Tag Archives: business

Essay

Value and Choice – Eating my words (a little)

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Last week, I was so bold as to call out the entire airline industry. Not enough innovation, too much nickle and diming, poor customer service.  You have heard it all before, but my mistake was to assume (you know how that ends) that the airline industry was acting as a unified block. In most cases, they are.  If American raises prices, Continental and United follow along the next day.  If United adds a new “cost option”, the rest act like sheep or more likely, lemmings to offer the new selection.

But then I read this story about three guys who came up with a new way to skip a lot of the nonsense that is associated with flying.  This is an entrepreneurial story that makes my heart sing, because these three non-aviation experts were able to think outside the box and come up with an entirely new aviation model in SeaPort Airlines.

The idea of getting around the FAA’s rules about security screenings by using planes that are under the legally mandated size is genius.  They have started small, flying between two heavily trafficked cities, Portland and Seattle in business turboprops outfitted for commuter use.  They fly into in-city airports, saving commute times on both ends. There are 10 scheduled round trip flights each weekday, so customers have plenty of options. Recently they have added some additional destinations both in the Northwest and in MidSouth as part of the FAA’s Essential Air Service Program.

From this we can learn a couple of key lessons.  The first is that the entrepreneurial spirit does not limit itself to technology companies.  Second, even the most moribund industry with the tightest controls can be attacked by a nimble competitor who is focused on serving a niche.  Don’t lo0k at the Facebooks and YouTubes of the world as the only example of exemplary entrepreneurship — that is the lottery, a one in several million chance. Rather, find a place where people are unhappy with their options and give them something better.  Be the best in your niche and you will reap the rewards.

Essay

The Whole Vision Thing

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Before you go any further in reading this, watch this video.

Have you watched it?  OK, then let’s proceed.

I have been reading Every Patient Tells a Story by Lisa Sanders, a technical advisor to the television show House. Lisa is an internist at Yale and an expert in the diagnosis process. The book provides an excellent description of how our medical system is predisposed to have difficulties in finding the causes to the unusual diseases. She talks about doctors focusing on the common solutions to a complicated combination of symptoms, not understanding the problem in depth before providing a diagnosis and relying too much on technology to make decisions that should have a human component.

This led me to thinking about how in business we also make these same kinds of errors.  Normally, these errors don’t have a human life or death hanging in the balance, but the viability of the business sure might.  The video that I pointed to at the beginning of this post shows that sometimes we don’t have the right attention to detail.

Extrapolate that finding into your business life and you will find all kinds of ways to increase your vigilance and gather more information to make informed decisions.  Now, I am not advocating analysis paralysis here.  Just as in the medical field, if you wait until you have every piece of evidence, the patient could likely be dead.  But you should be thinking about how to gather the right information and how to be aware of changes from your expectations.  In general, if everything is at status quo, you are missing something.  Perhaps it is the marketplace asking for something new.  Perhaps it is your competition who is planning a different strategy.  Perhaps it is the legal or regulatory environment. Perhaps it is just your own employees who are tired of the same old thing and are letting up on quality.  Any of these can have a huge impact on your business.  Your job is to watch out for the color changes, while the cards are being dealt.

Essay

Value and Choice

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When I think of all of the businesses that I might want to be involved with, the airline industry is down near the bottom of my list.  Massive government intervention, public ownership, reliance on a wildly fluctuating fuel cost, overcrowded marketplace, customer service nightmares, unionized unhappy employees throughout the organization.  Wow! But it still amazes me that the executives in charge of the majors take their eye off the ball so often.

Doug Parker, president of US Airways, crowed that the carrier was making $400 million per year on ancillary fees.  Never mind that the industry continues to lose money.  Never mind that US Airways lost $100 million in a recent quarter and saw its revenue drop over 13%. United Airlines makes $14 per passenger in ancillary charges, but lost $382 million in Q1 2009.

Never mind that the average consumer is tired of being nickled and dimed – window seat, head set, cut in front of the line, extra 5 inches of legroom, snack, soda, more miles, checked bag, overweight bag, travel on a busy day, talk to a ticket agent, redeem a frequent flyer award – all of these cost extra on at least one major airline (excepting Southwest). The whole travel experience is now so convoluted that some people have decided that the hassle of air travel is just not worth it.  I have had 4 opportunities this year to travel that in years past I would have chosen to fly. Not this year… my rule has become only fly if necessary.

From a customer service perspective it is a disaster.  Every time you need to talk to the company, they want your credit card.  Their eagle eyed bean counters (and remember that I usually love bean counters) are crowing about the new revenue, but aren’t looking at how many people have stopped flying.  That seems to be to be a bigger issue.

