My first real job experience that didn’t involve fast food was as an intern at The Boeing Company. It was the boondoggle of internships, with salmon bakes and dinners with the top brass for me and my cohorts. I was working on failure mode analysis on the new airplane design. Even though I was doing everyday Jane-engineer work, I was invited to sit in on an assortment of high level meetings thanks to this intern program. The plane design was in the last phase of a multiple phased process, so any design changes coming in at this stage would ripple through in painful and costly ways. The aircraft systems had multiple redundancies, and as it would happen, I found a failure mode that was below the required level of redundancies.
Having sat in on the design review meetings, I knew what would happen. I would present the failure mode. The analysis would be reviewed. The cost and delay of correcting the problem would be discussed and debated. This would go on for some time, until one of the 10 or so very senior guys sitting around this elegant wood conference table in their mostly white shirts and ties would say, in a slow, deep voice, emphasizing each word: “But….how much…is a human life worth?” At this, everyone else around the table would look down at their tie, at their hands. There would be a pregnant pause, a quiet interlude.
What do you think happened next? After this pause, the meeting would suddenly be on again, with the discussion now focused on how to make the change in the most efficient way. So I went to the next Friday meeting, this time as a participant, not a fly on the wall, and I presented my findings. And they groaned at the change. They reviewed my analysis. The schedule and cost implications were hotly debated. This went on for a while. Then someone said…
Boeing had a touchstone to test every decision on. It didn’t need escalation; it didn’t need a strategic review. You could argue this was easy for Boeing, since the consequences were so high.
So what do you do if you are just a regular company with regular products, like let’s say Costco? Costco’s famous “Calvin Klein jeans story,” from Evelyn Clark’s book Around the Corporate Campfire via Dan Heath and Chip Heath’s Made to Stick blog on Fastcompany, answers this question.
“In 1996, Costco was selling out of Calvin Klein jeans at $29.99 a pair. Then, the chain’s buyers struck a deal to get about 4 million pairs at a discounted price; with Costco’s usual 14% markup, the jeans would sell for just $22.99. The buyers knew that Costco could easily sell out the full order at $29.99. Where do you set the price? The decision: $22.99. Jim Sinegal, CEO, said, “I use that as an example because it would be so tempting for a buyer to go with the higher price for a very quick $28 million in additional profits, but ours didn’t. That’s an example of how we keep faith with the customer.” “
Costco has a pact with their customers. It’s not perhaps as compelling as keeping them safe at 30,000 feet, but there is an implicit contract with the customer, which drives loyalty and trust. In the jeans story, Costco gave up a quick $28M to “keep faith with the customer”. No escalation, no strategic review. Costco has their touchstone. What’s yours?
