The Switch Effect by Mike Gilbert disappoints » BevBlog

BevBlog: The Switch Effect by Mike Gilbert disappoints

Drops, drips, and leaks from the beverage industry.

Posted by John Craven, Tuesday, November 27th, 2007 at 2:21 pm

The story of The Switch is not a new one to anyone who has been in the beverage industry for the past few years. The company started from relatively humble roots, raised money, and crashed to bankruptcy before a new team came in and snatched up the company’s assets. It’s hardly a rosy tale of entrepreneurial success.

But that’s what Mike Gilbert, the initial creator and a cofounder of The Switch, would have you believe about the company.

Frankly, I was rather surprised when I received an advance copy of a book called “The Switch Effect,” — especially since it carried the tag line “A Real-Life Example of How to Become an Entrepreneur.” While there are plenty of failed entrepreneurs, providing a guidebook to becoming a successful one is something that seems predicated on one having, say, a verifiable success story to back up the “real life example” one is using is probably a good idea.

Unfortunately, that isn’t The Switch story – at least not the part that involves Gilbert, the book’s author. Gilbert, who left the company in 2002, jumps all over the map, covering conceptual topics such as finding one’s inner “entrepreneurial spirit,” random technical notes, such as charts about pasteurization and the supply chain, and quick passes over topics that would be more appropriate in a B-school text book, such as raising money and angel investors. Gilbert paints the whole trip as successful, while jumping – quite inexplicably — from 2002 to the company’s sale in 2006. Given that The Switch LLC was in bankruptcy court at the time, it’s hard to imagine that too many of the seeds of success were blooming for The Switch.

Gilbert’s experience with The Switch could be an interesting story – but right now it’s more of a poorly constructed façade. The Switch is really a story of entrepreneurs who got in too deep with investors in an industry where the brand couldn’t grow at a pace that was satisfactory to those backing it. Networking, raising money, leveraging – the real question is, “What did you do wrong?” Aside from giving Gilbert credibility, these are the interesting parts that might actually help the prospective entrepreneur. However, barring a rewrite, “The Switch Effect” is left with too much filler and not enough substance, resulting in an unfortunate effort that will be interpreted as a story that doesn’t hold water or as a promotional vehicle for Gilbert. �

This entry was posted on Tuesday, November 27th, 2007 at 2:21 pm and is filed under People, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

There are currently 10 responses to “The Switch Effect by Mike Gilbert disappoints”

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1 On November 28th, 2007, Interested Party said:
Hoe does Gilbert’s book treat the relationship with the other Switch founder?
2 On November 28th, 2007, jcraven said:
Not in a negative way…Sums it up by saying that Hargis was the outside guy and Gilbert was the inside guy. Drop me a line if you want to discuss further.
3 On November 29th, 2007, Another Interested Party said:
Mike Gilbert is a very spiritual and ethical person. While I agree the book would have been more effective if it detailed what went wrong, and how to avoid similar pitfalls, he was deliberately avoiding any mudslinging toward his less ethical co-founder. Kudos to Mike for rising above it.
As for what went actually went wrong, Mike will tell you he trusted the wrong person. However, the real details of what went are far deeper than that, and haven’t got a thing to do with the work of fiction that Bill Hargis’ wife wrote in the Inc. magazine article. Bill mismanaged the company into the ground and cooked the books to hide it. As opposed to taking accountability for not knowing what he was doing, he pointed an accusing finger at the people whose money he misspent.
4 On November 29th, 2007, Z said:
I wonder who would be interested in publishing this book?
And who is supposed to buy it / read it? Successful beverage execs?… or the Bravo Guys & Co.
Altogether who cares about the Switch?
It’s pity for the trees….
5 On November 29th, 2007, Not Interested Party said:
I can’t believe it!
How much more dirty laundry are we going to see. First was the press release and now the book and the comments of friends and relatives.
What is the purpose? Both founders are innocent (if they are not in jail) and the Switch was a failure.
Move on please…
6 On December 4th, 2007, Old Investor said:
As a former shareholder of the company, I was sent a link to this article and its comments, I felt compelled post MY comments.

