Case Study #6: Southwest Airlines – Much LUV for the Hub Expansion Strategy

Southwest Airlines does an exemplary job of delivering consistent, high levels of customer service across all points of brand contact, from the time one books a ticket online to the time they disembark at their final destination. What’s not to “luv” about this company?

Southwest prides itself on being punctual, an invaluable brand asset for any airline company. Its business model is based on operating out of smaller hubs where costs are low and productivity is high because incoming planes can land immediately and get back in the air after off-boarding and on-boarding passengers. The company has been very successful based on this business model. The Dallas-based airline has been profitable for 36 straight years but has been in the red since last fall. Traffic is down and costs are rising ((“If Southwest can make it there”, Associated Press, 25 June 2009).

This past Sunday, Southwest began service at LaGuardia Airport, one of the nation's most congested airports. It plans to operate out of other major hubs, one being Boston’s Logan Airport. This is perceived as risky because it may affect Southwest’s brand position as being punctual if it operates out of bigger airports known for congestion and delays. In addition, Southwest has to win the loyalty of business travelers who will increasingly dictate its future prospects for success (Associated Press).

Airlines generate higher margins from business travelers than leisure travelers. Southwest is generally perceived as the airline for cost-conscious vacationers, not the airline for corporate jetsetters. Brands which attempt to attract customer segments that are on the periphery of the target core customer base may exhaust significant resources for incremental financial gain. While the value of superior customer service across all points of brand contact may rank differently for the college senior going on spring break than the chief executive officer visiting a new manufacturing plant, Southwest maintains a powerful leadership position in the very important category-specific attribute of customer service, regardless of segment feedback. As Southwest extends operations in major hubs, they will undoubtedly dilute their brand position in punctuality, but recover and then gain from those losses through competitive pricing actions and service differentiation across profitable segments. Punctuality or the lack thereof is an accountability that is generally dispersed across the complex air transportation system, not to mention other unforeseen factors that may keep a plane on the ground for hours. Instead, Southwest must focus on maintaining excellent customer service as it executes the hub growth strategy. Given the internal camaraderie around Southwest corporate principles and values, service differentiation will not be traded off for revenue. There will always be LUV for the traveler at all points of brand contact.

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Case Study #5: National Basketball Association – Why Amazing Happened in the 2008-2009 Season

Unlike the global economy, the National Basketball Association can rightfully boast a fantastic 2008-2009 season. Last week, I saw a full page advertisement by the NBA in the Wall Street Journal. Within the ad, the NBA cited some business metrics:

• Regular viewership up 14 percent and playoff viewership up 18 percent
• The 2009 playoff finals on ABC were the five most-watched TV programs in June and watched by a record-breaking global audience in 215 countries and 42 languages.
• NBA.com traffic up by 25 percent.
• Video streams up by 46 percent.
• The NBA stores on Fifth Avenue (New York, New York) and NBAStore.com set all-time sales records.

While these are FAN-tastic metrics for the NBA, they didn’t happen overnight for an enterprise pummeled with more liabilities than assets to its brand. Since 1998, viewership of NBA finals coverage has experienced a precipitous decline. Sports and media experts attribute this decline for three main reasons:

• Michael Jordan’s retirement from the game of basketball and less-than-stellar comeback to the game.
• The NBA lockout in 1998-1999 forced the season to be shortened to 50 games per team. The league sought changes to the salary cap system and a ceiling on individual player salaries. The National Basketball Players Association (NBPA) opposed the owners' plans and wanted raises for players who earned the league's minimum salary. This was not received well by NBA fans and the media, as people felt both sides were being greedy. Sportswriter Tony Kornheiser described the labor dispute as one "between tall millionaires and short millionaires”.
• NBA referee Tim Donaghy was accused of manipulating a couple of playoff series. Donaghy pleaded guilty to conspiring with gamblers. In a letter filed in federal court, his lawyer claimed that NBA executives routinely encouraged referees to ring up bogus fouls and discouraged them from calling technical fouls on star players (Rhoden, William C. " SPORTS OF THE TIMES; The N.B.A.'s Perception Problem Is Real " New York Times 18 June 2008).

