Yosef Interviews Branders.com CEO Jerry McLaughlin

By Yosef Solomon on Feb 8, 2011

In the past week, I had the great pleasure of interviewing successful Entrepreneur Jerry McLaughlin, CEO of Branders.com. To give you a quick background, Branders.com was the world’s first online promotional items company and is currently the largest online.

Before co-founding Branders.com in May 1999, Mr. McLaughlin was with Altos Ventures; a venture capital firm focused on making early stage investments in companies and entrepreneurs.

Y: What would you say is the most important thing you’ve learned as an Entrepreneur?

J: Entrepreneurs are creative in a particular sense. They don’t necessarily invent anything, in the sense that Thomas Edison invented. They conceive of new ways to rearrange existing resources—and they do it before anybody else.

For example, Reed Hastings at Netflix looked at the DVD movie rental business, the U.S. Postal Service, and customers’ desire to save time and money, and rearranged those pieces—at first, only in his mind—to create value by giving people a different way to rent DVDs. In the process, he made life a little better for millions of customers, forced a national DVD movie rental chain to revise its predatory late fee policy, and built a company worth more than $10 billion. Executing the idea wasn’t easy, of course, but the rearrangement Reed saw was in its essence very simple.

Andrew Mason and his co-founders at Groupon have done their own rearranging and created a business that will hit $3 billion in sales in its 3rd year of existence. To the best of my knowledge, Groupon is the fastest growing company ever—but they didn’t invent, they rearranged.

Entrepreneurs see new, valuable combinations before those combinations become apparent to others.

Y: The new buzz word for entrepreneurs and start-ups is “Pivot.” Where do you think you had to “Pivot” or change the direction of an idea and why?

J: The only things worse than buzz words are new buzz words; rather than illuminate, they obscure. “Pivot” is particularly bad because it implies a crisp point of inflection, which rarely describes how businesses actually adopt a new direction.

For example, Branders.com was founded on the belief that the inherent conveniences of buying online would cause a high percentage of customers to shift their purchasing of promotional items to online vendors. But that didn’t happen. More than 10 years after Branders launched the first website selling promotional items, only about 3% of all promotional items purchases were being made through online vendors. By contrast, in the United States, over 80% of all airline tickets were being purchased online.

Over two years of introspection and analysis, Branders re-thought its entire reason to exist and decided to retool itself to deliver the lowest prices for promotional items anywhere in the United States and to maintain high service levels while doing it. We followed through with another 10 months of massive internal change, before unveiling our new prices—which are now, on average, 20% lower than our closest competitor. So, Branders made a defining “pivot” from focusing on convenience to focusing on price. But completing that signatre change of direction took us about three years.

Y: If you could start the process over, is there anything you would change?

J: Absolutely. In starting any business today, the first thing I’d do is find the fastest, cheapest, most reliable way to test my innovation. I wouldn’t even print business cards for my new venture without having first demonstrated the idea will work.

If I had followed my own hard-earned wisdom in this regard, I would have saved myself at least five years and $35 million in arriving at the place I am today. If you do not have a lot of money to finance a long research and development period and your idea cannot be subjected to a definitive test quickly and cheaply, then find a different idea.

Y: Do you ever want to retire?

J: I don’t think of retirement as a period of idleness or excessive leisure. I think of retirement as a period in my life when I can spend my money and all of my time without regard to what I will get in return—and yes, I look forward to living like that.

Y: What do you think are the biggest trends to look out for in Branding and Strategy in 2011?

J: I read more than anyone I know, but I don’t read newspapers or Internet news. The cycle times for big changes are much longer than the news cycle. For example, the role of the brand manager has been almost completely rewritten by the Internet and social media, but it will be some years before this becomes obvious.

A brand has meaning to the extent that customers believe it represents a solution to a particular problem in a particular way—“melts in your mouth, not in your hand.” Traditionally, brand managers told customers what the brand meant. But increasingly, customers tell each other directly what a brand is good for and not good for. More and more, the brand manager’s job is to tell the company what the brand means, based on customers’ published judgments. The brand manager is still the information intermediary, but the information flow has reversed.

Going forward, brand managers will become less like advertisers and more like product developers. As this shift becomes more apparent, the perceived value of communication skills in that role will recede and listening and discernment skills will become most prized.