Following rules and instructions to cook food from a cookbook might ensure your food will not taste bad, but does it make you a good chef?
I’ve been lucky to have gained extensive experience in management throughout my professional career ever since my graduation in 1994, looking back at those 21 years, I realize that I’ve been managing teams for almost 17 years and throughout these 17 years, I have been noticing a fixed pattern – and this is the topic of this article.
Is profit bad?
Why do most companies, specially larger corporations eventually fall into the mistake of morphing into a dinosaur, even if they were once successful ventures? the answer lies in the ultimate goal… profit
No one can deny that profit is important, and without making a good profit no company can sustain it’s business and grow, but the mistake everyone makes is looking at profit as a goal rather than a result. And when you focus only on results you don’t make any progress, but when you focus on progress you always get results.
A research done in 2009 based on survey data gathered from 520 business organizations in 17 countries (which was conducted with Mary Sully de Luque, of Thunderbird School of Global Management; David A. Waldman, of Arizona State University West; and Robert J. House, of the University of Pennsylvania) – This research stated that if a company management’s primary focus is on profit maximization, employees develop negative feelings toward the organization. They tend to perceive the company as autocratic and focused on the short term, and they report being somewhat less willing to sacrifice for the company. Corporate performance is poorer as a result.
But when the company makes it a priority to balance the concerns of customers and employees, employees perceive the company management as visionary and participatory. They report being more willing to exert extra effort, and corporate results improve.
JetBlue… from innovator to imitator.
Let’s look at a different perspective through the airline industry, airlines sometimes find they are suffering from high costs and try to maximize their profit margin by cutting on in-flight entertainment, reducing quality of food served (or just removing it all together), maybe reducing aisle width and spaces between seats to add a few extra, cut back on salaries and employee count… but then what happens?
The boutique airline JetBlue started by offering low-cost travel, but sought to distinguish itself by its amenities, JetBlue’s first major advertising campaign incorporated phrases like “Unbelievable” and “We like you, too”. Full-page newspaper advertisements boasted low-fares, new aircraft, leather seats, spacious legroom and a customer-service-oriented staff committed to “bringing humanity back to air travel.” With a goal of raising the bar for in-flight experience, JetBlue became the first airline to offer all passengers personalized in-flight entertainment, flat-screen monitors installed in every seatback allow customers live access to over 20 DIRECTV channels at no additional cost.
As JetBlue gained market share, they found a unique positioning where they competed with other low-cost carriers as well as major carriers. Amenities such as their live in-flight television, free and unlimited snack offerings, comfortable legroom, even business-class seats in addition to unique promotions fostered an image of impeccable customer service that rivaled the major airlines while competitive low fares made them a threat to low-cost no-frills carriers as well. In 2013 JetBlue announced that TrueBlue (their frequent flyer program) points will never expire for any reason as oppsed to other similar programs where points expire after a specified period.
There are hundreds of low-fare airlines around the world, and 7 in America competing with JetBlue, but what made them the most successful was their focus on being different rather than making more profit.
The old JetBlue could soon be a thing of the past, the carrier announced that it would add checked bag fees in 2016 and it will also pack passengers more tightly into its planes by increasing the number of seats on its Airbus A320s to 165 seats from 150 meaning less legroom. JetBlue had in the past avoided these moves, in an effort to preserve a brand that once redefined budget flying but that in recent years has disappointed investors looking at the success of “no frills” operations like that of Spirit Airlines.
Ultimately, the arrival of checked-bag fees, along with charging for Wi-Fi and adding seats to aircraft, is expected to increase JetBlue’s earnings per share by over 50 cents, but the short term positive financial news doesn’t mean JetBlue is on the right track. The carrier’s challenge is significant. The company is caught up in a familiar dynamic for the airline industry. It innovated when it arrived on the scene, tapping an appetite for a low-cost boutique flying experience — something akin to boutique hotels, which could be simultaneously less expensive and more stylish than established luxury lodging options. But the innovation tends to run its course, and then the upstart finds itself playing the same game as everyone else: competing on price. And because the carrier has put customers first for more than a decade, the trick will be figuring out how much like the rest of airline industry JetBlue can become without ceasing to be JetBlue.
Remember Apple’s Macintosh 1984 Ad? how about the 1985 Macintosh Office (Lemmings) Ad? what messages do these Ads have in common? the short answer is Think Different… Be Different… But being different proves harder than you might think.
The majority of people prefer staying in their comfort zone and advocate the phrase “We’ve always done it this way.”, “this is how the client wants it” and “that’s just the way we do things.” But basically each of these is literally someone telling you they are either too dumb to think of ways to make things better, too lazy, or just too afraid to risk trying something different.
John Sculley is an American businessman, entrepreneur and investor in high-tech startups. he was vice-president (1970–1977) and president of Pepsi-Cola (1977–1983), until he became CEO of Apple on April 8, 1983, a position he held for 10 years until 1993. Under Sculley’s management, who focused on current product lines and profitability, sales at Apple increased from $800 million to $8 billion. But when Sculley was ultimately was forced to step down as Apple CEO in May 1993 Apple had $2 billion in cash and $200 million in debt.
Jobs on the other hand focused on future innovation, and people realized later that Sculley’s initial success was due to the fact that he joined the company just when Jobs’ visions and creations were becoming highly lucrative.
When Steve Jobs returned to the company in July 1997, Apple was 90 days from going bankrupt and they needed a good products to turn things around. They started by reinventing the ‘boring beige box” and introducing the iMac in 1998. Apple also returned to the software space that year with an acquisition of Macromedia’s Final Cut product. And for the first time since 1993, Apple turned a profit of $309 million and in 1999, Apple’s sales grew 3.2%, and profits doubled to $601MM.
In 2001, Jobs announced their next big hit, the iPod. The portable music player went from concept to market in about 8 months. The iPod undoubtedly changed the music industry, but iTunes, which was also introduced this year, was Apple’s true genius.
Through selling dreams, not products… Jobs kept the company new and fresh by coming up with out-of-the-box concepts. He did this in all aspects of Apple, in new products, and even in hiring decisions, drawing inspiration from everywhere. Under the reign of Steve Jobs, Apple proved they weren’t afraid to take risks and fail. Jobs has said, “We’re gambling on our vision, and we’d rather do that than make ‘me-too’ products.”
In January 2006, and at roughly $80 per share, Apple’s stocks had increased ten fold in ten years, up from $6 in 1997. The iPhone and Apple TV were announced at the 2007 Macworld Expo, and by May 2007, Apple’s shares broke $100. In 2010, the company’s shares reached $300, the company has never been stronger and there seems to be no limits to what the company can achieve.
I was only by thinking differently and finding new ways to produce products, that Apple became a technology titan.
“Money can be a great motivator, but if you’re just in it for the cash, good luck building a billion-dollar business”, says John Sculley, looking back at how things turned out. “That they both – referring to Steve Jobs and Bill Gates – went on to build billion-dollar businesses was simply a byproduct of their intense passion. Never in any of those conversations did they ever talk about making money.”
I’ll end part 1 of this article with Sculley’s biggest advice to young entrepreneurs is “Business plans are almost obsolete these days, there’s nothing more powerful than customers that are happy.” but why are they obsolete? simply because business plans focus only on revenue and profit… transforming it into a goal rather than the result of a successful enterprise.