Challenges like this require intense creativity, teamwork and insights to remove the liabilities and plan for future growth. Here are some things that the NBA has done to rightfully boast about its business metrics last week:

• Re-focused brand promise: NBA has had quite a few taglines over the years, most of which were linked to the game of basketball. Given declining viewership, reputational damage and other factors impacting the game of basketball, the NBA had to focus on other commitments, such as NBA Cares. In 2005, David Stern, Commissioner of the NBA, set a five-year goal for the program of collecting $100 million in donations, providing one million hours in service and constructing 100 places for families to learn or play. By the end of 2006, the league gathered $32 million in charitable funds and built 108 gyms, learning centers and libraries (Bucher, Ric. " Why NBA Cares is more than a PR slogan” ESPN 29 November 2006). According to an April 23rd, 2009 NBA press release, the NBA Cares exceeded their donation, service and construction goals. The off-season was clearly not a time for rest for players or the league – They worked very hard to try and overturn the greedy, self-serving perception with selfless acts of giving and caring.
• Increased access for the media: An unprecedented number of journalists were allowed to access players and coaches during the 2009 final playoffs . A trailer at Staples Center provided television feeds to 215 countries in 42 languages (Horrow, Rick and Swatek, Karla. " The NBA’s Growing Global Appeal” The American Chronicle 12 June 2009). Because of proliferating interactive web and hardware technologies, viewers become closer to famous, public figures. Why restrict viewership on a key medium (television) when other channels are opening up the access to famous, public figures (example: Twitter updates by Shaq during half-time)? The NBA is more culturally diverse now than it was ten years ago. In 1989, 14 countries were represented in the NBA. In 2005, 35 countries are now represented in the NBA (Gardner, Tanner. "Show Me the Money! The Globalization of the NBA”. 2 November 2005). A 100%+ increase in non-U.S. representation demands an extensive global media strategy.
• Grow creatively in key global markets: The league decided to get into the reality television business. "Mengniu NBA Basketball Disciple," started airing in China last month. The show, a basketball competition in 64 cities involving retired NBA stars, will be broadcasted on Shandong TV in mainland China on Friday nights until August 28th. The winner will receive an all-expense paid trip to try out for the NBA's developmental league. An estimated 300 million people -- a total equal to the entire U.S. population -- play basketball in China, the NBA said, citing data provided by the Chinese Basketball Association. The number of viewers of league programming in China rose 34 percent last season to a record 1.6 billion, while traffic on the Chinese section of NBA.com has surged more than 50 percent. (Klayman, Ben. "NBA reality show another step for growth in China” Reuters 2 April 2009). Not only does this help the NBA recruit basketball talent in China, but it also generates ad revenue from a large and targeted base of viewers in a very engaging and creative way.

Amazing happened for the NBA because it infused a greater sense of social responsibility in its core brand, granted greater access to sports media representatives during the 2009 final playoffs and executed a creative way to recruit talent, build global brand and drive revenue by launching a reality television show. Take a look at the videos: NBA is still about basketball, but notice the humanity of the words. A greater, more noble spirit is in the brand now. And that may make the entire game better over the years.

Attaining and sustaining double digit ratings may take a few years, but as long as NBA continues to stay true to its renewed brand promise on and off the court, amazing WILL continue to happen.

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Two Views on Strategy Filtration

Please contact Anup Samanta at anup.samanta@gmail.com if you want a JPEG of this file.

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Case Study #4: Sole Envie, Inc. – Revolutionizing the Shoe Shopping Experience

Last year, I learned that a colleague of mine and her husband decided to start up a company. Monika Desai is the Chief Executive Officer of Sole Envie, Inc. and her husband, Eric Estabrooks, is the Chief Technology Officer of the company. Sole Envie (www.soleenvie.com) will revolutionize the way women shop for shoes – It will be an online social shopping community and e-commerce site that enables women to design, purchase and share with an online community the shoes of their dreams and express their style. The website will have an interactive configurator that will enable customers to mix and match a large assortment of design elements to create high quality, custom shoes that they desire. Customers will be able to order the shoes via the website and receive them within three weeks. Currently, the website is a blog that will be operationalized into the e-commerce site later this fall.

A few months ago, I approached this fashion-forward, technologically savvy duo about consulting for their business. Monika and Eric asked me to complete a five-year, unique visitor and sales conversion forecast model. I supplemented the model with a tactical marketing plan on how to achieve the unique visitor and sales conversion goals. I benchmarked sites such as Threadless, Zazzle and Nike ID to ground myself in online fashion customization. Then I identified quantifiable metrics for Web 2.0, I-phone application and search engine words that would be used by the Sole Envie target customer.

I admire how Monika and Eric manage their vision and passion for the business model with a seamless understanding of brand, product, manufacturing, distribution and financial inputs. They assume risk and reward based on several market, economic and operational factors. Most importantly, they embrace the sustainable, measurable growth of their brand. As cool as this concept is for the women’s shoe retail category, Monika and Eric realize they need to prove the concept. They are taking diligent measures to build integrity into the proof of the configuration technology.

