How The Airline Industry is Mis-Using Creativity

There are three types of change in running a company. Those that fix the problem. Those that make the problem worse. And those that look like the former but accelerate the latter.

If you apply the forces of creativity to them you greatly accelerate the results. A fact the U.S. airline industry is already experiencing.

This week the eight largest U.S. airlines announced their highest profit margins in a decade. Projections are that in 2011 the industry will earn $5 billion. If all goes well, next year that number will rise to $5.6 billion.

Which sounds healthy, until you realize that during the past nine years the airlines lost $60 billion. And 160,000 jobs.

Which means that even if they can sustain these new levels of performance for another ten years or so, by 2021 the US airline industry will have spent two decades producing a net return for its owners of exactly $0.

And that’s the best case scenario.

The worst case is that this turn-around will collapse like a suddenly depressurized cabin. 

If you believe in the power of creativity bet on the latter.

Because the airline industries have used a lot of it to create this turnaround. And most of it has been applied to finding new ways to take advantage of the customer. Bag fees. Change fees. And now potentially, use of the overhead storage compartment fees.

In fact the additional fees charged by the airlines in 2010 are higher than the industry’s actual profits. Which means that without those fees the airline industry is a loss making business.

But, when the gain to a business comes at the expense of its customers, with no improvement provided in return, the inevitable outcome is short-term increases in profitability followed by long term damage to the desire of the customer to be a customer.

Let’s apply positive creativity to this issue.

Peter Drucker once famously said that the Purpose of a business is to create a customer. The ability to provide something that people value and the ability to do so profitably.

But when a business focuses only on price, it makes irrelevant the thing that is actually most important to its customers.

The reason they paid the money in the first place. Whether that is whiter whites, lower taxes or satisfaction of a personal vanity .

And when judged by the results of a purchase, the airlines offer something of inestimable value.

Our lives.

The virtual guarantee that they will get us to our destination safely.

A value proposition on which to change the world. And one which supported by fair pricing, comfortable seats and an investment in the future would radically change their future.

It’s late in the game for the airlines to be re-establishing their core value. Perhaps too late. 

And when airline travel is finally replaced by something that makes sense, something that delivers us quickly, comfortably and safely without destroying the ozone layer and ending the existence of Polar Bears, something that has no need for pat-downs and retinal scans, something that greets its customers with enthusiasm and innovation, something that stimulates and satisfies its employees, and something that creates shareholder value, it is unlikely that whatever that something is will carry the names of any of today’s airlines. So small is the value of those brands in the eyes of their customers.

Unless, of course, the airlines unlock the power of positive creative thought, and apply it to creating long-term value.

For us.

And thus, for them.

Sitting on The Edge of Revolution

These are turbulent times. Politically, economically, socially.

A story on the web this morning reports that a fire department in rural Tennessee allowed a family’s house to burn to the ground because they hadn’t paid an annual $75 fee for fire department service. 

In addition to losing all of their possessions, the family’s cat and three dogs were killed. 

When the fire department arrived at the scene because the neighbor’s house was being threatened - they had paid the $75 fee - the fire chief ordered that water be sprayed only up to the property line between the two homes, despite the home owner offering to pay ‘anything’ to have his home saved.

I have a pragmatic view about building a business. You define a Purpose, hire people that you think can help you create that vision, invest in them until doing so becomes destructive to the organization or unhelpful to them, and then make a change. It’s called accountability. The mid point between ruthlessness and enablement.

Accountability must have flex in it. Circumstances and people are not fixed points of reference. And absolute rules create only dictatorships. 

I believe the most effective management structure is a benevolent hierachy. One that listens and then decides. A model that allows you to judge the quality of the thinking of the leadership of an organization, and its prospects for achieving its Purpose.

I have never thought about the Purpose of a fire department. ‘Protect lives and property,’ seems like a good place to start. Sending a large bill after you’ve provided that service would be an acceptable quid pro quo for even the most radical opponent of socialized government.

The news website on which I saw this story is running an online poll. 22% of the respondents believe that the fire chief was right to let the home burn.

Clearly they’re not animal lovers.

Revolutions are not known for promoting rational thought. 

Fear in buckets, yes. 

Which tends only to promote the circumstances that created the need for revolution to begin with.

Running any business during a revolution is hard. The screaming and yelling drowning out most of the ability to think clearly. 

But if you’re clear about why your business exists - clear to the point of being able to write it down in a single line without the use of the word ‘and’ - you’ll put out your customers’ fires with increasing ease.

