How Would You Beat?

How Would You Beat United Airlines?

July 31, 2020 thrv Season 1 Episode 9
How Would You Beat?
How Would You Beat United Airlines?
Chapters
How Would You Beat?
How Would You Beat United Airlines?
Jul 31, 2020 Season 1 Episode 9
thrv

In this episode, we look at a few different elements of Jobs Theory using United Airlines. How would you beat a huge airline like United? And who is the real competition for airlines. As Covid makes clear, airlines are not just competing with other airlines. We explore how you can use JTBD techniques to analyze your competitors and identify competitive threats that are not always obvious. 

Show Notes Transcript

In this episode, we look at a few different elements of Jobs Theory using United Airlines. How would you beat a huge airline like United? And who is the real competition for airlines. As Covid makes clear, airlines are not just competing with other airlines. We explore how you can use JTBD techniques to analyze your competitors and identify competitive threats that are not always obvious. 

Jay Haynes :

Welcome to our podcast. How would you beat? In each episode we pick a company and talk about how you could use jobs-to-be-done innovation methods to beat that company's product. We'll discuss innovation theory and explain the methods so you can put the theory into practice at your company. I'm Jay Haynes, the founder and CEO of thrv. That's T H R V without the vowel. thrv.com. We help product marketing and sales teams use jobs to be done innovation methods to build market and sell great products. I'm here with my colleague, Jared Ranere. Today we're going to look at United Airlines. How would you be United? United is obviously one of the major airlines and airlines as a result of COVID in this pandemic have obviously been hit really hard. They've lost two thirds of their market cap and we've talked about United before a little bit in a previous podcasts on Zoom. And in some ways, Zoom and United are competitors. And we'll get to that. But if you were looking at an airline and trying to figure out how would you beat them? How would you compete? You can use jobs-to-be-done theory and innovation methods to think about the jobs that people are hiring airlines for that would be the starting point to your product strategy. And if you are a direct competitor, like Delta, you could do this. Or, if you were thinking about competing with the airlines and taking market share for customers who are getting a job done using airlines today, you could use jobs-be-done innovation methods as well. We'll explore each of those things if you were a direct competitor, or if you were a new competitor. So how would you beat United?

Jared Ranere :

You mentioned that United took a major hit since the pandemic began because people aren't flying. But I think it's really interesting to look at United before the pandemic hit. Their market cap at the time was 27 billion. And they weren't winning, they were trailing Delta by 10 billion in market cap. And if you followed any of the airline news in like late 2019, early 2020, and I would just say even early 2019, you would have seen a lot of press about how Delta's customer experience was much better than United how Delta was treating its employees better, and how Delta was fetching higher prices per seat than United Delta was really winning on helping people take a flight better than United. So they were winning. They were they were beating United. Is that the right approach today? Is that is that we should we work on helping people take a flight better? Is that the best way to be United?

Jay Haynes :

Yeah, that's a great question. Obviously, it's fairly complex. So we'll try and break it down. When you're looking at a product or service like an airline, the first thing you can do is look at just that customer experience and that customer experience of using the airline to take a flight. To go to a foreign destination or a faraway destination, you can start to look at the consumption experience, as it's called in jobs- to-be-done theory. There's a whole series of consumption jobs that are actually using an airline to travel to a faraway place. And those include purchasing the product. So how do you get the ticket? How do you experience it? And then actually using the product, you can think of it as interfacing with the airline, and all of those customer experience things are incredibly important because if you have a bad experience, for example, it's not easy to purchase the product. Obviously, it's not going to be a good customer experience. And I think those are the dimensions that Delta really started to compete on, was how can we make all of this better? Now, I do think it’s kind of funny that Delta is an example of someone who is beating United. It's probably an example of why airlines still have a lot of room for improvement. And the reason I find it's funny is because Delta has what I consider to be the most confusing boarding priority system. And you can't tell you get your ticket and you're like, Oh, I'm sky priority. I think that's some sort of priority. And then you end up boarding, in the fifth group, because there's medallion and there's premium medallion, and there's sky priority medallion. I still can't figure out what the hierarchy is. There's no human who doesn't understand Delta's internal system could understand like how that works without some education, which is crazy. I still think it's insane. Why don't they just label them 1234 5678 which is exactly what Southwest does. You line up for Southwest is very easy. I'm in 5 or I'm in B22. It's pretty simple system. And I think that it’s interesting to think about why the airlines do that and it's probably because they're actually emotional jobs. They want their best customers to feel a certain way about using the airlines and those are important to me people like status they'd like to know like, Hey, I’m Gold Medallion Premium, whatever. That's where two things are intersecting. One that emotional experience, I'm gold, medallion, whatever, makes it more difficult to tell where am I supposed to get in line. Then you have that very strange customer experience where you're all kind of huddled around waiting, has my group been called? In front of these other people and the other people are trying to get in front of you. I find that a completely absurd customer experience. But nonetheless, Delta was clearly doing better than United in their customer experience rankings. But that's the way you would go about analyzing all this. If you were to say, Okay, how do we figure out if United is doing better than Delta is you would look at those jobs of purchasing a ticket, even boarding a plane that's really a consumption job of using an airline to get to a destination.