And gentlemen, you won’t be falling asleep by the benches while your wives shop for shoes at the mall. You just need to get a computer for yourself when Sole Envie goes live!

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Case Study #3: TiVo in the Ad Sales Business

TiVo created a convenience for viewers and a threat to advertisers. The friendly, smiling set-top box was definitely a bane for advertisers. However, the media mix is shifting given the proliferation of mobile technology, Web 2.0 platforms and other measurable sources of customer engagement - People can be entertained and informed by more mediums than the television. What happens to TiVo?

According to a June 18th article in Businessweek, TiVo is aspiring to be the Google of television. It wants to help viewers navigate the increasing selection of of entertainment choices and sell ads to boot. "Like Google," says CEO Thomas S. Rogers, "TiVo will bring that ease of use to TV sets."

Stratelysis doesn't always have to be about executing a new product idea or strategic relationship. It can also represent the process of evolving an existing product or service offering based on market transformations WITHOUT trading off key assets of the brand.

TiVo still enables customers to select and view programs with ease and no interruption, but given what the company can learn about customer usage of TiVo service, they are well-positioned to sell customized, engaging and targeted ad inventory to their clients. This provides an incremental revenue stream to the company that can recover, if not offset, losses from a declining set-top box subscription base. Given that one can TiVo from a computer or cell phone, the ads can also be integrated into those popular technologies, thereby increasing the frequency of targeted communication to capture more data about the customer. This will help refine and forecast revenue and profit generation attributed to that specific marketing tactic.

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Case Study #2: Walt Disney Co. - Netbooks

Asustek Computer Inc. is launching a Disney-branded netbook designed for children six to twelve years old. This product will include child-friendly software featuring the Disney characters while Internet browsers and e-mail programs will have extra filters allowing parents to control online activities. It will be available in late July from retailers such as Toys 'R Us Inc. and Amazon.com Inc. (Wall Street Journal, Asustek to Make Disney Netbook, June 18, 2009).

Disney's diversified brand/product architecture can be leveraged to help them compete in competitive markets, such as computing. Disney currently competes in the interactive gaming space; Competing in the netbook category isn't a stretch for the entertainment organization. Besides enabling more integration opportunities between the consumer services and WDIG groups, this strategy will enable end users (kids between six to twelve years old) grow their knowledge of online skills in a safe and effective way. Also, the end users have ownership of their computing technology, thereby engaging them to maximize the utility of the product for academic, personal and athletic purposes. Asustek grows its brand equity by not only aligning with Disney, but also by up selling the end-user on Asustek laptops, desktops or other hardware as they get older in age and have needs for more complex technologies.

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Case Study #1: Riversimple LLP - Hydrogen Powered Vehicle

Yesterday, U.K. based Riversimple LLP unveiled a prototype of a two-seat, hydrogen powered car promising fuel consumption equivalent to 254 miles a gallon. The car can reach 50mph and travel 240 miles on one tank of hydrogen. The company plans to lease the car for $325 a month for the vehicle's expected 20-year life. Leases would include refueling and the company hopes to begin production by 2013 (Wall Street Journal, Company Unviels Prototype of Hydrogen-Powered Car, June 17, 2009)

This is a good example of stratelysis. It is risky to launch a product in an addressable industry that is contracting. However, Riversimple recognized consumer demands for increased fuel efficiency, and built the vehicle with those ecological sensitivities in mind. Rather than accelerate an official launch into the marketplace for a solution not widely understood or used by its intended buyer base (who probably drive some combination of gas, diesel or hybrid powered vehicles), Riversimple is building brand loyalty and hydrogen technology acceptance through its leasing program while generating some revenue through that same program.

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What is Stratelysis

Strategy is often perceived as the result of blue-sky, high-altitude, no-holes barred innovative thinking that is encouraged to drive transformation within an organization to maintain or increase its competitive position in the marketplace. Analysis is often perceived as the data-driven, process-oriented and disciplined approach of measuring results before (forecasting) or after (reporting) a business action occurs. Imagine when these mindsets come together within an organization to execute an opportunity. In this situation, opposites are not immediately attracted to one another, but they have a lot to learn from the other. Everyday, organizations in various industry verticals are evolving because of economic, environmental, social, political and technological reasons. Rather than butt our antlers in cross-functional teams that are part of this evolution, we need to deploy stratelysis: the convergence of strategy and analysis. By doing so, strategy mindsets adapt to a quantitative approach to assess their decisions and analytic mindsets adapt a qualitative approach to explain the infrastructure of their models. I will periodically post examples of stratelysis and how this is a sustainable approach for long-term growth.

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