And get paid handsomely for doing so.

A Week’s Worth of Mistakes: # 3 - The Temptation of Price

I watch buyers of services haggle over prices almost every day. A fanatical fixation on fiscal fine tuning.  

The result of which is the buyer saves some money. The seller feels worth less. And the process is constantly measured by both to ensure the output is worth the price.

An exercise in defining the bare minimum.

In any negotiation, price is only one reference point. The other is value.

A focus that motivates both parties to work on creating more.

It is the difference between negotiating a price. And negotiating a deal.

A difference that recognizes that profit is only minimally affected by how well you save your money.

But massively affected by how well you use it.

Selling Nothing

I wrote a blog for Boards Magazine last week. Typically I keep my writing for them separate from this blog. However, Dennis Ryan wrote a post yesterday that picked up one of the thoughts from a slightly different perspective, and made me think it would be valuable to link them together.

The underlying theme to both pieces is that how we value something depends on many things.

One of which is not whether it actually exsts.

A thought to ponder as you think about how to improve your business.

Dennis' post is here.

My post from Boards is here.

Or here.

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Make a product. Provide a service. Exchange them for money.

The foundations of commerce.

Except on the web. Where new definitions of value are throwing traditional models under the bus.

In 2009, Lady Gaga sold more digital music than any other artist. 15.3 million tracks. She also gave away hundreds of millions more. On MySpace alone her songs were played 321.5 million times. All for free.

Today, many see her business model as a blueprint for the future. Give away the music and sell concert tickets, merchandise and anything else that the artist’s brand associates with. In Lady Gaga’s case this includes Polaroid and Estee Lauder. The high rent district indeed.

The magazine and newspaper industries, by comparison, look like scruffy kids playing stick ball in a derelict neighborhood. If you’re wondering what print real estate is worth these days pick up a copy of Time and feel for yourself. A business illness created by the willingness of those industries to jump in to the digital revolution before they understood what it meant to them. And proof that innovation is a kissing cousin to professional suicide if you don’t understand what makes your business valuable to your customers.

After all, what any of us are willing to pay for something is defined by two criteria. Its price. And our perception of its value.

When the price is zero, are we really going to argue the seller is wrong? That they have underestimated the value of what they are selling. More likely is that we will come to believe that our perception of its value was misinformed. That in the future we should expect more for less. Else we be taken for fools.

Value is a delicate balance. One that readers of Boards are involved with articulating every day. Choose this versus that because...? Take your pick. It works better, looks better, feels better, defines you better, is priced better.

Indeed, every piece of marketing ever created has been an articulation of value. A statement I invite you to challenge.

The problem comes when we ourselves undermine our own value proposition by letting others define what our stuff is worth. As 41 production companies who signed the P&G Preferred Vendors agreement recently discovered when P&G then hired someone else to shoot their Winter Olympics opening Anthem spot.

Or by giving away our stuff for free without a plan to make money on the back end. A problem that some in the print industries are now trying to correct.

Subscribers to The Wall Street Journal are mostly unwilling to pay for the newspaper’s web-based version. Since a lot of it has always been free, they don’t see why they should now pay for the rest.

By contrast, few have an issue paying an additional fee for the smartphone version of the Journal.

Because they were never told they could have it for free.

The perversity of this is that we expect that the medium in which the Wall Street Journal works best - desktops and laptops, complete with screen sizes and bandwidth that optimize the experience - should cost nothing.

But reduce the type to 4pt helvetica, and the download speed to the vagaries of AT&T and Verizon’s wireless networks, and we’re only too willing to add $4.99 a month to our bill.

A definition of value based entirely on perception.

Indeed value is so much about perception that if we limit our own company’s pricing structure to simply cost plus profit, we define ourselves as a commodity based business long before our customers see us that way.

Enduring business models are based instead on the understanding that people make buying decisions that are subjective. That is, as consumers we are motivated as much by how a purchase makes us feel as by an analysis of how efficiently it fills a need.

Which explains why in 2009, in the midst of economic catastrophe, U.S. consumers spent more than $1 billion on virtual goods and services.

Virtual, as in they don’t exist. Except in online worlds. Like FooPets, where you pay to adopt and care for a virtual pet. http://www.foopets.com/

FooPets has four million members. And is adding 20,000 new members a day.

Which is great news for Purina.

After all, they sell bags of virtual Purina Puppy Chow for $3.

