#372: Amancio Ortega: The Genius Behind the Inditex Group

Key takeaways

Ortega's success is rooted in a mission-driven approach, shaped by childhood experiences that emphasized financial responsibility.
Understanding customer needs and working backwards is fundamental to flourishing in any industry.
Harnessing the latest technology and logistics is critical for a competitive advantage, especially in fast-changing industries.
Simplifying processes and encouraging a culture of continuous improvement keep a business agile and responsive.
Effective leadership requires knowing your employees, creating a supportive environment, and valuing their contributions.

Summary

Amancio Ortega: The Henry Ford of Fashion

The episode explores Amancio Ortega’s parallel to Henry Ford, particularly their shared philosophy of efficiency, cost control, and customer focus. Ortega revolutionized the fashion industry by drastically reducing production lead times, with Zara being able to respond to fashion trends in as little as 15 days. Both Ford and Ortega maintained a singular focus on manufacturing processes that enabled them to dominate their respective markets through volume and availability.

The Deep-rooted Motivation Behind Ortega's Success

Listeners learn about Ortega's childhood experiences, notably the moment he pledged to never let his mother experience financial hardship again when he was just twelve. This incident galvanized his work ethic and dedication to earning money. Ortega's consistent narrative emphasizes a deep-seated mission and a relentless drive to improve the conditions for both his family and future customers.

The Importance of Customer Feedback in Business

Ortega’s strategy focuses on starting with customer desires and working backwards. His critique of the fashion industry was that many players ignored customers' needs, which led him to establish a business model that prioritizes customer feedback directly from stores. He integrated vertical operations to ensure he could swiftly adapt to those changing desires, ensuring a competitive edge over competitors.

Innovative Use of Technology and Logistics

The conversation highlights Ortega’s foresight in technology, beginning in the 1970s. He recognized the importance of integrating advanced logistics and communication systems within his manufacturing processes. By centralizing and computerizing his operations, Ortega set Inditex apart from traditional fashion companies that operated on outdated systems, allowing Zara to quickly adapt styles and maintain inventory.

The Philosophy of Continuous Improvement and Simplicity

Ortega embodies a philosophy that values continuous improvement and simplifying business processes over complicating them. He believes in managing by walking around, staying attuned to each part of the operation, and prioritizing the importance of the customer experience. This commitment to simplicity and not overthinking processes has shaped his managerial approach and the ethos at Inditex.

Ortega's Management Style and Company Culture

The episode discusses Ortega's aversion to hierarchy, emphasizing a collaborative culture at Inditex. He ensures every employee feels valued by knowing their names and not raising his voice at them. His leadership style focuses on cultivating a sense of belonging and motivates staff to provide critiques, stressing the importance of humility and continuous learning in fostering a successful workplace.

Show notes

Amancio Ortega is one of the wealthiest people in the world. Ortega is the founder of Inditex, a pioneer of fast fashion, an entrepreneur with over 60 years of experience, and has created a business model that is studied in universities that he could not access. His life story is inspiring, educational, and full of valuable ideas for future generations of founders. This episode is what I learned from reading This is Amancio Ortega: The Man Who Created Zara by Covadonga O'Shea.
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Notes and highlights from the episode:

I remembered a comment that Luis Miguel Dominguin made to me years ago, when he was at the peak of his glory and his son, still a child, played in the garden of his house. "This child will never be a bullfighter. To face a bull you have to go hungry.”

The important thing is to set goals in life and put all your soul into fulfilling them.

I have dreamed of growing the company since I was nobody.

We gave it every day. My priority has always been the company, and I have committed myself to it, with full dedication, from day one.

Ortega is a man of mission. He is so convinced of what he is and what he has to do.

I was convinced that I had to dominate the customer.

Ortega starts with the customer and work backwards: “I am going to manufacture what the customer wants.”

I met Ortega when Zara did not exist. He only had the factories. In those years when nobody thought about technology within our sector, in which there was almost no computer science or mobile phones, he wanted to have a good team in technology.

He built a groundbreaking and avant-garde textile distribution company.

Inditex's business is centered around one simple premise – to be quick at responding to the market.

Their main advantage: an astonishing ability to detect fashion trends, assimilate them, and make them a reality on the hanger at a bargain price, and all in less than 15 days.

Ortega wanted to integrate design and manufacturing first, then complete the chain with distribution and sales in his own stores, turning the customer into his source of privileged information and not just the receiver of a commodity.

I refuse to recognize that there are impossibilities. I cannot discover that any one knows enough about anything on this earth definitely to say what is and what is not possible. — Henry Ford

There are no mature sectors where everything is already discovered, but rather companies or managers with closed minds who resist innovation.

Logistics is a fundamental part of the circle that completes Inditex’s vertical integration process. Inventory control in all locations around the world is as important as getting the design right and producing in a short time; that's why Inditex has invested time, effort, and a lot of money in establishing logistics centers with the latest technologies.

Traditionally, the seller ensures high margins at the beginning of each season, but endures several months of discounts to get rid of stock; the customer knows, therefore, that in the long run they will get the same items at lower prices. Ortega's company renews its clothes in stores around the world every week and twice weekly in Europe. The buyer knows that they will always find new items, but probably won't be able to get what they tried on seven days ago. In this way, customers understand that if they see something they like, they have to buy it immediately, because in a few days it will no longer be in the store. It's about creating an atmosphere of scarcity and opportunity.

Ortega has created a business model that is studied in universities to which he could not access.

I consider myself a worker who is immensely fortunate to have done what he wanted in life and to continue doing it.

It's the most beautiful company in the world.

I want a company with a soul.

Ortega stayed focused on his one great objective: To enable the entire world to dress well.

Ortega refuses to settle halfway to excellence.

He is a man with a lot of personal charm because he is not false. He does not have ulterior motives. He can be very tough, impulsive, very sure of himself, but very truthful.

Ortega does not like to lead sitting in a chair.

He has never liked praise. More than once I've told him: 'What a beautiful collection, how happy the customers are!', and he always interrupts me and asks me: 'Now tell me what's wrong.”

When asked on his advice for future generations of entrepreneurs: “The first thing is that you like what you are doing, that you are passionate about your work. I insist on this idea because it is very important. It has to be something that you would almost pay to do.”

Simplicity is the heritage of geniuses.

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“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth
Be like Gareth. Buy a book: All the books featured on Founders Podcast