Why the “Middle of the Road” Is the Road to Ruin
Posted by Bill - July 25th, 2008These days, the only thing more unsettled than the weather is the state of the economy. Ford celebrates the 100th anniversary of the Model-T by posting the biggest quarterly loss in its history. The major airlines fly into the summer-vacation season by adding vast amounts of red ink to an industry that is already drowning in it. (American Airlines, by one estimate, loses $3.3 million per day.) And Yahoo, once the lovable darling of the Internet, caves in to corporate curmudgeon Carl Icahn as it tries to maintain its independence.
And yet…amidst all these dark clouds ands ominous forecasts, there are patches of bright sun and clear skies. Honda just reported profits of $1.7 billion for the quarter ended June 30—a record quarterly performance for a company that’s posted lots of great quarters. Southwest Airlines reported yet another profitable quarter—a 15% increase over a year ago, and its 69th consecutive quarter of profitability. And Netflix, the online-movie pioneer whose fortunes skeptics love to question, delivered better-than-expected results and increased its subscriber base to an eye-opening 8.4 million households.
How is it that Honda, Southwest, and Netflix manage to thrive, when so many of their peers not only struggle to break even but flirt with outright disaster? The answers don’t just speak to these three competitors, but to the new logic of competition itself.
First, high-performing companies understand that it’s not enough to be “pretty good” at everything anymore. As a company, you have to be the most of something—the most exclusive, the most affordable, the most responsive, the most friendly. Companies used to want to be in the middle of the road—that’s where all the customers were. But now, in an age of hyper-competition and non-stop innovation, the middle of the road is the road to ruin. What do they say in Texas? “The only thing in the middle of the road are yellow lines and dead armadillos.” To which we might now add: “And once-great companies that are slowly going out of business.”
There’s no doubt that Honda, Southwest, and Netflix have always understand what they are the most of. Honda is legendary for its focus on the performance of its engines and its commitment to grow from the low end of the automobile market up the value chain. Southwest has always managed to combine low fares with great service—anything else is a distraction. And Netflix understands that it doesn’t just offer customers the widest variety of movies to watch, but that it helps customer make smarter choices about the movies they watch.
Second, high-performance companies understand that in an era of great turmoil, the best strategy is to stick with what you believe in. Business thinkers love to excoriate big companies and their leaders because they don’t have the guts to change. In fact, the problem with many big companies is that all they do is change. They lurch from one consulting firm to the next, from one management fad to another, from one target customer base to a different set of customers. Detroit’s Big Three seem to change business strategies with every model year! They diversified into other industries, then refocused on cars, they pushed high-margins SUVs and pickups, now they are scrambling to make more small cars.
Amazingly, even in a business environment filled with dramatic change, Honda, Southwest, and Netflix stick to their guns. Sure, they tweak things at the margins: Southwest has fine-tuned its boarding procedures to appeal to business travelers, Netflix is experimenting with digital downloads as opposed to movies-by-mail. But they have made big strategic bets for the long term—and they don’t hedge their bets based on the price of fuel or the latest developments in Silicon Valley.
Legendary management guru Jim Collins puts it best: “The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.”
There’s a third element that helps to explain extraordinary performance in these extraordinarily difficult times. Each of these companies connects with its customers based not just on price and features, but on identity and emotion. They have become virtually irreplaceable in the eyes of their customers. The researchers at Gallup have identified an escalating hierarchy of connections between companies and their customers—from confidence to integrity to pride to passion. To test for passion, Gallup asks customers a simple question: “Can you imagine a world without this product or brand?” It’s a lofty goal, but great companies (like Honda, Southwest, and Netflix) get there.
Ask yourself, honestly: Can your customers live without you? Because if they can, they probably will.
Wanted: Non-Routine Savants
Posted by Polly - July 17th, 2008Google’s founders launched their IPO with a now-famous declaration of independence from business as usual: “Google is not a conventional company. We do not intend to become one.” That proved to be more than a boastful slogan largely because the company’s leaders focused from the start on being as unconventional and uncompromising about its people practices as they were about every other part of the business.
The company’s rigor and inventiveness when it comes to finding and unleashing the best talent is well-documented: from the practice of 20% time to the obsessive tweaking of its hiring algorithm to the juicy and utterly original language with which it describes its unique appeal to the best talent in the world. And this week, Google’s blog features a particularly illuminating post on which talent holds a unique appeal for the company (and any company interested in innovation).
