40 Tips For Budding Entrepreneurs
December 10, 2011 6 Comments
Here is a pretty nice article from today’s ET .The article is apparently an excerpt from the June ’11 issue of Southwest Airlines’ Spirit magazine.Enjoy!From Deccan Air in India to Ryan Air in UK, Sourthwest Airlines has been the role model for all low-cost airlines in the world. In being the lodestar, it also revolutionised air travel. On its 40th anniversary, the airline shares 40 funny yet insightful reasons that made it a success —each a valuable lesson to entrepreneurs
1| Keep Idea Simple Enough to Draw on Napkin
In 1966, Rollin W King sat with his lawyer, Herb Kelleher, in San Antonio’s St. Anthony Club and drew a triangle on a cocktail napkin. And lo, the napkin begat an airline. Rollin, owner of a money-losing commuter airline, wanted to start an intrastate carrier so the airline wouldn’t fall under the aegis of the Civil Aeronautics Board. Hence, the triangle. He labelled the corners “Dallas,” “Houston,” and “San Antonio”—The Golden Triangle of Texas.
2| A Legend is an Asset
That cocktail napkin became a whiskey-stained version of the Magna Carta. It summed up the infant company’s personality: Informal, pragmatic, and a little bit naughty. Rollin and Herb recognised the drama. Here was the stuff of legend. Now, all they had to do was form the most successful airline in history.
3| Hire a Good Lawyer
The good news was, they already had a top-notch lawyer in Herb. A graduate of Wesleyan University and New York University Law School, he kept a law office in San Antonio. Herb was no stranger to litigation, which was a very good thing: he was about to face the litigation storm of his life.
4| Raise More Money Than Needed and Double it
The partners — now four men, including Rollin’s brother-inlaw and a businessman-politician named John Peace—figured they needed a quarter-million dollars to start. Herb decided to raise twice that amount. That was prescient; the lawsuits would ground the airline for another four years.
5| Crazy is No Liability
Not always, anyway. If an idea immediately sounds good, chances are someone — many people — thought of it already. Rollin had no idea how to raise the capital for his new airline. “Rollin,” Herb said, “You’re crazy. Let’s do it!”
6| Recruit Over-the-Hill Executives
The Company’s new president, Lamar Muse, had worked for four airlines before joining Southwest. He and Rollin went out and recruited senior veterans of Braniff, American Airlines, and Trans-Texas Corridor. Naturally, people called them the “Over the Hill Gang.”
7| Target the Overcharged and the Underserved
Southwest began as a short-haul airline, offering a low-fare, high-frequency alternative to driving. That’s what the napkin was for. People had to drive for hours to get from one point of the triangle to another. Rollin’s napkin would provide a solution—and, just maybe, a profitable business.
8| Be the Good Guy
The day after the Texas Aeronautics Commission gave Southwest permission to fly to the three cities, three airlines got a restraining order to ground the new competition. They claimed Texas wasn’t big enough for another airline. “The public took our side as the underdogs, and the character and vehemence of the opposition gave us all kinds of esprit de corps,” Rollin said later. At the trial, a representative from Allstate insurance, Southwest’s biggest investor, took the witness stand to be interrogated by a lawyer from Braniff. “Can you please speak up?” the lawyer asked. “Sorry, but my shirt is choking me,” the Allstate man said. “I had to borrow it from Rollin King. Braniff lost my luggage.”
9| Two Strikes is One Hit Away from a Home Run
The lower court and the appeals court ruled against Southwest. Herb took the case to the Texas Supreme Court. That court overturned the findings of the two previous courts. And on December 7, 1970, the U.S. Supreme Court rejected an appeal by Southwest’s opponents.
10| Recognise Your Luck
“One thing you see time and time again throughout Southwest’s early history,” says Brian Lusk, a communications manager at Southwest and the airline’s de facto historian, “is how lucky it was. Herb was this lawyer who happened to have the exact skills Southwest would need later. Boeing was having trouble selling planes in the recession, just when Southwest needed planes. Purdue Airlines went out of business, releasing pilots just when Southwest needed them.”