That’s three real dollars. For digital dog food. Eaten by digital dogs.

So the next time you wonder why your customers want to pay you less, consider this.

Is it their perception of the value of what you’re selling that’s the problem.

Or yours?

Weekend Update

The Tiger Woods story has many arms and legs. All explored thoroughly elsewhere.

There is, however, a simple but powerful business lesson in his announcement yesterday.

When people start to turn away from what you're selling, it's tempting to promote it harder.

A better solution sometimes is to create demand.

By reducing supply.

Which comes with the added benefit that everyone who depends on you to make their living suddenly becomes your unpaid sales team.

Philosphical Friday: Perspective

Sitting on board an American Airlines plane to New York, I write this courtsey of wireless internet.

Interesting that a technology which so threatened our safety two years ago that we had to "turn off portable elecronic devices" within a three mile zone of our flights, is now less of a concern when the airline can charge $12.95.

A matter of perspective, I suspect.

The Starving Artist Strategy

I attended an advertising industry event in Hollywood last night. An incongruous juxtaposition for a business a long way away from the glamorous days of Mad Men.

We frequently work with companies that sell creativity. Their success depends on balancing art and commerce. A recipe that requires sensitive scales. Too much of the first. You’re brilliant but broke. Too much of the second. You’re irrelevant. Or unsatisfied. Or both.

Creative companies that have been around for any length of time are rarely run by the artists. If they’re talented, they don’t have time. And the insecurity that often drives great creativity is a bad foundation from which to negotiate fair payment.

Insecurity makes most of us act in a way that works against our self interest. And does much to undermine the inherent value of whatever we produce. A confident salesman sells more than the nervous one. Even if the merchandise is inferior. And though great work can speak for itself, it does better in the spotlight offered by the assured than in the shadows of self doubt.

When what you sell is subjective, the value is defined not only by the market but by how  well you frame the market’s perception. Exclusivity and aspiration are perceptions first and last.

I have watched, for some time, the systematic commoditization of many creative services. The failure of those industries to first value what they do, and then to present that value cogently and powerfully to their respective markets results always in the same conditions. Reduced prices. Lower margins. And the perceptions of product parity.

When individual companies then accept - or worse, establish - short-term business practices aimed only at bolstering revenue and profitability, they add their own high pressured hoses to the erosion.

Shooting themselves would be faster and less painful. But the net result is the same. And accompanied always by the complaints of company owners that the conditions in which they work are unfair.

As a business strategy, playing the victim creates neither sympathy nor success. And ignores the responsibility inherent in every industry that sells subjectivity.

The need first to take responsibility for how your customers perceive your value.

Which means establishing business practices that inherently command respect.

That requires confidence. A trait in short supply at the moment. But one that returns quickly with small victories.

The alternative is to sell cheap, pray hard and prepare for poverty.

It’s a strategy known as The Starving Artist.

Practiced by people who want everyone else to value their work more than they do.

5 Benefits To Negotiating Flat Fees

The days of hourly legal fees are behind us.

This is not news to our clients. Nor to the lawyers and accountants we work with on their behalf, who have long understood our belief that flat fees create a win-win scenario.

In fact, we have been hiring lawyers and accountants on a flat fee basis for almost a decade.

Through experience we have learned there are 5 benefits to doing so:

1. Both sides have to take responsibility for defining the scope of work before the agreement is struck

2. The service provider is motivated to get the work done as efficiently as possible.

3. The service provider is motivated to do the work as well as possible so that the can get hired and recommended again

4. The buyer is motivated to support the process they agreed to so they don’t get hit with change of scope fees

5. Both parties learn from the process. About their own methods and each other. This leads either to a better process next time. Or a quick end to a the relationship.

Either side can undermine this structure.

But there is a cost to doing so in the loss of future opportunity to work together.

If that’s not a cost to you, you’re doing business with the wrong people.

Why The 12 Days of Christmas Are Worth Only 9.6.

In 1993, the Wharton School economist Joel Waldfogel published an article called ‘The Deadweight Loss of Christmas”.

He contended that when you matched the cost of each gift with how much value the recipient attributed to it, there was a shortfall of $12 billion.

Thus empirically proving the concept that it is better to give than receive. About 20 percent better in economic terms.

Which strikes me as a lesson for any business.

Knowing what you can sell your customers and knowing what they would like to buy are two different value propositions.

And when your customers finally figure out that they are more valuable to you than you are to them, they won’t be thinking about how to ‘re-gift’ you.

