AirAsia

A few people said they enjoyed my post on Ryanair! So I thought I'd write a little about the airline Air-Asia who run an identical Low cost carrier model. (Perhaps because Conor McCarthy-former Ryanair Director is a co-founder!)

In December 2001, AirAsia was taken over by private entrepreneur Tony Fernandez. The company originally started out as a Malaysian government controlled Airline and offered customers full on board services with all the trimmings. Fernandez acquired the debt ridden airline for the abysmal share price of $0.26.


Given the time of the takeover by Fernandez, it was a significant risk. The acquisition took place shortly after the September 2001 terrorist attacks in new York, and the subsequent downturn of the airline industry that quickly followed. However Fernandez saw opportunity- aircraft leasing costs were at rock bottom prices and due to the mass lay-offs in the airline industry at the time there was an abundance of cheap affordable labour available.

The company's business model was completely restructured and made into Asia's firstlow fares airline. Fernandez saw the incredible growth of the no frills airline business model in Europe with company's such as EasyJet and Ryanair and knew the potential it would have in Asia. The low cost carrier model proved a huge success. An executive team was formed and spearheaded by Conor McCarthy, the former director of  RyanAir, in the hope that Air Asia could imitate the low fares no frills concept.

Air Asia executed the cost leadership strategy excellently introducing ticketless travelling and offering only one cabin class with a free seating policy. It positioned itself in the regional market as the cost leader with the promotional tagline “now everyone can fly.” Air Asia fareprices are an incredible 40% to 60% lower than those of rivals and facilitates the quick and easybooking of seats through regular fare promotions on its website, AirAsia.com

However the cost leadership strategy is not without its risks. The most significant ofwhich is imitation by competitors. To combat competitors imitation cost leaderscan increase the value of the good or services it provides to customers. 


AirAsia’s success inspired many low cost carrier imitators in the region andeven resulted in a price war with Malaysian airlines. AirAsia combats imitatorsthrough focusing on its low cost core competency but also by extending itsservice offering, allowing customers to purchase financial services such astravel insurance. Businesses looking to implement a cost leader strategy mayonly feel it applies to large businesses that can avail of bulk purchasing and downsizing. However small businesses can also be cost leaders, perhaps not to the extent of larger competitors’, but any firm that reaps the advantages oflow costs is essentially adopting some element of cost leadership into its strategy. AirAsia started in 2002 as a three aircraft operation, significantly lower than the major airlines fleet in the region within six years it hadexpanded to 72 aircraft's.

Author: Declan Egan

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Adopting a lean strategy to Knowledge work- Is it possible?

Read an article today on applying a lean strategy to knowledge based work, couldn't really see how it was possible until I looked at from my own perspective of knowledge work in college

The creation of the lean production line by efficiency wizards Toyota has spawned numerous approaches to improving operations and has been the forefront of their strategy ever since the company’s beginnings, when they assessed fords production and said “we can do it better.”

In regards to all things “lean” these improvements range from “relentless attention to detail, commitment to data-driven experimentation, and charging workers with the ongoing tasks of increasing efficiency and eliminating waste.”

Since Henry Ford’s Model T, the lean way of thinking and producing goods has continuously driven the latest innovation processes and waste elimination initiatives by some of the biggest and brightest brands out there.

What this article suggests, and what makes it so interesting, is the theory and practice of applying the lean concept to knowledge work. It challenges that knowledge work “which unlike car assembly-is not repetitive or easily defined” can be made lean if organizations draw on certain principles. Immediately I was sceptical. My understanding has been that the underlying principle and effective nature of lean thinking is that it has always applied to manufacturing and production lines.

It suggests that not only can lean principles be applied to knowledge work but they can also improve it through; “faster response time, higher quality and creativity, lower costs and reduced drudgery and frustration.” Reading on I was amazed to find how applicable lean was to knowledge work.

