The Importance of the Increment: An Ode to Subway, Milford, and my main man, Fred DeLuca.

Subway was founded in 1968 in Bridgeport, Conn., by Fred DeLuca, who recently passed away. I was raised in Milford, Conn., which is about a 10-minute drive to Bridgeport. I’m not sure how many Subway stores there were by the time I was 8 or 10 years old, but I would imagine it was a pretty small number. I remember a few things about Subway and several impressions that I had at the time. I don’t recall where exactly I received them. The first thing I recall about Subway is that the quality of their meat at the time did not seem very high to me, even as a young kid whose taste buds were perfectly satisfied with McDonalds. I remember specifically that the meat had chunks of fat embedded within, which bothered me even at that age. It was kind of like the pre-fabricated meat you can still buy that is cheap and not very pleasant to look at. The second impression I had was that it was a place where people would go after they smoked pot and had the “munchies.” I recall thinking of it as a place where burnouts hung out to satisfy their late-night cravings. As the son of a conservative Marine, this also was not particularly attractive to me. I can remember going into the Subway stores and seeing a bunch of people with scrubby long hair who looked as if they hadn’t bathed in a few weeks. Again, I don’t know if my impression of the Subway brand was correct, but I definitely remember it. I stopped going to Subway at the age of roughly 13, and I never returned until approximately 35 years later, when my younger son, Nolan, became an avid Subway fan and corralled me into a Subway in Salt Lake City, Utah. Since he kept clamoring to go, I reluctantly acceded to his request.

It shocked me how different Subway was from when I would go as a boy to their first couple of stores. The new stores had fresh bread. The meat was much higher quality. And it looked like normal people were patronizing the restaurant (present company excepted). I became an instant convert to the “new” (at least new to me) version of Subway. There are a couple of extremely good lessons that we, as entrepreneurs, can learn from Subway and my experience with it over the years:

1) If you mess up a customer experience in the beginning, it’s almost impossible to recover the brand and impression that you form in that consumer’s head. First impressions really do mean a lot, and I have found that they are almost impossible to reverse (unless all of your customers have nagging 8-year-old sons who force them to go back to your place of business).

2) An even more important point is that great businesses improve at the increment. They are constantly making small improvements to their businesses that are probably not even perceptible to a regular customer. The difference between a Subway in 1973 and 1974 was probably tiny, but the difference between a Subway in 1973 and a Subway in 1998 was a titanic one — like visiting another planet. The law of compound interest applies to growing businesses as well. It’s all about the daily, small improvements you are making constantly. Even with the best product, winning companies will find room for improvement. I don’t know Fred DeLuca personally, even though Subway is now headquartered in my hometown of Milford. But what he did with Subway is similar to the life stories of all great entrepreneurs, including John D. Rockefeller and Bill Gates. Most people don’t remember that Microsoft was never the first to market with an idea, but they were incredibly effective at releasing products and then incrementally improving them quickly, something that I know works as a software entrepreneur. I guess it shows that getting singles and doubles all the time is the surest way to huge success over the long run.

3) In the popular press, you sometimes get the impression that, in order to be successful, you need to invent a cool electric car or a disruptive social network. This defies all the data that we have around entrepreneurial success. Boring businesses that run extremely well and are constantly improving are the ones that win.