They’ll be thinking about how to return you.

Unopened.

Why The Web is A Bad Business Model

The internet is the greatest missed opportunity in the history of business.

Doubt that? Compare how much you have received from the internet to how much you have paid.

You’ve paid the people who laid the wire. The people that made the modems. The people who make the processors, the keyboards and the screens and the smart phones. And the people who sell you things through it.

But have you ever paid for it? And would you now?

At a breakfast meeting in LA last week, a group of highly influential media and communications industry executives were asked how many read the Wall Street Journal. Everyone raised their hand. Then put them down when asked if they would pay for an online subscription.

We all regard the internet as free.

Not because anyone decided to make it so. But because no one decided not to.

An event that went unnoticed at the time. Because no one was looking.

Today, YouTube streams 1.2 billion pieces of video. Per day. Which means every person on the internet, on average is watching one YouTube video per day.

A recent analysis suggests YouTube’s financial performance is improving and it may only lose $170 million this year. 

Although Credit Suisse back in April forecast a $470 million loss this year.

Either way, imagine creating something that is being used 1.2 billion times a day worldwide and worrying how much money you’re losing. If they charged a nickel, they’d be pulling in $60 million a day.

A lot of people are spending a lot of time trying to figure out how to monetize the web. And eventually, undoubtedly they will. Mobile apps are part of the solution.

But as you build your own business, the history of the internet offers an important lesson.

What happens today affects tomorrow. Often more than we want.

Changing that around means being conscious that today has two agendas. The present and the future.

Ignore the latter if you wish. You’ll see it again soon enough. Only this time, it will be calling the shots.

5 Things The Airline Industry Has Taught Us About Better Business

The airline business is pointless.

If there was any kind of alternative to traveling further than 250 miles, we’d all take it. And celebrate.

Instead, we game the system to get the lowest fare possible, hope our upgrade clears, and try to make sure there’s internet access on board to help us forget that as an indicator of man’s achievements, air travel is our only major innovation that’s going backwards. Having experienced Concorde, that’s a realization that hits me every time I fly.

Fifty years after the Boeing 707 was heralded as the first jet airliner, we still fly at exactly the same speed that modern miracle achieved on its maiden voyage. 591 MPH. Imagine where things would be if technological achievement had remained frozen in 1959. Today, New York to London is still 6 hours, give or take, depending on the jet stream.

Maybe that’s the real strategy behind global warming. Heat the planet, create violent weather conditions, jump on board the jet stream. It would make more sense than anything else those that run the airline industry have offered as business rationale.

Let’s look at just this decade. Since 9/11 the industry has:

• Gone through five Chapter 11 reorganizations


• Supported two mergers


• Eliminated about 250,000 jobs


• Been responsible for a mountain of debt and pension defaults.

If over that same period you ignore the tens of billions of dollars written off to goodwill write-downs, and the hundreds of millions of dollars of reorganization costs, then the airline industry only lost around $40 billion.

$40 billion. In an industry trying to make money.

With no competition.

That every one of us will have to use multiple times this year.

And yet. The most recently published quarterly reports have been met by airline executives with rejoicing over the increases they have generated in ancillary revenues. Things like baggage fees and on-board meals. United earns about $14 a passenger in those fees. They also lost $137 million in the 3rd quarter.

What they don’t know is the cause and effect of either number on the other.

In other words, they don’t know if charging for bags increases revenue or drives people to other airlines.

Seems like a fairly rudimentary piece of analysis. If we do this, will be better or worse off?

United don’t know. (No news there for the airline that came up with the profound brand positioning, Rising.  As opposed to the alternative, one presumes.)

Neither do any of its competitors. One of the many reasons why the airline industry has lost more money than it has ever made.

But the airline industry does have value. As a business model. Of what not to do.

1. Don’t sell your services for less than it costs you to provide them. Unless you know you can raise them tomorrow. Not think. Know.


2. Don’t build a business that is entirely dependent on any single resource, especially when controlled by a limited number of suppliers who are ambivalent whether you succeed or fail.


3. Don’t build a business around a small group of people with highly specific, and hard to replace skills. And if you must, align their interests with yours. So that the success of the business is their business - as well as yours.


4. Don't restrict innovation. If your business can't offer a significantly more valuable experience every three years, your customers will find someone who can. Unless you can corner the entire industry. In which case, you don't need anyone's help.


5. Don’t focus on narrow metrics that support what a great job you’re doing while the business is falling down around you.

