SUSTAINED ADVANTAGE, INC

The Formula? Your Company’s E = MC2 Equation Is WaitingHow to Copy the Southwest Airlines Formula

Merlin Spencer, MBA, PhD and Tim Young, EMBA

8/1/2010

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Sustained Advantage, Inc - Copyright © 2010 – All Rights Reserved 8800 Ensley Court, Leawood, KS 66206 (913) 381-7777 / mspencer@sustainedadvantage.com

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Table of Contents

Table of Contents.................................................................................................1

Southwest Airlines’ Simple Formula.....................................................................2Business Model Key Elements...............................................................................................2

SWAir Success = Dedication to Operations Excellence.........................................................3

The “New” SWAir Offering for Customers Changed Everything...........................4How does SWAir Compare to Good to Great Companies?....................................................5

Balance the Equations: What is E = MC2 at your organization?..........................6

Master Doers – Backbone of the Total Organization…………………………………………....6

Unbalanced Supply of Support visa vie Operations...............................................................8

Getting “Master Doers” in Right Jobs.....................................................................................9

Discussion..............................................................................................................................9

The Strategy Going Forward............................................................................122Stage One:.........................................................................................................................133

Stage Two:.........................................................................................................................133

Stage Three:........................................................................................................................ 14

Details for Organizational Assessment………………………………………………………….14

End Notes...........................................................................................................15 Books of Interest for References..………………………………………………………………… 16

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Southwest Airlines’ Simple Formula Southwest Airlinesi (SWAir) is the undisputed 37 year old airline industry leader, but what business formula (strategic choices) helps SWAir sustain this advantage? How do they stay on top – even during the toughest of times?

Herb Kelleher, one of the founders of SWAir, established the primary elements for their success through two decisions. First, he hired operations leaders who were “master doers” in their field and gave them the power to make all choices for how things would work day to day with customers. Second Kelleher challenged this team to complete a four plane route schedule with only three planes because they had to sell the fourth plane in order to keep three others in the air.

The end result was simple but elegant. When deciding how to make 3 planes fill a 4 plane schedule – things had to conform to a simple rule: less time on the ground – more time in the air, where they make money. That translated into a 10 minute turnaround, which results in an added flight per day per plane compared to industry standards. And that enables SWAir to generate profits with consistently lower prices per ticket, which passengers love.

Business Model Key ElementsThe SWAir business formula has 4 factors: One unique Offeringii produced and delivered around a Pivot Pointiii aimed at two Targeted Customer Groups that define two separate but complementary Entitiesiv (customer target and Offering defines an Entity; see footnotes on Page 15).

1. One Unique Offering : details for all the elements included in SWAir Offering are, almost without exception major departures from industry standards set by competitors. (See details Page 4)

2. Two Target Customer Groups : First targeted customer group: down town based business men traveling by automobile to 3 other cities. Second targeted group: Weekend pleasure travelers.

3. One Unifying Pivot Point : 10 minute turnaround is a central factor forcing operations personnel and customers to both act in new ways so 3 planes can do the work of 4.

4. Two Complementary Entities , which were a combination of 3 things:

a. Specific targeted customer group; 2. Offering tailored to customer target; and 3. Operations ability to make 10 minute turnarounds happen consistently.

b. Downtown business customers kept planes full during weekdays by saving travel time to and from their destinations, usually with return same day trips.

c. Within a year, SWAir added Peanut Fares for pleasure seeking customers that filled planes to same destinations for “fun” trips on weekends.

d. Result: Two different “Entities” based on distinctly separate customer motivations, each with a tailored Offering but same Master Doer Operations teams creating and delivering consistent and reliable services.

e. Best Outcome: Full planes – 7 days a week operating at a profit.

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SWAir Success = Dedication to Operations ExcellenceSouthwest business formula was created, perfected and is still successfully practiced by SWAir today through two types of leadership.

First: “Master Doers” in Operations: The Master Doer leaders and day-to-day operations employees know what they have to do for Pivot Point turns (now 25 minutes long). These folks are dedicated to operations excellence as they get it done very well as a daily routine for every plane, every stop, every time – at every airport with no exceptions - while “fixing” what’s not working to avoid any serious delays. Consistency in operations is crucial to successful outcomes between customers and employees.

Second: Top Leadership Dedication to Operations Excellence: Top leaders at SWAir understand the need to protect a Pivot Point focus as the central strategic element that drives the business model success. Their focus is to keep things simple, especially for operations folks as they provide all the services that routinely take care of customers. Together with Master Doers, top leaders foster an overall Guiding Principle: DO NOT ALLOW anyone to complicate any of the Offerings for customers where it makes life tougher for Operations, like doing special meals. It will unravel the Pivot Point.

