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Guest Post: Amazon vs. The New York Times

August 27, 2015

Our Guest Post today comes from Lawrence M. Miller, at http://www.ManagementMeditations.com

Last week the New York Times published an important article on Amazon and its very competitive, demanding culture. (Jay and Barry’s OM Blog summarized the issue on August 18th). I think the Times piece (http://www.nytimes.com/…/inside-amazon-wrestling-big-ideas-…) and the response to it from Jeff Bezos are important reading. Here is my take:

Amazon has grown in the highly competitive Internet and technology environment and is daily competing to bring new products and services to market. They have succeeded so far because of the intensity of their culture. They have been in the conquering “barbarian” stage of expansion and they are deliberately trying to hold on to that culture beyond the point at which it normally drifts into a more stable and comfortable state. Culturally, it is still a start up! And start-ups, fighting for their lives and to grab a piece of market territory that they can call their own, live at a level of intensity that makes many extremely uncomfortable. They are at war!

My guess is that Amazon is straddling the Barbarian and Builder/Explorer stage of my life cycle model. This is a good place to be in an external environment that is filled with rapidly emerging competitors and changing technologies. If you aren’t conquering you are probably about to be conquered!

Managing the culture of a company is like tuning a stringed instrument: over tighten and it makes a squealing sound; under tighten and it sounds dead. What is too much pressure for one person is not for another. If a company wants to grow, it needs to maintain that “creative dissatisfaction” that drives employees to innovate and perform at a high level. On the other hand, it wants a culture that does not drive away the most creative and capable. Amazon could not have succeeded as it has if its culture was driving away its most talented. It can’t be that bad!

NYT

 

OM in the News: Wendy’s Blackberry Supply Chain Troubles

August 26, 2015

wendys

It will have taken three years and a search involving more than 30 growers for Wendy’s to procure enough blackberries for a new salad it plans to offer next summer, reports The Wall Street Journal (Aug.19, 2015). “It’s been a slow, painful journey for us,” says the head of procurement. “We spent 14 months scavenging around the industry, looking at more suppliers than we ever have.” Wendy’s quest for the nearly 2 million pounds of blackberries it will need to embellish a seasonal salad at its 6,500 North American restaurants illustrates the challenges large chains are trying to digest as they seek to keep up with growing demand for fresh ingredients.

Wendy’s installed salad bars in restaurants in 1979, but the toppings have grown from simple tomatoes and croutons to include strawberries, blueberries, almonds and edamame. And it has accelerated the pace of product introductions, with seven new salads in the past two years. Fresh ingredients present a challenge for big chains because of their sprawling supply chains and rapid, repeatable preparation processes.

Adding blackberries posed Wendy’s most difficult supply-chain challenge ever. Most blackberries are sold to grocery stores, leaving little supply for restaurants. To meet Wendy’s needs, growers had to plant extra bushes, which take three years to produce mature fruit. Wendy’s normally reviews two to five suppliers for each type of produce it uses, but the company went through more than 30 before finding a pair that could supply enough blackberries. To maintain consistency, Wendy’s sends franchisees instruction cards dictating how the berries should be washed, cut and placed on the salads. Restaurants also need to ensure worker safety for all the slicing fresh produce requires—workers must wear chainmail mesh gloves—and to ensure the added prep work doesn’t slow service.

Classroom discussion questions:

  1. Are other fast food chains facing similar supply chain issues?
  2. Why are fruits and vegetables so important in restaurants today?

Video Tip: Starting Your Fall Semester With Videos

August 24, 2015

magicStarting about 20 years ago, with our 6th edition, Jay and I began developing a series of company video and cases. They have ranged  from manufacturers of potato chips, boats, and ambulances, to service firms like a hospital, an NBA team, Red Lobster, and Hard Rock.  The videos are brief (5 – 12 minutes) and tie directly to the content of a specific text chapter.  There may be as many as seven videos on one company (such as Arnold Palmer Hospital or Hard Rock Café) and students seem to like following one or two organizations throughout the text/semester.  We are very pleased, that over the years, our 35 videos have won many awards, including 2 Silver Addy’s for the best short video, selected from 10,000’s of entries each year. We are even up for an Emmy award for one of our Orlando Magic videos!

hard rockI have always started the first week of the semester with one or both of the following:  Hard Rock Café: OM in Services (8 minutes) and Frito-Lay:  OM in Manufacturing (7 minutes).  The first shows how a service firm that is known throughout the world approaches some of the 10 OM decisions around which we structure the text.  This firm is especially interesting because it is a lot more than a restaurant. We show that Hard Rock makes almost the same revenue from its small retail shops as it does from the food side of the house.

