ARJUN:
Tom, your fascinating journey starts with you being a food scientist and then going into packaged goods at Procter & Gamble. How did the P&G experience get you ready for the big impact you have had in restaurants?
TOM:
It's an interesting experience, going from grad school, where you’re in control of your own timing and destiny. The great experience at Procter & Gamble was to get into a company that really valued technical innovations, and then apply them with a lot of regimen and discipline to make sure that their products had a high level of performance. It was a great first step in transitioning from an academic environment to a business environment.
But for me personally, it had some limitations. It was all about function, no form, and it was really tough in that day to be creative because the innovation around technical attributes, be it removing grease, or more coffee flavors, those things were already present and driving a lot of the technical approaches. I found myself wishing and hoping and looking for opportunities to get closer to the consumer, where I could find a better balance between function, which is hugely important, and form, which is what really motivates people's choices, desires, and basically makes them really interested in product development.
ARJUN:
This is so fascinating, about the balance of function and form. Can you expand on how this influences people’s choices?
TOM:
I'll give you a great example from back in those days. One of the key projects I worked on at Procter & Gamble was the Duncan Hines cookies. Those were the soft and chewy ones. This was my first real scintilla that there was something that needed to get scratched, that wasn't going to get taken care of at Procter.
Our major competitor was Keebler. I compared our advertising. We were showing chocolate chips on a scale, demonstrating that we had more, and Keebler had only the Elf in a tree with a beautiful cookie aroma. It just spoke to the fact that function without aesthetic is lost on people who don't have an aesthetic value in their life. And what I was seeing emerge, even in those early days in the late '80s, was this tremendous underlying growth of American consumers taking on the need for much more aesthetic value. I can eat, taste innovation, all the things that really set up the path for restaurants to be what they became, which is the preferred way to eat and all the great creativity around that and other products that can apply that to themselves.
That's really the balance between form and function. What I saw was you had to have pure high integrity functionality in everything you do. Products have to perform. But in the absence of the story and the imagery that makes those things uber attractive, that pays off that function, I think it's a lost cause. So that was one of my major reasons for deciding to go somewhere else after cutting my teeth at Procter & Gamble.
ARJUN:
You have an exceedingly rare combination of experience, because if you look at the 1980s and '90s, most of us in the industry were either schooled in the PepsiCo way or the Procter & Gamble way. You have both unique learnings, and you have a pattern of success. Based on all that, how do you see a market opportunity, and how do you find the right product? How do you know you've pushed enough to reach critical mass?
TOM:
How do you find the opportunity? I think there are several strong ways to see it. Some of them are obvious but for others you have to be a little bit more intuitive, and I think I do have a fairly large intuitive attribute in my psyche that helps me. But I also believe that consumer demand - and quite frankly, consumer complacency, which is really latent demand-- is the best way to look at the marketplace and understand where there are things that haven't been done yet. The telltale sign of that is when you see entire categories starting to act like each other and blunt each other, and try to take away people's advantage by doing the same thing that makes a ton of sense from a product portfolio approach to your business.
But at the same time, think about it from what it does to consumers. It gives them mass market options that are generally indistinguishable from each other. And it's kind of a natural cycle especially in the U.S. mass market that people spend more time blunting each other than trying to figure out how to do something unique and different. I think that's the easiest answer for how you see the opportunity and then sometimes competitors drive you there. To be honest with you, it's a little bit of a balance.
I did a product at Pizza Hut called Bigfoot Pizza. It was designed to basically take away the advantage of Little Caesar's “Pizza Pizza” by giving people more pizza at the same price, but format it in a different way that would probably make a side-by-side comparison an advantage to Pizza Hut.
That “aha moment” to get to that product design and then the following attributes that made it taste great, et cetera, was not driven by an intuitive sense, or by understanding an unmet consumer need. It was looking at a competitor who was finding traction in the marketplace and then doing what I call one-upping them, finding a better way to execute their core strength with a meaningful difference for consumers. Not a copycat meaningful difference, but a really unique meaningful difference. And in the value game, it's more right. It's great tasting stuff but give people more of it.
So I would say those are probably the two biggest dynamics. As I look at blank pages in certain categories, I always look at what's there and how happy and how consistent is that across the marketplace, and what's not there that could be a big idea to explore.
The second part of your question is how to manage that. I was fortunate enough early in my career at Pizza Hut to adopt a process from one of my mentors who did a great job using heavy category users of specific product categories to really understand what motivates them and then bounce ideas off them in a very iterative way. So you weren't doing thumbs up, thumbs down analysis, you were guiding your way to find the target. Then once you found the emotional target, the purchase behavior-based target, you'd be winning at optimizing attributes. So, whether it was taste or appearance or even value, we worked really hard on those things to bring all three of those dimensions together. When you do that, guided by what consumers think is really interesting and different, and at the same time equally or more relevant, that's where you come up with big wins.
ARJUN:
So, at first you trust your intuitive attribute. You're also showing us that we need to avoid spending time blunting each other because you're not moving anything there. And then you connect to the unmet consumer needs, but the need is met as a meaningful difference as seen by guests. I think that's very powerful.
