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The Grateful Dead is one of the most popular bands of all time and they have enjoyed incredible relevance to this day. But let's admit it, they were not exactly poster boys for corporate America. In EVERYTHING I KNOW ABOUT BUSINESS I LEARNED FROM THE GRATEFUL DEAD, Deadhead and business scholar Barry Barnes proves that the Dead's influence on the business world will turn out to be a significant part of their legacy. Without intending to, the band pioneered ideas and practices that were subsequently embraced by ...
The Grateful Dead is one of the most popular bands of all time and they have enjoyed incredible relevance to this day. But let's admit it, they were not exactly poster boys for corporate America. In EVERYTHING I KNOW ABOUT BUSINESS I LEARNED FROM THE GRATEFUL DEAD, Deadhead and business scholar Barry Barnes proves that the Dead's influence on the business world will turn out to be a significant part of their legacy. Without intending to, the band pioneered ideas and practices that were subsequently embraced by American corporations. And in this book Barnes shares the ten most innovative business lessons from the Dead's illustrious career, including:
-Creating and delivering superior customer value
-Incorporating and establishing a board of directors early on
-Founding a merchandising division
-Giving away your product for free to increase demand
Above all, Barnes explains how the Dead were masters of what he calls "strategic improvisation" — the ability to adapt to changing times and circumstances — and that their success lay precisely in their commitment to constant change and relentless variation. For an extraordinary thirty years, the Dead improvised a business plan and realized their vision — all while making huge profits. EVERYTHING I KNOW ABOUT BUSINESS I LEARNED FROM THE GRATEFUL DEAD will show you how they did it — and what your business can learn from their long, strange trip.
In 1969, while working for IBM, I listened to my first Grateful Dead album. I didn’t much like it. About five years later I opened a record shop, Barry’s Record Rack, in Kansas City, and also became a DJ on an alternative rock station. At the insistence of some of my listeners and customers, I began to spin Dead albums more often, and then went to my first show, in Des Moines, Iowa, in 1974. I could appreciate the band more, but I still didn’t really get it. As Jerry Garcia, the Dead’s lead guitarist and spiritual leader, once put it, “The Grateful Dead is a lot like licorice. Some people like licorice and some people don’t. But the people who like it really like licorice.” Over the next few years I developed a taste for Grateful Dead licorice and began to really like it. I went to shows when the band came through Kansas City, and soon I started making short trips around the country to see two or three shows at a time. I even became a “taper,” recording shows surreptitiously—it was still officially unsanctioned at the time—and trading them with other fans around the country.
By the early 1980s, I had started working for John Deere, and my commitment to the band was growing. Despite stereotypes of the band’s fans as dropped-out hippies, the Dead have always had many fans in the business world, people who were as comfortable in a suit and tie as they were in tie-dye. Even so, I saw the Dead and my corporate job as two distinct parts of my life. The band, though, had one more major surprise in store for me. While watching the Grateful Dead play at the Greek Theatre in Berkeley, California, in 1985, I came to a realization: My two personae, Deadhead and businessman, weren’t terribly different after all. It suddenly became clear to me that the Grateful Dead had some important lessons to teach the business world.
That realization changed my life. Tourheads, a small group of fanatical Dead fans, were famous for quitting their jobs and following the Dead for an entire tour. I decided to do something similar: having worked for companies such as IBM and John Deere for two decades, I quit my corporate job to start a serious study of the business legacy of the Grateful Dead. I earned an MBA and a PhD, using the Dead as a case study in organizational change, then began a career teaching and consulting, always with the Dead at the center of my thoughts. I read all the books and articles on the Dead, interviewed members of the organization, and, of course, kept going to shows (194 in all, but who’s counting?). This book reveals the lessons I learned along the way.
When I tell people I study the business of the Grateful Dead, I sometimes get puzzled looks. It’s true that for much of their careers the members of the Dead were anticorporate and seemed downright allergic to making sensible business decisions. Phil Lesh, the band’s bassist, summed it up this way: “You could run an analysis of this business and drive an ordinary consultant berserk with the contradictions and waste in it.”