I mentioned earlier that Southwest has not moved to a la carte pricing.  They haven’t had a losing quarter this year.  Maybe that should tell the bean counters something.

Even in areas outside of the airlines, we see the same “logic”.  I tried to buy college football tickets online last week.  The website gave me two options for delivery. Print them out at home for $6 or pick them up at Will Call for $3.  In neither case, did the college incur any significant additional cost, but there was that ancillary charge.  Guess what, I didn’t purchase the tickets over the internet.  Oh well.

For those of you out there looking to break down your pricing to provide a more a la carte menu solution, I would recommend really investigating whether you will achieve the goals that you hoped by doing so.  You may be much better off by playing the Southwest to the majors.

Essay

Go for the close

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Recently, as part of some non-profit work I have been doing, I have been to two banks.  The purpose was to redeem CD’s that have matured.  These are not small accounts.  One was for low 5 digits and the other low 6 digits. Small community bank and mega-bank.  From the outside, not a whole lot of similarity here.

What was amazing to me was that no one at either bank asked if they could do anything to keep our account? Can I tell you about our new CD rates?  I would be happy to match the rate for any local bank. Nothing.  Just typed up the cashier’s check and handed it to us. I know that the banking business is in such a difficult place these days that I was floored that no one tried to keep an existing customer from leaving.

But hey, what do I know, I am not making the huge bucks running a bank.  I am sure that they know way better than me.

So, if you don’t run a bank, take my advice.  Ask people who are leaving “Is there anything that I can do to keep you as a customer?”.  Fix the problem or make a better offer.  It has to be cheaper than signing up a new customer and you have the possibility of someone like me writing a very different blog post about you.

Essay

Idea Risk

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Sorry for the time between posts, but summer intruded and must take precedence.  I will try to get back on a better schedule, but can make no promises since I still have another month or so of summer.  But on to more meaty topics…

So many entrepreneurs (me included sometimes) have said that they would love to start up a new venture if only they had a great idea.  But is that really the case?

While I was researching a new venture idea, I came upon the thought that there were really two kinds of risk in the entrepreneurial world.  The first is Idea Risk.  That is, is the idea good enough to base a viable business upon?  The second is Management Risk, or can the team that the entrepreneur has assembled pull it off?  Of these, Management Risk seemed to be the most likely to be able to be ameliorated through judicious use of mentors, incubators and trusted service providers.  The Idea Risk seemed to be a binary decision – either it was a good idea or not.  But the more that I have thought about it, the more that I find that Idea Risk has more facets.

I have a friend who, over the past year, has met with various people and has generated at least 7 or 8 actionable ideas.  Not just “Oh you should start up a new-age car dealership” kind of wacky ideas.  But full blown creative ideas, ideally suited to the person that he was talking with, with some sense of market potential, revenue sources… the real deal. In only one of those cases, has the person taken the idea and run with it.  And she didn’t do it until she was goaded into it and provided some incentives that reduced her risk.

And therein lies the real rub.  It is not the lack of ideas.  There are tons of ideas out there. If you are looking for a great idea, check out this list of 999. It may not even be the quality of the idea, although the new age car dealership doesn’t rock my boat. The real reason that people don’t start ventures is the risk factor.  They are worried that they will not make enough money.  They are worried that their mother-in-law will not like them.  They are worried that they will lose the house.  They are worried that their friends will think them crazy for leaving a perfectly good job as a manager at IBM.

My advice to you is that if you want to be an entrepreneur, you have to get over the fear of what everyone else has to say.  If you find an idea that you are passionate about, think Bill Gates “A computer on every desktop running Windows” or Anita Roddick‘s “To dedicate our business to the pursuit of social and environmental change.” at the Body Shop, go for it with all your heart and all your soul.

I truly believe that the key word in Idea Risk is Risk, not Idea.

Essay

The Impact of a Recommendation

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I had the opportunity recently to fill out an unconventional bio for a company that wanted to get some info on me.  Besides the usual, where did you work and what degrees you have earned, this bio asked questions like “What did you learn from your mother?” and “When you were a child, what do you most remember about playing?”.  Interesting questions, but the one that stumped me for a bit was “What do people say about you?”.

Now I have heard a lot of what people say about me (and not heard probably lots more).  But it is hard to put that down on a bio, without either sounding incredibly pompous or wishy washy.  I could ask people to recommend me on LinkedIn and get some of that feedback, but in general, the recommendations on LinkedIn are very white bread and don’t really give the flavor that I was trying to provide. I could give snippets of client thank you letters or performance reviews, but that too was not really what I was trying to provide as part of this bio.

