Mental Models

Never Outsource a Key Capability

August 17, 2020 By Nagesh Belludi Leave a Comment

In 2003, Domino’s Pizza started requiring its franchisees to adopt the company’s own point-of-sale system (POS) system, internally called PULSE, instead of letting franchisees choose third party POS systems that could integrate with Domino’s IT systems.

That strategy gave the company the ability to seamlessly control the entire ordering process and add functionalities such as online- and mobile-ordering, voice ordering, and contactless payments.

At the same time, Domino’s clever marketing convinced consumers that it has the snappiest ordering process among all the pizza vendors.

How Domino’s Pizza reinvented itself

In 2009, Domino’s changed its pizza recipe and admitted that its previous version was awful in a series of brilliant commercials that featured the tagline, “We’re Sorry for Sucking.” Executives even read out vicious customer comments on camera resembling the Jimmy Kimmel ‘Mean Tweets’ show.

Domino’s (which is, incidentally, headquartered a mile from my home in Ann Arbor, Michigan) used its PULSE POS system as the centerpiece of a technology ecosystem that has helped it flourish as an “an e-commerce company that sells pizza.”

Digital sales skyrocketed as the company tapped into greater demand for convenience, and Domino’s carved a bigger slice of home delivery and food pickup market. Morningstar’s R.J. Hottovy notes that Domino’s laser-sharp focus on improving online ordering has paid off leaps and bounds:

Technology plays an important role in Domino’s efforts to develop and enhance its brand image. Domino’s global technology platform includes a digital loyalty program with a rewards system, electronic customer profiling, geo-tracking of pizzas being delivered to customer homes, and customer geo-tracking to have carryout pizzas ready just as they enter the store. Other innovations include high-speed ovens (which reduced cooking time to four minutes) and Pulse (a unified point-of-sale system,) which have re-engineered fulfillment processes to be best-in-class. Pulse integrates all orders (regardless of origin) into a seamless interface that provides detailed monitoring of every aspect of the ordering, cooking, fulfillment, and delivery processes, which reduces bottlenecks and minimizes downtimes, enabling Domino’s to offer faster delivery times than competitors.

By owning the entire customer experience, Domino’s has been able to provide a consistent experience for customers irrespective of how they order, use data to create value for customers, and iterate quickly. No wonder, then, that Domino’s share price is up 28-fold since its 2004 IPO!

Idea for Impact: Don’t outsource what you’re supposed to do best.

Smart companies understand that outsourcing can result in loss of control over key capabilities. That can impede the company’s ability to improve its efficiency in serving customers or introduce changes in response to shifts in the marketplace.

How You See is What You See

August 15, 2020 By Nagesh Belludi Leave a Comment

So very often, we don’t give ourselves to allow for new understandings, new perspectives, and new interpretations to emerge.

Three people were visiting and viewing the Grand Canyon—an artist, a pastor and a cowboy. As they stood on the edge of that massive abyss, each one responded with a cry of exclamation. The artist said, “Ah, what a beautiful scene to paint!” The minister cried, “What a wonderful example of the handiwork of God!” The cowboy mused, “What a terrible place to lose a cow!”

Idea for Impact: Work to overcome the strong waves of conditioning that you’ve been exposed to your whole life.

Take a step back and consider how you’re responding to a situation emotionally and intellectually.

Free up your mind from the conditioning that may be restraining it.

Don’t let your narrow perspectives—those comfortable walls within which you confine yourself—to make you lose touch with what’s possible.

Explore. Discover. Discern. Open your mind to new frontiers.

Overcoming Personal Constraints is a Key to Success

August 14, 2020 By Nagesh Belludi Leave a Comment

Why do some people reach ever-higher levels of achievement, while others struggle or just plug along?

Norman Vincent Peale, the doyen of the think-positive mindset, provides a particularly illustrative example in You Can If You Think You Can (1987):

In Tokyo, I once met an American, an inspiring man, from Pennsylvania. Crippled from some form of paralysis, he was on a round-the-world journey in a wheelchair, getting a huge kick out of all his experiences. I commented that nothing seemed to get him down. His reply was a classic: “It’s only my legs that are paralyzed. The paralysis never got into my mind.”