Yet despite all that, it worked. Somehow it worked. The Grateful Dead managed to become one of the longest-lived, most beloved, and top-grossing acts of the late twentieth century. Founded in 1965, the band survived for thirty years and played a total of more than 2,300 shows, nearly all with the same core group of musicians: lead guitarist Jerry Garcia, bassist Phil Lesh, guitarist Bob Weir, and the two drummers, Bill Kreutzmann and Mickey Hart. On the strength of their brilliant live performances, they built an audience and added new fans slowly but steadily, all without the benefit of advertising or much radio airplay. In 1987, when their album In the Dark went platinum and “Touch of Grey” hit number nine on the charts, the band’s career went from moderately successful to stratospheric. They became the top touring act in the country, grossing tens of millions of dollars a year, and their merchandising branch, which sold everything from T-shirts to golf balls, became the envy of the rock world. Even now, sixteen years after breaking up, the Grateful Dead remains a formidable business empire.
How did they do it?
Not by following a solid business plan.
“It’s not possible for the Grateful Dead to have a business plan,” Lesh once explained. “We don’t even plan the music.” And that, precisely, is the point. The Dead were brilliant improvisers, finding musical success in constant change and relentless variation. Those same skills lay at the root of their business success. In all of their business dealings, they adopted a strategy I call strategic improvisation—blending planning and doing while staying alert, alive to fluid situations.
By implementing a loose management style, long on flexibility and short on structure, the Dead pioneered practices and strategies that would subsequently be embraced by corporate America. They created a horizontally managed organization with shared leadership, recognizing that decentralized decision making motivated employees to produce great work and remain loyal. They adopted, long before it became trendy, a socially conscious business model focused not only on profit but also on doing good. They placed an enormous value on customer service, and understood that keeping customers happy led to greater profitability. Long before “viral marketing” became a catchphrase in the late 1990s, the Dead essentially invented the practice by allowing fans to tape live shows and share the recordings with one another. You might even say the Dead understood the world of the Internet before the Internet existed: they helped nurture a “virtual community,” the Deadheads, dispersed geographically yet deeply committed to one another; they created an interactive relationship with their fans/customers, soliciting feedback and acting upon it; and they pioneered the concept of “free,” giving away their content in one form and making money on it in other ways.
Members of the band might laugh at this list of accolades. Jerry and the boys never set out to be great businessmen and never considered themselves as such. In fact, they didn’t much care about the business side of things, so long as it allowed them to keep playing music and making their fans happy. Their suspicions of the business world, in fact, turned out to be one of their greatest advantages, as they tossed out received wisdom and reinvented what it meant to run an organization. Throughout all their ups and downs, they remained committed to improvisation and innovation, and they were never satisfied unless they were constantly reinventing themselves, their music, and their business. In today’s business climate, beset by crisis and continual change, what lesson could be more important?
Most rock bands play predetermined arrangements of their music, and they practice obsessively to achieve their desired result: the ability to play note-perfect versions of their songs. The Grateful Dead, however, weren’t interested in achieving perfection and then repeating themselves. They prided themselves on never playing the same song the same way twice. “The whole thing with the Grateful Dead is a challenge to get something new happening, even when you don’t… feel anything new lurking around the corner,” guitarist Bob Weir once said. When they rehearsed, they weren’t so much learning the songs as learning one another—each came to know the intricacies of the others’ playing styles, their quirks, their strengths and weaknesses, their good and bad habits. They were challenging one another to make it new.
Improvisation is a useful skill for anyone working in an organization, whether it is a band or a major corporation. Since the 1980s, business theorists have proffered a variety of techniques intended to improve organizational flexibility and deliver better goods and services—such as Total Quality Management (enlisting every employee in the commitment to constant quality improvement) and Six Sigma (reducing the number of defects in manufacturing and business processes). Although each of these strategies made some important contributions, none seemed up to the challenge of meeting the constantly changing world of business. Given the chronic uncertainty in economic, political, and cultural climates, sometimes it’s surprising that companies bother to make strategic plans at all. Planning is still vital, of course, but what today’s businesses need is a new, more flexible approach to executing strategic plans.
