AIRCRAFT DESIGN

Making people feel like flying
Flying is boring. At least that's what Boeing determined after a series of psychologist-led focus groups it commissioned in Beijing, Atlanta, Munich and elsewhere. "The fundamental problem with travel is what you meant to buy [was] being someplace else, but the delivery system—the planes—is not what you wanted," explains Klaus Brauer, director of passenger satisfaction and revenue for Boeing Commercial Airplanes. To fix that problem, Boeing meticulously reconsidered every aspect of the in-flight experience for its next generation of airliner—the 787 Dreamliner. Ideas for improvement ranged to the off-the-wall, with themes like the Orient Express and camping by a babbling brook, considered, then discarded. "One experience popped up that was more universal than we ever hoped to find," says Brauer, laughing at how obvious it seems in retrospect, "and that was flying."

In practice, that desire made Boeing realize cabins have been designed to lessen the experience of flying: small windows, beige interiors, white light. In designing the Dreamliner, Boeing was able to make a number of changes it says will improve the passenger's experience. For instance, windows will be 50 percent larger, enabling passengers not at the window to enjoy a much better view, including over the rows in front of them. The shade is gone and replaced with what are essentially high-tech sunglasses: Windows can be dimmed so less light is allowed in, enabling neighbors to watch movies while allowing the window-seaters to see the world below and the stars above.

The new composite hull that allows larger windows also endures stress better than aluminum, allowing cabin pressure to be increased 20 percent to the equivalent to 6,000 feet above sea level. Statistically, that should result in as little passenger discomfort (like headaches) as occurs at sea level, Brauer boasts. Helping matters is an improved systems design that will allow in-flight humidity a modest bump to the teens from current single-digit levels. Cabin lighting will consist of hues of blue replicating day, evening and night skies as cabin crews see fit.

The only thing Boeing can't do much to improve is legroom: That's the decision of the airlines, not the manufacturer. Yet Boeing expects airlines to add roomier coach class in part of the cabin to cater to the increase in business travelers who have to fly economy. In all sections, the airplane has much more room at the shoulder and head level through a taller cabin, a factor that studies show is much more important in comfort than seat or cushion width. With a range of 8,500 miles, the jet can fly its 200-plus passengers nonstop on the same long-haul routes at a much better fuel efficiency than airlines expect now. With a smaller passenger load, Brauer expects the plane to thrive as airlines trend toward skipping hubs in favor of point-to-point routes. Don't book your tickets yet, though: The 787 is not expected to be in passenger service until 2008 with All Nippon, Japan and Northwest Airlines the biggest purchasers so far.

DESTINATIONS

Get there before everyone else

It seems inevitable that travel's great "undiscovered" destinations eventually become overrun. Finding the next Croatia or New Zealand before a million fellow travelers do isn't easy: More and more people are traveling and going farther afield due to pent-up demand from the past three years, according to American Express Travel. To figure out where the enterprising traveler should go before the masses find out, we polled a series of travel industry experts to tell us the next great destinations to go to now.

South America as a whole is becoming increasingly popular, but it's Argentina that promises to be the next hot place, says Cari Gray of Butterfield & Robinson, which runs luxury bicycling and walking trips around the globe. "Patagonia just keeps getting hotter and hotter. The demand has never been greater," she says. Patagonia, a vast area in the south, features glacier–cut mountains and stretches of shoreline where the astounding variety of wildlife appeals to many. But Patagonia isn't the only area worth visiting in Argentina. The wine-growing region of Mendoza, in the Andes foothills, offers some stunning scenery, as well as some of the world's finest wines. The region's reputation is growing in the wine world as a series of French companies establish wineries there. To the east, "Buenos Aires is incredible, it's so European," says Gray. Its lively café culture and general welcoming of visitors makes it the most urbane city in Latin America. Despite the collapse of the Argentinean economy in 2001, the country is safe for travelers and now a remarkable bargain, which is bound to mean Argentina won't stay undiscovered much longer, especially as the country gears up its efforts to draw American tourists southward.

Halfway around the world, the Himalayan kingdom of Bhutan is much more of a mystery for most Westerners, who are only starting to think of it as a potential destination. "Bhutan has breathtaking scenery and has been cut off to the world for decades," says Dennis Pinto, president of Micato Safaris, a luxury adventure travel outfit based in New York. Nestled in the mountains between Tibet and India, the Buddhist kingdom has long strictly regulated tourist entry for fear that its distinct mountain culture will be corrupted. The result is that those who discover it find a lightly trod expanse of pine-filled valleys and jaw-dropping mountain peaks dotted with ancient monasteries still in use.

Recent years have seen a loosening of Bhutan's wariness of tourism, and the first luxury properties have opened in the kingdom in the past year. In the cultural center of Paro, Como Hotels & Resorts opened the Uma Paro, a 30-room hotel perched on a mountain top. Also in Paro is a lodge operated by Amanresorts, which hopes to open more lodges across the country in coming years.