Jared Ranere :

Right. And I think what you're pointing out is something that is at the heart of jobs-to-be-done. That we sort of gloss over sometimes because we think about this all the time, but maybe not everybody else does but it's why are customers choosing one product or service or to not even try to get the job done at all over another and the consumption experience once you decide to take a flight, that consumption experience what is it going to be like to check my luggage? What is it going to be like to get my boarding pass? What is it going to be like to board the flight? What is it going to be like once I get there and I have to go through customs? Once you decide to take a flight, once you make that choice, you're now deciding between airlines on that consumption experience. But why do you decide to take a first flight in the first place, and that's where jobs-to-be-done can be really powerful. Because if you are not an airline, you can also serve customers, right? So when you think about why they're deciding to take a flight in the first place that gets you to what we call the functional job. The reason why people are using this product or service at all. So if you think about why people want to take a flight, they might be making a sales trip to acquire customers. That would be one functional job. They might be taking a vacation with their family or friends. They might be going to visit family or friends.

Jay Haynes :

There's a ton of different jobs. You could be taking airline to research information, you have to go to some archive or library somewhere where the information is not online. You could just be experiencing new cultures, meeting with colleagues to go shopping in a location, etc, recreational activities, fishing, skiing, etc. And, I think it is important, Jared, you make a great point, which is, if you're trying to innovate in any market, whether it's the airlines or whatever, you want to break down functional jobs, like we're talking about here. The consumption jobs, which we were talking about before the purchasing the product, interfacing it with how to use the product, learning to use it, etc. And then the emotional jobs. And the reason it's important to break down those three different jobs, is because what jobs theory is really used for is helping you understand complexity, and markets and humans are very complex. So if you can get a handle on that complexity, and then have a metric that you can target and measure, you're much more likely to succeed. Those metrics and those variables in the jobs are incredibly critical. And the reason we always look, at functional consumption and emotion is because the functional job does define the market. That that is the key, the market you're in is the functional job your customers trying to get done. And we've seen this happen with companies where they build a beautiful interface, and it looks great, and it seems easy to use, and it fails in the market. And the reason is, it's a great interface, but it doesn't help with the functional job. You and I have talked about this a lot with the companies we work with, but one of our favorite examples of this is Craigslist. Craigslist is it literally is an interface from the 1990s and they haven't changed it. It's just horrible. It doesn't meet any current design criteria. It would never win any design awards, but it gets the functional job done because they have a ton of liquidity in the marketplace. There are buyers and sellers of stuff on Craigslist. And so, people use Craigslist, even though it has a terrible interface. If you were going to compete against Craigslist, just having a better interface isn't enough, because the underlying jobs are to buy and sell stuff. And so, you would have to have that liquidity within the same market. That's true here too, with an airline. Now, if you're just direct competitors, like United, and Delta, you are competing for all these consumption jobs, because people have already decided to take a flight. They're trying to get to a faraway destination for whatever reason. And if you're in that mode of competing, well, Delta and United, you do have to consider those consumption jobs that are extremely important. But if you're trying to innovate against them. If you were trying to help people acquire customers, that's where a different platform can be a huge threat. We talked about this and how you would beat Zoom. But you can see this play out during this pandemic, just in very obvious terms. Instead of getting on an airline to use a plane in the airport as a platform to acquire customers, people are using Zoom, because Zoom is an alternative to acquiring customers.

Jared Ranere :

If the risk that Delta and United have is if they don't acknowledge what the true functional jobs are, is that they operate under an assumption that taking a flight is actually the best way to get all of these things done. And if they just assume that then that's where they're going to miss these competitors like video conferencing, who can help people acquire customers without flying and potentially you can acquire more customers faster because you're not taking the time to go to the airport, get to your hotel, check in, do all the other stuff that around taking a flight and going to physically meet with somebody. If you're just assuming take flight as the best answer to all these things, you could really miss out on innovations and competitors that could sideswipe you and take an important part of your market. We always talk about how the sale part of your customer base the sales, people who take flights, or many professionals are probably more willing to pay a premium price because the company is paying for it. So, they're less price sensitive, they're going to make money once they get there. And so, it's worth it to invest in the trip. And if they start using a different solution to other than flight, it's a major major threat to airlines. If you're United and Delta by having a list of the functional jobs that you're serving with taking a flight, you can see more clearly where flying is the best and perhaps the only way to do it, and you can make sure that and then you don't have to worry too much about innovating as those functional jobs because you already have an excellent functional solution. But then you have to think about where are your premium customer bases. And are your revenue drivers at risk because there are new solutions emerging to get the functional jobs done better than flying? And no matter how good you make that flight experience, it's not going to be better at the functional job. So, you're at risk, then the question is what do you do about it?