The business theorist and jazz musician Frank Barrett has written that musicians who improvise “do what managers find themselves doing: fabricating and inventing novel responses without a pre-scripted plan and without certainty of outcomes; discovering the future that their action creates as it unfolds.” No matter how strong your strategic plan is, running an organization involves making an endless series of adjustments, responding both to major crises and to the million small changes that constitute daily life. Fluid situations demand improvisation, the simultaneous blending of planning and doing. It’s a concept best described as “strategic improvisation.”
Strategic improvisation is the process of continually aligning spur-of-the-moment actions with long-term direction. It is solving problems innovatively by using only the resources at hand. It involves responding immediately to changing conditions while keeping the organization pointed in the right strategic direction. Requiring skill and experience, it’s much more than simply flying by the seat of your pants—it’s like doing major repairs on a 747 at thirty-five thousand feet in the air.
The Grateful Dead were masters of improvisation, not only in their music but also in the way they ran their business. They didn’t like the mainstream business world, and they especially didn’t like the way the music business was organized. But it’s not as if there was an alternate model they could follow, so instead they invented one. In a sense, this entire book is a study in how the Dead improvised a new way of doing business, tossing out the conventional wisdom and creating—in fits and starts, with many costly mistakes—a new, more humane, and more profitable way of operating in the cutthroat world of entertainment.
Grateful Dead Business Lesson 1: Strategic improvisation—the ability to plan, act, and make adjustments in real time—is the key to running a great organization.
What is musical improvisation? For any piece of music, there will be variation depending on the performer and the performance. You might call this “interpretation.” Improvisation simply takes the process of interpretation to its limits. There are still signposts—lyrics, chord progressions, rhythms, melodies—that make a certain song recognizable. But within that loose structure, the musicians have freedom to create new sounds and new patterns. Music emerges from the interaction of the players rather than from a well-defined structure in which everyone knows what comes next.
The Grateful Dead cut their teeth as a band in the fall of 1965 at a bar called the In Room in Belmont, California, between San Francisco and Palo Alto. Marvin Gaye and the Coasters played headline shows, while Garcia’s band—then called the Warlocks—played five fifty-minute sets a night, six nights a week. This period might be considered the band’s apprenticeship: Lesh, a virtuoso classical and jazz trumpeter, learned how to play bass; Weir, barely out of high school, polished his rudimentary guitar skills; Garcia set aside his beloved bluegrass and began to rock. There were dozens of bands in the region that had flipped out for the Rolling Stones and the Beatles, learned to play covers, wrote a few derivative originals, and found audiences in bars or at high school dances. In 1965, Garcia and the boys were not unlike those bands: they played louder and weirder, but mostly they played other people’s songs in fairly conventional ways.
This soon changed, partly out of simple necessity: the band didn’t know enough songs to fill their five sets a night, so they stretched out the songs they did know to fill the time. From this crude time-filling technique, musical genius was born. The band members don’t recall ever discussing the possibility of improvising—they just started slowly, and soon ran with it. Garcia took the lead, drawing on his experience playing bluegrass. He recalled, in particular, the influence of the Kentucky Colonels and their great improvisational fiddler, Scotty Stoneman. Phil Lesh offered guidance in improvisation from a very different background—avant-garde jazz, especially the work of the brilliant jazz saxophonist John Coltrane, whom Lesh had seen in San Francisco clubs in the late 1950s.
As the band continued to play their grueling sets at the In Room, they noticed that the trains on nearby tracks rolled by at consistent times every night. Rather than waiting for the trains to pass, or trying to drown out the noise, they chose to play along with the rumble of the trains. Within a few nights, they took that train noise, combined it with a fragment of the song “Mystic Eyes,” by Them (whose lead singer was Van Morrison), and created “Caution (Do Not Stop on Tracks).” That is the essence of improvisation: taking something unexpected and even unwelcome—the noise from a passing train, a new competitor for your business, an economic crisis—and using it to your advantage.
