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