Jay Haynes :

This is super important. I think what you do about it is brings up the question of resiliency for companies and you can see right now obviously, the airlines are not very resilient because we have this , pandemic that has just caused a huge humongous problems for them obviously, and they're laying off tons of employees etc. But this is a hopefully a once in 100 year phenomenon. We're not going to have a pandemics every other year, that would be a problem. Although I did see the plague was emerging again, it doesn't seem too exciting. So, this idea of resiliency is important because even Warren Buffett when he invests, he talks importantly about the concept of margin of safety. What could go wrong with an investment to have you lose your money? Which is the same thing from a company standpoint. What could go wrong with your company, so that it could put your company and your employees and their livelihood all at risk, like what's happening with the airlines right now. And if the companies of the airlines thought of themselves as more of a platform for these jobs. We talked about this a lot with companies that we worked with, even way before the pandemic. The airlines should have been buying web conferencing systems and really putting together a whole platform for companies and salespeople, for example, to acquire customers. If they really looked at that job and said, okay, yes, there are going to be times when you needed to get on a flight. But there are other times when you don't have to get on a flight, and you can acquire customers better with web conferencing and faster cheaper. That's where the airlines are now because they've seen how at risk, they really are for something. Just throwing a wrench in their whole business to an extreme degree like this, that going forward, we might never get back to the same type of travel that we had pre COVID. The reason for that is people have hired other solutions to get the job done. So everybody who's doing some sort of business meeting from whether it's a board meeting, or a sales call, or a team meeting, or something, now has an alternative to getting on a flight. And, Jared, you and I have done this. We've traveled all around the world as companies bring hundreds of peoples together to have a meeting. And that is unlikely to return to that level very soon. It might return but when people have these alternatives, and now these alternatives are being invested in so routers, internet bands, with video conferencing quality, stability, audio quality, all that thing is that is going to get better and better. You can see it in Zoom. Zoom's now got $75 -$80 billion market cap something like that. Yes, its value is going up because people see it as an alternative. So this is why the airlines should be rethinking their business. Not just saying, hey, can we get a bailout and we want the airline industry to come back. But really what are the business that we're in. And interestingly, as well, the airline business is actually not a very good business. It's not very profitable. Now the airlines have figured out a way to generate profitability by being semi-monopolies with hubs and spokes systems. But an airline is a service and that plane is taking off, they're going to price down to the marginal cost of that seat because they can't resell it. Once the flight has taken off and is leaving its destination. You can't inventory that seat. So it's already not a very good business. Whereas software obviously is can be incredibly profitable, which is why Zoom has a tiny fraction of United Airlines, but they have a much bigger market cap, because just more much more profitable business. They should be rethinking their entire business and looking at it from these jobs-to-be-done perspective. Even when we come out of this pandemic, how do we think about ourselves differently and what we're doing for our customers and what jobs are hiring us to do?

Jared Ranere :

Specifically, the way to approach that and this goes not just for airlines. This goes for any business that's operating on a platform that they think people want to use because of the platform. Like trains were this position decades ago. The oil industry is in this position, right? People think everybody wants oil. They don't really want oil, they want energy in order to get a bunch of different jobs done and if somebody comes up with a different way than oil to do it, it will get adopted that faster and cheaper. Any business that thinks that like their product is the thing that they need to improve and they just people automatically want to use their platform, whatever it is. If you sell video conferencing right now you should be doing this. The exercise is to go through if you're very large, you're generating a lot of revenue already. Go through and figure out who are your biggest revenue generating customer segments. And most profitable, define those customer bases. Think through why are they choosing using your product in the airlines case? Why are they taking a flight? They trying to acquire customers. Are they trying to do research experience a new culture, get out of bad weather? Once you have that list, look through and figure out which are the biggest market sizes right? This is how you do product strategy and jobs-to-be-done. You identify the customer identify the job, identify the size of that market, then you need to figure out the unmet needs. So, airlines need to figure out which are the biggest market sizes is where they're getting a lot of their revenue from today from which customers? What are the goals that people are trying to achieve? What are those jobs? And then what are the unmet needs today? And then they have to do an analysis or flights a great way to satisfy those unmet needs in the job. And if not, then they need to think about, okay, what platform would be a better way to do that? Is it video conferencing? Is it something else and they should be making those investments, and this is where they really have to transform their identity? They have to be willing to say we're not an airline company. We're a company that helps this type of customer this type of customer, this type of customer get these jobs done, no matter how the best way is to do it. This is hard. A lot of companies are not good at this right. They think of themselves as a clothing company. They think of themselves as a PC company, a music company. But if you abstract away from whatever product you're selling, you think of yourself as a getting a job done company. Then it makes more sense to make these investments and other products that can get the job done better and mitigate your risk of going fully in on a particular platform that isn't the best way and then loses.