Improvisation was more than a musical technique for the Dead: it was a way of life. The band, of course, never thought of their business in terms of strategic improvisation; they just did it. It’s possible, though, to take a look back and see how the Dead applied the principles of musical improvisation to their business dealings.
Habits are ingrained patterns of behavior, and because they persist below the level of consciousness, they can foil the best attempts to create change. Any business seeking to improve needs to get rid of some bad habits, both at the individual and organizational levels. By definition, improvisation aims to disrupt routine by shaping each unexpected situation into something new and interesting. With group improvisation, the members of the band act as a kind of habit-interrupting support group, encouraging one another to strike out in new directions.
That very unpredictability created the band’s musical and business niche. In the late 1960s, Garcia told an interviewer that the band was trying to interrupt the classic rock ’n’ roll rhythm, in which the bass and drums work together as a unit, into a sound “where the rhythm is more implied and less obvious.” Lesh, Garcia explained, came to the bass when he was already an accomplished trumpet player, so he sounds “utterly different than any other bass players.” The Dead were trying to escape from standard rhythms and arrangements, to avoid rigid structures and to free up some space for spontaneous creativity. The great rock ’n’ roll impresario Bill Graham once said, “The Grateful Dead are not only the best at what they do; they are the only ones who do what they do.” They created and owned their market.
The Dead carried this disdain for old habits into their business dealings, never trusting the standard operating procedures in the music industry. Instead of counting on preexisting resources to make and market their music and their brand, they created their own. As we’ll see in more detail in later chapters, the Dead started their own record company, their own merchandising company, and their own mail-order ticketing business. The old habits just didn’t work for the Dead, who epitomized the famous quotation from former Intel CEO Andy Grove, “Only the paranoid survive.” The Dead’s paranoia, their restlessness, prompted them to continually examine their habits and change them when necessary. As Dead lyricist Robert Hunter wrote in the classic Dead song “Uncle John’s Band,” “When life looks like Easy Street, there is danger at your door.”
In musical improvisation, there’s an axiom: If there are no mistakes, it’s a mistake. If everything you play is perfect, you’re not taking enough chances. In many businesses, to make a mistake and acknowledge it can only damage your career. Ultimately, though, this hurts the business. Imagine a toddler learning to walk without falling or a sports team unable to see the value of holding practices. The best learning often comes from making a mistake and adjusting future actions in response.
The Dead would be the first to acknowledge that they made plenty of errors. When the band formed in 1965, all five of the band members were relative novices. They improved simply by playing together, practicing endlessly, and learning from their errors. The same applied to their business efforts. Sam Cutler, a tour manager for the band from 1969 until 1974, reports that in these early years the band “didn’t really have any idea how to” make money. Rather than following traditional models, however, the Dead learned by doing. One of their biggest errors came in 1969, when they hired Mickey Hart’s father, Lenny, as their business manager. As a former music store owner, Lenny Hart was one of the few businessmen they knew. And since he was family, they trusted him to manage the money that had just started flowing in. The next year, Lenny fled to Mexico, having stolen about $150,000 from them. They didn’t press charges. Instead, they chalked it up to experience, hired more experienced and trustworthy managers, and got back to work. Dave Parker, one of those new managers, explained that the band wanted “to leave that sort of thing behind and not get into a big ugly lawsuit or anything, but to concentrate on their music.” The Dead didn’t waste time regretting their mistakes. Failure was the price of improvement.
Organizational structures and policies are created to reduce ambiguity and provide ready-made solutions and lines of communication. Despite these benefits, however, such structures can easily become rigid, inhibiting innovation, flexibility, and improvisation. The Grateful Dead preferred to minimize structure in both music and business. Their beloved song “Dark Star,” for instance, was released as a single in 1968 at less than three minutes long—yet in concert it could last anywhere from fifteen to forty-five minutes. From the song’s minimal structure, the band created an enormous range of flexibility.
