For Dan Roitman, much of business is science.
Since founding specialty Internet retailer Stroll LLC in his University of Maryland dorm room 13 years ago, Roitman’s career has consisted of an ongoing series of hypotheses, experiments, data analysis, adjusting of hypotheses and formulation of theories.
Roitman’s scientific approach to business-building has developed a highly entrepreneurial culture at Stroll, in which team members are encouraged to share ideas, innovate and test their assumptions. It’s a mentality that has helped the company sustain a period of rapid growth — 80 percent in 2008 and 50 percent in 2009, followed by a year-over-year 100 percent growth margin from 2010 to 2011. In 2012, the company surpassed $80 million in annual revenue for the first time.
But maintaining a forward-thinking mindset throughout the entire organization isn’t something that just happens. It requires CEO Roitman to hire, train and empower his people to achieve the desired results. It’s something that was driven home to Roitman during the recession, when he had to suspend the growth of the company for a year due to a lack of additional financing from Stroll’s bank.
“That was my biggest concern, because we had always been a growth company,” Roitman says. “Then, due to circumstances beyond our control, we had to put a specific order volume cap on the business.
“It really became more about communicating that this is the challenge, everybody knew what was going on in that environment, you had a lot of economic hardship, you heard a lot about layoffs that were going on elsewhere. I have to imagine everyone was happy that we were doing well, but frustrated that we couldn’t do better.”
Through it all, Roitman has had to focus on motivating his employees, maintaining a sense of transparency, while still encouraging open thought, experimentation and the scientific mentality that had made Stroll a success in the first place.
Embrace best practices
It’s easy to say you embrace best practices as an organization. Actually discovering, selecting and implementing best practices from another entity are another ballgame. Even if you are able to discover and select an outside idea that you think will help your business, there is a good chance you wouldn’t implement it — at least, not in the form in which you discovered it.
“I once heard a speaker talk about the idea of cloning best practices and how most people don’t have a so-called cloning gene,” Roitman says. “If I told you, right now, the secret to making a million dollars in 90 days and if you followed my instructions exactly, you’d make a million dollars; most people wouldn’t be able to follow it exactly. They’d start to think about how to improve upon what you’re telling them.
“Sam Walton would go into any competitor’s store, and even if it was a really shoddy store, he’d find something they were doing better than he was doing. Through that process, through a million little optimizations, he became a formidable competitor and then an industry leader.
“So if someone is doing something better than you are, you should at least recognize that they are and be willing to try it in your business as well.”
But it is a double-edged sword when it comes to adding new policies and processes to your organization. You don’t want to corrupt the external idea, because it was successful elsewhere for a reason, and that is why you want to on-board it at your company. But you also want to give your people an opportunity to think of ways they can improve upon the idea or alter it so it better fits your company’s specific situation.
For Roitman, that is where the need for a culture that utilizes a testing-based, scientific approach becomes critical. His team members at Stroll can propose new ideas and changes to existing ideas, but they have to back the proposals up with supporting data.
“If you have a constant, iterative testing philosophy, the barrier to testing is very low,” Roitman says. “So if somebody is doing something on, say, the marketing side, you ask yourself about the probability of something similar working in your business. What is the probability of this one idea being more successful than another?
“Ultimately, you have finite resources for your various departments, so you do have to have a mechanism for prioritizing — some kind of filter for what you believe the contribution or change will be.”
Roitman ran into a best-practices testing scenario when he and his leadership team noticed marketers in his company’s space were having success with video marketing initiatives. Through testing and quantification of the results that Roitman’s team believed Stroll could expect, the company was able to implement its own video marketing initiatives.
“Since then, we have won two major awards for our video marketing,” Roitman says. “That is an example of us taking a best practice from outside and utilizing it in a way that betters an area of our company.
“In another area, we’ve also brought in an industry expert to advise us on our shipping costs. It led to us having a 30 percent reduction in our shipping costs (in 2011), and we should have another 30 percent reduction (in 2012).
