Innovation

Books in Brief: ‘Flying Blind’ and the Crisis at Boeing

September 24, 2022 By Nagesh Belludi Leave a Comment

Bloomberg investigative journalist Peter Robison’s thoroughly researched Flying Blind: The 737 MAX Tragedy and the Fall of Boeing (2022) offers noteworthy lessons about corporate responsibility and leadership problem-solving.

In a nutshell, starting in the late 1990s, Boeing shifted from a company run by engineers who emphasized product integrity to one run by MBA-types who prized shareholder value over long-term product planning. Inspired by General Electric’s Jack Welch, the company embraced cost-cutting, outsourcing, financial engineering, union-busting, and co-opting regulators. These miscalculated strategies culminated in the 737 MAX disasters and disgraceful corporate responses.

Recommendation: Read Peter Robison’s Flying Blind, but be wary of the author’s broad-brush political biases, which, I found, sidetracked from the storyline. The internal organizational tensions that led to corporate deception and the fateful consequences of federal regulators’ consigning design approvals to Boeing are particularly interesting.

Key Takeaway: Negligent engineering to minimize costs and adhere to a delivery schedule is a symptom of ethical blight.

Dear Customer, Speak Early and Have it Your Way!

September 12, 2022 By Nagesh Belludi Leave a Comment

At the heart of every successful product is the ability to address a real need or circumstance of struggle—a “job to be done”—in consumers’ lives. Identification of this “job” happens early in the innovation process, as it forms the core insight around innovation development and execution.

Feedback-Influenced Design is a Key Point of Differentiation

Long before its current mess, Boeing was once the pioneer in aspects of product development. No example illustrates Boeing’s inventive stills than the groundbreaking Boeing 777 program, particularly in its use of iterative, paperless computer-aided design, assembly process-planning, and agile product development. Not only that, the Boeing 777 program offers the most high-profile examples of companies tapping consumers as never before to help them create new products.

Knowing very well that the secret to long-term success starts very early in the innovation process, director of engineering Alan Mulally led a “working together” initiative to organize product development around customer input. (Mulally left Boeing after not being named CEO in 2006 and engineered a dramatic turnaround at Ford Motor Co.)

Concept Testing at Every Stage of Development

In the late 1980s, just as the 777 program was being launched, Mulally made a consequential decision to involve its major potential customers in the development of the aircraft specifications. Mulally made up a “gang of eight” comprising All Nippon Airways, American Airlines, British Airways, Cathay Pacific, Delta Air Lines, Japan Airlines, Qantas, and United Airlines. At the group’s first meeting in January 1990, Mulally’s team distributed a 23-page questionnaire asking what each customer wanted in the design. Within two months, Boeing and the airlines decided on a basic design configuration.

The “working together” initiative was a radical departure from the bureaucratic project organization. Internally, Boeing had become bureaucratic and department-focused. Specialists in various departments would design their parts. Then, it was up to the manufacturing team (the system integrators) to figure out how to make it all come together. It was a “throw-it-over-the-wall” environment where the disconnect was a persistent problem.

Having customer input implied that development was centered on customer needs. This would also tear down the walls between departments—designers, suppliers, and assemblers usually separated by organizations or development phases would now be engaged collaboratively and talking and collaborating in real-time.

In an industry where manufacturers classically designed aircraft with only token customer input. Rather than presenting the market with what Boeing perceived as their idea of what was required, customers had direct input. Over the decades, the Boeing 777 became one of the world’s most successful commercial aircraft and continues to be the workhorse of many a customer fleet.

Idea for Impact: Create Something People Want

Whether selling products or services, fast food, or experiential travel, the most innovative companies organize their offerings around customers’ needs. From the very beginning, they tap consumers as never before to help them create new products, and they’re embedding customer knowledge into the business. Early and frequent feedback is one way to cope with the pressure for shorter product cycles and to be prudent about not investing time and resources in unpromising ideas. It also augurs well for the experiences-over-possessions shift in consumer values.

