The Strategy Canvas of the Short-Haul Airline Industry The strategic profile of Southwest Airlines differs dramatically from those of its competitors in the short-haul airline industry. Note how Southwest’s profile has more in common with the car’s than with the profile of other airlines.
Southwest Airline’s profile is a perfect example of a good strategy, because it shows the three complementary qualities that characterize an effective strategy: focus, divergence, and a compelling tag line. If your company’s strategic profile does not clearly reveal those qualities, your strategy will likely be muddled, undifferentiated, and hard to communicate.
Focus.
Every great strategy has focus, and a company’s strategic profile, or value curve, should clearly show it. Looking at Southwest’s profile, for example, you can see at once that the company emphasizes just three factors: friendly service, speed, and frequent point-to-point departures. By focusing in this way, Southwest has been able to price against car transportation; it doesn’t make extra investments in meals, lounges, and seating choices. By contrast, Southwest’s traditional competitors invest in all the airline industry’s competitive factors, which makes it much more difficult for them to match Southwest’s prices. Across-the-board investing is often a sign that competitors’ moves are setting a company’s agenda.
Divergence.
When a company’s strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness. Consider the similarities in most airlines’ meals and business-class lounges. On the strategy canvas, therefore, reactive strategists tend to share a profile. Indeed, in the case of Southwest, we found that the value curves of the company’s competitors were virtually identical, which is why they share the same value curve in the exhibit. By contrast, the value curves of innovators’ strategies always stand apart. They might eliminate or substantially reduce investments in certain factors, or they might dramatically increase investments in others. Sometimes they even create new factors, thereby changing the industry’s overall profile. Southwest, for instance, pioneered point-to-point travel between midsize cities; previously, the industry operated through hub-and-spoke systems.
Compelling tag line.
The final test of a good strategy picture is how well it lends itself to a tag line. “The speed of the plane at the price of the car—whenever you need it.” That’s the tag line of Southwest Airlines, or at least it could be What could Southwest’s competitors say? Even the most proficient ad agency would have difficulty reducing the conventional offering of lunches, seat choices, lounges, and hub links with standard service, slower speeds, and higher prices into a memorable tag line. A good tag line must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest. If you can’t come up with a strong and authentic tag line, chances are you don’t have a strong strategy, either.
Drawing Your Strategy Canvas
Drawing a strategy canvas is never easy. Even identifying the key factors of competition is far from straightforward. As we shall see, the final list is usually very different from the first draft.
Assessing to what extent your company and its competitors offer the various factors is equally challenging. Most managers have a strong impression of how they and their competitors fare along one or two dimensions within their own scope of responsibility, but very few are able to see the overall dynamics of their industry. The catering manager of an airline, for instance, will be highly sensitive to how his airline compares in terms of refreshments. But that focus makes consistent measurement difficult; what seems to be a very big difference to the catering manager may not be so important to customers, who look at the complete offering. Some managers will define the competitive factors according to internal benefits. For example, a CIO might prize his company’s IT infrastructure for its data-mining capacity, a feature lost on most customers, who are more concerned with speed and ease of use.
Over the years, we’ve developed a structured process for drawing and discussing a strategy canvas that results in the creation of distinct and communicable strategies. It was recently adopted by a 150-year-old financial services group that we’ll call European Financial Services (EFS). Through the process, EFS developed a strategy that has boosted overall revenues by 30%. The process, which involves a lot of visual stimulation in order to unlock people’s creativity, has four major steps.