Truth #1: You can’t be good at everything.

Invest your resources strategically. Underperform on the dimensions your customers value least so that you can overperform on the dimensions they value most.

Case: Southwest Airlines

Southwest remains an exception to the rule that airlines must lose money and make their customers miserable.  And it’s done so by proving that uncommon service isn’t the exclusive domain of high-priced, high-end offerings.

How does Southwest pull off low-cost excellence? Service design is a big part of the story, particularly the decision to be great on some parts of the flying experience and bad on others.  The tradeoffs come to life on the strategy graph below, a great visualization tool developed by a Harvard Business School colleague, Jan Rivkin.  For clarity, we call these graphs attribute maps.  [On Southwest’s attribute map below], you can see the attributes ranging from most important to least important for Southwest’s target customers listed on the vertical axis:

Low prices top the list, with friendly service in the number two spot. At the bottom, the items of least importance are an extensive network and on-board amenities. But also note Southwest’s performance. It’s best in class on the attributes that matter most to its customers and worst in class on those that matter least.

And these decisions are linked:  inconvenient airports mean cheaper gate real estate.  No meals mean that gate turnaround time is faster (no waiting for all those silver trays), which means more high-priced assets in the sky on any given day, compared to other airlines. Both decisions make it easier to deliver on its target market’s biggest priority:  low prices.  We call this approach bad in the service of great.

Saturday, February 11, 2012