The second video provides a perfect contrast to Hard Rock and makes for a great class discussion on how manufacturers differ from service firms.  Frito-Lay is also a product everyone knows.  But this company does not let outsiders in to tour, and has proprietary processes that even we were not allowed to film.  This video reviews how Frito-Lay deals with all 10 of the decisions that OM managers have to make.

I hope our video series helps get your Fall, 2015 semester off to a successful start. And there is more to come, as we introduce five new videos featuring OM at Alaska Airlines in January, 2016!

OM in the News: Shell Oil’s Artic Project Gamble

August 22, 2015

shell oil“In a windowless conference room in Anchorage,” writes BusinessWeek (Aug. 5-12, 2015), “a dozen Royal Dutch Shell employees report on the highest-profile oil project in the multinational’s vast global portfolio.” Warmed by mid-July temperatures, Arctic ice in the Chukchi Sea, northwest of the Alaskan mainland, is receding. Storms are easing; helicopter flights will soon resume. Underwater volcanoes are dormant. “That’s good news for us,” said Shell’s top Alaska executive.

Overhead, a bank of video monitors displays radar images of an armada of Shell vessels converging on a prospect called Burger J. Company geologists believe that beneath Burger J—70 miles offshore and 800 miles from the Anchorage command center—lie up to 15 billion barrels of oil. An additional 11 billion barrels are thought to be buried due east under the Beaufort Sea. All told, Arctic waters cover 13% of the world’s undiscovered petroleum–enough to supply the U.S. for more than a decade.

Surprise lurks in the Chukchi, whose frigid waters span from Alaska to Siberia. Logistical and legal obstacles have repeatedly delayed the Arctic initiative, on which Shell is spending more than $1 billion a year—more than $7 billion so far and counting. The single well in Chukchi that Shell aims to excavate this summer could be the most expensive on earth, and it hasn’t yielded its first barrel.

Activists have sued; judges have intervened. In 2010, work stopped when the Obama administration temporarily suspended offshore drilling throughout the U.S. Back in action in 2012, Shell suffered a maritime fiasco when ship engines conked out and a massive drill barge ran aground, requiring a Coast Guard rescue. Even against this challenging economic backdrop, Shell won’t postpone or downsize its Arctic dreams. The offshore Alaska field has the potential to be multiple times larger than the largest prospects in the U.S. Gulf of Mexico. But to put it mildly, Shell is assuming immense project management operational risks to drill in the Arctic.

Classroom discussion questions:

  1. Why are project management tools so critical to Shell?
  2. Why is Shell carrying out such a vast project?

Teaching Tip: The Critical First Day of Class

August 20, 2015

teachingThere’s only one first day of class.  Faculty Focus (Aug. 19, 2015) provides some ideas for taking advantage of opportunities that are not available in the same way on any other day of the course.

  • A good introduction to OM provides a bit of background; it builds connections by identifying shared experiences and common interests. The details offered in a good introduction motivate continued conversation.
  • The first day gives you the chance to explain why OM matters to you. Of all the potential majors, you chose one in this field—how did that happen?
  • The operations course develops important concrete analytic skills. The first day is a good time to let students know what they will be able to do—or do better—as a consequence of this course.
  • Courses have been known to change lives. Most don’t, but OM is probably the most dynamic subject in all of business.
  • Talk about your commitment to teaching–and your favorite things about teaching.
  • You can talk about your commitment to student learning.
  • It’s a chance to find out about your students in the course. This can build constructive relationships and help establish concrete ways to connect.
  • OM is a new course and the beginning of a new academic year. You and your students want the same things on the first day—a good course, a positive constructive learning environment, the chance to succeed.
  • Students may look passive and not especially interested, but don’t be fooled. On that very first day, get students connected with each other and the course content.
  • It’s the day in the course when it’s easiest for the teacher to genuinely smile. You have only good news to share, so let them hear it.

