BUSINESS MODELS

THE BIG PICTURE ON BUSINESS MODELS


1. To Grow, Get All of the Elements Right

If you think through, analyze and correctly solve each element of the business model, your company will grow.

2. Sequentially Solve the Business Model

Strategic planning should always start with the mission, then flow through the targets, value proposition, go to market, and finally the organization.
3. Understand the Role of Each Business Model Element

Once you understand each business model element, then it is much easier to solve for the right strategies to grow.

3. Strategic Alignment is the Key to Execution

Strategic alignment is when an organization is laser-focused on developing and delivering a killer value proposition and go-to-market that beats the competition.

A BUSINESS MODEL HAS 5 CORE ELEMENTS


There are five major components to any business model:

1. The Mission 
 
2. Targets 
 
3. Customer Value Proposition 
 
4. Go-to-Market 
 
5. The Organization

The way a business model works is, "The organization efficiently & effectively develops and delivers the customer value proposition and go-to-market to fulfill the needs of the target customers better than competitors, all for the purpose of achieving the mission."

The horizontal graphic below translates the flow of elements in a business model.


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THE WHO, WHAT, WHY, WHERE & HOW OF BUSINESS MODELS


We can take the horizontal business model graphic and make it vertical, which is the graphic we use throughout the site.


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Let's go over the big picture of the business model.

We start at the top with the mission, which ultimately gives purpose and provides the "why" the company exists. Enduring mission statements serve as a guide to help all employees make the right decisions, however big or small the decisions.

We next move down to the targets.  These include the markets and geographies ("where") the company competes in, for the business of the target customers ("who"). Companies that clearly define and deeply understand their targets, develop focused and aligned business models.

Next is the value proposition, which is the "what" and the core of any business model, composed of the products, services, and pricing of the business. Then there is the go-to-market, comprised of the distribution, sales, and marketing of the business. The purpose of go-to-market is to amplify the value proposition to drive customer acquisition and loyalty.

Finally, there is the organization, organized into functions (e.g., sales, ops, finance). Everything the organization does is a process (whether defined as one or not) executed by team members, partners, and infrastructure. The organization is the execution machine and the "how" things get done of a business model.  And, as stated before, the purpose of the organization is to efficiently and effectively develop and deliver the value proposition and go to market to fulfill the needs of customers better than competitors, all for the purpose of achieving the mission.

SOLVE A BUSINESS MODEL FROM THE TOP DOWN


Let's go over a few things about business models. First, look below to see all of the different types of strategy, which are just the tip of the iceberg. Second, most companies make the mistake of solving their strategy from the bottom up, starting with functional strategies. The conversation goes something like this, "We've got our board meeting coming up. Bob, I need your ops strategy. Jane, I need your marketing strategy. Helen, need your sales plan and strategy. Nate, give me a readout on the HR strategy."

I equate it to trying to design a car, with the chassis, brakes, engine and electronics team independently designing their part. In the end, it won't work. Now let's get into a simple case study to better understand how a business model works.


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SOUTHWEST AIRLINES - ONE OF THE CLEANEST BUSINESS MODELS


It is hard to find a better example of a well-tuned business model than Southwest Airlines. Started in 1967, Southwest Airlines has grown to be the largest domestic airline in the U.S., with $20 billion in annual sales, and 50,000 employees. With a deep history of award-winning service, Southwest has amassed 43 straight years of profitability. If you were lucky enough to buy $10,000 worth of Southwest stock in 1971, it would be worth over $20,000,000 today.


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THE MISSION - THE "WHY"


A company's mission statement represents the "why" the business exists and serves as inspiration and a guidepost for decision making. Every employee should live the mission statement and make decisions that reinforce the mission.

Back in 1971, Southwest's mission was so simple and effective, “Charge the lowest possible fare. And provide the highest quality service.”

Over the past 45+ years, Southwest's strategic and day-to-day decisions reinforced how they could charge the lowest possible fare and provide the highest quality service. You'll see Southwest's mission throughout Southwest's business model.

Today, Southwest's mission is broken up into three different elements, 1. Purpose, 2. Vision, 3. Mission.  The new mission is below and taken together, mainly reflect Southwest's original mission statement.


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TARGETS - THE "WHO" & "WHERE"


There are three primary targets for a business model: 1. Markets 2. Customers 3. Geographies. The targets define the "who" and "where" of a business model. A market establishes the solution space a business competes in for customers. If a leadership team truly understands the dynamics of their market, they can navigate their way to a leadership position. A defined target customer enables an organization to better tailor their value proposition to exceed the needs of the target customers. While target geographies focus the execution of a business and add to economies of scale.

