The great entrepreneur Herb Kelleher of Southwest Airlines just passed away. This excellent article of his unique brand of creativity is now 8 years old but its message goes much further back for us here at AAPN.
Back in the late 90’s, one of our Annual Conference speakers was William R. Murray, a former Marine and then an IBM executive. He talked to us about 3 main points but the first was about Herb Kelleher and his creation of Southwest. Even though over 10 years separated his talk and the following article, Bill Murray emphasized almost exactly the same points. We took them to heart. I bet we could spend a half an hour on each of the 10 points listed telling you our version of their impact here.
Over my 24+ years here, we’ve broadcast thousands and thousands of articles like the one which follows. Of course, no one article applies to all of our extremely diverse membership but some come close. This one comes close.
Ten Keys To Creativity From Southwest Airlines
randyelrod.com, JULY 20, 2011
Whether you’re a budding entrepreneur or just want to look like a genius, these ten keys to creativity from Southwest Airlines are just the ticket.
1. Keep the idea simple enough to draw on a 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 labeled the corners “Dallas,” “Houston,” and “San Antonio”—The Golden Triangle of Texas.
2. Raise more money than you need. Now double it. The partners—now four men, including Rollin’s brother-in-law and a businessman-politician named John Peace—figured they needed a quarter-million dollars just to start the Company. Herb decided to raise twice that amount. That was prescient; the lawsuits would ground the airline for another four years.
3. Target the overcharged and 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.
4. Two strikes is one hit away from a home run. The lower court ruled against Southwest. So did the appeals court. Herb took the case to the Texas Supreme Court, offering to do the lawyering for free and to pay his own expenses. 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. The only problem was, the new airline was broke.
5. Lack of money makes you more creative. Actually, Southwest was less than broke: 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. That’s the equivalent of buying a house at a discount and having the owner hold the mortgage. The recession of the early ’70s had been especially tough on Boeing, which had overbuilt aircraft it couldn’t sell. And 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. (One of them, Emilio Salazar, went on to pilot Southwest’s first flight.) Having no training facilities of its own, Southwest sent the new Crew to flight school at United Airlines.
6. A crisis can contain the germ of an 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. That plane had been used for regular flights as well as charters. 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.
7. 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. The airline chose to buy 737s for most of its fleet. This concentration on one kind of plane makes maintenance more cost-effective and allows more efficient training for Flight Crews and Ground Crews.
8. 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.” Our source makes the quote significant: We heard it from current CEO Gary Kelly, whose own humor has a self-deprecating flavor. It’s a tone that works, especially after your company has risen from underdog to big dog.
9. Beware of imitators, but take them as a compliment. 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 low-fare divisions of legacy airlines that attempted to copy the operation and business philosophy of Southwest in many of the same markets.
10. 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. This Company changes like crazy. And it stays the same like crazy—in ways like, say, being crazy.