By Mark Overbye
I’d like to catch the culprit dripping corrosive venom on my confidence at 3am. I’m trying to sleep. But certain destructive demons call on me during the darkest hours. And instead of a pleasant wake up bell, it’s alarming questions. Will cash flow meet the demand for dollars? How well supported is the market? Can vendors supply in time? What do our customers really think? Are we on the right track?
The morning light usually washes away the dark thoughts. But the challenges are real. Every business leader must ask themselves if the structure they’ve built can withstand the coming storms. And they are coming. Will the business become the rock upon which the waves crash? Or will the storm wash the business away.
Attending Yale University in 1962, Fred Smith rushed to finish an economics paper. The hurriedly written paper conveyed a concept for an overnight delivery service enabled by the emerging computer information age. At the time, Smith didn’t think much of it, but that paper set the stage for FedEx.
After graduating from Yale, Smith joined the Marine Corps as a platoon leader and forward air controller flying in the back seat of an OV-10 aircraft. Prior to being honorably discharged in 1969, Smith received a Silver Star, a Bronze Star and 2 Purple Hearts while serving 2 tours of duty in Viet Nam. The Viet Nam war provided ample opportunity to learn about aviation and war time planning when pressure is greatest.
Upon his return to the US, Smith purchased controlling interest in Ark Aviation Sales in Little Rock, Arkansas, an aircraft maintenance company. Shortly thereafter, he shifted the company’s focus toward trading used jets.
With his $4M inheritance and $91M in venture capital, a half billion dollars in today’s currency, Smith established FedEx in June 1971. Connecting 25 cities,14 Dassault Falcon 20 Fedex planes took off from Memphis, TN on April 17, 1973 with 186 packages marking the company’s first overnight deliveries.
Unfortunately, sky rocketing fuel prices dealt a blow beyond the contemplations of Smith’s economics paper. In its first 26 months the company lost $29M, putting FedEx on the brink of bankruptcy. Millions of dollars in debt, Smith rushed to raise additional funds.
Attempting to leverage more business loans, a previously successful strategy, Smith failed to find more lenders despite having a promising business model and a fleet of planes then servicing 35 cities.
A week after receiving a particularly disheartening business denial from General Dynamics, Smith found himself unable to fuel his planes for the coming week, a $24,000 bill. To stave off a complete business implosion, Smith tried every trick, including using the pilots’ personal credit cards and uncashed paychecks to pay for fuel.
His back against the wall, Smith impulsively flew to Las Vegas. Betting the company’s last $5,000 at blackjack tables, Smith miraculously won $27,000.
Upon returning, a flabbergast FedEx SVP Roger Frock exclaimed, “You mean you took our last $5,000 — how could you do that?” Smith nodded and asked, “What difference does it make?”
Capitalizing on his momentum, Smith ultimately secured between $50M-$70M from twenty of the leading risk venture firms. At the time, FedEX was the most highly financed new company in US history by venture capital.
Today FedEx operates the world’s largest air cargo business with over 650 aircraft flying to over 375 destinations in 220 countries. Traded on the NYSE, Fedex reported 2021 revenue of $84B with a net income of $5.23B and a diluted earnings per share of $19.45.
Interestingly, FedEx’s operating margin is only 7%. Even the best business managers cringe at the thought of such a skinny margin. How do you secure your business under such pressure? You ensure your business is the primary choice by customers, thus sustaining the business.
Proving their value, every day 600,000 FedEx employees deliver 16.5M packages using over 210K vehicles and process over 600M tracking requests with nearly 100% accuracy. They define a customer centric business. Even when things get tough, people still choose FedEx.
Regardless of industry, there’s only one standout business directive, a customer centric model. Do what it takes to capture customer favor. Recognizing the truth of the business landscape, acknowledging customer choices and delivering joy is the sure fire path to winning. Businesses concentrating first on the customer experience contribute to a legacy fortress capable of withstanding inevitable storms.
When seas are calm and times are good with abundant cash flow, a mountain of business sins can be covered up. But when the sea of cash recedes, those businesses without a customer centric business model may be left for dead. Accordingly, prudent managers consider customer satisfaction KPI’s as religiously as financial metrics.
Thriving in rough seas means asking tough questions:
- Are we the #1 customer choice in our market?
- Are we delivering joy at every customer touch point?
- Is our brand promise to serve and is every team member dedicated to that mission?
Unequivocally, striving for Yes is the only answer. Understand that rough seas make the best captains. And the best captains rely on a competent crew, a compass pointing to the right path and a map showing a destination with the happiest customers.
Mark Overbye is the CEO of Anthem Marine, as well as the chairman of USA Waterski and Wake Sports Foundation. He is also the founder of Montara Boats and Gekko Sports.