Burn the Business Plan

by Carl J Schramm

  As a first try, Head used shoemaker’s glue to sandwich a plastic honeycomb between two pieces of aluminum, which he then covered with an outer sheet of plastic. To permanently bond the layers together, he inserted the skis into a rubber bag that served as a vacuum chamber to eliminate bubbles in the glue. Then, to make his prototypes more flexible, he dipped them in boiling crankcase oil. The process was smelly, dangerous, and highly toxic.

  In the meantime, Head’s finances were straining under the cost of tools, materials, and rent. So, like Ewing Kauffman, Head hustled up card games when he needed cash. After eleven months of bluffing at poker and tinkering in his workshop, Head thought that he was ready to unveil the future of skiing. He returned to Mt. Mansfield. One cold morning, he invited the instructors to meet in the ski school’s lodge, where Head showed them the first five pairs of aluminum-plastic skis that had ever been made.

  One of the instructors gave the first of the shiny skis a vigorous shake. It came apart in his hands. A second instructor pushed the top of another ski into the floor, where it promptly disintegrated. The instructors took turns flexing more skis, and the laminated layers came apart on every one. With only one pair left, Head asked the instructors to watch him demonstrate how they worked on snow. As they gathered at the top of the bunny slope, Head slowly skied down the gentle hill. His skis came apart beneath his boots, leaving him in a tangled heap of twisted metal and broken plastic.

  Despite this discouraging debut, Head remained determined to make better skis. This became even more daunting when he became aware that he had competition, not an uncommon experience for innovator–entrepreneurs. A group of engineers from another aircraft company had begun to market an all-aluminum ski; the next winter, they manufactured several thousand pairs. Their product was heavy, however, and the metal surface could not hold wax. Worse, when a skier hit an ice patch the skis were impossible to control, making a hideous screeching noise and dumping the wearer into a snow bank. Head remained optimistic. He was sure that his vision of an aluminum and plastic ski held promise.

  The quest for better skis had taken over Head’s life. After two years of off-hours moonlighting and very little sleep, he quit his day job. Without regular employment, and having run out of suckers to outplay at the card table, he moved to a dingy basement apartment. On cold days he went without heat, wearing his father’s old overcoat. He borrowed money to eat and buy materials, and could no longer afford to pay the two after-hours aircraft mechanics who were assisting him. Fortunately, they believed in Head’s dream and kept on working, recording their hours on the wall of the workshop so that, if he was ever successful, he could pay them. (Which he did, and then some.)

  Head tried different combinations of plastic, metal, and plywood to create the combination of strength and flexibility that he needed. He experimented with various plastics for the ski’s bottom to prevent icing. He scraped together enough money to buy three used restaurant ovens and welded them together, experimenting with laminating plastic and metal together with heat to make the skis more durable. Head returned to Mt. Mansfield again and again, where the group of patient, but now intrigued, instructors continued to test his evolving prototypes. They may have found Head a bit ridiculous at first, but, over time, they came to appreciate his indomitable creative spirit and his devotion to their sport.

  By 1951, Head had succeeded in making a notably better ski. “Head Standards” were significantly lighter than wooden skis, and turned with half the effort. That year, he sold 1,100 pairs out of the back of his station wagon, setting up in parking lots at the bottom of ski slopes, and wearing a quirky raccoon coat to attract attention. Sales continued to grow, but Head also kept innovating; he added neoprene between the metal layers to reduce the “chatter” as his skis rode over bumps. While his skis were generally well received, they were not dominating the sport as Head knew that they should.

  In a moment of marketing inspiration, Head convinced a talented young French Alpine racer to try his skis. In the 1968 Winter Olympics, Jean-Claude Killy was on Head skis when he won gold medals in all three Alpine events. Head ski sales exploded. The next year, more than eighty percent of ski instructors, and a third of competitors in top international races, were on Heads. Two years later, fifty percent of American skiers bought Head’s skis, and the company sold 400,000 pairs across seventeen countries. In 1970, at the age of fifty-four and twenty-three years after his first humiliation at Mt. Mansfield, Head sold his company to AMF and retired.

