The world is changing, the customers are changing, the meaning of health is changing, what we eat is changing, how we dress is changing, purchasing environments are changing — It is always a volatile environment. Companies adapting to the changes, survive. Yes…Just Survive… Some businesses keep running all the time but they stay in the same place… just on the verge of survival. But few leaders make their businesses swim against the tide and keep it moving forward. They pull everyone forward along with them. They aim for a better payoff for all their efforts. What lessons could we learn from those leaders?
01. BE THE CUSTOMER
a) Indra Nooyi, CEO of Pepsico, asked her employees not to be representatives of customers but being customers themselves. She herself would visit retail stores as a typical customer and would experience the business from a consumer’s mind. She encouraged everyone to do the same.
b) Amazon was so successful in selling books because Jeff Bezos was an avid reader. He himself is an extreme user. He knew the desires, needs of his targeted user segment.
c) iTunes store was an essential reason for iPod’s massive success. iTunes store solved a lot of problems and gave a wonderful experience to the music fans. The reason — Steve Jobs himself was a huge music fan -a hardcore Bob Dylan fan. One of the reasons behind the bonding between Steve and Wozniak was their common interests in music. They hunted stores together to collect rare music albums. Being an avid user, Steve knew what were the real needs of a music listener.
d) Harley Davidson promotes a culture where employees are encouraged to become riders so that they could understand the customers.
e) Nike’s founders Phil Knight and Billy Bowden were track athletes. They knew the problems faced by professional athletes with the shoes as they had experienced themselves.
02. ATTENTION TO DETAILS
Charles R Swindoll quotes’ “The difference between something good and something great is ‘attention to detail’”.
Yes… ‘Attention To Detail’. It directly affects how a customer would feel about your product or service.
a) While designing packaging for Doritos, Indra Nooyi and her team came across an important observation that when a user gets to the bottom of the Doritos bag, men would take the bag and empty in his mouth whereas women would not do like that as many of them would try to be very decent. Women would put their hand inside the bag and try to take out all the Doritos. Unfortunately, they would leave some of the Doritos inside the bag. So, the Pepsico packaging team redesigned the pack in such a way that women could take out all the Doritos down to the last 5 per cent. And also that the bag would fit it in a women’s purse.
b) Meg Whitman’s first job was in P&G and her first assignment was to figure out how big a hole could be in the shampoo bottle. Initially, she thought it was a stupid assignment but it taught her a lot of valuable lessons. The major lesson was ‘Consumer Experience’ — The hole through which the shampoo flows was an essential customer touch point and it was one of the opportunities to provide peak experience to the consumer. It taught her to think from a customer perspective.
c) Walt Disney, while making Snow White and Seven Dwarfs, constantly worked on little details so that he could provide an impressive, distinctive and memorable ‘movie experience’. He continuously asked his team to evolve the characters of Queen, Snow-White, Dwarfs and make them realistic. He brought live animals into the studio so that his artist could study them in detail and understand their movements.
Walt made animators throw objects on a glass window to analyse the shattering effect. He hired a teenage actor to act the part of snow white so that his animators could understand body movements in various actions, poses. He encouraged animators to study the movement of dress, movement of hair as the actor/actress danced. He also prompted them to watch the movement of facial muscles when the actors laughed, smiled, cried and got angrier. Walt also pushed his animators to become actors themselves so that the character would be realistic. He encouraged them to act in front of mirrors.
If you do not focus on small things that matter, you are not going to be successful — focus on small things -Meg Whitman.
03. DO MORE OF THE RIGHT
Meg Whitman, Former CEO, HP says. “When we need to turn around a company, we should not go and fix what is wrong but figure out what is going right, what right things those people were doing and do more of that. Eventually, we would get into the fixing list”.
a) In 1996, Alexandre Behring was made in charge of GP Investimentos Limited. The company had just bought “Southern Line” of Brazil Railroads. The railroads were in terrible condition. 50% of the infrastructure needed repairs and the 20% of them were in complete collapse. Behring had limited cash on its balance sheet. Repairing each bridge would cost him a lot and it was way beyond his cash availability. Fixing everything that was broken would require hundreds of millions of dollars and a lot of time.