RETAIL

Shopping as lifestyle experience

At the Three on the Bund building in Shanghai's vibrant central district, patrons can shop for a unique selection of Giorgio Armani fashions, dine at a Jean-Georges Vongerichten restaurant and then casually enjoy an exhibit of contemporary art. If they're in need of a break, women go to the Evian Spa for a French "digi-esthetique" massage, while men can relax with a whiskey while getting a shave at the Barbers by Three. All of that has made Three on the Bund Shanghai's hottest attraction. But don't dare call it a mall—the complex is at the forefront of a new retail trend to fuse shopping with entertainment, relaxation and dining to create an experience that goes beyond brands and price.

"Within the four walls of the Three on the Bund, you are in a different world, a place that exudes energy and passion that come from the heart," says Handel Lee, the complex's developer and owner. The wealthy can shop wherever they like, so Lee reportedly spent $80 million to refurbish the Bund building to create an operation so compelling it would become a must-attend for Shanghai's growing wealthy elite. The seven-story building is anchored by the Shanghai Gallery of Art, off of which are four restaurants, including Jean-Georges'; two clothing boutiques, including Armani and his and hers spas and cocktail lounges that command 180-degree views of Shanghai. It's been so successful that Lee now says he's planning something similar for Tiananmen Square.

Lee is not the only one to tap into the desire to make shopping a unique, must-experience event. In Kuwait, Sheik Majed al-Sabah launched a line of similar shops in 2002 called Villa Moda, which he calls a "luxury bazaar." There, the demanding ultra-rich can shop in glass-enclosed mini-shops for Prada, Gucci and 80 other coveted brands, all the while enjoying al-Sabah's update on Arab-style service, where employees dote on customers rather than stand back behind counters.

The so-called Sheik of Chic manages to create even more enthusiasm by inviting 100 or so customers to unpack new shipments from the design houses in an atmosphere where people feel like they're opening presents. Inevitably, the enthusiasm translates into sales much greater than if the customers just saw them on the rack, al-Sabah says. The $20 million, 100,000-square-foot glass building in Kuwait has led to new locations in Qatar and Dubai.

While Three on the Bund and Villa Moda cater more to the ultra-wealthy who want only the best, more traditional retailers are beginning to take a page from the efforts of Lee and al-Sabah. Clothing retailers Saks Fifth Avenue and Diane von Furstenburg, for example, offer select customers a chance to view and purchase new collections before they're rolled out in stores, often enhancing the experience with food and drinks. Expect to see more as the retail world catches up with the innovators.

MANAGEMENT

Happy employees boost the bottom line

When corporations look to improve their bottom line, they end up striking fear into the hearts of employees with layoffs, budget cuts and slashed benefits. Such actions typically produce immediate results by lowering costs. But in a sharp rebuke to that slash-and-burn style, a growing number of executives are seeing actions that demoralize staff as counterproductive. Instead, they are striving to implement People Performance Management (PPM), a business philosophy based on the notion that motivated, happy employees significantly boost profits. It's a tactic that the likes of Dell, Southwest Airlines and Starbucks have used to obvious success.

"Organizations have realized they can't differentiate on price: What they do and what they make is easily replicable. Now it's the experience with the brands that matters to customers," says Don E. Schultz, professor emeritus at Northwestern University and founder of a center there focused on PPM. Employees are the face of the brand and the best avenue to boosting sales, he says.

Traditionally, PPM has taken the form of cash, merchandise and travel incentives, mainly as rewards for salespeople who reach aggressive annual goals. A recent study by Schultz's center found that companies spend $115 billion a year on such incentives, and on average see a 22 percent increase in performance.

But even more intriguing is the recent shift toward applying PPM for employees not directly involved in sales, such as warehouse staff and support personnel. This stems from a fundamental shift to focus on managing income from existing clients over time, rather than demanding short-term unit sales increases—a strategy that, in practice, means existing clients are ignored, says Schultz. One sign this strategy is wise comes from a recent study by the Russell Investment Group, which found that stocks of the Fortune "100 Best Places to Work" beat the broader market by 300 percent over a seven-year span.

One of the companies on that list, computer products retailer CDW, has used PPM to fuel 50% sales growth to $5 billion over the past eight years. "We don't manufacture anything. All of our competitive advantage comes from getting coworkers to believe, 'What I do at work today has an effect on the enterprise,'" explains Arthur S. Friedson, head of CDW's Coworker Services. It's not just cash bonuses for salespeople: CDW offers everything from onsite fitness and daycare centers to a series of short-term incentives that boosts the average employee's income by 25 percent a year. Employees with CDW for more than three years get a paid trip for them and their families to any place in the U.S. when the company hits aggressive annual sales or profit targets. More than 50 percent of the time, CDW foots the bill. "We're not doing this to get to heaven. The bottom line is results," Friedson says,

Results like that are causing what Shultz says is a "groundswell of interest." Recently, GE, Honeywell, PPG and Granger expressed serious interest to Schultz about implementing PPM. "Employees are a heck of a lot smarter than they get credit for. They just don't often have the resources," Schultz concludes.

