How do you leverage strategic themes to build your competitive advantage? Building on the example of Southwest Airlines as discussed in this video “How Do You Create Strategic Clarity In YOUR Organization?”, Gary further explains how to build competitive advantage by focusing on the strategic themes that make you different from your competition.
Here’s the transcript for this video:
“This principle can apply to nonprofits. It can apply to universities. It’s the same process. What’s the passion, what will make us different, and what’s the economic driver?
Now, in the case of Southwest, the economic driver is related to cost per passenger seat mile. You say, “Wow that’s a mouthful! What does that mean?”
Well, it means that they were driving everything they could to think of ways to lowering the cost of carrying a single person a single mile on an airplane. And this uncovers a whole series of activities that they needed to do to be different. And so, first of all, because they had short flights, they could have one brand of aircraft. That meant they only had to train their mechanics on one type of turnaround in terms of maintenance and repair. They only had to stock one type of parts. They didn’t have to have baggage handling that changed aircraft from one place to another. All these things lowered their cost. Lowering their cost allowed them to have higher volume, which allowed them to more fully utilize their planes, which drove down their cost per seat.
And that’s the amazing thing about strategy. When you get it right, it’s simple to express, and it unites people in their understanding of how their activities relate to driving down that one economic indicator. And the power of it is manifested in that these guys have made more money than the rest of the industry put together in the last 40 or 50 years.
So let me close with this thought: When it comes to strategy, strategy is about making choices. It’s about creating trade-offs. It’s about deliberately choosing to be different. Operational effectiveness, on the other hand, means performing similar activities to your competitor better than them. So it’s a very different idea of strategy and it’s a foundation for better performance.”