Friday, November 21, 2014

JetBlue: Stuck in the Middle?

My former student, Harris Roberts, asked an interesting question on Twitter yesterday:  Is JetBlue stuck in the middle?  In other words, are they stuck in a competitive position somewhere between an effective low cost strategy and a successful differentiation position?  The question arises because of the news that came out yesterday about the firm.  JetBlue announced that it would be charging baggage fees for the first time.  For certain types of low fare tickets, passengers will have to pay baggage fees.  In addition, the company will be reducing leg room and adding seats on certain jets that it will fly.  The announcements come after much investor pressure and a change in the CEO office.  Investors have clamored for JetBlue to improve its profitability, as it has lagged competitors in recent  years.  The moves, of course, represent a significant departure from JetBlue's past strategy.  If you have watched JetBlue's marketing in recent years, you know that more leg room and no baggage fees have been key elements of their message.  

Why do the moves suggest that JetBlue may be stuck in the middle strategically?  For years, JetBlue has tried to be the "Target" of the airline industry.  In other words, they have tried to differentiate themselves from the pure low cost players in the industry (Spirit, Southwest), while trying to operate more efficiently than the legacy carriers.  Target has tried to do the same for years, operating at a lower cost structure than traditional department stores or older discounters, while differentiating from Wal-Mart.  Such a strategy has been very successful for Target for decades, though the last few years have been challenging.  JetBlue's lagging profitability may suggest that it has not been able to achieve the efficiency of the low cost players.  At the same time, its efforts to differentiate (better service, TVs on the seats, more leg room) have not been sufficient to generate a price premium that offsets the higher costs associated with these amenities.  The moves to cut leg room and add baggage fees are not so much a sign that they are moving to become stuck in the middle... to me, they may indicate that JetBlue had already become stuck in the middle.   Now they are trying to find their way out of that challenging competitive position.   It's difficult, though, to make moves that contradict a longstanding marketing message.  It will be interesting to see how customers react. 

Thursday, November 20, 2014

Managing Up

David Bradford and Allan Cohen have written a new book, Influencing Up.  They are the authors of the previous best-selling leadership book, Influence Without Authority.   Stanford Business School has posted an interview with Bradford about the duo's latest work.  Bradford has a key insight about how we perceive ourselves relative to our bosses:

What does it take for a direct report to gain power in the employee-boss relationship?
First, not falling into the trap of accentuating the power gap. Research, much of it done here at Stanford, shows that when there is a significant gap between the most powerful and the least powerful, dysfunctional things happen for both parties. In the book, we say that "high power makes you deaf and low power gives you laryngitis." When you have high power, you tend to overestimate your abilities and can be closed to influence, which can be very dangerous in a fast-changing world. On the other hand, if you perceive you have very little power, you tend to shut down instead of offering alternate points of view, which is really what is needed. Now, sometimes power is objective: some people have a lot of money and others have very little; someone is CEO and another is a clerk. But we often exaggerate the power gaps, and when we do that we hurt ourselves and our bosses.

I think Bradford has made a good point.  Sometimes, employees do exaggerate the power gaps.   They do not realize the other sources of power that they may have. Clearly, the boss has the formal authority.  However, the subordinate may have deep expertise on a particular specialized subject.  The subordinate also may have cultivated a network of collaborators and allies in other parts of the organization.  That network may be a source of power.  The subordinate may have key facts on their side.  The question becomes:  How do you present that data most effectively?   In short, managing up does indeed require a thorough assessment of one's power in a particular situation.  Avoiding the knee-jerk conclusion that a massive power gap exists is good advice.   

Wednesday, November 19, 2014

Startup Funeral

Kevin Galligan is one of the organizers of an event called Startup Funeral that takes place in Manhattan.  A group of young professionals get together to hear the stories of startup failures.  The point is for entrepreneurs to share the lessons from an in-depth postmortem analysis of a startup failure.  At the same time, the event is supposed to be fun.... a party, according to Galligan.  Another organizer, Valerie Lisyansky, tells Fortune magazine: “It’s equally as important to be successful as it is to understand your failure, understand what happened, and educate community.”   Publicly sharing postmortems has become more commonplace in the startup community.   People want others to hear the lessons that they have learned the hard way.  

Is this type of event taking the entire "celebrate failure" movement a bit too far?   I don't think so, though I would note that the article refers to the fact that many entrepreneurs back out after initially committing to present at such events.  I think the key to a successful sharing of lessons learned from a startup postmortem is a safe environment.   I'm not sure an open invitation public party is the most safe environment.   You want to have a place where people are comfortable putting themselves out there and taking an interpersonal risk. I also think it's important to hear the perspective of multiple people involved in a startup, not simply the founder(s).   Multiple perspectives can shed light on causes of the failure that are not apparent to the founder(s), or that the founder(s) aren't ready to acknowledge. 

