If I am honest I really don’t read many business books. I know I probably should read more but I don’t. It’s often interesting reading reviews of some of the best-selling books by business gurus. The one and two star reviews often have far more detail and analysis than a glowing (and often bought or fake) five star review.
Probably one of the most common observations with business books, especially the ones based on a Harvard Business Review article, is that they are simply that. They would make a good article but the author has padded out what was an original article to be the length of a book.
So it has been fantastic to read a business book which is as refreshing, crisp, fulfilling and as full of attitude as a bottle of BrewDog Hardcore IPA. That’ll probably be because Business For Punks – Break All The Rules The BrewDog Way was written by James Watt, the co-founder of BrewDog, the at-times controversial brewer of craft lagers.
If you are wondering what place this book has on Transition Consciousness, I think a great place to start is to understand the definition of punk as used by Watt:
Now more than ever, businesses need to be brave enough to stand out through rebellion and anarchy and have the guts to be individual too.
In the 1970s punk rock changed the world. It was more than just music. It was a cultural phenomenon. At BrewDog our business is built on the punk mentality, At its core punk is about learning the skills you need to things on your own terms. At BrewDog we reject the status quo, we are passionate, we don’t give a damn and we always do something which is true to ourselves. Our approach has always been anti-authoritarian and non-conformist from the word go.
As I mentioned in my previous article Don’t Start a Business, Start a Crusade, BrewDog are not primarily about selling their own craft lager. They set out on a mission “to make people as passionate about great beer as we are”.
There are many interesting issues relating to sustainability and beer such as methods of production, aluminium vs glass, responsible drinking, local economies and employment, and growth vs small. Here in Brazil, we also have the rather terrible situation where the huge beverage corporations have won the right to replace their ingredients with genetically modified corn. Not hops or wheat or barley, but GMO corn. But at least the first BrewDog bar in Latin America is here in São Paulo, and it’s pretty much just around the corner so to speak from our apartment which is great for me.
It’s interesting since brands such as AmBev’s Bohemia have been launching their own premium craft lagers such as Bela Rosa, Jabutipa and Caá-yari to compete with the growing number of absolutely excellent Brazilian micro-breweries which have been really eating into the mainstream market share. These may look the part, but can they be trusted given the GMO corn in their other beers, and are they really that authentic, despite their Brazilian cultural aesthetic design? I’ll be covering all of these issues in the future. (AmBev also own Leffe, Hoegaarden, Budwieser, Stella Artois and Corona among others by the way).
If you are not familiar with the BrewDog story, it began in 2007 when the craft beer market in the UK did not exist. The choice was “industrial mass produced lager or stuffy and fundamentally boring cask ale”. Watt had spent some years as a fully qualified captain on a deep-sea trawler in the North Atlantic, which he describes as “one of the toughest environments on earth”. As he says, this led him to develop absolutely critical lessons about people, leadership, teamwork and adversity, observing that for a crew to be effective “leadership needs to come from the top down, the bottom up and everywhere in between”.
In 2004 Watt and his great friend Martin Dickie were amateur home brewers, but a chance meeting with the great beer writer Michael Jackson would transform their lives in an unimaginable way. On tasting their beer, Jackson commented that they should quit their jobs and start brewing straight away, a comment which was “the last bit of advice they ever listened to”.
And so in 2007 with the help of a £30,000 bank loan, BrewDog came into being, but as we read all throughout the book, the path to success pretty much at no point was plain sailing. However, BrewDog has managed to reach a turnover in excess of £50 million while remaining profitable each year since their inception, and their brewery in the north of Scotland is “one of the most technologically advanced and environmentally friendly”.
The reason I came to write this review is that earlier this month Maria and I had the opportunity to meet David McDowall, the Managing Director (or Navigator as he describes himself) of BewDog Bars. Not only did we have an interesting conversation about the different aspects of BrewDog, but he also generously gave us a copy this book.
One of the central tenets of the BrewDog ethos is an absolutely fixation on independence and not selling out, as has been the case with some other craft brewers and also Innocent Drinks who “started off as an great company” but who “lost control and lost their soul” after being bought by Coca-Cola, a company that is “the exact opposite to everything they claimed to stand for”.
One of aspects I really enjoyed when reading the book are what seem at first sight the many paradoxes as the one we have just seen: BrewDog “don’t give a damn” but are “passionate”. Don’t be fooled. The power of what Watt is calling “a manifesto for twenty first century business” is at one and same time extremely revolutionary but also surprisingly old school in that a punk attitude is not about a loss of control and not caring, but about passion combined with “Jedi-like” financial skills, which importantly focus on cash flow as the absolutely critical indicator of long-term viability and sustainability:
You need to be a Yoda-esque grand master of playing by the rules before you can even consider breaking them.
I can already see many elements that really resonate with my own experiences of being a co-founder of Genie Internet, the world’s first mobile internet portal which we created as a start up inside the behemoth of BT. We were certainly punk in breaking through so much bureaucracy as the book is ostensibly written for start ups and small businesses. In this second article I ask the question is the term Corporate Punks a contradiction in terms and whether or not the BrewDog punk ethos can apply in large businesses and corporations in a separate article.
Watts places cash flow and absolutely understanding the huge difference between cash flow and profit at the heart of developing a long-term sustainable business. And this of course entails having a “solid, sustainable, defensible and entrenched gross margin”.
There is some method amongst the madness in BrewDog for punks, lessons for business leaders which I would describe as wolves in sheeps clothing. The reason is that while on the face of it appear as business 101, these are the lessons that seem to be the hardest to learn, starting with the observation that many people who start businesses are naive in that they do not have a clue about finance.
