Interview: Chip Conley, author, "Peak" (Gel '08 speaker)

Chip Conley is CEO of Joie de Vivre Hospitality, the world's second- largest boutique hotel company. After a severe downturn in his business after 9/11, Conley read Abraham Maslow's works as inspiration for his turnaround plan. It worked: Joie de Vivre is again thriving, and Conley has written a book about what he learned - not only from Maslow, but from companies like Nike, Apple, and Harley-Davidson, which follow Maslow's thinking. Chip's book is Peak: How Great Companies Get Their Mojo from Maslow.

Chip will also speak at Gel 2008 in April in New York (sign up here).

Q - What's the main idea of "Peak"?

The main idea is that we're all humans in the workplace - whether employees, customers, or investors - and those companies that succeed and become peak performers touch us as people in the workplace, by focusing on higher needs, as opposed to base needs.

Q - How is Abraham Maslow significant?

Maslow wrote about the hierarchy of needs in the mid-20th century. There's no psychologist or psychiatrist quoted more in business schools or corporations than Maslow. Drucker, Covey, Bennis, and Collins all write about him in their books - they mention him in two or three pages, mostly talking about the hierarchy of needs.

What's interesting is that the psychology profession - including Freud, Skinner, and others - commonly looked at the worst practices in behavior in defining the human condition. Maslow says, let's look at best practices - people who are fulfilled or self-actualized, who can "be all you can be" and have clicked in to doing what they're supposed to be doing.

Q - Describe the pyramid containing the hierarchy of needs.

There are five levels in Maslow's pyramid. At the base are physiological needs. Then come safety, social belonging, and esteem, and at the top, self-actualization, which is where people are more likely to have peak experiences - what ought to be, is, and life feels great. Reading Maslow woke me up to the idea that if there are self-actualized people in the world, then maybe there could be self- actualized companies, since companies are just collections of people.

So in "Peak" I break down Maslow's pyramid and apply it to key relationships - employees, customers, and investors. I took Maslow's five levels and turned them into three levels: the first two levels, physical and safety needs, are just survival. Levels 3 and 4, social and esteem, are just success needs, how the world sees you. At the top of the pyramid, self-actualization, is a transformative state, where you've moved beyond your own ego. So I created the "transformation pyramid": survival on the bottom, then success, and transformation at the top. I then applied those three levels to the motivations of employees, customers, and investors.

Q - OK, what do you say about employees?

For employees, what's the survival need? Money, compensation. Sure, some CEOs are almost exclusively motivated by money. But for most people, it's just a base need. Every survey I've seen shows that money is not the primary motivator for employees. As nonprofits will tell you, the base foundational need is important, but the differential from one company to the next is not huge. Money as a differentiator isn't important.

The success need is being recognized. Marcus Buckingham's book "First Break All the Rules" showed that the number one reason people leave their job is their relationship with their direct supervisor. People join companies, but they leave their bosses.

The top of pyramid is something different, intangible - in the pyramid we're moving from the tangible, to the physiological, to the very intangible. For an employee, it's meaning. This is somewhat blasphemous for companies; it's hard to measure what's intangible. Yet MasterCard says what's true, that what's most important is "priceless," and that's intangible.

How do you put your attention on the top of the pyramid? The three levels represent money, recognition, and meaning: let's translate each to a word that describes a person's relationship with their work: a "job", a "career", or a "calling." Employers that move their employees up the pyramid get more happy and fulfilled and productive employees, who are much likelier to stay longer, and a positive spirit in that workplace. The fact is, I have 3,000 employees, and 1,200 of them clean toilets for a living. So it's a challenge for me to create that with my employees.

Q - What's the customer pyramid?

For a customer, the survival need equates to having one's expectations met. If you don't meet their expectations, you haven't met their survival needs; you've created buyer's remorse. It comes down to the difference between expectation and reality. Most companies get very focused on the base; that's what customer satisfaction surveys are about. "Was your check-in process efficient?" Well, sure it was, but I hated this and that other thing, which the survey won't ask me about. We most notice the intangible. Pure customer satisfaction is at the base of the pyramid.

