Sometimes, it's the counter-intuitive idea that hits the home run. But who'd have thought that a stodgy company like United Airlines would be the one to do it.
Like those of you who fly the legacy airlines with any regularity, I’ve grown weary of the poor service and, often, outright idiocy in the way airlines like United operate. I have my own list of pet peeves, which likely parallels yours. By now, our lists have become tedious in their retelling.
That’s why I found it refreshingly shocking to learn in today’s Wall Street Journal that United Airlines in late 2004 launched, as an experiment, “United p.s.,” a premium service (hence, the p.s.) on select domestic trans-continental flights (JFK-SFO and JFK-LAX). They converted half the cabins of some existing 757s (my least favorite airliner) to business and first class. Tickets cost as much as $3,235 round-trip for business class and $5,167 for first class. And guess what. The experiment has been a success. They’re making money on the new service – lots of money.
Here we are, in the midst of what some people say is a recession. Consumers are cutting back on discretionary spending. The word “staycation” has become a part of our summer 2008 lexicon, reflecting the fact that more people are opting to stay home for their vacations rather than pay $4 for a gallon gas, or squeeze their frames into ever-smaller airline seats on flights that have a less-than-even chance (sometimes worse odds) of departing or arriving on time.
In that context, airlines have been mothballing their older airliners, reducing the number of flights, laying off pilots and flight attendants and engaging in the fine art of saving every last dime. Then, along comes somebody at United with this counter-intuitive idea. Try to picture the planning session where that took place. Whoever came up with that idea and then managed to sell it to his or her bosses should get the award for "Bravest Manager of The Year."
That aside, there’s something deeper going on here. Remember the old one-pound can of coffee? If you’re still buying cans of Folgers or Maxwell House in your local supermarket, you’ll know that “one-pound” cans of coffee now contain 12 ounces. Last time I checked, one pound was 16 ounces. But the cans are the same size as before. There’s just less coffee in them – for the same price. And that’s the key.
Last week, my wife and I were cooking dinner and she asked me to boil a half-pound of spaghetti. Fool that I am, I figured that was about half the box, since boxes of pasta contain one pound. Wrong. When I drained the cooked pasta and put it in the bowl, it was obvious there wasn’t enough. Looking at the box, I discovered that, yes, the contents had been reduced by four ounces. Same old price, by the way.
In the same way, the airlines in the past few years have been gradually reducing the pitch (the space between the seats) in their planes, to the point of torture for anyone more than five and a half feet tall.
About two years ago, United came up with the nifty idea of charging extra for a little bit more knee room. And then, the aisle seats also started commanding a premium price. Next, they set aside the first few rows in economy class for an additional fee. Since there are few original ideas in the airline industry, all the other legacy airlines followed suit. Ditto on the brilliant idea to charge for checked baggage.
Be that as it may, what the airlines have been doing is the equivalent of the shrinking coffee can and pasta box. They continue to charge reasonable prices for air travel, reduce the number of flights, add rows of seats to their planes, and charge for stuff that used to be included in the ticket price, all in an effort to maximize what they call “butts in the seats” in their largely fruitless quest for profitability. What that has spawned is a lot of uncomfortable, cranky customers.
Maybe what United p.s. represents is a retro airline: just like the old days when it cost a lot of money to fly across the country, but by God, you did it in style.
Next up: a packaged goods company will go retro and bump up their price on a “one-pound” can of coffee or pasta that actually contains 16 ounces of product. And everyone else will follow suit. What a novel idea.
Insights and Ideas on Business and Employee Communications
Tuesday, July 29, 2008
Saturday, July 26, 2008
Joe Nocera weighs in
Joe Nocera in today’s New York Times (July 26) pretty much echoes what I wrote earlier this week, with more information about Steve Jobs’ health than I could ever have learned. Of course, he has better sources and a full-time job that enables him the luxury of doing some serious digging. Note that one of his sources is none other than Jobs himself - albeit off the record.
Yet in nearly 1700 words, he doesn’t mention the succession issue, which I find odd. If Nocera is so concerned about Apple shareholders, whose interest in Jobs' health is a legitimate concern, you'd think he would castigate the board for being so slipshod in its fiduciary responsibility of developing a CEO succession strategy.
Bottom line: I find it encouraging, if we are to believe what Nocera writes about his off-the-record conversation with Jobs, that the cancer has not returned.
Anyway, it’s an interesting read for those of you following this story.
(Full disclosure department: I am an Apple shareholder. But I am also a long-time Apple and Macintosh devotee.)
Yet in nearly 1700 words, he doesn’t mention the succession issue, which I find odd. If Nocera is so concerned about Apple shareholders, whose interest in Jobs' health is a legitimate concern, you'd think he would castigate the board for being so slipshod in its fiduciary responsibility of developing a CEO succession strategy.