The article draws on 6 principles for knowledge workers to follow to apply lean strategy processes.

1. Continually Root out all waste
2. Strive to make tacit knowledge explicit
3. Specify how workers should communicate
4. Use scientific method to solve problems quickly
5. Recognize that a lean system is a work in progress
6. Have leaders blaze the trail

From a college students perspective it’s fascinating to apply these principles to the knowledge work of, for example, a College group assignment or project. Doing this has really shown me that lean principles do indeed extend further than to just repetitive assembly lines and can be stretched to exectuing a lean strategy for college work.

Continually root out all waste- Apply the 5 why’s to make “waste” obvious. Why am I attending this group meeting? Why am I doing this part of this assignment? Why is this relevant? Using this methodology can get to the root cause of everything and can filter out unnecessary parts of project work that are really just there to fill the page but bear no real significance to the assignment objective.

Specify how workers should communicate- when multiple people are involved in a project just as in college group work, effective communication becomes imperative. A lean system can set down how communication should be articulated so as to avoid the bombardment of emails to other group members allowing the message of the communication to get lost. Define who in the group project should be communicating, how often and what, to avoid confusion.

Have leaders blaze the trail- As with all group efforts, the real involvement to the project success usually falls on one or two key participants. This person who in college terms is usually coined "group leader" is necessary and plays an important role in motivating and monitoring the overall performance of the group. It falls on the group leader to ensure that project deliverables are put in on time so to allow the overall report to be put together, ensuring it flows, is relevant and is presentable.

The best way to approach the article was to look at it from the college group work perspective and doing so has already given me some tips of how I can apply a lean strategy; ask the 5 whys, establish how communication is taking place and establish who is going to spearhead the effort and take the role of team leader.

Author: Declan Egan

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#CulturalAdaptability

Cultural Adaptability- more relevant now than ever in the workplace. Think Irish students have great cultural adaptability- We've been lucky enough to enjoy the boom times and travel all around europe and beyond and we also have a lot of exchange students in our class groups in college offering their views and opinions to projects.

Employees at all levels of contemporary organizations bring different beliefs, values, languages, expressions, gestures and customs with them to work. Cultural differences represent a massive challenge to all global organisations. So how can we define culture? And just how much of an impact can it have with achieving organisational goals? Geert Hofstede, a pioneer in his research of cross-cultural groups and organizations defines culture as “the collective programming of the human mind that distinguishesthe members of one human group from those of another. Culture in this sense isa system of collectively held values.”

Today’s global workplace is more diverse and complex than everbefore. The effective management of a global supply chain requires organisationsto adopt a new type of skill set; cultural adaptability. Cultural adaptability is fast becoming an integral component in management, it is the willingness and ability to recognize, understand andwork effectively across cultures. It is the appreciation that approaches and styles picked up in one region do not translate well in another. Managers of Multinational corporations interact daily with colleagues, bosses, suppliers and contractors from different cultures. In order to effectively operate in line with goals and targets across multiple regions, they must think and react with an open mind and respect that culture is a learned experience that starts at childhood. 

Cultural Adaptability and Crocs Inc.

The growth and profitability of Crocs Inc, the makers of  funky brightly coloured shoesusing an extremely comfortable plastic material called “croslite” has trulybeen astounding. Since the companies humble beginnings in 2002, Crocs has grown from a new start up venture initiated by three friends from Colorado, to a publicly traded company on the Nasdaq Global Select Market. Today Crocs products are sold globally, in 90 countries and the company is a world leader in innovative casual footwear for men, women and children. The Croslite material used in every croc shoe production boasts many advantages to traditional shoe designs and has been a major source of the success of the company. The Croslite material is easy to wash, prevents odours and moulds to the foot combining comfort and function.