And then I remembered the goofy exercise that we did at a previous employer.  I was working as a director of a professional services group.  I was one of 7 directors and it was the best working group that I had ever been on.  Not that we always agreed, but there was a dynamic quality to our interactions. For one of our offsite meetings, our Recruiting Director had the wild idea of having each of us write a short paragraph extolling the virtues of each of the other members, as a sort of recommendation. We all thought — there she goes again, new agey, touchy feely stuff, but we did it. She then collated them and provided each of us with a full version of our recommendations, without attribution.  It was a tremendous insight to see how others saw us. In some cases it was obvious who wrote the recommendation, but in others, I still have no idea.  What I was left with, though, was a composite of how I have impacted others.  I have kept that sheet in a special place.

And it was to that place that I went when I had to create my bio.

Takeaways:

  • Sometimes the most goofy sounding exercises can give you true value over the same old stuff.
  • Take an opportunity to write a short note to people (handwritten, if possible) to tell them about how them have impacted your life.  You have no idea how important this could be to someone’s day, life, ego, career.
  • If you are a manager of a team and want to make the team more cohesive, try this exercise.  I can guarantee that everyone will get something out of it.  Don’t forget to include yourself in this.  You can nominate someone else to receive the recommendations for you, so that they remain anonymous.
Essay, food

Perfection

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No matter what you purchase or sell, no matter how hard you work, you can almost never reach perfection.  Perfection is the holy grail of your business. Until recently I don’t believe that I had ever experienced perfection in a product or service.

I am proud to say that I witnessed and dare I say, participated in perfection in a small business.  The venue was Charlie Trotter’s restaurant in Chicago.  As part of a silent auction benefiting SuperSibs, I was the big winner of a Chef for a Day experience.  What that meant was that for 6 hours, I would be working (alas at no salary) as a sous chef for the restaurant.  After my Chef for a Day experience was completed, I had the opportunity to enjoy a meal with my wife and several friends at the kitchen table, a table for four elegantly set right in the working kitchen.

After arriving at 2pm and getting fitted for a chef’s jacket, apron and chef’s hat, I was set to work cleaning and dehulling fava beans.  Some of these fava beans were to be used for a decorative puree for a plate and others were to be used whole as part of the garnish for several plates for dinner.  Other jobs awaiting me were breaking down cilantro, lemons, chives and other herbs. The other chefs working all were friendly and helpful, directing me to the rudiments of the tasks at hand.

The kitchen was small and very busy, yet totally under control.  No screaming; everybody had a job to do and managed it well.  The kitchen had several master chefs, but also a large number of young chefs working their own stations. Charlie believes in supporting up and coming students, so there were several interns from Kendall College and Culinary Institute of America working their hearts out.  The experienced chefs were always around to lend a helping hand, whether it was shucking oysters or teaching an intern how to use a cherry pitter for the first time.

At about 4:30, they had a family dinner.  Food was plated and the front of house staff (waiters, hosts and maitre de) met in the studio kitchen for a meal.  While the food was good, it wasn’t that different from what we might have in my house on a typical evening.  Salad, a beef stew over rice, vegetables sauteed in a tomato sauce and (different from my house), homemade ice cream sundaes.  The front of house was very friendly, asking about what I did for a living and why I was interested in this opportunity.  They were also open to my many questions about their work background, how this restaurant is different from others and what they liked best about working there.  These kids, most of them were in their early 20’s, worked at least 12 hour shifts 5 and 6 days a week.  What impressed me most was the level of confidence they had in their abilities to deliver first class service to all their guests.  I deal with young people in their 20’s all the time and these were a special crew.

After family dinner, back to the kitchen for more prep work.  The kitchen was buzzing as the first service was about to start.  Charlie does work with the Chicago Public Schools and on that night was hosting a group of high school kids from CPS to a 10 course dinner. They were able to take a tour of the kitchen and, I’m sure, wonder what the balding guy was doing in the kitchen. The purpose of Charlie’s work is to show the kids what can be accomplished in the hospitality industry.  Many of the staff talked with the students and explained how things worked and took questions.

All of the ingredients were of the highest quality. There were special ingredients that were used just in Charlie Trotter’s kitchen. A special olive oil from a certain farm in Australia or the chocolate that comes from one estate in Africa and is used in 6 different ways.  But more than that was the confidence of the chefs in working with those ingredients.  There weren’t many recipes floating around, but there were a lot of tasting spoons.  This is how expert artists cook.  They have an idea and build it with the use of ingredients rather than paints or mosaic tiles.  But the creativity did not just extend to the building of the dishes.  It went to the unusual pairings of flavors, the plating of the dishes and even the physical dishes themselves (more about that later).

