The president and CEO of Scandinavia Airlines (SAS) shows how to adapt to the new customer-driven economy.
Traces the author's spectacular turnaround successes with three major corporations and spells out his trendsetting approach on meeting the demands of today's service economy.
Rudy Peterson was an American businessman staying at the Grand Hotel in Stockholm. One day he left the hotel and headed for Arlanda Airport, north of Stockholm, to accompany a colleague on a Scandinavian Airlines flight to Copenhagen. The trip was only for the day, but it was important.
When he arrived at the airport, he realized he'd left his ticket back at the hotel. He had set it down on the bureau to don his overcoat and had forgotten to pick it up.
Everyone knows you can't board an airplane without a ticket, so Rudy Peterson had already resigned himself to missing the flight and his business meeting in Copenhagen. But when he explained his dilemma to the ticket agent, he got a pleasant surprise.
"Don't worry, Mr. Peterson," she said with a smile. "Here's your boarding card. I'll insert a temporary ticket in here. If you just tell me your room number at the Grand Hotel and your destination in Copenhagen, I'll take care of the rest."
While Rudy and his colleague waited in the passenger lounge, the ticket agent dialed the hotel. A bellhop checked the room and found the ticket--exactly where Mr. Peterson had said it would be. The ticket agent then sent an SAS limo to retrieve it from the hotel and bring it directly to her. As it happened, they moved so quickly that the ticket arrived before the Copenhagen flight departed. No one was more surprised than Rudy Peterson when the flight attendant approached him and said calmly, "Mr. Peterson? Here's your ticket."
What would have happened at a more traditional airline? Most airline manuals are clear: "No ticket, no flight." At best, the ticket agentwould have informed her supervisor of the problem, but Rudy Peterson almost certainly would have missed his flight. Instead, because of the way SAS handled his situation, he was both impressed and on time for his meeting.
I'm very proud of the Rudy Peterson story because it reflects what we have been able to achieve at SAS. We have reoriented ourselves to become a customer-driven company--a company that recognizes that its only true assets are satisfied customers, all of whom expect to be treated as individuals and who won't select us as their airline unless we do just that.
As SAS we used to think of ourselves as the sum total of our aircraft, our maintenance bases, our offices, and our administrative procedures. But if you ask our customers about SAS, they won't tell you about our planes or our offices or the way we finance our capital investments. Instead, they'll talk about their experiences with the people at SAS. SAS is not a collection of material assets but the quality of the contact between an individual customer and the SAS employees who serve the customer directly (or, as we refer to them, our "front line").
Last year, each of our 10 million customers came in contact with approximately five SAS employees, and this contact lasted an average of 15 seconds each time. Thus, SAS is "created" 50 million times a year, 15 seconds at a time. These 50 million "moments of truth" are the moments that ultimately determine whether SAS will succeed or fail as a company. They are the moments when we must prove to our customers that SAS is their best alternative.
If we are truly dedicated to orienting our company toward each customer's individual needs, then we cannot rely on rule books and instructions from distant corporate offices. We have to place responsibility for ideas, decisions, and actions with the people who are SAS during those 15 seconds: ticket agents, flight attendants, baggage handlers, and all the other frontline employees. If they have to go up the organizational chain of command for a decision on an individual problem, then those 15 golden seconds will elapse without a response, and we will have lost an opportunity to earn a loyal customer.
This approach may seem to turn the traditional corporation upside down. It does, and I believe that is necessary. The traditional corporate structure resembles a layered pyramid with a pointed top, several intermediate levels, and a base connected with the market. At the top of the company sit the chief executive and a number of highly qualified vice presidents--well-educated, skilled specialists in finance, production, exports, and sales. The task of this top management group is to control operations by making all the decisions necessary to run the company.
The sheer number of decisions that must be made keeps them occupied with the decision-making process, necessitating that intermediaries convey these decisions throughout the company. So a large corps of people in middle management converts top management's decisions into instructions, rules, policies, and orders for the workers at the bottom level to follow. Although these people are called "middle management," they are actually not managers at all if by "manager" we mean someone who makes his own decisions within a sphere of responsibility. In reality, they are just messengers who relay decisions made higher up in the corporate pyramid.
At the bottom of the pyramid are the foot-soldiers, which include both blue- and white-collar workers. These are the people who have daily contact with the customers and who know the most about the company's frontline operations. Ironically, however, they are typically powerless to respond to the individual situations that constantly arise.
Yet the business environment upon which this hierarchical corporate structure was based has changed. In today's global economy, Western industrialized nations are no longer protected by their traditional competitive advantages, which once allowed Europeans and North Americans to produce and sell their goods exclusively in local markets. Cheap raw materials, cheap labor, and advanced technological developments are now found in the Third World. Today cows are slaughtered in Texas and the hides are sent to Argentina for tanning and then on to Korea to be made into baseball gloves. Finally, the gloves come full circle and are shipped back to Texas where they are sold to local sporting goods shops.
Overview
The president and CEO of Scandinavia Airlines (SAS) shows how to adapt to the new customer-driven economy.
Traces the author's spectacular turnaround successes with three major corporations and spells out his trendsetting approach on meeting the demands of today's service economy.