Lee Iacocca joined Ford Motor Company in the year 1946, as an engineering intern. Within a few months, he asked his management team to shift him to the sales and marketing department. He loved the sales work and began to grow in his career. By 1960, he became Vice-President and General Manager of the Ford Division. His first full-fledged new car development project after becoming VP was ‘Mustang’ and it went on to become a massive hit among the younger generation of the time. By 1978, he became President of Ford division. He proceeded to design and launch some more successful cars. He successfully transformed Ford’s failing Mercury brand.
After leaving Ford, Lee joined as CEO for Chrysler which was on the verge of bankruptcy. Many thought that Lee had chosen to fail. Almost everyone is of the view that Chrysler’s days were numbered. But Lee worked hard and successfully turned around the company to everyone’s surprise.
What Business and Management lessons can we learn from Lee Iacocca?
While working as an engineer in Ford’s production unit, Lee Iacocca realised that he no longer liked the engineering work and felt that the real action happened in marketing and sales. He thought that a good performance in marketing and sales would surely propel him soon to the top management position. Unfortunately, he had no experience in selling. He also knew that he had no natural talent for marketing. But Lee believed that a good salesman is not born but made.
Overcoming Challenges -In the initial phase of his marketing career, Lee was anxious, tensed and jittery while interacting with potential buyers whereas his colleagues were relaxed and had an outgoing personality. That did not deter him. He observed as much as possible from other salesman and slowly learnt to talk without anxiety, communicate clearly and also learnt how to present in such a way that people would listen. He began to observe and listen to his customers as much as possible which helped him to understand them better and customize the marketing content & solutions.
Grit -Lee understood that learning the skills of salesmanship would take time and effort. He was willing to be patient. He had to practice some of the skills over and over again. It was not a mindless effort -A very focussed effort on a small part of essential skills or activities and he kept incrementally improving them. He was determined and consistently committed. With sustained interest, deliberate practice, those sales skills soon became a habit for him. Eventually, within three years, Lee grew into a role where he taught the dealers on the art of selling the product to customers.
Lee showed that one’s skills, abilities are not fixed and can be changed or developed through dedication, determination, consistent commitment, hard work and deliberate practice which is nothing but ‘The Growth Mindset’.
THE IMPORTANCE OF CUSTOMER INTERFACE
When Lee joined Chrysler after a long stint at Ford, he was shocked to see that the company treated dealers badly. Both the Chrysler management and the dealers had ill-feeling towards each other -They took potshots, harboured grudges against each other. There was no trust between them.
The most important cog in a wheel of business is the people who face the customers as a representative of the company. For Wal-mart and Starbucks, it is the ‘Store Employees’ and the management makes sure that they are treated well and considered them as partners. Lee, having spent almost two decades interacting with dealers was aware that the dealers were the only prominently visible interface between customers and the company. They were the main part of the car business. They were the face of the brand. They sell and service all the cars factory is turning out. Through their consistent/ inconsistent behaviour, the dealers could either enhance the brand value or undermine the brand. To succeed in business, the management and the dealers would have to operate as a team.
Listen -From the beginning of his career, Lee learnt a lot about the dealers by consistently interacting with them. One of Lee’s suggestion is to spend as much time as possible to just listen to the people who form the customer interface. He carefully listened to whatever the dealers had to say even if he didn’t always like what he heard. Multiple perspectives offer a better solution to some of the hard business problems. Listening helped him to make plans and take actions to meet the needs and desires of dealers. When he became part of management later, he made sure that they were happy.
Lee considered the dealers as partners. He was very particular in providing equal treatment to everyone.
If the company could treat the dealers well, then the dealers would treat the customers well. If the customers were treated well, then they would recommend the product to others or might visit the showroom again for the next purchase. Real profits in the business lie in ‘loyal customers’.
PEOPLE BUY IDENTITY, NOT PRODUCTS
If you are planning to buy a sedan, you have multiple brands to choose. But you would prefer a particular model and brand.
Are you planning to buy a watch? Every watch would show the time, yet we prefer some brands. Why?