No matter how formidable your talents, you’ll be held back by certain attitudes and behaviors that limit your achievements.

Your personal constraints—some of them beyond your control—will determine your level of success. Identify those constraints and make a plan to triumph over them.

Idea for Impact: The more you can reframe your attitudes toward the past, future, and present, the more likely you’ll find a meaningful life. Don’t let your constraints lay down what you can achieve.

The Key to Reinvention is Getting Back to the Basics

August 6, 2020 By Nagesh Belludi 1 Comment

Leaders of turnarounds often succeed by putting the fundamentals on the table and insisting upon a greater emphasis on the basics.

The turnaround that CEO Brian Niccol has cooked up at Chipotle Mexican Grill [CMG] makes a great case study of the back-to-the-basics approach to management.

The Basics Often Get Lost in a Speedy World

To set the context, here’s a concise history of Chipotle: founded in 1993 by chef Steve Ells, Chipotle found great success in marketing its near-local sourcing of fresher ingredients, using naturally-raised proteins, and on-premises cooking.

Chipotle grew swiftly and established itself as the flag-bearer of the fast-casual trend that spurned fast-food orthodoxy. McDonald’s was a major investor from 1998 until 2006 when Chipotle went public.

In 2015, Chipotle’s star began to fade away when hundreds of its customers got sick from infections with salmonella, E. coli, and norovirus. Worried that this short-term rough patch can turn into a long-term downward slide, the company’s board recruited Niccol from Yum Brands’s Taco Bell division in 2018.

CEO Brian Niccol made Chipotle Fresh Again by Focusing on the Basics

In two short years as CEO, Niccol has returned Chipotle to industry-leading performance and positioned the company for above-industry growth. His Barron’s ‘Streetwise’ interview with the inimitable Jack Hough provides an insight into how strategic business leaders think and make decisions:

When I arrived at Chipotle, I discovered that it was a company full of ideas; it lacked discipline and the focus to figure out the few things we wanted to do really well. Chipotle had lost focus on executing the basics of running a great restaurant.

We modernized food safety practices and emphasized avoiding contamination and educating food suppliers and farmers.

We went back to following the original culinary on how to make great food: getting the right char on the chicken, the right amount of lemon, and the right amount of chopped jalapenos.

Idea for Impact: Getting the basics right is often the first essential step to building a greater organization.

So many companies fail on their fundamentals—and don’t even realize it—especially when their businesses have grown, market conditions have changed, and the companies have taken on all sorts of complexities that have stumbled.

If you want your organization to pull through a slump or hit a new growth trajectory, consider cracking down on the basics.

Focus on your core values and your underlying business model, which are like beacons that can help steer you on the right track. Inquire why your organization exists. How should you operate? What is your market position? What matters to the organization’s mission and vision? Focus on doing the right thing—and doing it consistently over time.

A renewed emphasis on the strategic basics will put your company in the best possible position to navigate new strategic choices, as Niccol’s Chipotle has done.

Power Inspires Hypocrisy

July 27, 2020 By Nagesh Belludi Leave a Comment

Mark Hurd, whom I featured in Friday’s article, was one of the most respected and eminent leaders in Silicon Valley until his mighty fall following his dalliance with a contractor during his time as CEO of Hewlett Packard (HP.)

Hurd had hired this contractor, a glamour model, as a “hostess” for “executive summit events,” even at out-of-town places where there is no HP event, but Hurd happened to be.

Hurd was ultimately exonerated of violating HP’s sexual-harassment policy (nothing was consummated with the contractor, and Hurd settled with the accuser for undisclosed terms) but he was officially charged with drumming up expense reports.

Hurd walked away from HP with a $34 million severance package. Almost immediately, he became co-president of Oracle, earning $11 million a year and options.

