The Billion-Person Focus Group

TikTok is disrupting business cycles and having a profound impact on product development. Have you tried a Keithadilla?

Good Morning!

Here are today’s highlights:            

• It’s either a small hotel or a big gift shop where you can buy cool stuff.

• How two business owners are taking a four-month sabbatical.

• More businesses are encouraging employees to take power naps. 

• Those pay-transparency laws are having an impact.

MARKETING

TikTok has become a billion-person focus group: “The social app has proved a force in marketing and media, and helped brands monitor consumer trends. According to CEO Shou Chew, five million businesses use the platform. For all its mind-reading insights, the platform has also become a disruptive force in research and development, upending conventional wisdom about product cycles, testing, differentiation and manufacturing. Companies scramble to mass-produce products, or fix existing ones, based on feedback that often has a very short shelf life.”

• “Smothered in a special sauce, the Keithadilla was a breakout hit for Chipotle Mexican Grill in the first quarter. It also gave the company indigestion. The twist on Chipotle’s traditional quesadilla was invented by a popular TikTok food influencer as an off-menu ‘hack.’”

• “Soon, the Mexican fast-casual chain was overwhelmed by custom orders. The item took longer to make and its mix of ingredients flustered workers, especially when the sauce—a combination of sour cream and chipotle-honey vinaigrette—ran out. When some staffers refused to make the off-menu item, customers began posting angry reviews online.”

• “Chipotle faced a decision: Give in to the whims of TikTok or risk losing business. The Keithadilla is now a permanent menu item. ‘We want to be at the pulse of culture,’ said Chris Brandt, the chain’s chief marketing officer.” READ MORE

At this boutique hotel, pretty much everything will be for sale: “In 2015, [Shannon] Maldonado, now 39, recalled thinking, ‘What if I start a modern gift shop?’ Soon after, she started a website, Yowie, that sold housewares, like ceramic cups and bowls. Ms. Maldonado soon quit her job at American Eagle to focus on the business. She moved to her native Philadelphia, where she hosted a series of Yowie pop-up shops before settling into a tiny store in the Queen Village neighborhood. Recently, she moved the store again, to a much bigger space on the ground floor of a new Yowie hotel designed and co-owned by Ms. Maldonado. The hotel is set to open this summer in Philadelphia. ‘My dream was to be connected to a hotel,’ she said. ‘I didn’t know that would be my hotel.’”

• “The 13-room Yowie hotel, which will also have a cafe, was originally two rowhouses on South Street near the Delaware River that have been combined. On a warm day in February, Ms. Maldonado stood in a sunlit corner room between two bay windows as she scrolled through her design plan for the unfinished space, pointing to where the custom side tables, colorful rugs, and artwork would go.”

• “Ms. Maldonado described her style as minimal but cozy, with an emphasis on color. The hotel’s décor mixes furniture from BluDot, Hay, and other brands with pieces from emerging makers, many of whom are local. It’s a strategy that’s also on display in the Yowie shop, where bold housewares from lines such as Dusen Dusen and Fredericks & Mae sit alongside handmade ceramic bowls and planters.”

• “At the Yowie hotel, bringing home items chosen by Ms. Maldonado will be possible: If guests are inspired to buy the mug in their room, or the table it rests on, they can buy the items from the Yowie store or directly from a maker through in-room catalogs identifying nearly all of the hotel’s décor, including the fringed Llot Llov light fixtures and the Sherwin Williams ‘Denim’ blue paint in the hallways.” READ MORE

THE ENTREPRENEURIAL LIFE

In a recent blog post, Chris Hutchinson explained why he’s taking a four-month sabbatical: “From May to August of 2023, our company’s two executive leaders—my wife Diana and me—will not be connecting with or participating in the roles we have been serving in Trebuchet Group. Our remaining five team members will be running the business and working with our amazing clients and partners. We’re taking a four-month-long sabbatical. When we’ve shared this news with others, we’re typically greeted by a couple of responses, which are listed below along with some of our thoughts.”

• “What amazing trips do you have planned? What book are you going to write? Actually we’re deliberately not packing our schedules full, nor am I going to be working on my next book. After a few iterations of supporting other leaders as they dreamed up and went on their own sabbaticals, we received some wisdom around leaving lots of space and time for choices as we go. We are considering a couple weeks in Alaska, New Mexico, and maybe the East Coast, and want to build stronger habits of self-care for ourselves—as well as doing some decluttering and organizing of some of our personal space.”

• “What will you do when you get back? Our plan is to sit down with the team and share together: What did we learn? What did they learn? What went well? Not so well? What do we want to keep, try, and drop going forward? Something I tossed out to the team for them to consider during the sabbatical is how we all might move to a four-day workweek while still achieving the impact, revenue, and profitability the company needs.”