The Identity -Every one of us would like to be different from our everyday peers. We would like to exhibit a different personality or identity in various contexts in front of society and the publicly visible or publicly consumed product helps us to convey that symbolic meaning about us.
In the Gym, wearing a Nike brand dress shows a different personality than wearing normal unknown brand wear. Drinking Gatorade in Gym exhibits another identity. We drink Starbucks to show that we care about authentic coffee and we are ‘cool’ people. By driving Prius, we exhibit a personality of caring for the environment. By buying an expensive purse a woman would like to show how successful she is. By buying products of mass brands, instead of premium brands, some of us exhibit an identity of living a simpler and minimalistic life. We use the products to convince ourselves and convince others about our personality.
Lee Iacocca’s first full-fledged car project as General Manager for Ford was ‘Mustang’. To promote the car, he sold ‘Identity’ through advertisements. He targeted the youth segment and spoke in their language. He gave some of the luxury options as a standard accessory for the Mustang. He targeted the thought of how a customer wants to be seen by others.
Lee Iacocca and his team did another interesting thing. They would call up every customer thirty days after he’d bought a new car. They would never ask how the customer liked his new car but how his friends liked the car? Tap the emotional element of how a customer wants to be seen by others. Lee reasons that if you asked the customer how he liked the car, he might feel obliged to think of something that was wrong with it. But if you asked him how his friends liked it, he would have to tell you how great the car was. Even if his friends didn’t like his car, he wouldn’t be able to admit it. He had to justify in his own mind that he had made a smart buy.
Deep down every customer desired a little more social status and marketers exploit it.
SELLING IS TO SOLVE A CUSTOMER’S PROBLEM
Nobody is interested in our product or service. Everyone is interested in themselves. They are not interested in our product’s benefits but how it would solve their problem.
Lee says that selling is about solving customer problems. If you do not understand the customer well, you cannot sell the car or any other product. You would be wasting time and losing credibility. A customer entering a showroom may not know why he needs a car? He may not be sure what type of car he needs? He needs guidance, information to make a $10,000 purchase. Many of them won’t understand what a trans-axle is or why they need a front-wheel drive. Women customers are different from men. Their requirements are different and the information they need varies from the male customers. A salesman’s job is to think about the problem from a customer’s perspective and help them to solve it.
Listen and Observe -To identify the problem, Lee asked his dealers to love your customers, spend time with them, observe them and listen carefully. The more you listen, the more you will understand their problem. How many trips do they make in a day? short trips or long trips? Who would be using the car most? Where they would be taking the car in the evenings, mornings, weekends? Night clubs? Church? Golf club? How severe their problem is? Is it affecting their daily life?
Multiple Options -While providing solutions, Lee advises providing a couple of solutions, not just a single one. The customer should feel that they are in control of the decision and at the same time, a person cannot choose without comparing it with something.
The Benefits To Salesman -Listening to customers, identifying the problem and taking initiatives to solve those problems in unique ways is part of becoming a quality leader. So, a salesman benefits indirectly. Lee owes his success to the years he worked as a salesman. Also, the information gathered would help the company to target untapped user value propositions and create new market opportunities.
A good salesperson will not solve problems for customers but they solve problems with customers.
In the 1980s, to increase the car sales, Lee Iacocca, then CEO of Chrysler, proposed an idea of thirty days money-back guarantee if any customer was not satisfied with his newly bought Chrysler car. Everyone in the company was shocked and called the idea outrageous. They were worried that people would return the car en masse and would state any reason for not liking the car. The management was afraid of potential financial losses. But to everyone’s surprise, the total number of returns was less than two-tenths of one per cent of total Chrysler cars sold in that year.
Why did so many customers not return the car and use the opportunity?
As expected, the thirty-day money back guarantee helped the consumers to overcome the resistance to buy the car. Once they brought the car to their home, their perspectives shifted -As they became the owner of the car, they unknowingly began to treat it as part of their family. They began to form pleasant memories while using the car. Consequently, the customer began to view returning the car as a loss.
“Losing something makes a person feel more depressed and painful than the happiness which he would get from gaining the same thing”.
Psychologists call this as ‘The endowment effect’ through ownership -A cognitive bias that says that once we own something (or have a feeling of ownership) we irrationally begin to value the product more than its objective value.
