Seth Berkowitz is the founder and CEO of Insomnia Cookies, a late night chain of stores on college campuses that sells cookies and brownies to hungry students. Berkowitz conceptualized and began his delivery business when he was a junior in college. He single-handedly produced, marketed, and moved his products, taking advantage of a captive student population with an appetite for sweet treats between 8pm and 3am. The company has come a long way since its start as a delivery only, one-man show. Insomnia Cookies has evolved from borrowing spaces in other stores, to focusing more on a retail model. Joe Essenfeld, the company’s Chief Operating Officer, and Elise Piatkowski, Marketing Director, help Berkowitz to manage the business. Together, the trio analyzed the company’s strategy to determine what was working and what needed to be changed. The delivery only model that dominated the company was not attracting new customers. A corporate decision was made to focus on finding highly visible locations that would attract plenty of foot traffic. Essenfeld says that if the business can’t find a prime retail location at a college campus, it will not open there. Finding the best on-campus locations required an in-depth planning approach. Piatkowski, explains that the company had a history of trying new stores based on the belief that the new location “was good enough”. This train of thought put the company at a disadvantage. Instead of making sound business decisions based on facts, Insomnia Cookies was opening some stores on the basis of biased decisions. This approach was short sighted and put the company at risk. Berkowitz, Essenfeld, and Piatkowski agreed that despite its past successes, the company needed to develop a more calculated approach. New store locations would be determined based on concrete information that offered a much clearer picture of where the company stood in each new market. Insomnia Cookies devised a strategy to make its decisions based on specific criteria. This essentially required the company to study each new student market to determine which campuses could accommodate stores. Piatkowski uses her background in marketing to gain an understanding about each campus. She explains that knowing what other options students have for late night delivery is a key factor. Students at downtown campuses often have easy access to vendors that are located outside of school boundaries. Some campuses are less central, limiting student activity to a smaller area. Every new campus presents the company with unique challenges. One difficult decision for the company was closing a store that failed to meet expectations. Essenfeld says that despite having some of its best marketing promotions and loyal customers, the school was not big enough to accommodate the business. The small campus size combined with a less than ideal location in a second floor office with no walk-in traffic made it virtually impossible to promote the brand. Essenfeld says that the decision to open the store was contrary to the company’s prime retail model.
One particularly creative decision the company made was to pilot a mobile operation. It converted a company delivery truck into a virtual bakery on wheels, complete with ovens, storage, a speaker system, and mobile broadband. The truck, a high profile advertisement in itself, would function as a type of satellite store. Cookies could be made and sold on the road, and cars or bikes could be used to deliver orders to customers. Berkowitz admits that the company is not clear on what to do with the truck.
Piatkowski refers to it as a “big purple monster”. Essenfeld describes the truck as the company’s most risky decision from an operations perspective. He says that the truck managers will have many responsibilities including driving the vehicle home, parking it, keeping it clean, and making sure the equipment inside stays at the right temperature.
In his role as COO, Essenfeld helps the company to weigh the risks with the benefits of corporate decisions. By starting with just one truck, the company reduces potential damage to the brand as well as lessening the financial impact of a failed venture. However, if the truck does attract substantial new business, the “big purple monster” could have the potential to redefine the global strategy of Insomnia Cookies altogether. While the company is hopeful that the project will be a success, there is cautious optimism amongst the group. Berkowitz, Essenfeld, and Piatkowski use their combined knowledge and skills effectively. They have learned to keep their personal feelings separate, and to respect and take advantage of each other’s strengths and styles. Piatkowski says that as the only woman at the company’s headquarters, she has more of an eye for detail and can pay attention to brand aesthetics. Piatkowski describes Berkowitz as very decisive with limited flexibility and says that Essenfeld sometimes “leaps before he looks”. Despite their differences, the three share a group dynamic that is competitive and challenging. By debriefing constantly, they keep one another balanced and motivated which works for the organization. Berkowitz says that as the company grows, decisions become more difficult. Finding ways to cut costs and dealing with stores that fail make the stakes higher. Berkowitz also notes the company’s responsibility to investors. In order to make smart decisions, Berkowitz routinely consults with Essenfeld and Piatkowski. While he admits that taking their input into consideration can slow things down, it allows for more conclusive decisions to be made. Insomnia Cookies stays on track by adhering to its prime retail strategy and repeating what has worked in the past. Essenfeld says that one of the best things the company has learned is to stay away from anything that is not working. This decision not to deviate from its proven approach keeps business on track. Only time will tell if mobile Insomnia Cookies will measure up on campuses across the country.
1. How did decision making at Insomnia Cookies change when the company grew and established a professional management team? Explain.
2. How were early decisions about store locations biased? Give an example of how each of the eight types of biases and other judgment shortcuts could lead to a poor choice of store location.
3. Was the decision to move to a retail model made using the rational decision-making process? Explain using the six steps of the model.
4. How does the management team at Insomnia Cookies use its diversity to its advantage in group decision-making? What cautions would you give them about the weaknesses of group decision making?
5. How is creativity approached at Insomnia Cookies? What recommendations could you make to increase the opportunities for the company to find creative, yet profitable, opportunities to expand?