The Loss Aversion Mental Model: A Case Study on Why People Think Spirit is a Horrible Airline

August 11, 2022 By Nagesh Belludi 1 Comment

When Spirit Airlines pivoted to competing on price in the late 2000s, it quickly gained a reputation not only for operational inefficiencies but also for its in-your-face, take-it-or-leave attitude towards customer service.

Where other airlines charged by-the-package fares for the flight experience, Spirit pared back service and introduced an a la carte pricing model. Charging for the “ancillaries”—i.e., everything optional, including water—allowed Spirit to keep ticket prices down and appeal to price-sensitive travelers willing to sacrifice the usual amenities for a lower ticket price.

In the ensuing years, the unconventionality of this business model did not go down well with customers. Much of the flying public’s frustration with Spirit had to do with Loss Aversion. That’s the notion that the emotional disappointment of a loss is more extreme than the joy of a comparable gain. If finding a cheaper fare on Spirit felt delightful, giving up some—or all—of the savings to purchase ancillaries and surrender the savings felt utterly miserable.

Passengers felt ripped off by these seemingly hidden fees, especially when the true cost of flying Spirit ended up greater than what the initial ticket price led them to believe.

Spirit became quickly convinced that there was a perception problem—its customers didn’t fully understand how its fares work. Particularly, first-time customers blindly presumed that Spirit Airlines works the same way as other airlines. In reality, there were no hidden or excessive fees, and passengers could only pay for what they need or want. In 2014, the airline introduced its “Spirit 101” campaign to educate customers and alter their perceptions. With time and the increased adaptation of the “Basic Fare” model and curtailed customer service by every other airline, passengers’ expectations have since been right-sized. Spirit Airlines has come a long way, and its customer service has improved vastly.

Further studies on loss aversion have shown that a cascade of successive fees is worse than the cumulative: i.e., three ancillary fees that add up to, say, $70, feel a lot worse than a single $70 fee. Appropriately, Spirit offers a “Bundle it Combo” package.

Evolution, Not Revolution

August 1, 2022 By Nagesh Belludi Leave a Comment

Innovation often transpires from synthesizing existing ideas in new ways, as the following case study on the iPod will illuminate.

In some sense, the iPod wasn’t a breakthrough innovation at all. It emerged from Steve Jobs’s “digital hub” approach to integrating iMac software for playing, editing, and managing photos, music, and movies. According to Walter Isaacson’s masterful biography of Steve Jobs (2011,) when Apple designers learned that Toshiba had newly prototyped a tiny 1.8-inch hard drive that could hold five gigabytes of storage (that’s about a thousand songs,) they conjured up a digital music player. Apple found that existing gadgets were “big and clunky or small and useless” with “unbelievably awful” user interfaces.

Sony’s Walkman had previously proven the market potential of portable audio players, having sold 200 million units in the two decades before Apple conceived the iPod. Napster had offered digital audio file distribution for over five years. Finger-driven touchscreens were pioneered in the 1960s, and Citibank rolled out touchscreen ATMs in the 1980s. (Apple didn’t offer touchscreens until 2007 with the iPhone.) Hence, the iPod’s innovation was in bringing all these capabilities together in a way that was easier to use and relevant to the consumer. Dartmouth’s strategy professor Ron Adner writes in The Wide Lens: What Successful Innovators See That Others Miss (2013.)

Apple was three years late [behind Creative, SanDisk, Sony, and Samsung, who had previously launched portable music players]. As we’ll see again in the case of the iPhone, Jobs tended to be late for everything because he wanted everything to be ready for him. Reflecting on catching technology waves in 2008, he said, “Things happen fairly slowly, you know. They do. These waves of technology, you can see them way before they happen, and you just have to choose wisely which ones you’re going to surf. If you choose unwisely, then you can waste a lot of energy, but if you choose wisely, it actually unfolds fairly slowly. It takes years.” Jobs’s discipline paid off.

Idea for Impact: Innovation often builds on existing technological competencies or as a synthesis of smaller innovations.

Why Investors Keep Backing Unprofitable Business Models

July 29, 2022 By Nagesh Belludi Leave a Comment

Investors have heaped billions into Q-Commerce—especially the rapid grocery startups—hoping to hook consumers on the convenience of groceries that would turn up immediately, sometimes in minutes.

