Robert Rosenberg: Former CEO of Dunkin Donuts and Author of Around the Corner to Around the World

Here's something remarkable and not in a good way. Disengaged employees cost US companies almost $1.9 trillion a year. That's a lot of zeros. Why? Because when teams lack the right skills, productivity declines, turnover increases, and strategies stagnate. But it doesn't have to be that way. At Project Management Institute, home of the PMP and globally recognized certifications, your people can learn to collaborate, deliver on time, and actually get things the cost of not upskilling way higher than the investment Project Management Institute. Find the answers@pmi.org. I'm Guy Kawasaki and this is Remarkable People. Today's Remarkable guest is the former CEO of Dunkin Donuts, Robert Rosenberg. Shortly after his graduation from the Harvard MBA program in 1963, he took over a family business. He was 25 at the time this small organization morphed into Dunkin Donuts. He ran Dunkin Donuts from 1963 to 1998. At the time of his retirement, Duncan Brands represented 6,500 locations, including Baskin Robbins and Togos. After his retirement, he became an adjunct professor at the F.W. olin Graduate School of Business at Bab, and he served on the board of Directors of Domino's Pizza, approximately 1500 locations at the time, and Sonic Corporation, approximately 1700 locations at the time. He has a new book coming out called around the Corner to around the World A Dozen Lessons I Learned Running Dunkin Donuts. In this interview, he covers topics such as the challenges of a family business, focus versus diversity in product offerings, the role of a CEO, the role of a board of directors, and the process of planning and budgeting. This episode of Remarkable People is brought to you by Remarkable, the paper tablet company. Yes, you got that right. Remarkable is sponsored by Remarkable. I have Version two in my hot little hands and it's so good. A very impressive upgrade. Here's how I use 1. Taking notes while I'm interviewing a podcast guest. 2. Taking notes while being briefed about a speaking gig. 3. Drafting the structure of keynote speeches. 4. Storing manuals for all the gizmos that I buy. 5. Roughing out drawings for things like surfboards, surfboard sheds. 6. Wrapping my head around complex ideas with diagrams and flowcharts. This is a remarkably well thought out product. It doesn't try to be all things to all people, but it takes notes better than anything I've used. Check out the recent reviews of the latest version. Guy I'm Guy Kawasaki and this is Remarkable People. And now here's Robert Rosenberg. He starts off by explaining the humble beginnings Of Dunkin Donuts.

They actually started. It was an outgrowth of an industrial feeding business, A business that had trucks that went around to different construction sites, small office sites, serving coffee and sandwiches and occasionally donuts and pastries. And it was started by my dad right after the war, and it was called Industrial Luncheon service. And my perception of that business was that his vending machines started to become popular in the early 1950s. It put a dent in the success of that business and the diversification move. In order to try to help a flagging business and help my dad and his partner, who was my uncle, to achieve my dad's dream of being a millionaire after taxes, they started to innovate other businesses. And one of those was a donut shop in a place called Quincy, Massachusetts. And that was the genesis of the business. And that was. It didn't start as Dunkin Donuts, however, it started as. Under a different name and a much more modest start.

There's this constant tension where there's diversification versus concentration. You have your father's business with multiple lines of businesses, and then you decide to go all into coffee and donuts. So can you address the issue of diversification versus concentration?

Yeah, that's a great question. It's always attention. It really gets at the heart of the art of management. There's the tension between what I would call. I'm actually borrowing something from an old Harvard professor between experimentation, which was this desire to keep springing out new things, and exploitation, which is basically taking a business that's already in your midst and burnishing it up, paying a lot of attention to it and exploiting it. One of the reasons why I ended up, at age 25, getting the nod to take over a family business was because it was in a lot of extremists. It was in trouble. And one of the key reasons it was in trouble was just because of the fact it was far too much experimentation. In 1963, there were eight little businesses and a small, not very deep management team. More than they could handle. And they overlooked and actually abused the diamond in the rough that was in their midst. And you're absolutely right. The first sort of five years of when I took over from the time I was 25 to 30, and then, lo and behold, what did I do in the next five years, but actually fall prey to the very same seduction in terms of expanding and exploring far more than I could handle or the organization could handle, and nearly took the whole business off a cliff. And luckily able to survive that and learn a lesson That I will never forget. I oftentimes liken it to a kid putting his hand on a stove and it burns and take it off quick. I'm not likely to do that again. But it took that kind of very vivid lesson to sort of groove in my mind and in the mind of our organization. The fact that we had to be very careful about how far we would experiment. And there was always a balance and there's always tension going on in any business isn't just our business, it's any business has that issue they have to deal with. And that's the art of a leader.

