Chapter 15 - Daring to Succeed: How Alain Bouchard Built the Couche-Tard & Circle K Convenience Store Empire
Today's Chapter is based on the book “Daring to Succeed: How Alain Bouchard Built the Couche-Tard & Circle K Convenience Store Empire” by Guy Gendron.
Buy it on Amazon here:
https://www.amazon.com/Daring-Succeed-Bouchard-Couche-Tard-Convenience/dp/198800263X
Here's what I learned from the book:
Decentralised Organisation
"We don't make a cent in these offices. The money is made in the stores."
— Alain Bouchard
Alain Bouchard is well known for building one of the largest convenient store empire in North America with Couche-Tard and Circle K. However, when he first started in the convenience store industry, Bouchard was considered a small fish in the pond. What distinguished himself from the others was his understanding that money was made in the stores and not at the administration level. As such, he created a business philosophy that reflected this reality:
“At Couche-Tard, says Alain Bouchard, "we are egoless." The company's administrative offices are "service centres," a term meant to reflect the organizational philosophy of the group. The staff working there is at the service of the stores, and not vice versa.”
— Guy Gendron
“The central structure was minimal, and intentionally so. They were all aware that the heart of their operations was in the stores, in the relationship with the customer. The decision to have no headquarters was a part of that philosophy, and the symbol of it.”
— Guy Gendron
This idea of having no headquarters is definitely not unique to Couche-Tard. In fact, Bouchard was inspired by Jack Welch, the ex-CEO of General Electric, who was nicknamed Neutron Jack for his practice of cutting thousand of jobs in administrative positions which he often referred to as “bureaucracy”. Couche-Tard believed that when a company becomes too bureaucratic and hierarchical, the company becomes a factory for producing reports and analyses, but forgets about the concrete aspects — like the customer who comes into the store, and who needs good service so that he'll return. Having no headquarters but a “service centre” solves this issue.
“Typically, says Bouchard, the stronger a company becomes, the more it tends to impose its procedures on all of its components. Couche-Tard's strength lies in taking almost the opposite tack. "Our DNA is the local business model," Bouchard says. "It's the most important element. It's what allowed us to build everything we've built."”
— Guy Gendron
This concept of inverted management was also used by Bernie Marcus and Arthur Blank while building The Home Depot. They realised that their store associates were the spinal cord of the company since they are the ones interacting with the customers and building the image of Home Depot.
Similarly, since Bouchard spent most of his time visiting convenience stores, he began to notice that the best insights sometimes came from the bottom rather than the top. By consequence, while many companies discourage this behaviour, Alain Bouchard encouraged his employees to have an entrepreneurial attitude and to make decisions.
“Make decisions, take initiative and you'll see where it can lead."
— Alain Bouchard“He [Alain Bouchard] encourages risktaking. This requires a high tolerance for error, but he prefers taking an overall position of trust-even when it sometimes backfires-to an overall position of mistrust that will sometimes prove justified.”
— Guy Gendron
This concept came to Bouchard while he was studying evening classes at HEC Montreal. One of his teacher, while talking about the principles of decision-making, told the students that the best way for employees to find out how high they can rise in a company is to make decisions that should technically come from their immediate boss; “Aiming high is the way to discover whether you've got what it takes. If you fail, at least you'll learn from your mistakes."
“To get there, Bouchard says, each individual has to find the zone in which they can make decisions, room to manoeuvre that fits their abilities and gives them a chance to show what they can do. "That's a basic need for all humans. We all want that: to reach the level of importance corresponding to our potential."”
— Guy Gendron
According to Richard Fortin, one of the co-founder of Couche-Tard, the decision to delegate power to the regions was the most important one in company's history. This was made because of the founders's lack of ego and their acknowledgement that their store employees are the ones who know the most about the customers. As such, the vice-presidents of operations of each regions were asked to prepare their own business plan — a description of what they would do if they were the owner of their own company, including advertising, marketing, human resources, and accounting. Despite this, Couche-Tard's management still had to find a middle ground in delegating the maximum of responsibilities to the store. As a matter of fact, they had to remain in control of the direction of the company to avoid each individual stores looking like independent retailers.