Much has been speculated about the real reasons HP’s board gave Hurd the boot, especially considering that he probably falsified his just an expense report just the once. Even then, said expenses were petty compared to the massive turnaround he had engineered at HP after walking into a very troubling situation. Hurd was famed for his no-nonsense management style and for finagling a culture of operational excellence at HP.

When the Hurd controversy broke out, Wall Street Journal’s Jonah Lehrer argued that when nice people rise to positions of power, “authority atrophies the very talents that got them there.”

The very traits that helped leaders accumulate control in the first place all but disappear once they rise to power. Instead of being polite, honest and outgoing, they become impulsive, reckless and rude.

Contrary to the notion that nice guys finish last, research shows that the surest way to accumulate power is to do unto others as you would have them do unto you.

But once nice guys reach the top, the headiness of wielding power causes them to morph into a very different kind of beast. They lose their ability to empathize with others, especially lesser mortals, and ignore information that doesn’t confirm what they already believe. Most tellingly, perhaps, they learn to excuse faults in themselves that they are quick to condemn in others. That’s not to say that every CEO is a secret villain. But even the most virtuous people can be undone by the corner office.

Idea for Impact: Power can become an enabler of corruption, deceit, and hypocrisy. People in positions of power have incentives to hold others to strict account for their behaviors even as they themselves act up, especially when the odds of being caught and punished are slim.

Don’t Live in a World Ruled by Falsehoods

July 17, 2020 By Nagesh Belludi Leave a Comment

“Reality is that which, when you stop believing in it, doesn’t go away,” defined the American author Philip K. Dick.

Lying is second nature to us, and under the influence of improbable thinking, even idealism, we’ll hang ourselves if given enough rope. Rebekah Campbell of the New York Times observed,

A study by the University of Massachusetts found that 60 percent of adults could not have a 10-minute conversation without lying at least once. The same study found that 40 percent of people lie on their resumes and a whopping 90 percent of those looking for a date online lie on their profiles.

Most people lie about little things to make them look good. People lie to stave off the consequences of making a mistake, to buy more time or to spare someone’s feelings. Their hearts may be in the right place, but they are still telling lies.

Telling lies is the No. 1 reason entrepreneurs fail. Not because telling lies makes you a bad person but because the act of lying plucks you from the present, preventing you from facing what is really going on in your world. Every time you overreport a metric, underreport a cost, are less than honest with a client or a member of your team, you create a false reality and you start living in it.

Idea for Impact: Stop Living in a World of Illusions

Live in the world of reality, not in the world of how you perceive reality.

Realistic thinking is grounded in an honest appraisal of all facts and data and conditions in different situations. Realistic thinking affords a clear-headed and conscious thought and behavior.

The great undertaking in life is to discover reality—to be truly honest and transparent with yourself about everything.

The meditation master Kalu Rinpoche wrote in The Dharma: That Illuminates All Beings Impartially Like the Light of the Sun and Moon (1986,)

You live in illusion, and the appearance of things.
There is a reality, but you do not know this.
When you understand this, you will see that you are nothing.
And being nothing, you are everything.
That is all.

How to Develop Customer Service Skills // Summary of Lee Cockerell’s ‘The Customer Rules’

July 13, 2020 By Nagesh Belludi Leave a Comment

Becoming great at customer service doesn’t require you to excel at a zillion things. You’ll just need to identify the core principles and get the basics right.

“At the end of the day, everything a business leader does is in the service of customer service … the customer always rules, and there are Rules for winning customers, keeping customers, and turning loyal customers into advocates and emissaries for your business,” writes Lee Cockerell in his prescriptive manual on The Customer Rules: The 39 Essential Rules for Delivering Sensational Service (2013.)

Cockerell is a veteran of the hospitality industry and an eminent corporate trailer. He spent eight years with Hilton, 17 years with Marriott, and 16 years with the Walt Disney. Before retirement, he was the executive vice president of operations at Walt Disney World in Florida and oversaw the resort’s 40,000 employees at 20 hotels, four theme parks, and two water parks.