Well-defined targets provide an organization clarity to make better decisions and execute at a higher level. And, when a business already has a winning value proposition in existing markets, customer segments and geographies, expanding into new markets, customer segments and geographies can lead to explosive growth. Though, if a company expands into new target markets, customers and geographies, before the value proposition and organization are ready, it can fragment focus, create shoddy execution, and over extend the business into financial distress.

Let's get into Southwest's target market, customer segments and geographies.


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Southwest's Target Market




The output of a market strategy is a differentiated positioning within the market. Southwest competes in the highly competitive commuter airline market, which, as an industry, lost $50 billion from 2001-2012.

The idea of Southwest was born on a napkin with lines connecting the three dots titled Dallas, San Antonio and Houston. Back in 1967, the founders of Southwest saw a hole in the commuter airline market. While the big airlines were built around national and regional hub and spoke route models, Southwest decided to focus on intrastate point-to-point routes (initially Dallas, Houston & San Antonio). Ever since, Southwest has stuck to this point-to-point route market positioning, while most of the other airlines relied on their hub and spoke models.


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Southwest's Target Customers




You start a business to fulfill a customer need. Southwest started a regional point-to-point airline for customers who wanted an hour flight rather than waste 3.5 to 4.5 hours in a car to drive from Dallas to Houston or San Antonio. Instead of spending 7 to 9 hours behind the car windshield for a day round trip, customers could be pampered by “the best service and the most beautiful girls in the sky.” Southwest had a unique perspective on how they defined the needs of their target customers, as stated in their 1975 Annual Report,

“We believe that in short-haul markets of up to 500 miles, the private automobile is a worthy competitor for those consumers representing the great majority of us who cannot logically place a value on time commensurate with the air fares now charged in those markets. Except for the businessman and woman market, a fare which does not compete with the cost of personal automobile travel will not permit any air market to reach its potential.

By focusing on this unmet customer need to substitute a flight for a car drive, Southwest was one of the key influencers in driving astronomical growth in U.S. domestic air travel. They attracted the business customer with low fares, convenience and service, and the leisure travelers with ultra-discounted weekend tickets to drive up their plane utilization. At the time, the ultra-discounted weekend fares opened up a whole new segment of travel customers who wanted to fly for pleasure, to visit family, recreation, and explore new destinations.

Over the past 45+ years, Southwest has continued their focus on the business and leisure customer segments, tailoring their value proposition and go-to-market to these two segments.


From Southwest's 1974 Annual Report
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Southwest's Target Geographies





While Southwest Airlines now serves over 100 destinations, one of the keys to Southwest's growth was it's deliberate geographic expansion strategy. In keeping with their mission to be a low-cost provider, Southwest has always pursued a geographic density strategy to drive cost and capital synergies and utilization.

Over the 6 years after their 1971 launch, Southwest continued to expand just in Texas with routes to the Rio Grande Valley, Austin, Corpus Christi, El Paso, Lubbock and Midland/Odessa. In 1977, Southwest with their fleet of 12 737s carried 2.4 million customers, which equals 200,000 passengers per plane, or 548 passengers per plane per day. Considering the population of Texas was only 13 million people in 1977, the word-of-mouth of the new, cool and cheap Southwest airlines was unavoidable. This geographic focus also enabled Southwest to leverage their fixed costs related to airports, personnel, maintenance facilities and advertising.

Southwest has always taken an extremely deliberate geographic expansion strategy, choosing routes that are natural extensions of the existing route network, which has led to the 40 years of steady profitable growth. Southwest has continuously focused on driving the economies of scale that a dense geographic strategy provides. Furthermore, Southwest has been extremely opportunistic with their airport selection, often focusing on lower cost second-tier airports in a region such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Oakland, San Jose, Burbank, Manchester, Providence, Ft-Lauderdale-Hollywood.

And, when Southwest expanded internationally, they made the strategic acquisition of AirTran, which didn't have many overlapping routes, but did have a robust business to the Carribbean, Mexico, and select Central American cities.

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The Strategic Takeaway on Targets




Understanding, defining and executing against target markets, customers, and geographies is core  to building a killer business model. If you create a differentiated position in a market, then you have a long-term vision of what you need to execute against. If you define the right target customers, then you can tailor a differentiated value proposition to drive more customer value than competitors, while also narrowing the scope of your go-to-market strategies. If you drive geographic density, then you reap economies of scale.

