Dean’s Blog

MOD Pizza: Culture Creates Purpose

Posted by Joseph Phillips on October 12, 2017 at 11:10 AM PDT


When Ally and Scott Svenson started MOD Pizza in 2008, they wanted to create an organization with a distinctive people-first culture that met a market need – fast-casual family-friendly food that happened to be pizza.  Today, MOD has 265 stores across 24 states and the UK, employing over 5500 “Mod Squaders.”  The brand has been named the fastest growing restaurant chain in the US for the last two years, and recently landed in the #2 spot on the Puget Sound Business Journal’s “Fastest Growing Private Companies” list. On October 11th, the Svenson’s joined the Albers Executive Speaker Series to explain their journey in progress with MOD pizza.   They are the first husband-wife team to participate in the Speaker Series, now in its 16th year! :}

The Svenson’s are serial entrepreneurs, recently being named the EY Entrepreneurs of the Year in the Pacific Northwest. The couple co-founded Seattle Coffee Company in London in 1994, and in 1998 sold it to Starbucks as their entry into the European market. Scott remained on as President of Starbucks UK, and subsequently President of Starbucks Europe, while Ally helped to oversee the transition of the Seattle Coffee Company stores to Starbucks branded stores.  While in the UK, the couple were also instrumental in growing Carluccio’s Ltd, a London based operator of Italian deli/cafes.

In 2001, the Svenson’s returned to their hometown of Seattle to raise their family.  Their entrepreneurial spirit again kicked in, and they began exploring ideas that combined their passion for business, people and purpose.  The first MOD opened in downtown Seattle, and the pioneer of fast casual pizza known for its individual artisan-style pizzas and salads and people-first culture was off and running.

More recently, MOD has become known for the purpose part of the business – hiring “second-chance” employees who experienced difficult times due to addictions, mental illness, or prison – people who few employers want to provide opportunity to.  The Svenson’s knew they wanted to have a business with a cause beyond earning profits, but did not start MOD with the goal of providing opportunity to at-risk individuals. Instead, that distinctive mission emerged from the people-first culture they created at MOD.

As they tell it, at the “five store mark,” they were still searching for a successful concept, with some stores doing OK financially and some struggling.  What was working was the culture.  The second-chance employees they had hired were doing well and were grateful for the MOD opportunity.  They were using MOD as a platform to change their lives.   Seeing this, the Svenson’s now knew what the purpose of MOD would be – instead of writing people off from the workplace like most of society was doing, they decided they would intentionally hire at-risk employees and give them a chance to reclaim meaning and purpose in their lives.  The MOD culture created the MOD mission.

They had a “dining room table” conversation about whether MOD could scale and whether they should try to expand the business.  It would have been easy enough to keep things simple, manageable – and small.  It was their second-chance employees who convinced them to go big.  They wanted others in similar circumstances to have the same opportunity for change that they had.  Now MOD is on a mission to spread this opportunity both nationally and internationally!

The Svenson’s noted that having a strong people-first culture and a purpose of hiring those who others would pass over is not just the right thing to do.  It also makes sense from a business standpoint.  It can give you a sustainable competitive advantage.  It will be something that is very difficult to replicate.  In the long run it will increase productivity because you will have engaged, experienced employees.  It will also build customer loyalty and connection.  Today, more and more consumers are drawn to brands that are about more than profits.  That promise of sustained competitive advantage has helped MOD raise $150 million from investors.  The Swenson’s said they cannot prove it is a winning formula – yet – but they believe it!

Ally and Scott shared their initial reluctance to promote the MOD purpose of hiring at-risk employees.  They were afraid it would come off as self-serving and insincere.  It was their second-chance employees who convinced them otherwise.  A TV station had gotten wind of the hiring strategy of MOD and wanted to do interviews on it to put together a story.  Those employees jumped at the opportunity to tell the MOD story.  They were proud of their accomplishments and wanted to give hope to others in similar circumstances.  That convinced the Svenson’s that it was OK to be more public about the MOD purpose.