After my work was complete, I was able to change into dress clothes and join our group back in the kitchen for our dinner.  Alex, our waiter for the evening, was that perfect combination of total knowledge of the food and kitchen and openness to work with the guests to make them feel totally comfortable asking questions and learning.  Alex told us at the start that we would not get a menu, but would be served whatever the chefs felt was best on that night. Would we like to choose a wine?  Not so simple; Charlie’s wine cellars hold 20,000 bottles of wine. Alex was right there to give guidance on how the menu might proceed, to make the wine selection easier.

But, Al, you have written 900 words and haven’t even talked about the food that you were served.  How could that be?  Well, over the 4 hours (yes, 4 hours) that we enjoyed our dinner, we were served 20 separate courses. Each was served in the French style with small portions (thank god for small favors), yet each dish was a work of art. Each dish was a complicated and creative mix of flavors that engaged your palate without a single note that became overwhelming.  There were 3 amuse (appetizers), 5 fish dishes, 2 vegetable focused dishes, 2 poultry, 2 meat, 1 cheese, 5 desserts.  Each dish was cooked without butter; so much for the French style.  But there were always surprises.  Freshwater eel with banana.  Duck breast with licorice jelly. Onion sorbet. Matsuzaka beef (Kobe style) with a plum vinegar broth that cut the richness of the beef. Frozen key lime meringue with cilantro and green peppercorn.  Unbelievable flavors and gorgeous presentation.  Each dish was presented in a unique serving plate.  We only had a duplicate plate once during the dinner.  Even the plates were chosen for the applicability to the specific course we were being served.  Some were small, some were large, some had wells for broths, some were shaped like boats, some were Asian in design.  Each was perfect for the course that presented.

And yet, what comes back is that we were able to have an elegant dinner sitting in the middle of a kitchen that was serving the second round of diners in the rest of the restaurant. Periodically, some guests from the restaurant were able to take a quick tour of the kitchen led by the same front of house staff that I had met at the family dinner. The activity around us did not abate, but there was no interruption to our dinner.

After dinner, Alex took us on a grand tour of the restaurant.  We were able to see the types of equipment used in the kitchen and how the ingredients were stored. We saw the Studio Kitchen, where Charlie Trotter films his TV show.  We saw the herb garden at the rear of the property.  We were able to tour some of the wine cellars.

All in all it was an unbelievable day (and night).  I had anticipated having fun seeing how a world class restaurant operates behind the scenes. I had anticipated a great dinner.  What I got was so much more.  It was the complete mix of people, processes, product, environment and training that made for a perfect experience.

My question to you is what would you have to do to get people to write about your business this way?  How can you make your business perfect?

Essay

I yam what I yam!

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There are so many great one line catchphrases that have come to us from cartoons.  But one of my favorites is from Popeye — I yam what I yam, and that’s all that I yam.  One of the things that I have learned over the years is that you have to know what you are, what your strengths are and look to enhance them, rather than look at trying to solve every weakness.

In business too, we seem this same dynamic.  Too many successful companies are looking for the newest thing when they have a good thing right in their own companies.

In Chicago, WGN Radio is a powerhouse.  It has a 50,000 watt transmitter that allows its signal to be heard in 37 states.  It is always in the top 2 in terms of market revenue.  If you asked anyone in the city what the demographic of the radio station’s listener was, they would know: it was an older, white, mixed politically, educationally advanced audience.  The station was a throwback to old times.  The announcers still read commercials live.  It had personalities who were engaging and a devoted audience for those personalities. The station had the ability to do indepth shows on topics that others could not. In short, it held its own place as a unique place on the radio dial.  But then Sam Zell bought the Tribune Company and with it, WGN Radio. In short order, their morning drive time host retired.  This was not a surprise — the host had planned his retirement for over 6 months.  Management named one of their afternoon hosts as the new morning host.  After 6 months, they moved him into a spot that they created by firing the hosts of a unique morning show directed at women that had been on the air for 20 years and had a hugely loyal following.  In the meantime, they fired the hosts of unique shows that focused on money, pets and gardening and replaced them with what the rest of the world sees in talk radio – bigoted, loudmouthed talk radio guys.  I am convinced that although WGN had a good thing going with their market, the moves that they made will make them a middle of the road player. By going after the coveted demographic segment (men 25-45), they will be indistinguishable from all of the other stations out there. The latest numbers are not in, but my prediction is that they will be trending in the wrong direction.

