FedEx and The Power of Disruptive Innovation

In 1973, at age 28 Fred Smith started FedEx. A company that was based upon a paper he did in 1965 while at Yale that rumor has it only got him a C grade. The term paper was based upon the then model of airfreight which he viewed as inadequate. Now the company has grown to the point where they have so many airplanes, they are considered the 6 largest airline in the world. The tag line that he used is still in operation today; “When it absolutely, positively has to be there overnight.”

During the 1973 Arab-Israeli War OPEC placed an embargo on U.S. oil imports. At the time, it seemed the most unlikely choice to open a business where reliance on fuel was a major consideration. The question is how did a company that was started at the beginning of a recession become a staple of the shipping industry, generating 45 billion in revenue? I mean from 1973-74 we had one of the worst stock market downturns in modern history.

The answer is partly due to Fred’s understanding of what a customer needed. To the point of being able to offer something that once they had it, they couldn’t live without it. In his initial paper he argued that shippers needed to accommodate shippers that had time-sensitive shipments. Now today, we can’t imagine a world where we could get something overnight-ed, but back then it was not something that was economic or in many cases possible. But as we will see, before FedEx came online, it wasn’t a necessity.

With the new awareness brought on by the U.S. recession that our economy was now global, it became even more imperative that companies find a way to do business in an ever-shrinking planet. The recession also required business owners to be more effective and efficient. For a business to keep its doors open, it had to operate with greater precision and speed than its rivals. This meant that getting documents, products, and information from point A to B quickly became a necessity.

Question, what is the new imperative in the lives of your customers? Now that they are living in a world ravaged by an invisible tiny villain aka Covid-19, how do you support them in their new imperative? Find a way to use innovative and new eyes to look at how their world operates. Our current level of innovation has us able to create wonders that people in the 70’s only dreamed about.

Those of us too young to remember the 70s might need a little bit of perspective. It’s hard to believe in today’s world of text message, smart phones, email, and 3-D printing why this was such a big deal. Remember, the internet was not offered commercially until the late 1980s. This meant that another solution needed to fill the void. The fax machine didn’t even actually take off until the late 1970s when Japanese manufacturers made them less cumbersome, expensive, and difficult to operate. There was a huge gap regarding a client’s need and what was currently available to them.

Do You Want to Just Be Good at The Game? Or Do You Want to Change The Rules?

The current shipping companies were obviously trying to solve the puzzle but they were too busy trying to optimize their current model instead of trying to solve the client’s problem. In other words, they had fallen in love with their product and not their customer. The question they asked themselves was, “How can I optimize my business model to be faster?” Fred asked a better question, “How do I create a business model that allows me to offer the client an overnight solution?” The answer was chronicled in an interview with Fortune Small Business in 2002:

Fred’s solution revolutionized the shipping industry. He created a model for shippers that is still in use today. His question changed everything, including the game, and made FedEx the world class shipper it is today. It took rivals time to catch up. In that time, FedEx continued to innovate and establish its foothold in the industry. Fred didn’t just want to be great at the game, he wanted to change the rules.

I am reminded of a scene in the movie Patch Adams. The late great Robin Williams plays Patch. Patch is depressed and self-admitted into a medical facility. While there, Patch runs into an eccentric named Arthur Mendelson. Arthur has him hold up his hand and ask him, “How many fingers do you see?” The right answer could only be known by looking past the fingers. Most business owners are too busy looking at their own solution to even get a clear view of the problem.

When was the last time you really dug into what your customer was dealing with that caused them to stay awake at night? What can you do that will change the game your industry is playing? What is a problem that your ideal clients are having that you can create a solution for that will make them take notice of you and make you the only vendor option?

In a post-Covid world the companies that will rise are the companies that start to look at the world differently. It’s the company that can, “See with new eyes,” (as they say) and rise up to transform their industry to one better, more effective and resilient than before. Because that is how innovation has always been done. Fred is just the classic example.

Asking your client why they do business with you is a great start in beginning to understand and develop a strategic position. But to become a true game changer, you must understand the map your client is operating. When you do that, you can offer a solution that they didn’t even know they needed until you offered it. Then, they can’t live without. When you do that, your clients will reach around other products to get what you have to offer.

Having a coach who has skill in both business strategy and shadow work gives you the edge to anticipate and engage changes before they happen. Schedule time with us now to see if we can support you. Or download the app and get started on your journey.