Keep your targets focused, until your business and economic model are ready to scale into new markets, customer segments and geographies. New markets, customer segments and geographies can provide explosive growth, but only if your value proposition and economics are ready to beat the competitors in the new targets. The downfall of too many businesses is they overextend themselves by trying to expand into too many new targets, fragmenting the focus and execution of the organization.

THE VALUE PROPOSITION - THE CORE & "WHAT"


The value proposition is the core of any business model. If customers get more value out of your value proposition than competitors, over time your company will win. A value proposition is made up of the products, services, and pricing of a business. Ultimately, customers buy products and services to improve their lives in some way. Value equals the rational and emotional benefits customers get from products and services minus the price they pay. Management teams are responsible for improving the value customers get from their products and services in a way that creates sustainable competitive differentiation and drives financial results. If they do this right and sustain it, the company will grow for a very long time. So, let's move on to Southwest's value proposition.


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Southwest's Value Proposition




Let's go back to the original Southwest mission "Charge the lowest possible fare. And provide the highest quality service.”  Frankly, it sounds a lot like their value proposition, which is what you want in a mission statement.

Herb Kelleher, the co-founder and former CEO of Southwest, understood the customer value equation from the beginning as he highlighted in an interview with Strategy + Business, after being honored as a “Lifetime Strategist,”

One of the things that people, I think, didn’t understand is that we started out saying we’re going to give you more for less, not less for less. We’re going to give you new airplanes, not old airplanes. We’re going to give you the best on-time performance. We’re going to give you the people who are most hospitable.”

1970s Southwest Ad


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Southwest's Service - Rational Benefits




In evaluating a value proposition, start with the rational benefits of the products and services. Southwest's rational benefits are getting customers and their bags from point A to B through the air, which they do with efficiency and competency.

They have the highest frequency of point to point routes, providing customers convenience and reduced travel time versus hub and spoke airlines. Southwest has the best historical on-time and baggage performance. They have a fast and convenient check-in process. In the event of a change, they have no change penalties and make it easy to book another flight. They also have the richest and easiest to redeem rewards program, averaging 9.5% passenger miles flown on Rapid Rewards flights, versus ~7% on other airlines.

By consistently and efficiently getting passengers and their bags from point A to B, Southwest consistently ranks as one of the top airlines in customer satisfaction.


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Southwest's Service - Emotional Benefits




If fly Southwest, you understand the difference in the emotional experience versus other airlines. It always starts with the people, and Southwest's employees have a fun, caring, and go the extra mile attitude.

Then there is Southwest's physical experience of newer planes, with leather seats, and extra legroom compared to other airlines in the same fare class.

Then there are the perks of free live TV, free snacks, drinks, and affordable $5 wifi and alcoholic beverages. If you're a frequent flier, they periodically send you ree alcoholic beverage coupons.

There is also the emotional lift of not being taken advantage of with bag and change fees.

Southwest's service is so good and their emotional connection with customers so strong that they can pull off marketing campaigns centered around "Love." Imagine what a bad joke it would be if other airlines tried to incorporate "love" in their marketing.


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Southwest Pricing




In 1993, the U.S. Department of Transportation coined the term the “Southwest Effect” for the rapid growth in total air travel a city to city route realized once Southwest started to fly the route. The "Southwest Effect" is driven by their value equation, which equals benefits - price. While we've gone through the customer benefits of Southwest, let's flip to the other side of the coin, pricing.

Historically, Southwest has been the price leader in the airline industry. With the growth of ultra-discount airlines (e.g., Frontier, Spirit), they may no longer be the ticket price leader, but they are probably still the leader in total cost of flying when you factor in the extra cost of bags, seat selection, change fees and the other charges of ultra-discount airlines.

Southwest utilizes their simple pricing in their #FeesDontFly marketing campaign. While the competitive herd goes one way, Southwest goes the other way, which is the essence of competitive differentiation.

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The Strategic Takeaways on Value Propositions




A value proposition is made up of the products, services, and pricing of a business. The goal with a value proposition is to drive better customer value (benefits - price) than competitors. Over the past 45+ years, Southwest has done a tremendous job of consistently delivering on customer value, leading them to grow into the largest U.S. domestic airline.