I really dont even know who Mike Gilbert is since he wasnt involved in the company when we invested. Bill Hargis was the person we invested in and still would be glad to invest in anything he is involved. He did a great job building a brand from nothing and helped create a major new beverage category. He conitnually kept us shareholders informed and managed the money he had (albeit it was very small amounts) with the skills like no other CEO I have been involved. Kudos to you Bill!!

I also read the Inc. Magazine article and found it to be extremely accurate. As a shareholder I can verify the business side’s accuracy, anyone that knows anything about the publishing industry knows the extensive fact checking that Inc would be required to do prior to publishing (especially a Cover Story). Surprisingly the other side chose not to comment when given the opportunity.

One has to seriously question the source of one of your commentors.

What was done to this company,its original shareholders and creditors was a shame and an example of the cut-throat business environement that exists today.
7 On January 2nd, 2008, shareholder said:
As a shareholder of the company and someone who was involved with the switch from the VERY beginning, i can tell you how it was, and what was wrong. First off, Mike was and is a good guy… Very ethical and honorable. The downfall of the switch was caused because mike was a trusting person. He trusted an untested person (Bill Hargis) to run the company he founded. Hargis is the equivalent to a used car salesman and was the key factor in driving this company into the dirt. Bill lied about everything from the start and burned many bridges. It was only a matter of time before he became exposed and fired from the company. If everyone did business like Mike it would be great to be an entrepreneur, but unfortunately there are sharks in the water that can only survive by cheating and stepping on people to try and get to the top.

Also to the “old investor” that left a comment about how great Bill is… obviously a planted response and i would not be surprised if it was Bill himself who wrote it… or maybe his wife again? That is how Bill operates. The article in INC magazine was written by his wife!! Seriously that says it all!
8 On April 29th, 2008, John Oliver said:
The Switch was the 8th start-up company (out of 10) in which I’ve played a senior management role. Of those ten, only one has achieved both market acceptance and profitability. That, as we’ve all heard many times, is the nature of start-up companies.

The value in Gilbert’s book seems to be that it offers a glimpse into some of the first-hand experiences of a values-driven entrepreneur. The book does not have great utility as a how-to manual for first-timers, despite the author’s intentions. The book deliberately sidesteps most of the real drama of the company (Gilbert truly is a nice guy). Those titillating details would likely have done more to capture an audience of readers. While the unpleasant realities of a dysfunctional start-up may have escaped Gilbert’s view, the absence of those events from The Switch Effect is a missed opportunity. This particular start-up is fertile ground, and could have presented us with a rich tutorial (or cautionary tale).

It’s worth noting that while Gilbert didn’t profit financially from The Switch, he has succeeded in creating a brand with preliminary, broad-based market acceptance (nationwide distribution in multiple channels). And the product has spawned a new sub-category in the Beverage Industry, along with a few surviving product innovations (most notably Izze). Gilbert’s account of the story matches its author’s strengths. It was his vision, optimism and problem solving that allowed the original idea to become a feasible product.

But Gilbert is also the first to admit that The Switch would never have survived initial concept development had it not been for the strengths of the partner he selected, Bill Hargis. Hargis possessed tenacity, coupled with direct sales experience in the Beverage Industry, and the swagger to persuade early investors. Gilbert did a pretty good job in selecting someone who managed to sell several million dollars of debt and equity in a very risky venture, over a period of some 4 years.

It would be easy to demonize Hargis. Among the dozens of individual investors who lost all their shares during the company’s bankruptcy, there are likely very few who feel any fondness for The Switch’s former CEO. But those same investors would have no doubt praised Hargis’ tireless work ethic, dogged determination, and perpetual, silver-tongued campaigning for the company, had their original shares benefitted from a liquidity event. Lest we forget, the Beverage Industry is separated only narrowly from the carnival barkers of an era that preceded the big cola companies. To paraphrase Isaac Newton, if Gilbert was able to take the company further, it was by standing on the shoulders of a snake-oil salesman.