• “We can’t afford this: Thanks to the 2008 Recession and resulting deep debt hole, after we climbed out we kept putting cash into a ‘just in case’ reserve for the business. This reserve not only enables the whole company to sleep better at night, it also gives us the buffer needed to support a sabbatical policy. We modeled ours after our extraordinary client Essential Ingredients/Cathedral Holdings so everyone in our company can, over time, participate in a sabbatical. Having people willingly invest their lives with us and our clients is priceless, and we want the business to honor that commitment.” READ MORE

ECOMMERCE

The world’s most popular shopping site is quietly upending retail: “Shein, pronounced ‘shee-in,’ may be the most ambitious company you’ve never heard of. Shein, which was founded in China and later moved its headquarters to Singapore, was the most downloaded shopping app in the world last year (it was No. 2 in the U.S. after Amazon.com‘s app, according to Apptopia). The retailer took off during the pandemic-era e-commerce boom, rising to global prominence on the back of Gen Z’s taste for the $4 shirts and $6 dresses, which it’s able to churn out with its norm-breaking supply-chain model.”

• “Lindsay Firko used to be a regular big-box customer, rarely making it out of her local Target without multiple shopping bags. But ever since the 28-year-old downloaded the app from online retailer Shein, her shopping sprees have changed.”

• “Rather than strolling the aisles of her local Pittsburgh retailers, Firko now spends hours scrolling Shein. Every few months, she piles her virtual cart with a bounty of items at spit-take prices: trendy pants, skirts, and tops at $3 or $6 apiece, household and beauty items like a $2 bath mat or a $5 soap dispenser, and the occasional just-couldn’t-pass-it up treat like a curly wig for her Jack Russell mix, Bailey.” READ MORE

HUMAN RESOURCES

Wealthy Street Bakery took a chance on hiring a homeless man. Four years later, he owns the company: “Andy Havemeier embarked on a four-year journey to become an owner at two of Grand Rapids’ most popular bakeries just after he ‘went down a dark path’ and hit rock bottom. His battle with alcohol-use disorder cost him a series of jobs and ultimately left him homeless. Struggling under the weight of his addiction, he turned to Guiding Light for help in 2019, joining the Grand Rapids-based non-profit rehabilitation and recovery program’s sober living community. After six months in the program, the nonprofit allows participants to start looking for a job. That’s when Havemeier set up what he anticipated being a practice interview at Wealthy Street Bakery as he got ready to dive into the job search.”

• “‘On May 31, Havemeier and a group of six local co-investors closed on a deal to acquire Wealthy Street Bakery and Hall Street Bakery from longtime owners Jim and Barb McClurg, who plan to advise the new ownership through a transition period. ‘He’s as ready as anybody could be,’ Jim McClurg said of Havemeier. ‘He’s got a fantastic mind for business.’”

• “While they intended to pass the company on to the next generation, the McClurgs’ children later realized that they did not want to take over the family business. They turned to the bakeries’ management team to gauge whether anyone had interest in buying the company. That’s when Havemeier raised his hand.”

• “Going into that initial interview with [Jim] McClurg, Havemeier said he immediately felt comfortable and decided to stay after he was offered a job as a front of house/kitchen manager. ‘If I didn’t have that large blemish on my resume as far as losing a couple jobs because of my addiction, that would probably have been the most perfect resume Jim’s ever seen for that position,’ he said. ‘But he still did take a great huge risk. Some of the jobs I’ve lost in the past were not small things that he had to overlook.’” READ MORE

You snooze, you win: “Napping on the job was once grounds for being fired. But new research shows that it may be wise for employers to actively encourage workers to take a power nap for better brain health. In fact, researchers at UCL, one of the top universities in London, and the University of the Republic in Uruguay found that daytime napping could slow the rate at which brains shrink as we age. The research team—who hope their findings will reduce any stigma that still exists around daytime napping—also found evidence that a short snooze can improve learning abilities and prevent dementia.”

• “They found that, overall, people that are predetermined to nap had a larger total brain volume—a marker of good brain health linked to a lower risk of dementia and other diseases. The study suggests the average difference in brain volume between habitual nappers and those who don’t nap is equivalent to 2.6 to 6.5 years of aging.”

