smac great by choice
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SMaC Great By Choice. Rafael Garcia Allyson Hatz Bonnie Lee Alexa McDaniel Molly Moseley. 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. - PowerPoint PPT PresentationTRANSCRIPT
RAFAEL GARCIA ALLYSON HATZ
BONNIE LEEALEXA MCDANIELMOLLY MOSELEY
SMaCGreat 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: Does 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 segment2. Utilize only 737 aircraft3. Continued high aircraft utilization and
quick turns4. The passenger is our #1 product5. Continued low fares and high frequency
of service6. Stay out of food services7. No interlining 8. Retain Texas as our #1 priority9. Keep the ‘family and people feeling’ in our
service10. Keep it simple
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Putnam stayed away from issuing vacuous statements
Although he specified: Two-hour segments 737s No food service No seat selectionPutnam laid out a CLEAR, SIMPLE, and CONCRETE
framework for decisions and action.
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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 With 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 marketsSouthwest• 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 JobsApple had successful rebirth because it
returned with fanatic discipline to original recipe
John Wooden – UCLA Basketball
10 NCAA championship teams in 12 yearsExemplified power of consistencyRan 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 part10Xers ask why their recipe isn’t working
anymore before assuming obsolete methodsSignature of mediocrity = chronic
inconsistency10Xers 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 1st, 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 environmentBalance 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