The success need is having desires met, which companies deliver either via technology or training. Good examples of using technology are Amazon and Netflix, which use mass-customized technology. The more I use them, the better they know me and my desires. Similarly, Four Seasons hotels are more high-touch. Through great training, the people there know my desires. That creates customer loyalty - and this second level is where it builds, not at the bottom of the pyramid.

Now for the top of the pyramid. Henry Ford said, "If I listened to my customers, they'd tell me to get a faster horse." By meeting the unrecognized needs of a customer, which the customer may not be able to articulate themselves, you create a customer evangelist. So there's customer loyalty in the middle, and evangelism at the top. A self-actualized customer is so thrilled you've met a need they didn't know they had, that they become believer. Companies that do this include Apple, Whole Foods, Southwest Airlines, and JetBlue. You get on a JetBlue flight and find your own TV at your seat. More importantly, you have some control at a time you'd otherwise feel out of control. Companies that do this well create not just loyalty but a marketing machine.

Q - What are some best practices of companies that use the customer pyramid to great effect?

There are four qualities that define companies that are creating these customer evangelists. First, they help their customers meet their highest goals - allowing a customer to achieve their ideal goals from using the product. Apple enables its customers to go out and exercise their minds. Nike encourages customers to "just do it." Google gives you exactly what you're looking for. These companies are helping customers meet their highest goals.

Second is giving your customers the ability to truly express themselves. By buying a Harley-Davidson, a middle-aged accountant from the Midwest can feel like a rebel. In the case of boutique hotels, you might say, "You are where you sleep." If a hotel has a personality that represents an aspiration for you, then hopefully when you check out it will have rubbed off on you a little bit. Similarly, there's a halo effect of being an Apple user; and Starbucks has tried to become a curator for a lifestyle for its customers. These are customers who feel like they can express themselves through the purchase of a product or service.

Third is making customers feel like they're part of a bigger cause. Hummer buyers may feel that connection, but most people would say that it's lacking a socially responsible element. Patagonia - the company, not the region in Argentina - runs its "1% for the planet" campaign, and its loyal customers are "Patagoniacs." They love being associated with Patagonia because it's part of a bigger cause. For people who buy from Apple, it's not just "I'm an iconoclastic rebel," but "I'm part of a bigger cause," the anti-Microsoft attitude. At Whole Foods Market, you may go there because you love the product, but lots of people buy there because they love the sustainability cause. People like buying a Toyota Prius because it makes them feel good about both buying a car and doing something for the planet, even though that's a rather oxymoronic thought.

The fourth quality is offering customers something of real value they hadn't even imagined. That's what JetBlue did with the TV screen. That's what FedEx did when they created overnight delivery. It was a remarkable thought, 25 years ago, that you could send something overnight. But that innovation became a commodity over time. A lot of people entered FedEx's market, and Fred Smith, the founder, said, "I thought I was in the transporting goods, and then I realized that I was in the business of creating peace of mind." So he created a logistics program to allow customers to track packages. Now the innovation, what people wanted, an almost unrecognized desired, was: if I'm sending it overnight, the person on either end wants to know where it is. FedEx went from being an also-ran to going to the top of the pyramid again and taking market share away from its competitors. FedEx's innovation in terms of tracking was addressing that peace of mind that customers were looking for.

Q - How can any company start to put these principles into practice?

The easiest way is to consider how Maslow's hierarchy can be applied to your customer. For example, for a hotel customer, the physical level is a clean and comfortable bed. Safety might be offering an electric card-key instead of a regular key, and making sure there's good lighting in the parking lot. And so on. Just remember that there is a hierarchy of needs of employees, customers, and investors, and you can help people around you understand that.

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See also:

• Peak: How Great Companies Get Their Mojo from Maslow, by Chip Conley

• Wikipedia entry on Abraham Maslow

• Musings, Chip's blog

• Gel 2008 conference, where Chip Conley is scheduled to speak

• More Good Experience interviews

• Oct 16, 2007
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