Today Delta’s CEO made an announcement that their business is not sustainable as is. Thus, this is an interesting interview with one of the more colorful figures in business – Herb Kelleher, chairman of Southwest Airlines. There are many theories as to why Southwest remains successful, I’ll share ours…

1) It helps to be founded in a period of deregulation – United, Delta, American etc have enormous labor costs due to historical union pacts
2) The reason SWA’s business model is so hard to replicate is that it has many processes that interlock to form true differentiation and efficiency. While you may be able to copy the point to point model, or the pricing procedure, duplicating them all and the connections between all the processs is incredibly difficult.

We did some research a few years ago on the value of innovation. In summary, the data we had correlated from ‘level’ of innovation (ranging from product, services, solutions, process, and business model) had a near exponential relationship with market valuation. I think Southwest is somewhere between the process and business model level after 35 or so years of operating. But the key of course, as with any business model is execution…

Well done Herb, and remember http://www.iflyswa.com 🙂