Business Stories

Constraints Inspire Creativity: How IKEA Started the “Flatpack Revolution”

November 2, 2020 By Nagesh Belludi Leave a Comment

Designer Gillis Lundgren of IKEA In the mid-1950s, Gillis Lundgren (1929–2016) was a draftsman living in a remote Swedish village of Älmhult. He was the fourth employee of a fledging entrepreneur named Ingvar Kamprad.

Kamprad’s business was called IKEA, an acronym combining his initials and those of his family’s farm and a nearby village. He had founded IKEA in 1943 and got his start selling stationery and stockings at age 17. In the 1950s, Kamprad had launched a low-cost mail-order furniture retailer to cater to farmers.

Constraints have played a role in many of the most revolutionary products

IKEA Flatpack Revolution - Gillis Lundgren's Lovet Table In 1956, Lundgren designed a veneered, low coffee table. He built the table at home but realized that the table was too big to fit into the back of his Volvo 445 Duett station wagon. Lundgren cut off the legs, packed them in a flat box with the tabletop, and rushed to a photoshoot for the IKEA furniture catalog.

And in so doing, Lundgren unintentionally birthed the flatpack furniture industry. He modified his simple design and drew up plans for a disassembled version of the table. Lundgren’s Lövet table (now called Lövbacken) became IKEA’s first successful mass-produced product.

IKEA and Its Flatpacking Took Over the World

IKEA’s trademark, easy-to-follow assembly instructions are a central ingredient to the company’s success. Manufacturing and distributing prefabricated furniture via flatpacking has proved enormously successful. It has dramatically facilitated the shipment and storage of pieces that otherwise took up much more space.

According to Bertil Torekull’s Leading by Design—The IKEA Story (1998,) the concept of ready-to-assemble furniture is much earlier than that. But IKEA was the first to systematically develop and sell the idea commercially.

Flatpacking contributed to many of IKEA’s products’ enduring popularity—they’re affordable, sleek, functional, and brilliantly efficient. In 1978, Lundgren designed the iconic Billy bookcase, the archetypical IKEA product that currently sells one in three seconds.

IKEA’s aesthetic of simplicity and efficiency reflects in its exclusive design and marketing approach. IKEA constantly questions its design, manufacturing, and distribution to create low-cost and acceptably good products.

The method has been adopted by numerous other business enterprises, transforming how products are made and sold globally.

Constraints Inspire Creativity - How IKEA Started the 'Flatpack Revolution'

Out of Limitations Comes Creativity

One problem with creativity is that sometimes people face an open field of creative possibilities and become paralyzed. Constraints can be the anchors of creativity [see more examples here, here, and here.]

Constraints fuel rather than limit creativity. Use constraints to break through habitual thinking and promote spontaneity. The mere experience of playing around with different constraints can stretch your imagination and open your mind’s eye for ingenuity.

Idea for Impact: Use constraints to help stimulate creativity. As the British writer and art critic G. K. Chesterton once declared, “Art consists of limitation. The most beautiful part of every picture is the frame.”

Never Cast a Blind Aye

October 17, 2020 By Nagesh Belludi Leave a Comment

Never Cast a Blind Aye Rep. Tom Moore Jr. (1918–2017) of the Texas House of Representatives was dismayed at how often his legislative colleagues in the Texas House of Representatives passed bills without reading and understanding them. For an April Fools’ Day prank in 1971, he sponsored this resolution honoring Albert de Salvo:

This compassionate gentleman’s dedication and devotion to his work has enabled the weak and the lonely throughout the nation to achieve and maintain a new degree of concern for their future. He has been officially recognized by the state of Massachusetts for his noted activities and unconventional techniques involving population control and applied psychology.

The resolution passed unanimously.

Albert de Salvo was actually the Massachusetts serial killer known as the “Boston Strangler.”

Having made his point, Rep. Moore withdrew the resolution.

Idea for Impact: Don’t endorse anything you haven’t read and understood thoroughly. Abstention, even denial, is much preferable to a blind aye!