Now you are specifically referring to product innovation and experimentation. But what about the issue of going international?

That's an issue as well. It's not as difficult in my view, as diversifying by business line. But when you move geographically, it takes on a whole new set of challenges and requires an immense amount of planning and care. As you need sometimes more distribution and you think you have a product or a brand that has national or international implications, sometimes you're forced into that kind of need to move. I don't think it's as risky, quite truthfully, as taking on a brand new business. So in other words, when I joined, the firm was called Universal Food Systems. We had pancake houses, hamburger stands, delicatessens, vending company, industrial feeding business, all different kind of business. That's a far more risky diversification, in my view, than growing geographically. Diversifying geographically.

How do you balance when you're diversifying geographically? For example, saying that this kind of coffee, this kind of donuts, they do well in the United States, so they're going to do well in Japan and England and Canada. So do you have centralized decision making or do you leave it to the local market to decide and have a different product offering?

You need to leave it to the local market. You have to customize the offering to the location. For example, when we diversified geographically into Japan, the customers at the time weren't as tall as they were in the US So the stools had to be lower. A different palette, different tastes, different products. A little of that was through trial and error and experimentation. But you do have to adapt the business unquestionably to the local market. And that requires people on the ground in the market who understand the market.

What are the challenges of a family business?

To have a business to go into as a young person is a big advantage. If you find yourself in a leadership role, though, it comes with its own challenges. And those challenges often come when change is required. Oftentimes you have to sometimes change strategy, organization, Menu. In our case, even the name of the business itself had to change. From Universal Food Systems to Dunkin Donuts. It was a major change. We changed strategy, organization, even Menu inherited Dunkin Donuts. 26 stores that opened the year that I joined the company in 1963, ranged in size from 18 seats to 89 seats and had full breakfast menus and had lunch menus and hamburgers, hot dogs, scrambled egg breakfast menus. So basically, a lot of things had to change. And that can create some tension between the founder and the subsequent generation, people who join a family business and requires a lot of delicate handling and perseverance. And our business was probably not unlike a lot of family businesses that aspire to grow bigger and to succeed. It requires change and adaptation, and that sometimes creates some conflict.

Let's say you're not going into a family business or inheriting a family business, but instead you are considering starting from scratch a new business. Would you say that it's a good or bad idea to start with a relative, spouse, you know, kids, whatever? Or if you can avoid that situation.

No, you wouldn't have a prohibition against. It's more talented. The one thing for a Bridgeling entrepreneur. One of the things that I taught at Babson when I was teaching entrepreneurship was one of the key elements, along with knowing you trade and apprenticing. You also have to surround yourself with a complementary group of people because it's a team sport. And if that team sport, if the trust and the competence exists among a family member, I wouldn't preclude someone just because they're a family member from that kind of activity. But I would be sure to make sure that there were clear lines of demarcation where responsibility started and stopped. It's delicate, but talent is talent. And talent could come from within the family or it could come from outside the family. The key element, though, is to get a complimentary set of skills as a team among the first hires in the business. So I'd say there's two real critical elements of any entrepreneur that's starting. One is, I believe in sort of an 8020 rule that 80% of most successful entrepreneurs spend anywhere from three to five years in the industry within which they start their business. So they know the opportunities, the challenges, the metrics, the gaps of where they can build a sustainable advantage. And the second is to make sure that they have maybe three things. The second thing is to make sure they have a team of people, even if it's a small team that really fill the needs of the organization and complement each other. And the third thing, I'd say they need enough capital because oftentimes your first strategy doesn't work work out and you got to be flexible enough to pivot and learn from your areas as you get rolling. So I would say those are the three things you need to be to successfully launch a business, whether it's with a family member or not a family member.

Do you think that a Harvard MBA or an MBA really prepared you for entrepreneurship?

In my case, I had worked so that I virtually grew up figuratively over the store. So I worked in the business, I went to hotel school, and I knew I was going to be joining the family business. Quite truthfully, I had no idea that I was going to be asked to assume the CEO role within days of me graduating. I honestly don't think I could have done the job had I not had my MBA training. Basically, in my second year of business school, I took courses in what was called strategy by Guy, my name as it was, who was one of the founders of bcg, Boston Consulting Group. And that gave me the perspective and the understanding of how important strategy really was. And I also took courses from a professor by the name of Walter Salmon who taught retailing. And I did papers and naturally I was gravitated to the family business, which I wrote my papers on. So I had an inkling when I got to the company that I sort of understood what I thought were the problems inherent in it and why it was in such turmoil. So I would have to say unquestionably that education helped me start off as a cocky kid, to have a running start, to have a sense of what to do, where to pay attention, and what the difference could be in terms of success or failure.