The Pivot Point focus also requires all support functions like IT, finance, HR, accounting, legal, marketing, PR, administration, etc. to protect Operations from any unnecessary complications. But how does this work within SWAir?

Support functions must follow a very simple rule: do not lengthen the Pivot Point turn time unless it is required by legal mandate. For example, if IT or HR or anyone had an idea for new systems that added time to the boarding process, they should and likely would say “Stop!! This is going in the wrong direction!” We need to rethink this idea so it lessens time boarding, not lengthens it because any ideas that complicate Operations can extend Pivot Point time. And that will eat away at profits and diminishes competitive advantage.

The upshot is pretty simple as well. First all the different support groups (HR, finance, IT, marketing, legal, etc.) must begin working closer together. The normal old ways of each separately taking their ideas for improvements to operations will complicate life for everyone. Now they need to plan together first and then with operations to make sure any changes being contemplated are consistent with maintaining or improving the Pivot Point turn time with every plane. So while all SWAir employees have one simple mantra they talk about: customer services, in reality they are protecting the consistent delivery of services, which is the Pivot Point turnaround time.

This puts everyone on the same page all working for one simple goal. And it creates profits because the basic formula works to keep prices low but productivity per employee very high. And that means customers return again and again and recommend that others join them by flying SWAir, which grows the customer base, revenues and profits.

Top Leaders Charge to Master Doers:

Consistency in operations is crucial to successful outcomes for customers so they repeat and recommend that others buy and fly.

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The “New” SWAir Offering for Customers Changed EverythingThe first requirement by “master doer” operations leaders at SWAir was to devise new ways to work with passengers. The result was a new set of “passenger rules” that broke all the existing airline industry rules. Today this totally new approach is well accepted by most air travelers. But when SWAir started out making passengers do all the things involved with SWAIR Offerings it was a major departure from norms of the industry that many “traditional” passengers resisted for quite some time.

1. All routes are point to point trips from older down town airports.

2. All flight reservations are made directly with SWAIR – no travel agents.

3. Simple point to point pricing for all tickets allows passengers to carry forward credit on missed flights – good for full value in next 12 months with no penalties or added reissue changes.

4. One type of aircraft – Boeing 737 – no exceptions (learn it once – parts, repairs, handling equipment, storage, etc., then repeat and improve solutions over time).

5. No interchange of luggage with other airlines.

6. No frills or hot meals – only snacks and drinks.

7. No pre-assigned seat selection system – open seating governed by when each passenger “checks in” to obtain a boarding pass.

8. More operations “managers” than any other airline by nearly double. These are working managers without offices, stationed “on the line” in airports working shoulder to shoulder with subordinates solving daily operations / implementation / customer issues.

9. In all operations areas, there are clear team goals, measures of success, feedback sessions on performance and team rules for how to meet or beat the 25 minute turnaround goal with planes and passengers. The lists below include the operational functions and team requirements for successful outcomes.

SWAir has Ten Team Practices SWAir has 12 Distinct Operations FunctionsLeadership with credibility and caring

Investing in frontline leadership

Hiring and training for relational competence

Using conflicts to build relationships

Bridging the work / family divide

Creating boundary spanners

Measuring performance broadly

Keeping jobs flexible at the boundaries

Establishing partnerships with unions

Building partnerships with suppliers

Pilots

Flight Attendants

Gate Agents

Ticketing Agents

Operations Agents

Ramp Agents

Baggage Transfer Agents

Cargo Agents

Mechanics

Fuelers

Aircraft Cleaners

Caterers

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10. All non-operations functions like IT, HR, legal and finance / accounting are designed to keep things simple and support the 25 minute Pivot Point goal without exceptions. Which means operations choices trump support function choices in nearly all cases unless support makes operations more productive.

11. This unique operations focus allows SWAir to have consistently low ticket prices and profits every year due to very high worker productivity

Summary: The common thread through all SWAIR choices in operations is simplicity and control – led by personnel we describe as “master doers”. They are high performance folks who see a bigger picture and make the “right stuff” happen between customers and operations. Who makes sure the “master doers” are in charge? Top management at SWAir sees their function as supporting and reinforcing the ability of “master doers” to make strategic choices that help everyone keep the Pivot Point goal of 25 minute turns per plane as top of mind every time a plane lands and takes off.

