Small is the new big

from Seth Godin's blog

Big used to matter. Big meant economies of scale. (You never hear about “economies of tiny” do you?) People, usually guys, often ex-Marines, wanted to be CEO of a big company. The Fortune 500 is where people went to make… a fortune.

There was a good reason for this. Value was added in ways that big organizations were good at. Value was added with efficient manufacturing, widespread distribution and very large R&D staffs. Value came from hundreds of operators standing by and from nine-figure TV ad budgets. Value came from a huge sales force.

Of course, it’s not just big organizations that added value. Big planes were better than small ones, because they were faster and more efficient. Big buildings were better than small ones because they facilitated communications and used downtown land quite efficiently. Bigger computers could handle more simultaneous users, as well.

Get Big Fast was the motto for startups, because big companies can go public and get more access to capital and use that capital to get even bigger. Big accounting firms were the place to go to get audited if you were a big company, because a big accounting firm could be trusted. Big law firms were the place to find the right lawyer, because big law firms were a one-stop shop.

And then small happened.

Enron (big) got audited by Andersen (big) and failed (big.) The World Trade Center was a target. TV advertising is collapsing so fast you can hear it. American Airlines (big) is getting creamed by Jet Blue (think small). BoingBoing (four people) has a readership growing a hundred times faster than the New Yorker (hundreds of people).

Big computers are silly. They use lots of power and are not nearly as efficient as properly networked Dell boxes (at least that’s the way it works at Yahoo and Google). Big boom boxes are replaced by tiny ipod shuffles. (Yeah, I know big-screen tvs are the big thing. Can’t be right all the time).

I’m writing this on a laptop at a skateboard park… that added wifi for parents. Because they wanted to. It took them a few minutes and $50. No big meetings, corporate policies or feasibility studies. They just did it.

Today, little companies often make more money than big companies. Little churches grow faster than worldwide ones. Little jets are way faster (door to door) than big ones.

Today, Craigslist (18 employees) is the fourth most visited site according to some measures. They are partly owned by eBay (more than 4,000 employees) which hopes to stay in the same league, traffic-wise. They’re certainly not growing nearly as fast.

Small means the founder makes a far greater percentage of the customer interactions. Small means the founder is close to the decisions that matter and can make them, quickly.

Small is the new big because small gives you the flexibility to change the business model when your competition changes theirs.

Small means you can tell the truth on your blog.

Small means that you can answer email from your customers.

Small means that you will outsource the boring, low-impact stuff like manufacturing and shipping and billing and packing to others, while you keep the power because you invent the remarkable and tell stories to people who want to hear them.

A small law firm or accounting firm or ad agency is succeeding because they’re good, not because they’re big. So smart small companies are happy to hire them.

A small restaurant has an owner who greets you by name.

A small venture fund doesn’t have to fund big bad ideas in order to get capital doing work. They can make small investments in tiny companies with good (big) ideas.

A small church has a minister with the time to visit you in the hospital when you’re sick.

Is it better to be the head of Craigslist or the head of UPS?

Small is the new big only when the person running the small thinks big.

Don’t wait. Get small. Think big.

Cathay Pacific to launch major cost-cutting measures

Originally published on asia.businesstraveller.com 17/04/2009

Deteriorating business conditions have forced Cathay Pacific (CX) to reduce passenger capacity by 8 percent and overall cargo capacity by 11 percent starting May. Its sister airline Dragonair will also see a 13 percent cut in passenger capacity.

Simultaneously, CX is introducing a voluntary Special Leave programme for its 17,000 workforce worldwide, encouraging them to take unpaid leave between one and four weeks, depending on seniority. Other cost-cutting measures include deferring airport lounge renovations in Hongkong and London as well as deliveries of new aircraft, looking into whether or not to renew aircraft leases expiring, renegotiation with suppliers for more discounts.

Tony Tyler, CX chief executive, said these decisions were taken “after carefully considering all our options”. He added the paramount aim was “keeping our network and team together in this challenging environment”.

The staff, he believed, understood the rough patch their company was experiencing. He said: “One employee I met summed it up very well: ‘We are all in the same boat.’ What we’re trying to do now is to keep the boat afloat (while) sailing through the storm.”

In the first quarter of the year, the airline’s turnover was 22.4 percent lower than the same period in 2008. Tyler warned that if the recession worsened, CX would look at instituting other measures, but what these were, he declined to say.

CX has become the latest victim of the continuing global financial crisis.

In February, Singapore Airlines cut passenger capacity by 11 due to falling demand and decommissioned 17 of its aircraft to cut costs. It is in talks with employees regarding early retirement and unpaid leave, but insisted that retrenchment was strictly a last resort.