I’m Not Impressed with Your Self-Elevating Job Title

October 12, 2020 By Nagesh Belludi Leave a Comment

Ben Horowitz of the venture capital firm Andreessen Horowitz discusses giving employees ego-boosting new job titles to appease them for not receiving a promotion or a pay increase:

Should your company make Vice President the top title or should you have Chief Marketing Officers, Chief Revenue Officers, Chief People Officer’s, and Chief Snack Officers? There are two schools of thought regarding this.

Marc Andreessen argues that people ask for many things from a company: salary, bonus, stock options, span of control, and titles. Of those, title is by far the cheapest, so it makes sense to give the highest titles possible… If it makes people feel better, let them feel better. Titles cost nothing. Better yet, when competing for new employees with other companies, using Andreessen’s method you can always outbid the competition in at least one dimension.

And, as a counterpoint, the pitfalls of job title inflation:

At Facebook, by contrast, Mark Zuckerberg… avoids accidentally giving new employees higher titles and positions than better performing existing employees. This boosts morale and increases fairness. Secondly, it forces all the managers of Facebook to deeply understand and internalize Facebook’s leveling system which serves the company extremely well in their own promotion and compensation processes. He also wants titles to be meaningful and reflect who has influence in the organization. As a company grows quickly, it’s important to provide organizational clarity wherever possible and that gets more difficult if there are 50 VPs and 10 Chiefs.

It’s become trendy to create and bandy about outlandish job titles and inflate career profiles.

I’m never impressed with self-elevating titles (e.g., Revenue Protection Officer for a Train Ticket Inspector, Director of First Impressions for a Receptionist) that make you sound like a pretentious, egotistical, and obnoxious person.

Your job title is supposed to help me understand what you do without having to open up the dictionary.

Yes, vague and puzzling job titles surface partly because the world is changing, and so are trades and occupations. Some new job titles are going to be needed.

But it’d be great if we could get by with a much smaller and simpler inventory of descriptive job titles.

Idea for Impact: Avoid bogus grandeur—challenge job title inflation. Don’t assign senior-sounding job titles to those with middle-ranking wages.

How to Create Emotional Connections with Your Customers

September 21, 2020 By Nagesh Belludi Leave a Comment

Consumers are shifting towards memorable experiences over material objects that bring happiness and well-being. Experiential consumption is increasing—the global spending on travel, leisure, and food service is estimated to grow from $5.8 trillion in 2016 to $8.0 trillion by 2030.

Businesses are responding by offering indulgences (think Apple products,) enhancing shopping experience (ordering and carrying-out Domino’s Pizza,) and creating more intimate experiences (Mastercard’s Priceless campaign) for consumers.

Persil Laundry Detergent - 'Dirt is Good' campaign One particularly edifying case study is Unilever’s Persil brand of laundry detergents (Unilever licenses this brand from Henkel in many countries.) As part of the “Dirt is good” campaign, Persil’s sentimental adverts that remind “learn to be a kid” (clip,) “climb a tree, break a leg … that’s part of life” (clip,) and “dirt makes us equal” (clip) have attempted to connect with consumers emotionally.

Persil bucked the longstanding ritual of creating dull adverts for its dull products (cheery moms grabbing washing baskets and fragrant flowers and butterflies rising from the clean laundry.) Persil doesn’t focus on the detergent’s stain-busting attributes. Instead, Persil’s campaign signals that children must feel free to experience the world around them regardless of the impact on their clothes. One prominent advert (clip) presented a cheerless robot who slowly transforms into a child while playing in the open air and splashing around in a muddy pool during a rainstorm: “Every child has the right to be a child. Dirt is good.”

Persil 'Dirt is Good' campaign - children spend less time outdoors than prison inmates

Even the UNICEF commended Unilever for “creating awareness of children’s right to play, the right to express themselves—in short, the right to be a child! It encourages parents to see the value of exploration, play, activity and exercise as critical to children’s development and important for full and healthy lives, even if it means that children get dirty in the process.”

Idea for Impact: Enhance how your customers see and feel the benefits of your products and services. Promote an emotional connection between products and customers.

The Grim Post-Industrial Decline of Detroit // Book Summary of ‘The Last Days of Detroit’

August 20, 2020 By Nagesh Belludi Leave a Comment

Mark Binelli’s The Last Days of Detroit: The Life and Death of an American Giant (2013) is an astonishing chronicle of Detroit from the initial days of the French settlers, to the arrival of Henry Ford in 1913, the racial unrest in 1967, and the present-day hipster arrivistes who’re trying to resurrect the city.