What’s truly Googley? “Non-routine problem solving skills.” Poster Jonathan Rosenberg goes on: Non-routine savants not only exhibit a data-driven analytic ability, good communication skills, great teamwork, and genuine passion—they also, importantly, demonstrate a willingness to experiment, see old things in new ways, let go of pet theories and assumptions. The challenge with that, he says, is that “It’s easy to educate for the routine, and hard to educate for the novel.”
That’s both good news and bad news. On the one hand, it points to the fact that creativity is not some genetic gift only available to a thin slice of the population. On the other, it underscores the fact that creativity is a habit and a discipline to be rigorously and regularly cultivated—and while it’s a prized outcome in schools and businesses, it tends to fall off the curriculum as a practice.
That’s why I’m drawn to people who seem to be masters of their domain, but never fall victim to their mastery. They’re inspirational not so much because they exhibit genius (which they do), but because they demonstrate discipline (but often make it seem like fun—practice is play). A classic example of this kind of artist at work is Dan Wieden, founder and chairman of Wieden + Kennedy, the Portland, Ore maverick ad agency of record for Nike and Starbucks. Dan is arguably a creative genius (he actually penned the words “Just do it”), but he’s a zealot when it comes to cultivating the fresh perspective of a newbie. He told me he’s come to believe his job is “to walk in stupid everyday.” Why? Because no matter what business you’re in, and no matter what day it is, something’s changed overnight. And it’s your job to forget what you knew yesterday and to start afresh today.
That goes against the grain in a business world that values the “experience curve” (the more you do something–whether it’s manufacture computer chips or craft advertising messages–the more productive and skilled you become). But the “non-routine savants” who win by playing a different game, appreciate the power of the “inexperience curve”—the idea that the more you do something, the more important it is to challenge the assumptions and habits that built your success in the first place.
Cultivating “stupidity” is surprisingly challenging. The most open-minded and creatively-charged leaders I know seem to share one quality: they’re insatiably curious—about a whole range of things, most of which seem to have nothing to do with their job. They make it a personal discipline to get out of their element, to mix it up with people who are not like them, to invite subversive elements into their sphere as often as possible, and to generally try anything that switches them off autopilot and awakens them to all the signals out in the world.
If that all sounds good to you, but you’re not exactly sure where to start, take a page from one of my favorite handbooks of productive stupidity (or, if you prefer, non-routine savanthood): Twyla Tharp’s “The Creative Habit.” It’s both rigorously practical and endlessly inspiring when it comes to cultivating creativity as a lifelong habit. The crunchy exercises, robust rituals, and powerful mindflips on every page perform an end-run around the fears, excuses, and smarts that keep us from seeing the world with fresh eyes and acting on what we see. Add it to your summer reading list. Who knows? You may come back from the beach with a breakthrough—or a job offer from Google.
Pixar Rules—Secrets of a Blockbuster Company
Posted by Bill - July 8th, 2008The arrival of summer means trips to the beach, fireworks and parades—and another boffo performance by the creative geniuses at Pixar. The studio’s just-released summer movie, Wall-E, has generated rapturous reviews, record-setting ticket sales, and loads of cultural commentary.
More than anything, though, Wall-E has generated amazement from Hollywood observers at Pixar’s capacity to generate hit after hit in the fickle world of big-budget filmmaking. Wall-E is the studio’s ninth consecutive number-one movie since the release of Toy Story in 1995, an unparalleled record of creative and commercial success.
There are all kinds of theories about the secrets of Pixar’s success. But I’m convinced that Pixar’s films work so well with audiences because Pixar works so distinctively as a company. Polly and I wrote about Pixar in Mavericks, and its latest box-office hit gives us a chance to reprise one of our “greatest-hit” messages from the book: You can’t win big unless you change the game in your field.
Pixar doesn’t just make films that perform better than standard fare. It also makes its films differently — and, in the process, defies many familiar, and dysfunctional, industry conventions. Pixar has become the envy of Hollywood because it never went Hollywood.
More than a few business pundits have drawn parallels between the flat, decentralized “corporation of the future” and the ad-hoc collection of actors, producers and technicians that come together around a film and disband once it is finished. In the Hollywood model, highly talented people agree to terms, do their jobs, and move on to the next project. The model allows for maximum flexibility, to be sure, but it inspires minimum loyalty and endless jockeying for advantage.
