As part of my series about the “5 Things You Need To Know To Create a Successful Service Business,” I had the pleasure of interviewing David Kiersznowski, founder and co-owner of DEMDACO, a wholesale gift company founded in 1997. DEMDACO’s headquarters are located in Leawood, KS and their distribution center is in Edgerton, KS. The company has corporate showrooms in Atlanta, Dallas and Las Vegas, with a sourcing office in Hong Kong. David has been involved in the gift industry since 1988 in the areas of wholesale, direct selling, Asia sourcing and production.
David has served on the boards of The Wedgwood Circle and International Arts Movement. He is currently on the advisory board of Commerce Bank.
David has a Masters of Management from Northwestern University’s Kellogg Graduate School of Management, and a Bachelor of Science in Manufacturing Engineering from Boston University.
Thank you so much for joining us! Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
I worked for a direct selling gift company called House of Lloyd for a few years in the late 80’s. It was my first introduction to the gift industry, and I loved seeing how gift items could bring comfort, love and joy to the world. A few years later, I had the opportunity to be a co-founder of a buying agency in Hong Kong, again focused on the gift industry. That experience allowed me to understand the production side of the gift industry. My years in Hong Kong were also the beginning of many wonderful industry friendships and relationships that would span almost three decades, from colleagues who joined our DEMDACO office in Hong Kong to factories that have produced beautiful giftware for us since the early 90’s.
What was the “Aha Moment” that led you to think of the idea for your current company? Can you share that story with us?
I’d love to say that there was an “Aha Moment,” but the reality perhaps is less exciting. I had moved back to Kansas City in 1996 for family reasons, and was basically trying to find a way to utilize the skills and knowledge I had gained in Hong Kong. I worked with a friend to explore the ad specialty market, but I didn’t like the notion that the majority of ideas and items developed would never actually get produced. I wanted to see something for the efforts we were putting in, so I decided to develop a wholesale gift line and begin to sell it at trade shows and through multi-line sales reps across the country. Our first DEMDACO show was in the summer of 1997 in Dallas.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
There were numerous funny mistakes in the first few years of the business, when we had a grand total of 3 employees. Perhaps the one that made me realize we really needed to develop some basic systems was a situation that still makes me wonder how we ever survived the first few years! We had three people total in the company, and we covered all of the functions. I handled product development and marketing, a friend handled sales, and our third colleague (a gift from heaven) handled most of the rest of life (customer service, administration, etc).
We did not have a proper inventory system; I basically tried to keep track of things on an excel spreadsheet. And so, if we didn’t have even a basic inventory system, you can imagine what our purchase order system looked like. It looked like me hand writing orders on a blank piece of paper and faxing it to our buying office in Hong Kong. It was hilariously arcane.
One of the first product categories we brought to market was a line of terra cotta angel tea lights. The angel figurines would come separate in the box, and would sit on a small indentation on the terra cotta candle holder, just in front of the candle. This created a “halo effect” on the angel, which was quite beautiful.
We noticed that, on some of the early samples from the factory, the small indentation was not large enough for the angel to be properly seated on the candle holder. In other words, the angel didn’t fit.
I decided to remind the factory that it was important for the angel to actually fit in the terra cotta base, so I hand wrote “(Angel must fit)” next to the name of the item.
Well, sure enough, when we received 500 pieces of 12 different items, the box for every item said “Item 036 Angel Tea Light Holder (Angel must fit).”
Yes, every box for each and every tea light holder had the verbiage “Angel must fit” printed boldly on the front of the box. It was quite clear to me at that point that our systems were not broken; it was worse than that. They didn’t even exist!
Thank you for that. Let’s now pivot to the main focus of our interview. Extensive research suggests that “purpose driven business” are more successful in many areas. When you started your company what was your vision, your purpose?
Honestly, I’m not sure I had much of a vision or sense of purpose when I first started the company. I was simply trying to find a sustainable vocation that utilized my experience from Hong Kong. I would say that my sense of purpose started to become clear a few years into the company. We had been very fortunate to be working with an artist, Susan Lordi, who brought a wonderful line called “Willow Tree” to market in January of 2000. That line literally changed the trajectory of our company, and we went from trying to survive (and not doing a great job of it) to becoming one of the faster growing companies in the industry.