TOM:
People ask me if I’m an inventor. I actually think of myself more as an innovator. Invention is creating things, some of which have purpose and some of which have different levels of purpose. Innovation is creating things with a purpose. At the heart of everything I've ever done that's been highly successful, whether it's stuffed crust pizza or McGriddles or the Smashburger brand or anything else, what was in the core of that idea? What was the notion that consumers found interesting, relevant and motivating? To me, we've fleshed everything out around it, but at the end of the day, that's what true innovation is. It's invention with purpose. And if that purpose is to re-evolve something that already exists for somebody in a meaningful way, big wins.
ARJUN:
I love the way you look at what is there and what is not there, why people are not happy, and what you could bring to the marketplace to make people happy. So now let's go back to 2007. At that time, Americans were eating a lot of burgers. I Googled this, and the average was seven burgers a week. From a layman's point of view, why would we need another burger place? What made you see the opportunity and exactly followed the whole path to create this new brand?
TOM:
In the last 15 years, I've probably answered this question more than anything else, because everybody wants to know. You're right. Back then burgers were a $100 billion category in and of themselves, and the category was generally owned by the big three brands: McDonald's, Burger King and Wendy's. I had worked at McDonalds, and in the early 2000s my team and I had a sense that something wasn't as relevant as it could have been with the company’s core, namely burgers. We were seeing our sales go up, but our loyalty scores were going down. At the end of the day, I am a scientist and I look at data and I found that relationship quite amazing.
When we probed that, we found that people were buying our burgers but they were very dispassionate about those burgers. I've had this happen maybe 10 times in my life, but sometimes, when you're behind the glass, the consumer says something you never forget. One day we were in the Midwest and we were asking, "Okay, if all burgers are the same, what makes you decide which one to choose?" One woman said, "If I'm driving down the street, and one brand is on the right and the other is on the left, I take the right-hand turn because it's easier." And I thought, “Here we are, a $20 billion market cap company, with our core historic heritage equity based on a right or left-hand turn.”
So, when we studied that a little more, we found that over the years burger places had commoditized burgers. We made them fast, cheap, and convenient to get. That was done for good reason, but it was at the expense of what I would call key mosaics in the modern architecture: quality, integrity and the ability to tell stories that resonate with people.
I called that dynamic of sales up and loyalty down the latent demand of dissatisfaction. I believed in that strongly, and I got others to believe in that strongly, because when everybody said, "We don't need another burger place," I said, "If only you knew what I knew." I felt that way for years and finally I had to leave McDonald's to actually act on it.
I met Rick in 2000, moved to Denver in 2003 and helped him do some things at Quiznos which I'm rather proud of, but then we wanted to build disruptive brands that would redefine existing categories, and Smashburger was the first of those.
So, we actually practiced and lived a craft of making sure that we were going to be unique and different in the key attributes consumers really cared about: taste, quality, richness, appearance. We built the entire Smashburger brand on having key points of differentiation that people could get passionate about instead of just acquiesced to. That amalgam of attributes, whether it was Häagen-Dazs shakes, Certified Angus beef, our smashing technique, our proprietary seasoning, artisan buns, proprietary sauces - you name it - there are 50 things I could tell you about Smashburger that made it special, but all of them came to the table in order to have a highly differentiated concept that consumers would appreciate at every turn.
ARJUN:
Just listening to you describe the Smashburger burgers gets me hungry. But let's walk away from food for a second. If you take your experience and everything you've talked about, what would be a few nuggets of advice for those who are in new product development and brand development, but not in restaurants? What would be your advice to them?
TOM:
I think there are certain categories to work in where you can really implement exceptional innovation, particularly around things like technology and medicine, and those things are really important. But in consumer goods, I only want to express things that I'm really comfortable with, which is really the consumer side of things. I think you have to focus on heavy category users. The bigness of ideas is a function of the bigness of the categories in consumer goods. My personal belief is that consumers are very slow to adopt radically new things unless they enable technology, medicine and things like that.
In the world of fashion, in the world of packaged goods, in the world of restaurants, in the world of cars, whatever other disposable lifetime purchases you make, the key to be big is focus on how you make heavy category users intrinsically happier than they are now. And just the sheer scope of where you spend your time hedges your bet that you're going to be working on things that have a meaningful difference to many more people, and there are a lot of them to talk to and study and see. So I think that's a big piece of advice that goes outside the restaurant category, and I distill it down to this: if you're not focusing on heavy category users, you're not focusing on the right thing.
ARJUN:
I'm reflecting on your career where you led marketing organizations, then you led global organizations, and then as a founder you put right teams in place. What are some of the traits you look at which are most important for future leaders in organizations where you're placing them?
TOM:
That's a great question. I believe in three things that make for successful organizations. I believe in process. I believe in talent. And I believe in structure. If you have those things right and they ladder up to what you're trying to achieve, generally you win. As it relates to people and hiring, I look for three things in no particular order, but they're all very important: passion, personal integrity, and talent. I love people who are willing to go the extra distance to think harder and outside the box. However you want to define personal passion, for some people it's just doing the same thing better than anybody else, for others it’s doing things different, but passion is so important. When I interview people at the CEO level or I have to assess partners, I always look for how their passion, their integrity and their talent fit into a well-designed process and structure that gets things done.