Turn that model on its head and you get the Pixar version: a tightknit company of long-term collaborators who stick together, learn from one another, and strive to improve with every production. Andrew Stanton, who directed Wall-E, was a key figure behind Finding Nemo, which won two Oscars, generated worldwide box-office of $840 million, and became the best-selling DVD of all time. But Stanton didn’t follow the success of Nemo by offering himself to the highest bidder or demanding perks and special treatment. He went back to his job as an employee of the studio, to pitch in on other films and eventually begin work on his next major project.
And Stanton is merely one of many super-talented writers and directors who have staked their reputations on their work at Pixar. Again, in contrast to convention, these professionals have traded one-time contracts for long-term affiliation and contribute across the studio, rather than to just their pet projects.
According to Randy Nelson, who joined the company in 1997 and is dean of Pixar University, this model reflects “Pixar’s specific critique of the industry’s standard practice.” He explains it this way: “Contracts allow you to be irresponsible as a company. You don’t need to worry about keeping people happy and fulfilled. What we have created here — an incredible workspace, opportunities to learn and grow, and, most of all, great co-workers — is better than any contract.”
Pixar University is at the center of Pixar’s workplace agenda. The operation has more than 110 courses: a complete filmmaking curriculum, classes on painting, drawing, sculpting and creative writing. “We offer the equivalent of an undergraduate education in fine arts and the art of filmmaking,” Nelson said. Every employee — whether an animator, technician, production assistant, accountant, marketer, or security guard — is encouraged to devote up to four hours a week, every week, to his or her education.
Randy Nelson is adamant: these classes are not just a break from the office routine. “This is part of everyone’s work,” he said. “We’re all filmmakers here. We all have access to the same curriculum. In class, people from every level sit right next to our directors and the president of the company.”
During our research, Polly sat in on a class at Pixar University. The students represented an intriguing cross-section of employees: a post-production software engineer, a set dresser, a marketer, even a company chef, Luigi Passalacqua. “I speak the language of food,” he said. “Now I’m learning to speak the language of film.”
Thanks to Pixar University, employees learn to see the company’s work (and their colleagues) in a new light. “The skills we develop are skills we need everywhere in the organization,” Nelson said. “Why teach drawing to accountants? Because drawing class doesn’t just teach people to draw. It teaches them to be more observant. There’s no company on earth that wouldn’t benefit from having people become more observant.”
That helps to explain why the Pixar University crest bears the Latin inscription, Alienus Non Diutius. Translation: alone no longer. “It’s the heart of our model,” Randy Nelson says, “giving people opportunities to fail together and to recover from mistakes together.”
That’s not how most of Hollywood does it—which helps to explain why Pixar does so well. How are you changing the game in your field? What is your distinctive take on how your industry operates? Do you work as distinctively as you compete?
Generate compelling answers to these make-or-break questions, and you just might create some hits of your own.
What George Carlin Taught Innovators—The Virtues of Vuja De
Posted by Bill - June 23rd, 2008Fans of edgy comedy—and critics of the political establishment—are mourning the death of George Carlin. Most of us know this game-changing comedian through his riff on the “seven words you can never say on television.” (Warning: This “Seven Dirty Words” clip on YouTube does indeed contain some pretty dirty words.)
But George Carlin made another contribution to the language—believe it or not, to the language of business and innovation. The term he coined was “vuja dé”—and it’s become a battle cry of sorts for innovators who aspire to make big change by identifying opportunities that others don’t see.
We all know déjà vu—looking at an unfamiliar situation and feeling like you’ve been there before. But what’s valuable to innovation is vuja dé—looking at a familiar situation with fresh eyes, as if you’ve never seen it before, and with those fresh eyes developing a new line of sight into the future.
Let’s face it: Most companies in most industries have a kind of tunnel vision. They chase the same opportunities that everyone else is chasing, they miss the same opportunities that everyone else is missing. It’s the companies that see a different game that win big. The most important question for innovators today is: What do you see that the competition doesn’t see?
Answering that question requires vuja dé. And vuja dé requires a radical shift in perspective—which is why outsiders often see the future first. It’s also one of the big limitations of benchmarking. The most creative CEOs I’ve met don’t aspire to learn from the “best in class” in their industry—especially when the best in class aren’t all that great. They aspire to learn from companies far outside their field as a way to shake things up and make real change.