At that point, it seemed clear to us that our company would be around for a few years, and so we started to ask questions about “who” we wanted to be (questions that didn’t seem relevant before, since we were simply trying to survive). Early on in these series of conversations and explorations, I started to sense that perhaps our purpose had less to do with how much business we did, and had more to do with how we did business. We started to bring in mentors to help us think through the type of company we wanted to be, and we developed an idea of trying to pursue business as it “ought to be.” To be sure, we failed miserably at times, almost every day, but at least we were developing a compass setting to help us navigate.
What do you do to articulate or demonstrate your company’s values to your employees and to your customers?
There are a few areas which help us develop the framework to attempt to demonstrate our values.
First, we are intentional with the words we use. Language is so important, and words and phrases are probably the first way we try to communicate our values. We have specific phrases we use that are unpacked frequently in all-company town hall meetings, company emails and departmental meetings. Perhaps it all starts with our Mission Statement: At DEMDACO, we strive to Lift the Spirit in consumers, in each other and in our communities.
We also try to simply live into our values by asking what “ought” to be our position in different situations. I’ll give an example. When Hurricane Katrina hit the southeast in 2005, our customer care and sales departments implemented a new “natural disaster” protocol, a protocol which still exists to this day. When an area is hit by a natural disaster (be it a tropical storm or fires, an earthquake, etc.), we immediately identify all of our accounts in the affected areas. We then put a “hold” on all shipments to those areas, because the last thing that a store needs is to receive new merchandise when they are trying to deal with a natural disaster. We then work with the sales rep in that area to determine how we can best assist our customers (and our sales reps). This often means trying to help our stores by providing a longer window for their outstanding invoices, or perhaps helping them get product back in stock if there was a flood. The point is, our teams seek to understand their specific needs during a natural disaster, and to help them get back on track.
One final example. The last part of our mission statement talks about lifting the spirit of those in our communities. To this end, we believe that we have a responsibility to help make our communities better places, and so we give every employee 5 “Lift the Spirit” days, fully paid, to volunteer in their community. It can be by volunteering at one of our non-profit partners, such as the Veterans Community Project or Children’s Mercy Hospital, or it can be simply taking the day to rake the leaves for a neighbor that might be infirmed. We view that business is not solely a financial endeavor; it is first, and foremost, a human endeavor. And so we try to model this by caring for people in our company and in our communities.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
We would probably focus on the word “ought.” It’s a very strong word and compass setting, and we think that it resonates with all of our colleagues. If, in all situations, we ask the question “what ought to happen here,” then we can bring in a sense of right and wrong, a sense of responsibility to the situation, and almost all of us will approach the situation with an eye toward making it better for all. “Ought” challenges the self-centeredness that is in most of us, and encourages us to seek the common good.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
I think that most companies have difficulties they face during the early years, and our company was no different. We were a typical entrepreneurial venture; much more concerned with developing product and selling it than we were with developing the systems that would allow the company to operate and grow. One of the areas that I was incredibly negligent in was the area of accounting and financial controls. Which basically meant that we had very little insight into our cash flow at any point in time.
I remember several times when the person responsible for payroll at our banking relationship came to me and basically said “We’re out of money, and you need to invest/deposit a significant amount in two days so that we can pay our employees, our factories and our other bills.” I felt like such an incredible failure as a business owner; I couldn’t even manage to implement a basic cash flow system. I would have to go to my co-owner, head in hands, and say “I’ve blown it again; we need to put more cash into the company, and we need to do it today or tomorrow.” The company was incredibly fortunate that our co-owner was a very understanding, very generous partner.
The drive to continue came, perhaps, from the (probably unwarranted) belief that, with a few tweaks and some continual learning, we really COULD hone in on the exact product mix to create a viable gift company. We knew the production side better than most, since we started as a buying agency in Hong Kong. So we simply had to figure out what product to design, how to market it, how to sell it, how to ship it, and how to collect on our invoices. When we look back on it now, we actually only “knew” one part of a very complex business model (the production part). We were probably naïve or ignorant on 80% of what was needed to run a viable gift company. But we kept telling ourselves that we really understood the production side, which SURELY had to be the most difficult part…so let’s keep going! And we did.
So, how are things going today? How did your values lead to your eventual success?
Well, pandemic aside, things are going very well; we are very grateful for where the company stands. I’m not sure how to specifically connect the dots between our values and our eventual success. They are probably a closed loop; sometimes our values helped us succeed more, and sometimes our success allowed us to focus more on our values.
