Southwest Airlines was
1) The only airline to earn a profit through the early 1990s.
2) The only airline to ever win the industry’s “triple crown” (measure of customer satisfaction)
3) One of the most successful airline stocks.
The case study analyses how they did it.
Southwest did not use conventional strategies like that of its competitors in the airline industry which focused on entry barriers like hub and spoke networks, sophisticated customer segmentation and information via computer reservation systems. Southwest adopted an unusual strategy.
Southwest’s fundamental strategy, as described by its management, was to compete against the car. They proposed to do this by providing friendly, reliable, low-cost service on short haul flights. What they required to do was delivering more for less, which would translate to deriving more from their employees for the same monetary compensation (as per industry standards). Therefore, Southwest had to think of ways to increase the non-monetary compensation component for its employees. By doing so they would create value for their employees and thereby motivate employees to convert some of that value to customer and firm value by designing operating processes, and encouraging behavioral norms that enable employees to reduce costs and to improve service. Change brings about resistance and chaos; only happy and motivated employees would willingly adopt new processes and systems and also go the extra mile to make things happen. Southwest would capture this value through low costs and superior service.
Southwest created an environment where an employee’s individuality would be respected and at the same time also ensured that they fit into ...