How does SWAir Compare to Good to Great Companies? The SWAir story in many ways mirrors what happened in the 11 companies profiled by Collins in Good to Greatv. Each top leader selected members of their operations and support teams (Master Doers) that met regularly to discuss how to handle and solve problems and challenges. These select leaders were on what Collins called “the Council”, which we describe as the Workplace Architect Forum. Their interaction with each other and the top leaders allowed them to refine the overall focus for these 11 companies into what Collins called the Hedgehog. In our view, 9 of the 11 greats also had Pivot Points, which is a much more refined quantitative goal around which to organize everything.

What’s different in most organizations today – compared to SWAir or Good to Great companies at their peak of performance? In too many cases, “master doers” who are working to make things happen successfully between operations and customers have lost their voice at the top management decision table. In many organizations their power has been significantly reduced or eliminated through decisions to outsource part or all of operations. And those remaining in operations are usually handed “strategies” set forth in financially focused bottom line oriented, top down run organizations.

In this “professional” system consistency of operational excellence may suffer because a clear Pivot Point is not visible and agreed upon as the driving force for successful outcomes by customers interacting with operations. Without an agreed upon customer focused Offering as the operations goal, any other goal can become the compelling one – no matter how impossible to achieve on a consistent basis. The challenges to remaining “master doers” are quite clear since the necessary resources are not defined by what they require to implement consistent operationally sound practices. Instead those in charge of operations are asked to “make it work” to the best of their abilities, which are usually not even close to Peak Performance levels like SWAir.

Master Doers’ Choices in Operations: They changed everything to make the “right stuff” happen ….between Operations and Customers.

Master Doers NO LONGER Representing

Customers: In too many cases both Master Doers & the Customers they represent have little or no voice at the top level decision table, all in the name of short term

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Success stories like Wal-Mart, P&G, IBM, Apple and Google exemplify the power of “master doers” to drive successful outcomes. These organizations have grown, promoted and protected their “master doers” on a consistent basis. Competitors have targeted hiring them away to boost results but normally with minimal success due to lack of proper support and focus on Pivot Points.

The overwhelming success in these companies arises from the interaction between customers and operations that is directed and managed by master doers as they define a global Pivot Point that all can agree is compelling for successful outcomes, including bottom line financial rewards. Top leaders in highly successful organizations routinely interact with “master doers” in identifying and then protecting and improving the Pivot Points by keeping things simple. And top leaders continue to stay grounded in reality by knowing and communicating with “master doers” as the key players who define and deliver value to customers. The secret is that their customers are willing to return regularly plus recommend that others buy and use, which grows the customer base.

So what if resources devoted to master doers” and operations decline while numbers of people and jobs in support tends to grow? And they lack an agreed on Pivot Point? There is a critical need for leaders to understand the implications from rapid growth in support functions like HR, finance, IT, legal, etc and proportional loss of people and power by operations and Master Doers. Successful operations must deliver consistently high quality Offerings for customers based on having the right resources. The next section explores interactions between support, operations, master doers and Pivot Point business models with a recommended process to improve things at your organization, no matter where it stands today.

Balance the Equations: What is E = MC2 at your organization?

Master Doers – Backbone of the Total Organization

If Master Doers are the most critical members of the total workforce, then those they work to serve, the customers are the most important people for the total organization. The majority of Master Doers are found in the Operations side of organizations, irrespective of the types of organizations. That means in service organizations the Master Doers are those doing the services and “touching” customers in dental and physicians’ offices, call centers or where ever they work.

A crucial question facing any organization is the number, age and skill levels of their Master Doer class of workers. Why? Because this group of workers performs best when they have a major hand in defining and implementing the value chain that creates, sells, produces and delivers outputs for customers to buy and use. A strategic leadership issue is the number and placement of Master Doers across the total organization as discussed in Good to Great. Answering the questions of whether there are enough Master Doers in the right jobs where they can make the best contributions in creating and delivering value to customers is a leadership issue of highest importance.

When an imbalance of too much Support compared to Operations begins to gain momentum, the first casualties are usually the Master Doers in Operations. Why? Because the Support folks typically have limited personal experiences in Operations so they are uninitiated in the complexities and challenges faced in day to day efforts to keep things flowing smoothly.

Master Doers in Charge of Operations:

Highly dependable leaders with deep, rich experience bases that “get the right things done” almost without fail, no matter the circumstances

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An important truism in Operations: Things are never without some type of challenge or difficulty. NEVER. So when Support people ask Operations folks to tell them what’s needed to get things running perfectly in Operations and the answer is NEVER going to happen, Support folks don’t seem to understand or accept this answer. Why can’t it just be “fixed” so it runs like it should most of the time ask the Support folks? The level of inexperience among Support is what makes Operations folks even more uneasy, because from an Operations point of view, NEVER running perfect is the norm not the exception. Why?