For those of us who are not really insiders, could you explain the gist of franchising?

Franchising is a wonderful and not too well understood business model. It basically combines aspects of a large corporate holder that has a style, a business style, a format of business, and it licenses the rights to utilize that to an individual entrepreneur at the local level. And it combines the sophistication, potential sophistication of a large brand holder or service holder, someone who has a business format combined with local, it combines it with local execution at the store level, at the unit level, close within the community. So it combines the best of both worlds and oftentimes understood it's not only a way for an individual to obtain and reduce risk and obtain an opportunity to enjoy greater earnings than might otherwise be available. But also today, in some of these enterprises, these franchise businesses have grown to become the pillars of many communities and have turned into large enterprises worth tens of millions of dollars. So it's been a method of wealth creation. There are probably in the United States today, 750,000 business format franchisees. And between that and dealerships, I would estimate that you could be accounting for as much as 25% of the goods and services in the United States are distributed through either dealers and or franchisees. And it is a wonderful business format. As I say, it reduces risk dramatically for an individual who's considering entrepreneurship as an alternative. Oftentimes people don't think of a franchise as a way, as an entrepreneur, but you are in business, but you're not in business by yourself. And you have the advantage of someone who's been there, done that, and put in the kind of apprenticeship that I often say is required of an entrepreneur going into business, the three to five years of learning the trade of that business. Oftentimes that's what a franchise helps an individual bridge that gap.

But as a franchisor, isn't it hard enough to make good coffee and donuts? And then you have to add hurting the cats of selling franchises. Didn't you just make your life twice as hard?

Not actually. Basically, you start with a school and you help train and inculcate people. You create a culture. You have field supervisors who help coach individual owners to maintain standards. And we believe that our success is really dependent upon our ability to consistently deliver high quality products and services day in and day out. So you may give up an element of control by virtue of having a third party, but you gain so much more by virtue of having someone who's got skin in the game on the front line, dealing directly with staff and customers in the community in which they're doing business. And most times you find that most franchisees understand the importance of a standardized execution of the product and the quality of the product. And you spend a lot of time, you start early with a school. In our case it was Dunkin Donut University, which was a six week training program, and then an ongoing business and opening crew, and then ongoing district managers, that one to every 20 stores that they're responsible for coaching and helping.

Do you think that back then the Dunkin Donut employee, the central employee, do you think they get up in the morning or got up in the morning and thought, I work for a great retailer of donuts and coffee, or they got up in the morning thinking, I work for a franchising company? Or did they have to think of both?

I think they thought of both success and a distributed system where you got lots of outlets, you rise and fall, staff rises and falls on how good the unit manager is. So they wake up and say, I not only am part of hopefully an enterprise that brings a smile to all my customers faces every day by starting their day off with a great cup of coffee and a baked product or fry product being a donut, but I also work for a great man, woman, husband, wife, team, whatever the ownership is, who care about me, who take good care of me, who are nice people, who appreciate me. So it's a combination of both. So hopefully it's both the brand as well as the unit manager. And the unit manager could well be an owner, a franchise owner and staff, I think relate directly to who the manager is of that unit.

Now, in the franchising business, one of the key tenants is geographic sort of exclusivity, right? So you don't put two Dunkin Donuts in the same shopping center. But what happens in a digital economy? Or is franchising just because there's no sort of geographic boundaries in a digital economy? So is franchising just off the table for anything digital?

No, I don't think so. As a matter of fact, basically the successful ones have started as operating companies just like ours did, where the founder starts with a concept that provides goods and services in a superior way. And the second generation of those that succeeded and made it big were those that kept that strong operating basis and grafted onto it a strong marketing orientation. Really all the packaged goods orientation. Now we're going through the third stage of those that are going to flourish in the future, those that normally maintain great operations and great marketing, but also understand the whole element of technology. So you're seeing the ones that are going to survive the pandemic, for example, are the ones that understand digitization, the ones that already have consumer relationship marketing, dao pad who have relationships, Apple pay or pre ordering and phone ordering and customization. So digitization is brought to bear as a big enabler. I think of some of these concepts and they're utilizing them. I was on the board of Domino's and basically we gravitated to become a technology company that spelled the difference in that particular company. We're thriving as a result of the ability to be a technology company.

There are many points in the book where you say that you were always in the field. You were looking at every site that you required, I think top management to Visit at least 100 stores a year. What happens in a pandemic where nobody gets on an airplane?