Binelli characterizes the eeriness of the city’s many impoverished neighborhoods, the administrative corruption, and the underperforming public schools—all climaxing in the city’s bankruptcy in 2013. “Ruin porn” from Detroit evocatively exposes once-majestic, now-decaying buildings and factories overgrown with prairie grasses and wildflowers and on the brink of collapse.

Binelli outlines how Detroit became the hub of industrialized America. Detroit’s decay really began well before 1967, when the racial riots made it worse. In the 1950s, carmakers and their suppliers moved production out of the city to places with cheaper labor and land. Industrial automation superseded low-skilled jobs. The flight of middle-class residents out of Detroit—to its suburbs and beyond—distressed the city’s tax base and left the poorest, more vulnerable residents to fend for themselves.

Binelli includes stirring and occasionally heart-warming interviews with many residents—teachers, volunteer firefighters, students, clerks, union leaders—and a few Detroit figures who’ve become part of the local folklore.

What is particularly bleak about The Last Days of Detroit is how Detroit has become a symbol of the decline of America. In Binelli’s analysis, there’s barely anything particularly grave about Detroit—ongoing socioeconomic changes could reproduce Detroit’s decay anywhere else in the post-industrial West.

Recommendation: Read Mark Binelli’s The Last Days of Detroit (2013). It’s a fabulous piece of Americana.

Food Delivery Apps are Eating Up Your Money

August 3, 2020 By Nagesh Belludi Leave a Comment

Food delivery apps have been the salvation for restaurants—and laid-off workers—during the COVID-19 pandemic. However, the promotions and fees charged by the likes of Uber Eats and GrubHub are bleeding restaurants dry. According to the Washington Post, one restaurant with $1,043 in food sales was left with just $377 after GrubHub’s charges for delivery, commission, processing, and promotions.

The food delivery startups’ #eatlocal and #keeprestaurantsopen promotions are exploiting customers’ generosity. Customers aren’t really helping out local restaurants as much as they may think. WIRED notes,

Uber Eats has waived delivery fees to consumers on most phone orders but still charges a 25% commission on orders from restaurants it partners with.

On a normal Wednesday night, [one Miami restaurateur] would expect roughly $5,000 in revenue. This Wednesday, the total was $665. Of that, $523 came through delivery apps, primarily Uber Eats. Those commissions totaled $131, leaving him just $534 to cover rent, plus the cost of food and staff. His typical daily overhead is about $3,000. With reduced staff, it’s now $1,200—more than twice as much as his revenue Wednesday. “It’s not sustainable,” he says.

Uber Eats isn’t the only company accused of trying to capitalize on the crisis. GrubHub’s “Supper for Support” initiative, meant to encourage buying from local restaurants, drew widespread criticism. The deal offers a $10 discount on certain orders between 5 pm and 9 pm, but restaurants that opt in cover the discount, and GrubHub still charges its commission on the full price.

Customers ought to know about these apps’ deceptive business practices and be able to make meaningful choices about patronizing local businesses.

In 2018, food delivery raked an estimated $161BB in sales worldwide, and the potential market size has attracted a great deal of startup funding. En bloc, the food delivery business has struggled to sustain itself profitably. The restaurants are particularly agitated, not least because food is a low-margin business, and the fiercely competitive meal-delivery firms just can’t recompense restaurants and riders as much as needed.

Idea for Impact: If you want to support your local businesses, patronize them directly. Call your order in. Pick up the order yourself or get your food delivered by the restaurant itself. Cut out the intermediary.

Putting the WOW in Customer Service // Book Summary of Tony Hsieh’s Delivering Happiness

July 30, 2020 By Nagesh Belludi Leave a Comment

To keep your customers in the present day, you can’t be content just to please them. If you want your business to thrive, you have to produce enthusiastic aficionados—customers who’re so keyed up about how you treat them that they want to tell stories about you. These customers and their cult-like loyalty become a key element of your sales force.

American entrepreneur Tony Hsieh built the online retail store Zappos on the fundamental idea that great service is not a happenstance. It starts when leaders decide what kind of experience they want their customers to have—and articulate that approach in a clear mission and vision. As in the case of luxury hotel chain Ritz-Carlton, leaders keep the mission alive by empowering their employees to go the extra mile for the customer. Above all, when it comes from the heart, great customer service keeps customers coming back over and over.

