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Published: April 30, 2010

 
 

Getting Back on Track

His top priority was to lift ALL out of its precarious, cash-strapped financial state. To accomplish this, he and his 35-year-old CFO, Duilio Calciolari, developed four rules to govern the company’s investments:

Rule 1: Money would be invested only in projects that would allow ALL to earn more revenue in the short term.

Rule 2: The best solution to any problem was the one that would cost the least money up front — even if it ended up costing more in the long term, and even if it was a lower-quality solution.

Rule 3: Options that would fix a problem quickly were preferred to slower options that would provide superior long-term fixes.

Rule 4: Reusing or recycling existing materials was better than acquiring new materials.

The four rules were clear: (1) Unblock revenue. (2) Minimize up-front cash. (3) Faster is better than best. (4) Use what you’ve got. These rules, taken together, ensured that cash wouldn’t be consumed unless it was being used as bait for more cash. Spend a little, make a little more.

This is what we mean by “scripting” the critical moves. Change begins at the level of individual decisions and behaviors, but that’s a hard place to start because that’s where the friction is. Inertia and decision paralysis will conspire to keep people doing things the old way. To spark movement in a new direction, you need to provide crystal-clear guidance. That’s why scripting is important — you’ve got to think about the specific behavior that you’d want to see in a tough moment, whether the tough moment takes place in a Brazilian railroad system or late at night in your own snack-loaded pantry.

You can’t script every move — that would be like trying to foresee the seventeenth move in a chess game. It’s the critical moves that count.… Behring’s four rules were focused on financial triage. He didn’t have the luxury of long-term planning. He needed his people to move, immediately, in a new direction, in hopes that they could buy ALL enough time to make a fuller transformation. (Notice that he didn’t say a word about other important issues such as employee morale or marketing or R&D.) By staying focused on the critical moves, he made it easier for his people to change direction.

In 1998, for instance, the company had to turn down business hauling grain because it didn’t have enough locomotives. While its competitors were negotiating for new locomotives, ALL’s engineers worked around the clock repairing old locomotives. (Faster is better than best. Minimize up-front cash.)

Also, ALL’s engineers figured out a way to boost the locomotives’ fuel capacity so they could operate longer without refueling. This reduced downtime, allowing more routes per locomotive, just as Southwest Airlines gets more flights per plane than its competitors because of its quick turnarounds at the gate. (Unblock revenue.) Engineers also found a creative solution to the nagging problem of damaged tracks, which limited a train’s speed. Rather than purchasing new metal rails, which cost US$400 per ton, they ripped up tracks at abandoned stations and installed them on active routes. (Use what you’ve got.)

Three years later, Behring’s discipline was paying off. ALL’s performance improved from a net loss of 80 million reals in 1998 to a net profit of 24 million reals in 2000.

— Chip Heath and Dan Heath

Copyright 2010 by Chip Heath and Dan Heath. Published by arrangement with Broadway Books, a division of Random House Inc.

 
 
 
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This Reviewer

  1. Tony Hsieh is the CEO of Zappos.com Inc., an online retailer that was acquired by Amazon.com in November 2009 in a deal valued at $1.2 billion. He also co-founded LinkExchange, which was acquired by Microsoft in 1998 for $265 million. He is the author of Delivering Happiness: A Path to Profits, Passion, and Purpose (Business Plus, 2010).

This Excerpt

  1. Switch: How to Change Things When Change Is Hard (Broadway Books, 2010) by Chip Heath and Dan Heath
  2. Chip Heath is the Thrive Foundation of Youth Professor of Organizational Behavior in the Graduate School of Business at Stanford University. He is a speaker and consultant on idea effectiveness, and is the coauthor, with his brother Dan, of the New York Times bestseller Made to Stick: Why Some Ideas Survive and Others Die (Random House, 2007).
  3. Dan Heath is a senior fellow at Duke University’s Center for the Advancement of Social Entrepreneurs. He is a co-columnist (with Chip) for Fast Company, and previously served as a consultant to the Aspen Institute and as a researcher for Harvard Business School.
 
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