ISN and Underwear

Kevin O’Brien makes some very good points in a recent note. What he points out is the classic problem of the small entrepreneurial business, which is that it’s very hard to hire people who will (a) take your business as seriously as you do and (b) will react as you react, and operate as you operate, with the same intelligence and good judgement.

In a sense, the problem that Kevin faces is similar to the problems Fruit of the Loom and others face when outsourcing manufacturing to maquiladora plants in Mexico: how do you convince a collection of poorly paid generic workers with no connection to you or your products to pay attention to quality and service? To quote from a case brought against Fruit of the Loom by its stockholders:

In its attempt to reduce inventories, Fruit had completely halted production at several of its maquiladora factories and fired workers rather than furlough them. As a result, when Fruit attempted to increase production … Fruit found it was not possible to rehire the trained and skilled workers it had fired. As a result, Fruit was forced to hire unskilled and poorly trained workers who were unable to efficiently and effectively produce goods and thus produced huge amounts of imperfect and irregular goods which resulted in grossly overvalued inventories for Fruit and Fruit not being able to produce the high-quality product needed to meet customer demand and increase revenues, while causing Fruit’s expenses to soar.
What Kevin says about ISN really boils down to this: of the several companies in what we might call the “West Royalty maquiladora zone”, Advantage produces underwear with the fewest defects.

The answer to the problem is obviously not Kevin answering the phone himself 24/7, for this would lead to the end of Kevin, which is not the desired result here. Perhaps the only solution is to take customer service back in-house, and to conceptually place the people who answer the telephone at the top of the corporate hierarchy, rather than at the bottom. Set them up with profit sharing. Give them business cards. Make sure they have plenty of Knudsen Juices in the fridge. Bring them meals. Give them free high-speed Internet access at home.

This will cost more. You will have to raise prices to pay for this. But, in the end, you will have a better product than anyone else, and the market will recognize this.

The good thing about all of this? You know the underwear needs work. Your competition insists, even in the face of underwear full of holes, with the the waistband falling off, that their underwear is just fine.