When We Need to Retool

There are times when an industry has gone as far as it can go on their current practices.  At times like that, it becomes necessary for a new player to come along and shake things up.  Most often, it takes a new player because the cost of changing the way an existing company does things is far to great for anyone to get accepted.  There are too many highly paid board members and CEO’s with too much pressure from stockholders to suggest drastically changing something within an organization.

As an example, I will use the struggling Airline industry.  Nothing seems to be working for them now.  At one point, it appeared that Southwest Airlines has come into an industry that needed a new player at the right time to change the way things work.  But it is apparent now that the change that should have been felt was not widely accepted.

When you have to charge someone an extra $20 to change their reservation on the phone, there is a problem.  In affect, you are scamming someone who is already your customer.  This person has already made the decision to fly with you.  They have already paid money, choosing your service over that of your competition.  So why make them question that decision?  Why make it any harder for them to get what they need?

When you have to charge people to check a bag based on how much it weighs without announcing that to them before they come in, there is a problem.  If I purchase a ticket online, and it does not warn me that I will pay an extra $15 because my bag is one pound over a limit, what am I supposed to take from that?  What happens the next time I need to fly, am I going to happily choose your company again and pack a little lighter?  No, probably I will do some more research and do everything possible to choose another carrier.

So what does the airline industry need?  Where does it go from here?  For starters, it needs an outsider’s persepective.  It will need a new leader, one that steps up and challenges the things that today’s giants take for granted.  How can you reward people for being loyal?  How can you save money for the company, and relay that savings to everyone who chooses your service?  Fuel is expensive, but is there a way to pay for rising fuel costs by cutting your expenses in another way?  Stop looking for little ways to “steal” money from customers.

It’s time for someone to start to think a little differently about the way that we fly.

3 Responses to When We Need to Retool

  1. phil says:

    I think your analysis forgets that structural problems can greatly affect how industries operate. For example, before airline deregulation, airlines competed on service because prices were essentially fixed. Since the 80s airlines have competed on costs. Consequently airfare is more affordable but the quality of service has decreased considerably. Also other changes in how the airlines operate (for example, how they negotiate labor contracts) have not seen such fundamental structural changes, even if it would benefit how airlines operated. The end result is a situation where airlines have little room to make significant in their business model in the short-term. Dramatic increases in their main variable capital input (fuel) is going to probably be the biggest such shock as the rest of their costs are capital-intensive and fixed (including labor more or less w/ how the contract negotiations usually work). Moreover, the extraordinarily high capital costs and intense regulations (think all the security rules post 9/11) in the airline industry prohibit the entry of lots new competitors. Your general point is well taken, but the airline industry has a unique structure that most businesses don’t need to worry about.

  2. watch5 says:

    I love it,Excellent article.I am decide to put this into use one of these days.Thank you for sharing this.To Your Success!

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