The truth is out there.

Just don’t expect to find it by looking up.

Value - Part 3

Cost and value are tricky things because they won’t stand still.

Last year, when all of America was complaining about the price of a gallon of gas there were at least two groups who weren't.

Those who read that, adjusted for inflation, a $4.00 gallon costs less in real terms than the 28 cents charged in 1958.

And those who spend enough time in the United Kingdom buying petrol at $10.00 a gallon to think that $4.00 is a pretty good deal.

For most of us, doubling the price of gas had little impact on our habit of driving everywhere. That was because the convenience of driving was more valuable than the extra expense. But it was also because habits have value too. One of which is not having to think about them. A potential change first has to cross the threshold of being worthy of thought. A value system in and of itself.

We had stopped thinking about what it cost to belong to Loch Lomond about a second after the gatekeeper greeted us that first day. And by the time we returned for our third visit, Loch Lomond had become a habit. For the next five years, we showed up Spring and Fall. And in between thought only of the next time.

We met Loch Lomond’s owner, Lyle Anderson, briefly in our second year. Doing so confirmed that the vision articulated in the Club’s written correspondence was reflective of Lyle’s personal love of the place. Limited and sensitive development that would create long term economic viability, while maintaining the intimate atmosphere we valued so much.

Lyle owned a number of big U.S. golf resorts. Truthfully, the kinds of places that have never appealed to us except occasionally as someone else’s guests. But their success
reassured us whenever we started to wonder how Loch Lomond’s economics could possibly work.

The Club sits on 1000 acres on a 999 year lease from the Clan Colquhoun. The definition of a long term strategy. The course had been built before Lyle bought the place from the bank of Scotland, its previous developer having gone bust.

Lyle saw value in the ground that had been laid, figured out what it would take to restore Rossdhu House, the Carriage House and the Garden Cottages, added antique furniture, luxurious fabrics, a high powered management team, first-class marketing and administrative support and must have come up with a huge red number. Huge. And very red.

For the first six years of our $5,000 membership, the annual dues were $1,800 and the 23 rooms cost between £250 and £400 a night. We were conscious of all this because the Club was clearly costing a lot more to run than the revenue that equation could generate. ‘It’s a loss leader for Lyle.” “It’s where he wants to retire.” “He just loves the place. Money’s not important to him.” Rumors abounded among members and staff alike. In every case we all wanted reassurance that this magical place could go on just as it was.

The truth, of course, was it couldn’t. And in early 2004 it was announced that a membership Conversion Plan was underway.

It came in the form of the single most beautiful sales piece I have ever seen. A cloth bound, membership book in its own presentation box containing some of the most stunning photographs of Loch Lomond. Interspersed among the pages were details of the new membership structure.

The Club offered two choices. Pay $75,000 and convert into a full equity membership that in theory would provide a return on your investment in five years.

Or enjoy one final year at the Club and leave.

I know we talked about it. But not for very long. We couldn’t imagine life without Loch Lomond. Our business was doing well. The Club would finance the payment. We’d get a return on our investment. And there’d be half as many members. It would be better than ever.

In six years, an angst ridden $5,000 decision had become a no-brainer at 80 grand.

Inflation and relative economic circumstances play a big part in determining value. But as you get older, how and where you spend your time has a bigger role to play. As does with whom. And in today’s world, privacy comes with a price. I value privacy more than exclusivity. It’s an important distinction in building a business. Particularly one selling a service.

Emotional forces are powerful drivers of value as well. And giving something up requires humility as well as discipline. But in a competitive world, humility is a scarce resource.

To be successful requires a healthy amount of self confidence. Without humility that can turns into short-sightedness. And sometimes arrogance. Bad traits in business and life.

If you bring humility to work with you every day, taking its restraining forces with you on vacation can be hard to do. And perhaps unhealthy. ‘I deserve this,’ is powerful fuel for the entrepreneur from time to time. Payment for some of the challenges faced and overcome.

Leaving Loch Lomond would on some level have been a statement of failure. That we couldn’t afford it. Or didn’t deserve it. Whatever the matrix of value we used to decide to convert, the ticker tape output said “do it.”

So we did. And the results were spectacular.

Over the next three years the Club opened beautiful new rooms in hidden parts of the grounds. A world class spa was built in the Walled Garden. An amazing, sanctuary of a place with a water treatment pool that I quickly dubbed ‘the womb’ for the security and tranquility it provided. The service got even more personal, the result of a bond formed with some of the people who helped us through 9/11 which we watched live on CNN from our room in Rossdhu.

