The secret sauce behind AirAsia and Starbucks

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Tony: “The danger of too many checks and balances is that you lack that entrepreneurial drive to take risks and then you die naturally anyway.”Tony: “The danger of too many checks and balances is that you lack that entrepreneurial drive to take risks and then you die naturally anyway.”

AirAsia boss Tan Sri Anthony Francis “Tony” Fernandes CBE believes that transformational entrepreneurship and innovation entails risk-taking and daring to fail as par for the course. “You’ve got to create a culture of taking a little bit of risk and be innovative. We don’t always get it right, but it’s important to create an entrepreneurial culture where people aren’t afraid of taking risks. The danger of too many checks and balances is that you lack that entrepreneurial drive to take risks and then you die naturally anyway.”

Zev SieglGTF2015 - Zev 1, Starbucks co-founder and startup business coach, agrees. “Suppose you embrace entrepreneurship, one of the people in the organisation runs with an idea, it gets approved, it gets funded, and it chews itself through $500,000 and has to be stopped. What happens to the individual who championed the idea? That really matters. If the organisation funded the idea and gave the go-ahead, it’s no longer that person’s idea alone. It’s extremely important to hold that person up as though they had succeeded; not only to that person, but to the other people who are watching. If you want to embrace a slightly higher degree of risk, you have to deal with the consequences when it doesn’t quite work.”

Both business moguls said this during a panel discussion at the inaugural Global Transformation Forum 2015 (GTF2015) held in Kuala Lumpur recently.

To Fernandes, innovation came in many different forms and revolved around people. “Our innovation had been in people management. My role is to turn a raw diamond into a diamond; to extract something that people didn’t even see in themselves, to push them again and again. Yes, innovation can be technological, but moreso people and their ability to think on the spot, coming up with new ideas.”

As examples of innovation, he cited the example of AirAsia flying to Bandung (Indonesia), which no one had done prior; now, there were 32 flights there daily and the whole place had been transformed. Tony also pointed out that it was the first airline in this part of the world to use the Internet to sell tickets.

“The Internet is incredibly transformative. There are great ASEAN and Malaysian companies that are building great businesses because they’re not constrained by government regulations. GrabTaxi (MyTeksi’s international brand name) is a fantastic Malaysian company that’s now all over ASEAN because regulators haven’t found a way of controlling them yet. Government should also allow innovation and facilitate business. And that would be transformational.”

When asked to share insights into the factors that led to the success of their businesses, both agreed that having a good idea was a significant part of it. Siegl pointed out that at its beginning, the founders of Starbucks identified a few factors that would enable it to be successful; gourmet coffee being a very profitable type of business, good value proposition for the consumer, and having the ‘X factor’ of caffeine, which formed a crucial part of daily life. “Now we see that in cellphones; how many times have you looked at your cellphone today?”

Fernandes additionally believed that it was also a matter of surrounding oneself with good people and to have a great team that shared the same vision and passion.

Siegl and Fernandes also agreed that it made solid sense to embrace good corporate citizenship values. Siegl stressed that companies with CSR agendas – perhaps via business foundations (such as the GAB Foundation) – are not completely altruistic. “But there is an expression that ‘you can do well by doing good’; for example, Starbucks is a major donor to a foundation in China called the China Education Project. ‘Major’ means $1 million a year for 3 years – that’s a lot of money.

“The project provides education for about 1,000 existing teachers; helps them develop skills teaching about the environment, and of course those 1,000 teachers are influencing tens of thousands of students. Why would Starbucks spend that kind of money? The answer is, Starbucks has 1,000 stores in China and wants to attract people like you and one way to do that is to at least appear to be a responsible organisation. And it’s better if you actually are.”

Fernandes, meanwhile, considers that a business has a responsibility first of all to its staff. “(Business partner) Kamarudin (Meranun) and I have really created a fantastic environment to work where it’s meritocracy, people can really achieve anything they want.”

Aside from hiring the first female pilots of jet aircraft in Malaysia – or Southeast Asia – Fernandes also opened up opportunities for school dropouts. “I said, if a woman can run a country, she can certainly fly a plane, and now we have 62 female pilots, leading to a situation where on one flight, the pilot, co-pilot and all the cabin crew were all female.

“There are so many bright kids in my company who, for social reasons left school at 13 or 15. So our first cadet pilot programme, we opened it up to everybody. Doesn’t matter if you went to Oxford, Cambridge, whatever, if you want to be a pilot, you can do it. And we funded that.”

In one instance, one of Fernandes’s staff was a boy luggage handler from East Malaysia who left school when he was 13. Fernandes encouraged and funded him through the Malaysian Flying Academy. “He got the highest flying marks there; today, he’s a Captain in an A320. We have created so many careers from nothing. Business is not just about ‘do the charity’ part; it’s about being socially responsible, looking after your employees, allowing them to develop and grow within the organisation, allowing them to get their dreams as well.”

Siegl added, “If you develop a reputation in your organisation for hiring good people or giving them a little bit of freedom, so they can express their initiative, that’s a social good, but it’s also something that really benefits the company, because you attract the people that you want if you have policies like that. Tony’s company AirAsia’s a pretty good example of that – my understanding is that it’s an interesting place to work, so you enable people to flourish.”

Emphasising the point, Siegl stated that Starbucks had made a deal with one of the more reputable online universities sometime last year, so anybody who works at least part-time (slightly over 20 hours/week) in Starbucks gets a credit to take classes at this online university (Arizona State). “This was a business deal, but the effect on the staff at Starbucks was amazing. Even those who had not (yet) taken up the offer really appreciated the respect that management had shown towards the future of the people that worked there, and it has had a galvanic effect on the esprit de corps of the company.”

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