Consumers are looking for what you can bring to the table. They like knowing who you are and what you can do for them. Bring them something different, but don’t bring something different to an audience that is not yours.  Don’t be like everyone else.  Know what you are and bring it – better, faster, cheaper – but bring it.

Essay

They just don’t get it

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How many times have you made the statement to yourself (or to your significant other) “Man, they just don’t get it.”? Maybe it’s because I am getting older, but it seems like those “Get off my lawn!”  moments are happening more and more frequently to me.  Let me give you a couple of examples from this week.

I read an article from Slate today about the plight of airline pilots, written from the point of view of a airline pilot.  In this rant, he blames the consumer for looking for $99 fares causing airline executives to: look for less experienced (cheaper) pilots, for diverting flights from big planes to commuter jets, for the decrease in pilot pay and even for the company not providing the pilots with free food.

We all know that the airline business is a tough one to be in.  It has been estimated that the US airline industry in all of its years of operation has not posted a cumulative profit.  Be that as it may, the pilots for a long time ruled the roost.  Their unions have provided the most senior of these pilots with salaries well into the 6 digits.  The author of the article talks about new pilots making “welfare wages”.  In fact, first year pilots make in the low $30K range across many of the major carriers.  Not big bucks, but it is based on a half time flying schedule. They are limited by Federal Law (FAR 121.481) to a maximum of 1000 hours flying time per year, which is considered half time in my book. Yes, they have to get to the job, but so do a lot of commuters. I don’t know about you, but $32K is not welfare wages. In fact, it is right at the median for wages across the whole US. The picture changes as the pilot gets more experience.  With the larger carriers, within 3 years, the salary will double or almost triple.  With the regional airlines, the initial salaries are lower and the rate of increase is also lower.  The pilots’ union for these carriers have had less success in negotiating the higher salaries than their brethren at the majors.

The author claims that safety is compromised by hiring younger, less experienced pilots at the regional airlines.  These pilots must meet the same qualifications, mandated by the FAA, as at the bigger carriers. His conclusion that the safety of passengers is threatened has not been verified by the actual events.  Flying in a commercial jet (of any size) is safer than most other modes of transportation.

But the most laughable point was that despite flying a full day, the pilots were not given free food.  Now, other than Google (and a few other non-traditional companies), where else do you, as an employee, expect to be fed while on the job?  Heck, even at Burger King, employees are not given free food, only discounted meals. Get off my lawn!

Well, let’s see… I haven’t talked about health care in about 12 hours, so let’s hit that one as well…

The AMA, Big Insurance and Big Pharma are against any major reformation of health care in our country.  And why not.  They are all making a ton of money at our expense.  I read an article by Abraham Verghese in the Wall Street Journal about the health care debacle from a doctor’s perspective.  In his article, he decries preventive medicine and electronic medical records (EMR) as not helping to solve the problems of our age.  In my opinion, both preventive medicine and EMR provide critical advantages to our populace.  Preventive medicine will allow doctors to get more information on the tracking of conditions.  This will provide the benefit to aggressively treat a risk factor and hopefully shortcut the critical issues that cost the most amount of money.  If the doctor was tracking the coronary heart disease over a period of time, the doctor and the patient together could plan for a treatment that was gradual and effective, rather than waiting for the heart attack and then starting treatment.  From both the cost standpoint and the quality of life standpoint, the patient would be in a better position.  EMR, if implemented correctly, will allow doctors to have the wisdom of the crowds to gather information on conditions and how others have successfully treated them, in much closer to real time.  Today we wait for articles to appear in medical journals to get our information.  We can and must do a better job here. Dr. Varghese, you just don’t get it.  The world has changed and the medical community needs to change as well.

So, the former Labor Secretary, Robert Reich writes regarding the health care crisis that the only way that we will get out of this mess is to look to cost containment, or even cost reduction.  Those doctors, hospitals, insurance companies, drug companies and their friends will need to reduce the costs of providing their products and services.  The best way to do that is through the free market system and a mandate from the government to implement changes in our medical systems.  President Obama needs to have a strong hand and force the issue.

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Big Picture, Business and Entrepreneurship

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Big Picture: And small differences.  The Washington Post op-ed today talks about statistical evidence that indicates that we should believe that the election numbers in Iran were fudged. Interesting conclusions.

Business: One of the internet’s success stories has to be Amazon.com.  What a lot of people don’t realize is that there is a lot going on at Amazon behind the scenes to ensure that you as a consumer get the right information to buy the right products.  And how they make money was an eye opener to me.  This is one case where the answer to how can you sell products at a loss can truly be Volume!

Entrepreneurship: On the other side of the coin, Clear has stopped doing business.  Joel writes about the lack of a change in business model that helped cause the failure of this company.