However the foundations of Croc shoes’ explosive revenue growthand presence in the global marketplace lay not just in their innovative and eye catching designs but also in their highly flexible supply chain model formed by a culturally experienced and aware management team. Crocs displayed its cultural adaptability in two simple strategic moves:

1/.Forming the Management: In the early stages of the Crocs development the company formed a management team composed of individuals from the electronic contract manufacturing industry, known for its global presence and dynamic nature. This new team had extensive experience in global manufacturing operations, mergers and acquisitions, and sales and marketing. Croc's now had an experienced management team who had a cultural understanding of global production accustomed to manufacturing what the customer needed, when it needed and responding rapidly to changes in demand.

2/.the right partners for Global Production:This globally aware management team were quick to learn that only contract manufacturers in Asia had the corporate culture to support the crocs manufacturing model. Manufacturers in Asia were flexible and could produce high volume, would take risks with croc's, purchasing new machinery for croc production and invested in growing the business through a mutual win-win relationship. Crocs were quick to realize that manufacturers in other parts of the world could simply not rival with Asian manufacturers responsiveness and commitment. As of 2006 over 60% of croc shoes are produced in China.

Author: Declan Egan

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Good Listening skills, not just a CV filler!

“My father said: You must never try to make all the money that's in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won't have many deals."

 

Quote by the late powerhouse Oil Industrialist, Paul Getty, capturing with great simplicity, the importance of win-win situations in Business.

Negotiation is at the centre of this concept of “win-win” and this article highlights, how even the most diverse stakeholders can reach agreements where all parties involved can feel appreciated and respected.

How can you advocate for a low carbon future when your company is among the largest emitters of carbon dioxide in the United States? A question James Rogers of Duke Energy is asked a lot. In the beginning Rogers was the newly appointed CEO of Personal Service Indiana. A company that in 1988 had just written down a €2.7 Billion loss on a half constructed nuclear plant. The reason? The plant development was halted halfway through by environmental groups, resulting in PSI’s largest construction project being shutdown. The company’s finances were in disarray, morale was low and the company had lost touch with its stakeholders and customers.

It was then that Rogers developed the plan; 100 days of listening. The idea, set out entirely by Rogers himself, was to meet with the companies many stakeholders in an attempt to” identify issues, set priorities, figure out who to trust and start repairing and rebuilding relationships” No matter what guidance he sought from the already established and veteran PSI board, he was always given one piece of advice, do not meet with any environmentalists. Internally, the idea of the CEO talking to the very groups who caused the recent meltdown was met with such resentment that Rogers almost decided to change course.

However Rogers prevailed and met with the leaders of the environmental groups. For him the goal was to come away with a better understanding of the group’s point of view and to see the issue from their perspective. He was quickly able to focus in on three of the opposition’s core beliefs; “ Nuclear energy was too costly, waste disposal was unmanageable, and the additional 2,360 megawatts of base load generation capacity wasn’t needed.” Rogers although disagreeing with some points, listened.

After the meeting Rogers realised that environmental risks had to be integrated into company decision making. In hindsight the lack of this function a result of the construction plant disaster. The company decided to convene and negotiate with its diverse stakeholders, especially environmentalists, to write a public statement about environmental considerations in future business dealings so as to never again “ waste billions of dollars on half constructing a plant.” Management would warn this would only empower groups that opposed the operations of PSI, but that was exactly what Rogers wanted to do.

With the help of the many stakeholders of PSI the company negotiated a 10 point corporate Environmental charter, allowing a total integration of company decision making with environmental risk.Rogers’s ability to treat the Environmentalist point of view and perspectives with respect and appreciation is a great example of putting agendas aside and simply listening to the needs and concerns of the other party. The nuclear plant construction was halted yes, but the 10 point charter allowed PSI to "plant a stake in the ground."

Final Thoughts:

You have to wonder if the company had merely listened to these environmentalists groups in the first place when initial planning for construction was under way, how much different the situation could have been. If the company had adopted Rogers’s approach of “empowering” stakeholders so as to make them feel respected, appreciated and listened to, who knows? They could have negotiated and reached an agreement. After all, the 3 core beliefs of the opposition weren’t exactly earth shattering.