Behring’s top priority was to lift the company out of its precarious, cash-strapped financial state. His policy was to see what is good and do more of them and earn more from them in the short term. Behring asked his team to repair old locomotives instead of buying new ones. His team removed good parts from their own fully dis-functional locomotives and used in the other old locomotives. Rather than purchasing new metal rails, the engineers ripped up tracks at abandoned stations and installed them on active routes. They used whatever good things they could lay hands on. The company soon turned profitable.
b) When Lou Gerstner became CEO of IBM, the company was struggling. Everyone was of the opinion that IBM had to be broken into small business units. Many believed that IBM could no longer compete as a single firm. Analysts pointed out a lot of examples — Microsoft made only software, Intel made only processors, Oracle made only business database software. In fact, Gerstner’s predecessor had initiated steps to break down the IBM into small units. But Gerstner saw IBM’s strength was its size and breadth. Every other competitor was small compared to IBM’s bigger size. IBM was good at delivering combined solutions for hardware and software rather than specialising in any one field. Due to Size, IBM could provide solutions to big corporates on a global scale and also provide better service and support to the clients. Gerstner decided that the best way forward for IBM was to provide an integrated solution. He shocked everyone. In a couple of years, IBM became profitable.
04. CROWDSOURCING FROM INSIDE THE COMPANY
Carlos Ghosn says that to turn around a struggling company, the solution has to come from inside the company. External consultants might be equipped with better knowledge & experience and might have better solutions. But when it comes to execution, there would be resistance from within the company. Motivational levels would be low. If the idea came from inside the company, it would be easy to make the employees buy the idea. The employees would further work wholeheartedly in implementing the same.
05. TALKING TO THE EMOTIONAL MIND
a) CARLOS GHOSN — In the late 1990s, Renault purchased stakes in Nissan, Japan which was at the brink of Bankruptcy. Renault’s then CEO, Carlos Ghosn was given the task to turn around the Nissan. Carlos travelled to Japan and took charge of the company. Most of the employees were skeptical of being under a foreign CEO, who had already earned a reputation of being called ‘Cost Cutter’. On his arrival, Carlos announced his intention to Nissan’s employees — “I am here for one reason: to fix the company. I came to Japan not for the sake of Renault, but for Nissan.” He got a warm applause. Carlos Ghosn spoke to the emotional mind of employees and alleviated their fears.
As soon Carlos Ghosn took charge of the company, he wanted to make certain changes that could deliver results — He had to shut down five of the Nissan’s loss-making factories. How did he manage? Carlos explained the reasons behind shutting down the units and told employees that those units were not helping Nissan’s employees but helping competitor’s interests. This explanation directly touched the emotional mind of employees.
Carlos saw that there was a lot of talented young guys inside the company but were denied opportunities in top jobs due to the culturally-ingrained seniority system in Japan. He turned around the problem and told the senior employees that he didn’t want age to be a discriminatory factor but to become a factor of respect for senior people, a factor of experience, but certainly not something that forbade great young potential to be promoted. Carlos explained the reasons every time and also spoke in terms of benefits to others.
b) RICK LEVIN — In the 1980s, Yale University was struggling to compete for students and faculty with other premier institutions. One of the major problems was its location — The New Haven city. The city had a crumbling old infrastructure — there was a severe unemployment crisis — the crime rates were high. As the globalisation was catching up, Yale University had to attract international students and faculty too. Unfortunately, the university was on the brink of falling from the list of top-tier educational institutions.
Rick Levin, then President of Yale University realised that for changing Yale’s future, he had to change the fortunes of the New Haven City. The Yale’s management board was ready to invest in building the city’s infrastructure. But Rick Levin did not want to spend money just like that. Rick had another challenge — Both New Haven people and the Yale University had a long history of not getting along well with frequent altercations. Both of them treated each other with suspicion. So, Rick Levin’s priority was to build trust between the city people, community leaders, political influencers, clergymen and the university.
Rick began with small activities that could help build trust in the long run. He made ‘Urban Outreach’ as part of the job description for every employee and the student. Every department was tasked to do some activities as part of ‘Urban Outreach’ every week that could benefit the local community. For example — The students of Forestry department and the faculty planted a lot of trees around the city. They built ‘Pocket Parks’ around the neighbourhood and took proper care of them. Yale’s drama schools did impromptu theatre acts at many places and educated & entertained the people. Slowly, Yale University won the hearts and minds of New Haven people. They believed that University was like one of them and really interested in building the city. After two years, on one fine day, the mayor of the city visited Rick Levin and gave him permission to go ahead and develop the city.
c) SAM WALTON — Sam Walton, Wal-Mart’s founder always talked in terms of ‘Benefits’ to his employees. If he wanted a person to work for Wal-Mart, he gave him the reasons and explained how it would transform the person’s life. One day, he thought of implementing an idea in all the stores. He requested every employee to greet the customer and ask if he could be of any help whenever the customer comes within ten feet distance. He advised his employee to look in the eye of the customer.