Many businesses make use of this endowment effect.
Further reading on the endowment effect
Endowment Effect in Business and Marketing
In the 1980s, to increase the car sales, Lee Iacocca, then CEO of Chrysler proposed an idea of thirty days money-back…
Once, Lee was giving a talk in one of the universities. A student asked Lee “Who motivates your employees when you are not around?”.
Be a Listener -A leader or a manager’s primary job is to motivate people. Communication is the key to motivate people. For clearer communication, the first step is to listen, listen and listen to their concerns, suggestions, ideas.
Lee says that a good manager needs to listen more than talking. He further adds “The difference between a good company and a mediocre company is -In good company, the managers listened to the employee’s problems and worked with them to solve the same”.
Honest and Sincere Appreciation - Lee writes “It is true that we cannot accept every single suggestion or idea but if you don’t get back to the guy and pat him on the back, appreciate the idea, he will never give you another one”.
Lee motivated managers to praise the efforts of people who gave ideas and advised them to provide an honest and sincere appreciation of ideas. He emboldened people to criticise every idea.
Lee stimulated his managers to reward people whenever they meet the objectives through promotion, money and importantly, kind words. More than monetary rewards, people would be motivated to work more if their stories are shared throughout the company and they were appreciated by peers. This would allow them to have a sense of ownership in their work.
Lee also recommends that when you appreciate or praise your employee, give it in writing so that they could see it very often. If you want to scold him, do it in words over a face-to-face meeting or over the phone where it could vanish in thin air.
Be Transparent, Share Information -Lee made a genuine effort to involve the employees in the business decisions, planning, and execution so that they all can be part of it. He was fine with sharing every essential information that would directly affect the future of the employee. It built trust and loyalty.
Strike While The Iron Is Hot but Keep Calm in the Storm -Lee advocates -When you reward an employee for his achievements, he would be in the best frame of mind and that would be a wonderful time to increase the responsibilities of an employee. It is the best time and would be easy to motivate him to do even more.
When an employee is down or could not meet an objective or upset about his failure, do not be hard on him. If you criticise him, you not only run the risk of hurting him badly, you are taking away his motivation to improve and try again. These are some of the gems of advice from Lee Iacocca.
Being a designer, I have spent a lot of time collecting user and market data for every project. The thought of not having collected enough information would always linger in my mind and would urge me to spend additional time to collect little more information or meet a couple of extra customers. While I lose myself over the research process, I failed to realise that the project is getting delayed and my inaction is becoming one of the reasons for business indecision at the client side.
Lee answers this situation, “Qualities that make a good manager is ‘Decisiveness’ -some managers got bogged down in their decision-making and the trouble with people like you is that you will not take action until you have got all the facts. Imagine, you have got already 85% of the data, but the truth is… The remaining data will take another six months and by the time you get the data and then moving to design and launch the product, the facts will be out of date because the market has moved on you. I agree you need facts but got to have a leap of faith. Research might be helpful but if delayed, it would wreak havoc on production plans and every other business timeline. You need to take a certain amount of risk.”
Andrew S Grove, former chairman, Intel took more than three years to decide on transitioning the company from memory chips to microprocessors. He felt whatever the information he had collected were not sufficient to push the company into a new direction. The indecision dragged on. But then one day, instead of waiting and wasting time, Andy took a leap of faith and decided to drop the ‘memory chips’ business and move to manufacture ‘microprocessors’. The rest is history.
When Lee became vice president of Ford, the company was working on new compact car development called ‘Cardinal’. Lee strongly felt that the car would not sell in the U.S market and was shocked to know that the company had already spent a lot of money. Though whatever the information the team collected was not sufficient to suggest dropping the project, Lee took a leap of faith, cancelled the ‘Cardinal’ project and moved the resources to build a new car, which became ‘The Mustang’ and it went on to become an iconic car.
The Fear Culture -Another factor for a manager’s or a leader’s indecision is — not able to collect sufficient information from his associates or employees. The main reason behind this is ‘Fearful Internal Culture’.
