Over the last four decades, the combined US airline industry hasn’t made a single dollar in profit.
Yet Texas-based low-cost carrier, Southwest Airlines, has been profitable - a success story in a disrupted industry, steered in the right direction by its hard-drinking, chain-smoking founder Herb Kelleher.
Kelleher has led the carrier through price wars, increased government regulation and the introduction of new technologies. He’s spent hundreds of millions of dollars on technology systems and infrastructure only to have his competitors come along and do exactly the same thing.
So how has his business survived and thrived? He finds the right people, brings them on board quickly and enables them to continue to transform and develop. These people are lobbyists, communicators and political scientists who sell throughout the organisation and understand the business areas and technologies they are responsible for.
Meanwhile, flamboyant entrepreneur Sir Richard Branson shook up the industry when he introduced Virgin Airlines in Australia in 2000 with low-cost flights operated by attractive and frivolous flight crews.
World Bank Group innovation leadership advisor, Mark C. Thompson, cited these airlines as prime examples of companies that have successfully navigated a highly disrupted industry during his presentation at the ANZ CIO Forum earlier this month.
Thompson now spends much of time coaching young companies and ‘trying to infect’ large organisations with the same modus operandi, the same ‘technology mojo’ as he puts it, that startups have as they disrupt industries over and over again.
While a graduate student at Stanford University in the mid-1990s, he said he was ‘slave labour’ on the book 'Built to Last’, authored by Jim Collins and Jerry I. Porras.
“It [the book] was so accurate about the success and 'built to last' nature of so many companies that no longer exist today. And what we discovered in the last five years, particularly if you look at the Dow Jones Index, is 29 out of the 30 companies are gone,” he said.
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Thompson told attendees that digital disruption is occurring across a host of industries with barriers to entry not being what they once were.
“Jeff Bezos [Amazon’s CEO] can be a ruthless guy, but he’s got humility in one respect, in that he realises that he will be disrupted some day. He continues to disrupt [industries], not just the book business, but becomes the world’s largest store and then becomes FedEx. The idea for him is that he wants to be all things to all industries.”
“Over and over again he says that his worst source of innovation and his best source of innovation is inside – that this whole notion of transformation is an inside job.
“There’s a great irony when we talk about innovation, because all of us in the room are talking to people who can intellectualise it – we all believe in change. Innovation is something we engage in – it’s something we believe in and love until it’s us that has to do it,” Thompson said.
The business is betting on you
Technology groups across organisations are becoming ‘bi-model’ – they need to deliver services and ‘keep the lights on’ but also work on innovative projects, some of which will fail, he said.
“The jury is out on what is going to work, so we are all in this place where you know we must disrupt but you need to have the courage to continue to think about your world that way.”
According to Thompson, people across organisations are taking a bet on IT chiefs in a way they never have in history.
“The CEO is looking to you to provide a level of guidance. There isn’t a time now where the CEO doesn’t want to think about you when making a strategic decision – capital or otherwise – because every aspect of the business puts you in the role of internal consultant.
“Sometimes they [CEOs] are fickle – they are accepting and embracing in one moment, and terrified in the next about handing over the keys to the kingdom to individuals such as yourself,” Thompson said.
IT chiefs, many with backgrounds in coding and engineering, need to demonstrate soft skills, which is hard but what’s needed to inject enthusiasm into teams so they can sell new ideas to the business, he said.
The Steve Jobs effect
Thompson was once chairman of now defunct organisation, RioPort Inc, a spin-off from the Rio (digital audio players) group of Diamond Multimedia. RioPort’s offering – an Internet service that allowed consumers to purchase legal digital music – was a precursor to Apple’s iTunes.
Steve Jobs, who Thompson had known since high school, was in the audience during a presentation Thompson gave in 2000 while at RioPort.
“I was full of myself at the time,” Thompson said. “Steve was there and came up to the front of the room and said ‘Mark, I remember you from high school.’
“He said ‘let me give you two pieces of advice because you are kind of being an idiot on stage now. That little MP3 idea – two years from now, we are going to have our own version of this and you’ve got a geeky piece of crap and we are going to crush you. So would you like to come and work with me now?’” Thompson said.
“This was his pitch – I just wanted to hit him the face with my microphone.”
At the time, Thompson had mortgaged his house with the intention of funding RioPort. Ultimately, he was right about the technology and quite obviously wrong about the company.
“Thank goodness Steve came up and scared the hell out of me that morning,” he said, adding that the worst thing about being criticised is that the person doing the criticising might be right.
“So I [invested] a little bit in Apple and got to know him [Jobs] pretty well during the development of the iPod and iTunes. They [competitors] thought he was nuts, everybody was stealing content on the Internet … there was so much arrogance on the part of his competition.
“One of his pieces of advice was, ‘let’s take away features from this product so it’s simple, so we can have a consumer product that is so beautiful it’s like jewellery.’ Nobody thought about it that way,” he said.
Jobs made these devices and supporting software simple so end users and B2B customers didn’t feel overwhelmed, Thompson said.
“Success is a very interesting thing – you get success by giving it away, by making others successful, by making others profitable. That’s the comeback kid with Steve Jobs, thinking about how his life would have to be. He became a much nicer person when he got the horrible news about cancer,” said Thompson.
“When he was facing his own death he understood that this was not about Steve … it was about having a legacy to create a company that was built to last.”
Follow Byron Connolly on Twitter:@ByronConnolly
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