CHAPTER 6: SMACGreat by ChoiceBy: Jim Collins

Team 1MGT 4380 – 001

Patrick Morales, William Turner, Becky Alvarado, Christopher Mathis, Jared Stowe

SMaC Recipe

Specific, Methodical, and Consistent Operating practices that are replicable

and create success into the future Contains practices “to do” and “not to

do” Must adhere to recipe Precise, not bland Guides companies amidst crisis

Deregulation of airline industry

Southwest Airlines: SMaC Recipe

1. Remain a short-haul carrier2. Boeing 737 is primary aircraft3. Quick turns; ten min. in most cases4. Passenger is #1 product; no air freight5. Low fares and frequency of service6. Stay out of food services7. No interlining8. Texas is #1 primary market9. Employees are a strong asset10. Keep it simple

Adhering to the SMaC Recipe with Fanatic Discipline

10X companies kept any ingredient in the mix for more than twenty years and proved durable

Progressive Insurance: 20+ years of durability and little change since 2002

Some might argue that poor operating models, not changes in the recipe, contributed to downfall

Southwest and PSA

Southwest Airlines began as a copy of Pacific Southwest Airlines

Both faced deregulation, disruptive environments, and nearly identical recipes

Southwest, not PSA, endured in the 20 years since deregulation . Why?

Southwest and PSA

PSA decided to move away from a proven recipe to follow another model (US Air)

PSA, having invented a successful recipe, should have been the most successful airline in history

Because they did not adhere to their proven recipe, they were forced to sell to US Air.

Apple and Microsoft

1985-1997

Microsoft did very well while Apple struggled

Apple constantly changed its recipe while Microsoft pursued theirs, relentlessly

John Wooden

UCLA men’s basketball coach during 1960’s and 1970’s

10 championships in 12 years as coach

“Pyramid of success”

SMaC Recipe

“The signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency”

Amending the SMaC recipe: paranoid, creative consistency

When is the right time to change the SMaC recipe? Intel: Microchips to Microprocessors – Very

subtle change in overall recipe How much change is necessary?

AMD: overhauled SMaC recipe multiple times – No long-term momentum

Which approach to take? Microsoft: “Zoom out” then “Zoom in”

approach taken – allowed Bill Gates to embrace the internet while keeping SMaC recipe in-tact

American Apparel: SMaC recipe

Initial American Apparel SMaC recipe(2005)

Changed in 2012?

1. Offer basic T’s and colors/designs that aren’t affected by industry trends.

No Change

2. Utilize vertical integration, cutting and sewing all garments in-house.

No Change

3. Promote domestic production and fair labor practices. No Change

4. Remain politically and environmentally active in the communities we produce in.

No Change

Consistency and Change

The Constitution

Flexible and durable framework

Amendments

Conclusion

SMAC Recipe

Three Key Factors

Figuring out what works and why?