Connections like that are hard to quantify. So we didn’t. We just acknowledged their value and were grateful to be able to come back.

Funny how things change.

Value - Part 2

I don’t remember when I first asked Chris to marry me. But it was some considerable time before she said yes. Considerable as in years. Two at least.

When she finally did so it was in a middle seat in coach on a late afternoon flight from LAX to Chicago. As settings go it was less than romantic. A shortcoming that our wedding more than made up for.

Four months after we first walked up the stairs of Rossdhu House, we made the journey again.

This time as bride and groom.

Accompanied by falling rose petals and the sound of bagpipes.

Both were a surprise.

In a day of blurred memories, this moment stands out. In part because it was the culmination of so much and I've never felt more present. In part because the thoughtfulness of the Club's management to provide two touches we had not asked for, framed the moment and made it a memory.

A lesson that big value can be built on small things.

Rossdhu is the ancestral home of the Clan Colquhoun. Built in the 16th Century, it is regarded locally as the ‘new’ house, and sits proudly and gracefully in the most prominent position within 1000 acres.

The ruins of the stark, defensively positioned castle it replaced still exist behind what is now the 18th green. Dramatic contrast of the values of the times in which each was built.

The transformation of the Colquhoun estate from fortress to playground happened as a tango. Periods of peace and calm interspersed by betrayal, black magic, murder and tragedy. Mary Queen of Scots visited twice, Queen Victoria once. As did Bill Clinton.

When the former President came to stay, he was given lodging at the Bed and Breakfast down the road in Luss, the rooms at Loch Lomond all being occupied by members, and the Club’s management being unwilling to dislocate any of us for a non-member.

Value is the foundation of any business that succeeds over the long term. People spend money based on a complex series of personal equations that we use to determine what something is worth.

Those equations are fluid, and some are more elastic than others. Aspiration, scarcity, social esteem, personal esteem, and need all play a role. As you move up the value chain (or perhaps down - a debate in and of itself), exclusivity quickly becomes an essential component of a pricing philosophy. And a Club that values my residence over that of a former President of the United States is winning the exclusivity equation.

Our wedding reception was held in the Green and White Dining room. It is one of my favorite rooms in the world, in both design and personal context, and we had thought carefully about how to set it up for the evening’s festivities. On the morning of our wedding three hours of intensive work by several members of staff ensured the room was prepared exactly as we had asked.

They spent three more hours that afternoon entirely re-doing it at the suggestion of the Club’s management, who came to us with what they thought was a better plan.

To care as much as your customers about the quality of their experience is the goal of every service business. To deliver that requires a set of values and a view of the big picture that are very rare.

The Club did what we asked. They did it perfectly. And then they wanted to do it better. There are books and theses on building customer loyalty. None taught me as much as that afternoon.

For the next six years we came back to Loch Lomond every Spring and every Fall. There are one hundred year old rhododendron bushes throughout the grounds. Many as tall as trees. I would live in Scotland for a lot of reasons. The people and the scenery being the first two. In that order. Fish and chips would come a close third. But a rhododendron the size of a small house in late May takes some beating.

At first we came alone, as though inviting the outside world would somehow burst the magical bubble that surrounded every visit. But over time we started to bring guests. Sitting over dinner in Chicago as we extended the invitation, we would wax lyrical about the Club. In every case, we were told later, our friends were certain there was no possibility that our description could be matched by the reality. In every case, within a day or arrival, we were told we had failed to do it justice.

Describing physical beauty or capability is much easier than describing experience. And experience, the application of beauty or benefit, is what determines value.

In the case of Loch Lomond, what defined the experience was the people. People who genuinely cared as much about your experience as you did. Mark, Ian, Keith, Trish, Donald, Colin, Jamie, Scott, Pat, Jim, Jim, Jane, Gemma, Damian, Willie, Willie, Alison and Billy. Billy was the head chef who made it a point to make me an apple pie whenever he heard I was coming, and whose staff was so well trained that at my first breakfast after arrival, and every meal thereafter, soy butter replaced the dairy butter to which I am allergic. No request. No reminder. Every time. Which was sometimes seven months since the last time.

There is a rattan carpet on the back stairs at Rossdhu that took us from our room, past reception and down into the locker room and Spike’s Bar. I can feel the carpet under my golf shoes as I write, on my way down to breakfast before teeing off. Bacon, sausage, grilled tomatoes and black tea. And the Times.