In Delivering Happiness: A Path to Profits, Passion, and Purpose (2010,) Hsieh discusses the importance of cultivating happiness as a launch pad to better results for your business.

How Zappos Profits from The Happiness Business

Hsieh did not create Zappos. He was one of the startup’s initial investors but got sucked in to help the original founder after six years. Zappos operated in survival mode for a while. As it began to outlive its financial struggles, Hsieh and his leadership team went about building an intentional corporate culture dedicated to employee empowerment and the promise of delivering happiness through a valued workforce and devoted customers.

Over the years, the number one driver of our growth at Zappos has been repeat customers and word of mouth. Our philosophy has been to take most of the money we would have spent on paid advertising and invest it into customer service and the customer experience instead, letting our customers do the marketing for us through word of mouth.

Hsieh tells his entrepreneurial life experiences, often presenting biographical stories to make his line of reasoning. Many great entrepreneurs got started early, and Hsieh is no exception. He started with worm-farming (age 7,) button-making (elementary school,) magic tricks involving dental dams (high school,) burger joint (college,) and web-consulting (post-college) before having considerable financial success with the internet advertising firm LinkExchange (sold in 1998 to Microsoft for $265 million.)

In 2009, Hsieh sold Zappos to Amazon for $847 million under pressure from Sequoia Capital, a major financier of Zappos. As a point of reference, Hsieh later recalled,

Some board members had always viewed our company culture as a pet project—“Tony’s social experiments,” they called it. I disagreed. I believe that getting the culture right is the most important thing a company can do. But the board took the conventional view–namely, that a business should focus on profitability first and then use the profits to do nice things for its employees. The board’s attitude was that my “social experiments” might make for good PR but that they didn’t move the overall business forward. The board wanted me, or whoever was CEO, to spend less time on worrying about employee happiness and more time selling shoes.

How Zappos Fostered a Culture and a Business Model Based on the Notion of Happiness

Delivering Happiness - Tony Hsieh of Zappos Zappos’s corporate culture is guided by ten core values, which aspire to empower employees, create a sense of community in the workplace (employees are encouraged to “create fun and a little weirdness” in the office and build personal connections with colleagues,) and serve a higher purpose beyond bottom-line metrics.

Zappos’s core values include: deliver WOW through service (#1,) be humble (#10,) do more with less (#8,) be passionate and determined (#9,) and create fun and a little weirdness (#3.)
Zappos wants only those employees who really want to work for the company. All new employees attend a four-week training program that immerses them in the company’s strategy, culture, and customer-obsession. Zappos offers $2,000 to walk out at the end of the first week, and the offer stands until the end of the fourth week. Only a small number of new employees take the offer.
Zappos challenges all employees to make at least one improvement every week. Allowing employees to improve the tasks they’re doing and enhancing the processes that they’re responsible for executing allows them to make their jobs more meaningful.
Instead of measuring call center efficiency by the time each call center operator spends on the phone with a customer, Zappos developed its own scorecards. Zappos quantifies such things as the personal and emotional connections operators make with customers using measures such as measuring the number of thank you cards.

Zappos is Obsessed with Impressing Customers

By focusing on company culture, everything else—such as building a brand with sustained revenue growth, fast turnaround times at warehouses, and passionate employees—fell into place.

Happiness is really just about four things: perceived control, perceived progress, connectedness (number and depth of your relationships,) and vision/meaning (being part of something bigger than yourself.)

Recommendation: Read Tony Hsieh’s Delivering Happiness. This insightful tome is brimming with practicable ideas on customer service, building a positive company culture, best hiring practices, how to motivate and train your team, and setting business goals and values. The core elements of Zappos’s DNA—purpose, happiness, culture, and profits—are an effective framework for making happiness a business model.

The Biggest Disaster and Its Aftermath // Book Summary of Serhii Plokhy’s ‘Chernobyl: History of a Tragedy’

May 11, 2020 By Nagesh Belludi Leave a Comment

I visited the Chernobyl Exclusion Zone last year. This 2,600 sq km (1,000 sq mi) region spanning Ukraine and Belarus is the ghastly site of the greatest peacetime nuclear disaster in history. Yes, it’s safe enough to visit—with precautions, of course. [Read travel writer Cameron Hewitt’s worthwhile trip-report.]

