Monday, November 17, 2008

Seamless @ Southwest

Historically, this organization just might be the original "seamless" brand.

"Seamless"; defined as an organization that makes and keeps a promise that matters to its customers through a business model that maintains consistent authenticity and delivery in the key areas of marketing, HR and operations.

To earn that distinction, a “seamless brand” is who they say they are (in their marketing) and do what they say they'll do (internally with their people and the way customers are served). And for more than three decades, one company, above all others, has emerged as the undisputed leader in the “seamless” category.

And to think it all started on the back of a napkin.

This organization is consistently named among the top five Most Admired Corporations in America in Fortune magazine's annual poll. It is also:

- The largest airline in the world by number of passengers carried.

- Maintaining the 5th-largest passenger fleet of aircraft among all of the world's commercial airlines with 3,500 flights daily.

- Serving twice as many customers per/employee as any other airline.

- One of the world's most profitable airlines, posting a profit for the 35th consecutive year in January 2008.

Southwest has been trendsetters since they started, with the first profit-sharing plan in the U.S. airline industry in 1973. Southwest consistently receives the fewest ratio of complaints per passengers boarded of all major U.S. carriers and they were one of the first to recognize the value in creating an environment to foster a vibrant, internal culture to create a distinct, competitive advantage.

With operations and HR running that smoothly, the Southwest brand becomes "seamless" in the way marketing messages are delivered to the outside world.

Legend has it that Herb Kelleher and one of his law clients, Texas businessman Rollin King, created the Southwest concept on a cocktail napkin in a San Antonio restaurant. Rather than the traditonal hub-and-spoke method, King drew a traingle on the napkin symbolizing the Dallas, Houston and San Antonio as the routes.

Kelleher who became Executive Chairman in 1978 is one of the few men in America who still smokes and drinks without apology. Years ago, when he turned over the reins as chief executive, Kelleher sat in a Frank Sinatra-like pose for the cover of Fortune, a glass of Wild Turkey in one hand and a cigarette in the other. Over the years, whenever reporters would ask him the secret to Southwest's success, Kelleher had a stock response. "You have to treat your employees like customers," he told Fortune in 2001. "When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us."

"We've never had layoffs, we could have made more money if we furloughed people. But we don't do that. And we honor them constantly. Our people know that if they are sick, we will take care of them. If there are occasions or grief or joy, we will be there with them. They know that we value them as people, not just cogs in a machine."

From its birth in 1971 — Southwest has succeeded by daring to be different: offering low fares to its passengers by eliminating unnecessary services, providing their own wacky brand of in-flight entertainment from its employees and using a remarkable hedge strategy to save hundreds of millions of dollars in fuel costs. For most airlines, fuel constitutes about 40% of their costs, up from 10 percent just a few years ago. But not Southwest. Not when 70 percent of the company's fuel is hedged at $51 a barrel — which is fantastic when your competitors are paying the going rate as world oil prices climb to about $126 a barrel. They are also one of the few Fortune 500's to bravely enter the blogosphere with a platform for both customers and employees to communicate with one another.

Can you begin to see why investors who bought $1,000 worth of Southwest stock at the IPO in 1972, would own investments worth about $1.8 million today?

Product or price advantages are difficult to come by in any category since they can be easily duplicated. But, a strong customer service culture, built on a "seamless" foundation is virtually impossible to copy. No question, WestJet has been able to pull it off in Canada, and yes it has led to incredible market share growth and profitability, but as the "Rock Star of People" Tyson Matheson shared with TSB, in an earlier post, it has been anything but easy.

If it was, everybody else would be doing it.

How many other brands would you refer to as "seamless"?

Who else has figured out a way to synchronize marketing, HR and operations and do it with both speed and passion?

"A company is stronger if it is bound by love rather than by fear" HERB KELLEHER

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