I first heard the term from Tom Kelley of IDEO, in his book The Ten Faces of Innovation. Tom reports that he heard the term from Stanford Professor Bob Sutton, who explores it in his book, Weird Ideas that Work. And Bob reports that George Carlin was the original inventor. This blog post from Tom gives a pretty good history of the term.
And now you’ve heard it from me! (Actually, in psychological circles, the more formal term is jamais vu, defined as “a sense of eeriness and the observer’s impression of seeing a situation for the first time, despite rationally knowing that he or she has been in the situation before.”)
So the next time you feel stuck, like you’re cycling through the same tired thinking about the same old problems, figure out a way to look at things fresh—to apply the virtues of vuja dé. It just might unleash a new approach to innovation—and prevent you, in your frustration, from using one of the seven words you can can never say on TV!
Thanks for the laughs, George, and thanks for helping us see the world with fresh eyes.
Why the Celtics Won—Lessons from Auerbach to “Ubuntu”
Posted by Bill - June 21st, 2008Boston is bathed in green now that the Celtics have secured their 17th World Championship banner after a 22-year drought. I had the great fortune to attend Game 6 and cheer on this likeable team, as three spectacular performers (Paul Pierce, Kevin Garnett, and Ray Allen) coalesced to do together what none of them had ever been able to do on their own—win an NBA title. It was a memorable night, filled with respect for the players and their coach, with nostalgia for the great teams and players in Celtics history, and with anticipation that this banner might be the first of several to be hoisted in Boston in the next few years.
It’s always fun to try to apply lessons from sports to the world of business—even though usually, as I’ve written in a previous post, the lessons are pretty limited. In this case, though, the re-emergence of the NBA’s most storied franchise can teach important lessons about leadership and teamwork—and teach us why, even as so much of the competitive environment changes all around us, the rules of success remain largely the same.
Indeed, what struck me most about Game 6 was how the success of the 2007-2008 Celtics blended leadership wisdom from the past with a cultural sensibility rooted in the present. Or, to put it more simply, how the unlikely combination of Red Auerbach and Archbishop Desmond Tutu inspired the team on its championship run.
The influence of Red Auerbach is obvious. I was choked up and literally choking towards the end of Game 6, as fans around me lit up cigars in tribute to the legendary coach, general manager, and president of the Boston Celtics—the man most responsible for those first 16 championship banners.
The best way to understand the genius of Red Auerbach, and to appreciate how relevant his ideas were to the current Celtics, is to re-read an interview he did with HBR back in 1987, shortly after the Celtics won their 16th title. My friend and Fast Company co-founder Alan Webber conducted the interview, and it is filled with insights about how to create teamwork in an organization, how to evaluate performance in ways that go beyond statistics, and how one bozo at the top (in this case, John Y. Brown, who co-owned the Celtics briefly) could jeopardize in a year what it had took decades to build. “How do you motivate the players?” Alan asked, expecting, I imagine, a complicated, multi-faceted answer. “Pride, that’s all,” Red answered. “Pride of excellence. Pride of winning. I tell our guys, ‘Isn’t it nice to go around all summer and say that you’re a member of the greatest basketball team in the world.’”
No wonder so many fans at Game 6 wore T-shirts emblazoned with messages about “Celtics pride”—a mystique that Red Auerbach invented, and this team finally restored, not because they won this game, but because of how they played all year.
But there was a second legendary leader whose values hovered over the court during Game 6. At the beginning of the season, searching for a way to inspire three great players to sacrifice on behalf of team goals, coach “Doc” Rivers read a collection of speeches by South Africa’s Archbishop Desmond Tutu. At the center of the speeches was the concept of “ubuntu”—a term from the Bantu languages of southern Africa that’s hard to translate into English but boils down to a simple but rich idea: “I am because of you.”
As Tutu explained, “A person with Ubuntu is open and available to others, affirming of others, does not feel threatened that others are able and good, for he or she has a proper self-assurance that comes from knowing that he or she belongs in a greater whole and is diminished when others are humiliated or diminished…”
The players took to the idea with real passion—they wore “ubuntu” on their wristbands, they chanted “ubuntu” as they broke the huddle, and, most important, they played selflessly, as if infused by the philosophy about which Archbishop Tutu spoke so eloquently.