What is next for MOD besides expansion across the globe?  They are working on a community store concept – something that has positive impact and will be “about and for” the neighborhood it serves.  Some of the initial thinking is being done with Seattle University’s Center for Community Engagement and the Entrepreneurship and Innovation Center in the Albers School, looking at the Yesler Terrace neighborhood near the SU campus.  It will be a facility that provides opportunity, training and feeds people, but does not duplicate services already available.  It is a work in progress but something that MOD is very serious about.

Scott and Ally Svenson have created a distinctive business with a strong people-first culture and a mission to provide opportunity to those who frequently are without one.  MOD Pizza is an inspiring story for all who know that business is a mechanism for social good and not just earning profits.  It is a belief they are turning into reality, thanks to a culture that creates purpose.




Meeting Mother Teresa

Posted by Joseph Phillips on September 29, 2017 at 12:09 PM PDT


At Seattle University’s Mass of the Holy Spirit on September 28th, Fr. Steve Sundborg, SJ, President of SU, reminded us that this month is the twentieth anniversary of Mother Teresa’s death.  I had the opportunity to meet Mother Teresa in December, 1996, which was just a few months before she passed away.

It was in Calcutta at her Missionaries of Charity center there.  I was travelling with a group of Creighton University graduate students doing a study tour of India.  I had co-sponsored the trip with my colleague, Dr. Vasant Raval, who is still a member of the Creighton accounting faculty today.  Calcutta was our first stop on the tour.  Mind you, in 1996 there were not many Americans visiting Calcutta as tourists, and the city had long surpassed what its infrastructure could support.  It was very different than Omaha, Nebraska!

We had heard that sometimes Mother Teresa would show up for the 6:00 AM mass in the chapel at the center.  So, we all got up early in the morning to make the mass.  Initially, she was not there, but not too long into the mass she slipped into the back and sat next to one of our students!

After the mass, she was happy to meet with us briefly, and invited us back the next day.  When we returned, we had our own audience with Mother Teresa.  She was short in stature, but as you might imagine, had a very powerful personality.  She was very intense and very committed to the importance of her work.  Of course she took the opportunity to remind us of the need for support of the mission of the Missionaries of Charity and we were happy to oblige with some modest financial contributions!

At one point in our conversation she produced a box that had medals with the image of St. Mary on them.  She looked me in the eye and said that these were miraculous medals that she wanted to give to our group.  Then she took a handful out of the box and placed them in my hand, instructing me to distribute to the group, which I dutifully did! 

Over the years I have given a few of these medals to people experiencing illness, and in each case their condition improved notably and they lived longer than expected.  I really do believe they are miraculous!

Sometimes you get asked questions such as, “who is the most famous person you have ever met?” or “who is the most impressive person you have ever met?”  I have an easy answer for those questions!  Looking back, it was such a privilege to have met Mother Teresa.  It seemed important at the time, but is even more important today.  It is not uncommon for a priest such as Father Sundborg to refer to Mother Teresa in his homily.  Each time that happens I am probably the only person in the church who can say that he actually met her!

By the way, in the picture above, you can see the box of medals in Mother Teresa's hands!  Can you spot me in the picture??

A Lesson From Totality

Posted by Joseph Phillips on August 28, 2017 at 7:08 AM PDT

I learned a valuable lesson from Totality. Along with many others, I headed to Oregon on August 21st to observe the full eclipse that went streaking across the US that day. Skies were crystal clear in the Willamette Valley, perfect for viewing the eclipse. As the moon gradually edged in front of the sun, it began to grow darker and colder. Soon there was just a sliver of orange peaking around the moon, and then -- there was totality! The sun was a dark blue globe surrounded by a shimmering white border that streaked out in different directions. It was amazing!

And what it taught me was the difference that 1% can make. Going from 99% blockage to 100% changed everything. Totality looks nothing like 99% -- or 95% or 90% for that matter. That last 1% makes all the difference.

As an economist, I am always analyzing things at the margin. I am always doing the cost-benefit analysis. I am always measuring the marginal benefit against the marginal cost.

It doesn't work with a full eclipse. It is the last one percent that provides the most gain, not the first one or ten or twenty percent, as we might normally presume. There is supposed to be declining marginal utility to any activity -- not true when it comes to the full eclipse!