Non-obvious Customer Service Insights

Cockerell structures his guidebook along 39 tips to serve customers with consistency, efficiency, creativity, and sincerity. He glosses over everything—hiring right, communicating a clear and relevant customer promise, fostering a customer-oriented culture, and creating a superior employee experience. Those employees can deliver a great customer experience, respond to complaints, and practice verbal skills to express empathy.

Make customer service every employee’s responsibility. Everything every employee does can have tremendous repercussions on the service your customers receive, and therefore your bottom line. “Pay close attention to every decision you make, every policy you announce, every procedure you introduce, every person you hire, every promotion you award, every e-mail you send, every conversation you have, every hand you shake, and every back you slap.”
You win customers one at a time and lose them a thousand at a time. Satisfied customers will spread the word only if they’re truly blown away their experience. Angry customers are “far more motivated to shout about their feelings, and furious exposes get a lot more attention than glowing testimonials. Humans are wired to pay more attention to the negative than the positive.”
Anticipate your customers’ needs. Discover what customers aren’t getting from your competitors and give it to them. Customers’ problems are a good source of business innovations. “Great businesses stand out by being different from the rest in the right way: by finding customer needs that are going unmet and figuring out a way to meet them.”
Keep an eye on your competitors. Be a copycat. Look outside your industry for great ideas and tweak them for their own purposes. “Don’t just imitate; pay attention to everything around you, spot the best ideas, and then find a better way to apply them.”
Treat customers the way you’d treat your loved ones. “First and last impressions have a tremendous influence on a customer’s lasting impression. A cheery hello and a sincere good-bye can leave a customer with a memory of a positive experience, regardless of what happens in between.”
Treat every customer like a regular. Familiarity breeds repeat business. “Do whatever you can to make regular customers feel like family and new customers feel like regulars. Remember the theme song from the TV series Cheers? Don’t you want to go “where everybody knows your name, and they’re always glad you came”? Make all your customers feel that you’re really glad they came.”
Prioritize WIN, “what’s important now,” your customers’ immediate needs, desires, and concerns. “Even a nod, a gesture, some brief eye contact, a pleasant “I’ll be right with you. Please make yourself comfortable”—that’s all it takes. People want to be acknowledged.”
Surprise your customers with a little extra when they least expect it. Neuroscientists have confirmed that the human brain “craves the excitement of surprise. The region of the brain called the nucleus accumbens, aka the pleasure center, experiences more activation when a pleasurable stimulus comes unexpectedly than it does when the same pleasure is predictable. “So if you get a present for your birthday, that’s nice. But you’ll like it a lot more if you get a present and it’s not your birthday.””
Don’t try too hard. “Being excessively solicitous and eager to please is annoying.” It makes you seem phony. “Think how annoying it is when a server at a restaurant stops by your table every five minutes to ask if everything’s okay with your meal.” No one likes to be pestered constantly. “If your customers have to stifle the urge to scream, “Go away!” or, “Leave us alone!” you’re trying too hard.”

Recommendation: Read Lee Cockerell’s The Customer Rules. With plenty of anecdotes, experiences, and very short no-nonsense chapters, this book is an enjoyable summary of the many simple—but often overlooked—first principles of building a customer-oriented culture and delivering great customer service.

Sometimes You Should Stop Believing // The Case Against Hope

July 6, 2020 By Nagesh Belludi Leave a Comment

Hoping for outcomes that are almost unfeasible is misleading—for example, hoping that you’ll win the lottery or that the victims of some deadly accident have somehow survived.

There is something about giving up hope and accepting the reality that is comforting

Research has suggested that letting go of hope can often set you free. For example, folks who hope for a miraculous therapy for a terminal disease are less happy than those who accept the hopelessness of the situation.

The life of the Holocaust survivor and psychiatrist Viktor Frankl is particularly illustrative of the difference between false and realistic hope. When confronted by the reality of the Auschwitz and Kaufering concentration camps, Frankl did not wish to dig his way out of his prison. Instead, he acknowledged the bleak reality of the concentration camps, and hoped vaguely for something feasible and sensible—that the war could end and he may be set free. Frankl, who later established logotherapy, famously helped his fellow prisoners bear the horror around them by urging them to contemplate the lives they may lead after the war.