As usual, Sam explained the benefits of such an activity to his employees behind his new idea. He told them “If you do this, your natural shyness would fly away. It would help your personality to develop and would help you in becoming a leader and you might become manager of this store.”. Always, think and talk in terms of benefits to others.
06. LISTEN, LISTEN
a) Carlos Ghosn believed that he needed the support of employees to turn around the company and also of the opinion that his employees would be the best source of information to understand the critical problems that need to be fixed, potential solutions, the ways to implement the solutions and the things that were working well in the company. He used to spend a lot of time talking to his employees, process managers, shop floor people. He asked them a lot of open-ended questions and encouraged them to share their ideas. He interviewed as many people as possible, particularly in critical process areas. It helped him to turn around the company.
b) Jeffrey Katzenberg, CEO of Dreamworks used to meet his employees across the table over the meal or a breakfast. His philosophy was that people would be naturally relaxed without any fear or anxiety while meeting others over food. The meeting would be more informal in nature. It helped Jeffrey to connect personally with his people and became close to them.
c) Sam Walton, founder of Wal-Mart used to meet his employees in his stores and listen to their ideas and concerns. He would often meet his truck drivers in the early morning at 4 AM with a box of doughnuts and listen to them for a couple of hours. The drivers would share information about the stores, about people working in the stores, warehouses, about wastages and about the community around the store. He loved spending time with his employees.
Carlos Ghosn, CEO Nissan announced a “Nissan Revival Plan” in 1999 and gave one-year, Two-Year and Three-Year plans. He went ahead and publicly announced that he would resign if the company did not turn profitable within one year. His public commitment made many employees believe in him. They understood the seriousness. People don’t like change unless that commitment is there.
08. ACCEPT THE BRUTAL TRUTH
If you run away from the truth, the truth will find you.
a) In the 1970s, Kroger and A&P faced changing customer preferences — People were looking for bigger, superstores with more choices and a whole lot of various conveniences. Ralph Burger, the CEO, A&P, discarded all these findings and believed that A&P’s hundred years of success would overcome everything. Burger and his team began to rigorously defend their ideas against those facts. They were not ready to face the truth. Kroger was also an old store but they came to the conclusion that their existing old business model(accounted for 100% of their business) won’t work and would go extinct. Lyle Everingham, then CEO of Kroger and his team confronted the brutal truth and acted on it.
b) For fifteen years(Before Wal-Mart), Sam Walton had been running a chain of independent variety stores in smaller towns. Those stores gave the revenues of $1.4 million by 1960s. Things appeared fine. In the meantime, Sam kept researching about the developments in the retail industry. His research showed that the future of retail appeared to be headed towards ‘discounting stores’ due to changing customer preferences. He saw how some larger stores were doing revenues of more than $2 million from each store compared to $1.4 million from Sam’s 15 stores. He visited many discounting stores all around the country and studied the concept in-depth. It was clear that discounting would go and dominate the market. “Buy it low, stack it high, sell it cheap” was the guiding principle of discounting.
Now, Sam had only two choices — Stay in the variety store business which would be going to be hit hard by the discounting wave of future or open a discount store. He was not afraid of the brutal truth staring at his face and he wisely chose the second option. He closed his variety stores and opened ‘Wal-Mart’.
c) Kimberley-Clark was in bad financial shape when Darwin Smith became its CEO in 1971. Smith confronted the ‘Brutal Truth’ that the traditional core business of ‘Kimberley-Clark’ — the coated paper was doomed to fail. It was no more viable to compete in that market. Smith took the decision to sell the mills. Everyone was shocked. He sold every mill, threw all the proceeds into the consumer business, investing in brands like Huggies and Kleenex. Rest is history.
You cannot make good decisions without first confronting the brutal truth — Jim Collins
09. FREEDOM AND RESPONSIBILITY
a) One of the main reasons why Wal-Mart consistently outperformed the competition was its employees. Employees are responsible for breakthrough customer experiences and those employees are shaped by the company’s culture.
Sam Walton, Walmart’s CEO, considered people working in his stores, warehouses as partners and called them ‘associates’ rather than employees. He believed that the more he shared profits with his associates, the more profit the company would gain. If the company could treat the associates well, then the associates would treat the customers well. If the customers were treated well, then they would visit the store again and again. Real profits in business lie in ‘repeat customers’.
Sam shared every information about the business to his associates and involved them in the business decisions, planning, and execution. He gave his associates freedom, authority and responsibility.