“Give more power to the regions. Acknowledge that it's the store employees who know most about what the customers want. All well and good: But it's also important to have direction. Each store can't simply do whatever it wants and act essentially as an independent retailer. The Couche-Tard founders knew their stores down to the last shelf. They weren't about to start signing blank cheques.”
— Guy Gendron
“So the question was how to reconcile these two seemingly contradictory imperatives: on the one hand, to regionalize decisionmaking powers and delegate a maximum of responsibility to the stores; on the other, to allow the company to exercise tight control of operations in order to increase efficiency and profitability.”
— Guy Gendron
Ego is the Enemy
“I’ve found that history is also made by individuals who fought their egos at every turn, who eschewed the spotlight, and who put their higher goals above their desire for recognition.”
— Ryan Holiday
Couche-Tard was built into a convenience store empire through mergers and acquisitions. In fact, one of the company’s strength was to identify companies whose stores were struggling due to disorganisation. Once acquired, Couche-Tard would implement their best practices in order to increase the newly acquired stores profitability. This often led to major cuts to the expenditures made by the upper management of the newly acquired companies. This was especially true when these were made at the expense of the stores which were often neglected .
“As it had with its previous acquisitions, Couche-Tard lightened the company's upper structure, an area where some expenditures seemed excessive. After returning from one of his first visits to Bigfoot's headquarters, Fortin mentioned to Bouchard that the small network with just over 200 stores possessed two private airplanes to transport senior executives, while the four founders of Couche-Tard still flew economy.“
— Guy Gendron
“As they were wont to do, the Couche-Tard founders visited the stores themselves to get a sense of their value. Richard Fortin remembers, "Often the coffee machine would have a sign saying 'Out of order.' That's unacceptable." In the course of their multiple American expeditions over the years, they would find again and again the same state of neglect in which the stores had been left, while the company's corporate headquarters were gleaming. "The way they were operating made no sense," says Fortin.”
— Guy Gendron
And yet, despite his success, Bouchard’s humilty and lack of ego was the main reason for the company’s success in doing mergers and acquisitions. In fact, these are such core values to him that he made them the company’s business model and mode of operation:
“Humility and lack of ego as a business model and mode of operation: It's an unusual proposition. But that's the inspiration for the highly decentralized structure of Couche-Tard; and according to its founders, it's the reason for its international success. Bouchard summarizes this philosophy in one word: empowerment. The concept doesn't merely weaken the notion of top-down authority-it establishes a whole new category of leadership, one based on trust.”
— Guy Gendron
As a matter of fact, the company’s most effective practices were integrated into the newly acquired stores and vice-versa. For Bouchard, It didn’t matter where the best ideas came from and accepting diversity is considered one of the company’s greatest assets. His eagerness to learn and to make Couche-Tard into a success triumphed over his own ego:
“Indeed, different can be just as good, and can sometimes even lead to better results. Accepting diversity-considering it a strength rather than a weakness-would one day be one of Couche-Tard's greatest assets.“
— Guy Gendron
“That's why we have such a great organization. We're constantly learning. My ego doesn't prevent me from buying another company with 20 stores that do things better than us and transferring their ideas to all of our own stores.”
— Alain Bouchard
“What I really like with Couche-Tard, is that when they buy something, their ears are bigger than their mouth." — Jacob Schram
This idea of integrating and applying the best methods of practice from each companies after every merger and acquisitions reminds me of the concept of synergy from Sam Zell who used to create value through mergers by removing redundancies in between businesses.
“This was my first experience listening to proposals about the great “synergies” of mergers. As an investor and a risk taker, my focus has to be on what is specifically attainable. Buying another company based on the perception of opportunities for cross-selling and other intangible benefits generally represents a much higher level of risk than I believe is justified. Therefore, I concentrate on eliminating redundancies, which measurably reduces the capital required to run the business. This epiphany later became relevant across industries from drugstores, to radio stations, to supermarkets, and others. Redundancies are much more predictable and transparent than theoretical opportunities to add value. My focus is always on the downside. Overly optimistic assumptions lead to the graveyard of corporate acquisitions.”
— Sam Zell
Beyond the Book
Read "Ego is the Enemy: The Legend of Genghis Khan" by Farnam Street