  Staying in the Game

  With time on his hands, money in the bank, and a yet unfulfilled desire to be good at the sports he enjoyed, Head built a tennis court at his home and hired a pro. He was a terrible player. His coach told Head that he’d quit if Head didn’t improve, so Head bought one of the first machines that shot balls across the net and doggedly practiced his stroke technique.

  Not surprisingly, Head was not very pleased with how the ball machine worked. He couldn’t resist the urge to tinker with it, and was spending more time improving the machine than practicing tennis. Once he had reengineered the machine, he visited its tiny manufacturer, Prince and, shortly thereafter, bought a controlling interest in the company. Head was back in the business of improving sports equipment.

  Playing better tennis was now something of a business imperative for him, but he now had less time to practice than ever. Predictably, Head began to wonder if he could improve his game if his racquet were better.

  Head had a complete machine shop in his house where he made a few racquets of aluminum. He noticed, like their traditional wood counterparts, they twisted when hitting the ball, which he thought might be part of his problem in getting the most from his swing. To correct for unwanted torque, he reinforced the racquet’s shaft and made some parts of the rim thicker than others. That didn’t help. After six months of experimentation, Head explained, the answer came to him when he was relaxing in an easy chair and listening to Bach: Instead of trying to redistribute the racquet’s weight, he needed to make its face bigger and wider.

  Head then discovered something that he found astonishing. In the hyperconservative world of tennis, governed by hundreds of rules promulgated by the U.S. Lawn Tennis Association (as it was then named) that covered everything from the color of clothing on the court to what to do if a ball fell out of your pocket, a racquet was defined simply as “an implement used to strike the ball.” Former Wimbledon champion Bobby Riggs had once won a match using a broom. Realizing that an oversized racquet face and frame could be his answer, Head made a few. He hired Kenneth Wright, an engineer at Princeton, to help him dissect the aerodynamics of a tennis racquet. Head and Wright locked experimental racquets into vises and shot tennis balls at them, recording the strike using time-lapse photography. They studied the speed at which balls bounced off various racquets from every area of its face. They were searching for the precise location of the “sweet spot,” the place on the racquet’s face that repelled the ball at the fastest speed.

  Conventional wisdom had always located the sweet spot in the center of the racquet face, but Head and Wright found that it actually was much closer to the racquet’s shaft. By designing a racquet with a larger head, they could move the sweet spot to the center, making it easier for players to hit stronger serves and volleys. Even more important, they discovered that the sweet spot on the new, larger, graphite-plastic racquet also was larger—about four times its size on a traditional racquet. These discoveries allowed Head to design a bigger racquet that wouldn’t torque and increased a player’s odds of hitting a strong, clean shot.

  The result looked like a “cross between a cruise missile and an endangered balloon fish.”1 Traditionalists dismissed it as a gimmick, but Head knew exactly what to do: He made sure that a number of tennis professionals had the chance to try a Prince Oversize. He persuaded Don Candy, the pro at his country club in Baltimore, to get a few of his students to play with his new racquet. Candy gave a Prince Oversize to fourteen-year-old Pam Shriv
er. The big racquet suited her powerful serve-and-volley game. It also fit her personality; Shriver didn’t mind the snickering from other players when she stepped onto the court with her peculiar weapon. In 1978, at just sixteen, she took the U.S. Open by storm, brushing aside top seed Martina Navratilova in the semi-finals. Although she was narrowly defeated by Chris Evert in the finals, Shriver’s unusual racquet quickly started to appear on courts across the country. The large “P” stenciled across the racquet face left no doubt about its maker. Twelve years after Head had bought a tennis-ball machine, he retired for a second time when he sold Prince.

  What Is “Entrepreneur’s Time”?

  Head was the first entrepreneur whom I knew well. When our family, with a new baby, moved into our house, I learned that the retired guy down the street was the man who had revolutionized skiing and tennis. We lived on a nearly blind curve and quickly learned that it was Head’s habit to blow his car’s horn in a continuous blast as he drove through the curve. After about the tenth time that Head’s horn had awakened our hard-to-get-to-sleep son, I stepped out into the street when I spotted him coming and put up my hand. He stopped, and I said, “Hi, I know that you’re Howard Head and that you’re an engineer. You of all people should know that sound doesn’t travel around a curve.” After a moment’s pause, Head burst into laughter. We were invited to dinner soon thereafter, and became good friends.