Call it pride. Call it something more exotic. But it’s still what separates mediocre organizations from champions. And it’s why, the morning after Game 6, I ordered a different kind of T-shirt. It’s green, of course, featuring the Celtics shamrock, but it has only one word on it: Ubuntu.
A Publishing Strategy Worth Talking About
Posted by Bill - June 16th, 2008Dave Balter, founder and CEO of BzzAgent, is my kind of innovator. First of all, he hasn’t just started a high-profile, fast-growing company—he helped invent an entire field. To be sure, word-of-mouth marketing was around long before Dave and his colleagues started their agency in Boston. But BzzAgent’s success, and Dave’s personal thought leadership in the area, has taken the field to whole new levels of impact and professionalism.
Second, he is the kind of entrepreneur who insists on walking his talk—no matter how controversial the actions may be. Dave’s entire philosophy of business is about the virtues of transparency and the power of interaction. So, as I have written elsewhere, he and his colleagues have opened up the inner workings of BzzAgent, turning their corporate blog into a warts-and-all look at how BzzAgent really operates.
Well, in the spirit of walking the talk, Dave has done it again—and all of you get to benefit from his commitment to innovation! Like many idea-driven entrepreneurs, Dave decided to publish a book, in this case, a short, insatiably useful guide to the state-of-the-art in his field. The book is called The Word of Mouth Manual Volume II, and if you have any curiosity about how to get customers to start talking about your products and services, you simply must get a copy.
And that’s where the innovation comes in! Dave has persuaded a collection of bloggers who believe in what he is doing to write about the book and suggest that their readers check it out. We’re all doing it on the same day—today—and of course we’re free to say whatever we’d like. In return for our being part of this experiment, our readers—that’s you!—get to download Dave’s book for free.
That’s right: This book, which I guarantee will be of tremendous value as you think about the best way to raise the visibility of whatever you’re doing, is available to you at no cost. You can download it here. Of course, if you’re a traditionalist, you can also buy it from Amazon here.
I hope Dave’s publishing experiment works for him (and you) because it demonstrates some game-changing approaches to the new world of marketing. It starts, of course, with a terrific product—something worth talking about. It then leverages a strategy to get people talking—in this case offering a valuable book at no cost. And finally, that strategy relies on allies and enthusiasts to help carry the message—people who are prepared to talk about what Dave and his colleagues are doing because they believe that they are advancing a cause, not just peddling a product.
My advice? Download the book, talk about it inside your company, and ask how you can apply its ideas to get other people talking about your products.
Why We Went Zany for Zappos—And What It Says About Us
Posted by Bill - May 27th, 2008Every so often, writers click with their audience in ways they never expect—and learn something important in the process. I’ve had that experience over the last week or so, when a short item I posted here, and on my “Game Changer” blog for Harvard Business Online, spread across the media landscape like wildfire, generating all sorts of attention on the Internet, landing on a national radio program, even being featured in the pages of The New York Times and other major newspapers.
The post featured thoughts about Zappos, the fabulously successful online shoe retailer and the quit-now bonus it offers to new hires. When Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The company says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit! Why? Because if you’re willing to take the company up on the offer, you don’t have the sense of commitment Zappos is looking for.
When I wrote about The Offer, I thought it was interesting because of how it applied to companies: Should more organizations pay their people to quit? But I’m convinced that my blog post generated so much attention because readers began to apply it to themselves: How big a “bribe” would I accept in order to stop doing what I am doing—and what does my answer say about how satisfied I am with my position and career?
As it turns out, that’s a question some high-powered business thinkers have asked as well. Jim Collins, one of the world’s most influential strategy gurus, began Good to Great, his record-shattering bestseller about corporate performance, with a story about what he did as he was finishing the manuscript. He went for a long run up a steep trail in Colorado, stopped to enjoy the view, when, he says, an “odd question” popped into his head: “How much would someone have to pay me not to publish Good to Great?” As the hypothetical price got higher and higher, and he still was prepared to publish the book, he finished his “interesting thought experiment” and came down from the trail convinced about his enthusiasm for the project.
So, in the spirit of the zany folks at Zappos, and the classic work of Jim Collins, perhaps it’s time to think seriously about how you would answer that question: How much money would it take for you to walk away from your company and your colleagues? Would your answer surprise your friends and family because the price is so high? (Meaning that you love what you do.) Or does the answer make you uncomfortable because the price is so low? (Meaning that your current job is selling you short.)
There’s no right answer, of course. But the answer may help you to figure out if your current job is truly right for you.
Yes, It Really is That Simple
Posted by Polly - May 24th, 2008Joe Nocera has a great piece on Southwest Airlines chairman Herb Kelleher’s final shareholders’ meeting in today’s New York Times. We’ve written here and in Mavericks about Southwest’s remarkable ability to set itself apart and define success—not just in an industry which is arguably one of the worst in history, but in the greater field of business itself. This week’s meeting, during which Kelleher handed over the chairman’s post to CEO Gary Kelly after 37 years, offers another object lesson in the iron-clad connection between engagement in the workplace and impact in the marketplace.
The contrast between the scene at the Southwest gathering and the American Airlines shareholders’ meeting, held just an hour earlier down the road in Dallas, is striking. While attendees of the AA meeting had to cross a picket line of angry members of the flight attendants’ and pilots’ unions (customers soured on the airline’s recent announcement of a $15 charge for checked baggage presumably hadn’t had time to organize yet), Southwest’s pilots not only joined other shareholders in giving the departing chairman a rousing standing ovation, they took out a full-page ad in USA Today celebrating Kelleher. It was, as Nocera puts it, “the love fest to end all love fests.”
That love (or “luv” in Southwest parlance) has long been a source of fascination and envy for analysts and competitors alike. And it is, according to Kelleher, the secret of the company’s success. He gave Nocera the same answer any of us who’ve traveled to Love Field to ask what makes Southwest tick have gotten: “You have to treat your employees like customers.” For Southwest, that means not only making an art and a science of hiring the right great people, but creating an environment where those people feel like valued members of the team, know that their ideas matter, understand that the big idea (in Southwest’s case “democratizing the skies”) drives every decision and trumps politics—and get in their bones that if you can’t enjoy yourself more often than not in the process, it’s not really winning. (It’s also worth noting that Southwest pays its people better than anyone else in the industry—while charging its customers the least and making the most money—and has never indulged in the widespread furloughs endemic to the business).
The rhetorical question at the heart of Nocera’s article is: Can it really be that simple? And while he reviews all the other standard arguments for the airline’s remarkable performance—from prescient fuel hedges to its efficient low-cost, low-fare, quick turnaround business model to timing—the answer is an emphatic yes. What’s more surprising than that answer is the fact that more leaders aren’t hip to it. I always feel a bit like a schoolmarm when I repeat this argument, but as long as the number of organizations that genuinely prioritize their people remains the inverse of the number of CEOs who declare “people are our most important asset,” I’ll happily shout it from the rooftops. Yes, people matter. Yes, you have to be as dedicated, inventive, and relentless when it comes to the human factor as any other aspect of your business. Yes, it’s the leader’s job to unleash the best contribution of every single person in the organization, not to crush and contain them with bureaucratic systems and byzantine policies.
I doubt I’d find a leader who would disagree on any of those points—I just wish I could find more who enthusiastically put them into practice. Maybe it would help to quantify the dollar value of this approach. Brad Bird, Pixar Animation’s two-time Oscar-winning director of The Incredibles and Ratatouille, did just that in a recent interview in The McKinsey Quarterly (registration required):
In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.
Before I got the chance to make films myself, I worked on a number of badly run productions and learned how not to make a film. I saw directors systematically restricting people’s input and ignoring any effort to bring up problems. As a result, people didn’t feel invested in their work, and their productivity went down. As their productivity fell, the number of hours of overtime would increase, and the film became a money pit.
I don’t know how the math works out in other industries, but I do know that like Southwest, Pixar is an organization that grasps how simple (if not easy) it is to draw a straight line between creating an environment for people to flourish and flourishing in the marketplace.
There’s No Such Thing as a Free Lunch (Zimbabwe Edition)
Posted by Bill - May 21st, 2008We interrupt this business blog to reflect for a moment on man’s inhumanity to man. I’d never make light of the economic, political, and human-rights meltdowns in Zimbabwe, a beautiful country ruled by one of the truly horrible human beings in the world. But sometimes a situation gets so tragic, so insanely awful, that you have to laugh a little to avoid crying.
Earlier today, the Associated Press reported that inflation in Zimbabwe is now running at an annual rate of one million percent. You read that right: One million percent! A loaf of bread, the AP says, now costs what twelve new cars cost ten years ago. How does one begin to comprehend one-million-percent inflation? Nick Carr, writing in his Rough Type technology blog, offers a few head-spinning glimpses of the situation. Item number one: The government has just added a half-billion-dollar note to the currency. A half-billion-dollar bill!
He also points to the Daily Speculations economics blog, whose author tells the following story about a friend of his who had lunch in the country: “During the meal, one of my mates was drinking beer—bottles of Castle Lager (fondly called bombers). He ordered a 5th one, was advised that the price, which when he ordered his 1st, 2nd 3rd and 4th ones, was 160 million per bottle, had gone up to 340 million per bottle.” You read that right too: The price of a bottle of beer more than doubled–during lunch! And the price started at 160 million Zimbabwe dollars per bottle.
I don’t know what to make of any of this, other than the world never loses its capacity to depress and amaze—and people, despite the most unthinkable conditions, somehow endure. So the next time you’re at lunch complaining to a colleague about how tough your business is, or how rotten the economy is, think of the people trying to make a go of it in Zimbabwe—and raise a beer to their struggles to stop this insanity.
Why Zappos Pays New Employees to Quit—And You Should Too
Posted by Bill - May 19th, 2008I spend a lot of time visiting with companies and figuring out what ideas they represent and what lessons we can learn from them. I usually leave these visits underwhelmed. There are plenty of companies with a hot product, a hip style, or a fast-rising stock price that are, essentially, one-trick ponies—they deliver great short-term results, but they don’t stand for anything big or important for the long-term.
Every so often, though, I spend time with a company that is so original in its strategy, so determined in its execution, and so transparent in its thinking, that it makes my head spin. Zappos is one of those companies. Two weeks ago, I paid a visit to Zappos headquarters in Henderson, Nevada, just outside Las Vegas, and spent time with CEO Tony Hsieh and his colleagues. I could write a whole series of posts (and just might) about what I learned from this incredible operation. But I want to focus this post on one small practice that offers big lessons for leaders who are serious about changing the game in their field—and filling their organization with people who are just as committed as they are.
First, some background. As most of you know, Zappos sells shoes—lots of them—over the Internet. The company expects to generate sales of more than $1 billion this year, up from just $70 million five years ago. Part of the reason for Zappos’s meteoric success is that it got the economics and operations right. It offers customers a huge selection—four million pairs of shoes (and other items, such as handbags and apparel) in a warehouse in Kentucky next to a UPS hub. (If Imelda Marcos weren’t already dead, she’d visit that warehouse and have a coronary on the spot.) It also offers free delivery and free returns—if you don’t like the shoes, you box them up and send them back to Zappos for no charge.
So the value proposition is a winner. But it’s the emotional connection that seals the deal. This company is fanatical about great service—not just satisfying customers, but amazing them. The company promises free, four-day delivery. That’s pretty good. But most of the time it delivers next-day service, a surprise that leaves a lasting impression on customers: “You said four days, but I got them the next morning.”
Zappos has also mastered the art of telephone service—a black hole for most Internet retailers. Zappos publishes its 1-800 number on every singe page of the site—and its smart and entertaining call-center employees are free to do whatever it takes to make you happy. There are no scripts, no time limits on calls, no robotic behavior, and plenty of legendary stories about Zappos and its customers.
This is a company that’s bursting with personality, to the point where a huge number of its 1,600 employees are power users of Twitter so that their friends, colleagues, and customers no what they’re up to at any moment in time. But here’s what’s really interesting. It’s a hard job, answering phones and talking to customers for hours at a time. So when Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period.
After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit!
Why? Because if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for. It’s hard to describe the level of energy in the Zappos culture—which means, by definition, it’s not for everybody. Zappos wants to learn if there’s a bad fit between what makes the organization tick and what makes individual employees tick—and it’s willing to pay to learn sooner rather than later. (About ten percent of new call-center employees take the money and run.)
Indeed, CEO Tony Hsieh and his colleagues keep raising the size of the quit-now bonus. It started at $100, went to $500, and may well go higher than $1,000 as the company gets bigger (and it becomes even more difficult to maintain the all-important culture and obsession with customers.)
It’s a small practice with big implications: Companies don’t engage emotionally with their customers—people do. If you want to create a memorable company, you have to fill your company with memorable people. How are you making sure that you’re filling your organization with the right people? And how much are you willing to pay to find out?
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