I’ve never really fathomed how the small-basket orders of low-margin groceries can endlessly compensate for the labor costs and overheads, even after discontinuing the generous referral bonuses, discount codes, and freebies enticing customers. The prospects may evolve if these startups subsist on ever more funding and develop massive businesses with efficiencies from scale. But then they’re right in Amazon’s wheelhouse.

Idea for Impact: Some business models are never created to be profitable, and investors should be wary of encouraging—and funding—loss-making propositions. The lure of backing an initial entrant, capturing market share, and then selling out to a more determined fool isn’t viable! Who needs goods delivered in such a rush for such charges, anyway?

Fall in Love with the Problem, Not the Solution

March 25, 2022 By Nagesh Belludi Leave a Comment

Entrepreneurs, don’t get so excited talking about your solution that you forget to emphasize how it solves a problem at all.

Which problem are you solving for the user? What pain-point are you alleviating? Why is your solution relevant to your customers? How will it make their life easier, faster, and cheaper?

After all, every great company starts by solving a painful problem. Focus more on that problem when you’re selling. Not only will this persuade your investors and customers, but it also rallies your team around a shared understanding of the problem and prepares you to ask for the level of resources it should receive.

Idea for Impact: Sell the problem first, not your idea. Often, jumping too quickly to a solution makes you lose sight of the nuances of the problem.

Ideas Evolve While Working on Something Unrelated

March 10, 2022 By Nagesh Belludi Leave a Comment

In the ’90s, Japanese conglomerate Hitachi, through its subsidy Hitachi-Omron Terminal Solutions, introduced the Clean ATM, which cleaned the bank notes during transactions. The Baltimore Sun (11-Dec-1996) notes,

Hitachi has turned its talents to money-laundering of a literal kind, with an automated teller machine that sterilizes and irons yen notes before dispensing them.

Hitachi did not set out to sanitize the money; its engineers were trying to solve the problem of crumpled bills, which tended to jam machines, a company spokesman says. They solved the problem by running the bills through rollers heated to 392 degrees [Fahrenheit, 200 degrees Celsius]—any hotter would singe paper money—and discovered that the process also killed bacteria.

Idea for Impact: Serendipity is central to the creative process. Many ideas evolve when you’re working on something unrelated. Always be ready to discover what you’re not looking for.

Many Creative People Think They Can Invent Best Working Solo

January 19, 2022 By Nagesh Belludi Leave a Comment

Apple co-founder Steve “Woz” Wozniak writes in his memoir, iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It (2006):

Most inventors and engineers I’ve met are like me—they’re shy and they live in their heads. They’re almost like artists. In fact, the very best of them are artists. And artists work best alone—best outside of corporate environments, best where they can control an invention’s design without a lot of other people designing it for marketing or some other committee. I don’t believe anything really revolutionary has ever been invented by committee… I’m going to give you some advice that might be hard to take. That advice is: Work alone.

Teams aren’t automatically better at creativity. In what’s termed “collaborative inhibition,” everyone needs to be happy, so team members talk and talk until they’ve reached a consensus on a decision which is usually the lowest common denominator—something tepid that everyone, worn out from the prolonged discussion, can endorse.

Idea for Impact: The best creative decisions often reflect a unique, opinionated perspective. Look for ways to increase organizational creativity by building better environments in which individual creativity can thrive.

Invite Employees to Contribute Their Wildest Ideas

December 13, 2021 By Nagesh Belludi Leave a Comment

When Hewlett-Packard (HP) Norway appointed Anita Krohn Traaseth managing director in 2012, she implemented a “speed date the boss” program. She invited every employee from every organization level for an informal, five-minute conversation based on three themes. She encouraged people to bring their big ideas on innovating individually and collectively.

Who are you, and what do you do at HP?

Where do you think we should change, and what should we keep focusing on?

What do you want to contribute beyond fulfilling your job responsibilities? Or, do you have a talent or skill you don’t get to use now in your position?