11| Lack of Money Makes You Frugal
With $142 in the bank, the Company had outstanding bills totaling more than $80,000. Lamar raised $1.25 million through promissory notes and got a bargain from Boeing: a huge price break on three airplanes, with Boeing financing 90 percent of it. All of a sudden, Southwest had a fleet. Meanwhile, Donald Ogden, a flight operations exec at American, hired 17 Pilots from Purdue Airlines, a charter company owned by Purdue University. The Pilots included several Cubans who had fled the Communist regime. Having no training facilities of its own, Southwest sent the new Crew to flight school at United Airlines.
12| Gain Talk Equity
That means free advertising. Southwest leaders developed a “personality description model” to craft the character for the airline. Free spirited, irreverent, sexy—the sauce was sauciness.
13| Promote from Within
Gary Kelly boarded a plane for the first time when he was in high school, flying brand new Southwest Airlines from his hometown, San Antonio, to Houston on a college football recruiting trip in 1972. The 122-seat plane was carrying a total of three Passengers. “I thought, Boy, this airline’s not going to be around very long,” he later told USA Today. Thirty-two years after that flight, he was the airline’s CEO.
14 | If the Zeitgeist Works for You, Use It
Many people who lived through the ’70s apologise for it. I can’t believe that hair! Those clothes! Most corporate dress codes tiptoed around the ’70s as if the decade were a mud puddle that might mess their Gucci loafers. Southwest dove into the ’70s, orange outfits and all. More than one American thought those first Southwest uniforms—short shorts, big white belt, gogo boots—heralded the collapse of civilization. Many other Americans thought those hot pants were pretty hot. Baby, that was one sexy decade, and Southwest did all it could to live up to the racy side of LUV. An ad recruiting Flight Attendants read, “Dear Raquel Welch: We’d like to offer you the position of a hostess with Southwest Airlines.” Ms Welch didn’t apply for the 40 open positions, but 1,200 other women did. Southwest was breaking rules even for the do-yourthang ’70s. After all, no other airline offered a bottle of Chivas Regal or Smirnoff with a $26 plane ticket.
15| Invent Your Own Culture
The person behind Southwest’s unique culture is Colleen Barrett, the airline’s former president. Colleen was Herb Kelleher’s legal secretary when Southwest got its start. She started as the corporate secretary in 1978, rose to VP of administration in 1986, and became president and chief operating officer in 2001. By the time she stepped down in 2008, she had crafted the tone and SPIRIT that defines Southwest today, from the annual Halloween party to the way a gate agent treats a Customer. Heartfelt. If one word defined Colleen and the Culture she worked to create, that’s it. We love that Forbes rated her above Queen Elizabeth II in its 100 Most Powerful Women ranking in 2005. She didn’t make No. 1., but only because Forbes doesn’t grade people by the size of their hearts.
16| A Culture has its Own Language
Throughout this article you’ll see some unusual wording, spelling, and capitalization: pilots are Pilots, passengers are Customers, and love is LUV. That’s all part of Southwest’s focus on its internal Culture. These people and that LUV are too important for ordinary spelling. Call it the Southwest dialect. It’s a meaningful thing.
17| The Legal Part is Never Over
Just when Southwest was about to take to the sky, the competition took their case to the Civil Aeronautics Board and a Texas court in Austin, claiming that the new airline was about to violate federal law by carrying interstate Passengers. Some of them, the argument went, were hooking up with other airlines to fly away from Texas. Therefore, the passengers were interstate and under the jurisdiction of federal law. The federal board threw out the complaints, but the Texas court issued a restraining order. Herb Kelleher flew to Austin from Dallas—on a Southwest 737. Though the airline wasn’t permitted to fly as an airline yet, it was required to do dry runs on all the routes without passengers. Herb told the pilot to drop him off in Austin—a town that had never seen a 737. Herb went straight to the Texas Supreme Court building, where his appearance won the sympathy of Judge Thomas Reavley. The judge ordered the entire Supreme Court to show up first thing the next morning so that Herb could plead his case. The next day, the Texas Supreme Court overruled the lower court.
