Roger Hamilton

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Roger Hamilton:How To Build The Greatest Thing
Remember the phrase `The greatest thing since sliced bread?' The company that actually pioneered
sliced bread, and made that phrase popular, just went bust. This while still selling 500 million of their
iconic Twinkies (named after dancing `Twinkle Toes') every year. What happened? When did sliced
bread stop being the greatest thing? When did the toes stop twinkling?
Hostess, which is making news in the US as one of the most public bankruptcies this year, is another
victim of `economies of scale' losing to `economies of speed'. Which way is your business heading and
what's the lesson from this?
Wonderbread debuted in the 1920s and pioneered sliced bread loafs in the US, rapidly making
Continental Baking the largest baker in the US. One of their bakers, James Dewar, came up with
`Twinkies' to keep their strawberry shortcake machines busy when strawberries were out of seasons.
They began with banana filling and then, when WW2 made bananas short in supply, Twinkies switched
to vanilla filling and sales took off.
After its early innovative years, Continental (now called `Hostess') spent the next 70 years gobbling up
other companies to build economies of scale. All the gobbling finally led to incurable indigestion.
It was a slow death. At the beginning of 2012, the company had over $2 billion in liabilities from both
the unions and the financiers the company was in debt to. This month, Hostess employees went on
strike. The company warned `Get back to work or everyone loses their jobs'. No one listened. No one
came back.
On Friday the company threw in the towel and the CEO, Gregory Rayburn announced "Hostess Brands
will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to
the highest bidders."
Throughout all this time Twinkies have inexplicably held their sales up at the half billion mark year
after year. Through no fault of the Twinkies, the company went from Twinkle Toes to Lead Boots.
Compare the woes of Hostess to fast growing food brands like Innocent, Bare Fruit, Plum Organics and
Chobani (which now has $634 million sales 7 years after launch). The difference? They are all focused
on being ultra-responsive, delivering great products to growing markets. Hostess, on the other hand, is
still relying on products like Twinkies, that haven't changed for decades, and has been spending all its
effort trying to manage its size.
These fresh, lean companies are the new Twinkle Toes. The days of the big ships are over. The days of
the fleet of fast-moving racing yachts are here.
Jettison your legacy issues and any weight that is making you bigger instead of better. Put on your
dancing shoes and change moves often.
Economies of speed are beating economies of scale from one industry to the next.
While it's sad days for Twinkie lovers (but someone will buy and resurrect the brand) and the workers

of Hostess (but they will step into new dancing shoes), this shift in business is a big positive for every
entrepreneur as it levels the playing field - from the biggest to the most nimble.
It's the greatest shift since the industrial revolution.
In fact, it could be the greatest thing since sliced bread.
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