Everyone’s an Innovator: Ramp up creativity with your frontline employees

Krohn Traaseth’s initiative defined the roadmap for her tenure. It pushed HP to become one of Norway’s top workplaces within three years. HP Norway improved every major organizational performance measure, such as staff turnover, customer satisfaction, top-line growth, and bottom-line performance.

Not only that, her discussions uncovered that there were 30 skilled musicians on her payroll. HP Norway formed a band, which played live to 1,800 company executives in Barcelona in 2013, gaining better visibility to her Norwegian outpost.

Following Krohn Traaseth’s success, other HP divisions and employers have now introduced the concept of ‘Speed Date the Boss’ initiatives in other countries.

Idea for Impact: Value the frontline people in your organization as talented assets, not cheap cogs.

Krohn Traaseth’s program was so successful because, as the top boss, she showed that she was willing to listen. She also openly modeled her willingness to listen to her management teams and foster their engagement.

When employees see the boss willing to receive honest feedback and no one’s head rolls, they’re more likely to speak up.
Soliciting ideas directly from employees individually, rather than holding brainstorms, takes the edge off group dynamics. Group settings aren’t where all employees feel free to share their best–and bold—ideas.
Rank-and-file employees can be a great source of innovation if only their leaders listen to them. Organizational innovation doesn’t have to trickle top-down or emanate from the R&D team. The best way to produce great ideas is to start by generating many ideas. Encourage everyone on your team to think, contribute, and participate.

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PS: Anita Krohn Traaseth is now the CEO of Innovation Norway, a state-sponsored project focused on promoting innovation and economic development. She’s the author of Good Enough for the Bastards (2014,) a Norwegian version of Sheryl Sandberg‘s Lean In: Women, Work, and the Will to Lead (2013.)

Cf: See my guide on preparing an action plan at a new job by collecting the expectations of all the people with whom your new role interacts.

Book Summary of Verne Harnish’s ‘The Greatest Business Decisions of All Time’

December 6, 2021 By Nagesh Belludi Leave a Comment

The Greatest Business Decisions of All Time (2012) is a flatfooted anthology of 18 engaging—and oversimplified—business stories that influenced the course of business. Edited by management consultant Verne Harnish, this tome contains long articles by nine Fortune magazine journalists.