These lessons evolve into a master class in mastering chaos, complexity and culture, the three pillars of a twenty first century punk business being:
- Company culture
- The quality of your core offering
- Gross margin
These pillars are totally interconnected, each one “depending solely on the other two for their existence”. As Watt observes, effective cultures take time, but the effort is an absolute necessity to build a flourishing business:
Whilst you can’t impose a culture, you can cultivate it. It is organic, emergent and fragile. It is a huge challenge to nurture it whilst you are pushing hard for growth.
A refreshing aspect of this book is that it reads like the antithesis of the more extreme venture capitalist start-up mentalities. So you won’t find talk of growth for the sake of growth, exit strategies and unicorns in any of the pages:
Folk who build to sell don’t build for longevity, they just want the maximum for themselves, and they don’t care what happens to the business.
before we examine the way in which BrewDog have managed to grow to where they are now, I would like to mention Maria’s own personal definition of sustainability:
Sustainability is the quality of our relationships.
This is the approach we take with Holonomics, one which leads us to becoming more sensitive to our relationships – with the environment, nature, those people around us, and principally our relationship to ourselves. Translated into punk, this leads BrewDog to being “a kind of modern day punk co-op that is ultimately about connectivity, culture and community”. The way they achieved this was with their genuinely groundbreaking Equity for Punks programme:
BrewDog is an alternative small company, part owned by the people who love the beers that we make. They are our shareholders, our best customers, our friends, and the heart and soul of our business.
The first Equity for Punks programme was launched in 2010 which not only saw £15million raised but also created a “legion of brand ambassadors around the globe”. One really important insight is that the first seven companies BrewDog met to discuss this innovation all dismissed the idea as impossible. BrewDog did not give up after three or four rejections, but carried on until they found an eighth who thought the proposal “might just be possible”.
As you can see, as well as “owning the bar” there are a number of other benefits as outlined in the current prospectus for the fourth edition:
In contrast to other crowdfunding platforms at the time which offered little security, BrewDog went through the full and formal approval regulation process leading to the same same standards as large-scale public listings. So here we find another paradox, it pays to really follow rules at certain times in order to break the rules.
As Watts explains:
The real beauty of the Equity for Punks model is not the financial side. It is in terms of how it entrenches the relationship between us and the people who enjoy the beers we make.
We wanted to put an end to the traditional, slightly adversarial paradigm, with producer and customer both playing a zero-sum game. We wanted to completely align our goals and objectives with those of the people who buy our beers, to lock our customers in for the long haul and ensure we all shared the same objectives.
As authors and public speakers, Maria and I have to put our reputation on the line when discussing business case studies, be it at conferences such as Sustainable Brands, or when teaching our MBA students. We have to be extremely careful in terms of who we put forward as great examples of leaders, since it can be quite common for a business leader or company to put themselves forward as a leading light of business ethics or sustainable business practices, only for them at a later stage to be discovered to be involved in corrupt practices, greenwashing, or through ego simply not being able to practice the values and methods preached.
This theme of ego and ethics has been something I was writing about in detail last year, and led to me coining the term ‘knotworks’ which I define as “networks with ego”. I think one of the themes which really resonated with me was the way in which Watts writes about ego and the way in which “your success will only serve to heighten the hater’s of their own inadequacies”. As he says:
Pretty much all you need to do for people to hate you is to be successful doing something you love”.
My notion of knotworks is also reflected in the section on co-creation whereby Watts describes collaboration as being for “those with no ideas”. So here we have one further paradox – be punk, innovate without watering down your ideas and seeing them die by committee, but if you are to change the world, don’t do so alone. Being punk is about running together with partners who share your vision and can make you sharper, faster and better. You can maintain the mantra of small is beautiful by nurturing both your people and your culture, and your community of evangelist investors.
So as I said, while part of what we do is putting our reputation on the lines, at some point you also need to put your money where your mouth is. For so many years I have been well and truly out of equities, finding the game to be rigged and utterly without ethics. But especially having met David, and reading the prospectus which are distributed both on-line and in BrewDog bars, I now am owner of the bar.
There are many extremely pertinent lessons in Business for Punks, which has sections on the fundamentals of finance, the approach to selling, product design, marketing, team building, leadership, velocity, complexity, risk, decision making, problem solving, indicators, planning, time management and mindset. The advice is absolutely sound, and while at times the writing is bombastic, it discusses many of the less sexy aspects of starting a business that more superficial books disregard.
I did mention at the start of this review that many people do regard BrewDog as controversial. Yes, they have been known to break the rules, but this rule breaking understands that for Generation Y “every single thing you do is marketing”. This is a lesson, as I previously alluded to, that those stuck in ego often fail to understand.
Everything you and your business does is marketing. Modern brands don’t belong to companies, they belong to the customers.
Absolutely everything communicates something about your business and ultimately your brand, which in turn affect’s people perception of it.
For me BrewDog are an authentic business and brand because you know exactly where you stand with them. They are who they are, they live an bleed their mission, and they are not trying to be all things to all people. They are not claiming to have ethics and values and be sustainable while operating with corporate ego, hidden agendas and what are to all intents and purposes controlling, hierarchical and traditional ownership business models.
I think this is a genuine business manifesto for a new generation of entrepreneurs, people who need to learn the ways of finance and team building as passionately as they are constructing their apps, platforms, events and experiences. There is also a huge amount of wisdom which can certainly be applied by old sea dogs in lumbering corporations, but that is another article.
Ultimately, what is so great is the final piece of advice which was also the first piece of advice as well.