Tuesday, November 18, 2014

Reed Hastings: Make as Few Decisions as Possible

Netflix CEO Reed Hastings sat down for a terrific interview with Bill Snyder of Stanford's Graduate School of Business.   I found several terrific nuggets in the piece.  In the first quote, Hastings makes the point that he's given people a great deal of autonomy at Netflix.  However, with that autonomy comes responsibility.   He has high expectations.  In the second quote, he points out that the CEO does not have be the ultimate product expert.   In fact, there may be a downside to that type of situation.  I like the concept of a "distributed set of great thinkers."  Great leaders, I believe, know how to marshal the collective intellect of an organization. 

“I take pride in making as few decisions as possible, as opposed to making as many as possible,” Hastings says. One example: Netflix’s decision to produce the popular House of Cards was a huge one, but the meeting that gave the project a green light lasted just 30 minutes. Others had already laid down the groundwork and details, making it easy for Hastings to sign off. “It’s creating a sense [in your employees] that ‘If I want to make a difference, I can make a difference.’” Freedom is only one part of the Netflix culture; the other is responsibility. Netflix, says Hastings, has created a culture of high performance. “Adequate performance gets a generous severance package,” he says, adding that “we turn over a lot of people.”

 Without mentioning Apple or the late CEO Steve Jobs by name, Hastings says certain companies’ conception of the top job was very different than his view. “Some companies operate by the principle of the product genius at the top,’’ Hastings says. “There’s this whole motif that to be a great CEO you have to be a great product person. That’s intoxicating and fun, but you build in incredible amounts of dependence on yourselves. You’re much stronger building a distributed set of great thinkers,” he says.

Friday, November 14, 2014

Understanding Your Rivals' Time Horizon

Great firms engage in rigorous competitor analysis.  They try to understand their rivals' goals, strategies, capabilities, and weaknesses.    Beyond that, I believe that good competitor analysis entails an understanding of your competitor's time horizon.  Are they managing the business quarter to quarter, so as to meet Wall Street expectations?  Or, does your rival have a long term orientation?  Are they willing to make significant investments today with payoffs expected well down the road? 

Why does the time horizon of competitors matter?  Suppose that your small firm is contemplating entering a new product market segment.   You are trying to anticipate the incumbents' response to your entry.  Will they retaliate aggressively when you try to take share?  If they are very short-term oriented, they may not want to hurt their margins substantially so as to attack a small new entrant.  On other hand, if they are very long term oriented, they might bite the bullet today to try to retain market share and deter future entrants.  

Similarly, suppose that technological change is taking place in your industry, and firms are examining an unproven new technology with uncertain payoffs.   A rival with a long term orientation may be willing to make a big, bold bet, knowing that the payoff may not come for a number of years.  A rival who is focused on next quarter may hold off on such risky investments. 

Thursday, November 13, 2014

Onboarding Employees the Whirlpool Way: "Real Whirled"

Companies are experimenting with many new ways to onboard young employees.   Whirlpool has one of the more novel systems.   They have run a program called "Real Whirled" for 15 years.  A group of new young employees live together for 10 weeks in a two-story condo in Michigan.  According to this article in Fast Company, "For those 10 weeks you're spending most of your waking hours using their products in the kitchen and laundry room and comparing them with competitors, hosting dinners for executives, going to product testing labs—essentially becoming one with the appliances you will eventually sell on the sales floor."  Nearly 400 people have gone through this program at Whirlpool.   Not everyone thrives in this environment.  However, Fast Company reports that, "Since 2009, Whirlpool has retained 80% of everyone who has participated. There is also an extensive alumni network, filled with people in all parts of the company..."  

Wednesday, November 12, 2014

GM Turns "Chevy Guy" Gaffe Into Positive Promotion

During the presentation of the World Series MVP trophy, a Chevy manager (Rikk Wilde) became very nervous.  He had a hard time getting the right words out, and eventually he described the Chevy truck as, "class-winning and leading, you know, technology and stuff."   Soon, #chevyguy and #technologyandstuff began to trend on Twitter.  GM didn't reprimand the employee.  Instead, Wilde's bosses understood why he had become so nervous.  Moreover, GM decided to capitalize on the social media buzz created by the gaffe.  They even incorporated the gaffe into their online promotions.  Jamie Barbour, a social media manager at GM, began the company's efforts by tweeting at 1:29am: "Truck yeah the 2015 #ChevyColorado has awesome #TechnologyAndStuff!"  Then the company used #TechnologyAndStuff with three online video ads the next day.   They even bought prime time spots during late night comedy shows to run one of those ads.   I love these types of stories.  Companies should be willing to laugh at themselves sometimes, and they should turn these types of gaffes into marketing opportunities whenever possible.