Balancing innovation & tradition in cannabis
By Kaitlin Domangue
I received the most interesting email from one of my subscribers last week.
I’m keeping his name and much of his quote private to protect his information & opinions, but in a nutshell, he said:
“I think the greatest shortcoming of the cannabis industry is that it thinks it’s a unicorn. Sure, it has a lot of unique hurdles and a specialized plant, but beyond that it’s just an agriculture/retail business. Cannabis has trouble applying existing, external business knowledge and processes to identical/common problems and always looks for a “cannabis industry” solution.”
This is a perspective I rarely see people discussing. But we need to change that. I fully agree with my subscriber’s opinion.
The absence of traditional business practices
A lot of cannabis operators get their start in the business world by working in cannabis. That’s true for me, my husband, and several other professionals I know.
We have a very particular set of skills (shout out to Liam Neeson’s character for losing his daughter several times) and knowledge that have afforded us incredible opportunities in the cannabis business world.
But – cannabis business is all we know.
Our business lessons don’t come from experiencing traditional business and applying the principles we’ve learned to this emerging landscape.
They come after our feet being held to the fire for being in the industry. After fighting with payment processors all day to get our bank account bank. Battling Big Tech to get our social media accounts reinstated.
And the list goes on.
In some ways, that makes us savvy business people.
We know how to get things done and are fantastic generalists, as all strong people in business are. We are fresh with ideas and most of all: completely immersed in the cannabis world.
In other ways, we might be *too* hypervigilant.
Sometimes creating mountains out of molehills because we’ve become accustomed to the constant chaos and stress of cannabis. We can’t distinguish between “normal” problems in business and cannabis-specific ones.
So we are constantly reinventing the wheel. Applying an innovative spin on traditional, longstanding problems that have existed in business for decades, maybe even centuries.
Also in his email, my subscriber said his boss felt like he needed to create a completely new method of calculating ROI in their vertical, but every business under the sun has calculated ROI since the beginning of time.
Hear me clearly: this is not because cannabis operators are less intelligent than traditional business people.
It’s because the cannabis industry is so different from every other industry around, that without a firm grasp on basic business principles: you’re stuck thinking reinventing the wheel *is* the only option.
After being denied a bank account, taxes audited & rejected by the IRS, social media accounts deleted, and more: it’s easy to see why operators who are new to the business world think everything, even calculating the ROI, should be made from scratch.
It’s almost second nature.
A 2018 report found that most professionals in the cannabis industry skew younger.
The report collected data from 180 cannabis workers and found that approximately 66% of them are Millennials. Just 4% of respondents were Baby Boomers.
And with younger leadership sometimes comes less experienced business people (I say as a 26 year old woman with no traditional business experience).
It’s not a question of intelligence, as much of the industry holds a college degree (42% of those surveyed), but seasoned, hands-on business experience isn’t as common in younger people.
In traditional industries, young people typically have older mentors or supervisors who have seen the marketplace and company itself change over time.
Some have been there for decades. They’ve come to predict certain patterns and practices in their niche. Young, incoming professionals can absorb that knowledge and learn the ropes from people before them.
California legalized medical cannabis in 1996, but the accessible recreational market didn’t get started until 2014 when Colorado made its first sale.
We have plenty of legacy experts in the cannabis side of things, but the licensed industry hasn’t existed long enough for us to develop long standing predictions and best practices for the new marketplace.
Even so, in the last 9 years since recreational sales started, over half the country has legalized cannabis for medical or recreational purposes. New trends and data are emerging in licensed businesses all the time.
So – what does that mean?
Constantly working with a problem-solving, innovative state of mind can slow your decision making processes because you’re spending too much time creating a new way of doing things.
There’s enough innovation as a result of being a new, in-demand, AND federally illegal industry.
Enough challenges come from that. Replicate traditional business practices where you can to save time, energy, and oftentimes money.
Cannabis Business Times wrote a fantastic article highlighting six cannabis business lessons we learned too late. Here are 3 that apply to this conversation:
- Be wary of “experts”
“In our experience, there are no experts in legal cannabis, just a bunch of people in this newly created legal industry with differing levels of ignorance. Illicit-market operators going legit have a lot to offer, but keep in mind they might not have any experience operating in a regulated environment. Additionally, newly minted experts, as a rule, do not have significant expertise in newly morphing industries,” says CBT.
- Understand your state and local regulatory landscape
“One of the traps newly minted cannabis entrepreneurs fall into is spending too much time looking at the federal level, following minor bills in Congress with only a few co-sponsors, chatting about what this politician said or what that public figure stated. None of it means anything unless actions, laws, and regulations are implemented in your state.”
- Expend the necessary energy obtaining a cannabis bank account
“Nothing screams legitimacy and offers a higher level of validation than a depository institution taking your cannabis company on as a client. The accounts are not easy to get, and sometimes it requires a concerted effort not only to find an institution that works with cannabis companies, but also to get through the application process and the quarterly reviews.”
What I’m thinking
There are cannabis professionals who reject all traditional business people without legacy market backgrounds.
That isn’t a growth-oriented & scalable mindset.
Corporate cannabis has shown us its ugliest side, but every individual on this planet has something to teach.
Legacy operators are incredibly savvy, quick thinking, and they know good cannabis & cutlivation techniques.
Traditional business people also have a strong grasp on operations, go-to-market strategy, the ebb and flow of the economy, what makes a good B2B partnership, etc.
Carefully blending the two makes for a well-run cannabis operation.
Ankur Rungta’s story is the perfect example of applying traditional business principles to the cannabis industry.
Ankur is the CEO and founder of C3 Industries, a vertically-integrated, multi-state operator housing several cannabis brands. C3 has operations in
Their dispensary, High Profile, just so happens to be one of my *favorites* in Missouri! Such a fantastic and kind staff.
Ankur’s corporate law firm and Wall Street investment background means he’s incredibly versed in the M&A, finance, and legal arenas.
He did a podcast with MJBizDaily talking about this subject, here’s a few (broken up by me) quotes that resonate:
“To be successful in this industry, in particular, within with a vertical MSO strategy, there’s a lot of different skills that are needed. [Of my] three co founders, my brother and I have similar backgrounds. But our third partner … built a career in Colorado … and worked for many years at The Green Solution; his background was in the kind of commercial cultivation and processing kind of arena. And he … had a unique skill set of designing and building out and then operating some of the first large facilities in in the Denver market. And so he fit in … seamlessly with [what] we brought, which was more on the the capital markets, the real estate financing … some of the other pieces of the business.
… The three of us brought very complementary skill sets into the business and covered a lot of the key areas, I think, where we didn’t have an expertise in retail, which has now become a very large part of our business. .. In all parts of our business, we’ve really tried to bring in more and more specialized people with the right skill sets. In some cases, they’re from cannabis. In some cases, they’re from outside cannabis. And ultimately … we’re trying to build a long term sustainable enterprise.
And … in this business … when you’re doing so many different things, you really need to have all the right folks otherwise, it’s not going to be successful.”
In a nutshell: Traditional business expertise is valuable to the cannabis industry. Blending the right people with the right set of skills makes for the most successful cannabis companies.