It's hard. It gets hard. You basically have to rely on zoom and a lot of communication and high touch that hopefully this won't last forever. But it is a limiting factor. And this is a business that is very much a social business. It's a lot of relationships when you're dealing with franchisees and franchisee leadership. So you have to employ technology as an intermediary to help you maintain that high touch.

What's the state of the art of how you assess a new location? How do you decide, put it on this corner or not?

Basically a lot of regression analysis, a lot of data. We buy information on every community, we map out all the competition, we take a look at all the demographics within 1, 2, 3 miles. Most retail businesses in my experience generate 80% of their business within a 10 minute driving time or walking time, be it an in town location or a suburban location. And all of that data is generally systematized and evaluated. In our case, we basically looked more importantly at developing our brand and advertisable markets as opposed to going wherever anybody wanted to buy a franchise. So we were very disciplined in terms of how we grew. We were big believers that brand had extraordinary value. And as a result of that, we spent a lot of time deciding where we put new distribution. So we would take a city and we would basically map out where all the competition was, where the most desirable locations would be, based upon the data that we had on our computers. And we also did regression analysis to determine those considerations that most impacted sales. So we had models that could give us estimates of sales plus or minus 10%, 90% of the time. And then we also did it by virtue of visual observation. So the senior development manager of the company or in the region would give a thumbs up or thumbs down. But armed with all of that data and all of that information, it's pretty scientific. It's not a hit or miss activity. But a lot of the key of it in my view, is to build brand in a market. To get both ad weight and distribution. You need both. You can't just rely on ad weight. Without distribution, a lot of it's wasted. You need both.

Speaking of advertising, where are you now on advertising? Because before it was obvious you advertise in newspaper, magazine, tv, radio. Now with social media, has your emphasis switched to targeting via Facebook? People in a certain region of a certain age who might want coffee and donuts.

In my days, I take you back a bit. It was basically Adwaite. So the more that we were on air, the better we were. So at 26 weeks we had a certain kind of growth in same store sales of 38 weeks, even more at 150 gross rating points and then even more significantly when we were on air at 52 weeks, at least 150 gross rating points. Clearly social media plays an important role and a lot of it is within the systems themselves. They have loyalty clubs and track followers based online. In terms of adding on to the media way additive as opposed to subtractive in terms of the budget, I am sure. So they're keeping up mass media as well as very pinpointed individual contact, consumer relationship marketing based on loyalty, based on award characteristics where customers follow a brand and take advantage of all of the benefits that they get through social media.

I had no idea that Dunkin Coffee would never be older than 18 minutes and Dunkin Donuts would never be older than four hours. So can you discuss this emphasis on quality and how you came to these kinds of decisions?

It really started way back. The business was always founded on an uncompromising commitment to quality products. When I assume responsibility for the business, as I said earlier, a lot of the more recent stores that the prior management had opened were diverse menus of all kinds of food products undifferentiated. So we committed ourselves to make sure that we were going to focus on at the time two products, coffee and donuts. And we were going to make sure that those products were the very best in the world. I also had the opportunity to run into a fellow by the name of Charlie Lubin, who was the founder of Sara Lee. And I visited with him at his club. He had already sold his business to Consolidated Foods. But I asked him over lunch to tell me what he thought the secret to his success was. And he turned to me and he said, I was taken back. Am I repeating it? And he said, what do you think a pound cake is? I said, I have no idea. He said, a pound cake is a pound of flour, a pound of sugar and a pound of butter. And that sort of just stuck in my head. I said, when you really think about those long live food products, what they have in common is the real deal. Butter, cream, real fruit fillings and coffee, you know, really made rich with real pure cream. That really spells the difference in terms of a food product. And we made a commitment then that any product we would have would always be of the utmost of quality. So, you know, if we used Madagascar vanilla and Saigon cinnamon before the Vietnamese war, we try to use the very best ingredients we could find. The Dunkin Donut specifications for coffee. It might run 27 pages. Most dairies in the United States do not make 18% light cream. I believe that coffee tastes absolutely more delicious when you have real 18% light cream. The difference in mouthfeel and taste is totally different. We had to go around the country and convince dairies who continually refined all the way down to skim milk to no butter fat from 40% whipping cream butter fat. We had to convince them to make 18% cream for us. And we were very fastidious about all those kinds of products and how we delivered them. Same thing with our donut mixes and our shortening and fillings with pure fruit fillings. And jelly to us was apple and raspberry fruit, and that was a jelly filling. Apple filling was real apple. If we're going to be in that business, we're going to have to have the best product, the best tasting and the most delicious product, Almost always made with real ingredients in order to be able to provide a competitive advantage.

