Michael Basch
Innovation at Federal Express — and Beyond

Bob Serling: This is 15-Minute Innovation, and today I have the pleasure of talking with Mike Basch. And I emphasize "pleasure" because Mike is one of the most brilliant thinkers I know of. So, Mike, welcome!

Mike Basch: Thanks, Bob.

Bob: My first question for you is, what's the biggest business-building idea that you're known for?

Mike: I believe it would be the FedEx barcode tracing system. That allowed us as a company to gain a distinct market advantage and kept the competitors at bay for years after it was implemented.

Bob: Now, because I know a little bit of the story from us having talked before, I think some of the background that people might not understand is that, as a founding member of Federal Express, and when this occurred — I mean today barcode is ubiquitous, it's everywhere — but when this occurred, I don't think much of anyone was using barcode at the time, were they?

Mike: Well, it's very interesting, Bob. The technology was just under development, and there were several companies on Route 28 around Boston, which was the tech center for this kind of technology back in 1973, I think it was. There wasn't any retailer using this technology, and there was nobody really using it, as you pointed out. So, in fact, we had to shelve the product for several years, until the technology caught up.

The way we knew this was that we basically went out and printed up a bunch of airbills with barcodes on them, took scanners, went to Rochester, New York, gave the airbills to Kodak and Xerox and some of the big shippers, and then tried to scan them as they came through the center. But we discovered that you had to scan each one four or five times before you got a reading, and that obviously slowed down the ability of the station to perform their function.

Bob: Sure.

Mike: But we knew it was coming. There wasn't any question. I forget which retailers jumped on it first, but once the retailers jumped on it, like anything else that establishes that level of volume, you have then an avalanche of technology that is very reliable, and what you see today, nobody ever misses a scan.

Bob: Right. So what was the before and after effect of bringing that barcode technology into FedEx?

Mike: Well, it's interesting. Several things happened, some of which we did not anticipate. Fred Smith laid out the goal: we needed to be able to answer a call any time of day, any time of year, and within 30 seconds tell them where their package is. And he identified the points at which we would do that — in other words, not what street it's on, but rather it's on the truck for delivery. We knew that because we scanned it getting on the truck.

So we went to work and began looking at various ways of doing that.

The first benefit that came from it was to meet that vision that Fred had, and we knew it could do that.

The other side benefits, which were probably more powerful over time, were the ability to truly manage our delivery operations. For example, prior to barcode scanning, or tracking, if you will, we had delivery sheets. In other words, the driver would take your package, write down the time and a little bit of information about you, then have you sign it, and that became our ability to track our performance when it came to on-time delivery.

Well, anybody with any kind of eyes would look at those reports and see, "Okay, we delivered ten stops an hour up until 10:00, and then all of a sudden we delivered 40 stops in a half an hour." Well, the reality was they weren't delivering by 10:30. They were delivering maybe by 11:00 or 11:30 in some cases, and nobody could ever catch it, so you couldn't manage the people.

And so with barcode scanning, when you scan that package, that's your time. You deliver it and that's the time.

That allowed us to begin managing more effectively exactly what our commitments were and how well we were meeting those.

Bob: That's great. So how did you come up with this idea to bring barcoding into the process?

Mike: We had a major brainstorming session where we just brought in people with all levels of expertise — scientist types, some delivery types — and just brainstormed. It was very interesting. We came up with ideas, like one of the concepts was a dog that barks when he's lost, so when a package arrived in a center that wasn't the right place, it would make a noise or bark.

Bob: Yes!

Mike: And the original tracing system that UPS had, and we modeled ours after theirs, was a by-exception system. In other words, you had in every station a list of those packages that didn't belong there.

In the beginning — it shows you how paradigms work — in the beginning the brainstorming took a direction like, "Let's continue doing what we're doing only automate it. And once we got into that, we said, "Wait a minute. That doesn't really give us a failsafe system", and so you really had to do something that would positively say, "Yes, I got that package."

And then one of the people in the room said, "I've heard about this barcode scanning technology", and that kind of launched us off on that track, and that's when we visited the companies in Boston and began the testing.

Bob: So obviously a team was very instrumental in coming up with this decision and getting input from a wide variety of sources, rather than just management sitting down and trying to hammer it out themselves.

Mike: Yeah, exactly. I think what I've learned through the years in terms of innovation — you could have a genius come up with an idea, but a team makes it better. You could have an issue — for example, in my present company, we had an issue. You know, our present company has mirrors that track the sun, and we needed a controller that was far more reliable than the one we had, so we had to come up with a different design.

We put eight people in a room. We spent two days actually brainstorming. At the end of the two days we had a concept, and then it took us the next six months to implement it.

The point being that no matter how bright somebody is, they can come up with a beginning idea or a great concept, but it's always made better by taking the input from a diversity of people.

Bob: You know another great example of that — a real quick one — is when Reebok was looking to challenge Adidas and Puma back in the old days before Nike was really big. They did the same thing.