Nobody would share an idea or suggestion if the person would be punished for the idea’s consequences. A unit head might worry that the new idea would take resources away from the existing project but would be afraid of sharing his views. The marketing head may not feel confident about the proposed sales volume but would keep within himself. If people are not open about their suggestions it would extend the indecision or might lead to false decisions.
It is important to create an environment that will not cultivate fear among employees — an environment where people will not hesitate to talk freely and share their ideas -An environment where ideas alone will be criticised and not people -An environment where they can even question CEO’s ideas, plans and action -An environment where people are allowed to make mistakes as part of experimentation and will not be punished. If you are not afraid of making a mistake then you will not be afraid of admitting it.
Lee implies, “You might be good at your work. You might be capable of doing the work of two people but still, it’s only two people. But if you learn to delegate and if you could motivate another person, who in turn able to motivate another person with your guidance, you are equal to the work of thousands of people. Delegation is about inspiring the next guy below you to inspire more people. If you do not delegate, business growth will be affected”. -More productive work in less time.
Lee further adds that one of the most difficult transitions for leaders to make is the shift from doing to delegating. It is a major psychological shift to focus less on yourself and more on the success of other people in the vital areas of the company.
If you do not delegate, you end up burning out yourself, resulting in substandard output. By delegating, you improve your employee’s engagement, involvement, skills and leadership potential. You empower them. You build trust. You get more support for business growth.
In order to delegate, you need to understand your employee’s strengths, weaknesses, likes, dislikes, passion etc… which provides an opportunity to learn about them. Delegation is people management.
People fail to advance in their careers because they don’t learn to manage their colleagues.
MAKING BETTER DECISIONS
When Lee became Ford’s president, he saw that the company had to submit a quarterly review system to all stakeholders. He then had a thought why the same rule should not be applied to the executives, managers and the employees. Till that time, Ford had an annual review process.
Set a Shorter Timeline -Lee felt that the annual review process was completely not in sync with the way executives made decisions. Due to the dynamic business environment, business decisions had to happen more frequently and cannot wait until the annual review meeting in order to respond to competitive threats and opportunities. Some of those decisions happened without rigorous analysis and debate, resulting in critical errors. So, Lee changed the system to a quarterly review system.
Lee also advised his employees to keep the objectives as minimum as possible so that everyone can focus on what matters most.
Lee insisted on writing down the plan as it would force the employee to get down to the specifics of the plan.
Objectives and Key Results -Lee encouraged his employees to prepare a ninety-day plan in consultation with their supervisors and create their own set of quarterly objectives & key results which would match the company’s goals, core values and objectives. Every three months, the goals will be measured and reviewed. -What are your objectives for the next ninety days? How do you plan to achieve them? How do you measure them?
Bottom-Up or Top-Down -Lee promoted the ‘bottom-up’ approach. Each employee was his own boss, sets his own goals, share it with the manager and become accountable to themselves and not to their bosses. Setting his own goal helped an employee to be self-motivated and be highly productive. This process also helped a lot of new ideas to reach top management. The ‘top-down’ approach failed to motivate the employees.
Lee further adds -The ‘bottom-up’ approach forced a dialogue between a manager and his employee as they have to accomplish the goals together. It necessitated them to spend time and get to know each other better. By working together, their inter-relationship improved drastically. A family culture began to blossom. The manager’s role began to shift. He became less of an authority figure and more of an advisor and a senior colleague for his employee. Instead of focusing on how to solve a conflict, they began to focus on what conflict needs to be solved. Instead of ‘Review and approve’ approach, the managers began to adopt ‘Debate and Decide’ approach.
Have a ‘Growth Mindset. Listen to your customers and employees as much as possible. Observe them and understand their needs and desires. Once you understand your customers, your market boundaries would extend and new opportunities would arise. Once you understand your employees, you would soon establish market leadership.
References: IACOCCA -An Autobiography by Lee Iacocca, Stop Making Plans; Start Making Decisions by Michael C. Mankins and Richard Steele, ‘Only The Paranoid Survive’ by Andrew S. Grove, Measure What Matters by John Doerr, Mindset by Carol Dweck, Nudge by Richard Thaler, Predictably Irrational by Dan Ariely.
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