| What does the following list of companies have in | | | | aggressive and the carriers were profitable so the |
| common? | | | | need to squeeze costs was not urgent. |
| A&P | | | | When de-regulation occurred in 1978 the major |
| Hudson Motor Car Co. | | | | carriers did not anticipate the radical disruptive |
| Montgomery Ward | | | | innovation that was just around the corner. An |
| TWA | | | | aviation pioneer in San Antonio named Herb Kelleher |
| Horn and Hardart | | | | did. He watched as fares plummeted without |
| Studebaker | | | | government regulation protection. Competition for |
| Indian Motorcycle | | | | gates, destinations and expansion resulted in many |
| Bonwit Teller | | | | regional carriers (Republic, Piedmont, etc.) being |
| Woolworth | | | | gobbled up by the majors. Out of the changing |
| Bethlehem Steel | | | | landscape for air travel Mr. Kelleher saw opportunity. |
| Polaroid | | | | Mr. Kelleher created and launched Southwest Airlines |
| LTV | | | | to address a gaping need. Southwest utilized a |
| These Companies were successful, recognizable | | | | business model that reflected the changing landscape |
| brands in their respective categories. They were | | | | in providing air service. The major carriers utilize |
| publicly traded and a number were in the Nifty Fifty | | | | complex pricing models that try to maximize seat |
| in the 1970's and/or the Dow Jones Industrial | | | | yield revenues. Southwest posted one low price for |
| Average. The element they all have in common (and | | | | every seat on a flight. The major airlines were totally |
| with hundreds of other equally recognizable names) is | | | | union shops. Southwest was non-union. The major |
| that they did not innovate. They created a static | | | | carriers flew a mix of plane types. Southwest flew |
| business model and did not anticipate that there | | | | only the Boeing 737 (this streamlined service and |
| were newer, better ways to implement new | | | | parts expense). |
| technology and strategies. | | | | Very quickly the flying public recognized that a Dallas |
| Let's look at two old, established retail categories and | | | | to Phoenix flight that was $579 on American, and |
| how the ability to innovate has determined | | | | $149 on Southwest, was a no-brainer. Southwest |
| contemporary success or failure. | | | | remains ahead of the curve with standardized |
| Music Stores | | | | policies, simple restrictions, a feel good fun loving |
| Recorded music retail has always been a competitive | | | | staff, hedging contracts for jet fuel purchases and |
| market. Tower Records followed the national chain | | | | the promise of value for money on each flight. |
| concept, offering a broad range of music styles and | | | | Southwest capitalized on the changes it recognized |
| competitive pricing. Mass marketers such as Target | | | | was coming in the air travel universe. Today, there |
| and Best Buy offer music as well, typically only the | | | | are a number of airlines utilizing some or/all of the |
| more popular artists, narrow and deep. Every city | | | | Southwest model and virtually all are successful. Easy |
| had a local shop, sometimes specializing in a specific | | | | Jet, Jet Blue and Ryan Air in Europe are booming |
| area of musical taste. The underlying similarity was | | | | while the old-line giants all over the world are in |
| that a customer came into the store, made a | | | | desperate straits. |
| selection and the purchased the disc. | | | | Proctor and Gamble is a wonderful example of an old |
| Then along came the inter-net. The ability to protect | | | | alpha enterprise that is constantly re-inventing itself |
| trademarks and copyrights was believed to trump | | | | to reflect changing market conditions. Dell Computer, |
| this technology. Artists and record companies | | | | MicroSoft, Intel, Research in Motion, Nokia and many |
| believed that legal protections would enable them to | | | | more are examples of businesses (all little more than |
| continue as always: selling an album, with one or two | | | | 20 years old) that innovate, change, anticipate and |
| hits, for $20 to $30. Software was written enabling | | | | succeed. They were all small startups only a few |
| the music consumer to cheaply, or for free, | | | | years ago. |
| download specific hit songs while avoiding the filler | | | | For entrepreneurs, the ability to innovate and keep |
| cuts. The Napster effect has revolutionized the music | | | | ahead of the field is crucial. When analyzing the |
| industry. | | | | potential for a successful market placement the |
| Napster is a disruptive technology. The world of | | | | ability to create a cutting edge business model is so |
| music retail was stood on its head. Legal fights and | | | | important. If your goal is to open a male clothing |
| challenges are still being fought. However, chains like | | | | shop and one already exists in the area you have |
| Tower Records are gone. The marketplace did not | | | | chosen, you have a problem, unless you can |
| allow for a rigid system to thrive in the face of | | | | differentiate your unique selling proposition. Maybe |
| innovation. Tower did not stay flexible, anticipating | | | | this can be accomplished by offering a tailoring |
| technology advances and changing tastes. Trying to | | | | operation for hand cut suits, or specializing in formal |
| sell albums with 15 cuts, when the consumer only | | | | wear. |
| wants to hear and pay for two hit songs, is an | | | | Whatever your product or service, define a business |
| obvious loser. | | | | model that separates you from your head to head |
| Airlines | | | | competition. Do not play the price game. Lowest |
| Until the late 1970's the airline industry was protected | | | | price is almost always a temporary benefit, someone |
| by Federal Government regulation. This enabled the | | | | will come along that can produce cheaper, faster, |
| airlines to artificially inflate fare pricing. Hub and spoke | | | | better. Your goal should be the offer of a benefit |
| systems were created. Each major carrier had a | | | | that the customer will value, desire and not find |
| geographic area of strength (Delta the southeast, | | | | immediately available. Then back up the benefit with |
| USAir the middle Atlantic, American the mid-west and | | | | superior service and the promise of continued new |
| Latin America, etc.) that they dominated. Unions were | | | | cutting edge innovation. Innovate or die! |