Can you imagine ever sharing with your customers what the actual costs of your product are? Or sharing actual financials with your team? Or giving competitors your secret “sauce” to save on production costs?
It sounds a little wild, but it truly is something to consider as another competitive advantage that evolved enterprises enjoy. We’re living in a time when the public trust for governments, corporations, and other institutions is at a significant low point. So how do we garner trust from our team members, customers, and other stakeholders? It is easy, although it’s not simple. Trust comes from transparency and that’s happening whether we like it or not.
One evolved enterprise really thriving, using radical transparency, is online clothing e-tailer Everlane. They are committed to showing the consumer what an item costs, reducing the middleman fees, and even shedding light on some of the opaque factory conditions where the apparel is made.
Here is an example of transparent pricing for a t-shirt they sell for $22. Notice the specific costs for each of the components. The hard cost is $9 plus a $5 donation to the ACLU for this shirt line.
Everlane goes one step further with transparency to their manufacturing process. On their site, you can also dig deeper into the story behind each factory that a piece of clothing is made in. By learning this information, you feel even more connected to the product you are wearing or buying.
I’ve also used transparent pricing with good results. For example, last year when we released the first version of Evolved Enterprise, I wanted to get 10,000 copies out into the world. One popular marketing angle lately has been a “FREE + shipping” offer like others have done – but that didn’t sit right with me. Instead, we showed exactly, line by line, our hard costs for the book from printing, shipping, packaging, credit card processing, etc.
This way I was able to get the price as low as possible and provide an added layer of trust for the release. We ended up selling over 12,000 books in a short time and getting it into the hands of so many impactful entrepreneurs.
Let your team know what’s really going on…
A few years back, I took our Maverick1000 group to Ann Arbor, MI, to meet with my friend Ari Weinzweig, co-founder of Zingerman’s. I had heard and read a bunch about Zingerman’s approach to business and knew it was interesting and different…but didn’t realize how unusual it really was until I dug in.
There’s a reason Inc. magazine referred to them as “the coolest business in America.” On one trip, we stopped by the Roadhouse for dinner. It was here that the group got their first taste (bad pun intended) of the Zingerman’s experience. Ari was on hand bussing tables. I nearly missed him before he “bumped” into me on purpose. After that I gave him a hard time for leaving my water glass half empty. It was interesting because it wasn’t a special thing he did since we were there – most nights Ari is working the floor because he truly loves it and gets more insight than being in the front of the house.
Every week there is a front-of-house and back-of-house meeting where the numbers are discussed in a completely open way, practicing open book finance
But one of my biggest lessons came that night from our waitress, Alison. I was asking her about Zingerman’s and the job, and pretty quickly our conversation turned to food costs and how she knew the doughnut dessert had a 22 per cent food cost, while the brownie sundae was 28 per cent (or something like that). And since they are both great desserts, she would recommend the doughnut one since it would help her with the gain share all the staff are entitled to when they hit their numbers.
I was blown away that our “regular” waitress would be so in tune with the finances and how they worked their way back to her bonus compensation. It makes sense since every week there is a front-of-house and back-of-house meeting where the numbers are discussed in a completely open way, practicing open book finance.
Competitive collaboration savings
Okay, sharing with customers and even employees is one thing, but what about sharing your best information with “competitors”? Now that would be business blasphemy, right? Maybe not if you’re Patagonia. Yvon Choinard, the founder of Patagonia, has always been about putting the environment first – even before their company. (I actually think this has only helped their sales and fan base since consumers can spot inauthentic values.) Over the past 40 years, Patagonia has consistently done the unusual, from looking at how to only use ethical raw materials to even telling consumers to purchase less of their products with a recent Black Friday full-page ad.
As a private company with sales over $400MM, Choinard is passionate about showing small and big companies how to do business in a different way. And one of those ways is helping form a Sustainable Apparel Coalition with some unlikely partners, like Walmart and Levi’s. They wanted to share best practices to save money through environmental initiatives, like reducing its packaging and water consumption.
And that’s the secret. There has to be (and there already is) a real economic incentive to make a difference. This positive change works for everyone because it’s part of a bigger mission to make an even greater difference in the world.
- This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Yanik is the founder of Maverick1000, a global collective of industry transforming entrepreneurs and the author of Evolved Enterprise. He is on a mission to change the way business is played.