Bottom line: I find it encouraging, if we are to believe what Nocera writes about his off-the-record conversation with Jobs, that the cancer has not returned.
Anyway, it’s an interesting read for those of you following this story.
(Full disclosure department: I am an Apple shareholder. But I am also a long-time Apple and Macintosh devotee.)
Wednesday, July 23, 2008
Steve Jobs and the CEO succession issue
In its current jittery state, it doesn’t take much to send the stock market reeling. Nor does it take much to pull the rug out from under a single stock. Case in point, on the heels of a less-than-enthusiastic quarterly forecast, a rampant rumor (largely on Internet blogs) regarding the health of CEO Steve Jobs sent Apple stock tumbling in pre-market trading on July 22. At one point, it was down nearly 20 points (12 percent) before recovering much of the lost value in the afternoon.
Still, the speculation and price fluctuation drove two separate stories in the next day’s Wall Street Journal. The key issue, of course, is not so much Jobs’ health as the fact that Apple has no succession plan in place. And in the absence of such a plan, legitimate concerns about a CEO’s health can reek havoc with a company’s near-term prospects, especially in a volatile stock market.
Steve Jobs is an avid vegetarian and so usually does look pretty gaunt. But his 2004 bout with pancreatic cancer hasn’t been forgotten. Some people are now speculating that he's having a relapse. On July 21, Apple’s Chief Financial Officer Peter Oppenheimer declined to answer an analyst's question about Jobs' health, calling it “a private matter.” Fair enough, but that simple comment was probably the impetus behind all the subsequent buzz.
As CNET opined on the story in the midst of the July 22 stock price tumble, “there is no universal standard for how companies are expected to disclose the health issues of their executive officers, the way there are standards for how companies are required to disclose material financial information. Corporate-governance experts generally agree that a company's board of directors has the responsibility to determine whether the health of its CEO is affecting his or her ability to run the company. Likewise, CEOs have a responsibility to be honest and up-front with the board of directors over the true state of their health.”
This is an issue facing all public companies and, as the Journal points out, continues to be a concern for the Securities and Exchange Commission (SEC) – which to date has taken a mostly laissez faire attitude. The SEC to date seems to be saying that, so long as the board is kept informed and there is no unusual (i.e., suspicious) insider trading going on, then it's probably ok.
The current rumors at Apple, in fact, mirror something that I noticed a month ago when Apple rolled out the new iPhone 3G and iPhone 2.0 software at the Worldwide Developers' Conference in San Francisco in June. I've watched videos of several of his appearances, in their entirety, at MacWorld and such the past few years. One glaring difference last month was how he yielded the stage to other people – giving them more time than usual.
When Jobs and Apple introduced the first iPhone at MacWorld in January 2007, Eric Schmidt, Jerry Yang and Stan Sigman, CEOs of Google, Yahoo and Cingular, respectively, briefly took the stage in turn. But last month, two Apple senior executives took the microphone to discuss at length the new features of the iPhone 3G and the new software: Phil Schiller, senior VP for Worldwide Product Marketing, and Scott Forstall, senior VP for iPhone software. (Schillar, incidentally, is often cited among some bloggers as a possible successor to Jobs.) It's very unusual for Jobs to give the stage to any other Apple people. So it got me wondering then.
Nobody at Apple asked me, but if they did, my counsel would be two-fold:
Number one, in cases like this, silence is not golden. Better that Jobs be seen in public, looking hale and hearty (assuming that's the case), even if a bit underweight. I know he's a private guy, but if he cares for the near-term future of his company, it would be good for him to be seen a bit more than usual, for instance dropping in unannounced at a couple of Apple Stores, or offering himself up for selected one-on-one interviews, such as with Charlie Rose. Give the interviewer the chance to ask the health question. Then, answer it honestly.
On the other hand, if in fact he is suffering a relapse or some other unrelated health problem, then this counsel goes out the window. Silence would then be the best approach for the time being.
Secondly, regardless of Jobs' state of health, Apple’s board has been remiss in not addressing the succession issue long ago. This is a company - like Oracle and Dell - that is built around one man's genius and creativity. And it is in danger of losing its raison d'etre if it were to lose him suddenly. The board, then, should step up and develop a succession plan and be very public about it. Sure, Jobs is the heart of Apple and whenever he finally announces his retirement, for whatever reason, the stock will undoubtedly plunge. But a strong succession plan and successor will alleviate much of the damage.