This same minimalist approach to structure was found in their organization. While they were never a large organization, the Grateful Dead did have seventy full-time employees in 1994, their last full year as a band. Despite a rather complicated operation, they always found it easiest to operate without job titles or job descriptions. As Garcia said, “What we wanted to do was play music, and we didn’t want to have to be businessmen. We didn’t even want to decide; we just wanted to play…. We were truly coming from an unstructured space.” In 1981 the band commissioned an internal report, called “A Balanced Objective,” that attempted to define the structure of the band’s business enterprises. The report, however, ended up stressing not organization but flexibility. “To define the ‘flexible group process’ is to lose it,” the report concluded. “Its value lies in the spontaneity which comes from acknowledgement of it and openness to the unknown next point of invention.” Even in its business planning documents, the Dead spoke in the language of improvisation.
In improvised music, each musician must listen to the others, then fill in and assist where needed without stepping on the others’ lead. What is needed, in other words, is teamwork, and that’s what the Dead forged through their years of playing together. “The arrangements are almost nil,” Garcia said of their style. “The intra-band collaboration is almost total.” Lesh once explained how the Dead’s sense of shared responsibility created their signature sound: “Since our ideal of improvisation is collective improvisation, it’s necessarily going to be more detailed, more diverse, more complicated than the kind of music where it’s just a solo with accompaniment.” “Solo with accompaniment” relies on one star musician to be creative while everyone else backs him up—you might think of this in terms of a command-and-control form of business management, in which all of the creativity is expected to emerge from the executive suites. If we follow the Dead’s model of collective improvisation, by contrast, every person in the organization is expected to share in the creative enterprise.
The Dead also alternated between soloing and supporting organizationally, anticipating the business world’s shift, decades later, toward “employee empowerment” and “shared leadership.” It’s now recognized that employees must not only follow but also lead, drawing on their skill and training to deal with unexpected situations. Although most people considered Garcia the leader of the Dead, he rejected any notion that he held the reins of power. Instead, as we’ll see, the Dead’s organization was consensus-driven, with all band members holding spots on the board of directors and even the janitors having a voice at company meetings.
Frank Barrett tells us that because an improvising musician “can never know for certain where the music is going, one can only make guesses and anticipate possible paths based on what has already happened, meanwhile continue playing under the assumption that whatever happened must amount to something sensible.” Put another way, the burden is on the musicians to take what they’ve just played, build on it, and make it work in the future.
The Dead, because they didn’t like to do business planning, were forced to do a lot of retrospective sense making. This is most clearly seen in their decision to allow fans to tape concerts. Conventional wisdom held that allowing taping would cut into record sales. The Dead, though, tolerated the practice, largely because they didn’t want to be authoritarian. This turned out to be a wonderful decision, as the tapes were traded widely and inspired many more people to become fans. Once the Dead realized these benefits, they embraced the tapers. Although taping made little business sense at first, retrospectively the band turned it into one of their smartest business moves. As Hunter wrote in the lyrics for “Playing in the Band,” “Some folks trust to reason / Others trust to might / I don’t trust to nothing / But I know it come out right.”
The Dead’s most successful improvisation was the creation of its unusual business model—one that anticipated the plan of nearly every up-and-coming band working today.
Early in 2011 the online magazine Slate published an article marveling at the success of the Dave Matthews Band, which appeared among the top-ten grossing musical acts of 2010. Compared to the list’s other, longer-established acts, such as Bon Jovi and Roger Waters of Pink Floyd, Dave Matthews had sold a comparatively modest number of records. Instead, his band was a success due to nearly constant touring. With the rise of digital file sharing and online music services, record sales have plummeted, never to recover. Bands in the future will make money like the Dave Matthews Band, which “lives to tour, making them not just popular, but very, very profitable.” Dave Matthews toured so much that between 2000 and 2009 they sold more tickets than any other band on earth. The Slate article bore the headline “The Dave Matthews Band Shows How to Make Money in the Music Industry.”