False Hope is Delusional, Realistic Hope is Worthwhile

Yes, hope can be life-affirming. It can give you the impetus to keep on in the face of struggle and disappointment. Hope—underpinned by hard work—is what made many a great achievement possible, from inventing life-changing drugs to dismantling racial segregation.

But false hope is deadly. It can shackle you to an outcome you long for but cannot achieve.

False hopes lead to disappointment. If you hope to become an eminent actor or a great chess player, your expectations are bound to be dashed. It’s much better to hope that you’ll enjoy acting or playing basketball and acknowledge the inadequacies you can’t overcome.

Don’t rehash false hope as optimism. Characterize it for what it is: the sweet illusion of denial. Don’t be fooled by the unbridled optimism espoused by our hope-obsessed culture.

False hope locks you into a concept—of people, situation, job, culture—that has little bearing on the reality. False hope will bind you to the idea of what could be, instead of what is.

Idea for Impact: Sometimes you should stop believing. Giving up hope and embracing reality can set you free. False hope is futile.

Surrounded by Yes

June 18, 2020 By Nagesh Belludi Leave a Comment

Social-Media Impose “Censorship” Through Recommendions and Filters

Google, Facebook, Amazon, and other media companies have built unbelievably powerful tools for collecting and organizing personal data. They’re developing and perfecting algorithms that track your activities and accumulate repositories of seemingly-trivial social media data.

They know whom you hang out with and what you like. And they can make extraordinarily good deductions about your demographics, social influences, political partisanship, social and economic preferences, and everything else. They’re influencing not just what content you see, but also which sites you visit in the first place.

These companies’ intentions are modest enough: to feed you the news you’re likely to want and to expose you to the kind of products and services you’re likely to respond to. The pages you’re shown are tailored for who you are, where you live, whom you interact with, and what you’ve previously clicked on.

The purveyors of the internet make money from advertising and paid subscriptions. Their goal is stickiness: they need traffic to thrive and prosper. Their success depends on their ability to draw you, keep you longer, and persuade you to return before you choose to leave.

Recommender systems have an enormous influence on the discourse you’re exposed to.

There’s a dangerous consequence here. What you should realize is that Google, Facebook, and Amazon have become gatekeepers of everything you see on the internet. Their content filtering and recommender systems are substituting editorial judgment. They’re not neutral and, given their economic objectives, often serve to amplify your biases.

The problem with filtering and recommender systems is that everybody likes them. The content you’re fed with is, in a sense, an endless stream of affirmations that you’re right—you’ll see more of what you’re interested in and associate with others who share your viewpoints. The consensus view is reinforced—the world seems to agree with you. Everything feels more normal!

On a broader scale, as people converge to likeminded people in virtual neighborhoods, you tend to operate in an intellectual bubble. Left to all these devices of today’s information-consumption patterns, much of your opinions and judgments are subjective, imprecise, incomplete, narrow-minded, or utterly unapprised.

All this has made it difficult for you to seek out contrasting views even if you feel so disposed. When you do venture out, all you’ll see are trolls who get offended by the slightest of disagreements—any attempt to challenge their beliefs is taken as a grievous insult. These trolls resort to bumper sticker-rhetoric, name-calling, demeaning attacks, and ill-informed declarations.

Idea for Impact: There’s Great Value in Listening Carefully and Charitably to Ideological Opponents.

Reach out. Consider alternative world-views that may cause you to philosophize differently. Find well-intentioned, respectful people who can challenge your viewpoints. Associate with ideological challengers who can help you improve your understanding of conflicting perspectives.