We are often told to give 100% of ourselves to whatever we do, or better yet 110%! An economist would listen to that and wonder whether 95% or 99% would do, since the last bit of effort will be subject to diminishing returns. But that could be a mistake! What if that last 1% of effort makes all the difference, just like in a full eclipse? What if going that extra mile really is the difference between a huge success and a mediocre result or even a failure?

I am changing the way I am looking at things. Efficiency is important, but I can't always assume that the last one percent of effort will yield only minor benefits. The payoff could be huge, just like it is in Totality!

23rd Annual IAJBS World Forum

Posted by Joseph Phillips on July 26, 2017 at 8:07 AM PDT

The 23rd Annual International Association of Jesuit Business Schools (IAJBS) World Forum took place in Namur, Belgium from July 16-18.  Including myself, there were six attendees from Albers and one faculty member from the School of New and Continuing Studies. The event brought together 130 faculty from 19 different countries, 5 different continents, and 50 different universities and institutes.  The 24th World Forum will take place at Seattle University, July 22-25, 2018!  Mark your calendars!  We are looking forward to hosting!

Our faculty managed to deliver five papers at the conference, despite being sidetracked by a beer tasting river cruise and dinner in a castle!  The cruise featured the five different beers brewed by the monks who run the Chimay brewery.  Chimay Blue was the clear favorite for the Albers crowd and the other conference participants.

Namur is at the junction of two rivers, the Meuse and Sambre, and since this made it a strategic location back in the middle ages, naturally there is a big castle, the Citadel, looming over the river junction.  While the Citadel looks formidable, over its history it was under siege 21 times and each time the castle fell. Zero for 21 is not good in any sport!

The University of Namur was the host institution for the conference, and it happens to be the only Jesuit university in Europe outside of Spain.  Namur is a town of about 110,000 in the French speaking part of Belgium (Wallonia), and while not high on the list of places to see in Belgium, it is actually a spot worth visiting if you have the opportunity.  Besides the castle, it has a very walkable downtown core with many narrow streets free of automobile traffic, exactly what a tourist hopes to find in a European town!  I really do not understand why Rick Steves does not cover it in his guide for Belgium!

The IAJBS is an organization that brings together the deans of Jesuit business schools around the world.  Our board has members from the US, Latin America, Europe, India and Asia.  The main activity of IAJBS is to organize the annual World Forum that brings faculty and administrators together from a variety of Jesuit institutions around the globe.  These gatherings facilitate collaboration between the business schools, whether that is joint programs (the University of San Francisco, IQS in Barcelona, and Fu Jen in Taiwan jointly deliver a master’s degree program), faculty collaboration in research, sponsorship of the Journal of Management for Global Sustainability, or sharing best practices in Jesuit business education.

Every four years, IAJBS is joined at the World Forum by Colleagues in Jesuit Business Education (CJBE), which is a group of US Jesuit business school faculty who collaborate and share around the delivery of Jesuit business education. CJBE will be joining us in Seattle for its Twentieth Annual Conference next year.  Ironically, CJBE was founded in 1998 and its first conference was held at Seattle University!  They have not been back since, but we are happy to have them in 2018!  To mark the occasion, we are welcoming Fr. Bob Spitzer, SJ, to give a keynote address.  Fr. Spitzer, former president of Gonzaga, was instrumental in the founding of CJBE while a faculty member at SU!

Fr. Michael Garanzini, SJ, Secretary for Higher Education for the Jesuits, was at the World Forum, and delivered a keynote address about his plans to establish the International Association of Jesuit Universities (IAJU), indicating that he saw IAJBS as model for organizing other Jesuit activities in higher education on a global basis.  He will be convening a meeting in July, 2018 of Jesuit university presidents from around the world to launch this initiative.

The 23rd Annual World Forum was another successful event for IAJBS.  Now it falls to us to host a successful 24th Annual IAJBS World Forum in Seattle in 2018!

Summer Business Institute Marks 15th Year

Posted by Joseph Phillips on July 6, 2017 at 3:07 PM PDT

June 24-29 we hosted the 15th Annual Summer Business Institute, bringing thirty-five sophomores and juniors from 19 different Puget Sound area high schools to the SU campus.  SBI seeks to inspire under-represented students to pursue a college education, including the possibility of studying business, of course!