If a pot of coffee was older than 18 minutes, it was thrown away. And donuts older than four hours were thrown away.

So now they have larger units in terms of how they sell coffee. But in those times, we had a 60 ounce pot of coffee and we would make it continuously. We would grind the beans fresh on premise in front of the customer so that the beans and the beans were delivered in nitrogen flush packs every week fresh from the roaster. So the product never deteriorated. I think coffee begins to deteriorate after 10 days or so. We never allowed the coffee being deteriorated. It was always packaged properly and we ground it fresh in front of people. We ground it more richly than any of our competitors. Significantly more so that 60 ounces of water coming out at 200 degrees when it brewed, it didn't pick up as many of the tannins because we had a richer base in terms of the amount of coffee that we put in the pot. And so all of those steps and including the cream that we used when we finally served it, we were committed. Champions of product quality. Always. That was always a hallmark of the business. Still is.

I found your discussion of the number of objectives a company should have quite interesting. So can you provide your perspective on how many objectives a company should have? What kind of objectives should they be? Are they all quantifiable?

It's all part of a planning process that ran throughout the whole width and breadth of the company. Everybody, really. It was either a profit center or a Cost center. So everybody operated in a program of management by objectives. So the first element of the planning process really was most important. It was a mission. What did the company want to be? And if you couldn't define yourself with those words to be, it was hard to describe what your purpose and what your mission was. After that you had to define, in my view, no more than five, but probably best, three critical metrics of what you want the business to have or as a profit center, what that profit center has to achieve. But I use objectives and achievements as one word. And goals, they all mean the same thing. And so I have found that no organization can really put itself to achieve an infinite number of things that a business or that an individual can measure. An infinite number. But there are some that are absolutely more critical than others. In our case, we basically had an earnings per share goal, we had a return on investment goal for our franchisees, and we had a certain debt capacity that we wouldn't exceed. And those are the three metrics that we measured the business against. And then following that, we would generally select five or so key levers that you could pull. Because our belief was, is that no organization, be it the United States government or a small entrepreneurial company, can't really effectively put its time and attention to anything more than four to six levers or strategic initiatives at a time. And then we had individual more granular tactics to support each of those individual strategic initiatives. And that was our planning model. But the objectives generally were, whether it be a department, an individual or a company, had to be those that you felt most reflected success. And you generally get what you measure. And don't measure too many things because you end up confusing everyone and they're in conflict with each other. Oftentimes they have to pick the ones that are most critical to the. You know, how would you know it when you see it, what success mean to you?

Now tell me about budgeting.

Same thing. It would start basically at the beginning of the cycle. We would start at the operating committee level, which would be the group of senior management sit together. We had a model that we would take a look at five years in advance in terms of the key elements of our business. New distribution, same store sales, profit margins at the unit level, SGA sales, general and administrative expenses. We would model our behavior and to see whether or not we had gaps in terms of achieving our 15% growth rate and whether we could do it comfortably or whether we really had to stretch or whether we had to begin to plant some new saplings for future growth. Because we were running out of geography or we were running out of room or something was going on. In our case, as baby boomers started to age, same store sales had gone from what had historically been about 6% compounded per year down to about 3%. Started to put a strain on our growth rate. So we had to begin to start to look to change the business and adjust and adapt. So that was the planning process. And then every year before the planning cycle start, I would issue, with the advice and consent of the senior managers of the company, a statement of goals and objectives and strategies and outline them in terms of what we had hoped to achieve. Not to be prescriptive, but as a guideline to people in terms of where we were heading. And then individually, every department would sit down with a supervisor and go over the goals for the year. In addition to that, there would also be. We only had one budget for the whole company and we didn't change the budget during the course of the year. But we would identify potential gaps of where we could miss, where we could go off budget and would generally require each department head and the company as a whole to have a plan of attack in the event that there were gaps started to create during the course of the year. So for example, if we really thought it was going to be tight, we might defer some of the spending on new hires till later in the year to ensure that we were off to the right start. That might have been our cushion in order to be able to achieve our budget. So it was a top to bottom everybody, all people on deck planning cycle. Everybody was involved. So even if you were an accounts payable supervisor, you basically had no revenue, but you had expenses and you were involved in the process as well. And you were evaluated based upon your ability to achieve your objectives through the period and through the year.

Would you say that? Let's say that the budget for 2020 was established and three months later you're in the midst of a pandemic. Stores are all closed, whatever. This is the perfect storm of difficulty for a business. You do not recast your budget. You, at the end of this year, you'll just say we reach 10% of our budget because of the pandemic. Or do you recast at all?

