Peak – How Great Companies Get Their Mojo From Maslow – by Chip Conley, Founder & CEO of Joie de Vivre Hospitality, and Stanford Graduate School of Business Graduate
Episode 1 Intro: We all know about Maslow’s hierarchy of needs. Conley’s thesis is that the best businesses will focus on getting its employees, customers and investors (at least 1, if not 2 or all of these stakeholders) to reach the point of self-actualisation in relation to their business. He simplifies Maslow’s hierarchy into 3 (vs 5) levels – Survival, Success, Transformation. This kind of thinking is of particular interest to me, perhaps because my mother is a psychoanalyst and I have been surrounded by this language from an early age; perhaps because I spent 2 years at Stanford Business School drinking the Silicon Valley Koolaid; perhaps because it feels true and in the best businesses I have seen I can see it in action.
The below is an overview of the book Peak with its most salient points drawn out and a bit of commentary from our point of view.
First, the 3 level breakdown of Maslow’s usual 5 level hierarchy of needs for Employees, Customers and Investors:
I think it’s an incredibly important concept and one that all our startups should focus on. It is arguably more applicable to consumer-facing companies, but that’s not to say there is a lot in here for enterprise focused businesses too.
He talks about encouraging CEOs to focus not on the base of the pyramid, but constantly on the middle and upper levels of the pyramid. If you focus on the base, you won’t exceed the base….and “companies that cultivate an environment that allows for peak individual performance are rewarded with peak company performance”.
Conley started reaping the benefits of his focus on the peak of the pyramid(s) when the dot com bust decimated the Bay Area hotel market, where his business is exclusively focused. Given the strong relationships he had formed with his customers, employees and investors, by focusing on their Peak needs, he believes he was able to grow during that downturn, taking large market share from his competitors that focused on the base of the Pyramid.
THE EMPLOYEE PYRAMID
Extrinsic factors such as money and work-environment are base needs, but they don’t motivate people to work harder or smarter. Intrinsic rewards do that – recognition and meaning in work.
But how do you measure this? Conley does it using Fortune magazine’s “100 Best Companies to Work for” survey, administered by the Great Places to Work Institute. Take the survey and benchmark vs the best.
THE CUSTOMER PYRAMID
Peak: Meets unrecognised needs
Middle: Meets desires
Base: Meets expectations
An initial step to understanding what the Peak needs are of customers is to think beyond the exact service/product the company is offering them and to instead think about the need it is solving. E.g. Fedex CEO: “We thought we were selling the transportation of goods, when in fact we were selling peace of mind”. Perhaps for:
The best companies know their customers. Really know their customers. They don’t use research & surveys “as a drunk uses a lamp post….for support, not illumination” (David Ogilvy), they spend time with their customers, often just observing them, and they think hard, very hard, about what their customers want, and then deliver it fast.
Joie de Vivre did an interesting thing – they modeled each of their hotels around a magazine. This was a way to create a theme for the hotel group, but more importantly it allowed everyone working in each hotel to understand what the ethnography of their guests was likely to be. The Wired hotel clientele are different to the Vanity Fair hotel clientele who are different to the Rolling Stone hotel clientele etc.
As with Chip’s whole business, he created a hierarchy of needs for his hotel customers:
Maslow’s Hierarchy Chip’s Customer Outcome
|Self actualisation –>||Identity refreshment|
|Esteem –>||Feeling like a VIP|
|Social/Belonging –>||Responsive Staff Service|
|Safety –>||Well-lit parking, electronic door locks|
|Physiological –>||A comfy and clean bed|
What does identity refreshment mean? This mean going well beyond just satisfaction (that’s covered by the 1st 3 levels of the hierarchy) and to a situation where the guest is inspired by what they experience in the hotel to the extent that they want to make a positive change in their lives. If you’re in the Rolling Stone theme hotel in San Francisco, you may want to pick up your old Fender guitar and start practicing again, or you may want to get your daughter music lessons.