SBI offers the students the opportunity to explore various aspects of university life.  This includes living in college dorms for the duration of program, attending business classes taught by Albers professors, visiting sponsoring company headquarters, participating in a team business plan competition, and workshops on the college admission process, college financial aid, and financial literacy.

One of the most important parts of the program is the Albers students who serve as counselors.  These students serve as inspirational role models for the high school students.  This year we had another great group of counselors – Joe Maisterra (junior Marketing major), Max Napadiy (Senior Management and Marketing major), Maria Medina (Master of Professional Accounting student), Catherine Sepulveda (junior Management major), Haneia Simpson (junior International Business major), and Samone Washington (business sophomore).  At the closing luncheon, they all made wonderful closing remarks to the students and their families and friends.  You could tell how our students had such a positive influence on the high school students and I was so proud of them!


SBI Closing Luncheon and Awards Ceremony


One of the changes we have made over the years is to follow up with students after they complete the summer program and invite them back to campus for activities that will assist in the college application process.  This includes a Personal Statement Workshop and a Scholarship/FAFSA Workshop.  These students often are the first students in their families to attend college, so they have no one guiding them on the process at home, and at some schools college counselling services have been cut back significantly.  Knowing how the college application process works can really make a difference in determining one’s success in pursuing a college degree.

Several companies in the Seattle region recognize the power of this program and how it contributes to creating a diverse work force, and they support the program with their financial contributions.  Many thanks to this year’s sponsors – The Boeing Company, Wells Fargo, and Washington Federal.

Albers alum Duron Jones is the program director, and he works with our Director of Marketing and Communications, Barb Hauke, to organize the program.  They do a terrific job every year of putting together an incredible program for these students!

Graduation 2017

Posted by Joseph Phillips on June 12, 2017 at 4:06 PM PDT



Seattle University’s 2017 Commencement took place on June 11th at Key Arena.  More than 2,000 students received their diplomas that day, including 333 undergraduate students and 305 graduate students from the Albers School!

Several Albers students received awards at the university level.  Maddy Lynch, business economics student, was one of four students to receive the President’s Award, presented to the undergraduate student(s) with the highest GPA.  Gus Orlando, graduating from our Master of Professional Accounting program, received the Provost’s Award, presented to the graduate student with the highest GPA.  We are proud of both of them and here is my view of the award presentation to Gus:


Maddy also received the Paul Volpe Award, which goes to the Albers undergrad with the highest GPA, and Gus was one of three students to receive the Jerry Viscione Award, presented to the Albers grad student(s) with the highest GPA.  The other Viscione recipients were Miranda Brown and Dara Sadri.

Two Albers faculty and staff members received graduate degrees.  Amelia Marckworth, program coordinator in the Innovation and Entrepreneurship Center, received her Master in Non-profit Leadership degree.  Nathan Colaner, Instructor in Business Ethics, received his Professional MBA degree.  Congratulations to Nathan and Amelia!

Another highlight was the first group of graduates from our MS in Business Analytics program!  Seven students were among the 305 graduate students receiving degrees.

Writer Sherman Alexie was the speaker at the undergraduate ceremony.  I especially appreciated his recognition of our international students and thanking them for completing their studies in the US.  He also reminded graduates how privileged they are to receive a degree from a school like SU and challenged them to make the most of the opportunities that presents to them. 

Maggy Barankitse, a humanitarian from Burundi and previous recipient of the Opus Prize when it was awarded at SU, was the commencement speaker in the graduate ceremony.  She talked about her work in an environment of ethnic strife and challenged graduates to be as “crazy” as she is when it comes to addressing societal problems.

Graduation Day in Seattle University’s 125th anniversary year was a great celebration.  Congratulations to all our graduates!  We expect great things from you as leaders pursuing a just and humane world!