In On Being Certain: Believing You Are Right Even When You’re Not (2008,) neurologist and author Robert Burton argues that certainty is an emotion just like anger, passion, or sorrow. Once you develop a “that’s right” disposition about a subject matter, your brain subconsciously protects you from wasting its processing effort on problems for which it has already found a solution that you believe is good enough, and is continuously reinforced. In other words, your cerebral laziness could subconsciously lead you to “do less” by simply embracing a cast-iron certainty rather than re-examining your assumptions.

Don’t be lazy. Doggedly examine your biases and prejudices.

Why Is (Was!) Airline Boarding a Mess?

June 11, 2020 By Nagesh Belludi Leave a Comment

Prescript: I drafted and pre-scheduled this article late last year … who would have imagined that life, and the airline industry specifically, could be utterly derailed by a lethal virus?

Boarding an airplane is one of the most inefficient aspects of flying.

There’s no money to be made when a plane is sitting on the ground. Little wonder, then, that airlines have attempted for decades to improve the boarding process—usually with little to no success.

Airlines and airports have engaged industrial engineers, logistics experts, and university researchers to study how to get passengers into their planes in a timely fashion. They’ve experimented with back-to-front, window-to-aisle, every-other-row, and many seating combinations thereof. The improvements have turned out marginal at best.

A Little Too Theoretical to Work Well

No airline seems to have cracked the code for efficient boarding because of the same old reasons—much of the sequencing models and organizing tests are a little too theoretical for reality and are reductive about human behavior.

All the boarding methods have an implicit assumption that passengers are orderly and don’t create frustrating bottlenecks. But, when it comes down to it, passengers simply can’t lend themselves to the airline’s preferred boarding order. Passengers don’t show up at the gate on time and organize themselves precisely in the airline’s prescribed sequence. Once onboard, they don’t place their carryon bags into bins promptly and clear the aisle swiftly.

To make matters worse, airlines need to treat some passengers preferentially—the highest paying customers, loyal frequent flyers, military personnel, people with special needs, and families with young kids must board before general boarding. Then there’re complications arising from making passengers pay for carryon bags. Passengers with bare-bones tickets are not only given middle seats but also inconvenienced enough to board in the end and then scramble for overhead bin space for their bags.

All these complexities add a significant burden on gate agents and flight attendants, who, while making every effort for an on-time departure, must monitor passengers boarding when they must, carrying paid-for carryon bags, and using overhead bin space near their seats.

Basic Human Nature is the Inhibiting Factor

Given the not-so-orderly-and-decorous tendencies of humans, no one boarding method has statistically proved to be consistently and reliably better than others. As a result, airlines fall back on a variety of general boarding schemes, usually some combinations of back-to-front and window-to-aisle arrangement.

In my experience, the “free-for-all” seating that Southwest Airlines operates appears the fastest. Southwest’s passengers don’t get assigned seat numbers, so they have the freedom to sit anywhere they want. They line up for boarding in the order they check-in and reach the gate. Once onboard, they move quickly to find the best available seats and keep out of each other’s way. Southwest is also helped by the fact that passengers tend to have fewer and smaller carryon bags because Southwest doesn’t charge for checked luggage.

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Mental Models

How Domino’s Pizza reinvented itself

Idea for Impact: Don’t outsource what you’re supposed to do best.

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

The Basics Often Get Lost in a Speedy World

CEO Brian Niccol made Chipotle Fresh Again by Focusing on the Basics

Idea for Impact: Getting the basics right is often the first essential step to building a greater organization.

Wondering what to read next?

Wondering what to read next?

Idea for Impact: Stop Living in a World of Illusions

Wondering what to read next?

Non-obvious Customer Service Insights

Wondering what to read next?

There is something about giving up hope and accepting the reality that is comforting

False Hope is Delusional, Realistic Hope is Worthwhile

Wondering what to read next?

Social-Media Impose “Censorship” Through Recommendions and Filters

Recommender systems have an enormous influence on the discourse you’re exposed to.

Idea for Impact: There’s Great Value in Listening Carefully and Charitably to Ideological Opponents.

Wondering what to read next?

A Little Too Theoretical to Work Well

Basic Human Nature is the Inhibiting Factor

Wondering what to read next?