Chernobyl is a gripping testimony to the perils of hubris and a poignant monument to the untold misery it imposed upon swathes of people.

To round out my learning from the trip, I recently read Chernobyl: History of a Tragedy (2019,) Harvard historian Serhii Plokhy’s haunting account of the nuclear disaster.

Abandoned City of Pripyat Near the Chernobyl Facility

An Accident That Was Waiting to Happen

At 1:21 A.M. on 26-April-1987, an experimental safety test at Unit 4 of the Vladimir Ilyich Lenin Nuclear Power Plant complex in Chernobyl went dreadfully wrong. The test instigated a power surge. The reactor exploded and burst open, spewing a plume of radioactive elements into the atmosphere.

The discharge amounted to some 400 times more radioactive material than from the Hiroshima atomic bomb. Deputy Chief Engineer Anatoly Dyatlov, who was in charge of the calamitous test, called the ensuing meltdown “a picture worthy of the pen of the great Dante.” Sixty percent of the radioactive fallout came to settle in Belarus. Winds carried radioactive elements all the way to Scandinavia.

Right away, hundreds of firefighters and security forces consigned themselves to stabilize the reactor and stop the fires from spreading to the other reactors. In so doing, they exposed themselves to fatal doses of radiation, spending the rest of their lives grappling with serious health problems.

The world first learned of the accident when abnormal radiation levels were detected at one of Sweden’s nuclear facilities some 52 hours after the accident. It took the Soviet regime three days to acknowledge the meltdown publicly, “There has been an accident at the Chernobyl atomic-electricity station.” Soviet leader Mikhail Gorbachev addressed the nation 18 days after the accident, “The first time we have encountered in reality such a sinister force of nuclear energy that has escaped control.”

A Soviet Dream Town Then, a Graveyard of Dreams Now

Abandoned Contaminated School In Chernobyl Exclusion Zone The ghost town of Pripyat, a purpose-built workers’ settlement a mile from the nuclear plant, seized my mind’s eye. It was one of the Soviet Union’s most desirable communities, and 50,000 people lived there when the accident happened. Today, it’s a post-apocalyptic time warp—full of all kinds of dilapidated civic structures that once showcased the ideal Soviet lifestyle.

Pripyat was evacuated entirely on the afternoon of the disaster. Left to rot, the town has been completely overtaken by nature. A Ferris wheel—completed two weeks before the explosion, but never used—has become an enduring symbol of the inflictions. So have unforgettable images of deserted houses engulfed by forest, loveable stray dogs in dire need of medical attention, and a day-nursery strewn with workbooks and playthings.

Abandoned Pripyat Amusement Park: Graveyard of Dreams

A Human Tragedy: Disaster, Response, Fallout

Chernobyl: History of a Tragedy (2019) is a masterful retelling of the episode and its aftermath. Author Serhii Plokhy, who leads the Harvard Ukrainian Research Institute, grew up 500 kilometers south of Chernobyl. He later discovered that his thyroid had been inflamed by radiation.

Plokhy offers deeply sympathetic portrayals of the plant’s managers and engineers, the first-responders who risked their lives to contain the damage, and the civilians in the affected areas of Ukraine and Belarus.

New Safe Containment of the Chernobyl Nuclear Power Plant Drawing upon the victims’ first-hand accounts as well as official records made available only after Ukraine’s 2013–14 Euromaidan revolution, Plokhy meticulously reconstructs the making of the tragedy—from the plant’s hasty construction to the assembly of the “New Safe Containment” structure installed in 2019.

The cleanup of the radioactive fallout could continue for decades. Robotic cranes will work in intense radiation and dismantle the internal structures and dispose of radioactive remnants from the reactors. The damage from the disaster may last for centuries—the half-life of the plutonium-239 isotope, one constituent of the explosion, is 24,000 years.

Design Flaws, Not All Operator Errors

Plokhy shows how Chernobyl personified the Soviet system’s socio-economic failings. Chernobyl was a disaster waiting to happen—an absolute storm of design flaws and human error.