For struggling companies, the first thing to look at is the customer value proposition, which is most likely deficient versus the competition. Even for successful companies, the bottom line is to continuously focus on differentiating the value proposition to improve benefits, while also driving down costs, which can either translate into enhanced profit or price improvement. The Customer Value Wedge is a nice visual to understand this concept better.

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GO-TO-MARKET - AMPLIFYING THE VALUE PROPOSITION


The go-to-market strategies of a business model is how a company drives and fulfills demand of products and services to customers. The three components of go-to-market includes distribution, sales and marketing. Really strong go-to-market strategies effectively and efficiently amplify the value proposition to the defined target customers.

The big strategic choices with distribution is whether to go direct, indirect, or a hybrid model of both direct and indirect channels. The big strategic goal with sales and marketing is to drive campaigns and activities to increase the size of the customer funnel and accelerate customers through the funnel.


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Southwest Direct Distribution




With the rise of digital channels, distribution is currently a hotbed of disruption and innovation. Thousands of companies have cut out significant distribution costs from their value chain, by going directly to customers through digital channels.

Given Southwest's mission of low fares, in the late 90s, as Expedia, Priceline, Orbitz and other travel websites grew, Southwest decided to not partner with third-party websites and only utilize Southwest.com as their online distribution.  At the time it was a risky move as many airline analysts said Southwest was going to suffer. However, given the strength of Southwest's value proposition and loyalty, the direct distribution strategy paid off.

For Southwest, the estimated savings are ~$700 million a year by not using the travel sites. Southwest can split the $700 million between higher profits and lower fares for customers. It is a example of driving the customer value wedge.

Distribution strategy is a critical element of any go-to-market strategy, and getting it right can be the difference between winning and losing.


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Southwest Sales & Marketing




Southwest's marketing, encapsulated in their campaigns of "Tranfarency" and "Love" reflect their mission of low fares and high quality service. "Transfarency" amplifies the rational benefits of Southwest's value proposition, while "Love" amplifies the emotional benefits.

One of the main outputs of any marketing strategy is a campaign, which is simply a combination of messages and media. There are three media meta-channels; advocacy, owned and paid. The beauty of Southwest is how consistent they are in driving their brand messages across all three of these media meta-channels.

With Southwest, and most B2C companies, there isn't really a "Sales" element to their business model, as there is in most B2B business models.

Too often companies blame marketing for their growth woes, instead of addressing the lack of value in their value proposition. Two of the most successful retailers, Costco and Trader Joe's, spend almost nothing on marketing but continue to grow through the strength of their value proposition and word-of-mouth advocacy. From 2010 to 2013, Southwest kept their advertising spend almost flat but increased revenues 46%.


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The Strategic Takeaways on Go-to-Market




Too often, executives blame distribution, marketing and/or sales strategies for growth woes. They often  replace their sales and marketing leaders or spend more on advertising and salespeople, when, what they need to improve is their value proposition.

Go-to-market strategies amplify a value proposition. If the value proposition is inferior to the competition, improve the value proposition, and then amplify value proposition through bigger and better go-to-market strategies.

If your business has a strong value proposition, add growth fuel by heavily investing in distribution, sales, and marketing. And, align the go-to-market strategies to the target customer and their typical purchasing journey. Lastly, get the brand messaging right to tap into the rational and emotional benefits of the value proposition.

THE ORGANIZATION - THE HEART & "HOW"


The purpose of an organization is to efficiently and effectively develop and deliver the customer value proposition and go-to-market. Reflect on this for a minute. Is your role, and everyone in the company focused somehow on developing and delivering the customer value proposition and go-to-market?

Organizations are simply a collection of processes, executed by a combination of people, infrastructure, and partners. The processes are organized into functions.

There are two types of functions: 1. value chain functions 2. support functions. Value chain functions create the value proposition, and deliver and service the value proposition (i.e., logistics, product development, manufacturing, sales, marketing, service operations). Support functions support the efficiency and effectiveness of other functions (i.e., procurement, IT, finance, HR, legal).


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Solve the Top Before Getting to the Bottom




From a strategic perspective, the better the top part of the business model is defined, the easier it is to define the right organizational and functional strategies. Strategic alignment (mission, targets, value prop, go-to-market, functional and org strategies aligned) is one of the easiest ways to drive the efficiency and effectiveness of the organization.

Another important component of organizational strategy is core competencies, which are those capabilities that a business needs to be world-class at to develop and deliver the competitive differentiation and advantage of the business model.

