Reps, Bootstrapping, and The Harvard Business School

The below article was published by MANA, the largest Sales Rep association in the country. It shares
Professor Gary Naumann’s excellent treatise on the Relevance of the R&R, HBS case on its 30th anniversary.

Regular readers of Agency Sales magazine know Harvard MBA Bob Reiss as a “super-rep” whose business successes were so innovative that they were featured in a Harvard Business School case study titled “R&R” after the name of Reiss’ rep firm. Decades later, that entrepreneurship case study remains one of Harvard’s top-selling teaching aids used in business school curricula across the globe.
Much of Reiss’ successes revolve around his practice of “bootstrapping,” sharing risks and rewards with carefully chosen partners rather than relying on loans or personal savings to fund his ventures. Reiss’ web site is www.bootstrapping101.com.
One business school professor who has included this case study in his classes is Gary Naumann, Professor of Practice, The Hahnco Companies Professor of Entrepreneurship, W. P. Carey School of Business, Arizona State University. In this guest blog Naumann shares his experience using the Bob Reiss case study with his students.
I have been teaching Entrepreneurship to undergraduates, MBAs and Executive MBAs since 1993, and have used the R&R case in every course I have taught. I never really thought specifically about the relevance of the case until recently asked because I always considered it timeless for the following reasons. The students and I did this just recently as we were discussing the case:
Strategic partnerships. Critical then and critical now. Being able to quickly identify a company whose interests would be aligned with yours will always be important…getting them to listen is the art.
Promotion vs. advertising . Anybody can write a check…getting the word out without cash is even more relevant today with being able to go viral overnight. Students today are fortunate to be able to use these techniques via social media and create electronic word-of-mouth.
Converting Fixed costs to variable costs . Over the years I have had so many students tell me they are going to pull a “Bob Reiss”, either in their existing companies or potential start-ups by sharing the wealth, renting versus owning resources, and paying commissions or royalties instead of up-front fees or equity.
Know your industry . Not everyone can be as deep as Bob Reiss was in the toy and game industry, but going deep in whatever industry you decide to pursue gives you insight, contacts and credibility that are critical to success. I always differentiate in teaching the case between factors that were “out there” for anyone to pick up on by paying attention, and those that Bob brought to the table by virtue of his individual efforts and experience.
Sense of urgency/timeline . Every situation, every case we look at has a timeline. There is no better example of “hitting your marks” than R&R. Students need to adopt Bob’s action orientation and the understanding that opportunities are like waves building, cresting and breaking in the ocean…catch one, ride it, and make the most of it…or wait for the next one.
Barter . The biggest examples of this were the 5 ads that Bob built into the agreement. He needed some advertising and this was key to his success. We use barter everyday with great success.
Intrapreneurship. Since many of my students are currently working for larger organizations, we approach entrepreneurship as a mindset versus a set of behaviors. We encourage them to be intrapreneurial in their current positions, just as Bob did by building and running the personalized pen division in his first job out of HBS for low salary and commissions.
Outsourcing. An important concept that Bob used to the max. It doesn’t have to mean that it goes overseas, just that you find someone else that is really good at something versus doing it in-house and building up layers of fixed costs.
Crowdsourcing. By using his small group of friends to brainstorm about ideas for the trivia game, Bob was able to hit on television. He was an early crowdsourcer…now the groups are bigger and viral…same principle…seek out broad opinions on how to build something.
Relationship Building. Critical to success then and now. Students get to see first-hand just how important it is to have people to go to for key components of any business…especially when there is a tight time-line.
Treat people well . This is a two way street and relates to reps, suppliers, service providers etc. These should be viewed as partnerships where each party “takes care” of the other by doing good work, paying on time and not grinding for the last dime…there is always another deal.
Breakeven. Could not be more more relevant…too many business owners do not understand where they are in the business and what it will take to breakeven. We hit this hard because of its applicability across the board. They come to understand that one of the reasons Bob was so successful was a clear understanding of his breakeven and that the order from K Mart alone pushed him over the top.
Trust/Ethics. This is the quintessential element of what was relevant then and is relevant now. This was on display throughout the case in Bob’s dealings with TV Guide, Sam, his reps and everyone he dealt with on this business. If students today and tomorrow can internalize the importance of building trust, we will have done a good job.
Good luck to all…and yes, luck plays a key role, always…you just have to be ready when it shows its face.

Bob Reiss additions to Professor Gary Naumann’s list

CRITICAL IMPORTANCE OF SALES FUNCTION (not taught at most schools) is the reason I gave such a generous deal to Sam Kaplan. It freed me to devote most of my time to selling. There was a short window of opportunity.

FLEXIBILITY IMPORTANCE–The plan was to do the TV Guide Trivia game without a board so it could be played on the Trivial Pursuit board. TV Guide objected to this, and we quickly had to add a board. The reality was that it worked out great as it gave us a higher profit percentage and more profit dollars per games sold.

TESTING can limit risk and save money. Our testing was to offer games at Toy Fair with our only investment being the prototype game and showing a TV Guide ad. The reaction from buyers told us to go full speed ahead. A major buyer negative reception would have probably produced an abandonment of the venture.

THE VALUE OF SHORT COMMUNICATIONS—The initial overture to TV Guide was a cold call six-sentence letter to the publisher, which resulted in the appointment and deal consummation. (Long letters from strangers usually don’t get read.)

VALUE OF LICENSING—The TV Guide name gave us credibility to go against the giants in the business.

PRICING a product on what market can bear rather than the cost. The product cost was $3.10, and we sold it wholesale at $12.50 We easily could have set a lower price based on that cost, but we were catching a trend at the outset, had a major brand behind us, and short life of the product.

TRY TO GET INVESTORS THAT BRING MORE TO THE TABLE THAN MONEY.
Sam Kaplan surely fit that description.

FACTORS—a major bootstrapping tool was employed for their guarantee of our receivables. They are mainly used for their advance of money based on your receivables and inventory. We didn’t need them for that as we were cash positive after the first orders.

BOOTSTRAPPING actions are heavily demonstrated in the R&R case and are more important than ever. My definition of it is “to pursue success with limited resources and with the help of others.” By limited resources I mean shortages of money, knowledge, and relationships. The book Bootstrapping 101 contains the entire case in an appendix and points out all the Bootstrapping tips employed in the case,which are still relevant.
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