companies. On one end of the spectrum were idea-driven companies founded by eager business school students and other ambitious number crunchers eager to cash in on the flood of VC money chasing attractive business plans. On the other end, Gurley posited demand-driven companies - those formed to meet a simple need in the market.

I agree with Gurley's assessment, and in fact, I believe that his distinction illuminates the babble we are hearing today about a return to placing value on the concept of profitability. Everywhere today we hear about the newfound, some might say renewed, obsession with profits. But, I think we're seeing nostalgia for something different - a focus on businesses that work.

Selling the idea behind a company to score-driven VCs is finally taking a backseat to developing a viable business that solves a need for customers. This brings up the question for entrepreneurs: How do you find that need? My suggestion? Start with what you know.

That's exactly what Tom First and Tom Scott, the "juice guys" who founded Nantucket Nectars 12 years ago, did. They met as students at Brown University and shared a common love for the bucolic island off the coast of Massachusetts that became the namesake of their line of juices. While bumming around on Nantucket after graduating, they discovered that their passion for fresh juice might lead to something bigger.

"Tom and I didn't know we were starting a business," says Scott of their early days mixing batches of juice on a wharf.

But they were. Today, the privately held company has spent more than five years on Inc. magazine's list of fastest-growing companies, and it continues to grow at more than 40 percent a year. The two Toms recently tapped someone for the role of president, charging that person with focusing on the day-to-day work of Nantucket Nectars so they can focus on their next venture.

This year the two Toms launched Shelflink, an ambitious attempt to rout out inefficiencies in antiquated distribution systems. Essentially, their plan is to link up the three key players - vendors, distributors and manufacturers - that compose those systems. Shelflink will install Net-connected PCs into individual stores, and those stores then will use the Shelflink system to track orders, monitor inventory and restock merchandise from distributors. The seeds of Shelflink naturally emerged out of the work the Toms have been doing day in and day out for more than a decade.

"In a way, we knew we needed this product 12 years ago," says Scott, who remembers that when Nantucket Nectars first began selling to local retailers, they would use marine radios to gather information on who needed what and on how well their wares were being displayed. Even today they compile information on how their wares are being merchandised by having sales reps take Polaroid snapshots and mail them to the company's Boston headquarters.

From the early days, the Toms learned that concocting the perfect blend of juice was far less consuming than cracking the distribution system. Though they invested plenty of time in creating an all-natural drink and building a brand that conveyed their values, their greatest challenge was in cracking the system.

Shelflink, which launched earlier this fall, addressed burning needs they saw in their daily work. The two are adamant that they aren't trying to create an entirely new distribution system or trying to cut anybody out of the existing system. Instead, they are simply trying to tap into the Web to enable their most basic customers to save money and time.

Perhaps the best way to describe their business philosophy comes from a quote originally made as an aesthetic statement by the doctor and poet William Carlos Williams: "No ideas but in things." The two Toms are pursuing something they care about deeply through experience, rather than trying to cash in by inventing a nifty idea for a business.

"Business by theory is stupid," says Scott, adding, "our success is not about terms like 'speed-to-market,' but about our ability to weather storms."

Adds First, "I'm sort of cynical about that first-mover thing, because what were we? The thousandth mover in juice? And we did fine. First mover is one thing - but the customer is everything."

Gus Rancatore, owner of Toscanini's Ice Cream, a Cambridge, Mass.-based store that is a charter vendor with Shelflink, says the Toms "understand their business and have a proportionate idea of what they can do." Unlike a product founded with wild visions of changing the world, Rancatore says, Shelflink attacks a specific problem - the inherently sloppy nature of ordering products from vendors - with a focus and ease that tilt the odds toward wide adoption. "This enables people whose jobs are by their nature very disorderly to lead a more productive life," he says.

Surely, in this time of great change, there will always be world-changing big ideas and new new companies that use venture capital as rocket fuel to become masters of their domain. But those stories shouldn't obscure the real work of building a company, the natural steps that apply to the vast majority of startups today - Web-enabled or not.

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THE BOOK

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TOM'S WRITING

Just Managing – articles that Tom wrote for The Industry Standard and some Business Articles written for Inc., Fortune Small Business, Harvard Management Update, and other places.

Read about other books and web sites about starting your own business.

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