The real challenge for The Switch is that it was, and remains, very expensive to make. Because the product is 100% fruit juice, its ingredients cost is several times as high as New Age Beverage alternatives like teas, vitamin waters, energy drinks and traditional sodas. As the new (post-bankruptcy) owners of the company quickly discovered (note the smaller can size in circulation today), it’s nearly impossible to reach profitability by selling a product for $1.29 when its cost to produce and distribute is more than $1.00. That’s a particularly steep hill to climb in a business historically dominated by the company with the most innovative (loudest) consumer marketing. The Switch’s potential for continued market acceptance and financial viability will always be wedded to that reality. Neither of the company’s two founders, nor any of their successors, can alter the product’s basic economics.
9 On October 20th, 2009, beverage gal said:
How funny — the battle continues! It sounds like one partner has faded off into the sunset with a self-published book while the other has gone on to start another successful juice company with some his original investors and employees. Fruit 66 is getting more attention than Switch in today’s market and it sounds like they’re bitter about it. I’m thinking the results speak for themselves!
10 On November 7th, 2009, Sean said:
Does anyone know how I can contact Mike Gilbert….I think he is an interesting guy and I would like to get in touch with him.

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1 On November 28th, 2007, Interested Party said:

Hoe does Gilbert’s book treat the relationship with the other Switch founder?

2 On November 28th, 2007, jcraven said:

Not in a negative way…Sums it up by saying that Hargis was the outside guy and Gilbert was the inside guy. Drop me a line if you want to discuss further.

3 On November 29th, 2007, Another Interested Party said:

Mike Gilbert is a very spiritual and ethical person. While I agree the book would have been more effective if it detailed what went wrong, and how to avoid similar pitfalls, he was deliberately avoiding any mudslinging toward his less ethical co-founder. Kudos to Mike for rising above it.
As for what went actually went wrong, Mike will tell you he trusted the wrong person. However, the real details of what went are far deeper than that, and haven’t got a thing to do with the work of fiction that Bill Hargis’ wife wrote in the Inc. magazine article. Bill mismanaged the company into the ground and cooked the books to hide it. As opposed to taking accountability for not knowing what he was doing, he pointed an accusing finger at the people whose money he misspent.

4 On November 29th, 2007, Z said:

I wonder who would be interested in publishing this book?
And who is supposed to buy it / read it? Successful beverage execs?… or the Bravo Guys & Co.
Altogether who cares about the Switch?
It’s pity for the trees….

5 On November 29th, 2007, Not Interested Party said:

I can’t believe it!
How much more dirty laundry are we going to see. First was the press release and now the book and the comments of friends and relatives.
What is the purpose? Both founders are innocent (if they are not in jail) and the Switch was a failure.
Move on please…

6 On December 4th, 2007, Old Investor said:

As a former shareholder of the company, I was sent a link to this article and its comments, I felt compelled post MY comments.

I really dont even know who Mike Gilbert is since he wasnt involved in the company when we invested. Bill Hargis was the person we invested in and still would be glad to invest in anything he is involved. He did a great job building a brand from nothing and helped create a major new beverage category. He conitnually kept us shareholders informed and managed the money he had (albeit it was very small amounts) with the skills like no other CEO I have been involved. Kudos to you Bill!!

I also read the Inc. Magazine article and found it to be extremely accurate. As a shareholder I can verify the business side’s accuracy, anyone that knows anything about the publishing industry knows the extensive fact checking that Inc would be required to do prior to publishing (especially a Cover Story). Surprisingly the other side chose not to comment when given the opportunity.

One has to seriously question the source of one of your commentors.

What was done to this company,its original shareholders and creditors was a shame and an example of the cut-throat business environement that exists today.

