SMaC Great By Choice

shawlaskewvilleUrban and Civil

Nov 29, 2013 (3 years and 6 months ago)

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RAFAEL GARCIA

ALLYSON
HATZ

BONNIE LEE

ALEXA

MCDANIEL

MOLLY MOSELEY


SMaC

Great By Choice

SMaC


Howard Putnam, CEO of Southwest Airlines in 1979,
wrestled with a question:




“Does the sweeping disruption of deregulation call
for a revolution in how we run our company?”

SMaC

So Putnam considered 4 main questions:
D
oes
deregulation..


Undermine our low
-
cost model?


Threaten our high
-
spirit, employee
-
focused
culture?


Erode the competitive value of rapid gate
turns or destroy the viability of our point
-
to
-
point system?


Does radical change in our environment call
for inflicting radical change upon ourselves?


SMaC


Mr. Putnam concluded that Southwest Airlines
should continue to expand based on the ‘cookie
-
cutter’ approach.



He also concluded the Southwest Airlines “cookie
recipe”.




1.
Remain a short
-
haul segment

2.
Utilize only 737 aircraft

3.
Continued high aircraft utilization and quick
turns

4.
The passenger is our #1 product

5.
Continued low fares and high frequency of
service

6.
Stay out of food services

7.
No interlining

8.
Retain Texas as our #1 priority

9.
Keep the ‘family and people feeling’ in our service

10.
Keep it simple

SMaC


Putnam stayed away from issuing vacuous
statements


Although he specified:


Two
-
hour segments


737s


No food service


No seat selection

Putnam laid out a CLEAR, SIMPLE, and CONCRETE
framework for decisions and action.

SMaC


This elements have only changed about 20% in a
quarter of a century, despite a series of disruptive
events. Such as:


Massive industry mergers


Recessions


Interest
-
rate spikes


The Internet


9/11

Adhering To the
SMaC

Recipe
W
ith Fanatic
Discipline


10X companies kept ingredients for more than 20
years



Comparisons showed
SMaC

during best years



Comparisons changed recipes to a greater degree

Southwest Airlines vs. PSA


Facing deregulation, disruptive environment,
identical recipes, fabulous core markets

Southwest


Began as a copy of PSA


Builds momentum in Texas


Analysts said they needed to
change their formula


Putnam’s simple list “needed
major revision


CEO kept most of the recipe
intact


Became one of the most
admired companies in the
world


Only one that endured as
great company


PSA


Reacted to deregulation by
becoming more like United
Airlines


Moved away from recipe


Languished post deregulation


Sold out to US Air


Became irrelevant, then
forgotten

Apple


Rise and fall illustrates the danger of straying from a
recipe and the value of restoring it


Mid
-
1990s: fallen from glory days


Will Apple
Computer Survive?


Chronic inconsistency: revolving door at the top


4 changes of CEO in 11 years


Turnaround began in 1997 with Steve Jobs


Apple had successful rebirth because it returned with
fanatic discipline
to original recipe

John Wooden


UCLA Basketball


10 NCAA championship teams in 12 years


Exemplified power of consistency


Ran drills from same set of 3x5 cards with rare
modifications


“Pyramid of Success”: a philosophy of life and
competition


Detailed recipe down to how players should tie their shoes

IKEA


Main Ingredients:


Simple product design


Massive friendly retail stores


Very low prices


Create a better life for people


In the beginning: concentrated on continuous cost
reduction


During rising prices and global recession, they set out for
a new path to offer even lower prices to consumers


Lowering operational costs


Become
better

at increasing volume


Develop
better

functioning supply chain


Empower co
-
workers












Adhering To the
SMaC

Recipe With Fanatic
Discipline


Change is not the most difficult part


10Xers ask why their recipe isn’t working anymore
before assuming obsolete methods


Signature of mediocrity = chronic inconsistency


10Xers accomplish goals by adhering to what they
know works

Amending the
SMaC

recipe: Paranoid, Creative
Consistency


A great company
must
evolve its recipe, revising
selected elements when conditions merit, while
keeping most of its recipe intact.