Now let's dive into how Southwest reinforces their business model through their organizational strategies. Southwest's mission and value proposition of low cost, high service is accomplished through Southwest's strategies related to Team Members, Infrastructure, Partners & Processes.


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Southwest's Enduring Focus on People




People are the heart and soul of any organization. Southwest's mantra is "employees first, customers second, shareholders third. As Herb Kelleher, co-founder of Southwest said, "If the employees serve the customer well, the customer comes back, and that makes the shareholders happy. It’s simple, it’s not a conflict, it’s a chain."

Southwest has one of the most passionate and loyal workforces. They were named the best company for work life balance. They've ranked as high as #13 in Forbes Best Employer list. They've never had a layoff or cut pay.  Voluntary turnover is less than 2%. With over 50,000 employees, Southwest does an incredible job of keeping their team members happy, productive and passionate. So, the question is how?

There are three main elements to a holistic people strategy: 1. org design, 2. employee journey, 3. culture. Let's dig into Southwest's employee journey and culture to understand how they elevate and realize the potential of their team.


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Southwest's Culture




A company's culture starts with their values, which are reinforced by norms and the environment. Benefits and compensation are also critical to a company's culture.

It is hard to beat Southwest's culture. What other companies celebrate their culture in their recruiting materials? And, what other companies have a Culture Services Department and Local and Companywide Culture Committees?

It all starts with Southwest's values, which is broken up into "Live the Southwest Way" (Warrior Spirit, Servant's Heart, Fun-LUVing Attitude) and "Work the Southwest Way" (Safety and Reliability, Friendly Customer Service and Low Costs).

Southwest norms; how Southwest team members interact with each other and the company interacts with them, reinforce the values. Southwest's environment (their offices, planes, gates, etc.) celebrates employees, travel and Southwest. Southwest also reinforces their values and norms with spirit parties, chili cook-offs, and Luvlines (their employee magazine).

Though Southwest is a low-price airline, their compensation is some of the highest in the industry. And, they align all team members to their mission and financial performance through a generous profit sharing plan. In 2015, Southwest paid out $620 million in profit-sharing, which amounted to over $12,000 per employee. This plan reinforces the Work the Southwest Way values. Southwest's benefits are numerous and generous. There are too many to list out, but you should take a quick glance at them on Southwest's website.

While culture may seem squishy and nebulous, if you get the values right and reinforce them with norms, the environment, benefits and compensation, a strong and enduring culture can take root in any company.


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Southwest's Employee Journey





Strong companies infuse their mission and values into their employee journey, including recruiting, hiring, onboarding, development, evaluation and advancement. Some companies do it better than others, but great companies, such as Southwest, are deliberate and thoughtful in their employee journey strategy.

Southwest leadership knows that starting out with the right people, who inherently embody Southwest's values is paramount to realizing their mission and preserving their culture. Southwest hires less than 2% of applicants and 6% of interviewees. Their interview process is rigorous, with group interviews, fit interviews, and a profile guide.

New hires go through a 4-week training program that not only trains them on the ins and outs of the job, but enculturates them in the Southwest values with fun activities such as egg balancing relays and scavenger hunts. Once a team member begins to work, they are assigned a team member sponsor and participate in new hire parties and luncheons to reinforce the Southwest norms and culture.

Evaluation and advancement are based not only on the skills of a team member but also on their demonstration of living the Southwest values. Team member development is reinforced through SWA University, extensive leadership and management development programs, along with continuous feedback and coaching.

There is also continuous celebration of Southwest team members. Customers see it in the Southwest magazine with monthly articles on team members that have gone above and beyond. Southwest advertisements use team members instead of actors. Team members can give each other SWAG (Southwest Airlines Gratitude) points, utilizing an online platform that allows team members to recognize other team members for their Warrior Spirit, Servant's Heart or Fun-LUVing Attitude.  Team members can turn their points in for gift cards and merchandise. There are also numerous employee awards, such as the Spirit Award.

Southwest has thoughtfully optimized their employee journey to elevate and realize the potential of their 50,000+ person team.

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Southwest's Infrastructure




Infrastructure includes the equipment, information technology, facilities, machinery, and other physical assets used by a business. Infrastructure strategy and decisions are tough, given the typical large investment, sometimes long and complex implementations, against the backdrop of a continuously changing future.