It was like coming home. Better than home. We were made to feel like Lords of the Estate of Luss. And we tried to honor that by being benevolent ones. Grateful ones. And we counted the days between visits.

At some point during each stay, conversation between us and our guests turned to wondering about the business practicalities of all this. The rooms were expensive, and I had to keep reminding Chris that the five full bottles of Moulton Brown products that we were encouraged to take on our departure, and the complimentary bottle of Port that met us on our arrival were not ‘free.’ Quickly, however, they became part of the value expectation of each stay and a point of reference of the Club’s commitment to quality.

But the $5,000 initiation fee had begun to worry us in a different way. And as we came to experience the Club’s commitment to quality throughout the facilities and the world class golf course that had first attracted us, we began to speculate how the Club's owners could pay for all this.

It turns out, we weren’t the only ones doing those calculations.

Value - Part 1

In the spring of 1998, Chris and I joined a golf club in Scotland sight unseen. That is, I had seen it on television and read about it in a book. It looked and sounded extraordinary.

The initiation fee was $5,000, plus two letters of recommendation. I worried about both. Marriage was finally in the air and this was an expense and a distraction. Would it be worth it?

As humans, everything we do is based on a value matrix. Time and money are the most common. But we apply value to every moment of our existence. Is it better to be asleep or awake. To listen to music or news. Classic or rock. To eat now or later. Well or carelessly. To listen or ignore.

Each demands a judgement. And as a species, and as individuals, we have developed a sophisticated matrix that allows us to make decisions and move forward, or not, thousands of times a day. It happens at light speed and you’re using it at this moment, and this moment, and this one.

Thank you.

For deciding it's worth coming a little further with me.

At the core of this matrix are definitions of value. Sometimes sophisticated. Sometimes simplistic. Some are static. Some are fluid. Some are provided. Like the law. Some are personal. The trick is knowing when to re-assess them. A value equation in itself.

In early 1998, we plugged $5,000 and two letters of recommendation into our value matrix, added a magazine article we had just found about the Club to the soup and stirred.

Three months later we drove up to the guard gates for the first time as members and, without introduction, were greeted by eleven words. Eleven words which set a standard that, for the next nine years, never wavered.

“Ah, Mr Day. Welcome to Loch Lomond. We’ve been expecting you.”

First impressions are powerful. And set a tone. They define value instantly and reinforce it over time. As a business owner, your first impression is one of your most valuable assets. Making it powerful is under-valued by most entrepreneurs.

This, however, was a first impression of magical proportions. Our first visit. A rented car. No photograph. And four months before Google existed. As owners of a service business we were mesmerized by this small but powerful feat of customer connection.

Loch Lomond, we were soon to discover, was a place where magic happened on a regular basis. A breathtaking, romantic, timeless place where dreams came true. A real life Brigadoon. With the added benefit of five star facilities and six star service.

Driving into the stunning grounds on that first afternoon, past two of the most beautiful golf holes I had ever seen - the hills as backdrop to one and the Loch as backdrop to the other - I started to worry there had been a mistake. Could we really be members of this?

Aspiration is a delicate attribute for a business to instill and maintain. Too much and you seem aloof and disinterested. Too little and it becomes cheap glitz. Affected and inauthentic. Creating an aspirational brand requires taste. Maintaining one requires sensitivity and judgment.

As we parked the car, desperately trying to hide the accumulated sweet wrappers and empty Coke bottles of a three hour cross-country drive, we sat for a second and looked at each other. ‘Can you believe this?’ Chris asked, straight faced. I shook my head. ‘Let’s leave the stuff in the car for now until they actually let us check in,” she suggested.

When the pair of matching Range Rovers suddenly screeched to a halt on either side of our car - one for us and one for the luggage - the choice was taken out of our hands. Nonchalantly, we tried to act as though this was how we arrived everywhere we went.

Moments later we were deposited gently at a set of stone steps that led up to the most magnificent Georgian mansion I have still ever seen.

One man stepped forward from the phalanx of uniformed staff. “Mr and Mrs Day. My name’s Robert. Welcome to Rossdhu.”

He turned and led the way up. And after a moment’s hesitation, we followed. As we reached the imposing front doors, I stopped to survey the sweeping views of the Loch. ‘It’s quite something, isn’t it,” said Robert proudly.

I nodded and glanced at Chris. She smiled.