ARJUN:
What's the difference to you between process and structure?
TOM:
Process is the way you do things. This basically gives you a paradigm of internal standards to work against. For example, I have a new product process that I use for everything as big as a concept down to an individual product that basically involves recruiting heavy creditors or users and bouncing ideas off them and using them internally to fine tune ideas. That's a process. It's a great process.
If the people listening to the outcome of that aren't the right people or are all the same people, then that process gets applied to a structure that doesn't know how to take that outcome and do things with it. So a process is how you look at things, how you manage things, how you meter and how you read things that are essential to what you're trying to get done. That can be financial analytics, or creative processes, it doesn’t really matter.
Structure makes sure that you have the roundness and fullness of team so there are enough people to carry the coupon on the front end and enough people to close with success on the back end. And by the way, certain processes are relevant for certain parts of that structure and certain processes aren't. So, it is an organic process and every company that ever had great success had a great sense of how to use those three things effectively.
ARJUN:
I love that. Process, talent, and structure. I love the definition, the roundness and fullness of a team to build them together. Speaking of process, in this journey of talking to leaders, one of the things I see is every leader has a process and wants to act, but when they do, there's a decent amount of stubbornness. Once the train leaves the station, they have to get to the goal, which means lots of them start taking words out of the dictionary. What are a few words or phrases that don't exist in Tom Ryan's dictionary?
TOM:
Mediocrity is an easy one. Consensus is an easy one. So is blending. I think the keywords that are missing in my vocabulary would speak to things like complacency and settling. I never settle. And even when we have a big success, I always ask myself, “What's next? How do we build on that? Where do we take that?” Because when I look at developing things in general, it's like a movie. While I’ve never talked to a movie producer, I’m sure they watch their product and then cover their eyes on certain scenes and say, "Man, would I like to do that differently." I feel that way about everything I do. I like constantly challenging ourselves to take things to the next level. Next leveling is really key in the market these days.
ARJUN:
I really loved that the first two words you said don’t exist for you are mediocrity and consensus. I feel they are so well connected that when many of us are in the process of getting consensus, the train leaves the station and we are still standing where we are.
Let’s move to something more serious, which so many businesses are struggling with. That’s COVID-19. What's your secret to succeed during these times? How are you helping brands do that?
TOM:
Every brand has their own set of circumstances. I think one of the keys to success is just to be as kind as you can, in whatever circumstances this virus creates for you. Whether it's being kind to your customers, being kind to your employees, being kind to your teammates, being kind to your family. It’s very stressful, and I think it's amazingly easy to take this out on other people. I should say, I borrowed this. The Smashburger team talks about being kind and they're taking it to a different level in everything they do.
I also think patience is a key virtue through this. Sometimes it's the patience to wait to act, and sometimes it's the patience not to act at all. Smashburger is thriving, honestly, because of some really interesting new avenues of revenue that they generated as well as a focus on off-premise. On the other end, Tom's Urban and Tom's Watch Bar sit in areas where communal sporting events and communal watching events happen. The kindness there is not to open. It just makes sense in the long-term. With patience, there's another factor which is perseverance. I think when this is over, those who are smart about it, steer through it with patience and kindness are going to win on the other side.
ARJUN:
Most business leaders have short-term success incentives. They focus so much on short-term success, but that can take you into a dead end and then the brand gets stuck. How do you balance short-term and long-term success? I really wanted to know from you because looking at Lover's Line and Texas King, a lot of things came and went. How do you see the blend of short-term and long-term success?
TOM:
At the end of the day successful companies have vital sustaining growth. Part of the mindset that helps me get to those long-term wins is that I've always viewed the brands I work for as signing up to write the next chapter in a book. Because brands have history, brands have legacy, and quite frankly, equity begets equity and lack of equity does the same thing. Moves made by brands as part of the long-term will have a long-term consequence of trust and belief. I think the key is building products with great attributes and strong promises that motivate people, and then fulfillment of those promises in a way that is better than the promise. You can get to that, but it requires patience in almost everything I can think of that would take a long time. Or, it was very successful, but took longer than the prevailing pressures of the business did.
So what you have in the meantime is promotions. Promotional products, which you can do without much homework, and test the waters to see how things go. It's kind of news for news’ sake. They provide short-term news. You design them so you never hurt or damage the reputation of the brand, but they're not necessarily built for enduring value. I think in my world, in restaurants, that need is a balance of those two things because sometimes no matter how much homework you do, promotional items can be more popular than you think and so they last.
It's a great way to get out there, interact with consumers, see some things in real time. But I do think that when you look at the core products, at least the ones I've worked on, McGriddles and Pepperoni Lover’s and Stuffed Crust Pizza, those all have in their name something that you have to deliver on in a way that nobody delivered on it before. If you get that homework done, you market it effectively and well, and own it. It will be with you for a long time.
ARJUN:
Thank you, Tom. This was really fascinating as I love the way you connected the dots and made it simple