7 On January 2nd, 2008, shareholder said:

As a shareholder of the company and someone who was involved with the switch from the VERY beginning, i can tell you how it was, and what was wrong. First off, Mike was and is a good guy… Very ethical and honorable. The downfall of the switch was caused because mike was a trusting person. He trusted an untested person (Bill Hargis) to run the company he founded. Hargis is the equivalent to a used car salesman and was the key factor in driving this company into the dirt. Bill lied about everything from the start and burned many bridges. It was only a matter of time before he became exposed and fired from the company. If everyone did business like Mike it would be great to be an entrepreneur, but unfortunately there are sharks in the water that can only survive by cheating and stepping on people to try and get to the top.

Also to the “old investor” that left a comment about how great Bill is… obviously a planted response and i would not be surprised if it was Bill himself who wrote it… or maybe his wife again? That is how Bill operates. The article in INC magazine was written by his wife!! Seriously that says it all!

8 On April 29th, 2008, John Oliver said:

The Switch was the 8th start-up company (out of 10) in which I’ve played a senior management role. Of those ten, only one has achieved both market acceptance and profitability. That, as we’ve all heard many times, is the nature of start-up companies.

The value in Gilbert’s book seems to be that it offers a glimpse into some of the first-hand experiences of a values-driven entrepreneur. The book does not have great utility as a how-to manual for first-timers, despite the author’s intentions. The book deliberately sidesteps most of the real drama of the company (Gilbert truly is a nice guy). Those titillating details would likely have done more to capture an audience of readers. While the unpleasant realities of a dysfunctional start-up may have escaped Gilbert’s view, the absence of those events from The Switch Effect is a missed opportunity. This particular start-up is fertile ground, and could have presented us with a rich tutorial (or cautionary tale).

It’s worth noting that while Gilbert didn’t profit financially from The Switch, he has succeeded in creating a brand with preliminary, broad-based market acceptance (nationwide distribution in multiple channels). And the product has spawned a new sub-category in the Beverage Industry, along with a few surviving product innovations (most notably Izze). Gilbert’s account of the story matches its author’s strengths. It was his vision, optimism and problem solving that allowed the original idea to become a feasible product.

But Gilbert is also the first to admit that The Switch would never have survived initial concept development had it not been for the strengths of the partner he selected, Bill Hargis. Hargis possessed tenacity, coupled with direct sales experience in the Beverage Industry, and the swagger to persuade early investors. Gilbert did a pretty good job in selecting someone who managed to sell several million dollars of debt and equity in a very risky venture, over a period of some 4 years.

It would be easy to demonize Hargis. Among the dozens of individual investors who lost all their shares during the company’s bankruptcy, there are likely very few who feel any fondness for The Switch’s former CEO. But those same investors would have no doubt praised Hargis’ tireless work ethic, dogged determination, and perpetual, silver-tongued campaigning for the company, had their original shares benefitted from a liquidity event. Lest we forget, the Beverage Industry is separated only narrowly from the carnival barkers of an era that preceded the big cola companies. To paraphrase Isaac Newton, if Gilbert was able to take the company further, it was by standing on the shoulders of a snake-oil salesman.

The real challenge for The Switch is that it was, and remains, very expensive to make. Because the product is 100% fruit juice, its ingredients cost is several times as high as New Age Beverage alternatives like teas, vitamin waters, energy drinks and traditional sodas. As the new (post-bankruptcy) owners of the company quickly discovered (note the smaller can size in circulation today), it’s nearly impossible to reach profitability by selling a product for $1.29 when its cost to produce and distribute is more than $1.00. That’s a particularly steep hill to climb in a business historically dominated by the company with the most innovative (loudest) consumer marketing. The Switch’s potential for continued market acceptance and financial viability will always be wedded to that reality. Neither of the company’s two founders, nor any of their successors, can alter the product’s basic economics.

9 On October 20th, 2009, beverage gal said:

How funny — the battle continues! It sounds like one partner has faded off into the sunset with a self-published book while the other has gone on to start another successful juice company with some his original investors and employees. Fruit 66 is getting more attention than Switch in today’s market and it sounds like they’re bitter about it. I’m thinking the results speak for themselves!

10 On November 7th, 2009, Sean said:

Does anyone know how I can contact Mike Gilbert….I think he is an interesting guy and I would like to get in touch with him.

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