Most business pundits hold Southwest Airlines (SWA) up as a great model for other businesses. And rightfully so, with SWA’s terrific streak of profitable quarters. However, today’s Dallas Morning News asserts that SWA is in trouble. Apparently, costs are increasing and they’re saying that the company will soon have difficulty sustaining growth and profitability..
SWA is a great example of a company that started with a radically different Success Formula that won big in the marketplace, and they’ve certainly made it better over the years. However, their innovations have been in the nature of Defending & Extending (D&E) their original model, not transforming it. SWA is aging. It has left the “Flats” part of its lifecycle and is in the “Swamp”—this calls for reinventing their Success Formula, not merely fixing or improving it.
Before they finally die from obsolescence, the major airlines like American will take business from SWA as they lower their rates in a last ditch effort to survive. But more disturbing to SWA is the rise of smart new competitors like Jet Blue, whose Success Formula breaks even the rules that SWA plays by. We now hear talk of SWA planning to follow Jet Blue’s lead by testing seatback video systems… what a long fall for SWA.
And things are only likely to get worse for SWA now that they’ve promoted a CFO into the CEO role. Without knowing him personally, we would predict that he will behave like a typical D&E manager, focusing on costs and efficiency, and will drive the company deeper into the “Swamp.” Soon SWA may be just another sad story of a great company that stumbled…
