I recently finished reading “Quench Your Own Thirst” by Sam Adam’s and Boston Beer founder Jim Koch. Koch chronicles the startup of Sam Adams along with entertaining stories and tips on how to run a successful company.
This piece isn’t a review as much as some random thoughts about the book and quotes/antidotes/stories I found interesting. That said I did enjoy the book overall. It’s a very easy read at 243 pages. There are 42 chapters with some as short as 3 pages (which I found odd at first but began to like quite a bit).
Koch at times comes across as corny and I wondered if some of the stories he told are just a tad embellished or simplified. I also felt like he might have downplayed his own intellect as a key part to his success. Koch portrays himself as an underdog that got to where he is by fighting tooth and nail against the big boys. This is true for sure, but he’s also a very smart guy. I could be wrong on this one but Koch (sort of like Buffett) made it all seem easier and more achievable than it truly was. Koch graduated from Harvard, enrolled in a dual J.D./M.B.A. program at Harvard, was a consultant for Boston Consulting Group and came from a family of brewers. He was quite sharp. Koch was armed with both the financial/business knowledge as well as the operational knowledge of brewing.
That said and out of the way, Koch shares some great insights, lessons, advice and knowledge that can be applied to most businesses. Below are some of the tidbits that stood out to me.
“Make it better or cheaper. Better or cheaper, there’s no way around it. Make it one of these, or don’t make it at all.”
“I constantly asked myself, “Do I really need this?” I focused on only two things, making great beer and working our butts off to sell it. I would spend money on these things without hesitation, but on nothing else. If something didn’t help me do what was best for the beer, it wasn’t a priority. End of story.”
“You should focus on the product, and on selling it. A great sales force can’t sell without a great product.”
“When people asked what I did, I told them I had two priorities, the quality of the beer and the culture of the company. Those were the only things I couldn’t delegate to people who were better managers than I was.”
“The number of customers times the average number of units they will purchase times the price they will pay for these purchases yields your revenues. The cost per unit at the projected volume gives you your variable costs, which is subtracted from the revenues to get your gross margin dollars. If that number is bigger than your fixed costs, you’re making money and can grow. If its not bigger on an ongoing basis, you don’t have a business.”
“Some leaders might proclaim some lofty standard or principle, feeling good about “our values” and “taking a stand”. Yet it’s mostly talk and everybody knows it. Management doesn’t give the front-line people the resources they need to live up to it, so the front-line people have to figure out a way to do their jobs without making it too obvious that the principle is being violated. Nobody calls out the bullshit. The result is cynical disenchantment throughout the system.”
“My father had told me that it usually takes a different person to run a company than it did to start it. An entrepreneur brings drive, innovation, raw energy, and the mentality of pushing boundaries. You never want to lose that as a company, but you also have to recognize that once a business reaches a certain size it needs someone with different talents and qualities making the decisions.”
The Doom Loop
A concept Koch learned at BCG
“You had a good manager running a business with a business model that wasn’t working any longer. Senior management started ramping up the pressure, usually without giving low-level managers the resources or insights to fix the underlying problem. Once lower-level managers were in this position, they were screwed. Their bosses enforced a sense of urgency, demanding weekly or monthly reports about what managers were doing to fix the problems. This led managers to grab at short term fixes, usually some form of cost cutting or layoffs to buy themselves time to understand and address the underlying problems. But managers never had enough time to do the work to get the business on the right track long term. Eventually, even great managers lost their jobs.”
The Big Boys
Pete Coors, CEO of Coors Brewing, gives advice to Koch regarding a Budweiser attack on Sam Adams
Coors: “Jim, what I’ve learned is that if you punch August (Busch) in the nose, he’ll break every bone in your body.”
Coors: “Do you play polo?”
Koch: “Of course not. I can’t afford to play polo.”
Coors: “Then you can’t afford to sue Anheuser-Busch.”
“One of the greatest challenges any established business has is retaining the unique, inspiring culture it had as a start-up. The arrival of each new employee potentially erodes the culture because of his or her lack of familiarity with what you do and how you do it.”
“The first day is the moment when new employees are most receptive to discovering important things about the organization. It’s when they learn culture.”
“I spend 5 hours with new employees on their first day.”
““What if you spend all the time and money training people and they leave,” he asked me. What if you don’t train people, and they stay? Isn’t that much worse?”
“For the first twelve years of Boston Beer, growth had averaged over 40%. Then, in one month, October 1996 to be exact, the growth stopped, and the long period of stagnation in our business began.”
“Ultimately, growth presents entrepreneurial companies with a choice: Improve the quality or lower the cost of production.”
“I learned an important lesson—that the value of the stock is not the same as the underlying value of the company.”
“The value of the company depends on elements that contribute to the creation of real value—things like providing superior products at fair prices. You need to be learning and innovating, giving your people interesting, motivating work and compensating them fairly, creating value for your community, and doing it all in a way that yields a good profit. That’s not what much of Wall Street Values but its what creates long term value for investors.”
What stood out to me most was Koch’s enthusiasm, his ability to simplify, and extreme focus. Koch does a great job of illustrating the importance of culture and how tough it is to instill and maintain. There are a ton of great lessons in here and if you’re interested in running/owning a business “Quench Your Own Thirst” is definitely worth one’s while. A quick, easy and informative read.