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Stelios Haji-Ioannou, founder and non-executive chairman of easyGroup, opened his keynote address at the Harvard Business School European Business Conference with a confession and a proposal.
"I wasn't smart enough to go to school here—and I cheated at the beginning by getting money from my father," said the Athens-born entrepreneur. "So I'm neither clever, nor self-made, which begs the question: Why did you invite me?"
For his part, Haji-Ioannou said, he wanted to familiarize the audience with the "easy" brand, and engage in an extended brainstorming session for future "easy" businesses.
easyGroup, he explained, is not a conglomerate; each company—easyJet, easyInternetCafé, and easyCar, among others—is separately owned and managed, but all are service-oriented and share a "recession-proof business model" with the following components: a price-elastic demand curve (consumers will use the service more frequently if it costs less); high fixed costs; low marginal costs per customer; yield management that ensures assets are utilized as much as possible; no frills; the ability to outsource tasks to the customer; exceeding customer expectations ("under-promising and over-delivering"); and prices that dramatically undercut the competition's.
| All we need to start a business is 150 cars, 4 employees, and 15 rented parking spaces. |
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— Stelios Haji-Ioannou, easyGroup |
easyJet, founded in 1995, exemplifies all of these qualities, noted Haji-Ioannou. Despite the economic hardships faced by other airlines, it recently placed an order for 120 Airbus 319s, a 156-seat airplane ideally suited for short-haul trips throughout Europe. The company expects to have 164 planes in circulation by the end of 2007.
Haji-Ioannou showed live images (via Webcam) from an easyInternetCafé that had opened in a London McDonald's just a few hours earlier. The company, launched just over three years ago, has suffered its share of growing pains, but enjoys nearly two million customers a month at its low-cost cybercafes. A year ago, Haji-Ioannou undertook a dramatic restructuring of the company by cutting staff from 450 to less than forty, eliminating retail goods, and leasing space to or from existing businesses instead of operating stand-alone stores.
New paradigm for car rentals
With the founding of easyCar, Haji-Ioannou described how he created a new paradigm for a budget car rental service. The company uses mobile van units and laptop computers to check in customers on location (95 percent of bookings are handled online), eliminating the need for furnished offices and additional personnel.
"All we need to start a business is 150 cars, 4 employees, and 15 rented parking spaces," he said. Another payroll-saving measure? "I got the customers to wash their own cars!" he said, explaining that the company levies a £10 fee when cars are not returned in clean condition. Eighty-five percent of customers do the washing up themselves, once again reducing payroll costs. The company plans to operate 170 sites across Europe by the end of 2004.
After mentioning easyValue (a dot-com offering comparative information for online shopping) and easyMoney (a custom credit card that allows customers to pick and choose benefits and services), Haji-Ioannou opened the floor to suggestions for extensions of the "easy" brand.
How about low-cost fashion and cosmetics? "We're not really makers of things," he responded. "And I don't think the model works particularly well with retailing. It's ideally suited to virtual products or services with no physical inventory." What about easyLaundrettes? "Do you think people would wash their clothes more often if you made it cheaper?" he asked. "I don't think it's price-elastic."
Budget hotels? "Yes, absolutely." An enterprise with the working name of easyDorm that uses the same clean-it-yourself approach as easyCar is currently under review. easyCinema is another venture in the planning stages. "It's highly price-elastic, and we're working on a system that will automate the ticket-buying and ticket-taking process," said Haji-Ioannou. The content, however, is owned by outside sources—and film companies will no doubt raise objections to lower-than-average ticket prices. As a result, he said, "I've been spending a lot of time lately with competition lawyers."
| We're not really makers of things. |
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— Stelios Haji-Ioannou, easyGroup |
Other "easy" brand suggestions included taxis ("Not a lot of frills to cut."); gyms ("Definitely a possibility, but is it price-elastic?"); buses ("Very good one, but it's still regulated in most European countries."); and cruise ships ("Yes—it's very price-elastic and full of frills.").
How about an easyMBA? A student would search for professors, build his own curriculum. "Education has always struck me as something that is not price-elastic, but I might be wrong," Haji-Ioannou responded diplomatically. "Tradition and reputation are very difficult to overcome."