Because the changes that face Operations arise from a multitude of sources, but principally from outside factors that are totally beyond their control. It includes things and situations with competitors that get a new advantage with products or services and existing and prospective customers that want to change what they buy. Include changes by suppliers, new product changes, trade changes and unexpected things like oil leaks, volcano eruptions, currency crises, banking collapses, commodity price changes, etc where the ability to control these factors is non existent and you see why NEVER running perfectly in operations is the right answer.

Rapid adaptations and adjustments are the cure that works, which is provided by Master Doers. That’s why they are the most important people in the most valued jobs.

An initiative to improve the effectiveness in your organization works best if you can complete a “global” view of your division or the total organization. You start by identifying two pieces: Operations and Support functions. The second task is to create a process flow chart that shows how the value chain within Operations works to create, produce, sell and post sale support the outputs sold to customers. A third task is to identify all the Master Doer class of employees. Then place them onto the process flow chart that shows where each one fits into the value chain as they create value for customers. Finally a documentation process that defines how Master Doers communicate with each other as they work to overcome barriers and keep things running to fulfill customer orders will complete the “global” view.

The value flow chart is designed to separate the work in Operations from Support so the Master Doers in each group can be identified, located by function and position and selected ones interviewed. Specific jobs that Master Doers complete and how those jobs are connected to each other needs to be identified and diagrammed based on how things actually work day to day. This exercise shows why most traditional organization charts provide little insight into how things happen in the real work flows that are followed day to day. When doing the value chain diagrams it needs to show the different types of communications connections between and among the Master Doers as they tackle and solve different types of barriers and issues.

These highly capable “doers” are the backbone for the value creation process and need to have open and honest exchanges on what’s happening that impedes progress. As they discuss ways to “fix” the problems and keep track of what’s been done, it’s important to recognize that most of these “fixes” are kept in the personal experience base of Master Doers. As long as they have this role and continue to fulfill the job of helping “make things happen” as a daily routine, operations will continue to “work fine”. BUT, if or when they are not involved and others don’t have their background and knowledge it’s easy to see why lesser choices are made until a new Master Doer can be established by “fixing” new mistakes.

Organizational Assessment: Specify Operations and Support Separately:

Operations folks “touch” customers with their work; Support folks help Operations but don’t “touch” customers directly.

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Keeping politics and other disruptions from interfering with decisions and actions that optimize value to customers is what Master Doers do best. They identify roadblocks and solve problems that would otherwise impede progress in implementing solutions that work. This is especially important for keeping Operations on a highly successful track of creating revenues at the lowest possible costs.

There is another level of investigation that can be helpful in making more rapid progress toward discovery of a Pivot Point and improving outcomes. In most highly successful organizations there will be one key position or function that holds sway over most or all aspects within Operations. For example, the Principal in the K – 12 educational systems or the airport operations manager for SWAirlines or the leaders of major residential real estate offices are the key value chain creators in each organization. If this key individual is not a Master Doer of the highest level of achievement they will not function at the highest levels as a decision maker for the teams reporting to them. Why? The day to day work done when completing these jobs is complex and ever changing at least on a day to day if not on an hour by hour basis. That means the job holder must have established decision guidelines for all subordinates that adjust according to changing circumstances in order to achieve the best outcomes for customers, whether students, passengers or buyers / sellers of residential properties.

The ways Master Doers are organized around the lead person in the key Operations position helps determine the speed and quality of choices made along the value creation process that has been diagrammed and detailed. How well the customer needs have been assessed and then fulfilled obviously determines the levels of satisfaction, which drives their return purchases plus recommendations that others buy and use the Offering. Ultimately that’s the final threshold to cross successfully: have buyers and end users return and recommend that others buy and use, which is how a customer base grows and the sellers thrive.

The Two Dilemmas Centered Around Master DoersMost organizations find themselves facing two major dilemmas. The first is the proper allocation of Support resources and funding relative to the size and types of Operations they serve. The second dilemma is obtaining and then maintaining an adequate number and mix of Master Doers that assures Operations can and will know and meet customer needs with consistent high quality of Offerings.

Unbalanced Supply of Support visa vie OperationsAll too often senior management has increased the scope of Support to a level where it diminishes value received by Operations. In fairness when leaders ask, “What is the right amount of resource needed to provide proper levels of support to operations?” there is no a simple answer. However, we strongly believe that….

An oversupply of support creates its own demand, where requests and requirements from support begin interfering with operations abilities to get the right stuff done. That can complicate things and lead to higher costs.

A different dilemma occurs when an inadequate supply of support forces operations to “fly blind” without sufficient data to guide them, which in turn leads to higher costs. In some organizations

New Complication: Oversupply of support creates its own demand, which interrupts operations and increases costs.

