No Apologies From the Boss of a No-Frills Airline

By SARAH LYALL
August 1, 2009 NYT

A critical component of creating competitive separation is deciding what you ARE and what you are NOT while meeting needs or creating outcomes for a large enough segment of customers. Ryanair is an example that some may think is counterintuitive. They do NOT deliver service but low fares, a good on-time record, few cancellations and few lost bags. The key is to be good enough to be world class in delivering your Value Promise to your target customers to keep yourself separate from you competitors in the eyes of your customers:

RYANAIR flies more than 850 routes across Europe, often to obscure airports far away from big cities — “from nowhere to nowhere,” in the scoffing words of Sir Stelios Haji-Ioannou, who runs the competing airline EasyJet. Ryanair’s post-tax profit fell by 78 percent in the year that ended in March, but still amounted to $149 million. While most carriers are hemorrhaging passengers, Ryanair expects its passenger numbers to increase, to 68 million this year from 57 million in 2008. ……..
The mystery is why so many people are willing to put up with an airline that, in the words of The Economist, “has become a byword for appalling customer service, misleading advertising claims and jeering rudeness towards anyone or anything that gets in its way……”
………“Nobody helps you — it’s as simple as that,” said Malcolm Ginsberg, editor in chief of the travel newsletter aerbt.co.uk, describing what happens to Ryanair passengers who need assistance at the airport.

That is not the point, Mr. O’Leary said in a recent interview. “Our customer service is unlike every other airline, which has this image of, ‘We want to fall down at your feet and you can walk all over us and the customer is always right,’ and all that nonsense.”

By contrast, Mr. O’Leary continued, Ryanair promises four things: low fares, a good on-time record, few cancellations and few lost bags.(critical driver of their competitive separation)

“But if you want anything more — go away! Will we put you in a hotel room if your flight was canceled?” Mr. O’Leary asked rhetorically. “No! Go away.”

Inside the Kraft Foods Transformation
Eleven of the top leaders from the largest food and beverage company in the U.S. talk about their three-year turnaround and their campaign to reorganize for growth.

Reprint No. 09307
http://www.strategy-business.com/article/09307?gko=399b2

Published: August 27, 2009
/ Autumn 2009 / Issue 56

I HIGHLY recommend reading this article in full. The intro is:

"When a company’s corporate core gets too far from its businesses, from the marketplace, and from its consumers, then a new organizational model may be needed. That was true of Kraft Foods when I (Irene Rosenfeld) returned as chief executive in June 2006. I had just spent three years running the Frito-Lay division of PepsiCo, where decision making was highly decentralized. That experience had reminded me how powerful it is when people come to work every day aligned with and focused only on the business, rather than on the internal organizational demands"

This is the decentralized organization model they evolved to:

Cisco Buys Norwegian Firm for $3 Billion
By ASHLEE VANCE
NYT, 10/2/09

Successful innovation across full business designs –segmenting target customers and determining the desired outcomes for them; developing a value proposition for those targets; and defining a sustainable value capture model—should require an expansion of one’s capabilities (in the broadest sense from physical and HR assets, to market access, to intellectual property etc.) if the organization is pushed hard enough. My belief is that your current capability platform must be a critical component of achieving the desired growth business design (if not, why do it) but it should not be limiting. How to achieve those capabilities is always an issue. There are generally three options: build them yourself; buy them; or form partnerships/alliances (a key component of our class on Implementing Organic Growth Strategies -- http://execed.kellogg.northwestern.edu/programs/LEAD20/index.htm)

This article on Cisco’s recent capability plan to build their business for video conferencing exemplifies that the answer is situational.

M&A to Fill Capability voids:

"Cisco sells companies expensive, room-size videoconferencing systems known as TelePresence systems. Tandberg has similar technology but also sells smaller, cheaper conferencing units. In addition, Tandberg has specialized software for managing videoconferencing systems and for creating connections between systems that rely on different underlying technology.
“It really enables us to build out our portfolio,” said Ned Hooper, a senior vice president at Cisco.
Cisco’s corporate videoconferencing products require the company to outfit a customer’s conference room with several large display screens, networking equipment and even special tables, chairs and wall paint. By contrast, Tandberg has a range of gear, including high-definition video systems that can sit on desks or be used with personal computers."

M&A to drive growth for existing capabilities and to go into new markets:

"Cisco has bought close to 40 companies in the last five years…….the acquisitions have suited Cisco’s mission of backing products that generate more Internet traffic, which in turn drives demand for the networking hardware that has long been the core of its business.
The deals have also thrust Cisco into new markets like consumer electronics, business collaboration software and computer servers where the company now finds itself in direct competition with its traditional business partners, like Hewlett-Packard, Microsoft and I.B.M."

They will form alliances when it is the preferred approach particularly when the challenge of integrating an acquired company is very difficult, in this case a true service business vs. what Cisco normally does:

"Still, companies like Cisco, Dell and EMC must find ways to match the heft of Hewlett-Packard and I.B.M., which have huge technology services businesses to complement their hardware and software pursuits.
Rather than acquiring a large services company, Cisco will continue to partner with independent players like Accenture and Wipro, Mr. Chambers said.
“I think that is a more scalable, faster-speed and less confrontational model,” he said."