The Chernobyl nuclear plant was hailed as a jewel in the crown of the Soviet Union’s technological achievement and the lynchpin of an ambitious nuclear power program. The RBMK (high power channel-type reactor) was flaunted as more powerful and cheaper than other prevalent nuclear power plant designs.

Inside Chernobyl's Radioactive Ruins - Engulfed by Forest Anatoliy Alexandrov, the principal designer of the RBMK reactor and head of the Soviet Academy of Sciences, reportedly claimed that the RBMK was reliable enough to be installed on the Red Square. The communist czars skimped on protective containment structures in a great hurry to commission the Chernobyl reactors.

Commissars at the Ministry of Medium Machine Building, the secretive agency in charge of the Soviet nuclear program, knew all too well of the fatal flaws in the design and the construction of the RBMK reactors. Viktor Briukhanov, the Chernobyl plant’s director, had complained, “God forbid that we suffer any serious mishap—I’m afraid that not only Ukraine but the Union as a whole would not be able to deal with such a disaster.”

Yet, the powers-that-were assumed that clever-enough reactor operators could make up for the design’s shortcomings. Little wonder, then, that the Soviets ultimately attributed the accident to “awkward and silly” mistakes by operators who failed to activate the emergency systems during the safety test.

Memorial to the Victims of the Chernobyl Disaster

The Fallings of the Soviet System’s Internal Workings

Chernobyl: History of a Tragedy dwells on Soviet leadership and the ubiquitous disconnects and the vast dysfunctions in the Soviet state’s affairs.

Chernobyl is a metaphor for the failing Soviet system and its reflexive secrecy, central decision-making, and disregard for candor. The KGB worked systematically to minimize news of the disaster’s impact. KGB operatives censored the news of the lethal radioactive dust (calling it “just a harmless steam discharge,”) shepherded the tribunal hearings, and downplayed the political outcomes of the disaster.

Even the hundreds of thousands of Ukrainians, Belarusians, and Russians evacuated from the thirty-kilometer zone weren’t given full details of the tragedy for weeks. In the days following the accident, the Communist Party’s apparatus, well aware of the risks of radiation, did not curtail children’s participation in Kyiv’s May Day celebrations and parades.

Author Plokhy’s most insightful chapters discuss the historic political fallout of the disaster. Moscow downplayed the design flaws in the reactor and made scapegoats of a handful of the plant’s engineers and operators—just three men received 10-year prison sentences in 1987. One of the three, Deputy Chief Engineer Anatoly Dyatlov (whom I quoted above referring to Dante,) was granted amnesty after only three years. He died five years later from a heart failure caused by radiation sickness.

Chernobyl’s outstanding narrative feature is the interpretation of the disaster in the framework of the fate of the Soviet Union. Plokhy explains how Chernobyl was a decisive trigger to the unraveling of the Soviet Union. Chernobyl served as an unqualified catalyst for Gorbachev’s policy of glasnost (“openness.”) Too, it fanned the flames of the nationalist movements in the soon-to-break-away republics of Ukraine, Belarus, and the Baltics.

Recommendation: Read This Captivating Account of a Great Human Tragedy

Serhii Plokhy’s Chernobyl: History of a Tragedy (2019) is a must-read record of human fallacies and hubris. It’s a poignant narrative of the courage and helplessness of the thousands of firefighters, police officers, doctors, nurses, military personnel, and the communities who risked their lives to mitigate the aftermath of the disaster, investigate, and “liquidate” the site. On top, Chernobyl is an edifying thesis on how the disaster accelerated the decline and the downfall of the Soviet Union.

How Ritz-Carlton Goes the Extra Mile // Book Summary of ‘The New Gold Standard’

April 13, 2020 By Nagesh Belludi Leave a Comment

Psychologist Joseph Michelli’s The New Gold Standard (2008) describes how luxury hotel chain Ritz-Carlton has programmed its organization to foster customer-centric behavior in employees at all levels.

Ritz-Carlton’s clearly-defined and well-implemented cultural principles, called “Gold Standards,” enable the company’s employees to deliver the exceptional service that its refined customers have come to expect. Ritz-Carlton’s brand recognition is so deep-rooted that such phrases as “ritzy” and “putting on the ritz” have become part of the lexicon.