18| Have a Recognizable Home
Southwest’s founders made Love its home. Dallas Love Field, the airline’s home base, was built as an Army air base in 1917 and named after a heroic young officer named Moss Lee Love. Not every Company would make Love its whole tone, its mood, its … ethos. Newspaper ads run by the airline in its first year mentioned “love” 18 times. After 1977, when the New York Stock Exchange made Southwest’s ticker symbol LUV, the airline insisted on giving “love” a ’60s-mod spelling: It’s all about LUV, man.
19| A Crisis can Contain the Germ of a Big Idea
Yeah, that’s a fancy way of saying “Necessity is the mother of invention” or, as Ralph Waldo Emerson put it, “A weed is a plant whose virtue has not yet been discovered.” Southwest had to pull up its own weed on May 13, 1972, when a court ruling forbidding out-of-state charters forced the company to sell its fourth aircraft. With only three planes to serve 29 daily flights, the airline devised the 10-minute “turn”—getting each plane to pull into the gate, perform maintenance, stock supplies, load Passengers, and push back in just 10 minutes. The industry average at the time: 30 to 40 minutes.
20| Simplicity has Value
In the fall of 1972, Southwest introduced the two-tier fare system. Regular fares were $20 to $26, and “Pleasure Class” fares— offered on weekends and on weeknights after 7 p.m.— cost just $13. To this day, the fares are simple. No extra fees. Simplicity extends to equipment.
21| It Doesn’t Hurt to Look Like a Toy
If you want to seem playful, add value by making people think of playing with your products. Look at the most successful tech gear: toys. Southwest took that notion a step further in the ’80s by making planes irresistible to a gargantuan kindergartner. In 1988, dignitaries, including Herb, the chairman of SeaWorld of Texas, and the mayors of Dallas and Houston dressed as penguins and boarded the maiden flight of Shamu One, a Boeing 737- 300 painted like a whale. There are now three Shamus flying Southwest Customers.
22| Remember Your Chief Mission
Don’t let the onboard jokes fool you. Southwest’s official No. 1 priority is Safety. The airline continues to sit at or near the top in that category in rankings by the International Airline Passengers Association and other industry surveys.
23| Instead of Whining, Give a Lollipop
In 1988, the federal government banned smoking on flights of two hours or less. If anyone had a reason to cry, it was Herb, a man who likes his cigarettes to this day. The standard response to any new law is to complain about it—it’s the American way—but Southwest instead handed out 200,000 lollipops to nicotine-deprived Customers.
24| It Helps to Have an Extroverted Leader
Through much of Southwest’s history, Herb earned millions worth of free publicity through a studied hamminess. He began appearing in television commercials in the 1980s, wearing a sack over his head out of “embarrassment” over his airline’s ridiculously low fares. Another spot showed a plane proving Southwest’s fast turnaround time by closing its door without him.
25| Get into Fun Advertising Wars
Controversy can extend your advertising budget. One print ad read, “WE’D LIKE TO MATCH THEIR NEW FARES, BUT WE’D HAVE TO RAISE OURS.” Southwest took its competitiveness to its advertising as recently as this year, when it sent real Employees after rivals to “arrest” them for charging bag fees.
26| Take Your Business, Not Yourself, Seriously
In 2005, Chief Executive magazine ranked Herb third behind Jack Welch and Bill Gates as one of the top CEOs of all time. We would rank him as the funniest. During the toughest legal battles Southwest fought against its many corporate rivals, Herb won the media’s sympathy through self-deprecating humor. At one public meeting, an ex Marine asked a question and added, “I don’t want any B.S.” (He didn’t use initials.) Herb replied, “Then I’ve been rendered mute.”
27| See Your Business as a Cause
Southwest’s mission is Freedom to move about the country. Before Southwest, only 15% of adults in the United States had flown on a commercial flight. By the end of the century, 85% had taken to the skies. A prime reason is the “Southwest Effect”—the phenomenon in which the entrance of Southwest into a market lowers the average fare on other airlines while dramatically increasing the number of Passengers.