No, you talk like once in a hundred year event. Yeah. Face that kind of event. You'd have to recast that kind of a sea change and the community was going to happen. That would not be wise. No, you'd have to pivot, you'd have to make a lot of Adjustments and adaptations. But we would do that even without a pandemic. But we never had to face anything of that magnitude. So for example, as I suggested, it was going to be a tight year. We might defer certain hires and certain things to later in the year to make sure that we had a healthy margin and that we were well on our way to achieving our budget before we would spend. So it would be those adjustments that we would have in our back pocket as we move through the course of the year that just could good management not to over promise and you don't want to over promise and under deliver.

But just to be clear, so let's say you set a budget and a pandemic doesn't happen. But whatever, for whatever reason, it's clear that you're not going to make that budget. Now you talk about the variables you can change to reduce costs and stuff, but you would not recalculate the budget so that it looked like you came closer to the budget of you would not. You just take it, you just let it be.

You're talking about like a once in a millennial kind of thing. But under normal circumstances, basically, hopefully our planning was smart enough and well enough. And the fact of the matter is that we never, you know, we always delivered on our promise. After the second five year era, in which case we had a miscast strategy and the wrong set of objectives, I was still trying to grow at 100% or 50% a year, which was crazy. Once we learned the error of my ways and never recreated that and reduced ourselves down to a much more manageable 15% growth rate, we were always close. And I think there was only one year we didn't make our annual. And 25 years after that, I think there was only one year. Senior management didn't get its bonus based on the achievement of its annual budget, in which case we forsook our bonuses and made sure that the rest of the team did get it because we took the hit. It was our plans. But I think that was one out of 25 years where we really missed.

Let's now talk about boards of directors. So who do you want on a board and what should it do?

Board of directors. Who do I want? I want basically the same thing I would do in terms of trying to select an organization. I would define the assignment. So a lot of what you might need is based upon what the needs of the enterprise are as best you can define them. So if you were going to grow internationally, you'd want someone that would be savvy in that regard, if you had financing issues, you probably want someone with those kind of financial skills. If you had legal issues, you probably want a lawyer. In my view, I think some of the best board members are retired or existing practitioners who are in the field. In my experience, that's been my own experience on my little tunnel vision. But I basically served on companies that either had the boards of companies that either were in the restaurant business or franchising companies where I could add some value. And I found that that operating experience was helpful to the board in addition to the other skills and requirements we had. And some companies governance may be an issue, and you might want to bring in someone who really has had some experience in creating the right kind of governance issues and the right kind of governance within the board. So a lot of it depends upon what the needs of the business are, which is the same way. Same lesson I would use in terms of hiring staff. I would basically do as best job as I could at defining the assignment that needed to be filled. Their function to oversee strategy in terms of what you want to be, what you want to have, and what those four or five levers you're going to pull, are they on target? And then most importantly alongside that is the insurance that you have the right CEO running the company. Their primary function is to replace that CEO. If that CEO is incompetent, he or she is incompetent and unable to deliver the objectives they promise.

I read this, and I hope I got it right. But did you say in the book that there are four board meetings and there are four topics decided in advance, and there's that kind of structure that each of those four beat four board meetings had a specific theme. Because most boards that I'm affiliated with or have been affiliated with, they sort of like go over the operating results for the past between the last two board meetings, and they bring up new issues, but it's never as thematic as.