Values First

Ritz-Carlton propagates its customer-centricity goals by making a compact trifold “Credo Card” part of each employee’s uniform. These cards describe the “ultimate guest experience,” and they are shared with guests eagerly. Michelli writes, “Ultimately the value of the Credo or any other core cultural roadmap is the opportunity it affords those inside the business to realize how the ideal customer and staff experience looks and feels.”

Ritz-Carlton Gold Standards Credo Card - Customer Service Service Principle #10 of Gold Standards states, “When a guest has a problem or needs something special, you should break away from your regular duties to address and resolve the issue.” Irrespective of rank and title, every employee can spend as much as $2,000 per day per guest without a supervisor’s approval to solve a guest’s problem. This distinctive policy not only permits the employees to fulfill their guests’spoken and implied needs but also empowers employees to use their best judgment to create memorable and personal experiences for guests.

While some might think that this type of empowerment is both ill advised and financially irresponsible, leadership at Ritz-Carlton has determined the trust they place in employees is well founded. Rather than being extravagant with the resources entrusted to them, the employees tend to be very cautious … the advantage of the $2,000 staff empowerment is that the employees don’t have to delay a service response by taking it up to the next level in the organization, and they can take the initiative to enhance guest experiences.

Ritz-Carlton Gold Standards of Customer Service

Empowerment through Trust

Guided by co-founder Horst Schulze’s oft-cited business principle, “Ladies and gentlemen serving ladies and gentlemen,” Ritz-Carlton selects, trains, and cultivates a dedicated workforce of outstanding professionals who are just as deserving of respect as Ritz-Carlton’s upscale guests.

Ritz-Carlton’s customer-centric principles and culture inform its hiring and training processes and preside over the rewards and promotion systems. Managers use every opportunity to go over the company’s values and remind everybody to polish up on caring for guests. For example, at the start of each shift, everyone—from laundry staff to executives—participates in a 15-minute “lineup” to talk about the nitty-gritty of the Gold Standards.

Michelli observes, “When it comes to the Gold Standards, Ritz-Carlton leaders and frontline staff alike can appear, from an outsider’s perspective, to be teetering toward the fanatical.” No wonder, then, that Ritz-Carlton has become a paradigm for the highest level of sustainable customer experience. In the year 2000, the company launched the Ritz-Carlton Leadership Center to offer courses and to consult for anyone interested in its cult of customer service. In 2001, when Steve Jobs and Ron Johnson were preparing to launch Apple Stores, they sent executives to Ritz-Carlton’s leadership program to learn about offering the best customer experience. Apple’s notion of anticipatory customer service and the concept of Genius Bars originated from Ritz-Carlton.

Delivering Wow!

During the “lineup” meetings, Ritz-Carlton managers and leaders also reinforce the customer-service principles by sharing “Wow!” stories of delighting guests. The internal communication department collects such stories each week and publishes them in the in-house newsletters. “Positive storytelling. The ability to capture, share, and inspire through tangible examples of what it means to live the Credo and core corporate values.”

The New Gold Standard includes many anecdotes from hotel guests, employees, managers, and executives to explain how Ritz-Carlton has “going above and beyond the call of duty” embodied in its culture.

A breakfast waiter scurried to a neighborhood grocery store to buy a guest’s preferred grape jelly when the dining room did not have it on hand.
At the Ritz-Carlton Dubai, a manager and a staff carpenter built a temporary access ramp made of wood boards to allow a guest and his wheelchair-bound wife to access the sandy beach, dine by the ocean, and watch the sun go down.
When a guest called the Ritz-Carlton Naples to notify that she had run out of gas, a doorman filled up a few five-gallon gasoline containers and drove 40 miles to help out the stranded woman and her children.
During Hurricane Katrina, employees of the Ritz-Carlton New Orleans pushed laundry carts loaded with luggage and guests through flooded streets to get them to safe locations.

Ritz-Carlton Leadership Center $2000 Empowerment Lest the reader dismisses these as cherry-picked examples of “overdoing it” in Michelli’s laudatory narrative, these cases in point are demonstrative of the Ritz-Carlton DNA. The employees feel thoroughly invested in and trusted by their employers. And Ritz-Carlton recognizes that customer loyalty is dependent upon the frontline employees who administer such sophisticated service daily.