28 | Put the Worker First
It may surprise you to learn that Southwest is the most unionized airline, with 85 percent of Employees in unions. Yet the airline has a reputation for amicable relations, and its work rules are remarkably flexible; it’s not unusual to see a Pilot help clean a plane to ready it for its next flight. Southwest was also the first airline to offer a profit-sharing plan, in 1974. Employees now own 13% of the airline. The biggest proof of Southwest’s capital-E Employees-first value came after 9/11, when other airlines laid off thousands of workers. The airline closed out 2010, after the worst decade in aviation history, without having furloughed Employees.
29| Sweat the Small Stuff, but Avoid Lawyers
In 1992, Southwest got into a tiff with a company called Stevens Aviation. Both companies were using the slogan, “Just Plane Smart.” Instead of taking the matter to court, the CEOs of the two companies arm wrestled for the right to use the slogan. Calling the match “Malice in Dallas,” they gathered cheerleaders, employees, and professional wrestlers for a publicity-happy extravaganza. The money saved in legal fees went to charity. Herb lost.
30| Take Imitators as aCompliment
As soon as people stop making fun of your idea, they’ll start imitating it. That took the airline industry a while, in Southwest’s case. In the mid’90s, four major airlines attempted to steal the Southwest plan with United Shuttle, Continental Lite, Delta Express, and US Airways’ MetroJet: all lowfare divisions of legacy airlines that attempted to copy the operation and business philosophy of Southwest in many of the same markets. They failed.
31| The Web ain’t Cool, It’s a Tool
Southwest was the first airline to establish a home page. By 2010, Southwest.com boasted more unique visitors than any other airline, and ranked as the second largest travel site.
32| Set and Renew Noble Expectations
Every Southwest Employee gets a set of expectations and can recite them that include aspects of the “Warrior Spirit” (be courageous, display a sense of urgency), “Servant’s Heart” (follow the Golden Rule, put others first), and “Fun-LUVing Attitude” (don’t take yourself too seriously; celebrate successes).
33| Scaling Up should Make You a Force
Three thousand, four hundred flights a day. Almost 35,000 Employees. Eighty-eight million total Passengers carried in 2010. Net income half a billion. Five hundred forty-eight Boeing 737 jets. A danger of rapid growth is that people will no longer sympathize with you. Southwest has tried to use its size to its advantage.
34| Go Green
Southwest was one of the first companies in the United States to produce an integrated report with a triple bottom line: Performance, People, and Planet. It was ranked in the top 150 in Newsweek’s 2010 Green Rankings of the largest publicly traded companies in America, and named Greenest Airline by the nonprofit group Climate Counts in 2011.
35| It’s About Customer Service
SWA has consistently received the lowest ratio of complaints per passenger boarded of all major U.S. carriers since the Department of Transportation started keeping track in 1987.
36| Listen to Advice, Then Celebrate It
For years, Michael Levy, the founder and former publisher of Texas Monthly magazine, bugged the Southwest brass about the fuel-saving advantages of putting winglets on aircraft—those little triangles on the ends of wings. In 2003, Southwest took the suggestion. For a month, a set of the new winglets bore Levy’s picture.
37| Pick Your Peaks and Stick to Them
Southwest started out aspiring to be the No. 1 lowfare airline, the No. 1 airline for customer service, and the safest airline. It has tried to lead the large airlines in on-time arrival and baggage handling. It now also boasts the world’s largest all-Boeing fleet, and the most domestic passengers of any airline. Oh, and it gets repeatedly ranked among most admired companies by Fortune (4th in 2010, and the only commercial airline among the top 50).
38| Manage Permanence
Business pundits talk about “managing change.” Equally important is knowing what not to change, and how to keep what you want to keep. CEO Gary Kelly has managed for permanence in the essential qualities of Southwest: low fares, Customer Service, simplicity, and FUN.
39| Never Rest on Your Laurels
We stole that almost verbatim from Herb. (Being Herb, he used spicier language.) Southwest continues to take that wisdom seriously. The just completed $1.4-billion purchase of AirTran gives the combined airline a powerful presence in Atlanta’s Hartsfield-Jackson International Airport, the world’s busiest. Southwest will enter 38 new airports, and is working to open AirTran’s international routes to its network. So much for resting on laurels.
40| It’s OK to be Unprofitable for a Year
Just be sure to be profitable for at least the next 39.