Business Strategy

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Imperial Class: A progress report

Several months ago, I posted a news release from May 2018 (69 KB PDF) in which the newly consolidated airline DeltaUnited-American announced the end of coach service:

“Coach just got to be more trouble than it’s worth,” explained Capt. O’Leary. “Coach passengers always buy the cheapest fares, but they still expect to be treated like royalty. I tell you, though, did you ever see the coach section of a 777 after a 12-hour flight? And those toilets! Our business class clients complain about even being on the same plane with those people, and who can blame them?”

Slowly but inexorably it is coming to pass. Here are a couple of updates: Continue reading →

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PDCA vs. OODA — Why not take both?

One of Boyd’s great achievements was to demonstrate that by using the principles we call “maneuver warfare,” one could harmonize all levels of war, from the tactical through the grand strategic (see Patterns, 141-144). Attrition warfare, by contrast, can certainly win wars, but it has a nasty habit of losing the peace.

But business is not war, and it isn’t immediately clear what terms like “tactical” and “strategic” might mean for businesses or whether thinking in such terms helps businesses survive and grow.

In this guest post, my friend and colleague Dean Lenane takes on this question and, in the best tradition of John Boyd, tests his answer in the marketplace.

PDCA and OODA – Complementary Systems from Complimentary Men

By Dean Lenane

I had the privilege of working with Dr. W. Edwards Deming during the early 1980’s when he was reintroduced to the American business environment. Deming had of course become something of a celebrity due to his identification with the success of Japanese automotive juggernaut, which was making life difficult for the American automobile manufacturers by producing well equipped, high quality vehicles at very reasonable prices.

Teams of “experts” were sent to Japan to determine how the Japanese had managed this miracle and one of the things that they brought back was a newly re-minted Dr. Deming. Deming was consulted and cosseted and sent for by many companies, one of which was Ford. Here, I was introduced to the man as he was employed by Ford to go and sort out the quality systems of some of the major suppliers to Ford. One of these targeted companies was United Technologies Automotive, where I was employed as a quality and reliability engineer. Continue reading →

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Living with Amazon, part II

Last post noted that independent booksellers are holding their own against Amazon, and even increasing in numbers. They couldn’t do this if they were just more expensive versions of Amazon — sell a small selection of the same books, just at a higher price.

Here’s the problem in a nutshell: What Amazon’s doing is working great. So you have to find something that Amazon isn’t already doing, which is sell a huge range of stuff, deliver it quickly, take it back if you don’t like it, and recommend other stuff based on your buying and browsing history. And — let me emphasize that — and for which customers will pay enough money to give you a viable business venture.

Continue reading →

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Bookstores: How to live with Amazon

Something to do with orientation — be something they’re not. 

I buy a lot from Amazon primarily because I live in a place where there isn’t that much retail. But I always try my local stores first, and if I find it there, I buy it there.

So from my standpoint, they don’t compete.  Turns out, that’s a good key to success, and not just for bookstores (athletic gear is another), as Leo Mirani points out in a recent post at Quartz.com:

The reason? There is very little difference between big, impersonal chain stores selling books and a big, impersonal website selling books. Independent retailers, on the other hand, have a lot to offer that Amazon cannot: niche coffee, atmosphere, serendipitous discoverability of new titles and authors, recommendations from knowledgable staff, signings and events, to name a few.

Actually, there’s a lot of difference “between big, impersonal chain stores selling books and a big, impersonal website selling books,” much of it having to do with being disappointed. But that’s a topic for another post.

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Tipping: The Aussies weigh in

James Fallows posted a comment on tipping from a reader in Australia:

We do not tip in Australia. We find it demeaning to the tipper and the tippee. We have a relatively egalitarian society (compared to the US), and social safety nets that preserve the dignity of the poor, the sick, the hapless and the downtrodden. Yet we are an aggressive capitalistic society, like the US. Why then, are there these differences?

Tipping, to us, is an insult. It insults our egalitarian core. It reminds us that we once were servants to undeserving masters. We have abandoned this relationship, and I can assure your readers, that levels of service (eg in restaurants), in Australia, are not seriously diminished by the lack of tipping.

I agree with Fallows’s assessment — that this certainly rings true — but the real point is not tipping, per se. It’s orientation, or rather orientation lock.

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Dismal science of airline travel

Airlines are not a public service, unless you fly a lot on C-17s and C-130s. Like many of the rest of us, they’re in the game to make money or at least not to lose so much that the stock price tanks and the CEO gets fired.

With that in mind, here’s an excerpt from a piece the New York Times ran week before last on the economics of business class travel:

Travelers in business and first class may represent 10 to 15 percent of long-haul seats globally, but they account for up to half of the revenue of airlines like Lufthansa or British Airways, says Samuel Engel, a vice president at ICF SH&E, an aviation consulting firm. … But there is only so much space inside a plane. As the more lucrative seats expand, the coach section often contracts, with more seats jammed into the same cabin space and more discomfort for coach passengers.