The Grateful Dead, however, had demonstrated that same way to make money three decades earlier; Dave Matthews simply followed their example. The Dead, though, had no such model to follow. They were improvising their strategy from scratch.
Necessity demanded this innovation. By the early 1970s, the Dead were facing tremendous financial pressure. They kept a lot of people on staff and paid them generous wages, and they also undertook costly experiments, such as starting their own record label and investing heavily in cutting-edge sound systems. Having upended rock ’n’ roll habits, however, the Dead were forced to come up with something new.
The business model for most rock ’n’ roll bands was to tour just after the release of an album, in order to promote its sales. Playing live was lucrative, certainly, but record sales were a band’s bread and butter. The Jefferson Airplane, good friends of the Dead, sold a lot of records and did more limited touring. The Dead tried to follow this model, but it never worked. For most of its career, the Dead managed to attract big crowds to their live shows, but they never produced the record sales to match. Their improvisations on stage didn’t translate onto vinyl. As Garcia explained, “We don’t make money except by going out and playing music.”
And play they did. Their peak touring year was 1970, when they played an astonishing 120 shows. By the 1980s they’d settled into a regular schedule: three tours a year, in March–April, June–July, and September–October. Each tour featured 17 shows and lasted three and a half weeks. In between these tours, they did limited shows in the Bay Area and elsewhere on the West Coast. This added up to a brutal 80 shows a year.
Even after their 1987 single “Touch of Grey” became their only top-ten hit, they kept up their frantic schedule. By now touring was in their blood, and they kept at it. In 1989 the band played 73 shows in 17 states and sold out nearly every show. In the recession year of 1991, when the concert business was off by 25 percent, the Dead stayed hot and became the top-grossing act in the country. In 1993 the band played 81 shows and sold more than 1.75 million tickets—which represented 99.4 percent of all available seats. In some ways, 1995, their final year of touring, was the most remarkable. Though they played only 45 shows, they grossed $33.5 million, more than all but three other bands.
For many years the Dead wished they didn’t need to tour quite so much. But in business, wish and reality are often far apart. As it turned out, relentless touring was the best thing that could have happened to them. Though they griped at times, they loved touring, and, most important, it kept them in touch with their fans. Often new businesses succeed because the most passionate employees—the owners—are still working at the ground level, enjoying face-to-face contact with customers. As these businesses expand, however, the owners become disconnected from the daily working reality, and the customer experience suffers. A Grateful Dead tour, by contrast, was the equivalent of a company’s top brass getting out to meet and greet customers seventy or eighty nights a year. They stayed close to the fans, and as a result the fans stayed close to them.
Beset by a crisis—the inability to make money the way rock bands usually did—the Dead stayed nimble, kept adjusting, and pioneered a revolutionary new business model.
Bruce Hornsby, the great pianist and songwriter who played more than a hundred shows with the Dead, often encountered other musicians who couldn’t understand why he wanted to play with them. “If you’re not an aficionado and you hear a live tape, well, there’s lots of out-of-tune singing and out-of-time playing and lots of clams [bad chords] and mistakes, and that’s hard for a lot of musicians to get past.” One might imagine a mainstream businessman offering the same judgments on the Dead’s business practices. But Hornsby added this: “I understand that, but I also feel sorry for those people because I think they missed something that was truly great.”
Improvising may lead to mistakes, but it also opens the door to greatness. Strategic improvisation is a skill that embraces mistakes as a learning opportunity rather than ignoring them or placing blame. It thrives on flexibility but withers amid rigid hierarchies. In any given situation, it encourages those with the best skills to step forward and “solo,” and then to step back and “support” when the situation changes.
Excerpted from Everything I Know About Business I Learned from the Grateful Dead by Barry Barnes Copyright © 2011 by Barry Barnes. Excerpted by permission.
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Posted April 10, 2012