“Poobah, it seems to me that Customer Centricity, a Culture of Innovation and Continuous Optimization would be impossible to manage if you didn’t have Corporate Agility. A company has got to be nimble and quick.”
“The big fish aren’t eating the small fish,” said the old man.
“The fast fish are eating the slow.”
The old man said, “Not many years ago, if you stopped someone on the street and asked ‘Who is the dominant seller of books in America?’ their answer would have been ‘Barnes and Noble.’ But by early 2017, Amazon had not only blown past Barnes and Noble, but its market value was higher than Barnes & Noble, Best Buy, Target, Macy’s, Kohl’s, Sears, JCPenney, Dillard’s, Gap and Nordstrom, combined.”
“And you attribute that to Corporate Agility?”
“Absolutely,” said the old man. “Have you heard of Bezos ‘two-pizza rule?'”
“He won’t allow a team to be bigger than what you can feed with two pizzas.”
The old man said, “When your people have reliable data regarding the customer’s reality, and crystal clarity regarding their mission and purpose, you can give authority to small, nimble teams. Bezos has figured out how to combine the entrepreneurial culture of a small company with the financial resources of a large one. And that allows Amazon to tackle and solve problems that other big companies can’t quite wrap their arms around.”
The younger man said, “I see how a lemonade stand could brand like Amazon, so what keeps other big companies from building on those same four pillars?”
The old man answered,
“ONE: An Organizational Focus keeps them from Customer Centricity.
TWO: Risk Aversion – maintaining the status quo – keeps them from Continuous Optimization.
THREE: A Competitor Focus – watching the industry leaders – keeps them from having a Culture of Innovation.
FOUR: Misplaced Accountability – the need to place blame – keeps them from Corporate Agility.”
“But a minute ago you told me bureaucracy, arrogance, and the fear of making a mistake kept companies from being agile.”
“What is bureaucracy but an Organizational Focus? And doesn’t arrogance always lead to Misplaced Accountability – the need to blame someone else? And what is Risk Aversion but the fear of making a mistake?
The young man’s face grew serious. “It’s fear that causes companies to have a Competitor Focus, Poobah. Fear.”
The old man’s eyes grew hard and his mouth became a thin, straight line. He leaned across the table and motioned the younger man to lean in toward him. He said, “What most CEOs need to do is hire an old woman to knit them a pair of balls.”
The younger man started to laugh but then he saw the old man wasn’t smiling.
The old man leaned back in his chair. “There’s another big company in America that’s every bit as good as Amazon.”
The younger man raised his eyebrows. “Do tell, Poobah, say on.”
“Costco is another big company built on the four pillars. Go to Fortune.com and look for a story about Costco in December, 2016.”
“I found it,” said the younger man. And then he began to read, “If you think Costco should be emulating Amazon, consider this: Jeff Bezos’s company has adopted Costco’s membership model with Amazon Prime, as one analyst noted to me, rather than Costco adopting Amazon’s e-commerce model.” A moment later, he began reading again. “Costco is a retailing colossus. Its worldwide sales trail only those of Walmart, which has 11,528 stores compared to Costco’s 715, and Amazon, which just climbed into second place. Costco is the world’s largest seller of choice and prime beef, organic foods, rotisserie chicken, wine, and it moves more nuts than Planters. Its private label, Kirkland Signature, which sells everything from beverages to packaged goods and apparel, generates more revenues than Coca-Cola.”
“With only 715 locations, compared to Wal-Mart’s 11,528…” The old man paused a beat to let that soak in. “Sunshine, there’s no one at Costco that needs an old woman to knit them anything.”
The younger man began reading again. “But Costco, big as it is, prides itself on not being your typical multibillion-dollar company. That is where the culture comes in. Executives frequently answer their own phones. “I may get a call from a cashier,” admits CEO Jelinek, “who says, ‘I’m not getting enough hours.’”
“Caring and humility lead to Corporate Agility.”
The younger man looked up and locked eyes with the old one. Then he looked down and continued reading, “Costco is a lean company. The company’s spending on basic overhead—the selling, general, and administrative category – is only 10% of revenues, compared, for example, with about 20% at Walmart.”
The old man said, “And Costco pays its workers an average of $20.89 an hour, compared with Wal-Mart’s average wage of $11.83.”
The younger man continued. “Among Costco’s efficiencies are the fact that it doesn’t advertise; it has a limited selection – only 3,700 products compared with 140,000 at a Walmart superstore and half a billion at Amazon.”
Looking down at his screen, the younger man read silently for awhile. Then he looked up and said, “Jim Sinegal was an 18-year-old college student who became the protégé of a guy named Sol Price who, during the Great Depression, saw a lot of people gouged by unscrupulous merchants. Sol Price taught Sinegal his Golden Rule of Business: Always do the right thing.”
“Where have we heard that before, Sunshine?”
The younger man looked up and said, “Richard Kessler,” and then went on, “In 1983, Jim Sinegal and Jeffrey Brotman decided to open a warehouse store. But they didn’t see it as a company. They saw it as a mission – a better way of doing business. ‘Do the right thing’ is still the company mantra and Costco employees really do try to live up to it. People who work at Costco say they hear it every day.”
The old man asked, “Does the Fortune story describe how Sinegal and Brotman defined their mission – this ‘better way of doing business?'”
The younger man looked down at his screen again. “It means never trying to gouge vendors or customers or employees. It means facing up to mistakes and making them right without being forced to do so or making excuses. It even means maintaining a return policy without restrictions, even though they know some customers abuse it. Poobah, it says when Costco discovered that a shirt they had advertised as 100% silk wasn’t actually silk, they contacted each and every purchaser and refunded all their money.”
“Who does that sound like, Sunshine?”
“That sounds like Julius Rosenwald and Sears before the Marshmallow Eaters took over.”
The old man said, “Costco is a company that looks beyond the data about company performance. They’re obviously looking at the data that reveals their customer’s reality.”
The younger man looked down at his screen one more time. When he looked up again, his eyes were big and round. “It says here that Costco executives occasionally invoke Sears as a cautionary tale of a company that was once great and then lost its sense of identity. Jim Sinegal says, ‘Culture is not the most important thing. It’s the only thing.'”
© 2017, Roy H. Williams - www.mondaymorningmemo.com
Jeffrey and Bryan Eisenberg - www.belikeamazon.com