Five Business Lessons From A Toothpick Maker

Almost every entrepreneur would love to know the secrets to business success. Is it innovation as espoused by many icons of industry? Is it marketing brilliance or is it sophisticated management? Nobody knows for sure. What worked for others may not work for you. In my case, a simple manufacturer of toothpicks is my favorite business model.

While it has been obvious to almost everyone that the practices of the large corporations are often not applicable to small companies, we tend to believe that cloning the management styles of famous entrepreneurs will enable us to improve our business skills. Perhaps it would be helpful to also study the methods of those who run companies that are most similar in size to our business. Hopefully, we could find ways to succeed without needing to be a business genius.

In my personal quest to find the answer, what influenced me most was an acquaintance that became comfortably wealthy although he didn’t seem special. He was just of average intelligence and not more hardworking than the other people around him. Here is what I observed about his style:

He sticks to his knitting. For his entire life, he has made nothing but toothpicks, but he mastered every single detail about the business. Nobody could beat his price because he could sell low due to high productivity. Many would think that in this modern age, it would be foolish not to try new things; sticking to your knitting does not mean forgetting about innovation, but to focus on what you know. You may wonder about the conglomerates that are now dominant in many industries. It all depends on the nature of the business. If the industry has few competitors due to factors that are difficult to overcome, like needing billions of pesos in capital, then a cash-rich well-managed conglomerate could penetrate a market it has no expertise in, if the players are less nimble and more loaded with overhead. Also, most conglomerates already have more cash than they could invest in their main business so they are looking for other places to put their money in. It may surprise you to know that even that icon of innovation, the late Steve Jobs, often advised people to stick to their knitting! Even his arch rival, Microsoft Co-founder Bill Gates, became the richest man in the world for over a decade (until he decided to start giving it away when he concentrated on philanthropy) by focusing on just computer software.

His overhead is small. There is the barest minimum of administrative staff and they multitasked heavily. Almost everyone else is a production worker. Even the supervisors do physical work and are fully capable of substituting for an absent worker if needed. There seems to be not a minute wasted.

He did not have a formal employee manual until quite recently. For the bulk of the history of his company, he relied on sound discretion instead of a formal set of rules. While this set-up was eventually changed due to a lawyer’s advice of possible legal problems, in the past there were few problems due to the missing manual. When he did finally have a manual, it was composed of just a few pages everyone easily understood. In our current litigious society, it will probably be more prudent to have an employee manual from the start. Nevertheless, it should be as short and as flexible as possible.

He thought highly of his work. While I did not have the opportunity to ask him if he felt passionate about his work, I think it is difficult to get excited about making toothpicks. However, I have lost count of how many insist that passion is essential for business success. This may indeed be true if your work is in the arts or certain types of positions, but for the vast majority of people, not hating their work, their boss or co-workers will do. Perhaps, people now have a feeling of entitlement to a job that they would love. Well and good if possible, but it is hard enough to find something that will suffice to keep you financially stable. This is due to the tendency for people to be passionate about the same things, such that “lovable” work is chased by too many people—consequently reducing its financial returns. The majority will find it more practical to just find a hobby that will satisfy their passion.

He is a hands-on entrepreneur. He opens his factory, and he’s the one who closes up. He knows every aspect of his operations and it would be extremely difficult to cheat without him knowing about it in a short time. Payments go directly to him so there is no chance for malversation. He also does the purchasing so he’s able to get the lowest possible price at the quality he desires. Admittedly, in certain types of business, such lack of delegation would not allow for growth. We always hear that you should work on your business and not in your business, but if you look around with your eyes wide open, you will see that most profitable small enterprises, except for the franchises, are run by hands-on entrepreneurs.

I noticed that the story of the toothpick maker is the story of most successful small businesses here. There are thousands of businessmen that are just like him and only a handful of superstar businessmen. Would it not be more feasible to start first more like him than to blindly mimic the techniques that only extraordinary entrepreneurs can execute?

*Originally published by the Manila Bulletin. C-4, Sunday, September 16, 2012. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.