British Airways struggles in the competitive world of airline travel

August 12, 2013

Airlines around the world are competing fiercely for business. Creativity, robust business models and effective leadership will be required to survive

Unsurprisingly, airlines have become one of the favourite sources of business school cases. The American Southwest airlines has been studied for its innovative “no frills/customer care” approach. LWD has looked at Emirates for its complex business model (is it more a vehicle for fulfilling Dubai’s development aspiration?). We have also commented on the often egregious leadership styles exhibited by airline CEOs, such as Willy Walsh of British Airlines.

Why Southwest is a dangerous case to study

I have listened to many student presentations lauding Southwest over the flailing giants of the industry which in comparison show financial vulnerability. One point that is rarely mentioned is that Southwest, a fine example of strategic leadership, is also a relatively simple business to study. [Compare its number of destinations, fleet size, freight business and scheduled passenger distances for example with Delta or even British Airways. However, the case helps Professors make the kind of glib generalization I offered for it above]. Southwest has pioneered the so-called peanut airlines which have replaced meals by peanut snacks. Even within the peanut lines the business models must not be assumed to be identical. Ryanair sees Southwest as its inspiration, but has approached customer satisfaction in a completely different way.

Dilemmas for old and new airlines

The old airlines struggle with older fleets. With a strong business model this may eventually turn out well. The newer airlines have the advantages of the technological advances in the new generations of plane. They also have the disadvantages of untested glitches that beset new models.

Just an opinion

This weekend, I read of the problems encountered by passengers on a British Airlines flight attempting to travel on the Boeing 747 to London from Riyadh, Saudi Arabia [7 August 2013]. After a forced return to Riyadh, believed to a problem with the wing flaps, the plane set off and turned back again.

On my last British Airways flight in July, from Heathrow to Manchester, the plane sat on the runway for nearly two hours. The first announcement said that the safety checks had not been carried out overnight. The second announcement said that a toilet needed fixing, the third announcement that a piece of equipment was being brought to fix a wing flap.

Personal opinions make poor business analyses. I do not suggest from these two episodes that British Airlines is a bad or dangerous airline. I still like its service, and of course its safety record and will continue to use its services. The anecdotes indicate the increasing operational pressures that accompany extremely competitive businesses. I hold a similar view over BP and the factors contributing to the Deepwater Horizon disaster.

Stop Press: BA and the leaders we deserve

A curious little story from Sri Lanka of a British Airlines fight and a political leader who tried to get out while the plane was in motion. OK, so I was attracted by the title of the piece “The Leaders We Deserve”.

American Giant and the greatest Hoodie ever made

March 14, 2013

American Giant HoodieAmerican Giant was founded by entrepreneur Bayard Winthrop on a simple idea, to create the greatest Hoodie ever made. The product was so successful it almost bust the company in its start-up year

This is how the story hit the headlines this week [Match 2013]:

After only eight months in business, everything at online fashion company American Giant was going according to plan last year. The San Francisco-based business was enjoying “slow but steady growth”, says founder Bayard Winthrop. Then American Giant got the type of positive publicity many companies can only dream off. Orders rocketed, and the firm was sent into emergency mode. “Four days later we had nothing left,” says Mr Winthrop. “We were down to the sticks in our warehouse.”

Since it is an online-only retailer, customers cannot try on the clothing before buying. And reliant upon word-of-mouth marketing, Mr Winthrop estimated it would take two years for American Giant to really take off. Then the online magazine Slate ran an article that named American Giant’s hooded sweatshirt “the greatest Hoodie ever made”. It triggered half a million dollars of new orders in less than two days, clearing out American Giant’s inventory.

The nature of web-based success

We have become accustomed to the unpredictable explosion of growth as a business idea goes viral. Typically, a simple concept captures the imagination and attracts the attention of millions of people often in the time cycle of twenty four hours as the news spreads around the world.

The precise ingredients for success remain unclear. A few years ago Facebook and then Twitter burst on the scene. Twitter had two factors going for it. It’s brilliant idea was easy to explain: Anything worth saying can be captured in 140 characters or less. The second element was the speed of take up of the idea which becomes part of its success. In other words Twitter became famous for becoming famous.

The New Darwinism of the Web

In the New Darwinism of the Web, there is room for only one species at the top of the food chain. This not a new idea, but it certainly applies in web-based markets, where dominance by one ‘species’ is common.

Which brings us back to American Giant

The story is a sure-fire candidate for study as a Business School case. If it isn’t already, [March 2013] it’s because case writers can’t be as agile as their business heroes.

The greatest Hoodie in the world

The idea of producing the greatest Hoodie in the world has another old-fashioned virtue, the wow factor, which is often accompanied by the famous words “Why didn’t I think of that?”

Not such a simple idea

Part of the answer to the question is that the monstrously successful business idea has to be ‘financialized’. Sometimes deliberately with foresight, sometimes by ‘stumbling upon it, the entrepreneur had to see not just what such a product might look like, but how the idea could be protected and commercialized.

A leadership challenge

If you haven’t come across the history of American Giant, here’s my challenge. If you had the idea of “the greatest Hoodie in the world” how would you turn it into a world-beater.

I’ll offer a few ideas, but you will need to keep a look out for them in future amendments to this post. And I’ll welcome suggestions from LWD subscribers.

To be continued…