I Love This Job!
The best part of being a speaker, author, strategist, and researcher is getting to work with so many disparate industries and organizations.
Just last week:
Keynote 1: Michigan County Road Commission Self-Insurance Pool about Hug Your Haters and turning unhappiness into an advantage
Keynote 2: GSK and ViiV pharmaceuticals about the Coveted
Customer Experience, and the emerging synthesis of marketing and CX
I'm glad I got to do some Hug Your Haters work with Michigan folks.
Given the tone and tenor of the world right now, I'm going to create an all-new version of that material and start doing more keynotes on how companies and organizations can successfully deal with unhappy employees and dissatisfied customers.
Interested? Reply to this email and let's talk about it.
Will "if you can't beat 'em, join 'em" work for Southwest Airlines?
50 years.
FIFTY YEARS!
That's how long Southwest Airlines stuck by their unique "no assigned seats" approach to airplane seating.
Southwest's proletarian approach to seating was the essence of the brand, and a true differentiator in an industry where all streams empty into the sea of sameness.
But Southwest completely switched course, announcing recently:
- all seats will be assigned
- passengers can pay extra for additional legroom (1/3 of all seats)
- red eye flights will be offered (yay?)
- Southwest flights will be available on aggregator websites, like Kayak
"From now on, we're going to be just like everyone else, okay?"
Why would they do this?
If you have a defensible difference (especially one you've protected for 50 years), you typically fight like two raccoons in a trash can to keep it.
But Southwest VOLUNTARILY gave it up. Why?
The only time you unilaterally yield on a core market differentiator is when the costs of providing the difference exceed the revenue created by it.
According to Southwest CEO Bob Jordan, 80% of Southwest customers and 86% of potential customers prefer an assigned seat. 4 in 5!
I'm certain they also have data that shows very few customers choose Southwest BECAUSE of open seating. I suspect their "two bags free" policy is more likely to be the actual preference lever.
(Note: it is now ONE bag free....)
Southwest found themselves in the unenviable position of defending an unloved difference-maker, burdened by passenger uncertainty about where they might be able to sit, micro-aggressions in the "line up by numerical order" queue, families being split up on board, and other annoyances.
Perhaps not coincidentally, Southwest's profit in Q2 2024 was $367 million. Seems solid, but not compared to $683 million in the same quarter a year ago.
Another behind-the-scenes gravitational force: a $2 billion investment in June from activist group Elliot, which seeks to replace Bob Jordan due to slumping profits.
This move was jarring enough that the Southwest board created a poison pill provision to essentially bar a forced takeover of the company, followed shortly by this reversal of a foundational aspect of the business model.
It's weird to conclude that a company that made $12 million in profits per DAY last quarter is scared, but Southwest is, in fact, afraid. And that's when you murder the differentiator.
Will it work?
Southwest is now essentially competing on a level playing field against United, Delta, and American.
Is that a fight they can win?
Maybe?
They are also adding in-air power plugs at your seat (yes!) and improved Wi-Fi (thank you, because the Southwest Wi-Fi is hilariously terrible).
They'll also make more money per seat by charging for extra leg room, although some of that will be offset by people not paying $20 to get a low boarding number.
What about you? Will you fly Southwest more, same, or less now? Please do reply and let me know. I'll probably fly more, personally.
There is recent-ish precedent for a brand throwing a longstanding differentiator overboard like a mutinous sailor.
Remember 6 years ago, when LL Bean ended their "no questions asked" returns policy after 106 years? (see link for my interview on CNBC about this)
Similar to Southwest, despite the fact that LL Bean's limitless returns were a core differentiator, too many people were abusing the spirit of the policy, costing the retailer $50 million per year in "abusive returns".
LL Bean is privately held, so profit information is undisclosed, but top line results suggest their abandonment of their differentiator didn't hurt much, if at all:
2020 - $1.59 billion up 5%
2021 - $1.8 billion up 14%
2022 - $1.8 billion
2023 - $1.7 billion, pretty solid given retail challenges everywhere
By 2027 we'll be able to look back to this summer and decide whether Southwest's open seating retreat was the catalyst to a brighter future, or the beginning of the end of a great brand.
The Books Report
I'm a Formula 1 fan, and if you are even a casual follower of this fast-growing racing series I very much recommend How to Build a Car, from Adrian Newey.
Newey is the foremost designer racing vehicles, working on TWENTY-TWO championship-winning F1 cars.
This book gives a good overview of how and why some cars are faster than others, plus a very interesting insight into his career, including the business side of the sport. He's also a terrific writer.
Excellent audiobook too, which is how I consumed this one.
Jay's Faves
For the vast majority of my life, I assumed rice was....rice. I knew there was brown, white, wild, Jasmine, and so forth.
But I never put much thought into the vagaries of rice until my wife got the Zojirushi rice cooker/warmer.
These folks are SERIOUS about rice! 150 pages of instructions, because small variations in rice texture, shape, and size change the cooking time and process.
The difference between what this thing puts out and regular stovetop rice is MASSIVE. Did I feel dumb paying $148 to cook rice?
Yes.
Am I glad I did so? Very much yes.
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