People & Culture as a long term competitive advantage

Analyzing and working with many companies made me a great believer in companies with a strong culture that empowers employees. A company itself seldom generates sustainable value in my view.

Strong culture

A close analysis would usually reveal that the employees within the company are what generates that value. A company’s sustainable differentiator might depend on great customer service, short lead times, innovative products or a strong sales funnel. All of these items eventually come down to a single element – people (and that’s where many companies fail):

– A great customer service means a kind and professional service representative that helped a customer solve a long outstanding and annoying problem.

– Short lead time usually involves an employee at the supply chain who works late to make sure an urgent shipment reach the customer promptly.

– An innovative product has to do with an employee who thought of the initiate concept and spent hours convincing others of its potential.

– A strong funnel has to do with marketing and sales teams doing their best to reach customers, sometimes in creative ways and passionately pitching the product/service. Moreover, a business between two companies is usually a result of two champions that drive the business within their organizations.

Again, it’s all about people and a culture that motivates people.

Let me demonstrate that through an example of a company with a strong culture: Southwest airlines, an American low-cost airline, headquartered on the grounds of Dallas Love Field in Dallas, Texas. Southwest is very famous for its customer service (In 2005 and again in 2008 The American Customer Satisfaction Index (ACSI) recognized Southwest Airlines as leading the industry in customer satisfaction). Southwest is also famous for its informal approach and fun flights.

A low cost company usually means low salaries and unmotivated employees, right?

Well not in Southwest. Southwest’s founders Rollin King and Herb Kelleher defined one mission: to get their airplanes up in the air as long as possible. Every minute the airplane is in the air means revenues for Southwest. The key elements of their strategy: high on-time performance, short turnarounds in airports, great customer service and fun. They also understood that on an ongoing basis it all comes down to the employees. Many times getting a plane back on the runway requires motivated employees and creativity: quickly loading or fueling the plane, quickly getting the cabin ready or fixing a maintenance problem. It’s all about employees – Southwest employees.Customer service most definitely involves people.

Here is a story: An elderly passenger was flying with Southwest to visit his son. In the airport he noticed that he forgot his glasses at home and he can’t see a thing. A Southwest ground representative noticed the sad man and started to talk to him. He learned about the passenger’s situation and rushed to his locker to give the passenger his own extra set of glasses. There are many other such stories.Southwest customer service

Southwest is not alone.

I recently met a CEO of a $5B revenues public company. It was Friday afternoon, just before the weekend. As I entered the building, I noticed an employee, on his way home, wearing a company branded shirt. For me, it was the first signal to the company’s strong culture and emphasis on employees. I later learnt how right I was.
I met the CEO and told him that I found no publicly available interviews with him. “Whatever I have to say, I say to my employees”, he said, “My employees are the best source of public relations and marketing”. He is right. That employee, either wearing a company’s branded shirt or telling his friend how much he enjoys working there, is most likely to drive potential talent or even customers that will eventually lead to business growth (new innovative products, new prospects etc.).

To summarize, I’ve combined a strong culture and people since I think they are tightly coupled. Together they create a sustainable competitive advantage that is hard to replicate.

 

 

 

Some information about Southwest:

 For the tenth year in a row, FORTUNE magazine recognized Southwest Airlines in its annual survey of corporate reputations. Among all industries in 2005, FORTUNE has listed Southwest Airlines as number three among America’s Top Ten most admired corporations.

 FORTUNE has ranked Southwest Airlines in the top five of the “Best Companies to Work For” in America. Southwest ranked first in 1997 and 1998, second in 1999, and fourth in 2000. Southwest has chosen not to participate since 2000.

 For 2007, the eighth year in a row, Business Ethics magazine lists Southwest Airlines in its “100 Best Corporate Citizens”, a list that ranks public companies based on their corporate service to various stakeholder groups. Southwest is one of only 11 repeat winners that have made the list all eight years.

 In 2005 and again in 2008 The American Customer Satisfaction Index (ACSI) recognized Southwest Airlines as leading the industry in customer satisfaction. The ACSI, conducted by the University of Michigan, independently tracks customer satisfaction levels by measuring the household consumption experience.

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About shanishoham

After 14 years of General Management and incubating/scaling new businesses & organizations for enterprises (established a $55M mobile business and a $100M/400 employees global division), I became an investor Today I’m a board member/mentor with 5 incubators & micro-VCs and involved with many other private & public incubators around the world. I also founded a VC firm named 2020 and I'm a member with a number of angel groups so i get to see & work with many startups, innovation centers and other parties across the ecosystem. I’m an alumnus of the Stanford Graduate School of business - Sloan Master in Management program, a 10 months intensive program for 57 carefully selected experienced Executives and leaders from all around the world.

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