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support has not grown fast enough to keep up with what’s needed, creating a partial vacuum where requests and requirements from operations are not properly completed.

Establishing and maintaining a proper balance between supply and demand for support to meet and exceed needs for help by operations is a complex task that is never quite right. However, the answer seems clear: establish a “master doers” team that interacts with top leaders to identify a workable common goal as the Pivot Point. Based on a single target, the balance of resources between operations and support becomes a dynamic process that always tends toward a proper “direction” by increasing or diminishing resources devoted to each, given needs from operations to consistently provide Offerings to customers that meet the Pivot Point goal.

i Wikipedia: Southwest Airlines Co. (NYSE: LUV) is an American low-cost airline. Southwest is the largest airline in the world by number of passengers carried per year (as of 2009). Southwest maintains the third-largest passenger fleet of aircraft among all of the world's commercial airlines. As of May 3, 2009, Southwest operates approximately 3,510 flights daily. Southwest has its headquarters on the grounds of Love Field in Dallas, Texas.

Southwest Airlines has carried more customers than any other U.S. airline since August 2006 for combined domestic and international passengers according to the U.S. Department of Transportation's Bureau of Transportation Statistics. Southwest Airlines is one of the world’s most profitable airlines, posting a profit for the 37th consecutive year in January 2010.

Southwest's successful business model involves flying multiple short, quick trips into the secondary (more efficient and less costly) airports of major markets, and using only one aircraft type, the Boeing 737.

Definitions of terms based on 12 steps needed to gain Sustained Advantage over competitors are listed below. For further clarification or to provide suggested changes, please call cell phone 913 381 7777 for Merlin Spencer or email mspencer@sustainedadvantage.com . Thank you so much for your time and consideration. ii

? An Offering is the combination of all the elements from operations that “touch” customers in creation, sale, production, delivery and follow-on support of an organization’s goods and services that customers gain value from and are willing to purchase. The “use” of what’s purchased will vary by every situation, so both buyers and users views of an Offering are included when doing any data collection and analyses of what’s working best and what’s not working in an Offering.

iii Pivot Point Concept – The notion of Pivot Point is presented as a uniform goal for any organization. The “target” for a Pivot Point discovery process is to isolate how operations is working together and interacting with prospects and customers when creating and delivering some type of value to customers or constituents. Examples include students at school, patients in health care, citizens in communities, and members in organizations or associations as well as buyers and users of cars, cell phones, computers and all other types of products and services. The Pivot Point is normally discovered by a small team of “master doers” being focused on interactions between the customers and the operations. This paper uses Southwest Airlines business model as an example to demonstrate the tension between the complex and simplistic approaches to setting strategies, goals and rewards in organizations. iv An Entity is the combination of an Offering and targeted customer group or segment. Most organizations have more than one Entity since they do serve multiple customer segments, categories or types. Again the buyers and end users need to be included in all data collection and analyses for completeness and accuracy in describing findings and recommendations concerning Entities.

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Getting “Master Doers” in Right JobsThe second dilemma is focused on getting the right numbers of “master doers” into the right jobs. When there is an oversupply of “master doers” it will normally take care of itself, as the excess will find other pursuits within or outside their current organization. “Master doers” are the type of persons that solve problems to make the right things happen because they have these tendencies woven deep within their personality. They respect each other and can sense when their skills are not fully engaged, which leads them to search out other options to apply their talents.

But when there aren’t enough “master doers” to provide leadership and problem-solving talent it leaves both operations and support teams without sufficient capabilities to guide them. In turn the organizational gap will usually result in lower productivity and higher costs.

Peak Performance is most commonly referred to in sporting situations such as the Olympic Games. Our reference is to those organizations that have proven their abilities to create and deliver superior levels of outputs (Offerings) over several years, thereby gaining a reputation for outstanding performance. Establishing and sustaining the organizational disciplines to reach and sustain Peak Performance outcomes on a consistent basis is seldom achieved by organizations of any type. A few best selling authors have described companies at Peak Performance levels, but no one has presented the “formula” by which to make it happen. It’s our belief that “Your Company’s E = MC2 Equation is Waiting” to be uncovered. We’ll help you Copy the Southwest Airlines Formula so you can come on board and start at any time.

vBooks of interest when searching for Pivot Point and your company’s equation include the following.

