The head and heart of business strategy
A story about how a Seattle entrepreneur navigated Covid-19
Preface: why I wrote this story
I write about inspiring business strategies and tactics that drive growth. I used to believe that a sound strategy originates from the head: rational and logical.
During the pandemic, I witnessed many businesses making strategic choices, not just with logical planning, but also based on their virtues and beliefs. They led me to observe another origination of business strategies. It comes from the heart: emotional and belief driven.
I would like to share with you this story about how a business shaped its survival strategy with both the heart and the head.
The decision
It was a rainy day in early March 2020. Ben had been silently staring at the document in front of him for hours. His HR manager had everything ready to go once Ben signs off.
It was a layoff plan; it would let go 50% of Ben’s workforce and cut 50% of salaries for the remaining employees. “It’s the only way to give us a chance to survive,” Ben’s leadership team told their boss after careful evaluation of the dire situation.
Ben picked up the pen, but eventually put it down. He was not willing to give up on his employees, for they had been loyal to him for years. He saw them as the greatest asset of the company, and worried that he might never be able to recruit them back.
Ben’s head understood the situation, but his heart had other plans. “I’m not going to sign-off on this”, Ben told his HR manager, “let us figure out something better together”.
The world turned upside down
Ben is the owner of Greater Pacific Industries, Inc., a promotional product trading and services company. The Company connects product demands across the world with factories in Asia, and provides full-service promotional product procurement, including custom design, sourcing, production management and door-to-door logistics.
Founded in 1995, it had grown from zero to $70 million in annual revenues, and had offices in Seattle, Philadelphia, San Diego, and Shanghai.
However, the world turned upside down for Ben when COVID-19 hit in early 2020.
When the pandemic first took hold in China in February 2020, many of Ben’s shipments from his suppliers suddenly stalled. The virus outbreak shocked the country into a complete lockdown, bringing its factory manufacturing, transportation, and port activities to a standstill.
Then one after another, Ben’s customers in the U.S. and Europe canceled their orders. As conferences and customer engagements moved to virtual and most business activities froze, demand and budget on promotional products plummeted.
Ben’s 25-year-old business seemed to evaporate overnight as sales came to a halt.
In 2020, many key players in the $22 billion Ad Specialty Industry filed for bankruptcy. Would Ben and Greater Pacific Industries be one of them?
The gamble: do or die
With little revenue coming in, Ben’s cashflow would dry up quickly. There was only one option left for Ben: survive. After countless stressful brainstorms and debates with his managers, Ben decided to shift the business to sell personal protective equipment (PPE), for he sensed that masks, gloves, gowns, and sanitizers were the few things in urgent demand across the world amid the pandemic.
However, Ben and his team had no experience with either the demand or supply side of the PPE market. They talked to their existing suppliers on spinning up PPE production lines, and cold-called PPE manufacturers to negotiate orders. At the same time, they ran advertisements in websites and emails to try their luck.
Still, Ben had no idea if any of these efforts and investments would materialize into orders.
The answer became clear when customers responded to his advertisements. Within one week, they got $9 million in orders and a rush of inquiries. However, an even bigger challenge was waiting for Ben: the complicated and fast-changing government policies and regulation on PPE importation.
To ensure compliance, Ben and his team spent many sleepless nights and days to research standards and qualifications required by regulators and hospital buyers. Furthermore, they reached out to FDA policy experts and U.S. customs brokers to learn the details of relevant regulations and import processes for PPE.
Despite all the due diligence they conducted, his business was still hit hard by abrupt policy changes.
Ben experienced multiple shipments being turned away by US customs, due to sudden FDA bans and other sharp turns in regulatory direction. “One of our shipments passed customs inspection and got FDA approval just the week before, but then the next shipment with the exact same product was rejected at the same port, simply because of some change of rules.” It not only cost Ben hundreds of thousands of dollars, but also hurt customer relationships, which he had worked so hard to build.
“It’s the cost of doing business.” Ben commented helplessly. However, instead of giving up, he pressed on to face the challenge. To keep up with the ever-changing regulations, he proactively consulted policy experts on the latest guidelines and their implications. To ensure consistently high standards, he hired more staff for quality control. To manage his exposure to failed deliveries caused by unexpected circumstances, he purchased significant numbers of insurance policies.
Ben and his team managed to navigate one obstacle after another. In April, May and June of 2020, the company sold tens of millions of dollars of PPE. Because of this pivot to PPE merchandise, Ben successfully kept his business afloat.
“I was not even sure if the business would still exist in its 26th year”, said Ben, “It’s a gamble, and I simply got lucky.” That was his heart talking. The risk of his gamble was mitigated by Ben’s choices based on his beliefs, values, and business acumen. While the first set of orders may have been a result of luck, subsequent ones were direct results of trust, relationships, research, and thoughtful risk management. Moreover, by keeping his team intact, he maintained a high service level and was able to execute strategized actions, all of which amidst an almost overnight surge in PPE demand.
Redwood in fire
Ben’s story reminds me of the redwood. In a forest, trees can be easily destroyed by natural disturbances, such as fire, flood, and heavy wind. However, research shows that redwood forests have the capability to not only withstand major natural disruptions, but also benefit from them.
Over the centuries, redwood forests in California have been frequently exposed to wildfires. But after a fire, instead of shrinking, redwoods sprout much more aggressively in burnt areas. As saplings grow, the species continues to prosper.
They just keep reviving and regenerating.
It’s never the same again
Ben celebrated his company’s 26th anniversary in January 2021. It was a unique celebration this year: the business not only survived 2020 by pivoting to PPE sales, but also managed to launch two new business lines: e-commerce and retail.
He runs his business with both the heart and the head.
When I asked Ben about his secret to building a 26-year-old and growing business, he replied: “I just keep inventing and re-inventing. It’s never the same again.”
