Friday, August 23, 2019

Southwest's Advantages

Southwest built its company on a frugal, customer-focused, cost-effective ethos, wringing out every ounce of value from its operations and assessing the market for opportunities to separate itself from its competitors.  By flying between lesser-used airports and avoiding “the traditional hub-and-spoke system,” it can bring down costs and, more importantly, flight and boarding time by avoiding highly-trafficked airports.  The airline finds further efficiencies in its boarding process, the planes it flies, and by purchasing fuel “years in advance.”  It is always looking for the edge in pricing programs and services, trying to create a virtuous cycle where innovations beget lower prices, which beget customer satisfaction and more innovations.  Southwest’s mindset and operating principles are comprehensive and focused at all times on value.  While other airlines could copy one or even several of the features that Southwest boasts, the majority of airlines could not compete with every one of them, point for point.  Southwest’s ability to do so, and the innovations it will doubtless invent moving forward, gives it a competitive advantage that is nearly impossible to match.  

The risks to Southwest are that it gets so focused on value and cutting prices, that this pursuit could affect safety and security.  Perhaps there is pressure to board a plane faster than is possible, or to not perform as comprehensive a plane safety check as has always been done.  Little slips along the way can add up to catastrophe.  Catastrophe can set back the reputation of an airline in an instant and for years to come.

Or, perhaps the fleet of planes - or equipment - you bank on can become a liability, as is the case with Southwest and the Boeing 737 Max.

In tough economic times, you would think that Southwest would be well-positioned to thrive in those conditions.  As the airline that matches great customer service with lower prices and fast turnarounds, Southwest should actually benefit from ominous economic conditions.  Other airlines could certainly imitate Southwest’s business model, but the model is in Southwest’s DNA.  The question is: do the other airlines have the stomach to pivot all the way to what Southwest does?  Are they willing to completely move their operations to “second-class” cities and away from their hub-and-spoke operations?  And, if now one or several airlines are matching the model exactly, does it not play to the advantage of the airline synonymous with those services to win the business in a choice among (now) equals? & The Future

he jump from dial-up to high-speed internet was a crucial aspect to the success of a Software-as-a-service provider.  As we move towards 5G mobile internet, and internet overall that is quantum steps better than even what we have today, the applications and services made possible by that speed will change how we interact online, and off.  Machine Learning, Artificial Intelligence, and algorithms will be assimilated and computed in ways that are beyond our conceptions.  They will also interact with a wired world, in what is right now called the Internet of Things.  A company like will certainly be on the cutting edge of what these technologies can make possible to its users.  Creating greater efficiencies will be an understatement.  

At a practical level, the company’s Platform-as-a-service, called, could yield more products as well.  This service allows customers to create their own applications atop the platform.  The intelligence that can gain from these everyday innovations could power the next product, for all users or for meaningful niche audiences. & Success foresaw a world where customers would “rent” software from the connected internet, also known as cloud computing.  Today, we cannot imagine a world without cloud computing, which powers almost everything we do, from entertainment, to work, to collaboration, to basic human contact.  But, in the times before was created in the late 1990s, consumers would manage and interact with almost all computer software at a local network level.  Discs would be provided once you purchased software, which would allow you to download the current iteration of that product.  This product would then sit locally on your computer, and only your computer.  You would pay a large, one-time fee at the initial purchase and then each time you wanted to update a product.  Update cycles were often annual affairs.  Even if a cloud-like service could exist at the time, (slow) internet speeds would make it a very frustrating product.  

Founder Marc Benioff was able to visualize a future of where lightning-fast internet speeds would be the norm, and then leverage that knowledge to see that consumers in the future would welcome software subscriptions from a centralized platform.  This virtuous cycle would then make the product even better because software/platform updates could be distributed and pulled down in much faster increments.  

The company was also extremely customer-focused, building beautiful interfaces, welcoming and acting on customer feedback, and continually innovating and iterating the product.   And while its core product was excellent, was not shy about acquiring new companies to bolster its offerings, including 19 companies alone between 2010-12. does not rest on its laurels, either.  It is always working to improve its products, pivot towards new ones, and relentlessly seek new customers.  According to a case study about the company, it “spends 7 percent of revenues on research and development and an astonishing 53 percent on marketing to help generate leads and new customers.”  

What's Next for Apple?

Particularly in technology, it’s hard to predict what’s next.  And if the typical consumer can, then that is probably not a great thing for the company.  Apple tends to dabble in markets that are not its core offerings - think cars - but it is difficult to see some of those products panning out.

Apple may have reached maturity in the life cycle of its hardware products, like phones, tablets, laptops/desktops, wearables.  Services will be the product that Apple focuses on going forward.  Moving from high-price, one-time purchases for hardware, towards regular and modest subscription costs and ongoing services is the best bet for the company.  With products like magazines (Apple News), television and movies (Apple TV+), iCloud (cloud storage), music (Apple Music), as well as app subscriptions (App Store), Apple Pay/Apple Card, AppleCare, and Apple Health, Apple is looking to make revenue from its users on an ongoing, frictionless basis.

Apple & Innovation

Apple is led by a visionary cross-functional management team, especially in the years that Founder and CEO Steve Jobs was at the helm.  Jobs identified world-changing talent and put together a brain-trust with people like Johnny Ives and Tim Cook, and it was this small coterie of individuals who could bring technological marvels to market in quick order.  Jobs’ innate ability to know what customers wanted before they even realized it was the engine that drove Apple’s innovation.

When you think about the “Make or Buy” decision, Apple certainly made some acquisitions over the years - notably Beats by Dre - but organic growth in its own laboratories was what accounted for the majority of its product creations.  Even while creating entirely new product lines, the company also benefited from incremental innovation.  From software updates, to tweaks to original product designs, Apple has always looked to deliver revolutionary and evolutionary change.  

Apple has also not been shy about disrupting its own technologies, such as creating an iPad which could be a competitor to the iPhone or Mac computer.  Also, think about the initial uproar after they removed the headphone jack from iPhones.  The company took its lumps in the media and from customer reviews, but it believed this was the decision to future-proof the product.  Eventually, the AirPods - a proprietary wireless version of the company’s wired earbuds - were released and took over the market; people stopped even thinking about wired headphones.  

It has not all been success for Apple.  The company moves nimbly and releases what it thinks will be great products.  Alas, sometimes they are faulty ideas or products that the market does not identify with.  Misses have included Ping, the company’s attempt at a music social media site; the release to all iPhones of a U2 album; “bendgate”, where newer, thinner phones would literally bend from pocket pressure; antenna gate, where calls would drop from certain hand placements on the phone; and, most recently, “AirPower”, which was to be the wireless charging station to rule them all.

There are very few Apples, but there are companies that come close and a few that are near-equals.  Google comes to mind.  Google started as a search engine that could index and organize the chaotic internet of the time.  It expanded to the innovative Google AdWords (advertising), Gmail (e-mail), Chrome (web browser), and more.  It has made smart acquisitions, most notably of YouTube in 2006.  The company is always innovating and often prefers to release products that are not necessarily “finished,” but that are good enough to hit the market.  It then takes in customer feedback and iterates the product into the best possible version.

#310: Everywhere You Go

Matt talks with fellow podcaster Earnest Christian about being true to yourself, finding time for your passions, current listening habits, sports, and much more.

Check out this episode!

Wednesday, August 21, 2019

#309: Matthew O'Daniels

Matt O'Daniels joins to talk 2019-20 NCAAF preview, NBA offseason, and MLB playoff push.

Check out this episode!