Kevin & Jacquie Freiberg, Nuts – Herb Kelleher’s Crazy Recipe for Business and Personal Success, Broadway Books, 1996Jody H. Gittell, The Southwest Airlines Way, McGraw Hill, 2003Jim Collins, Good to Great, Harper Collins Publications, 2001John P. Kotter, The General Managers, The Free Press, 1982Charles A. Garfield, Peak Performance, Warner Books, 1984Larry Bossidy & Ram Charan, Execution: The Discipline of Getting things Done, Crown Business, 2002Jim Collins, How the Mighty Fall, Harper Collins, 2009Sun Tzu, The Art of War, Translation by Samuel B. Griffith. Oxford University Press, 1963Peter Drucker, Management: Tasks, Responsibilities and Practices, Harper & Row, 1973Mike Woodcock, Team Development Manual, Halsted Press, 1979Gene Dalton, Paul Lawrence and Larry Greiner, Organizational Change and Development, Richard Irwin, 1970Clayton Christensen & Michael Raynor, The Innovator’s Solution, Harvard Business School Press, 2003Bradley Gale, Managing Customer Value: Creating Quality & Service That Customers See, Free Press, 1994Kees Van Der Heijden, Scenarios: The Art of Strategic Conversation, Wiley, 1997Daniel Goleman, Richard Boyatzis & Annie McKee, Primal Leadership: Realizing the Power of Emotional Intelligence, Harvard Business School Press, 2002Abraham Maslow, Maslow on Management, John Wiley, 1998Orvis Collins & David Moore, The Enterprising Man, Michigan State University Studies, 1964Charles Kepner and Benjamin Tregoe, The New Rational Manager, Princeton Research Press, 1981Henry Mintzberg and James Quinn, Readings in the Strategy Process, Prentice Hall, 1996Russell Ackoff, Redesigning the Future: A Systems Approach to Societal Problems, Wiley, 1974Russell Ackoff, Creating the Corporate Future: Plan or Be Planned For, Wiley, 1981William Bridges, The Character of Organizations, Davis-Black Publishing, 1992Barnett C. Helzberg, Jr. What I Learned Before I Sold to Warren Buffett, Wiley, 2003

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General Guiding Principle:

Anytime an organization has a scarcity of “master doers” within any major function for whatever reason, all aspects of productivity and performance will be lowered.

The causes for the inadequate numbers of “master doers” need to be addressed and fixed or lesser results will continue unabated. Similar to the first dilemma, establishing and maintaining a proper balance between supply and demand of “master doers” required to meet and fulfill the numbers needed in the right jobs to achieve operations excellence (Peak Performance) in an organization is a complex task that is never quite “right”. Again the answer seems clear: a team of “master doers” routinely meets with top leaders to first identify and then regularly achieve a workable common goal as the Pivot Point. Using this common goal as a single target, the teams’ ongoing ability to gain operations excellence with the right numbers of “master doers” plus employees in the right jobs becomes a dynamic process that always tends toward the right “direction.” There is a natural tendency toward having enough “master doers” to consistently fulfill the Pivot Point goal.

Discussion When working to establish a powerful Pivot Point business model for your organization, determining proper interaction between the supply of support, the numbers of “master doers” and jobs they currently occupy in operations is a first order decision.

If an oversupply of support is at play, it will usually drive out some of the “master doer” class of folks in operations. Why? Because life is short, and master doers have many different options for other positions in most cases. When master doers are without upper level help and intervention, the support folks will usually get their way. And when support drives changes without agreement from operations, efforts to make changes happen also get in the way of operations getting their “regular” work done.

But why have resources been shifted into support at the expense of operations? Why are folks doing work that is “touching” customers and creating value being laid off and shrunk relative to those in finance, marketing, PR, IT, HR and other support roles that are increased? In our experience with many different situations, support has definitely been “winning” more of these decisions than operations in recent times. Why? Because they are usually more capable of “selling” their point of view to decision makers, who have in most cases a support function background. Operations types have been relegated to lesser positions in part because they are always “tied to the hassle of getting things done” that meet or exceed customer requirements. That includes sales, advertising, production, distribution and after sale customer care.

So when is everything operating without any problems in the operations world? Never – because of the nature of this work it’s never without problems and hassles of one type or another. Yes there can be hassles in support functions like IT when computer systems fail or invoices get mixed up due to improper programming changes. But for the most part, support is very routine and stable compared to most day to day operations groups. And this stability allows for fewer sleepless nights and more ability to concentrate on making incremental improvements as a routine matter. And these differences in day to day challenges are part of why support teams tend to view operations as an ongoing train wreck that needs to get “fixed”. And as smart and capable folks, support usually has many different ways to

Scarcity of “Master Doers” of any type:

Too few within any major function for what ever reason, all productivity and performance will be lowered.

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make changes they believe will solve many of the core problems and thereby make things in operations run smoother.