  Tall and unassuming, Head was textbook geeky and, at first, a bit shy. Like many other innovators of great talent and drive, he was quick to say that he wasn’t anyone special, that he had been lucky enough to stumble onto his life’s purpose. I was in the midst of building my first company and spent as much time talking with Head as I could. My biggest question to him, which is the same one that I ask every entrepreneur today, was, “How did you decide to start your business?” Head’s answer was particularly thoughtful. In his case, Head said, he had no choice. He saw himself as cursed by never being able to look at or use an object without seeing that it needed to be better. As the story of his reengineering of the Prince ball machine shows, he just couldn’t keep himself from trying to improve things.

  Upon reflection, Head mused that, when a personality like his starts to work on a new product, he doesn’t really know how long it might take to get to the finish line. That type of person, Head observed, slips into “entrepreneur’s time,” a corollary of the entrepreneur’s curse. The innovator walls off the pressure of time, knowing that no matter how long it may take, he wants to get to a new product that is as close to perfection as he can make it.

  Head made a second observation, one relating to the relationship of time and innovation. He said that it takes about twice as long for a new product to become accepted by the market as it takes to invent it. It took more than ten years after Head had developed a better ski before skiers understood what he’d accomplished, and slightly less for his Prince tennis racquet to upset the tennis world.

  Were Head alive now, I wonder if his thesis would have changed: With today’s lightning-fast communications and direct-to-consumer marketing possibilities via the Internet, perhaps that 2:1 ratio no longer pertains. Has the cycle shortened? Notwithstanding the speed of market adoption of new products, perhaps Head’s basic thesis still holds: All innovation results from taking a new idea to market, absorbing customer feedback to improve its design, and repeating or iterating the process until the market is receptive.2 Both Head and Dyson sought to replace products that no one thought needed improving. Their self-certain visions that the world needed better vacuum cleaners, skis, and tennis racquets, but didn’t know it, brings to mind Henry Ford’s observation that, if asked what they wanted, his potential customers would have answered, “faster horses.” Steve Jobs thought the same way when he said, “Customers don’t know what they want until we’ve shown them.”

  Reinventing a Market and Growing Faster Than Apple

  Just as Paul Stebbins graduated from college in 1979, the economy tanked. His job prospects were “limited, bordering on none,” so he returned home to Connecticut. Steve, the Stebbins family’s next-door neighbor, had been asked by a cousin in Greece to buy fuel for his only freighter, a vessel that he was about to send to New York for the first time with a cargo of general merchandise from Europe. The ship needed to be refueled so that it could return home, and Steve’s cousin needed someone in America to purchase fuel oil. Steve’s only qualification to help was that he was family, that is, deemed trustworthy, and that he spoke Greek. Holding down his regular job by day, Steve took a crash course on the phone with his Greek cousin on how to buy fuel every night for weeks. Steve needed help.

  He hired Stebbins part time to run back and forth to New York with piles of documents that were a part of buying fuel oil, and told Stebbins to keep his eyes and ears open and to learn as much as he could. Delivering documents, Stebbins’ job took him down into the engine rooms of freighters, to pier-side oil terminals, to the wire rooms of international banks, and sometimes into fancy law offices in Manhattan. Stebbins became intrigued with what he learned. At night, he would return to Connecticut and report to Steve, and they began to figure out how oil was being bought and sold. Stebbins had majored in international affairs in college; what he was observing seemed to him to be the tangible, real-time commerce that his textbooks had described.

  Infected with the excitement of the business, Stebbins landed a full-time job at a New York brokerage firm, where he traded fuel oil. He was good at spot transactions, which provided him with a handsome income for a guy in his twenties. But he was equally interested in the larger dynamics of international oil markets. As he recalls, “I could tell something bigger was going on. Gradually, the number of companies selling oil in the world market was growing. More oil was being produced by smaller firms that no one had ever heard of, who were operating in remote corners of the globe. The market for fuel oil was becoming chaotic. The old forces that made for stability in oil prices were slowly eroding.”

