Changing How the World Does Business

From one of the founding executives of FedEx comes the first full inside story of how Fed Ex came to be one of the world's most successful, innovative, and admired companies. Frock reveals the details of how the company was conceived, launched, and kept afloat despite incredible obstacles.

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Foreword, by Charles Lewis Lea, Jr.
• Acknowledgments
• Introduction: A Case History of Courage and Tenacity
• Part I: From Skepticism to Affirmation: Before May 1972
• Part II: Naïve Optimism: May 1972 to March 1973
• Part III: Within an Inch of Failure: March 1973 to May 1974
• Part IV: One for All and All for One: June 1974 to May 1978
• Part V: Transformation and Separation: May 1978 to January 1982
• Part VI: A New Model for Success
• Appendix: Time Line for the Startup, 1971 to 1982
• Index
• About the Author

"This book is the manual for entrepreneurs with big dreams. Frock has documented, through personal experience and painstaking research, one of America's most successful start-ups. He provides the critical ingredients for bringing a major dream to life-no matter what the business or endeavor."
- Michael Basch, CEO, Nature's Lighting, author of Customer Culture: How FedEx and Other Great Companies Keep the Customer First Every Day

“Early on, Frock recognized the value of international service and calculated that the global market would eventually need and support the FedEx business model. We worked closely with him to establish their first cross border network between the US and Canada. His vision helped us to become the most successful player in the Canadian market.”
- Simon Caviezel, President and CEO, Cansica, Inc., Federal Express Canadian Licensee

“[This book] explains the vital importance that enthusiasm and passion play in people who tackle seemingly overwhelming obstacles and find a way to make it work. In many ways, the Porsche turnaround that I [led] in the 1980s was an application of the management concepts detailed in Changing the Way the World Does Business. Properly applied, these concepts can people to rise to a performance level that achieves business miracles in an increasingly competitive world.”
- Peter W. Schutz, former head of Porsche

“The success-laden secrets of a corporate giant's heart and soul are revealed as Frock shares his personal experiences and entrepreneurial views with a keenness that is at once exciting and enlightening… Changing How the World Does Business reflects [Frock's] ethical nature from which success of gigantic proportions was realized as the global giant known to us all as FedEx.”
- Linda G. Sapia, former Manager, FedEx

“Tomorrow's leaders will be encouraged by this exciting succession of experiences that ‘Changed the Way the World Does Business.'”
-The Honorable Roger W. Kallock, former Deputy Under Secretary of Defense, Logistics and Material Readiness, and Chairman, Chagrin Consulting Associates

A Case History of Courage and Tenacity

1

FedEx has changed the way we do business, allowing established firms to expand their services throughout the world and helping smaller companies to look and act like corporate giants, making overnight connections with global markets. Its founders helped to restructure the transportation industry and created a unique corporate culture that has placed FedEx among the most successful new ventures of the past 50 years.

Fortune magazine has described FedEx as one of the top ten business triumphs of the 1970s and lists the firm as one of the Top 10 Most Admired Companies in America and the world; one of 100 Best Companies to Work For in America, among which it has been listed continuously since 1998; and one of the 50 Best Companies for Minorities.

The company has also received similar accolades and recognition from the Wall Street Journal, Business Week, Computerworld, Wired, Logistics Management and Distribution, Information Week, Business Ethics, Forbes, Air Cargo World, and Financial Times. Internationally, FedEx has been recognized as one of the best employers in Canada, Switzerland, Brazil, Latin America, Mexico, Chile, Hong Kong, Singapore, Korea, the Philippines, India, and Argentina.

In its original incarnation as Federal Express, the firm developed a completely new concept of customer service, pioneered technical advances for the entire transportation industry, and significantly altered our work environment. People can now live and work outside major metropolitan cities by utilizing FedEx's exceptional reach and reliability to connect with other areas of the business world. We can now move radiopharmaceuticals with short shelf lives and critical blood samples overnight and ship products directly from manufacturer to consumer, greatly simplifying the distribution chain.

2

While FedEx is now a household word, the company that invented overnight delivery was far from an overnight success. The inside story is one of great interest to anyone starting a new business, for it highlights the extraordinary combination of grit and determination, teamwork and creative thinking, luck and perseverance needed to keep a company afloat in its early stages.

I had the good fortune to be a member of the initial team assembled by Fred Smith, the founder of Federal Express. We experienced difficulties and near disasters, but we also had our share of good fortune and occasional help from some surprising sources. On several occasions, we came within an inch of failure, because of dwindling financial resources, regulatory roadblocks, or unforeseen events like the Arab oil embargo. Once, Fred's luck at the gaming tables of Las Vegas helped to save the company from financial disaster. Another time, we had to ask our employees to hold their paychecks while we waited for the next wave of financing.