The most negative fallout from a shift to support as the more important function is the recurring loss of master doer class in the workforce.

In the complexity of identifying and solving the many unforeseen operations problems, no one excels like a master doer. And few things frustrate them more than “outsider” support folks who try imposing uninvited complex ways to meet and solve the unexpected things that keep disrupting throughputs in operations. That’s why master doers at SWAir have kept things simple and focused on the Pivot Point. It’s also why the master doers in 11 great companies kept pressing for changes leading them toward the Hedgehog (simplify, make routine and streamline), which also lessens chances for unexpected problems and issues to intervene.

Ergo – one solution for both dilemmas: discover the Pivot Point as a single goal for everyone to know and work to achieve every day.

In order to uncover a Pivot Point and build the systems around this overall goal, an organization must begin to protect and grow the master doer class in all areas. This process starts when top leaders make a decision, name and work closely with a small master doer team dedicated to the goal of defining a Pivot Point. As this effort evolves, all aspects of the workforce will begin to unify around a very simple Pivot Point business model like the 25 minute turn at SWAir. It’s a goal that all can see and embrace when doing their part in making it happen every day.

The SWAir story helps highlight both dilemmas and provides guidance on potential answers. Consider the “Support to Operations Dilemma” first. A leader in Operations faces a threefold level of complexity when getting help from support. After asking for help and then coordinating improvement efforts, at the same time he must manage across his value chain ensuring alignment and cohesiveness.  One job is focused on getting the right help from support and the other on timely outputs when producing and delivering service/products in Offerings to customers. 

And the support dilemma is more complex because functions like HR, finance, IT, marketing, PR and legal are not coordinated or synchronized. Each tends to act on their own without much concern for a combined effect on each other or how they impact operations. Thus an “oversupply” of support tends to arrive without fanfare because many different requirements from separate groups can easily overburden operations.

So when leaders in Operations say an oversupply of Support is one of their biggest concerns it is likely a true statement. But how to establish a better alignment is an even tougher issue. 

Unintended Consequences:

Since support functions are not coordinated an oversupply tends to arrive without fanfare in requirements from separate groups (HR, finance, IT, legal, etc) that overburden

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The second dilemma concerns the proper number and placement of “master doers” within the organization. Certainly an oversupply seems improbable and will tend to correct itself without much flourish. Undersupply is a totally different matter, as it will normally occur in both operations and support areas, but today more so in operations.

There has been a tendency for support to attract the more highly educated class to populate jobs in finance, IT, accounting, marketing, HR and legal, while they are shunning operations jobs as being “difficult” and having “never ending problems.” That leaves operations folks in sales, advertising, production, distribution and customer service centers to endure the questions and challenges of those in support jobs. This is especially tough when support folks have not, for the most part, been exposed on a daily basis to the challenges of running operations at the Peak Performance levels.

From the point of view of support experts, getting things working better in operations may be tough, but why so challenging every day? Enter the “master doer” class of operations folks who have long track records of getting things done right, done on time and within budget. And how have they managed such a track record? By doing these jobs over and over again and learning how to make things happen at high levels of success even under very tough circumstances. BUT, they cannot work miracles without the proper resources and right numbers of their class who have the “right jobs” located in the right places.

Somehow when organizations are lacking a proper balance between operations and support, this imbalance tends to emphasize the dilemmas for not having the right numbers and positions for “master doers” who can solve the problems.

As the support functions have gotten more resources they must prove this has been the proper decision. So they begin making things happen – but to what end? They cannot in most cases do their work without the cooperation and implementation from operations, which will involve getting things done that impact customers.

Usually this also impacts revenues (sales to customers) and costs. It’s justified by helping reduce costs, improve productivity and increase the bottom line. Much of the time these new ideas from support have never been tried and implemented successfully in this group or organization. Why? If this has been tried and succeeded in the past, it would not be a new project happening today.

So what is the upshot arising from the two types of dilemmas? And what does it

mean to you, your team, your department / division and organization?

Unintended Consequences:

Somehow lacking a proper balance between operations and support tends to emphasize the dilemmas for not having the right numbers and positions for “master doers”.

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Operations(The core business processes, assets, and resources that accomplish getting new and

retaining customers through the development and delivery of goods and services)

Customers Master DoersPivotPoint

SupportWhen the oversupply of support exists, they have a tendency to push new ideas and projects at operations faster than the later can absorb and implement them. Why? Because the time and resources needed to dream up these ideas and sell them as a feasible right answer is much easier and faster than efforts to make them work in real live situations with customers. In the case of a forced sale, customers can be either “inside” the organization or “real” ones who will be receiving the benefits and using this new approach. As prospective customers there are two decision choices: first whether to say yes and “buy into” starting this new approach and second how hard to work in making it successful in actual use. Customers buy and use it as they team with the folks in both support and operations that create and deliver the new changes to them. Buying is usually much easier than using it and making it work correctly.

