Smisek’s United Ouster – Were You Really Surprised?

Smisek’s United Ouster – Were You Really Surprised?

by | Sep 11, 2015 | Current Affairs, Defend & Extend, In the Swamp, Leadership

Jeff Smisek, CEO of United Continental Holdings, was fired this week. It appears he was making deals with public officials (specifically the Chairman of the Port Authority of New York and New Jersey) to keep personally favored flights of politicians in the air, even when unprofitable, in a quid-pro-quo exchange for government subsidies to move a taxiway and better airport transit.

Wow, horse-trading of the kind that put the governor of Illinois in the penitentiary.

United-Jeff-Smisek-FiredBut you have to ask yourself, couldn’t you see it coming?  Or are we just so used to lousy leadership that we think there’s no end to it?

United has been beset with a number of problems.  Since Mr. Smisek organized the merger of Continental (his former employer) with United, creating the world’s largest airline at the time, things have not gone well.  Since announcing the merger in 2010, more has gone wrong than right at United:

The merged airline didn’t start in a great position.  It was in 2009 that a budding musician watched United baggage handlers destroy his guitar, leading to a series of videos on bad customer service that took to the top of YouTube and iTunes and his book on the culture of customer abuse at United underscored a major PR nightmare.

How could things seem to constantly become worse?  It was clear that at the top, United’s leadership cared only about cost control (ironically code named Project Quality.) Operational efficiency was seen as the only strategy, and it did not matter how much this strategy disaffected employees, suppliers or customers.  In 2013 United ranked dead last in the quality ranking of all airlines by Wichita State University, and the airline replied by saying it really didn’t care.

The power of thinking that if you focus on pennies and nickels the quarters and dollars will take care of themselves is strong.  It encourages you be very focused on details, even myopic, and operate your business very narrowly.  And it can set you up to make really dumb mistakes, like possibly trading airline flights for construction subsidies.

Focus, focus, focus often leads to being blind, blind, blind to the world around you.

There were ample signs of all the things going wrong at United, and the need for a change. The open question is why it took a criminal investigation into bribing government officials for the airline’s Board to fire the CEO?  Bad performance apparently didn’t matter?  Do you have to be an accused lawbreaker to be shown the door?

The story broke in February, so the Board has had a few months to find a replacement CEO.  Mr. Oscar Munoz will now take the reigns.  But one has to wonder if he is up for the challenges.  As a former railroad President, his world of relationships was much smaller than the millions of customers and 84,000 employees at United.

United’s top brass has a serious need “to get over itself.”  United’s internal focus, driven by costs, has disenfranchised its brand embassadors, its customer base, and many industry analysts.

United needs to become a lot clearer about what customers really need and want. Years of overly simplistic “all customers care about is price” has commoditized United’s approach to air travel.  Customers have been smart enough to see through lower seat prices, only to be stuck with seat assignment and baggage fees raising total trip cost.  And charging for everything on the plane, including cheesy TV shows, has customers wondering just how far from Spirit Airlines’ approach United would drift before someone reminded leadership what their customers want and why they used to choose United.

Unfortunately, it is a bit unsettling that CEO Munoz said his first action will be to take 90 days “traveling the system and listening and talking to our people and working with our management team.”  Sounds like a lot more internal focus.  Spending more time talking to customers at United’s hubs, and seeing how they are treated from check-in to baggage, might do him a lot more good.

United became big via acquisition.  That is much different than building an airline, like say Southwest did.  Growth via purchase is not the same as growth via loyal customers and an attractive brand proposition.  United has clearly lost its way.  It has a lot of problems to solve, but first among them should be understanding what customers want.  Then designing the model to profitably deliver it.

Are you relevant? – Xerox, United, Airlines

by | Mar 20, 2009 | Current Affairs, General, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Travel, Web/Tech

"Xerox chops earnings outlook as sales slide" is the headline on Marketwatch.com.  Do you remember when Xerox was considered the most powerful sales company on earth?  In the 1970s and into the 1980s corporations marveled at the sales processes at Xerox – because those processes brought in quarter after quarter of increasing profitable revenue.  Xerox practically wiped out competitors – the small printing press manufacturers – during this period, and "carbon paper" was quickly becoming a museum relic (if you are under 30 you'll have to ask someone older what carbon paper is – because it requires an explanation of something called a typewriter as well [lol]). 

But today, do you care about Xerox?  If you have a copier, you don't care who made it.  It could be from Sharp, or Canon, or anybody.  You don't care if it's Xerox unless you work in a "copy store" like Kinko's or run the copy center for the corporation – and possibly not even in those jobs.  And because desktop printers have practically made copiers obsolete, you may not care about copiers at all.  In short, even though Xerox invented the marketplace for widespread duplicating, because the company stayed in its old market of big copiers it has seen revenue declines and has largely become irrelevant.

"U.S. airline revenue plunges for another month" is another Marketwatch.com headline.  And I ask again, do you care?  The airlines were deregulated 30 years ago, and since then as a group they've never consistently made money (only 1 airline – Southwest – is the exception to this discussion.)  The big players in the early days included TWA, Eastern, Braniff, PanAm – names long gone from the skies.  They've been replaced by Delta, American and United – as we've watched the near collapse of US Airways, Northwest and Continental.  But we've grown so used to the big airlines losing money, and going bankrupt, and screaming about unions and fuel costs, that we've pretty much quit caring.  The only thing frequent travelers care about now is their "frequent flier miles" and how they can use them.  The airline itself is irrelevant – just so long as I get those miles and get my status and they let me board early.

When you don't grow, you lose relevance.  In the mid-1980s the battle raged between Apple's Macintosh and the PC (generically, from all manufacturers) as to which was going to be the dominant desktop computer.  By the 1990s that question had been answered, and as Macintosh sales lagged Apple lost relevance.  But then when the iPod, iTunes, iTouch and iPhone came along suddenly Apple gained a LOT of relevance.  When companies grow, they demonstrate the ability to serve markets.  They are relevant.  When they don't grow, like GM and Citibank, they lose relevance.  It's not about cash flow or even profitability.  When you grow, like Amazon with its Kindle launch, you get attention because you demonstrate you are connected to where markets are headed.

Is your business obsessing about costs to the point it is hurting revenue?  If so, you are at risk of losing relevance.  Like Sara Lee in consumer goods, or Sears in retailing, even if the companies are able to make a profit – possibly even grow profits after some bad years – if you can't grow the top line you just aren't relevant.  And if you aren't relevant, you can't get more customers interested in your products/services, and you can't encourage investors.  People want to be part of Google, not Kodak.

To maintain (or regain) relevance today, you have to focus on growth.  Cutting costs is not enough.  If you lose relevance, you lose your customer base and financing, and you make it a whole lot easier for competitors to grow.  While you're looking internally, or managing the bottom line, competitors are figuring out the market direction, and proving it by demonstrating growth.  And that's why today, even more than before, it is so critical you focus planning on future markets for growth, obsess about competitors, use Disruptions to change behavior and implement White Space to experiment with new business opportunities.  Because if you don't do those things you are far, far too likely to simply become irrelevant.

[note: Thanks for feedback that my spelling and grammar have gotten pretty sloppy lately.  I'm going to allocate more time to review, as well as writing.  And hopefully pick up some proofreading to see if this can improve.  Sorry for the recent problems, and I appreciate your feedback on errors.]