What you discussed, whatever the particular topic is at the moment. Each of the four meetings had a theme. It would start with what we would call a swot Strengths, weaknesses, opportunities and threat analysis of the company and the environment in which it operated. And so that the board would have some idea of what the industry was doing, what the competitors were doing, where the opportunities lie, where the threats lie. So that would start the whole planning cycle off. So every board member would be involved in what was happening within the business and the industry. The second, in addition to other activities. So we might also at that meeting have a threat analysis where you would basically Think through what disaster could befall the business and how would you respond to it. For example, if there were a pandemic, what steps would we take in advance? Not in real time, but in advance? In our case, oftentimes the greatest threat we faced is a health issue. What if someone, God forbid, got sick and we started to have E. Coli? Now, in a fried product, that's less likely. But in other boards, I served on the food business. So we would identify the three or four major threats and how we would respond. So that would be done in addition to, let's say, the SWOT analysis that would start the planning cycle or some other activity. Plus the CFO would give us a quarterly results of the things that you would be more noticeably comfortable with in a board meeting. What's going on? What's the latest numbers? But we would start way in advance of that in a big picture. The next meeting we might have an individual activity, but we would. Where we might be looking at quality control or some other issue, or a department head would report. And we would also look at the numbers. But then we would have a final. And that would provide the board the opportunity, given the SWOT analysis they've already been armed with three months earlier, to now come in and say, does this make sense to me? Is this the right mission? Is this the right set of objectives? Do we have the right kind of management to do that? Had I had that in place in the second era of my career, I might not have decided to change from a focused donut and coffee company to a franchising company and almost drove the company off a cliff. That's when we began to start to put that kind of formalized thinking and planning in place to protect the CEO me from making those kind of errors again, to have a kind of forum to say, whoa, have you thought about this? Does this really make sense? Do you really have the resources to do that? This is where they're engaged and where they provide value. So that would be a five year plan. The next meeting, the third meeting in the cycle would be the annual plan, which would come off the five year plan that already now been inculcated with the SWOT analysis in terms of the positioning of the brand, the strengths and weaknesses, the five year plan in terms of what we want to accomplish and whether or not we're following on the annual plan. The fourth meeting would be a toe. I was in the military. So it's a table of organization and equipment. You basically would list every single senior manager in the company based upon promotability so they'd be green, promotable within two years. Yellow, need more of an environment. Red. They're barely identified. They have to leave the company. So you would go through every one of the senior managers. Everybody would identify everybody within the organization so that the board knew how deep the organization was and who would be the successor to the CEO. Yes, that was the rhythm of the board. And quite truthfully, I was able to bring that same kind of rhythm to the other boards that I served on. That same kind of rhythm. And it served us well, at least on some of the major publicly owned boards that I served on.

Until I read that in your book, I had never heard of four different themes for four board meetings, ever. My eyes were opened by that discussion. Now, let's talk about what makes a good CEO.

A number of things, I think. A good CEO, in my view, has to have a passion for the job and a passion for the business. You got to really love the business. You really have to have a passion for the job because it's a taxing one. I think a good CEO has to understand what are the major functions that have to be fulfilled as a CEO. And in my view, if the strategy and the organization aren't spot on, there's little else you can do to make a successful enterprise. So you got to get those two things right. So a lot of time and energy goes into shepherding the planning process, some of which we've already covered, and manning the organization with the appropriate people to fulfill that plan, that strategy. The third function I think is critical, from my experience has been you also are communicator in chief. It's part of your responsibility to align all constituents behind the strategy of the company. And that is a continuing task. Most people think that they say it once and everybody gets it. Not true. People are so preoccupied with their daily lives. You very much have to repeat over and over again and work very hard in the field, wherever you go, in every forum, to ensure people are buying into and understand the strategy and the objectives of the company. And the last thing that a function that a CEO, a good CEO, has to be is someone willing to jump in. And in times of crisis. The world is an unpredictable place, as we know, and there are going to be crises that occur like a pandemic, and a CEO has to be able to jump in. In my experience, what works best in times of crisis is putting together a small team of people who really can handle the task and make sure the other parts of the organization and separate them away from the day to day operation of the business have them focus particularly on that crisis and that activity, while the rest of the organization executes on a day to day basis. The execution of the business, those are the functions I see in terms of strategy, organization, communication and crisis management. And the other part of being a good CEO is the values that you stand for and their characteristics. I do think that the best CEOs I found have been extremely trustworthy people of high integrity, a passion for the business, humble, basically, open to input from others, continuing to grow. It's a long journey and the world is changing so quickly. So many new activities, so many new things happening that you really have to continue to grow and expose yourself to all kinds of seminars and colleagues and learnings and books. So those combination of both of personal characteristics as well as functions make for, in my opinion, in my experience, a good CEO.

Starbucks started in 1971. So from 1971 to when you retired, Dunkin and Starbucks were both in the world. What's your analysis of Starbucks?

All right. I don't see Starbucks as starting in 91. I mean 71. I see it starting in 91. When Howard Schultz got there and he bought it, it might have been weeks before that, but it really didn't come onto my screen until then. And initially, not so much today, but initially. During my era, I basically saw it as a different business. It was a lifestyle brand and it could go anywhere in the world. It wasn't so much selling a product, it was as a lifestyle, a third place, a place between home and the office. And it was an environment. It had a kind of a. Maybe not so much today, but in Those days, back 25 years ago, it had a panache, the macchiatos and lattes that were different than Duncan's Small Medium Large Coffee to go. It was a different business. I learned things from it. I watched carefully what they did, but I didn't see them so much as direct competitors. We were a QSR business and they were what I would call a lifestyle brand. It was a different kind of customer. Oftentimes there's a lot of exchange between them. And now increasingly I see them coming up against each other more as they edge out each of them with their daily brew in order to appeal to the Dunkin customer on the go. And Dunkin's moving into nitrogen flush and cold brew and lattes, cappuccinos and other things. And I was already beginning to do that when I took over at Baskin Robbins. But the answer to your question is for the last eight years, they were Very much on my screen. But I saw them somewhat to learn from in terms of what they were doing, particularly with Frappuccinos. A lot of cream based products. I thought people love things that taste delicious and that was a way forward for us. And we began to introduce. When I took over Bascot, I found we had great flavor people there and we began to start to migrate. The first product we introduced, I took the marketing head from Duncan and made him in charge of Baskin Robbins was a cappuccino blast it was called and that then moved to Culada at Dunkin. And it was a coffee based cold beverage, very creamy. And it was Baskin's first beverage. And Dunkin started to have an offering in the midday afternoon part which we hadn't had before. A lot of that was inspired by my observation of Starbucks, but I didn't see them as direct competitors. And we are increasingly coming up there bumping against each other. But not so much so during my.