Qantas on April 14, announced it would slash up to 1,750 jobs, ground 10 aircraft and defer delivery of the superjumbo Airbus A380 and other aircraft. It has downgraded its profit forecasts by as much 80 percent.

See also: How companies are reducing costs

Question:
What are some of the ways airline comapanies can cut costs in the economic downturn?

CUTTING COSTS, SAVING JOBS - Kenny the Fish stays buoyant

April 2, 2009 (ST by Yang Huiwen)

Boss of ornamental fish group Qian Hu has imbued staff with culture of cost consciousness

THE global economy is in troubled waters, but ornamental fish group Qian Hu is well-placed to swim against the tide thanks to extensive measures to scale back costs.

Having a boss known as Kenny the Fish who leads from the front and pledges no layoffs helps as well.

Kenny Yap - executive chairman and managing director - told The Straits Times: 'In Chinese, there is a saying that business is half earned and half saved. That very much applies to us.'

He has made the firm highly cost-conscious over the years and the culture has become so accepted by staff that it has allowed the firm to get even leaner during these times.

Mr Yap, 43, who has won numerous entrepreneur awards, is credited with transforming a small time specialist breeder into an integrated group exporting ornamental fish to over 80 countries, with retail stores in Malaysia, Thailand China.

The downturn has certainly hit the firm but the numbers still stack up pretty well.
Revenue dipped 7.2 per cent in the fourth quarter last year, but better cost controls meant net profit rose 10 per cent over 2007's to $1.74 million.

'We've had a low-maintenance company lifestyle all along. It's all about building good habits when it comes to managing costs,' said Mr Yap.

Keeping costs down became part of the group's DNA after an ambitious but expensive move to expand and diversify from 2004 to 2006 sent the firm briefly into the red. There was a desperate need to control costs then, prompting Mr Yap and two other deputy CEOs to give up bonuses for three years.

It also taught valuable lessons in cost management that have left them in good stead to weather this global turmoil. Qian Hu is so cost-conscious it does not even engage a cleaner. Instead, staff draw up a duty roster and take turns to clean the premises at Jalan Lekar every day. This instils in employees the 'concept of ownership', said Mr Yap, who does his share of the work by cleaning the toilets.

Leaders have to lead by example, he added. 'If you are fair to your employees, they will make sacrifices during bad times.'

Good times or bad, senior executives fly economy class or even take budget airlines for business trips, and stay in two- or three-star hotels.

But the firm is stepping up its cost-control measures, after setting an internal target to further bring down total expenses from the previous year's. Measures include more aggressive recycling, conserving energy, a cheaper menu at its corporate dinner and improving productivity of its fish breeding process.
Staff have been assured no one will be losing his rice bowl, thanks to its 'corporate culture of being prudent in spending, even during good times', said Mr Yap.

Operations manager Ong Seng Ann, 41, said: 'All along, I think the company has been very conservative when it comes to spending. Everyone of us is doing his part and doing it well, and hopefully that will keep the company going strong.'

He and his operations team, for example, are doing their bit by aiming to reduce the death rate of fish through more inspections and quality checks.

The company has also become tougher on overtime claims. Operational staff, who take care of the fish, have been encouraged to 'clock out' when they have completed their day's work, said human resources senior manager Raymond Yip.

It recently converted all its lever-type turn-on taps to spring-activated push taps to save water. There is also a greater focus on recycling items such as plastic bags and styrofoam boxes.

Qian Hu is also cutting down on internal company events. Its recreational days for staff have been cut from three to two a year.

The Jobs Credit scheme is offsetting about $220,000 in wage costs a year. This helps mitigate a 2 to 4 per cent increment in staff salaries implemented last year. There are no plans to freeze or cut pay, although the firm is capping headcount at the current 137 for its Singapore operations.

Mr Chai Teck Yi, 24, who works in the export part of the business, said he was relieved that he was assured of his job. 'It helps that our bosses give us regular updates of how the company is doing and the plans they have in store.'

Said Mr Yap: 'Frequent communication with employees is extremely important during the
cost-controlling period. This is because we must constantly impart that concept and at the same time update them on the progress so that they can be assured there is a purpose for their sacrifice and there are results as well.'

Qian Hu is also taking a more cautious approach in managing cashflow. The finance department now monitors its debt collection on a daily basis to make sure customers are sticking to their credit terms, instead of a few times each month.

'I don't think the business is recession-proof, but it is resilient,' said Mr Yap. For this year,the group will continue to focus on containing operating costs and increasing productivity, he said.

Question:
Identify some of the ways Qian Hu is cutting costs