All too often, boards are too passive on this subject. Cases in point: GM and Oracle. Who will succeed GM’s CEO Rick Wagoner? Hasn't he adequately demonstrated his inability to address the core challenges facing GM? Isn't it time for a fresh approach? And why can't Oracle’s Larry Ellison dampen his ego a bit to select a successor who will stick around long enough to actually succeed him?
In the opposite case, look at GE. Few people ever lost sleep over succession issues at GE. It's part of their culture to cultivate future leaders, and CEOs announce their coming retirement well ahead of time to help the board identify their successor. Apple would do well to emulate the GE model.
Still, the speculation and price fluctuation drove two separate stories in the next day’s Wall Street Journal. The key issue, of course, is not so much Jobs’ health as the fact that Apple has no succession plan in place. And in the absence of such a plan, legitimate concerns about a CEO’s health can reek havoc with a company’s near-term prospects, especially in a volatile stock market.
Steve Jobs is an avid vegetarian and so usually does look pretty gaunt. But his 2004 bout with pancreatic cancer hasn’t been forgotten. Some people are now speculating that he's having a relapse. On July 21, Apple’s Chief Financial Officer Peter Oppenheimer declined to answer an analyst's question about Jobs' health, calling it “a private matter.” Fair enough, but that simple comment was probably the impetus behind all the subsequent buzz.
As CNET opined on the story in the midst of the July 22 stock price tumble, “there is no universal standard for how companies are expected to disclose the health issues of their executive officers, the way there are standards for how companies are required to disclose material financial information. Corporate-governance experts generally agree that a company's board of directors has the responsibility to determine whether the health of its CEO is affecting his or her ability to run the company. Likewise, CEOs have a responsibility to be honest and up-front with the board of directors over the true state of their health.”
This is an issue facing all public companies and, as the Journal points out, continues to be a concern for the Securities and Exchange Commission (SEC) – which to date has taken a mostly laissez faire attitude. The SEC to date seems to be saying that, so long as the board is kept informed and there is no unusual (i.e., suspicious) insider trading going on, then it's probably ok.
The current rumors at Apple, in fact, mirror something that I noticed a month ago when Apple rolled out the new iPhone 3G and iPhone 2.0 software at the Worldwide Developers' Conference in San Francisco in June. I've watched videos of several of his appearances, in their entirety, at MacWorld and such the past few years. One glaring difference last month was how he yielded the stage to other people – giving them more time than usual.
When Jobs and Apple introduced the first iPhone at MacWorld in January 2007, Eric Schmidt, Jerry Yang and Stan Sigman, CEOs of Google, Yahoo and Cingular, respectively, briefly took the stage in turn. But last month, two Apple senior executives took the microphone to discuss at length the new features of the iPhone 3G and the new software: Phil Schiller, senior VP for Worldwide Product Marketing, and Scott Forstall, senior VP for iPhone software. (Schillar, incidentally, is often cited among some bloggers as a possible successor to Jobs.) It's very unusual for Jobs to give the stage to any other Apple people. So it got me wondering then.
Nobody at Apple asked me, but if they did, my counsel would be two-fold:
Number one, in cases like this, silence is not golden. Better that Jobs be seen in public, looking hale and hearty (assuming that's the case), even if a bit underweight. I know he's a private guy, but if he cares for the near-term future of his company, it would be good for him to be seen a bit more than usual, for instance dropping in unannounced at a couple of Apple Stores, or offering himself up for selected one-on-one interviews, such as with Charlie Rose. Give the interviewer the chance to ask the health question. Then, answer it honestly.
On the other hand, if in fact he is suffering a relapse or some other unrelated health problem, then this counsel goes out the window. Silence would then be the best approach for the time being.
Secondly, regardless of Jobs' state of health, Apple’s board has been remiss in not addressing the succession issue long ago. This is a company - like Oracle and Dell - that is built around one man's genius and creativity. And it is in danger of losing its raison d'etre if it were to lose him suddenly. The board, then, should step up and develop a succession plan and be very public about it. Sure, Jobs is the heart of Apple and whenever he finally announces his retirement, for whatever reason, the stock will undoubtedly plunge. But a strong succession plan and successor will alleviate much of the damage.
All too often, boards are too passive on this subject. Cases in point: GM and Oracle. Who will succeed GM’s CEO Rick Wagoner? Hasn't he adequately demonstrated his inability to address the core challenges facing GM? Isn't it time for a fresh approach? And why can't Oracle’s Larry Ellison dampen his ego a bit to select a successor who will stick around long enough to actually succeed him?
In the opposite case, look at GE. Few people ever lost sleep over succession issues at GE. It's part of their culture to cultivate future leaders, and CEOs announce their coming retirement well ahead of time to help the board identify their successor. Apple would do well to emulate the GE model.
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