“We didn’t directly adopt a best practice from somewhere else in that case, but the insight from the industry expert that we brought in allowed us to take things to the next level in that area, and it’s information we wouldn’t have gotten any other way.”
Learn from mistakes
Another aspect of having a culture that is focused on experimentation and learning by doing is a willingness to accept mistakes and failure as part of the process. That is, as long as the failure is part of the process and not a part of employee underperformance.
With entrepreneurship as a key building block of Roitman’s culture at Stroll, often he is willing to take new products to market, and let the market determine whether the idea was good or not.
“Obviously, it depends on what level you’re talking about making mistakes,” Roitman says. “But if you inherently have a testing culture, you know you’re going to have failures, and it’s simply going to be a part of the experimentation process.
“But there are failures of concepts or improvements, and there is failure of performance, which is an entirely different category. The performance category isn’t just a matter of experimentation. It’s a matter of setting up support structures so that people don’t set themselves up for failure. You have to work with them to define goals up front that are realistic and all the general management concepts around that.
“Once you’ve defined the goals, you need to check in with your people to make sure they are on track and setting up workable project plans.”
If you’re working with your people to set achievable goals and realistic project plans, it becomes much easier for you and your leadership team to separate a bad idea from a bad performance.
“It’s all in the mechanics around your execution, which you need to have in your processes,” Roitman says. “If someone just isn’t performing, there is an issue there. But if it’s an idea itself that is failing, but everyone thought it was worthwhile to pursue and a reasonable move to make at the outset, there is no problem in that case. And you have to cultivate that mentality within all layers of management.”
To help guard against large-scale mistakes that could have wide-ranging implications for your company, Roitman says you should put platforms in place that allow you to test new ideas on a smaller level, then scale the successful ideas to larger projects involving more people.
It is a tactic that allows you to commit fewer resources to a project initially, while still getting a sense for whether the idea will work — which is a critical factor as many companies are still struggling with resource management in the wake of the recession.
“That can definitely be something you’re doing; we’ve done that ourselves,” Roitman says. “For instance, in our call center, we’ve rolled out a small-scale test in one area, see how that does, then roll it out on a larger scale.
“In some other areas, we’ve broken down into teams across different areas of the company and tried different things in each area. That allows us to gain some insight into how we can work with different needs and different management methodologies.”
As you go through these processes, you have to keep in mind that your role as the leader is to serve as the traffic cop who ensures that the right type and right amount of resources find their way to the right areas of the organization, into the hands that can best use the resources to produce the ideas and product that turn the highest profit.
“Everything is interrelated,” Roitman says. “Departmental activities roll up to the company at large. So my job is to make sure the plan we have communicated is clearly on track, everybody knows the most important things we have to focus on, and there are no other distractions. We have a lot of ideas flying around, which is a good thing, but we still have to maintain focus. As far as the direction you are going, you have to define what is in and what is out — you have to define both.”
How to reach: Stroll LLC, (215) 701-3300 or www.stroll.com
The Roitman file
founder and CEO
Education: International business and German degrees, University of Maryland
First job: Unofficially, I mowed lawns and shoveled snow. Officially, I had an internship with the Department of Defense after my first year of college.
What is the best business lesson you’ve learned?
The earlier you can establish the elements of a strong culture, the higher the probability of success of the organization. It starts out with just getting revenue and having a business in the first place, but after that, you need to have a vision and clear goals around that vision, and the right people on board with the proper motivation. Having the right operating conditions helps that immensely.
What traits or skills are essential for a business leader?
One thing that we really focus on in our organization is transparency. After that, you need to be able to develop a really strong vision that influences the organization years into the future. People have to know what they’re doing and why they’re doing it.
What is your definition of success?
Success comes at a couple of different levels. On a micro level, it’s accomplishing something meaningful within the organization. On a macro level, one of the greatest forms is giving back to the community and creating jobs. As we all know, our economy needs sustainable, productive jobs today.