It’s now easier than ever to launch a company. But while 400,000 businesses flood the market in the United States every year, the vast majority of these will never get off the ground, much less be around in five years. By some estimates 80% percent of all startups will crash and burn.
So what are the secrets of companies that are able to stand the test of time? What does it take to create a business that matters to the world?
To begin to answer these questions, we’ve spoken to people from a wide range of industries–from beauty to technology to furniture–who have helped build successful and seemingly enduring businesses. While they each have their own strategies for creating products that stand out in a crowded marketplace, there was one thread that connected their outlooks: Each was fixated with understanding and catering to the needs of their customers.
Take Dropbox‘s head of design, for instance, who ensures that someone from his team is spending time with users every single day to find ways to improve the way that people work and collaborate online. Or how the founders of Birchbox have found ways to delight their customers at every stage of the purchasing process.
These people believe that mattering as a business means bringing value, delight, and meaning to the lives of their customers. Read on to learn how they work to create businesses that not only sell top-notch products or experiences, but also inspire others.
Tristan Walker says that when he was thinking about starting a health and beauty company for men and women of color, he wasn’t simply focused on how much money there was to be made by catering to this market segment. Instead, his head was swirling with stories about how difficult it is to grow up in a country where cosmetics and grooming companies have consistently ignored your needs as a consumer. For instance, it has often been near impossible to find the right foundation color if you happen to be a dark-skinned woman, and until recently there were no razors available in stores designed for men with coarse, curly facial hair.
Walker himself has experienced some of this angst. Early in his career, when he was an intern on Wall Street, another trader rudely told him to clean up the hair on his face. “I remember being mortified not only by the fact that the guy was a jerk, but also that I didn’t know what to do,” Walker says. “There were just no products for me on the market. For a hundred years, we haven’t had products that have worked for us.”
In 2013, he decided to tackle the shaving problem himself. He founded Walker & Co., a company with the goal of making health and beauty simple for people of color. Over the last two years, he has built a team of 20 employees and together, they have created a shaving system called the Bevel that solves some the of issues that many men with thick facial hair, like himself, experience. The product has been a hit: It has a 95% customer loyalty rate and will soon be sold on the shelves of Target stores. With his most recent $24 million round of Series B funding, he’s working on developing a suite of other products for people of color. The next product is slated to be released in 2016.
Walker’s investors–who include Silicon Valley firms like Andreessen Horowitz and Google Ventures as well as celebrities like John Legend and Magic Johnson–see the massive market potential that Walker & Co. is tapping into. Nielsen reports that African-Americans already have $1.1 trillion in spending power, a figure that is growing 64% faster than the general market. Catering to these consumers makes good business sense, but Walker says he isn’t focused on profits right now. Walker believes that the only way his company will be able to penetrate this customer base is if he stays focused on his original mission and values.“It’s less about market share and more about mindshare,” he says. “How do we actually build a company that inspires unbridled loyalty to the products that we sell? It starts from a place of authenticity.”
Walker believes it is important to listen carefully to what his customers are saying about their everyday experiences with grooming products. For instance, he’s heard from black men in the army who have struggled their entire careers to stay clean-shaven for work. He’s heard from single mothers who have wanted to walk their sons through the important rite of passage of their first shave, but were stumped because they couldn’t find any razors that avoided razor burn or ingrown hairs. These are not just stories about underserved consumers; these are stories about people who could not get on with their jobs or their family lives because brands were not thinking about their needs. “These are stories shared by millions of people,” Walker says. “We take a very consumer-centric approach to our innovation. It’s not about building it and seeing if they come; it’s talking to them and knowing that they will come.”
Walker’s strategy of listening carefully to his target audience and designing products that thoughtfully accommodate their needs means that he’s not chasing fast growth or quick wins. But ultimately, he believes he’s creating a company and products that will matter to people of color for the long haul. “The question I ask myself is, can we build a company that this generation can be fundamentally proud to support?” he says. “It goes deeper than just the product. We inspire pride in gentlemen who have beards and will never shave.”
While Katia Beauchamp and Hayley Barna were still in business school, they realized they had struck gold with an idea that would usher the beauty industry into the Internet era. It was 2010, and while many categories–books, clothing, electronics–had found their way onto e-commerce platforms, women didn’t want to buy their makeup and skincare products online, since an important part of the purchasing experience is visiting makeup counters to sample products. “Women expect to test and try and smell and smear a product before they are willing to buy it,” Beauchamp says. “The number one reason that anyone buys a beauty product is trial.”
So together, Beauchamp and Barna developed the model behind the now-famous Birchbox–the monthly subscription service that delivers personalized samples of beauty products right to your doorstep. The pair focused carefully on execution: The products came wrapped in pretty tissue paper, so that each monthly delivery felt like a present. Women fell in love with the idea almost immediately.