Idea for Impact: Foster a foundation of customer-centricity

Speed-read Joseph Michelli’s The New Gold Standard. It offers ample insights into establishing your own gold standards for achieving excellence in customer service.

Create a customer-centric culture that identifies, nurtures, and reinforces service-excellence as a primary guiding principle. “Leadership often involves fostering the environment in which everyday creativity emerges in response to the needs of specific customer groups.”
Foster a culture where employees take up personal accountability for resolving customers’ problems.
Train employees to anticipate and fulfill the unmet—even unstated—needs of customers.
Reiterate that providing a ‘wow!’ experience should be each employee’s goal during every interaction with a customer.

Five Where Only One is Needed: How Airbus Avoids Single Points of Failure

April 6, 2020 By Nagesh Belludi Leave a Comment

In my case study of the Boeing 737 MAX aircraft’s anti-stall mechanism, I examined how relying on data from only one Angle-of-Attack (AoA) sensor caused two accidents and the aircraft’s consequent grounding.

A single point of failure is a system component, which, upon failure, renders the entire system unavailable, dysfunctional, or unreliable. In other words, if a bunch of things relies on one component within your system, and that component breaks, you are counting the time to a catastrophe.

Case Study: How Airbus Builds Multiple Redundancies to Minimize Single Points of Failure

As the Boeing 737 MAX disaster has emphasized, single points of failure in products, services, and processes may spell disaster for organizations that have not adequately identified and mitigated these critical risks. Reducing single points of failure requires a thorough knowledge of the vital systems and processes that an organization relies on to be successful.

How Airbus Avoids Single Points of Failure Since the dawn of flying, reliance on one sensor has been anathema.

The Airbus A380 aircraft, for example, features 100,000 different wires—that’s 470 km of cables weighing some 5700 kg. Airbus’s wiring includes double or triple redundancy to mitigate the risk of single points of failure caused by defect wiring (e.g., corrosion, chafing of isolation or loose contact) or cut wires (e.g., through particles intruding aircraft structure as in case of an engine burst.)

The Airbus fly-by-wire flight control system has quadruplex redundancy i.e., it has five flight control computers where only one computer is needed to fly the aircraft. Consequently, an Airbus aircraft can afford to lose four of these computers and still be flyable. Of the five flight control computers, three are primary computers and two are secondary (backup) computers. The primary and the secondary flight control computers use different processors, are designed and supplied by different vendors, feature different chips from different manufacturers, and have different software systems developed by different teams using different programming languages. All this redundancy reduces the probability of common hardware- and software-errors that could lead to system failure.

Redundancy is Expensive but Indispensable

The multiple redundant flight control computers continuously keep track of each other’s output. If one computer produces deviant results for some reason, the flight control system as a whole excludes the results from that aberrant computer in determining the appropriate actions for the flight controls.

How Airbus Avoids Single Points of Failure: Multiple Redundant Flight Control Computers By replicating critical sensors, computers, and actuators, Airbus provides for a “graceful degradation” state, where essential facilities remain available, allowing the pilot to fly and land the plane. If an Airbus loses all engine power, a ram air turbine can power the aircraft’s most critical systems, allowing the pilot to glide and land the plane (as happened with Air Transat Flight 236.)

Idea for Impact: Build redundancy to prevent system failure from the breakdown of a single component

When you devise a highly reliable system, identify potential single points of failure, and investigate how these risks and failure modes can be mitigated.

For every component of a product or a service you work on, identify single points of failure by asking, “If this component fails, does the rest of the system still work, and, more importantly, does it still do the function it is supposed to do?”

Add redundancy to the system so that failure of any component does not mean failure of the entire system.

If you can’t build redundancy into a system due to some physical or operational complexity, establish frequent inspections and maintenance to keep the system reliable.

Postscript: In people-management, make sure that no one person has sole custody of some critical institutional knowledge, creativity, reputation, or experience that makes him indispensable to the organization’s business continuity and its future performance. If he/she should leave, the organization suffers the loss of that valued standing and expertise. See my article about this notion of key-person dependency risk, the threat posed by an organization, or a team’s over-reliance on one or a few individuals.

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