SMaC
Great By Choice
RAFAEL GARCIA
ALLYSON HATZ
BONNIE LEE
ALEXA MCDANIEL
MOLLY MOSELEY
SMaC
 Howard Putnam, CEO of Southwest Airlines in 1979,
wrestled with a question:
 “Does the sweeping disruption of deregulation call
for a revolution in how we run our company?”
SMaC
So Putnam considered 4 main questions: Does
deregulation..
 Undermine our low-cost model?
 Threaten our high-spirit, employee-focused
culture?
 Erode the competitive value of rapid gate
turns or destroy the viability of our point-topoint system?
 Does radical change in our environment call
for inflicting radical change upon ourselves?
SMaC
 Mr. Putnam concluded that Southwest Airlines
should continue to expand based on the ‘cookiecutter’ approach.
 He also concluded the Southwest Airlines “cookie
recipe”.
Remain a short-haul segment
2. Utilize only 737 aircraft
1.
3. Continued high aircraft utilization and quick
turns
4. The passenger is our #1 product
5. Continued low fares and high frequency of
service
6. Stay out of food services
7. No interlining
8. Retain Texas as our #1 priority
9. Keep the ‘family and people feeling’ in our service
10. Keep it simple
SMaC
 Putnam stayed away from issuing vacuous
statements
 Although he specified:
Two-hour segments
 737s
 No food service
 No seat selection
Putnam laid out a CLEAR, SIMPLE, and CONCRETE
framework for decisions and action.

SMaC
 This elements have only changed about 20% in a
quarter of a century, despite a series of disruptive
events. Such as:
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Massive industry mergers
Recessions
Interest-rate spikes
The Internet
9/11
Adhering To the SMaC Recipe With Fanatic
Discipline
• 10X companies kept ingredients for more than 20
years
• Comparisons showed SMaC during best years
• Comparisons changed recipes to a greater degree
Southwest Airlines vs. PSA
 Facing deregulation, disruptive environment,
identical recipes, fabulous core markets
Southwest
•Began as a copy of PSA
•Builds momentum in Texas
•Analysts said they needed to
change their formula
•Putnam’s simple list “needed
major revision
•CEO kept most of the recipe
intact
•Became one of the most
admired companies in the
world
•Only one that endured as
great company
PSA
•Reacted to deregulation by
becoming more like United
Airlines
•Moved away from recipe
•Languished post deregulation
•Sold out to US Air
•Became irrelevant, then
forgotten
Apple
 Rise and fall illustrates the danger of straying from a
recipe and the value of restoring it
 Mid-1990s: fallen from glory days – Will Apple
Computer Survive?
 Chronic inconsistency: revolving door at the top

4 changes of CEO in 11 years
 Turnaround began in 1997 with Steve Jobs
 Apple had successful rebirth because it returned with
fanatic discipline to original recipe
John Wooden – UCLA Basketball
 10 NCAA championship teams in 12 years
 Exemplified power of consistency
 Ran drills from same set of 3x5 cards with rare
modifications
 “Pyramid of Success”: a philosophy of life and
competition

Detailed recipe down to how players should tie their shoes
IKEA
 Main Ingredients:
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Simple product design
Massive friendly retail stores
Very low prices
Create a better life for people
 In the beginning: concentrated on continuous cost
reduction
 During rising prices and global recession, they set out for
a new path to offer even lower prices to consumers
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Lowering operational costs
Become better at increasing volume
Develop better functioning supply chain
Empower co-workers
Adhering To the SMaC Recipe With Fanatic
Discipline
 Change is not the most difficult part
 10Xers ask why their recipe isn’t working anymore
before assuming obsolete methods
 Signature of mediocrity = chronic inconsistency
 10Xers accomplish goals by adhering to what they
know works
Amending the SMaC recipe: Paranoid, Creative
Consistency
 A great company must evolve its recipe, revising
selected elements when conditions merit, while
keeping most of its recipe intact.
 EX: in 1985, Intel’s memory-chip business.
 Japanese competitors threw the industry into a price
war by driving prices down 80% in 2 years.
Intel’s Recipe for Success
 In 1969, Intel began making
microprocessors, putting all
the computer functions on a
single chip. (They were
originally only in the memorychip business).
 Over 16 years they
continuously gained
momentum with the
microprocessors.
“If New Management Came In, What Would They Do?”
 Get out of the memory-chip business.
 Put their full attention into the microprocessor
business.
 Crucial to their success:
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Exit from memory chips
Not changing other elements of its SMaC recipe
“Genius of the AND”
 On one hand, Intel changes only a small fraction of
its SMaC recipe at any given time, keeping the rest of
it intact.
 On the other hand, this isn’t just an “incremental”
change- a SMaC recipe change is a significant
change.
 By grasping this point, a 10X enterprise can achieve
significant change and continuity-at the same time.
Firing Bullets
 The Intel case shows how firing bullets can give you a
hedge against an uncertain future, so that you might
have a ready-made amendment ready to go when the
world changes.
 Intel didn’t react to the memory-business disruption
by inventing the microprocessor; it had been firing
bullets for more than a decade, proving itself in
microprocessors.
2 Approaches to Amending the SMaC Recipe
 1) Exercising empirical creativity (internally driven)-
Firing bullets to discover and test a new practice
before making it part of the recipe.
 2) Exercising productive paranoia (externally
focused)- Disciple to zoom out to perceive and access
a change in conditions, then zoom in to implement
amendments as needed.
 10Xers employ both approaches
Intel’s Success
 In the Intel case, empirical creativity came 1st, and
then productive paranoia kicked in when the
memory-chip business became untenable.
 10Xers reject the choice between consistency and
change; they embrace consistency and change, both
at the same time
IKEA
 How does IKEA embrace change and
consistency simultaneously?
 They are consistently changing and
lowering their prices to compete with
competitors.
 Focused on conceptual consistency.
Although the product assortment and
functionality of IKEA’s products differ
between regions, and new products and
themed showroom corners are
constantly added to its range, the overall
IKEA experience remains consistent, no
matter when, where, or how consumers
interact with the brand. This makes the
IKEA experience memorable.
SMaC Recipe
 SMaC
 Specific, Methodical, and Consistent
 SMaC Recipe
 A set of durable operating practices that create a replicable
and consistent success formula
 Turns strategic concepts into reality
 Unchanging from situation to situation
 Helps people keep their bearings and sustain high
performance in extreme conditions
 The more unforgiving your world, the more SMaC you need
to be
SMaC Recipe
 “Not to do”
 Southwest Airlines: Do not interline, serve food, offer firstclass seats, carry air freight
 Microsoft: Do not wait to develop perfect software to enter the
market; get good enough to launch and then improve.
 Intel: Do not cut R&D during industry recession.
IMAX on Everest
 David Breashears developed SMaC recipe for
filmmaking in high mountains.
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50-degree-below-zero freezer in Toronto for practice
Developed protocols for handling IMAX camera with bare
hands
“Idiot Check List”
160 mile, 28 day trek in Nepal before Everest
 May 23, 1996: Mount Everest IMAX project
Consistency and Change:
The Great Human Tension
 Create practical framework that is flexible and
durable
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Ex: US constitution
Amendment mechanism
Consistent, to work in radically changing and unpredictable
environment
 Balance between continuity and change
 Concrete rules to guide decisions
 Understanding what actually works takes time
SMaC Recipe Comparison
 Changes to a SMaC recipe are like amendments
 Greatness is ability to:
 keep moving forward
 Figuring out what works
 Consistent approach with discipline, creativity and
paranoia