45th Annual Accounting Awards Banquet

Posted by Joseph Phillips on June 5, 2017 at 4:06 PM PDT



The 45th Annual Accounting Awards Banquet took place on June 2nd.  Twenty-six different scholarships and awards were given to 39 accounting students that evening!  Some of the highlights included the Outstanding Senior Award going to Trey Takara and Daniel Verburg (first time we could not narrow it down to one person!), Gus Orlando winning the Outstanding Master of Professional Accounting degree Award, and Mr. Verburg winning the Beta Alpha Psi Outstanding Leader Award.

I am so impressed that the Department of Accounting has been able to carry on this tradition for 45 years!  That means all the students and some of the faculty were not even born when this event started! :}  Nearly 100 were in attendance this year!

This year the event was facilitated by four generous sponsors – Clark Nuber, Deloitte, EY, and Weyerhaeuser!  Many accounting professionals and mentors in our Accounting Mentor Program were in attendance.

Dennis Applegate, an adjunct instructor in the department and member of the Internal Audit Program Advisory Board, received the Chair’s Award for outstanding service to the department.

Sarah Bee is stepping down as faculty advisor for Beta Alpha Psi, the accounting honor society.   BAP President, Daniel Verburg, gave an excellent tribute to Sarah outlining her success as the advisor to this very active student organization.

Congratulations to the Department of Accounting on their 45th successful awards banquet!

Expeditors International CEO on Culture

Posted by Joseph Phillips on May 25, 2017 at 5:05 PM PDT



Jeff Musser, President and CEO of Expeditors International, was the speaker for the Albers Executive Speaker Series on May 23rd on the SU campus.  Musser was appointed CEO of Expeditors in 2013, after starting with the company as a part-time messenger in 1983.  He worked his way up through the organization, from District Manager, to Regional VP, to CIO before becoming CEO a few years ago.

Musser started off by explaining how the culture of Expeditors consists of nine factors – curiosity, pride, attitude, excellence, resolute, integrity, pride, sense of humor, and appearance.  He did not try to unpack each factor, but did note that “appearance” sometimes get people’s attention.  The company wants to project a professional appearance since they believe that provides a competitive advantage to them.  He noted that younger employees push back on the dress code, which means Expeditors needs to provide an explanation as to why appearance is considered important for success.  It is not something they will compromise.

He reminded the audience that Expeditors business-to-business model is a non-asset model.  They own no planes, ships, or trucks.  They believe there are more than enough of those assets available already.  While freight moving companies may overinvest in assets at certain points, in the long run the firms they partner with will need to get capacity right in order to be profitable.

Musser lamented that in this day and age people are not taking the time to engage and understand others.  Instead of trying to understand the other person’s point of view or why something is done in a particular way, we want to impose our perspective.  Via social media we are surrounding ourselves with people who view things as we do, thus creating our own “echo chamber” as it were.  He encouraged the audience to engage in more open dialogue to understand other points of view, which can be more powerful than simply exercising free speech.

As for leading and managing today’s workforce, Musser had several observations:

  • One challenge is people want to move up in the organization too quickly. They need to understand they will be in the workforce for a long time and everything does not happen in the first six months.  Younger people often need to slow down and show greater patience.
  • Every leader and manager is called upon to deliver “bad news” to employees. Musser said that the biggest mistake made is sitting on that information for too long.  The fear of delivering bad news must be overcome, and in many cases employees are appreciative of receiving the news in a timely fashion.
  • Some of the things they look for in new hires are a strong work ethic, intelligence, and treating others with respect. He said Expeditors hires for attitude – they can teach skills. 
  • He finds periodic check-ins more valuable for employee development than annual evaluation.
  • New employees often enter the organization wanting to disrupt the culture, rather than first taking the time to understand why things are the way they are. This is another example of not stepping back and thinking about the other’s point of view.
  • People tend to self-select into advancement opportunities. They gravitate to what level of responsibility they are comfortable with.  There is not a need to coach that.

When asked about the success of, Musser expressed great admiration for the firm, and noted that unlike most companies who are trying to figure out what to outsource, Amazon seems determined to do everything on its own.  He also noted that whereas most large companies are rewarded for their profitability, right now Amazon is rewarded for growth.  At some point, that will shift and profitability will become the standard the company is measured by.  That shift may force Amazon to do more outsourcing and abandon some of its business lines.