“Robert,” I said, summoning up my most casual voice. “Do you do weddings?”

Change - Part 1

We’re in Chicago this week, packing up our home so we can complete our move East.

It’s been a two year process. In May of 2005 we listed our house with a vague idea that we would move to the New York area once it sold. We thought we’d have a last lazy summer in Chicago while we got used to the idea of leaving our adopted city and a house that we love.

We were in London the day the house was added to the real estate listings. At the Chelsea Flower Show. I know because that’s where I was standing when our real estate broker called. We had an offer. It had taken 47 minutes.

Two hours later they called back and offered us our asking price.

Panic set in. We came up with all the reasons why we weren’t ready. All the practical things that Chicago had for us. Doctors. Dentists. Vets. Dog day-care. All the friends we’d be leaving. The work we were doing at PAWS Chicago. All of this loss danced before our eyes.

We said no and took the house off the market.

My heart rejoiced.

Somewhere in the darker corners of my being, an instinct was hammering on the door of my fear trying to get out.

Bullys Beware

Self interest is everywhere.

Actually, it always has been. But in recent weeks it’s become markedly more obvious. And more destructive.

Which is what happens when bullys have control.

Power is a transient, temporary phenomenon. What you do with it while you have it has a disproportionately large effect on two things: your future and your legacy.

So, nothing big.

In the last twelve months two things have happened to massively shift balances of power. The global economy collapsed. And social networking exploded. Those who had money now have much less. And those who were silent, now have a voice.

The first has been manifested in the advertising industry where agencies, thrashing blindly in the death throes of an archaic business model, try to suck the life out of everyone beneath them in the food chain.

Not satisfied with ‘Sequential Liability’, some agency holding companies are now trying to impose contracts that give them the right to decide not to pay their suppliers. At any point in the production process. For any reason.

Talk about faith based relationships.

Since most agencies rarely make the first contractually obligated payment before the vendor is expected to start working, the billion dollar agency now has the vendor funding virtually every project. With no guarantee of payment. Ever.

In Vegas it’s called gambling. But at least there the house posts the odds. And the rules.

In other places it’s called abuse. But as long as the victim keeps coming back for more, nothing much changes.

What’s happening in Iran makes for an interesting contrast.

There, a thirty year-long, one-sided relationship is shifting as we watch, thanks to the power of social networking. Suddenly, those who suffer have a means to give voice and encouragement to like-minded others. And the didactic instructions of a ‘supreme ruler’ are no longer so menacing. Nor so supreme.

Fiction is littered with bullies who were toppled by the apparently inferior oppressed. David and Goliath. Jack and the Beanstalk. The War of the Worlds. The outcome of each a reflection of the underlying sense of balance on which the world operates. And those who smirk at the lessons of fiction ignore the reality on which they are based.

History is being written as we speak. On a global stage in Iran. And in the small, and self-important world of advertising.

But in each case the outcome will ultimately be the same.

And it will not be the bully who wins.

Four Changes A Business Shouldn’t Make

There are many things you should be doing as a business owner at the moment.

Here are four you should not.

1. Charging Less For The Same Service.

This is a one-way ticket. Once you give more for less you establish a new normal. There is no way back from that.

Instead, look at your business from your customer’s eyes. What’s valuable to them? Charge for that. And replace the things that aren’t valuable to them with things that are.

2. Trying To Be Something You’re Not

Understand what you do. Which is not always obvious when you're involved in the day to day.

The best way to make sure you really know is to ask your customers why they use you. If you refuse to accept platitudes and the easy answers, you'll gain incredible insight.

Once you really know what makes you great in the eyes of your customers, look for other ways to use that expertise.

This will do two things.

Grow your business against your fundamental strengths - always the strongest platform. 

And prevent you from getting involved in trendy areas that seem like a good idea, but which are almost always expensive distractions.

3. Cutting By Cost or By Experience or By Position.

Every company has its own view about how to cut overhead. In my experience, they almost always use the wrong one. Assuming you've reached the point where salary cuts just aren't enough then there's one simple method you should apply.

Cut by value. What someone costs is not the criteria. What each employee is worth, is. We've developed a Value Matrix™ to help our clients do this. You should have something similar.

 
4. Jumping Into Social Media Without A Strategy.

It’s time consuming to do it well. And not everyone should be doing it.

If you’re going to get into the white-water rapids of social media, you need to understand how you're going to benefit by doing so.

Then if you decide it's worth it to you, get in. With purpose.