  At the same time that Stebbins entered the brokerage business, so had Michael Kasbar. His path to trading oil was as serendipitous as Stebbins. When Kasbar’s mother vetoed his taking a job as an assistant bread baker, telling him that she expected more of her college-educated son, he restarted his job search. One day, when he was reading a newspaper story that projected that the oil industry would lead the economy out of recession, Kasbar decided where to look. Using the Manhattan Yellow Pages, he started calling companies that identified themselves as being in the oil business. Eventually, he got a job at a marine-fuel brokerage firm.

  Kasbar and Stebbins met by chance about five years after each had started trading oil. Comparing notes, they agreed that the standard sources for ships’ fuel, major oil companies like Exxon and Shell, appeared to be devoting more and more of their attentions to exploration, drilling, and refining higher-priced fuels. As a result, new and untested suppliers of small lots were coming into the market, and the supply of consistently reliable fuel oil was dwindling. Without predictable sources, traders had to pull oil from several, often unknown, refiners to assemble complete orders.

  The specter of disaster loomed over these patchwork deals. Once bunker oil from a variety of different refineries was mixed and pumped on board, there was no tracing the source of any bad oil. That mattered a lot. The risk was that a ship would be stuck at sea because its fuel was adulterated with poorly refined product. The expense and financial consequence of having to rescue a disabled freighter on the high seas was enormous; empty ships had to be dispatched to take on stranded cargo, ocean-going tugs were needed to pull the disabled ship to port, late delivery of cargo could result in huge penalties to the shipping companies, and, worst of all, an affected ship usually had to go to dry dock to be refurbished with new engines, a big-ticket process that could take months. Without the ability to trace fuel to its source, there was no legal recourse for the significant damages. The risk of tyro suppliers was spinning out of control.

  After long conversa
tions with potential customers and suppliers, Kasbar and Stebbins left their jobs to found Trans-Tec Services, a marine-fuel brokerage, in 1985. They convinced a Greek shipping mogul (not Steve’s cousin) to bankroll their startup. With a good balance sheet, they were able to begin buying futures contracts from dependable sources. Big shipping companies became Trans-Tec’s customers because they needed assurance as to the quality, quantity, and reliability of their fuel. Because they were buying oil in such large quantities, Kasbar and Stebbins acquired more knowledge about the direction of the global oil market than most other buyers and sellers, allowing them to profitably buy and sell futures contracts.

  As Trans-Tec grew and its market power increased, the company established and enforced trading and testing standards to ensure the quality of the oil that refiners supplied. The company also developed important innovations, including better ways for ships to rendezvous and refuel in midocean. Trans-Tec was on its way to becoming the world’s biggest marine fuel and service provider.

  For some time, Kasbar and Stebbins had been considering expansion into the aviation market, but they needed more resources. After identifying a larger company, IRC, that had complementary assets, they entered into a sale transaction that eventually put them in charge of the larger company. Slowly, they began to remodel their new parent into a company that could capture the exponential growth that Kasbar and Stebbins had envisioned—becoming the largest independent global supplier of marine and jet fuel, now known as World Fuel Services.

  Their strategy worked. Supplying airlines with jet fuel turned out to be an even bigger market than supplying ocean-going vessels. Moving into aviation allowed their global company to develop the world’s most exclusive business credit card to serve the private aircraft industry, and to begin to supply logistics services, including ground transport. Thirty-three years after two young guys started Trans-Tec, World Fuel Services customers include entire navies, huge shipping and cruise ship lines, many of the world’s largest air carriers, and trucking companies worldwide. The company does business in two hundred countries and employs four thousand people. Its annual revenues exceed $40 billion, more than many better-known companies on the Fortune 100 list. For the ten year period from 2003 to 2013, World Fuel Services’ growth outpaced even Apple, providing the highest return to its investors of any publicly traded stock.