The power of being nice: when guerriglieros start being nice you get bigger profits

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I pass quite some time watching videos on YouTube, mostly TED talks, VICE short videos and “algorithm suggested” stuff. A few days ago I watched to this video https://www.youtube.com/watch?v=6A4pA7XlDI8&feature=youtu.be where Michael O’Leary (the CEO of Ryanair) holds a 50 min conference on Ryanair at RCSI in Dublin in November 2015 as part of the Annual RCSI Millin Meeting.

I suggest everybody to watch the video, mister O’Leary is a successful businessman that revolutionized the airline industry. He is very fun to listen hereafter some quotes from the speech as a motivational:

  • “People are not your biggest asset: they are your biggest cost” – Michael O’Leary
  • Q (Auditor): “How do you motivate employees?” A (Michael O’Leary): “With fear, fear works very well!”
  • “It is not difficult to be cheaper than Lufthansa on the days they are actually flying and are not on strike again” – Michael O’Leary

 

Image: https://upload.wikimedia.org/wikipedia/commons/thumb/7/75/Michael_O%E2%80%99Leary_2015_%28cropped%29.jpg/220px-Michael_O%E2%80%99Leary_2015_%28cropped%29.jpg

Michael O’Leary, Image: Wikipedia

The main point that you get from the speech is that politeness matters and that nobody can remain forever a guerrilla -style start – up: even Ryanair in the last few years has changed its strategy and one of the new goals is “being nice to customers” after years of growth pushed by aggressive cost cutting and zero tolerance internal policies. This shift in strategy has boosted sales and profit (profit after tax in fiscal year ending 31/03/2016 was up 43% compared to the year before).

I find this change in strategy quite interesting and I would have never thought it would have worked when I first read in March 2016 this article on the Wall Street Journal. Ryanair is known for being a very low price carrier, that offers very low fares but therefore charges an extra price for anything the passenger might want (quite famous is a quote by O’Leary that says: “Anyone who thinks Ryanair flights are some sort of bastion of sanctity where you can contemplate your navel is wrong. We already bombard you with as many in-flight announcements and trolleys as we can. Anyone who looks like sleeping, we wake them up to sell them things”): forget about drinks, free luggage, help at check-in, etc.. Shifting to a more customer friendly approach surely involves more costs and if passengers don’t accept slightly higher prices the overall balance would have led to lower profits. However, customers appreciated the move and showed that people are actually ready to pay a bit more for some politeness and friendliness.

I think this is an important point for anybody starting a company, at the beginning a “guerriglieros” approach might work quite well (Uber has grown also by using some strategies that are not the best example of commercial correctness although not illegal, for example they were booking and unbooking rides on the app of their competitor Lyft in order to create long waiting times for real customers) but after some time it is important to shift to more polite and friendly operations since people do care about how they are treated.

 

 

Ryanair new strategy: https://www.wsj.com/articles/ryanairs-new-strategy-being-nice-1457862512

Ryanair investor report: https://investor.ryanair.com/wp-content/uploads/2016/05/Ryanair-Results-FY2016.pdf

Lyft cancelled rides: http://money.cnn.com/2014/08/11/technology/uber-fake-ride-requests-lyft/index.html

“Don’t try to be original, just try to be good.” — Paul Rand, Graphic Designer

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Up to a few weeks ago my stereotype image, probably influenced by background in mechanical engineering, of an entrepreneur starting a company was somebody that has a brilliant idea that could disrupt a market and strives for a “blue ocean” strategy, potentially something Aileen Lee would describe as a unicorn.

A few weeks ago, I started a group work with some classmates for a course I was taking at SSE. It turned out that one of them, Matilda, was actually 6 months in to the journey of starting a company called bSaka (you can visit their website here bSaka). I immediately though she was some kind of Swedish version of Mark Zuckerberg but this was not the case: the company goal is to help people live a life of harmony and happiness and it does this through the commercialization of clothes. These clothes are designed to support people during meditation activities such as yoga and are manufactured with a strong concern for sustainability. All this sounded great but I was still skeptical about the potential of such a company: Where was the disruptive technology? Where was the app? How can you compete with companies like Zara or Nike? What is better in them compared to incumbent players?

Recently the company held a start-up launching event and a new product was launched so I got to hear the story behind the company and the reasons that pushed this group of friends to engage in such a tough venture. Matilda had gone though some rough times that she had overcome through meditation and yoga. She found out that with a more harmonic and less frenetic life she was feeling much better, there company’s goal is to support people in this journey of self-awareness. Matilda speech was quite impressive and you could feel the inner motivation, there I realized that being an entrepreneur does not necessarily mean being original and having a disruptive technology to leverage but is mostly about trying to be good at what you do and passionate about it.