OM in the News: Want an 80-Hour Workweek? Try Amazon!

August 18, 2015
A company picnic. Some fathers said they considered quitting because of pressure from bosses to spend less time with their families. “Nearly every person I worked with, I saw cry at their desk.” states a former marketing exec.

A company picnic. Some fathers said they considered quitting because of pressure from bosses to spend less time with their families. “Nearly every person I worked with, I saw cry at their desk.” states a former marketing exec.

On Monday mornings in Seattle, recruits line up for an orientation intended to catapult them into Amazon’s singular way of working. They are told to forget the “poor habits” they learned at previous jobs. When they “hit the wall” from the unrelenting pace, there is only one solution: “Climb the wall.” To be the best Amazonians they can be, they should be guided by the leadership principles, 14 rules inscribed on laminated cards. At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late, and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses.

Most of the newcomers filing in on Mondays will not be there in a few years.  Losers leave or are fired in annual cullings of the staff — “purposeful Darwinism,” says former HR director. Some workers who suffered from cancer, miscarriages and other personal crises said they had been evaluated unfairly rather than given time to recover. “When you’re not able to give your absolute all, 80 hours a week, they see it as a major weakness,” stated one former employee. “Amazon is in the vanguard of where technology wants to take the modern office: more nimble and more productive, but harsher and less forgiving,” writes The New York Times (Aug. 16, 2015).

 “You can work long, hard or smart, but at Amazon.com you can’t choose two out of three,” says Jeff Bezos. If Amazon becomes the country club like Microsoft, “We would die,” he adds. The firm retains new HQ workers in part by requiring them to repay a part of their signing bonus if they leave within a year, and a portion of their hefty relocation fees if they leave within 2 years. The median employee tenure is 1 year, among the briefest in the Fortune 500. Only 15% of employees have been at the company more than 5 years.

Classroom discussion questions:

  1. Would the Amazon model work in the typical firm?
  2. Why do employees seek out Amazon jobs?

OM in the News: The Deadly Ice Cream Recall

August 16, 2015

blue bellMy teenage son is a Blue Bell ice cream junkie. He polishes off about two 1/2 gallon containers of vanilla (why vanilla, of all flavors?!) a week–or at least he did until all Blue Bell was pulled off the shelves in April. Federal records, reports The Wall Street Journal (Aug. 5, 2015), show that Blue Bell failed to follow practices recommended that might have prevented listeria contamination of ice cream at its plants. The recall came after health officials tied its ice cream to 3 deaths in Kansas since the start of 2014, and additional illnesses elsewhere.

The Food and Drug Administration states that sanitation problems that created refuges for listeria have persisted at Blue Bell since at least 2009. Beginning in 2013, Blue Bell repeatedly found listeria in its Oklahoma facility—including on floors, a drain and at equipment that fills half-gallon containers—indicating the company didn’t do enough to identify the underlying cause or eliminate the source.

The FDA advises companies to regularly test for listeria on surfaces that touch food. It also recommends testing the food itself. But records show Blue Bell didn’t test its ice cream, or surfaces that touched it, despite finding listeria traces in the plant.

Until recently, listeria in ice cream was uncommon, though not unheard of. Neither of the two largest U.S. ice cream producers— Edy’s and Ben & Jerry’s—have had to recall their products due to contamination. However, three smaller ones recently have recalled products because of listeria contamination, including  Jeni’s Splendid Ice Creams, which had to shut production twice. So Blue Bell’s problems reflect broader complacency in the ice-cream industry about listeria. Many believe the frozen dessert is at lower risk of being associated with infections from listeria than some other packaged foods, in part because the bacteria doesn’t grow when food is frozen.

But as we discuss in Chapter 17, maintenance isn’t just about keeping facilities clean and machines working. It also involves management and employee awareness and involvement.

Classroom discussion questions:

  1. What did Blue Bell do wrong?
  2. What would quality expert Philip Crosby (see Chapter 6) say about the cause of the outbreak?
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