One more time: So what is the upshot arising from the two types of dilemmas? And what does it mean to you, your team, your department / division and organization?

The Strategy Going ForwardWhat’s so very interesting about these two sets of dilemmas is that they can both be solved with the same remedy. It’s a process that involves indentifying existing master doers and connecting them with upper level leaders who are willing to tackle the issues head on. And work with each other and master doers until a solution is in place that is successful. The process goes something like the following steps and phases.

Stage One: Gain preliminary agreement by a team that one or both of the dilemmas seems to be damaging and limiting successful outcomes in their organization.

1. Discuss and agree on specific situations where outcomes can be improved.

a. Note there are plenty of companies that lack high quality in both operations and support and sometimes the shortfalls are just in operations. 

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b. It seems the trick is to identify all types of problems and tackle one or two that “hurt” the most.

2. But in any case, understanding and getting agreement on the most important Pivot Point goal is a starting point that helps move all projects along a faster more effective pathway to higher levels of success.

3. Also discuss and agree that most of the power to make needed changes lies within this team and not with others.

a. If you don’t have projects where you do control enough power to “make the proper changes happen” then you have two choices:

i. Gain agreement by others who can help make it happen; or

ii. Change to a project where your team does have the power to make it happen.

4. Discuss and agree on the obvious steps this team can take that will gain improvements in outcomes that are visible and tangible to themselves and to others inside the organization.

5. Discuss and agree on the resources and time frame needed in which to plan and carry out the necessary steps to make improvements happen.

Stage Two: Formalize the work plans, time frames, resource commitments and targeted outcomes for the first phase of this change effort. Make certain that one or more top level leaders are aware of and have participated in at least one of the steps 1 - 5 and have committed to being involved in discussing and reviewing progress on the new initiatives. NOTE: this is usually the top level executive that your team reports to now.

Stage Three: Commence doing the projects.

1. Findings and new initiatives are socialized and agreed on before being implemented. Depending on the complexity of changes, a carefully planned implementation program is usually required to assure successful outcomes in any change efforts.

2. Continued involvement of the top level leader is very important to the overall acceptance and full support for changes being planned.

3. Making as certain as possible that the first efforts are successful is a crucial strategic choice in change efforts. Any level of failure will be accepted as pretty much complete failure. It will shut down most change efforts in their tracks.

Decision at the Top:

Establish a “Master Doer” team working with top executives to identify and sustain a Pivot Point goal that customers agree is “right”.

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4. Depending on the levels of success in Stage 3, the next initiatives should be more obvious. Those involved with Stage 3 will begin to have either positive or negative feelings about what’s happened and how that impacts their work lives. Their “customers” will also have opinions about how well or poorly this new approach is working.

5. Whether it’s a smashing success or dismal failure, a new decision is made to stop for good or wait a while to decide or proceed immediately with the next new initiative.

So who sets a goal of helping “master doers” refine operations to uncover a Pivot Point? And where and how do support functions like HR, finance, IT, marketing, PR and legal work to make certain Master Doers in operations succeed with consistently delivered high quality Offerings for customers? And how does a more focused effort get started at your organization, with your help? And whose permission is needed to make a decision to start now? The answer – anyone can start at any time, but top level support will help it progress faster.

Details for Organizational Assessment

1. Operations include all those folks that “touch” customers and directly create value, which translates into revenues. The value chain that Operations uses to create and deliver value to customers includes all the functions and processes needed to complete the steps used by employees as they do their work and make sales.

a. The Operations functions include new product design and innovation, pricing, sales, advertising, production, delivery and customer support in after sales follow-up with all services provided to customers such as warranty, repairs, etc.

2. Support includes all those folks that do not “touch” customers as a line function but help Operations get the work done more effectively as members of the organization work together toward a goal to meet customer needs and create value they want and will pay to receive.

a. Support is normally comprised of HR, finance, accounting, IT, marketing, PR, legal, purchasing and “administration” that includes security, real estate, communications, environmental and other ‘housekeeping” functions.

3. In recent years the Support function has tended to grow larger as compared to Operations with increases in finance, IT, HR, marketing and accounting. New Support areas with added personnel in PR, Training, legal, Environmental, Security, and Stockholder Relations have contributed to much larger budgets for Support. Cost restructuring has usually focused on reducing Operations jobs or outsourcing those jobs overseas for lower costs of goods sold.

End Notes