EX: in 1985, Intel’s memory
-
chip business.


Japanese competitors threw the industry into a price
war by driving prices down 80% in 2 years.

Intel’s Recipe for Success


In 1969, Intel began making
microprocessors, putting all
the computer functions on a
single chip. (They were
originally only in the memory
-
chip business).


Over 16 years they
continuously gained
momentum with the
microprocessors.

“If New Management Came In, What Would They Do?”


Get out of the memory
-
chip business.


Put their full attention into the microprocessor
business.


Crucial to their success:


Exit from memory chips


Not changing other elements of its
SMaC

recipe


“Genius of the AND”


On one hand, Intel changes only a small fraction of
its
SMaC

recipe at any given time, keeping the rest of
it intact.


On the other hand, this isn’t just an “incremental”
change
-

a
SMaC

recipe change is a significant
change.


By grasping this point, a 10X enterprise can achieve
significant change and continuity
-
at the same time.

Firing Bullets


The Intel case shows how firing bullets can give you a
hedge against an uncertain future, so that you might
have a ready
-
made amendment ready to go when the
world changes.


Intel didn’t react to the memory
-
business disruption
by inventing the microprocessor; it had been firing
bullets for more than a decade, proving itself in
microprocessors.

2 Approaches to Amending the
SMaC

Recipe


1) Exercising empirical creativity (internally driven)
-

Firing bullets to discover and test a new practice
before making it part of the recipe.


2) Exercising productive paranoia (externally
focused)
-

Disciple to zoom out to perceive and access
a change in conditions, then zoom in to implement
amendments as needed.


10Xers employ both approaches

Intel’s Success


In the Intel case, empirical creativity came 1
st
, and
then productive paranoia kicked in when the
memory
-
chip business became untenable.


10Xers reject the choice between consistency and
change; they embrace consistency and change, both
at the same time

IKEA


How does IKEA embrace change and
consistency simultaneously?


They are consistently changing and
lowering their prices to compete with
competitors.


Focused on conceptual consistency.
Although the product assortment and
functionality of IKEA’s products differ
between regions, and new products and
themed showroom corners are
constantly added to its range, the overall
IKEA experience remains consistent, no
matter when, where, or how consumers
interact with the brand. This makes the
IKEA experience memorable.


SMaC Recipe


SMaC


Specific, Methodical, and Consistent


SMaC Recipe


A set of durable operating practices that create a replicable
and consistent success formula


Turns strategic concepts into reality


Unchanging from situation to situation


Helps people keep their bearings and sustain high
performance in extreme conditions


The more unforgiving your world, the more SMaC you need
to be

SMaC Recipe



Not

to do”


Southwest Airlines: Do not interline, serve food, offer first
-
class seats, carry air freight


Microsoft: Do not wait to develop perfect software to enter the
market; get good enough to launch and then improve.


Intel: Do not cut R&D during industry recession.

IMAX on Everest


David
Breashears

developed SMaC recipe for
filmmaking in high mountains.


50
-
degree
-
below
-
zero freezer in Toronto for practice


Developed protocols for handling IMAX camera with bare
hands


“Idiot Check List”


160 mile, 28 day trek in Nepal before Everest


May 23, 1996: Mount Everest IMAX project

Consistency and Change:

The Great Human Tension


Create practical framework that is flexible and
durable


Ex: US constitution


Amendment mechanism


Consistent, to work in radically changing and unpredictable
environment


Balance between continuity and change


Concrete rules to guide decisions


Understanding what actually works takes time

SMaC

Recipe Comparison


Changes to a SMaC recipe are like amendments


Greatness is ability to:


keep moving forward


Figuring out what works


Consistent approach with discipline, creativity and
paranoia