LIFESTYLE

Entrepreneurs temper business drive with lifestyle choices

As the second in command at a Portland, Ore., homebuilder, David Hale helped grow the company into the state's largest builder. Yet instead of continuing to reap the rewards that come with being second in command, Hale struck out on his own, examining markets from Portland to Las Vegas to Spokane, Wash., before settling on Boise, Idaho, as the place to cast his lot. What tipped the scales? Boise provided easy access to biking trails, fly-fishing and skiing.

"I'm five minutes from work and two minutes from mountain biking. In Portland, just to get to the trails was two hours," says Hale. Considering the time and effort needed to start up a business, he didn't want to waste time trying to squeeze in leisure time. It's worked out well for Hale: In the eight years since founding his firm, his company has grown to $8 million a year in revenue, specializing in urban infill housing. Being close to the trails has helped, too: In his spare time, Hale races his mountain bike competitively.

His story isn't that unusual. More and more executives are rethinking the need to be centered in the major business centers and instead moving to places like Bozeman, Mont., or Saranac Lake, N.Y. Previously, only sporting goods companies set up shop in places considered lifestyle towns, like Nike in Beaverton, Ore. But more and more traditional firms have been moving to areas with better lifestyle features. According to a study by the Federal Reserve Bank of Chicago, corporate headquarters located in small cities and towns increased 23 percent in the decade ending in 2000, outpacing growth in the five largest cities in the country. Indeed, New York City, home to a third of the nation's 500 largest companies in 1955, now hosts just 10 percent. Similar drops have been seen in London and Chicago, forsaken by increasing numbers of firms for smaller locales.

Much of the movement away from large cities is enabled by the great advances in the Internet, mobile phones and overnight delivery services, which allow people to run businesses almost anywhere without being at a disadvantage, according to the Fed study. "You would be shocked and amazed that they are drinking from the same information hose we are," says Rich Karlgaard, publisher of Forbes and author of Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness, a book detailing the phenomenon of entrepreneurs moving for lifestyle considerations. Karlgaard says the movement is just starting to gain momentum. "There is a second act to their lives that can be bigger and richer and more fulfilling than anything they had ever hoped for" by moving to small towns, he adds.

There are often great business advantages to moving to a smaller town, such as lower taxes, government subsidies and cheaper labor, but there's little doubt many people are looking at life much like Boise's Hale. "Life is short, and I want to live it to the fullest," Hale says. "Part of that is having as much time as possible to do things in business and outside of business."

LUXURY

Luxury for the Masses

Six years ago, Au Bon Pain founder Ronald Shaich bet his livelihood on one idea: That consumers would pay a few bucks more for sandwiches served on artisan-made bread in an friendly, upscale setting. He believed it so much that he sold off Au Bon Pain and renamed a smaller chain he owned Panera Bread. Today, Panera is a $1.4 billion sales chain and a perfect example of the "new luxury" trend that is revolutionizing business, says Michael J. Silverstein.

"Consumers don't want to pay more. But they do when the benefits compensate," he explains. "They will work very hard to stretch their dollars, taking a discount airline, shopping at Costco, and then turning around and staying at the Ritz-Carlton."

Silverstein knows what he's talking about. He and Bath & Body Works CEO Neil Fiske have co-authored a book titled Trading Up: Why Consumers Want New Luxury Goods—and How Companies Create Them. The book, which has sold 140,000 copies, is based on the findings on changing consumer behavior from a host of Boston Consulting Group (BCG) analysts. Silverstein, a director at BCG, estimates some 96 percent of Americans trade up in some manner, whether by choosing Panera over a cheaper deli or picking a Victoria's Secret bra instead of a midpriced department store brand.

It's not consistent as to when and where consumers trade up, though. They are constantly making value-for-money judgments, deciding to trade up when they decide something is worth the splurge. The trading up phenomenon is best seen in the companies that have capitalized on it: Starbucks, Coach, Kendall-Jackson, Callaway Golf and Samsung, among others. What they have in common that is that they engage consumers' emotions—whether with self-expression, adventure or nurturing—and are affordable, yet command a premium based on value for money, according to Silverstein.

Successful new luxury brands aren't just marketing creations: They offer technical differences with competing goods that result in genuine product performance gains. The losers in this business environment are old-line luxury goods, which tend to be aloof and expensive, and midpriced conventional goods that can't command a premium and can't compete with the prices of the discounters below them. New luxury goods are able both to command a premium and to sell at significant volumes.

The idea may sound simple enough, but Silverstein warns it's not easy to transform a company into New Luxury: If true value isn't delivered, consumers will abandon brands faster than they ever did in the past. But for those who can thread the needle, the rewards are great. Of $1.3 trillion in annual sales Silverstein and Fiske identified across 23 categories, New Luxury has grabbed 19 percent of the market. As a category, it's growing upwards of 15 percent each year. "New luxury is one of the most exciting growth opportunities of the past 50 years," says Silverstein. "It is a chance to rapidly gain market share and forever change markets."

Brendan Coffey is a freelance writer based in New Jersey.