• “Some bosses already hailed snoozing as a great way to improve productivity and well-being, long before the research touted its efficacy. Google, Ben & Jerry’s, Cisco, and Nike are among the small but growing list of employers to have embraced napping as an on-the-job perk and introduced dedicated napping facilities in their workspaces.” READ MORE

Pay transparency laws are having an impact: “Salary transparency legislation has been enacted in California, Washington State, Colorado, and a handful of cities including New York. Illinois passed a wage transparency law in May. More than one-fourth of the U.S. labor force is now covered by salary transparency legislation, according to an estimate by the National Women’s Law Center. Norms are shifting nationwide: At Indeed, a job search website, about 45 percent of all advertisements for work in the United States now carry a pay range disclosure, up from less than 20 percent before the pandemic. Lawmakers often introduce pay transparency laws in an effort to help reduce gender and racial wage gaps.”

• “In some cases, employers have avoided disclosing specific pay practices by posting job advertisements with salary ranges that could apply to anyone at the company, from a new hire in a cubicle to an executive with a corner office. At Netflix, for example, current job postings in California show pay ranges from $60,000 to $290,000 for a role in consumer products and $195,000 to $510,000 for a senior manager in talent and recruiting.”

• “A tight labor market may pressure an employer to compete for workers, resulting in a more precise (and potentially higher) pay rate on a job listing. By contrast, in industries that have seen layoffs, employers may be able to attract qualified applicants without posting exact salaries.” READ MORE

SILICON VALLEY

There’s a lot of vacant office space in Silicon Valley: “Office-vacancy rates in Silicon Valley, which includes the Northern California communities of San Jose, Palo Alto and Sunnyvale, were up to 17 percent  in June from 11 percent in 2019, according to data firm CoStar Group. In some spots, such as Menlo Park and Mountain View, the rate surpassed 20 percent this spring, CoStar said. The level of surplus office space remains below what is available just north in San Francisco, where the vacancy rate has more than tripled from 2019 to more than 25 percent. But some analysts and investors expect Silicon Valley will narrow the gap because tech companies are going through layoffs and are shedding unwanted floors.”

• “San Francisco’s vacancy rates rose faster and sooner than in Silicon Valley, in part because much of the demand in the city was fueled by smaller firms that were quicker to cancel leases, according to brokers and landlords.”

• “Silicon Valley offices are dominated by top companies such as Google, Meta, and Apple, which have been slower to give up space in a market that is usually tight. ‘Historically those firms almost never gave up space,’ said George Fox, executive vice president with commercial real-estate services firm CBRE Group.”

• “Rising office vacancies in Silicon Valley have worried the region’s retailers, restaurants and other small businesses that depend on tech employees.” READ MORE

PROFILE

Robert Mondavi changed the wine industry; his grandson is trying to change farming: By the force of his charismatic personality, [Robert] Mondavi, a hard-driving visionary who established the Robert Mondavi Winery after being forced out of the family business, practically willed Napa to strive for greatness. Now, Carlo Mondavi, a grandson of Robert, is taking on a similar role, pushing the California wine industry in a new direction born not of 20th-century aspirations but of the existential threat of the 21st-century: climate change.”

• “Enter the Monarch, a compact tractor specifically aimed at small fruit and vegetable farms, including vineyards. It relies on electric vehicle technology, robotics, and artificial intelligence that Mr. Mondavi sees as a solution to the obstacles that many conventional farmers say prevent them from transitioning to organic or other more sustainable methods.”

• “‘This is technology that helps our planet,’ Mr. Mondavi said. ‘It changes the economic dynamic, helping to make it cheaper to farm organically or regeneratively than to farm conventionally.’”

• “The tractor has the capacity to drive itself, though, as with self-driving cars, the notion can make people nervous. Still, driving a tractor is a dangerous job, particularly with vineyards on slopes. Around the world, farmers die every year in tractor accidents. Self-driving offers an additional bonus.”

• “‘It allows us to provide more opportunity for vineyard workers to be able to manage multiple tractors and more complexity, rather than one person, one tractor, which is how we currently do things,’ Mr. Matthiasson said. ‘More responsibility, more pay, more opportunity.’” READ MORE

THE 21 HATS PODCAST

Twelve Hours a Day, Six Days a Week: This week, we meet Jennifer Kerhin, the newest addition to the 21 Hats Podcast team. Jennifer’s business, SB Expos and Events, is an event-management business that survived the shut down in 2020 and has grown to more than $3 million a year in revenue. When Covid first hit, Jennifer tells Jay Goltz, she really thought it would put her out of business; in the end, she says, it made her stronger. Even so, she is very much stuck working in her business, while looking for ways to extract herself from day-to-day tasks someone else could handle. But how do you free yourself up enough so that you have the time to put the people and systems in place that you know you need? And how long should that take? “I hate to tell you,” says Jay, “it took me 10 years, but I'm going to help you here, so it's going to take you 10 months.”

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren