1. 40 Lessons to Learn from Southwest

    August 30, 2011 by

    Southwest Airlines is the largest airline in the US, based on domestic passengers carried and one of the most profitable airline companies (at least in the US). On 18th June 2011 Southwest celebrated their 40th anniversary of being in business. To highlight its success Southwest Airlines published 40 lessons to learn in their in-flight magazine “Spirit”.

    The 40 lessons details many of the best practices that are often highlighted by business authors and consultants. In my opinion, the one thing that is clearly different is that Southwest Airlines does not just talk about these concepts, they apply them every day and every time.

    These lessons are universal and if you learn and apply them then you can be successful as well. So read the article and use it as checklist for  "how are we are doing".

    The 40 lessons are below and you can download the full article from here.

    Ahmed Abbas

    40 Lessons to Learn from Southwest Airlines 

    1. Keep the idea simple enough to draw on a napkin.

    2. A legend is an asset.

    3. Hire a good lawyer.

    4. Raise more money than you think you need. Now double it.

    5. Crazy is no liability.

    6. Find Executives who look like they walked off the set of "The Expendables".

    7. Target the overcharged and underserved.

    8. Be the good guy.

    9. Two strikes is one hit away from a home run.

    10. Recognize your luck.

    11. Lack of money makes you frugal.

    12. Gain talk equity.

    13. Promote from within.

    14. If the zeitgeist works for you, use it.

    15. Invent your own Culture and put a top person in charge of it.

    16. A Culture has its own language.

    17. The legal part is never over.

    18. Have a recognizable home.

    19. A crisis can contain the germ of a big idea.

    20. Simplicity has value.

    21. It doesn’t hurt to look like a toy.

    22. Remember your chief mission.

    23. Instead of whining, give a lollipop.

    24. It helps to have an extroverted Leader.

    25. Get into fun advertising wars.

    26. Take your business, not yourself, seriously.

    27. See your business as a cause.

    28. Put the worker first.

    29. Sweat the small stuff, but try not to lawyer it.

    30. Beware of imitators, but take them as a compliment.

    31. The Web ain’t cool, it’s a tool.

    32. Set and renew noble expectations.

    33. Increasing size should make you a force for good.

    34. Get green.

    35. It’s about Customer Service, not "scalability."

    36. Listen to advice, then celebrate it.

    37. Pick your peaks and stick to them.

    38. Manage permanence.

    39. Never rest on your laurels or you will get a thorn in your, um, butt.

    40. It’s OK to be unprofitable for a year.

  2. Collaborate to Grow the Pie

    July 22, 2011 by

    A very interesting article by Vicki Gardner, Harvard Business Review, is shown below. It highlights recent micro research conducted by Nielsen suggesting that genuine innovation should come from collaboration between manufacturers and retailers instead of fighting each other over splitting the profit pie.

    The study suggests that collaboration between manufacturers and retailers is essential to introduce new products or categories that consumers want and need and at the same time does not damage the existing lines or listings. For example many of the gadgets today offer features which most “normal” consumer are not even aware of more than ten percent of the features let alone use them all. The study also suggests that there are “supposed” innovations introduced by the manufacturers which are not really genuine innovations and consumer focused but merely they are more of product tweaks and noise made to create supposed ‘we have news’ sales packs and media releases.

    The full article below.

    Ahmed Abbas

    The National Football League (NFL) is in the midst of a public and piggish spectacle of billionaires arguing with millionaires about how to split approximately $10 billion in revenue. This is time, effort and money merely focused on splitting the pie versus growing the pie by innovating the product for the benefit of all, especially the fans.

    Similar lockouts are played out on a much more frequent basis between the consumer packaged goods makers and their retail partners. Far too many retailers and manufacturers opt for pie-splitting instead of collaborating to come up with pie-growing strategies. Of the billions of dollars spent each year on trade promotion and innovation, our estimates are that only $1 in every $8 spent on trade promotion (13%) and $1 in every $20 (5%) generated from innovation actually grow their respective categories.

    The rest of the dollars just shift share from one retailer to another or one manufacturer to another. These pie-splitting strategies often just drive short-term, unsustainable results where companies are merely "renting share." And in the long-run, too much share stealing without category growth destroys long-term industry profitability for everyone involved.

    The Nielsen Company just completed a macro study analyzing trade promotion across 30 grocery categories. The findings are surprising. Only 13% of trade dollars spent actually result in category growth. Instead, 15% of sales driven by trade promotions result in brand switching (good for the "winning" manufacturer) and 17% of sales driven by trade promotions result in store switching (good for the "winning" retailer).

    Sadly, the single largest result of trade promotion is subsidized volume at nearly 55% of all trade spend. This is trade spend where the no new consumers or incremental units were purchased—instead, customers who would have purchased a product anyway are being given discounts, gutting profits. One might think that all consumers would be happy with lower prices, but The Cambridge Group analysis across dozens of categories shows that the truly price sensitive consumer tends to be only 10-30% of households. Most consumers actually want new benefits and innovation and are willing to pay for them.

    Regarding innovation, the numbers indicate that the vast majority of innovation also results in splitting the pie vs. growing the pie — and in some cases, innovation inadvertently shrinks the pie. Nielsen also looked at sales from new products in every category within grocery in recent years. In one year $2.7 billion in sales was generated via new products in the grocery channel. But $3.2 billion was lost due to de-listing — meaning failed products that were pulled from shelves, or products pulled by manufacturers even though some consumers may have preferred the product — for a net negative of $500 million. Put another way: for every incremental $1.00 gained from a new product, $1.20 was lost due to de-listing.

    So is growing the pie an impossible task? No, but manufacturers and retailers have to collaborate more upfront on shopper and innovation strategies.

    Consider one example. Over the last five years, Jimmy Dean's has expanded its frame of reference beyond just breakfast sausage into convenient breakfast meals that provide longer lasting energy — a niche that delivers a breakfast like what you'd get at a fast-food restaurant with sausage at its center. In that time, Jimmy Dean's tripled its frozen breakfast sales with $200 million in incremental sales. But the category overall grew from $1.2 billion to $1.5 billion, with Jimmy Dean's driving nearly two-thirds of all the growth. It's a great example of what can happen when manufacturers and retailers stop fighting over splitting the pie and instead find a way to increase the share — in this case by stealing sales that might otherwise have gone to fast food establishments.

    The path to pie-growing strategies centers on better innovation. When manufacturers create innovation that drives category growth, there is less need to drive unhelpful trade promotion.

    First, innovation leaders at manufacturers need to redefine success. Too often manufacturers aim for $50 million+ ideas without regard as to where the additional revenue originated. Ideally it comes from category growth. If it comes from a competitor's share or, even worse, cannibalizing a product in its own portfolio, it's a less effective innovation. Innovations that grow the pie allow the manufacturer to benefit disproportionately — and the retailer will be fully supportive, since it grows sales instead of reapportioning existing shares. Our collective experience is that innovations that are truly differentiated and are appealing enough to command pricing power have a much greater chance of growing the category sales and margin.

    Second, innovation leaders need to better collaborate across marketing and sales functions within their organizations and with retailers to not just hand off innovations, but get roll up their sleeves into the trenches of retail execution and category growth. How can this innovation drive incremental trips to the store? How can this build baskets for the retailers? What SKUs will be deleted to make room? What is the optimal shelf-spacing, assortment and merchandising?

    Finally, as is the case with any real collaboration, greater honesty and accountability is required from both manufacturers and retailers about innovation. At a recent summit of top retailers and CPG manufacturers, several executives were refreshingly candid about the innovation charade that goes on every year. The executive noted that manufacturers constantly launch new products that they know in their heart of hearts aren't worthy (not differentiated, not worthy of a price premium, not likely to grow the category), but they go ahead because they complain retailers want 'new news'. Retailers constantly accept innovations that they also secretly believe aren't really that good, but they do so because they don't want to be the first one to say the emperor has no clothes.

    Fundamentally, the issues are rooted in our culture of competition and the need for more courage to collaborate. Pie-splitting as a growth strategy is attractive because it is more familiar and easier. For many of us it is deeply ingrained that for one to win, the other has to lose. Pie-growing is not only more foreign, it also takes more courage as it is a more uncertain and messier. It also takes more creativity, as well as an ability to stand in your partner's shoes. We expect the best retailers will sync up with the best manufacturers and lead the way, as it is way more fun to work in a growth category. Hopefully a new, mutually beneficial way of working together will emerge — just in time for a full NFL season.

  3. Goal 1: Teeny Weenie Summertime Bikini (or appropriate swimwear)

    August 20, 2010 by

    Hello all,

    Here is another great article from our friend Adam Stoehr of the National Quality Institute in Canada. The National Quality Institute, http://www.nqi.ca, are BPIR.com’s partner for Canada.  Adam’s article describes his yearly struggle to fit into his Teeny Weenie Summertime Bikini!

    Goal 1: Teeny Weenie Summertime Bikini (or appropriate swimwear)   
    By: Adam Stoehr, Vice President, Educational Services, National Quality Institute

    Adam Stoehr       Example Data

    Many of us spend the months of May and June staring in the mirror, looking at rolls and bulges and wishing them away.  Feeling comfortable in a summertime bathing suit (referred to in this article as a bikini/appropriate swimwear) is a common goal.  Some of my family and friends will have more success achieving this goal than others.  Let’s explore how we can maximize our success in achieving important goals.  To do this, we need to answer two questions: “What is a goal?” and “What is a measure?”

    If you want to suck the life out of a meeting, start with a discussion on measuring process outputs and achieving desired goals.  I dare you to try it.  Here is your script: “Let’s identify process outputs, and determine appropriate measures, and collect the data, and analyze the results, and base our ongoing decisions on these facts, and set goals to improve.”   By the end of this long sentence everyone in the room will be hearing “blah blah blah blah blah blah blah.”  The unfortunate thing is that the intent of this sentence is a critical piece in measurement, goal setting, and continuous improvement.

    What is a goal?

    Let’s start with setting a goal.  A smart goal in my bikini/appropriate swimwear example would be: I want to reduce my weight from 210 pounds to 200 pounds by July 28, 2010. Why is it smart? It’s smart because it’s Specific, Measurable, Attainable, Relative, and Time-bound.

    SMART Test:  Reduce my weight from 210 pounds to 200 pounds by July 28, 2010.

    • Specific: I’m talking about my weight, not the size of my swim suit, not the amount of exercise required, not the opinions of others, only my weight.
    • Measurable:  I have numbers built into my goal.  With this goal there is no doubt what success looks like and how I’m going to measure it.
    • Attainable: a 10 pound gap in the next two months is within my reach.  If I set this goal too far out of my reach, like 180 pounds for example, I would be more likely to run from it than achieve it (which would ironically be relative to my overall goal anyway).
    • Relative: This test reminds me that this goal should be relevant to overall goals and objectives.  I have an overall goal of improving my health and reaching a “normal” BMI.  This goal is consistent with (relative to) the overall goal.
    • Time Bound: “by July 28th” reminds me that I’m on the clock.  This also happens to be the date of the Process Mapping course I’ll be teaching in Cottage Country where I’ll have plenty of time to wear my bikini/appropriate swimwear.  If I left off the deadline, other priorities with more imminent deadlines might get in the way of my achieving this goal.

    What is a measure?

    Lots of definitions are available but here is how I look at measures.  A measure is something that helps us make decisions.  I wish all numbers were measures but numbers actually have to grow up to be measures.  How do numbers grow up?  They start off as data, then they grow into information, then they become metrics, and then they end up as measures.  Just as your baby brain wasn’t as good at decision making as your adult brain, so your data isn’t as useful as your measures in decision making.

    What is a measure?

    Bikini/Appropriate Swimwear – Example Data

    The data are the numbers in their rawest form.  For my example, the fact that I weigh 210 pounds is the data.  Data is interesting but it’s not very useful on its own.  Unfortunately we often mistake data for measures.

    Information is the data in context. For my example, it would be like me telling you:

    • According to BMI levels men my age and height should weigh 185 pounds (best practice)
    • A recent study showed that on average Canadian men my age and height weighed 198 pounds (researched practice)
    • Two years ago I weighed 260 pounds and last year I weighed 225 pounds (historical comparison)

    Information is interesting but it’s not very useful on its own.  Refer to chart below for more details about my bikini/appropriate swimwear readiness historical data.



    I define metrics as your analysis of the information.  Now that you have the data and the information you can make an analysis.  For my example you can:
    • Assess progress: Good progress has been made since 2008.
    • Compare and contrast: He’s doing well compared to the past and not so well compared to best practice and researched practice
    • Form opinions: He is doing well.  If he could drop another 15 pounds he would be bikini/appropriate swimwear ready.

    We are now in a much richer place with our numbers and we can start to call them measures.

    I save the word measure for something that helps me with decisions.  A really strong measure is one that is helping me with a goal related decision.  A measure is therefore a culmination of all of the above.  It’s data in context, that has been analyzed, that can make me a better decision maker.  In my example it would be one of the following:

    • Because Adam has lowered his weight by 50 pounds over the last 2 years we are going to continue our healthy eating regime at the same pace as early 2010.
    • Because Adam has not met the average weight for men his age (i.e. he’s not bikini/appropriate swimwear ready) we are going to increase the exercise regime compared with 2009.
    The goal is clear! The measures are clear! All that remains is achieving the goal.  If you want to see whether I achieve this particular goal, join me on July 28th where I will be teaching an “Introduction to Process Mapping” course in Cottage Country.  Don’t worry, for the actual course I’ll be wearing pants and a golf shirt but I can’t promise that I won’t be wearing my teeny weenie summer time bikini/appropriate swimwear the rest of the time.  Have a great summer and I wish you the best on your own bikini/appropriate swimwear goals.

    As you can see we have refrained from including any photos of Adam in his swimwear for this year. If you would like a photo please contact him directly!

    Best regards
    Dr Robin Mann, Commercial Director and Part-Owner, BPIR.com Limited, r.s.mann@massey.ac.nz