In fact, the concept was so irresistible that other companies soon flooded the market with hundreds of other monthly subscription boxes, not just in the beauty category but also in every other category imaginable: There are now subscription boxes full of snacks, socks, sex toys, and soap. And yet, despite copying the model, none of these other companies have come close to Birchbox’s growth and profitability.
So how has Birchbox managed to stand the test of time, even as other competitors have sprung up in their wake? Beauchamp says the secret to Birchbox’s success was that the box itself was never at the core of the business. The box was just a marketing tool that allowed consumers to learn about products that they could purchase from the Birchbox online store.
Even though the subscription model was a hit, Beauchamp and Barna realized that the novelty of a pretty monthly sample box would quickly lose its charm. So they worked with beauty brands to ensure that customers were always receiving the latest products. They built an online store that made it easy for customers to purchase products they had sampled. They also created a sophisticated analytics infrastructure so that they could personalize each box to each customer’s tastes, while providing valuable data and feedback to beauty brands to help them with product development.
“We understood that the value proposition had to be deep for us to become a staple in consumers’ lives,” Beauchamp says. “It couldn’t just be fun, because fun wears off. It couldn’t just be pretty, because eventually you have enough pretty things.”
And ultimately, the pair had big dreams: They wanted to create a business that mattered, not simply an exciting new marketing concept. For them, this meant bringing the beauty industry into the digital age by removing the friction of the discovery process for the consumer. This was a much more ambitious project, but Beauchamp believes that to create a company that is successful in today’s crowded marketplace, entrepreneurs have no choice but to offer consumers something of real value. “We knew that we’d bitten off a lot,” she says. “But I really believe that consumers’ demands are getting more complicated: They want more substance and depth to what companies provide them. We were feeling that in ourselves and that’s why we built Birchbox. ”
In 2007, Drew Houston, an MIT student, was on a bus from Boston to New York hoping to get a solid four and a half hours of work done. But as soon as he sat down, he realized he’d left his flash drive at home. While he was left to twiddle his thumbs on the bus ride, it occurred to him that everybody could benefit from a cloud-based file storage and sharing system, so as an engineer, he decided to build Dropbox with fellow student Arash Ferdowsi. Since then, they’ve racked up a customer base of 400 million people.
But what sets Dropbox apart isn’t just the ability to access files. After all, file transferring is not a unique idea and it has been around for a long time. The problem was that many of these technologies were clumsy and inelegant; employees could download files from a company server using FTPs, for instance, but this involved logging into a complex system. “It was almost like having to learn a new language for you to add a file,” says Alex Castellarnau, Dropbox’s head of design. “In many ways, Dropbox was creating a design solution, not just a technology solution. Dropbox used a known concept–a folder–to explain the cloud and syncing files.”
Dropbox has always been obsessed with designing a product that customers would find intuitive. Castellarnau says that keeping things simple is key, to reduce unnecessary anxiety on the user’s part. This means constantly referencing things that the average user would already recognize: the folder, drag-and-drop files, simply clicking a button to share a file with someone else. “It’s about tapping into a known norm, or an existing social convention, and adding value onto that,” Castellarnau says. “You and I could probably come up with 50 ways to reinvent the traffic light, but why would we want to, when it is such a universally recognized norm?”
This all sounds very basic, but Castellarnau says that design that looks clean and easy to use actually takes a lot of careful thinking on the part of the design team. Dropbox is obsessed with understanding their consumers; as they work to develop new products and tweak existing ones, they are constantly testing their design with real subjects. There are 20 people at the company whose only role is to talk to users to glean insights. They ask to be invited into users’ homes or offices to observe how they use Dropbox and integrate it into their work. Before any product sees the light of day, thousands of users have had a chance to try it out and offer their feedback. Dropbox also tests products around the world, to see if cultural norms change the way that people engage with Dropbox. “There’s not a single day in which we are not engaging with users in one way or another,” Castellarnau says.
Castellarnau’s fundamental principle: It is never worth creating a new tool just for the sake of adding a new feature. In other words, each new tool must respond to a clear user need. This is a very different philosophy from companies like Apple that have tried to preempt trends. Steve Jobs famously once said, “A lot of times, people don’t know what they want until you show it to them.” At Dropbox, focus groups and user preferences are driving forces that dictate the company’s agenda. Castellarnau points out that in the beginning, customers turned to Dropbox to access their own files, but they have since started to use the product primarily for sharing files with people in groups. So today, Dropbox’s design team is focused on simplifying the way that groups can collaborate and work together on the platform. “Our users define the mission of the company,” Castellarnau says. “We evolve with them.”
He would know. Five years ago, when Brett started working at West Elm, he had one mission: to infuse the furniture brand with soul. At the time, West Elm was just another brand within the Williams-Sonoma conglomerate stocked with solid, predictable products that generated a respectable revenue stream for the company. But Brett believed that if the brand continued to be unexceptional, it wouldn’t last long; he could foresee that it would lose out to brands that had more personality and that resonated more deeply with customers.
