Wednesday, December 08, 2010
Southwest Expands and Slips
Are we seeing the first signs of slippage in the Southwest model given its aggressive expansion of late? As readers of this blog now, I'm always concerned when firms begin to violate their tradeoffs, which made them unique, in an effort to drive growth. In the past few years, Southwest has moved into congested airports such as LaGuardia and Boston's Logan Airport. Now, we read from Business Week that Southwest has slipped to eighth in on-time arrivals, after being first or second for many years. Moreover, turnaround time has increased from twenty minutes to thirty minutes. Can Southwest stop the slide? How will the AirTran deal affect this decline in performance? Southwest bears close watching in the next year or so.
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Would you say that all companies that aim for double-digit annual growth will at some point fall apart because they necessarily violate trade-offs in order to achieve that growth? Are there any examples of companies that are actually able to grow significantly year after year, long-term, while remaining true to their initial trade-offs? I'm just thinking that at some point focused companies like Southwest will reach an apex and realize that they have to violate trade-offs if they want to grow at double-digit rates...which ironically leads to their demise.
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