Fred's tenacious drive and brilliant leadership got us through crisis after crisis. However, no individual can create and build a successful enterprise without the help of others. This book contains the personal insights of the people who took part in the FedEx startup-many appear for the first time in print. This is the insider's view, full of cliffhangers and last-minute saves that show the trials faced by anyone launching a new business.

The FedEx story shows the careful planning required for a startup and the flexibility and quick thinking needed to deal with unanticipated challenges. Knowledgeable professionals evaluated the Federal Express concept, researched the potential market for the service, investigated the competition, and prepared a startup plan. However, the concept went through several critical adjustments on its roller-coaster ride to success. In this book, I set out to explore the process of innovation and the character traits needed to move a promising vision into the real world.

3

FedEx went through several periods of risk and turmoil, yet breakthroughs often followed our periods of deep apprehension and doubt. Our final lesson is a positive one: If the concept is right, courage and tenacity can tilt the odds in one's favor.

The FedEx story is also an antidote to the negative press big business has received in the past few years. We read every day about the greed, the lies, and the fraudulent practices in both the private and public sector. The founders of FedEx were not perfect, but their basic operating principles of integrity, truth, equality, and personal responsibility provide a model for others to emulate. In a rapidly changing business climate, we valued open communications and cooperation at every level of the organization. FedEx created a win-win climate for all of its constituents, providing security for its employees, reliable service for its customers, and a fair return to its shareholders.

After the Enron and WorldCom scandals, the Securities and Exchange Commission issued its requirement that chief executive officers attest to the correctness of their financial reports. FedEx was one of the first major corporations to do so, without requesting extra time for review, because its CEO had created an ethical climate and remained closely involved with the company's day-today operations.

It is my fondest hope that this book will serve as a principled guide for new startups as well as established companies, and perhaps even convince a few of the ethically challenged to reexamine their options. It is possible for an organization to operate with ethical principles and still be successful.

The front-row seat to FedEx's incredible journey to success that this book offers will appeal to a wide and diverse audience. In addition to those launching new enterprises, business analysts will profit from this firsthand account of the company's growth from startup to maturity. Executives desiring to improve their leadership skills can learn from the strategy and tactics employed by Fred Smith and his leadership team. Finally, managers and supervisors can learn how to motivate employees and encourage innovative thinking.

For convenience, the book is organized chronologically.

PART I examines the development of the concept, with the initial goal of transporting small time-sensitive packages overnight, and the initial feasibility studies.
PART II describes the operating plans, initial management staff, regulatory roadblocks, and inauguration of the service.
PART III focuses on the company's continuing financial struggles and expansion of the service network.
PART IV recounts the growth of the organization up to the first public offering.
PART V explores the transformation from a startup company to a mature organization and shows the growing pains that FedEx endured.
PART VI looks at the corporate culture that is largely responsible for the company's success and how FedEx has changed the way others do business.
4

FedEx today has annual revenues of $30 billion, more than 250,000 employees, and a fleet of over six hundred aircraft; operates more than 70,000 surface vehicles; and provides service to over two hundred countries, representing most of the industrial world. On a typical day, the company handles nearly six million important time-critical packages and larger freight shipments. It is, in fact, one of the largest transportation companies in the world, ranking in the top five in revenue among the world's airlines.

The rise of this company rests on two key innovations. The first is the hub-and-spokes network-the system used to move packages and documents from origin to destination. The hub, located in Memphis, Tennessee, is the facility for sorting packages and documents. The spokes of the network are the routes to and from the originating cities. Packages picked up from shippers in the afternoon are flown to the hub before midnight, sorted to outbound flights within two hours, and delivered to their destination the following morning. No one had ever created such a simple and elegant process to move time-sensitive packages from place to place.

5

However, our employees and unique supporting culture were equally important contributors to the success of the company. At several places, I refer to the “purple blood” attitude of the FedEx employees, borrowing a color from our logo to describe the impassioned workers who were the lifeblood of our company. I have included stories about the dedication and contributions of these remarkable individuals who stood by us from the beginning, when outsiders ridiculed our efforts and called our vision crazy. As Tom Morris observes in If Aristotle Ran General Motors, “it is the people within any enterprise and their interactions that ultimately produce excellence or mediocrity.”

Building Federal Express from concept to triumph was a wonderfully rewarding business adventure. Fred Smith's beginning concept and dynamic leadership inspired us all, but it took an incomparable workforce to turn his vision into reality. I am fortunate to have been a part of FedEx's incredible journey and honored to be the one putting our tale into print.