They brought in a really diverse team that included scientists and surgeons and engineers, and essentially what they did is they got an idea for the air-pump shoe that made Reebok such a popular brand.

That idea was brought in by a surgeon who was working on a new type of surgical cuff with an inflatable bladder that would restrict blood flow so they could get in and do surgery quicker, without losing blood. And they transported that inflatable bladder concept over into an athletic shoe, which became the Reebok Pump, and had a massive hit with it. And this never would have occurred if they didn't do what you do, which is to bring in input from many diverse sources, as opposed to just relying on the same sources all the time.

Mike: Yeah, I got so excited about that process, that after I left FedEx, I went to work at a company called Synectics in Cambridge, Mass, using the process. And using your tennis shoe analogy, it's very interesting. I forget which company it was, Reebok or one of those — one of the majors in tennis shoes, and they actually got a diverse bunch of people in and they took them out to a tennis court and had them take their shoes off and asked, "What's your foot telling you?"

And what they came up with is that kind of circular thing where you could quickly turn. There was a tennis player...

Bob: Yes, that pivot point on the ball of the foot.

Mike: Yeah, that's right. A tennis player has to very, very quickly rotate on the ball of the foot, and that's how that particular idea came about.

Bob: So I'm assuming then, that when you need to come up with a big idea to solve a problem or achieve a business goal, that teamwork is your preferred methodology?

Mike: The only methodology.

Bob: That's interesting because there are some people who just absolutely love to work alone.

Mike: Yes, and I'm not ruling that out, Bob. I'm saying that teamwork establishes direction, establishes concepts.

For example, when we did come out of our session about a year ago with my present company, we had a chief engineer that had to go away for several months and just work on the electronic package.

Bob: And now, your present company is Ciralight, and what exactly does Ciralight do?

Mike: We provide daylighting, or an active or advanced daylighting. That term is used to describe a system of skylight, if you will. It has mirrors that attract the sun, from sun up to sun down, and reflect that light into a building.

Bob: Oh, that's really interesting. So can you elaborate a bit on how you used this teamwork process to solve the problem you spoke about a moment ago?

Mike: Yes. First of all, you have to describe exactly what you're trying to accomplish. When I talked about the Federal Express barcode, it's to be able to call and get an answer within 30 seconds, any time of day or night, as to where your package is, with 100% reliability or at least a very high degree — 100% was the goal.

In our case, it was to devise a new mirror rotating system that would both be reliable for ten years — we added a slogan for that, set it and forget it — and also not infringe on anybody's intellectual property.

Bob: I see. And what was the problem that necessitated the solution? Were current technologies infringing on other proprietary rights, or there just wasn't anything available?

Mike: Current technology didn't work.

Bob: I see.

Mike: Put it on the roof, and sometimes some would last five years, some would last five days, so it wasn't reliable and it wasn't consistent. It just didn't work.

Secondly, the technology we started with, yes, there were patent rights on a new one. It was a claim made that we could just not overcome except by redesign of the mechanics.

Bob: I see. So what type of team did you assemble to approach this particular problem?

Mike: It's very interesting. You know, we talked about diversity. We had a woman who knew the old technology, had installed and sold it for years — sold it, not designed it. We had a very, very creative electronics engineer. We had a very solid — I don't know the term, but it's a software engineer who programs chips, not computers. We had a person who was a customer. We had a person who had installed systems on roofs for years.

If you look at it, we had very technical to very non-technical. We had basically all ages. We had only one woman, and I wish I'd had a few more, but we couldn't find women who, at that time, were interested in doing that.

I facilitated the group, and it was just a great group of folks.

Oh, we had a research guy who was just excellent at taking a problem and doing research on the web. People would ask, "Well, what's that got to do with designing sun-tracking mirrors?" And the reality was that during the process of this, at night he would look up certain things and find information on questions that came up during the day.

Bob: That's great. So collectively you were then able to come up with a solution which has now allowed the company to move forward.

Mike: Yes.

Bob: That's great. Well, Mike, I knew this was going to be an illuminating interview (laughs), and I guess that's a funny term with Ciralight. But as always in talking to you, it's been even more illuminating than I expected, and I really appreciate you taking the time to talk with me today.

Can I ask you now how people can find out more about Ciralight and what you are doing and how to get in touch with you if they'd like to?

Mike: Sure. Bob, you know I'm a process guy, and I love this kind of 15-minute deal. I think that's awesome.

People can find more out about Ciralight by going to our website, and it's www.ciralight.com. Cira is interesting — it's the Latin word for sun, so it's our proprietary word for sunlight, and that's the best way to find out.

Or they can email me at mbasch@ciralight.com.

Bob: And this natural lighting — is it available for individuals or is it mainly for manufacturers?

Mike: It's strictly non-residential.

Bob: I see. Very good. Again, I want to thank you very much for your time. It's been a terrific 15 minutes.

Mike: Bob, I enjoyed the process. Thanks very much.