The power of listening is as important in business as it is in day to day life. The lesson that can be taken away from this example is to always be open to engage in negotiations with opposing parties and to treat the views and opinions of other stakeholders involved with respect and if needed, action.

Author: Declan Egan

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Differentiation and The Nintendo Wii

Below is my analysis on a Case Study today I read today on Nintendo and how it completely disrupted the gaming market with the Nintendo Wii-Amazing what you can do by just thinking a little differently.

From the bus stop on the way to work, your internet browsing at home, to the branded coffee cup in your hand, we are bombarded daily with hundreds of marketing messages and brand communications. The drivers behind these corporate campaigns are a range of diverse and inter related goods and services all fighting and competing for your attention and ultimately, dominant market share. Differentiation today, is more important than ever. 

To put it simply by adopting a differentiation strategy a firm’s aim is to produce unique products and services for customers who value differentiated or innovative features more than they value low cost. A prime example of this would be the growing trend in popularity of Apple Inc products and the increased use of Google chrome and Google apps- all of which have innovation and design orientations. Through uniquely satisfying customer needs, firms that follow a differentiation strategy are able to charge premium prices and gain significant customer loyalty in the process. However differentiation should not only be subject to the technology industry. Dynamic capability can be utilized within any organization to identify possible primary and support activities that allow a firm to differentiate a good or service. 

"Differentiation is the essence of strategy, the prime source of competitive advantage"

In the year 2000 the gaming industry was ruled by three big players; Sony, Microsoft and Nintendo. The level of competition between these companies was fierce and the industry was driven by their products; Sony’s Playstation 2, Microsoft’s Xbox and Nintendo’s GameCube.

The strategies of this “big three” and the innovations of the industry were focused on furthering the technological advancements of their products. A battle consistently won by Sony’s Playstation console. The integration of better graphical displays, increased hardware capacity and faster processing speeds were the sources of higher perceived customer value and competitive advantage.


It was not until 2006 when Nintendo began to implement a differentiation strategy that the dynamic of the industry shifted. Nintendo identified potential risks facing the industry, the most worrying of which was the ever growing complexity and the high user involvement required of video games, something that had no appeal to non gamers and people with busy lifestyles. Nintendo devised a radically different strategy aimed at targeting non gamers in order to create a potentially greater market free of demographics, experienced gamers and gender. Nintendo “thought seriously about what a game console should be” and launched its new console the Nintendo Wii in 2008.

“For some time we have believed the game industry is ready for disruption. It is what we all need to expand our audience. It is what we all need to expand our imaginations.”

(Iwata - President of Nintendo Co. Ltd 2006)

Nintendo saw what the gaming industry what was doing and identified the potential of creating a console that would appeal to non gamers. The bridge to this opportunity was the Wii which incorporated innovation, design and a disruptive technology to the gaming industry, Motion Detectors, enabling real life simulation of various sports and games. The success of the Wii even allowed Nintendo to become Japan’s most valuable listed company after Toyota in September 2007. Many businesses would argue that they do not possess the tacit knowledge necessary to achieve “disruption through differentiation”


I read a great article in the December issue of HBR by Zook and Allen where they called the development and implementation of a differentiation strategy the “Great Repeatable Business Model”- It really is a great title and fits perfectly! Differentiation, as a strategy is certainly here to stay, as more and more businesses opt to implement it to remain competitive it is important they do not necessarily view it as requiring a complete re invention of the company’s products or services. Many businesses and top level managers hear the term differentiation and immediately think -new marketing research, new product development and of course, new costs. Differentiation strategy is more effective when viewed as a process for fundamentally building on core competencies, identifying the unique competitive aspects of your businesses offering and then delivering that differentiation to the customer.

