Airline pioneer proves the power of simplicity

Herb Kelleher

We lost a giant in the business world when Herb Kelleher died on Jan. 3 at the age of 87. Long before innovation and disruption were industry buzzwords, Kelleher was revolutionizing air travel with the late-1960s launch of Southwest Airlines. He opened up air travel to penny-wise consumers who previously had to rely on ground transportation for long distance trips. We can learn a few things from Kelleher.

First, Kelleher adopted game-changing tactics that lowered the cost of air travel. For example, Southwest only flies Boeing 737s, while other airlines fly a variety of airplane models. The one-aircraft approach is simpler, and saves a lot of money on maintenance and training. As a banker, how could you simplify your operations? Where could you streamline? Where would uniformity save you money?

Second, by lowering prices, Kelleher was able to expand the market. Those new customers became his customers. Southwest didn’t have to fight to take customers away from other airlines. So often in banking, lending becomes a project to take customers away from competitors. Is there a better way — a way to serve customers who currently aren’t looking to banks to finance their needs?

Third, they don’t charge typical fees. On Southwest, you can change a reservation without a fee, and you can check two bags without a charge. You might think this costs them money, but I would argue these practices generate a ton of positive, effective, free, word-of-mouth advertising. However much money Southwest might give up on the front end, it is consistently the most profitable airline in the United States. Many banks look to fee income to bolster their bottom lines but depending on the nature of those fees, it could be worth reconsidering whether you charge fees at all.

Fourth, Southwest doesn’t fly to Asia or Europe. It doesn’t offer first class and it doesn’t provide meals. But the airline does get you to where you want to go, generally on time. Think about the core services you provide best. Are you wasting resources offering expensive-to-offer peripheral products and services where you will never be No. 1? What do your customers really want? Figure that out, deliver, and you will have a winning business plan.

And Southwest loves its employees. Famous for remembering employees’ birthdays, Kelleher trusted employees to be themselves. No formulaic service interactions on this airline! Southwest employees delivered with enthusiasm and customers responded. Likewise in banking, see what a difference it makes to love your employees. I guarantee, customers will notice.