The following is an excerpt from “Your Company is Your Castle: Proven Methods for Building a Resilient Business” written by business transformation veteran Sandeep Chennakeshu. Fed Books. 2023.
So often, as I’ve seen in my career, companies identify brilliant ideas that can take their products to a mass market, but they ultimately fall short. The two main reasons for this are because their plans are not well thought out and because they get distracted, lose focus, and are not well executed. In the end, the product turned out to be not what it should have been. This is fatal.
To make a disruptive product from a disruptive idea, many things need to come together. Disruptive product delivery is required
Defining the winning proposition of your product; and planning and executing every step that will make that proposal a reality.
I’ll use the famous Harvard Business Case Study on Southwest Airlines to illustrate my point. Southwest Airlines entered a crowded US market in 1993 amid a field of eleven competitors. Their product was a service—airplane travel.
Their strategy was to enter as a budget airline with a twist. Their benchmark for pricing was any form of transportation, including automobiles, not other airlines. This was revolutionary thinking. Can this be done?
This meant they had to adjust their costs to compete with people driving between cities instead of flying. They knew what it cost to drive between cities, and this was a key data point in their model. They would also have estimated how many passengers would be flying with them at various ticket prices. To be profitable, the cost per passenger must be less than the ticket price.
The main costs of running an airline include aircraft (purchase or lease), fuel, aircraft maintenance costs, airport landing costs, gate occupancy costs (how long the aircraft is parked at the gate), labor costs ( those who are) are included. work for the airline), food and drink for passengers, and marketing costs for getting passengers to fly on their planes.
To optimize its costs, Southwest flew one type of aircraft (Boeing 737) and used relatively new aircraft to reduce maintenance. He sought ideas from his pilots to reduce fuel costs. They flew direct between smaller airports that had lower landing fees. Many other airlines used a hub and spoke model—flying to the hub and making connections to the destination. Southwest expedited the boarding and disembarking of passengers, thereby reducing gate occupancy times. They served drinks and peanuts but not food, eliminated paper tickets, and used direct Internet marketing—no travel agents or middlemen. This made them very cost competitive. I’m sure they reiterated their plans several times to recover their costs to secure profitability.
Cost was not the only factor. They modeled the most convenient time to fly for their target travelers, made booking tickets easy, simplified the boarding process, made travelers feel welcome on board, and ensured that travelers could find cheap tickets. Were doing the business of not eating.
OK, it worked. The Southwest has transformed since those early days. They probably aren’t even the cheapest airline today. However, they are the only domestic airline in the world that has been profitable for forty-seven years.2