Author: Declan Egan

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Ryanair + Price= Quality

Just seen some tweets of people hating on Ryanair yet again. This always frustrates me, imagine how many less trips, sights and experiences we'd have without the low cost airline.

The word quality bears no significance in today’s Ireland.

A nation still in the midst of its worst recession ever and yet it seems as though general consumer prices are still the same. Quality in terms of a paid service should include many things, but in today’s market it filters down to one fundamental: Price.

I guess it really comes down to how you perceive Quality and indeed value. And that’s exactly the problem. There is a totally backwards concept of it in Ireland today.  Take the general ravings of the public of the poor customer service and unfair charges of Ryanair (you were warned not to go over 20kg!), something that infuriates me.

Yes it seems that the horrific customer service, outrageous charges and the all in all uncomfortable experience of flying with Ryanair culminates directly into a service of definite bad quality. Meaning that less people are flying with Ryanair right?

Well, Not exactly. In July 2010 Ryanair became the first airline in Europe ever to carry more than 7 million passengers in one month. Today the airline flies to over 1,100 routes and to more than 155 airports in 26 countries. It seems that in amidst of all this bad press exists, dare I say, a quality service. Why else would so many people fly with Ryanair as oppose to competitors’?

It doesn’t take a genius to know why either; price. No matter how much we hate to admit it, the Ryanair service plus its price equals excellent quality and when taking a quality-value based approach, quality and value are two of the same.

In the words of the eccentric CEO of Ryanair, Michael O’Leary commercial air passengers should no longer be perceived as “delicate creatures” reliant on “free pillows, blankets, and tea.” Flying should be “quick, efficient, safe” and above all else “affordable”.

Ryanair won’t be winning any customer service awards or indeed most comfortable flyer 2012, but when perceiving quality In relation to price Ryanair is the market leader in Europe. With a focus on internal efficiency and external effectiveness, Ryanair meets customer expectations by offering a commoditized way of getting from A to B and exceeds customer expectations with price.

Author: Declan Egan

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Innovation and P&G

Read an interesting article today on how P&G have tripled their innovation success rate

Innovation is truly at the heart of Proctor and Gamble and has allowed them to achieve tremendous year on year growth. However in the early 2000s only a very small percentage of its new products were meeting their revenue and profit targets.

Fast forward to today and P&G has tripled its innovation success rate, the result of a strategic effort by P&G over the past decade to systematize innovation and growth. P&G has no misconceptions of their history and completely understands how innovation is an incremental part of the company’s success story.

P&G recognized growth "couldn’t come from simply doing more of the same thing” CEO Bob McDonald notes “We know from our history that while promotions may win quarters, innovation wins decades.”

A key example of this strategic effort is that of “Tide,” A laundry detergent and the company’s biggest brand. The well established “Tide” brand performed consistenly for P&G. Early 2000s however, it was no longer growing fast enough to support P&G’s needs.

A decade later and Tide’s revenues have almost doubled. How you ask? Well previosuly the tide brand consisted of only one product; laundry detergent. Today however, the tide name has an extensive product mix (Tide Stain Release, Swash Odour Spray to name a few).

P&G has also taken the brand to emerging markets. With research showing that 80% of consumers in India wash their clothes by hand, P&G saw an opportunity. The team came up with “Tide Naturals” which cleaned clothes well without causing irritation to the consumer’s skin. Perfecting this innovative surge was P&G’s pricing of TideNaturals, 30% lower to comparable cleaners.

Tide is a shining example of taking product and adding the innovative prowess of P&G and their vision to create new product lines.

But what about an entirely new business Model? Can P&Gs innovation stretch that far?

It seems so. Tide Dry Cleaners was setup when a team began exploring ways to disrupt the dry cleaning market and arose from the general conception of traditional dry cleaners being, “unfriendly, dingy” places with inconvenient hours. It's appears that P&G's innovation is as sustainable as it is brilliant.

Author: Declan Egan
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