You should be able to read the handwriting on this bulkhead. I made my prediction a while back in “Newly merged airline ends coach service“, and we may get there sooner than I thought. If the economics swing just a little bit, coach will become a loss leader, sort of, and the bean counters will start pushing to end it:

Generally speaking, a first-class seat takes up the space of six to eight coach seats and a business-class seat takes up about four coach seats. The same is roughly true for ticket prices: first class is generally more than twice the price of business; business class is usually four times the price of coach.

As a bonus, they can get rid of all those pesky, whining, bargain-obsessed coach passengers.

Can you make money off coach? I don’t know. Maybe relaunch Sir Freddie Laker’s original Skytrain concept with used widebodies in an all-coach configuration flying only major city pairs? The rest of the country can go Greyhound. Once the majors exit the coach business, they won’t be as motivated to sabotage a discount start-up as they were back during the 1970s. May even be glad to have someone take it off their hands.

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Here’s a tip for you

As I was signing the credit card slip last week, I mentioned to the dentist that he was missing out on a sure source of revenue to the tune of about 18%.

“How? That would double my profit margin.”

“Above the signature, add a line for a tip.”

Ah, the simple solutions are often the best.  We had a polite, if maybe just a little strained, chuckle.

Tipping has always struck me as a bad way to run a business because it doesn’t reinforce the virtues that Boyd associated with superior performance in organizations. As you might recall from Certain to Win, for example, these included his EBFAS climate and his “Theme for Vitality and Growth,” IOHAI.  In particular, it doesn’t seem to do much to promote teamwork, such as wait staff pitching in to help out when one waiter became overloaded, or taking the initiative to solve non-wait-related problems in the restaurant (like tidying up common areas or making suggestions for improvement — kaizen).

Plus, it reinforces a caste system, with some staff on straight hourly wage, some on salary, and one particular group on sub-minimum wage plus tips. Not good for Einheit.

But then, the restaurant business isn’t one I know much about; I don’t have any Fingerspitzengefühl for it.

Turns out, though, that I may be right. Check out restaurateur Jay Porter’s article, “After I banned tipping at my restaurant, the service got better and we made more money.”

Note the conclusion, which might come straight out of Boyd:

By removing tipping from the Linkery, we aligned ourselves with every other business model in America. Servers and management could work together toward one goal: giving all of our guests the best possible experience. When we did it well, we all made more money. As you can imagine, it was easy for us to find people who wanted to work in this environment, with clear goals and rewards for succeeding as a team.

One you have everybody together as a team, you can start investing in people and really get the benefit from Boyd’s climate. You may even be able to evolve an implementation of the principles that underlie maneuver warfare and the Toyota Production System/lean production. History suggests that if you do, you’ll wipe the table with the competition (a little pun, sorry).

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Incestuous delusion

It’s coming up on 30 years since Chuck Spinney and the group working with Boyd coined the term “incestuous amplification.” You can Google it to see how it has entered the mainstream.

Some of the definitions roughly equate it to “groupthink” or to situations where people limit their associations to those who agree with them.  But the underlying idea can manifest itself in many other ways, none of them beneficial to an organization’s ability to thrive and grow or even to survive.

Chuck’s definition is:  “It occurs when the preconceptions in the decider’s Orientation (which is his/her repository of ideology, belief systems, cultural heritage, previous experiences, education, genetic heritage, etc) misshape the Observations feeding that Orientation.”  As he notes: “Once IA is set into motion and is left uncorrected, it always tears any decision cycle to pieces from within. Boyd showed why there are very fundamental epistemological reasons for this unfolding evolution.” For more detail, see Chuck’s essay “Incestuous amplification and the madness of King George.” Continue reading →

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A couple of delicious articles on Microsoft

First off, I’m  not a Microsoft basher: We have a Windows 7 PC (Dell) that we use for accounting and database work. It was inexpensive and works great more than three years after we bought it.

And I looked at the Surface before buying a Kindle Fire HD 7. Nice little machine, but much too expensive for what I use a tablet for. I didn’t buy an iPad mini, either, for much the same reason. At this point, I should confess that my wife and I own three Macs, an iPad, and two iPhones, and if I can nurse my nearly 5 year old MacBook, which I’m using to write this, until the fall or early 2014, I’ll most likely buy a MacBook Pro.

With that off my chest, there were a couple of great articles this week on the Fall of the House of Microsoft. Continue reading →

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More box technology

I’m still fascinated by these things.

brooksHere are a couple from recent shoe purchases. They are similar but not identical, which suggests that somebody is working on the design.

It’s amazing that they fabricate these boxes, apparently by the hundreds of thousands, out of cardboard no less, and with such precision that they don’t need glue, tape, or staples to stay together during shipping, at the store, or on the way home. and all for what must be negligible cost.

sauconyThe Saucony pair, by the way, represents my first foray into “zero drop” shoes. Actually they have 4mm, compared to the 10-12 on my regular shoes. I’ve been running for about 40 years, so it’s with some trepidation that I’m trying them, but they do seem to be all the rage.