by Adam Hartung | Apr 11, 2013 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership
The good folks at Wichita State (a final four contender as U.S. basketball fans know) and Purdue released their 2013 Airline Quality Rating. United Airlines came in dead last. To which United responded that they simply did not care. Oh my.
Interestingly, this study is based wholly on statistical performance, rather than customer input. The academics utilize on-time flight performance, denied passenger boardings, mishandled bags and complaints filed with the Department of Transportation. It does not even begin to explore surveying customers about their satisfaction. Anyone who flies regularly can well imagine those results. Oh my.
So how would you expect an innovative, adaptive growth-oriented company (think like Amazon, Apple, Samsung, Virgin, Neimann-Marcus, Lulu Lemon) to react to declining customer performance metrics? They might actually change the product, to make it more desirable by customers. They might hire more customer service representatives to identify customer issues and fix problems quicker. They might adjust their processes to achieve higher customer satisfaction. They might train their employees to be more customer-oriented.
But, United decidedly is not an innovative, adaptive organization. So it responded by denying the situation. Claiming things are getting better. And talking about how it is spending more money on its long-term strategy.
United doesn't care about customers – and really never has. United is focused on "operational excellence" (using the word excellence very loosely) as Messrs. Treacy and Wiersema called this strategy in their mega-popular book "The Discipline of Market Leaders" from 1995. United's strategy, like many, many businesses, is to constantly strive for better execution of an old strategy (in their case, hub-and-spoke flight operations) by hammering away at cutting costs.
Locked in to this strategy, United invests in more airplanes and gates (including making acquisitions like Continental) believing that being bigger will lead to more cost cutting opportunities (code named "synergies".) They beat up on employees, fight with unions, remove anything unessential (like food) invent ways to create charges (like checked bags or change fees), fiddle with fuel costs, ignore customers and constantly try to engineer minute enhancements to operations in efforts to save pennies.
Like many companies, United is fixated on this strategy, even if it can't make any money. Even if this strategy once drove it to bankruptcy. Even if its employees are miserable. Even if quality metrics decline. Even if every year customers are less and less happy with the product. All of that be darned! United just keeps doing what it has always done, for over 3 decades, hoping that somehow – magically – results will improve.
Today people have choices. More choices than ever. That's true for transportation as well. As customers have become less happy, they simply won't pay as much to fly. The impact of all this operational focus, but let the customer be danged, management is price degradation to the point that United, like all the airlines, barely (or doesn't – like American) cover costs. And because of all the competition each airline constantly chases the other to the bottom of customer satisfaction – each lowering its price as it mimics the others with cost cuts.
In 1963 National Airlines ran ads asking "is this any way to run an airline?" Well, no.
Success today – everywhere, not just airlines – requires more than operational focus. Constantly cutting costs ruins the brand, customer satisfaction, eliminates investment in new products and inevitably kills profitability. The litany of failed airlines demonstrates just how ineffective this strategy has become. Because operational improvements are so easily matched by competitors, and ignores alternatives (like trains, buses and automobiles for airlines) it leads to price wars, lower profits and bankruptcy.
Nobody looks to airlines as a model of management. But many companies still believe operational excellence will lead to success. They need to look at the long-term implications of this strategy, and recognize that without innovation, new products and highly satisfied new customers no business will thrive – or even survive.
by Adam Hartung | Aug 26, 2010 | Defend & Extend, In the Whirlpool, Leadership, Lifecycle
Summary:
- Trends happen much faster than we expect
- Old solutions disappear much faster than we anticipate
- Early adopters are big winners, suppliers who expect markets to last longer are killed in end-stage price wars
- We can anticipate the failure of land line phones in just a few years (as declining demand makes infrastructure maintenance too costly)
- There are a lot of other changes coming very quickly, more quickly than many of us anticipate – putting those who are late to change at risk of survival
How long do you think you’ll keep a land-line based telephone? From the looks of things, it may be only another year or two. They may be as popular as an old-fashioned printing press in just 5 years.
