| What does the following list of companies have in | | | | opportunity.Mr. Kelleher created and launched |
| common?A&P | | | | Southwest Airlines to address a gaping need. |
| Hudson Motor Car Co. | | | | Southwest utilized a business model that reflected |
| Montgomery Ward | | | | the changing landscape in providing air service. The |
| TWA | | | | major carriers utilize complex pricing models that try |
| Horn and Hardart | | | | to maximize seat yield revenues. Southwest posted |
| Studebaker | | | | one low price for every seat on a flight. The major |
| Indian Motorcycle | | | | airlines were totally union shops. Southwest was |
| Bonwit Teller | | | | non-union. The major carriers flew a mix of plane |
| Woolworth | | | | types. Southwest flew only the Boeing 737 (this |
| Bethlehem Steel | | | | streamlined service and parts expense).Very quickly |
| Polaroid | | | | the flying public recognized that a Dallas to Phoenix |
| LTVThese Companies were successful, recognizable | | | | flight that was $579 on American, and $149 on |
| brands in their respective categories. They were | | | | Southwest, was a no-brainer. Southwest remains |
| publicly traded and a number were in the Nifty Fifty | | | | ahead of the curve with standardized policies, simple |
| in the 1970's and/or the Dow Jones Industrial | | | | restrictions, a feel good fun loving staff, hedging |
| Average. The element they all have in common (and | | | | contracts for jet fuel purchases and the promise of |
| with hundreds of other equally recognizable names) is | | | | value for money on each flight.Southwest capitalized |
| that they did not innovate. They created a static | | | | on the changes it recognized was coming in the air |
| business model and did not anticipate that there | | | | travel universe. Today, there are a number of airlines |
| were newer, better ways to implement new | | | | utilizing some or/all of the Southwest model and |
| technology and strategies.Let's look at two old, | | | | virtually all are successful. Easy Jet, Jet Blue and Ryan |
| established retail categories and how the ability to | | | | Air in Europe are booming while the old-line giants all |
| innovate has determined contemporary success or | | | | over the world are in desperate straits.Proctor and |
| failure.Music Stores | | | | Gamble is a wonderful example of an old alpha |
| Recorded music retail has always been a competitive | | | | enterprise that is constantly re-inventing itself to |
| market. Tower Records followed the national chain | | | | reflect changing market conditions. Dell Computer, |
| concept, offering a broad range of music styles and | | | | MicroSoft, Intel, Research in Motion, Nokia and many |
| competitive pricing. Mass marketers such as Target | | | | more are examples of businesses (all little more than |
| and Best Buy offer music as well, typically only the | | | | 20 years old) that innovate, change, anticipate and |
| more popular artists, narrow and deep. Every city | | | | succeed. They were all small startups only a few |
| had a local shop, sometimes specializing in a specific | | | | years ago.For entrepreneurs, the ability to innovate |
| area of musical taste. The underlying similarity was | | | | and keep ahead of the field is crucial. When analyzing |
| that a customer came into the store, made a | | | | the potential for a successful market placement the |
| selection and the purchased the disc.Then along came | | | | ability to create a cutting edge business model is so |
| the inter-net. The ability to protect trademarks and | | | | important. If your goal is to open a male clothing |
| copyrights was believed to trump this technology. | | | | shop and one already exists in the area you have |
| Artists and record companies believed that legal | | | | chosen, you have a problem, unless you can |
| protections would enable them to continue as always: | | | | differentiate your unique selling proposition. Maybe |
| selling an album, with one or two hits, for $20 to $30. | | | | this can be accomplished by offering a tailoring |
| Software was written enabling the music consumer | | | | operation for hand cut suits, or specializing in formal |
| to cheaply, or for free, download specific hit songs | | | | wear.Whatever your product or service, define a |
| while avoiding the filler cuts. The Napster effect has | | | | business model that separates you from your head |
| revolutionized the music industry.Napster is a | | | | to head competition. Do not play the price game. |
| disruptive technology. The world of music retail was | | | | Lowest price is almost always a temporary benefit, |
| stood on its head. Legal fights and challenges are still | | | | someone will come along that can produce cheaper, |
| being fought. However, chains like Tower Records | | | | faster, better. Your goal should be the offer of a |
| are gone. The marketplace did not allow for a rigid | | | | benefit that the customer will value, desire and not |
| system to thrive in the face of innovation. Tower did | | | | find immediately available. Then back up the benefit |
| not stay flexible, anticipating technology advances | | | | with superior service and the promise of continued |
| and changing tastes. Trying to sell albums with 15 | | | | new cutting edge innovation. Innovate or die!Geoff |
| cuts, when the consumer only wants to hear and | | | | Ficke has been a serial entrepreneur for almost 50 |
| pay for two hit songs, is an obvious loser.Airlines | | | | years. As a small boy, earning his spending money |
| Until the late 1970's the airline industry was | | | | doing odd jobs in the neighborhood, he learned the |
| protected by Federal Government regulation. This | | | | value of selling himself, offering service and value for |
| enabled the airlines to artificially inflate fare pricing. | | | | money.After putting himself through the University of |
| Hub and spoke systems were created. Each major | | | | Kentucky (B.A. Broadcast Journalism, 1969) and |
| carrier had a geographic area of strength (Delta the | | | | serving in the United States Marine Corp, Mr. Ficke |
| southeast, USAir the middle Atlantic, American the | | | | commenced a career in the cosmetic industry. After |
| mid-west and Latin America, etc.) that they | | | | rising to National Sales Manager for Vidal Sassoon Hair |
| dominated. Unions were aggressive and the carriers | | | | Care at age 28, he then launched a number of |
| were profitable so the need to squeeze costs was | | | | ventures, including Rubigo Cosmetics, Parfums Pierre |
| not urgent.When de-regulation occurred in 1978 the | | | | Wulff Paris, Le Bain Couture and Fashion Fragrance.Mr. |
| major carriers did not anticipate the radical disruptive | | | | Ficke and his consulting firm, Duquesa Marketing, Inc. |
| innovation that was just around the corner. An | | | | ( has assisted businesses large and small, domestic |
| aviation pioneer in San Antonio named Herb Kelleher | | | | and international, entrepreneurs, inventors and |
| did. He watched as fares plummeted without | | | | students in new product development, capital |
| government regulation protection. Competition for | | | | formation, licensing, marketing, sales and business |
| gates, destinations and expansion resulted in many | | | | plans and successful implementation of his customized |
| regional carriers (Republic, Piedmont, etc.) being | | | | strategies. He is a Senior Fellow at the Page Center |
| gobbled up by the majors. Out of the changing | | | | for Entrepreneurial Studies, Business School, Miami |
| landscape for air travel Mr. Kelleher saw | | | | University, Oxford, Ohio. |