One of the important factors for a business’ success is to build an internal culture around the freedom and responsibility of every individual — Jim Collins
b) Stephen Schwarzman, CEO of Blackstone, was of the opinion that nobody, particularly brilliant people likes to work at a place where they are tightly controlled. If there is no autonomy then there is no dignity. Stephen, further adds that it is a well-known fact that most people do not like to work like subordinated work units. They want to be in charge of their destiny and would like to have ownership of their growth and a leader’s job was to help them in their pursuit. The leaders have to provide sufficient autonomy so that the employees could think that they are valued and they have self-worth. The employees should feel that they have a lot of freedom to use their talents. Freedom would encourage risk-taking, creativity and experimentation. This would further help the growth of our business. People would grow both professionally and personally. They would stay longer in our companies.
10. FINDING GOOD PEOPLE or GOOD IDEAS
a) Ed Catmull, the CEO, Pixar, says that the central problem in a business is not finding the good ideas but finding the good people. Most people think the opposite was true.
In 1996, Pixar was asked to make ‘Toy Story 2’ movie. Unfortunately, the team who made the earlier Toy Story movie were occupied in making of ‘A Bug’s Life’ movie. Ed Catmull then formed a new creative team of people to make the sequel.
Unfortunately, the making of ‘Toy Story 2’ movie did not go as expected. The story was not coming out well. After ten months, Ed Catmull was forced to take a call and replaced the team with the original ‘Toy Story 1’ team. The team began the movie from scratch. They had only eight months to finish the project. They successfully did and the movie was a massive success. Ed Catmull points out that the original core concept(The Idea) of ‘Toy Story 2’ was same for both the teams but the people made the difference.
If you give a good idea to a mediocre team, they will screw it up; if you give a mediocre idea to a great team, they will either fix it or throw it away and come up with something that works — Ed Catmull.
b) If you have right people, then the problem of how to motivate and how to manage people properly goes away. In the 1980s, banking deregulation wrecked havoc in the banking industry. Wells Fargo handled these challenges better than any other bank and began its fifteen-year of spectacular performance. Carl Reichardt, who became CEO in 1983, attributed the success to the people around him.
c) When David Maxwell became CEO of the struggling company, Fannie Mae, in 1981, the first step he took was to get the right people on the Fannie Mae management team.
d) Nucor hired people based on the idea that it is easy to teach people how to make steel but not the work ethic. So, Nucor located its mills in places where the farmers are habituated to go to bed early, rise at dawn and get to work on time. Nucor employees usually showed up for work thirty minutes early.
People are just not the most important asset. Right people are -Jim Collins
e) Walter Bruckart, Vice President, Circuit city said, “There are five factors that led to the transition of a company from mediocrity to excellence. One would be people. Two would be people. Three would be people. Four would be people. And five would be people. A huge part of our company’s transition can be attributed to our discipline in picking the right people”
f) When Kimberley-Clark sold the mills to get rid of the paper business, Darwin Smith made it clear that the company would keep its best people even though they had little or no consumer experience.
“It doesn’t make sense to hire smart people and then tell them what to do; We hire smart people so that they can tell us what to do” — Steve Jobs.
11. COMMUNICATION STRUCTURE
a) Ed Catmull, CEO, PIXAR writes that we have confused organisational structure with the communication structure. He agrees that organisation structure might be important for better control and on-time completion of projects. But communication need not follow organisation structure. Communication needs to be able to happen between anybody at any time. There should be an open door policy. Anybody can go to the head of the company and talk about his concerns, ideas.
b) Sam Walton had an open door communication policy at Wal-Mart. If anybody has an important business problem in his mind, he encouraged them to bring it out in the open at a Friday morning meeting or at the Saturday morning meeting, so that they all could sit and solve together. If not, the person could directly approach the chairman or any other department head, regional head at any time. People can freely share their ideas with anyone, which they have picked up from various places. Sam shared every business information will all his employees including part-time employees. He always included as many store managers and associates in Wal-Mart’s annual meeting.
A strong leader makes a lot of difference in the business. Leadership is not just about profits, clients, mergers but about building a sustainable internal culture and creating future leaders so that the company would keep moving even if the present leader leaves the organisation.
References: Interviews with CEOs -Videos by Stanford Graduate School Of Business — Interviews of Indra Nooyi, Meg Whitman, Rick Levin, Carlos Ghosn, Jeffrey Katzenberg, Stephen Schwarzman, Ed Catmull. Good To Great by Jim Collins, Sam Walton’s Made in America, Creativity Inc. by Ed Catmull, How to Win Friends and Influence People by Dale Carnegie, ‘The Everything Store’ by Brad Stone, Switch by Chip and Dan Heath, Wired to Care by Dev Patnaik, HBR-Ten must reads on Leadership.