I think one of the ways that our values helped our success is that, as I mentioned before, we have never viewed business as solely a financial endeavor. We view it first, and foremost, as a human endeavor. That has helped to create an environment where we have been fortunate to have many people stay with the company for years. The woman who runs all of our Asia operations was hired by my partner in 1992; she is still with us today, and has helped us maintain tremendous relationships with our factories. The woman who was the number 3 employee in the company, who at one time or another handled almost every possible area of administration during the early years, is still with the company, and helps to keep the stories of the “early years” alive to our newer colleagues.
We’ve also managed to maintain strong working relationships with the artists we work with, and this has absolutely helped us succeed in our business. We have always been a design-based company, and we have tremendous respect for the amazing artists we work with. The mutual respect and care that we have shown our artists, and have received from them, has led to our being able to work together closely to bring items to the market that “lift the spirit.”
Based on your experience and success, what are the five most important things a founder or CEO should know in order to create a very successful service based business? Please share a story or an example for each.
- Don’t view business primarily through a financial lens; view it as a human endeavor. There are many times, especially during slow or negative growth years, when one might be tempted to slash line items from the company, because the company might have certain financial objectives to meet. And those are real and valid issues; a company can only continue if there is a long-term financial viability to it. But some of the small expenditures that make a place “human” might be more important than a little more profit during a year. We have a tradition at the company during the summer of having an ice cream truck pull up to the front of the building on Wednesday’s at 2pm. Anyone that wants to can press pause on what they’re doing, and go outside to enjoy a little summertime treat and some fellowship with their colleagues. Would it be cheaper to bring in ice cream bars bought from a local big box retailer? Absolutely. Would it be the same as having the ice cream truck pull up to the front of the building on Wednesday’s? No, not even close.
- Start the idea of “service” at home; begin by serving your own employees. I once read that the primary job of a leader was to create the conditions for success to occur. This means serving and equipping your colleague to succeed in their positions. It seems that many leaders are focused on their OWN success; what can they do to ensure they are successful in their positions. Instead, focus on creating an environment where your colleagues can and will succeed. These will both create a much more pleasant and joyful culture, and will also eventually lead to the success of the company.
- Work hard to get your financial house in order. This might seem like an ironic statement coming from a company that states that business is not exclusively a financial endeavor, but it is first, and foremost, a human endeavor. We believe that without hesitation. However, the reality is that a healthy financial position allows a company to invest more, in its culture, in its people, in its community, in new product development, etc. I think Max DePree wrote something like “Profits are like breath. You breathe to live, but nobody lives to breathe.” In other words, profits are not the end goal, but allow you to pursue the end goal (living, or in our particular case, to Lift the Spirit).
- Make sure you have colleagues who believe in your mission and are well suited for their positions. This means having a clear, frequent, honest system of feedback to your colleagues, so that they understand how they are doing and areas they need to work on. We have had some very talented people join the company who never really “bought in” to our mission. Through direct evaluations and feedback, they often self-selected out of the company, helping to preserve the culture we were trying to create. Additionally, we have also had some incredibly kind people who joined the company, but who simply did not have the appropriate skills necessary to do their work. Again, we have been honest and direct with them, helping them to see that there was simply not a good fit there. And they usually knew it before we did. For a service company to be great, it has to have BOTH people who believe in the mission and are good at their work.
- Carefully evaluate and implement proper uses of technology. Ultimately, technology will rarely be a replacement for good, human customer service. Just listen to someone trying to navigate prompts during a phone call to a service provider; you often hear the caller yelling “Speak to a representative!” to the automated system on the other side. However, technology CAN help a customer service representative provide better service (“I see you ordered this item in an large last year; would you like me to update your stored profile size to a medium now?”)
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
There are so many people that I am grateful towards who helped our company get to where we are. Too many to list. But I would certainly start with my co-founder and co-owner, Demi Lloyd. She has always been incredibly supportive of the company, its mission and our employees. Second, I would say that we most likely would not be in existence if we didn’t have the good fortune of working with artist Susan Lordi. Her Willow Tree collection completely changed the trajectory of the company, and we have been fortunate to work with her for over 20 years to bring her incredible creations to market.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I would say that, if we were fortunate enough be part of a larger movement in our industry, it would be to take the idea of “lifting the spirit” and press into that in all ways. What would it mean for our industry to think through that? How would it affect product development, packaging, the people we hired and the events we put on, etc. And what if all of the companies in a specific community worked together to “lift the spirit” of those in a community? What would volunteerism look like, or support of charities, etc. It would be a gift to be part of a larger movement focused on lifting the spirit.