Apple and the Return of Steve Jobs. The 1996 decision by Apple’s board of directors to bring back Jobs revived the company, transformed the consumer electronics industry, and made Apple one of the most valuable companies in the world.
Zappos and Free Shipping. Zappos’s decision to offer free shipping and 365-day free returns lured more mainstream buyers onto the internet. Other retailers had no choice but to provide free shipping (albeit with some restrictions) and absorb the costs.
Samsung and Global Immersion. In the early 1990s, Chairman Lee Kun-Hee instituted a policy to send his brightest young employees on international sabbaticals that exposed them to the local cultures and build business networks. This program later fuelled Samsung’s global ambitions.
Johnson & Johnson and the Tylenol Comeback. Consistent with the company’s “patients come before profit” credo, CEO James E. Burke set the benchmark for crisis management when he decided to pull Tylenol off the shelves nationwide and create a tamper-proof bottle at the cost of $100 million. Johnson & Johnson cemented its reputation for responsible management.
3M’s 15% Free Time Rule and Innovation. 3M Company CEO William McKnight’s extraordinary idea of giving employees free time for “experimental doodling” yielded such innovative products as Post-It notes. 3M quickly diversified its portfolio and entered many consumer- and industrial-businesses. 3M inspired Google’s 20% rule.
The “Intel Inside” Marketing Campaign. To forestall the commoditization of the computer chip, CEO Andy Grove shifted Intel’s image from that of a microprocessor company to that of a producer of a coveted, brand-name product that stood for performance. Intel became a household name that consumers sought when they purchased a computer.
General Electric’s Jack Welch and Crotonville. Welch transformed GE’s sprawling management-training institute in Crotonville, New York, into a focal point of learning for the company.
Bill Gates and His “Think Weeks.” The Microsoft founder’s twice-yearly retreat in rural isolation allowed him to read, reflect, and map out ideas—away from the distractions and the noise of business life.
Softsoap and Impeding Competition. A small Minnesota company called Minnetonka Corp. developed liquid hand soap in the early 1980s. When Softsoap started flying off the shelves, deep-pocked behemoths like Procter & Gamble began to prototype their own variants. Minnetonka’s CEO Robert Taylor developed a smart strategy to block his giant competitors and keep his company’s market share. He purchased the entire U.S. supply of plastic pumps used in the liquid soap bottles for one year—that’s 100 million units from the only supplier. By the time his competitors had access to the plastic pumps, Taylor’s Softsoap’s brand was well established.
Toyota and the Quality Revolution. Toyota’s institutional obsession with waste-reduction, zero defects, and process improvement has transformed manufacturing and inspired excellence in every service industry—including hospitals.
Nordstrom and Customer Service Excellence. Nordstrom built its brand on “above-and-beyond” customer service and problem-solving. The entirety of the Nordstrom Employee Handbook fits on a 5×8 card and contains precisely one rule, “Use the best judgment in all situations. There will be no additional rules.”
Tata Steel and Labor Relations. During a turbulent period of India’s leading steelmaker, Managing Director Jamshed J Irani confronted a bloated cost structure by reducing his 78,000-strong workforce to 40,000 by 2005. In keeping with the Tata Group’s rich philanthropic legacy, Irani offered decent pension plans and invested in labor welfare.
Boeing 707 and the Jet Age. Boeing’s decision to develop the Boeing 707 at the cost of $185 million (more than the company’s market capitalization) “remade a company, an industry, and the very culture of its time.” The 707 was the first transatlantic commercial jetliner in an era of prop planes. It kicked off the Jet Age, revolutionized air travel, and established Boeing as a dominant airliner manufacturer.
IBM and the Customer-Centric Makeover. In 1993, Lou Gerstner became CEO and embarked on an “Operation Bear Hug” to launch new communication pipelines between top executives and IBM’s customers. This helped transform IBM from an inwardly focused bureaucracy to a customer-centric market-driven innovator.
Sam Walton and Walmart’s Saturday Morning Meeting. Walton’s energetic 6:00 A.M. meeting was a pep rally, merchandising workshop, and financial update—all rolled into one. He brainstormed with his store managers on how to improve things week after week and helped metamorphose Walmart from a single, small-town variety store in 1962 into the world’s largest retailer.
Eli Whitney and the Dawn of American Technology. Whitney’s invention of the “saw gin” that worked well with short-staple cotton helped transform Southern agriculture (and sustain the institution of African slavery!) Whitney then popularized the use of interchangeable parts in making firearms.
Bill Hewlett and David Packard and the “HP Way.” The essence of Hewlett-Packard’s management philosophy was an openness and respect for the employees. With a framework of principles and the simplicity of their management methods, they established many progressive management practices that prevail even today.
Henry Ford and the Factory- and Wage-Revolution. When Ford introduced the moving assembly line, his fledging factory was confronting a dispirited workforce, declining workmanship and quality, absenteeism, and annual labor turnover of 370 percent. Then Ford decided to raise wages from $2.50 to $5 a day. The following week, Ford Motors had more than 26,000 job applicants. Ford increased production rates and slashed the per-unit cost of the Model T. Annual labor turnover fell to 16 percent, and Ford’s profits doubled within two years. Every time Ford increased the productivity of car production, he continued to raise wages. His well-paid workers had more to spend—and could afford the very cars they built.

Recommended: Quick read. The Greatest Business Decisions of All Time is a concise and entertaining read, especially if you like getting into heads, the thoughts, and the motivations of well-known business luminaries. The 18 case studies lack rigor and are beset with recency biases, narrative fallacies, and a misplaced sense of causes and effects. Some stories, e.g., the Softsoap one, aren’t well known.

Daniel Gross’s Forbes Greatest Business Stories of All Time (1997) is significantly more engrossing and instructional.

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Innovation

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Feedback-Influenced Design is a Key Point of Differentiation

Concept Testing at Every Stage of Development

Idea for Impact: Create Something People Want

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Everyone’s an Innovator: Ramp up creativity with your frontline employees

Idea for Impact: Value the frontline people in your organization as talented assets, not cheap cogs.

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