Growth at the cost of sustainable agriculture and ideas

 

In 2001, over 194,821 wishful thinkers sent in their applications, yet only 6,406 applicants were accepted.  No, I am not talking about elitist schools in Boston like M.I.T., Harvard or Boston College.  No, I am not talking about applicants trying to get into the C.I.A., the F.B.I. or even American Idol.  That 3% acceptance rate belongs to Southwest Airlines.  Yep, that’s right.  This low fare airline does not even fly out of the country! (once regarded as a top perk of the trade for airline industry workers).  So, how did this demand to work for Southwest develop?  The answer:  The Southwest Spirit.

People commonly refer to Southwest’s culture as The Southwest Spirit.  On the customer end, the culture is an intangible resource that supports Positively Outrageous Service.  Pilots, gate attendants and flight attendants use enthusiasm and light sarcasm to create a fun atmosphere for the passengers.  The corporate strategy empowers these employees to utilize their own individual senses of humor and other means to provide this excellent service in almost any way they see fit.

The Southwestern Spirit extends within the organization as well.  Southwest has never laid off workers and works closely to maintain a cooperative relationship with the unions their employees belong too.  These strategies provide a safe atmosphere for employees through job security and a powerful voice by which they can voice their concerns.  Employee training programs, recognition programs, and special employee days like “Walk-a-Mile Day,” which encourages employees to work the job of a coworker for a day, all promote “communication and camaraderie” as important values within the culture.

One reason employees feel comfortable focusing on The Southwest Spirit is that they do not need to worry about job security.  This partial freedom from worry allows employees to behave with a creative, energetic attitude similar to that of children whose needs have been taken care of by caring parents.  Knowing that Southwest will continue to support them financially and respect their needs, employees can spend their time at work innovating, and having fun with passengers, instead of worrying about their jobs.  This job security enables the employees to focus on and create exceptional capabilities that are unique to Southwest.  These capabilities can, in turn, be used to create competitive advantages for Southwest Airlines when compared with their competitors.

The slow, steady and low risk growth of Southwest has also been a major factor in allowing the company to provide the strong job security.  Without this low risk approach, the Southwest employees could potentially lose confidence in the company’s ability to provide long term job security.

In 2002, Southwest could be seen as the most financially successful airline in the U.S. market, based primarily on the fact they had been the only airline to earn profits in 2001.  The general turmoil in the airline industry combined with Southwest’s relative strength created an opportunity for Southwest to aggressively expand their reach by spreading throughout the northeastern U.S. where they currently had only a minor presence.  Although the opportunity existed for Southwest to aggressively expand into the northeast U.S., the divergence from their historical policy of steady growth would be accompanied by a risk too great to ignore – the loss of job security, thus The Southwestern Spirit, thus the company’s capabilities and competitive advantages.   

 

After 9-11, a sociocultural fear of flying and terrorism pervaded the global environment.  Economic depression also ensued.  Within the U.S., the government created the Air Transportation Safety and System Stabilization Act.   This act called for higher airport security and airplane maintenance causing an increase in the cost of operations for the airline industry.  The situation worsened as passengers became disgruntled with the increased check in and take off times due to the increased security.  Although automation technology did curb check-in times to some degree, overall, the external environment decreased demand and raised costs for the airline industry.

Southwest’s well positioned financial state in 2001 permitted the company to work through these financial hardships.  One of their long time visions saw Southwest as able to provide job security and create prosperity during bad times due to their management policies during good times.  From their success in 2001, one can see Southwest succeeded in creating this vision, but how?

Southwest’s utilized its many tangible resources.  These resources included being the only investment grade airline, earning profit in 29 consecutive years, controlling the newest fleet of airplanes in the industry, owning a network of airports (especially low traffic airports) in at least 58 cities, and ticket less check-in kiosks.  These tangible resources, combined with the intangible resources from The Southwestern Spirit, unite to create capabilities.  Without The Southwestern Spirit, the following capabilities would not exist to their current extent.

Southwestern focuses their capabilities on two market segments:  The time-oriented business traveler and the price-oriented leisure traveler.  The business traveler receives frequent and point-to-point flights to meet their need of time-savings.  Southwest has the capability to efficiently turnaround an airplane in 15 minutes, compared to the industry average of 45 minutes.  This is done with innovative gate crews and baggage handlers as well as flight attendants who go beyond their normal duties by aiding ground crews in the cleaning the airplanes to improve turnaround time.  The Southwestern Spirit fosters the innovation and teamwork within Southwest, which creates this competitive advantage of quick turnaround.

Quick turnaround also creates a cost advantage for Southwest.  The less time the planes spend on the ground, the more time they can spend in the air allowing Southwest to average eight flights per day with each airplane, twice the industry average.  By having to purchase fewer $28 million Boeing 737 airplanes and provide maintenance for them, Southwest creates a cost advantage over competitors. 

As I alluded to earlier, the central management of Southwest empowers employees to take an active role in satisfying the needs of their passengers.  This creates the capability for Southwest of providing superior quality of service.  In fact, Southwest maintained the lowest number of complaints in the airline industry. 

The quick turnaround times, low costs and quality service have been sustainable competitive advantages for Southwest.  These advantages allow Southwest to continue to grow into new markets and fight off threats from competitors and new entrants such as United’s The Shuttle, American West, Continental Lite and Western Pacific.  These companies have been unable to imitate and sustain the success of Southwest mainly due social complexity of The Southwestern Spirit.  Competitors will adopt such Southwest strategies as the frequent point-to-point flights, but without the Southwest culture these competitors cannot imitate the quick turnaround times and quality service at such low costs.  This cost advantage run any competitors out of business.

 

The Southwestern Spirit is vital to sustaining these competitive advantages for Southwest.  By Southwest aggressively expanding in the northeastern U.S. they deviate from their historical low risk expansion beliefs.  As the company’s risk increases, the strength of the employees’ belief that their jobs will be secure for years to come decreases.  As job security decreases, risk-averse employees begin to worry about the future and start looking around for more secure positions.  These worries inhibit employees from focusing all their energies into innovating, being productive and providing excellent customer service.  With out these capabilities, Southwest’s competitive advantages will deteriorate and dilute towards the industry norms.