Great by Choice By: Jim Collins Team 1 MGT 4380 – 001 Patrick Morales, William Turner, Becky Alvarado, Christopher Mathis, Jared Stowe

 Specific, Methodical, and Consistent  Operating practices that are replicable and create success into the future  Contains practices “to do” and “not to do”  Must adhere to recipe  Precise, not bland  Guides companies amidst crisis  Deregulation of airline industry

1. Remain a short-haul carrier 2. Boeing 737 is primary aircraft 3. Quick turns; ten min. in most cases 4. Passenger is #1 product; no air freight 5. Low fares and frequency of service 6. Stay out of food services 7. No interlining 8. Texas is #1 primary market 9. Employees are a strong asset 10. Keep it simple

 10X companies kept any ingredient in the mix for more than twenty years and proved durable  Progressive Insurance: 20+ years of durability and little change since 2002  Some might argue that poor operating models, not changes in the recipe, contributed to downfall

 Southwest Airlines began as a copy of Pacific Southwest Airlines  Both faced deregulation, disruptive environments, and nearly identical recipes  Southwest, not PSA, endured in the 20 years since deregulation. Why?

 PSA decided to move away from a proven recipe to follow another model (US Air)  PSA, having invented a successful recipe, should have been the most successful airline in history  Because they did not adhere to their proven recipe, they were forced to sell to US Air.

  Microsoft did very well while Apple struggled  Apple constantly changed its recipe while Microsoft pursued theirs, relentlessly

 UCLA men’s basketball coach during 1960’s and 1970’s  10 championships in 12 years as coach  “Pyramid of success”

 “The signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency”

 When is the right time to change the SMaC recipe?  Intel: Microchips to Microprocessors – Very subtle change in overall recipe  How much change is necessary?  AMD: overhauled SMaC recipe multiple times – No long-term momentum  Which approach to take?  Microsoft: “Zoom out” then “Zoom in” approach taken – allowed Bill Gates to embrace the internet while keeping SMaC recipe in-tact

Initial American Apparel SMaC recipe(2005) Changed in 2012? 1. Offer basic T’s and colors/designs that aren’t affected by industry trends.No Change 2. Utilize vertical integration, cutting and sewing all garments in-house.No Change 3. Promote domestic production and fair labor practices.No Change 4. Remain politically and environmentally active in the communities we produce in. No Change

 The Constitution  Flexible and durable framework  Amendments

 SMAC Recipe  Three Key Factors  Figuring out what works and why?