The point is that you have to be disappointed with just “satisfying” your guests – that means you are reaching the industry average level of expectation. If you want to stay ahead of the crowd you have to continuously push your industry to the next level – you have to be a revolutionary and so do all of your staff. Give your employees permission to think radically and, to a certain extent, act radically.
If you manage that you won’t need to spend much on marketing – your customers will do it for you.
How do you turn customers into evangelists?
Work out what business you are in (e.g. Joie de Vivre – selling dreams & providing priceless memories vs selling sleep), work out how you can help your customers self-actualise and sell that to your customers. You want to understand your customer better than they understand themselves and therefore deliver experiences that they weren’t expecting and couldn’t imagine.
Apple does this through their Genius Bars and training sessions but helping their customers get more out of their Macs so they can get more out of themselves. Steve Jobs famously said that the personal computer is a “bicycle for the mind,” giving people the ability to “explore like never before”. The link between Apple and Joie de Vivre is actually pretty close when it comes to the Apple retail stores. The former head of retail at Apple, Ron Johnson, asked 18 friends and associates who he considered thought leaders and asked them about their best service experiences. 16 of the 18 mentioned a hotel experience. So Ron designed the Apple stores around the hotel experience – the greeter at the door, the “bar”, the VIP service through $99 ProCare which gives customers unlimited access to every service the store offers. It has worked pretty well!
You not only have to know what business you are in, but also who your customers are – you need to position yourself in the market in the right way and once you know who your customers are you need to really get to know them. Big companies use ethnographers and social anthropologists to tell them what their customer are like. Intuit did one better – its QuickBooks division sent 500 employees on “follow-me-home” assignments for 3 days to view users using the software at home/in the office which yielded valuable insights. This customer observation approach is a foundation of the amazing design firm, IDEO’s, approach which heavily influenced my Stanford MBA. You can read (a lot) more about their approach here.
Can’t afford your own ethnographers – one hotel company simply gave its guests disposable cameras and asked them to photograph things they considered “magical” or “dreary” at its property.
Chip identified 4 themes at the top of the Customer Pyramid:
Some ideas for you:
THE INVESTOR PYRAMID
Middle: Relationship alignment
Base: Transactional alignment
I’ll cover this part in a bit less depth than the others.
The key components of transactional alignment are:
The secret to great investing isn’t becoming the ultimate whiz kid at financial models or necessarily being the shrewdest negotiator in the room, it has a lot more to do with building long-term relationships with the entrepreneurs and business leaders who deserve your confidence. Bill Price, cofounder Texas Pacific Group
If RoI is the only thing binding you and your investor(s) together, it’s going to be a rocky road to success. When you are invested in by a venture capitalist, you will most likely have a very long relationship ahead with that individual and firm. You have to get on. You also have to try hard to ensure that if there are many investors, particularly if there are a few of equal size and importance, that they get on with each other.
The key to building these relationships is to collaborate with your investors to make them feel part of the business. You have to of course select investors who are willing to get involved in this way. Ask them before they invest: “What has been your most satisfying investment relationship and why?”
Perhaps consider some perks you can offer your investors through your company’s services.
Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it’s the only thing that ever has. Margaret Mead
This is going to be less relevant to professional investors who run funds. Their mandate is to select the most profitable investments for their own limited partners (their investors).
However, if you are looking for high net worth investors, it can only be of benefit if your company is having a clearly positive impact on the World in what ever way you can articulate it. They want to hear how their money isn’t only making them money, but is making a difference to the lives of individuals or the environment.
BRINGING IT ALL TOGETHER
Business is simple. Management’s job is to take care of employees. The employees’ job is to take care of the customers. Happy customers take care of the shareholders. It’s a virtuous circle. John Mackey, Founder & CEO Whole Foods Market
Chip put together all 3 pyramids into one giant pyramid as shown below. Sums it all up well
Click on the image to enlarge it