His job, as he saw it, was to give West Elm a distinctive aesthetic that people would immediately recognize. Out of a blank canvas, he wanted to create a look that was handcrafted and that told a story about the individuals who had made each piece of furniture. “I wanted to foster that emotional connection,” he says.
When it comes to aesthetics, though, choosing to take a brand in a new direction comes with uncertainty and the distinct possibility of failure. A new look might fall flat or be panned by critics, losing the company millions in unsold products. But Brett, who worked at Anthropologie and Urban Outfitters before joining West Elm, had experience creating bold brands that had a clear voice in the marketplace–and he felt like it was time to trust his instincts.
But Brett does not take risks blindly. He has a philosophy about how to go about introducing new ideas and concepts into a brand. Step one: Register a big win early. “You have two minutes to turn things around and get people’s attention,” he says. “You need to build your credibility.” As Brett assessed all the changes he wanted to carry out, he picked one that he felt would have the highest chance of success. In his case, he focused on one product line: bedding. He would be able to introduce new duvets and sheets very quickly, and he had a good sense of what kinds of patterns would strike a chord with consumers, so he enlisted all his designers and product managers to get behind this one category.
When this first project proved a success, he moved on to a bigger project, which was to empower all the store managers to redesign showrooms to feel more natural, like a home. Then, he was to take an even bigger risk, which was to shoot the catalogs very differently from what had come before, to make even more dramatic changes to the brand’s image. The new artwork was full of vintage items and did not have a staged feel; they also drew attention to the makers of various products. “These were relatively small things that I could do with minimal resources,” Brett says. “I didn’t have to go out and ask for large amounts of capital, but they had a big impact on the business.” Within the first two months of Brett’s tenure, sales increased by 20% and kept increasing over the next months. These successes allowed him to articulate his vision and gain the trust of the board and the top brass at Williams-Sonoma.
Another crucial aspect of Brett’s strategy was to win the support of his staff members, so they did not feel like these changes were happening too quickly or without their input. It was important to Brett to keep in regular communication with his team, to explain his vision to them and also ask for their feedback. But ultimately, Brett believes that being innovative as a company is empowering to employees. The very act of taking risks helps workers feel that their work matters. “People want to come to work with a sense of purpose,” Brett says. “Taking these risks is not just a customer strategy, it’s absolutely a way to hire the best talent and to keep them engaged.”
With so many fitness options available on the market, it takes effort to stand out. But SoulCycle, a chain of cycling studios that has built up a cult following, has managed to be noticed. It was founded in 2006–and by 2011, it had been acquired by Equinox. Now it is about to go public, while also rapidly expanding across the country.
Melanie Whelan, SoulCycle‘s CEO, believes that the secret to the company’s success is that fitness is not at the heart of SoulCycle. When the company came onto the scene, spinning was something that you could do as part of your gym membership–but SoulCycle was designed to be more than just an exercise regimen: It was meant to be a boutique studio where people could come to escape the stresses of their life and find inspiration. The experience is meant to be as much about achieving emotional balance as about physical health. “There was a real hole in the market to create an exercise experience that was joyful and fun,” Whelan says. “The core of the business was creating an experience that was magical and that would extend outside the studio into people’s lives.”
It is hard enough creating an effective workout program–but SoulCycle‘s goal was much loftier. It wanted to create a workout that did not feel like work. To achieve this, the company has examined every aspect of the exercise experience and reimagined it. “We look at a thousand little elements in our studios,” Whelan says. “We want them to be sanctuaries for our riders.” For instance, to create an otherworldly ambience, SoulCycle outfitted rooms with candlelight and other atmospheric lighting as riders cycle. In a more practical move, the company installed phone chargers in lockers so that riders could leave their sessions with fully loaded batteries.
But Whelan says that it is the staff that defines the experience for riders. “We say we’re a hospitality company before we’re a fitness company,” she says. Front desk staff are expected to get to know riders well and forge relationships with them, so they can ask how their day is as they come through the door. SoulCycle seeks out instructors who are motivational and fit in well with the company’s inspirational culture. However, Whelan says that these instructors are also encouraged to be authentic and to express themselves; within the broad framework of the company, they have the freedom to choose their own music and modify routines based on the energy in the room.
Whelan believes that building a business that matters involves thinking beyond simply delivering an effective service. She believes finding ways to give customers a magical, memorable experience is key. This is something that Whelan and her staff discuss every day. And because the goal is to make the cycling experience more than just exercise, she does not see SoulCycle’s competition as other fitness studios, but anything that a customer could be doing with their spare time. “That includes staying home on a cold day in their pajamas,” Whelan says. “We really challenge ourselves to make every experience that a rider has amazing so that they choose to come back.” In other words, the spin class needs to be so inspiring that riders can’t wait to hop on the SoulCycle saddle again.
How are you building a business that matters? Tell us in the comments section below.
Hear more from many of the interviewees in this article at our upcoming Fast Company Innovation Festival.