Source: Silicon Alley Insider from BusinessInsider.com
As the chart shows, already about a third of Americans have discontinued their land lines. And, we can see the trend is accelerating. This doesn’t count people that have one, but have quit using it. From about half of a percent dropping their line each quarter early in 2007, by 2009 the trend had increased to 1.2 to 1.5 percent dropping their land lines quarterly. And that’s normal – trends accelerate – much faster than incumbent technology suppliers predict.
Mobile phones started out with limited use. They were big, and had short battery life. It was sketchy if transmission quality would be good enough to hear or talk. They were expensive to use, and had limited service areas. In the early days, only people who had a big need used them. It took a few years before adoption grew to where most people had one. But then, in the last 5 years, it has become clear that almost everyone has one. Even the old and elderly. And many people have two – one for personal and one for business.
When trends begin they are easy to discount. Early versions are less good than the current solution. Costs are high. But early adopters have a reason to pick up the new solution. There is some kind of unmet need that the solution fits. From that small base, the products improve. Most incumbent suppliers plot out a linear curve adoption curve, and expect dropping of the old solution to be some time way out in the future.
But improvements to the “fringe” solution come faster than incumbents – and even big users of incumbent technologies – expect. Adoption starts growing faster. Yet, the incumbent supplier will listen to big customers and expect people to keep their solutions for a long time as they gradually adopt the new:
- People will have an automobile, but they’ll hang onto the horse and buggy because roads are so poor
- He may buy a new copier, but he’ll keep the mimeo machine “just in case”
- Folks will get a phone, and email, but they’ll keep writing letters and thus need a postman daily
- People may buy refrigerators, but they’ll keep the icebox and want weekly ice delivery
- Readers will skim the web for news, but they’ll want to keep reading a daily newspaper
- PCs will be popular, but folks will hang onto that old typewriter “maybe to type envelopes or something”
- Installing spreadsheets on company PC’s will not eliminate the need for adding machines “for when we need the tape”
- Digital cameras will be convenient, but users will want the film camera for picture prints
- Installing a DVR will not eliminate the videocassette player because people “still may want to watch old tapes some day”
- People will keep their cassette players, and DVD players, even as they buy a new MP3 player because they will want to listen to the purchased collections
Actually, once someone adopts the new solution, they rapidly find no need for the old solution. It goes to the closet, and then the trash, quickly. And from a market perspective, once a third to a half the customers quit using a product it will disappear from use almost overnight. From that perspective, those who depend upon traditional land line phones have plenty to worry about. Because we’re near a third. And smart phones keep adding more capability every month – the iPhone now has almost 300,000 apps, and Android phones have over 100,000! It’s easy to see where the functionality, ease of use and ubiquitousness of mobile phones could make the old land line a waste of money within just 24 months!
So, what will happen to bill collectors and political phone ads (robocalls), when we quit using land lines? Along with the loss of land lines is the loss of the traditional phone book to find people. When will the cost of maintaining the poles and lines become so high, relative to the number of users, that we simply take them down to recycle the material? Lots of things change when growth begins to decline for land-lines, causing the decline to happen more quickly. And changing how we all get things done – as consumers and as businesses. Are you prepared?
The tendency is to think change will happen slowly. It doesn’t. When markets shift it happens quickly. Much more quickly than the entrenched competitor expects. The “experts” always say the demand for the old will last much longer than happens. He hopes to have a long life, clipping coupons, across a “maturing” market. Instead, demand falls rapidly and remaining competitors go into price wars trying to stay alive – hoping the market will some day return to the old way of doing things. Those who didn’t anticipate the shift rapidly run out of cash, and fail.
Are you ready for impending market shifts? How prepared are you for a world where
- We don’t print anything, because everyone has some kind of on-line digital document reader. Not just books and magazines, but user instructions, warranty info, etc.
- We don’t need cash because we can Paypal transact anything using our smartphone
- Doctors can monitor all your vital statistics real time, remotely, 24x7x365. Manufacturers can monitor use of their products 24x7x365
- So much retail is on-line that the amount of retail floor space declines 40%
- You can regrow a finger, or organ, if it is damaged
- Television and radio aren’t serially broadcast, you organize what you want when you want it. There are no “commercials” in content delivery
- The primary way of communicating with friends and colleagues is Facebook and Twitter – forget text except for only very private communications