In Southwest's case, their infrastructure strategy reinforce their low-cost mission. In 1971, Southwest began service with four Boeing 737s, which was introduced into the market a mere four years earlier. While competitors used 15-25 seat commuter jets for the same type of routes, Southwest's 737s seated 112 passengers, ensuring Southwest a superior cost structure, once they got the planes fully utilized (which took a few years). Still to this day, Southwest's fleet of 700+ planes are all Boeing 737s, compared to United Airlines, which utilizes over 20 types of planes.

As stated in Southwest's 10-K, "The Company’s low-cost structure has historically been facilitated by Southwest’s use of a single aircraft type, the Boeing 737, an operationally efficient point-to-point route structure, and highly productive employees. Southwest’s use of a single aircraft type has allowed for simplified scheduling, maintenance, flight operations, and training activities."

Southwest's no seat assignments policy massively simplifies their systems and processes, with no need to track seats and seat assignments for every plane for every flight for an entire year out.

Then there is the decision, back in the early 2000s, not to install in-flight entertainment, which would have cost multiple millions of dollars per plane and led to installation downtime. The weight of each in-seat display unit can be upwards of 13 pounds. Every pound of extra weight adds ~$1,400 per year per plane in extra fuel. 13 pounds per seat adds ~$3 million in additional operating costs per year per aircraft. In-flight entertainment didn't align with their low-cost mission. Fast forward a decade, and now Southwest has arguably the best in-flight entertainment with free live TV with BYOD (bring your own device).

Southwest has always aligned their infrastructure strategy with their mission and value proposition, which has led to Southwest's unit cost leadership of 4.4 cents per available seat mile versus 5.4 to 5.8 cents for other airlines.


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Southwest's Partners




Partners are all those companies that support a business. To understand the breadth of partners in a company, simply look at the accounts payable list to see all the partners.. Now, while many partners are transactional, in most businesses there are a few strategic partners that can really support the success of a business model.

In the case of Southwest, Boeing is a strong and important strategic partner. Here is a great quote from a nice history of the Boeing / Southwest partnership,

"Our relationship with Southwest is about more than just delivering great airplanes," said Carolyn Corvi, vice president and general manager of the Boeing 737/757 Programs. "It's about understanding their business, trusting each other and working together to achieve solutions. We know that while they have a lot of fun and play hard, they also run a business model that the entire industry emulates and admires. We are delighted and honored to have such a wonderful partner."

And, you can see the benefits of this partnership, with Southwest often being the launch partner on Boeing's new 737, and customizing them to meet the needs of Southwest's customers. Take a look at the 737-800 MAX as an example.


Southwest's Processes




Every action in a business is a process, whether acknowledged as one or not. The key to processes is to be lean and efficient, by reducing non-value add actions and inventory, otherwise know as waste. For Southwest, the foundation of great processes is great people, infrastructure and partners, which enables them to have super lean & low-cost processes and high plane utilization.

Just think about Southwest's quick gate turnaround, which originated as a 10-minute turnaround challenge, which you can read about here. They only use 737s, so their turnaround teams and training are optimized on one type of plane. They don't have food carts, and they have customers and stewards clean-up during deplaning. Their team members are incentivized, through the profit sharing plan, to get planes out on time and turn them around quickly.

Or, think about their no seat assignments, which helps lean out many processes. Customer service interactions about seat assignments are non-existent, which also lowers their IT costs by eliminating the complexity of seat assignments. Furthermore, the first customers to check-in are the first to get their boarding number, which drives earlier check-in and better over / under booking metrics, eliminating the need to kick paying customers off an overbooked flight.

Southwest's lean processes also make it the historical leader in on-time and baggage performance. The collective focus on lean processes helps Southwest's team members realize their mission of being a low cost airline.


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Strategic Takeaways on Organizations




Southwest's organization efficiently and effectively develops and delivers their value proposition and go-to-market. Southwest's alignment of their entire business model from the mission to the targets to the value proposition, go-to-market and the organization is extremely rare. So is their phenomenal revenue growth and 45 years of profitability.



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BUSINESS MODEL STRATEGY


If a company doesn't have a mission or it is weak, fix that first. If the target markets, customers, and geographies are too broad, then focus and better define them. If the value proposition doesn't drive better customer value than the competition, then solve that. If the value proposition is strong, then focus on scaling through an improved go-to-market strategy. The better focused the top part of the business model, the easier it is to develop great organizational and functional strategies. If the business model is robust and working, then, and only then, think about expanding into new markets, customer segments or geographies.

Every company has the potential to grow for decades, but it all comes down to strategy and execution.


NEXT SECTION: COMPETITIVE ADVANTAGE