Musser is very excited about what the Internet of Things means for the logistics industry.  With connected devices, the ability to track items second by second should result in significant improvements in customer service.  Periodic updates will be replaced by continuous tracking.  This also provides Expeditors with more data for improving performance and advising customers on logistics strategy.

Throughout the presentation, Musser showed himself to be a down to earth, humble, and earnest leader.  He definitely models the nine values that characterize the Expeditors culture.  He proved to be a first rate speaker for our students to hear from!



Journey to Jakarta

Posted by Joseph Phillips on May 18, 2017 at 9:05 AM PDT

Everything you have heard about the traffic in Jakarta is true – but not at 1:00 AM in the morning when it took only 25 minutes to get from the airport to my hotel.  May 9 to 15 I took a trip to Jakarta to visit with SU alumni.  We have nearly 1000 alumni in Indonesia and most of them graduated from the Albers School, so I accompanied Jim Hembree from University Advancement on this trip to connect with our Jakarta alums.

Jim planned a variety of meetings with the alumni.  Some were one on one, some were small groups, and we had an evening reception where more than 40 alumni attended.  Altogether, we saw about 60 alumni.  They were an enthusiastic group and happy to see SU visiting Jakarta.  They are very appreciative of their SU education and reminisced about some of their favorite Albers faculty, such as Fiona Robertson, Bob Callahan, and Teresa Ling.  Fiona was super tough they said.  Bob Callahan’s business communications class was life changing.  Teresa Ling was their mother figure in Seattle.

Naturally, the Jakarta weather was not like Seattle’s this time of year.  The temperature was in the 90’s during the day and very humid.  Of course, much of our time was spent under air-conditioned conditions, either indoors or in air-conditioned cars.  One evening I decided to walk over to a reception and was told by the locals, “we don’t walk, we will drive you over,” but I decided the 20 minute walk needed to be part of my Jakarta experience!

Sunday mornings they close down Thamrin Road in the center of town to automobile traffic and let people walk, run, and bike.  We do the same thing to Lake Washington Boulevard on Sundays in the summer here in Seattle.  As you can see from the photo below, people take advantage of the opportunity!


There is not much in the way of tourist activity in Jakarta.  For that sort of thing, people suggested going to Bali.  Jakarta’s President sees tourism as a potential economic driver for the nation, so he has initiated a number of new tourism projects, but I am assuming they are all outside Jakarta.

Right now there is political turmoil around the recent sentencing of Jakarta’s governor on blasphemy charges.  There were a number of political demonstrations by his supporters during our visit, but we did not see them up close.  Many people are worried that religion is being used for political purposes and are concerned about the implications for the 2019 presidential election.  They believe their democracy is at risk and the political freedoms that go with it.  Of course, religion has been used for political purposes in the US, so it is not surprising that it happens elsewhere.

We learned that Indonesian students thinking of studying abroad are not overly worried about the immigration drama created by the Trump administration, at least not yet.  Studying in the US is definitely something they are willing to consider, and when they do, Seattle is one of the more desirable locations for them.  Indonesians perceive that Seattle has less crime, is more tolerant, and has a larger Asian presence than most of the US.  Seattle also has a significant Indonesian community which makes it easier to think about locating to Seattle.

Right now we have over 150 Indonesian students studying at SU, with over 100 in the Albers School.  It is important to keep Indonesian students coming to our campus.  If you look at the history of the university, we have had a large presence of Indonesian students since the mid-1990’s, and the alumni that we talked to stretch back to that time.  The vast majority of those alumni graduated from the Albers School, so they are a very important group to us.

This was my first trip to Jakarta, and any time you go somewhere for the first time, it is an interesting trip because you cannot help but learn a lot!  It was also great to reconnect with our Jakarta alumni.  They are doing well professionally and very appreciative of their SU education!

Alaska Air CFO Speaks at Albers

Posted by Joseph Phillips on April 21, 2017 at 5:04 PM PDT

Brandon Pedersen, EVP and CFO of Alaska Airlines, participated in the Albers Executive Speaker Series on April 20th.  The title of his presentation was, “What keeps Alaska Air Going?”