Era, out of ignorance, what is a QSR?

Quick Service Restaurant? That's what they call. That's McDonald's, Dunkin, Kentucky Fried Chicken, Yum Brands.

It's all QSR now my last question, a couple weeks ago I interviewed a New York Times reporter and she had the Central and West Africa bureau when Boko Haram had just kidnapped the 250 girls. So this is a hardcore investigative reporter in Nigeria and Cameroon. And asked her what makes a great interview. And she told me something that I have now incorporated into my interview, which is the question, what have I not asked you that I should have asked you?

I think that you have been the most incisive interviewer that I have. This is like my seventh podcast and I found that you were deeper into the book, more understanding of it, asked me harder questions. So I'd be hard pressed to find out what you might have asked me that you could have that you didn't. You touched on most of the critical elements I think that might be of value to your listeners. So I don't. I'll have to think more about it. But I don't have an initial reaction other than the fact that that you ask good questions.

That's very flattering. Unless you told it to the other six people too. You know, host is only as good as his guest.

Oh, you're sweet.

Okay. No, I thought of one more. So changing from Dunkin Donuts to Dunkin. Thumbs up, thumbs down.

When we hired the guy from Reebok, he came in and said you should do a positioning study. The guy comes in and says, we've looked at it, your business has changed. It's going to sleep with a switch. Me and you become from a bakery business, you become a beverage business. You got 60% of your business is in beverages. And so I want to change the advertising. Get rid of the guy that represents you who does advertising. Fred the baker. Time to make the donuts. And you coffee plus one equals three. And I said, oh my God. I said, what the hell does that mean? I just spent $250,000 on a physician setting. And he explained to me how basically we were a beverage business. And that began us down a long road of saying, if that be true, then why would we call ourselves Dunkin Donuts? Donuts are now representing at that time maybe 15 or 20% of the sales. Now it's probably closer to 10 or 15% of sales. And we were clearly a lot bigger and better than that. We had just been purchased by a large English company. And they said, look, we just spent $320 million to buy the business. We prefer you not to change the that we spent $320 million for. We enabled it. So when the time came, now that this new generation of management decided, they called me wisely and I think basically, don't throw us under the bus. I said, far from it. I think it's a wise move. I wholly support it. Think it's smart.

Well, for your next interview, which I think anybody who has his or her act together at all should ask you that question about the name change. I give you something that you can cite which would just shut them up forever, which is to say that Apple Computer Inc. Is no longer Apple Computer Inc. It's Apple. Probably for the same reason that they make phones and tablets and pads and web services. So they're not Apple Computer, they're Apple. So same thing.

Right? I will use that one there. Because people do ask occasionally, particularly back when they did, it was big news. Change is hard. It's amazing how hard it is for customers. I remember when I went away from porcelain cups in the 80s and went to paper cups and self service away from a question mark counter. I was on a talk show and wanted to talk about franchising and the customers were calling in and swearing at me and upsetting me. The way that fourth one comes, change can be very hard. Particularly when it's somebody's routine day in and day out. They take it very personal.

I hope you enjoyed this interview of someone who ran a large analog operation for quite a few decades. Not just clicks and bits and a B testing, but real stuff. Donuts and coffee. Donuts no older than four hours, and coffee no older than 18 minutes. I'm Guy Kawasaki, and this is Remarkable People. My thanks to Jeff C. And Peg Fitzpatrick for making this podcast a slam dunkin. I can hear the groans already. Remember, wash your hands, wear a mask. Don't go into crowded restaurants and bars and listen to Tony Fauci. Mahalo and aloha. This episode of Remarkable People is brought to you by Remarkable, the Paper Tablet Company. This is remarkable people.