In his capacity as Executive Vice President of Finance and Chief Financial Officer for Alaska Air Group, Pedersen oversees a long list of company activities, including finance, fleet management, accounting/tax, investor relations, financial planning, supply chain, and internal audit. Before assuming his current role in 2010, he served as corporate controller for seven years. Prior to joining Alaska, he was a partner at KPMG.  In 2015, Pedersen was recognized by the Puget Sound Business Journal as its “CFO of the Year” for large public companies.



In his remarks, Pedersen emphasized the importance of long term sustainable growth for Alaska, growth that benefits customers, employees, communities and shareholders (and not just shareholders!).  What keeps the company going is a combination of five factors:

  • Great people – it is a service business, so employees need to be engaged and focused on the customer.
  • Low cost – not the lowest price, but they have lower prices than the major airlines.
  • Fuel efficiency – fuel is a big factor in airline expenses and they focus on minimizing this expense.
  • Conservative capital allocation – they don’t borrow too much and try to grow too fast.
  • Strong network – serve many markets in the US.

When they looked out to see where opportunities for growth were, the 40 million people living in California caught their eye.  Then it was a matter of do you build to serve that customer base or do you buy in to the market?  In the wake of the Virgin America merger, you know they decided to buy!

Virgin made sense because they had a loyal customer base and award winning service, similar to what Alaska can claim.  They had 60+ airplanes and they had gates in Los Angeles and San Francisco.  It would take a long time to grow into what Virgin already offered.

Of course, a successful merger is not easy, with the most difficult issue being blending Virgin America employees into the Alaska culture.  When asked how they have attempted to do that, Pedersen mentioned they held a “Values Jam” and emerged with five new values for the combined organization.  (Quizzed later on what the five were, despite having little time to memorize them, he managed to call them out – “Do the right thing,” “Own safety,” Be kindhearted,” “Be remarkable,” and “Deliver results!”)  They also held 20 “Momentum Sessions,” which brought together employees from both organizations to learn more about each other.

In the Q&A, Pedersen was asked what does Alaska need to be really good at doing?  His answer was, “customer service.”  They are trying to provide value at a good price, or as he put it, to provide a “Costco feeling” to the customer.  They are not trying to be the low price provider, but looking for the right combination of price and quality experience.

When asked about Alaska’s relationship with Boeing, he noted that when you are a smaller organization (6% market share), partnerships are extremely important to you, and the three most important partnerships for them are with Bank of America, General Electric, and Boeing, with Boeing being the most important.  They make a great airplane (the 737) and they have great people to work with.

Another question was about Delta’s big move into Sea-Tac, and how was Alaska responding to that challenge?  He said that when Delta first decided to replicate the Alaska network, the initial reaction was panic, but then they realized that competition was good and would make them a better organization providing a better customer experience, and that is what has happened!

He was also asked, “What is the hardest decision you have had to make as CFO?”  Without hesitation, he said, “That is an easy question!”  It is always how much to invest in technology.  How do you know what is really needed and how do you know what is “super cool” and nice to have?  The IT group will never think you are investing enough in technology!

Back to the merger, he was asked about the challenges of having a mixed Boeing/Airbus fleet that results from the Virgin America merger.  Pedersen reminded that there are advantages and disadvantages to each, and there was no need to rush into a decision about returning to one fleet or retaining a mix.  The Airbus planes are leased and come off lease in the 2021 to 2024 time period.  He also explained their move to the Embraer 175 for regional flights to smaller markets.   They have found it to be a fabulous plane offering a much better flight experience to the customer.   Regional flights used to be offered under the Horizon brand, but they decided to phase that out and go to market with one brand as they expanded into California.  The Alaska brand is not so well known there and two brands would be too confusing to consumers.

Several times throughout the presentation, Pedersen stressed the importance of not overinvesting in equipment (airplanes), and particularly not getting carried away during periods of profitability.  The industry has a history of getting carried away during the good times, and the last few years have been good years for air carriers.  Listening to him, you are convinced that Alaska is not in the process of repeating that mistake!

Brandon Pedersen gave a lively and informative presentation to our students!  You could tell that Alaska is highly respected by the audience and it is great to have them as our home town airline!