Jay Haynes :

Yeah, I think that's great. Andobviously the obvious company that has done this extremely well is Apple. As you just mentioned, Apple's name used to be Apple Computer, and they dropped the name computer, because, of course, they don't just make these computer boxes sit on your desktop. At first, they made iPods then they made phones and now they make phones and watches and tablets. And that is, I think, an incredibly important idea for big companies is that you can't stay in your box. Meaning you can't stay with your product. Even if it looks like it's something like an airline that is just going to be the forever because it's not. Things change, whether it's a global pandemic or other market forces or alternatives that are emerge, you want to be the company that is looking for those alternatives. We work with companies a lot and we do these kinds of competitive analysis. We like to think about who's a competitor that's going to attack you, that's going to take away a crucial part of your business. And Apple does this extremely well. People forget because the iPhone has been such an enormous success for Apple, obviously, they forget that the iPod was 50% of Apple's revenue at its peak. That is extraordinary. I mean, if you think about it, they built a product that was going to destroy 50% of their revenue. And they'd never been in the phone business and people dismiss their ability to get into the quote, phone business. The idea that we call it an iPhone is just kind of silly anyway, it's obviously not a phone. It's a portable computer. But they're very good at that. Right? They are very good at saying, okay, and Phil Schiller, one of their executives even talked about this he says that they think like, what job should the Mac get done? What jobs should an iPad get done? What jobs should your phone get done? What jobs your watch get done. And clearly because they're different platforms, and they have different constraints. They're each getting different jobs done. Your watch, can't edit a movie or engineer a song. So, they're not trying to make your watch do that. But your Mac can,obviously, with a lot of computing power, and it's important that other companies think about it this way, too. You mean the airlines just generally have planes and airplanes and airports. But they really should be thinking about this diverse set of products. And at first, it might look very strange. You would have enormous pressure from Wall Street analysts, especially for public companies who categorize things in these industries. And they'd say, well, wait, you're an airline? Why are you getting in this SAS CRM business?

Jared Ranere :

You don't have the right to play there. Yeah, They wouldn't understand it at all. But you would say, well, we're trying to help our customers, salespeople acquire customers or whatever it is. And then that makes much more logical sense. And in fact, for anybody listening who hasn't read the famous Theater 11 Marketing Myopia paper, which you can find on the Harvard Business Review site. We highly recommend reading that and Jared mentioned these things like oil industry, etc. That's really where all this jobs-to-be-done thinking started back in the 60s is Theodore Levitt was analyzing these industries. And these big industries have missing these huge growth opportunities. And one of the examples he uses is the oil and gas industry. The oil industry, they missed the opportunity for natural gas. He talks about the television industry versus the movie industry. And this is where they were clearly like thinking themselves, we make movies and you make television. And what emerged out of that, of course, is these entertainment companies because they don't, they don't really care if you're hiring their product, whether it's a TV or movie, or music or whatever. They care that you're trying to get the job done with being entertained. And this is true for energy companies, they’ve become more diversified. Although it's lots of issues with the energy companies. But the general idea is the theory still holds true there. And the entertainment companies would be a great example for the airlines. Because they really did become these huge diversified entertainment companies. Now they don't care if you're buying music. If you're watching their TV shows, or you're watching their movies or going to the theaters or whatever, you're still hiring that company to be entertained. And that's the way the airline should start to think about this just a spurt, certainly out of the pandemic to become more resilient than they have been in the past. I love the iPhone revenue example here, because it's like just imagining or the iPod revenue example, imagining United coming out and saying, we don't want business people to take flights anymore. We want them to use this other product we just came up with. How crazy would that look, but it's probably the right play. And, just to be clear, I like going to other parts of the world. I don't want airlines to go away altogether and stop offering flights. I would like people to beam me. If anybody comes with that technology, I prefer to get beamed from country to country. Yeah, but actually get on a plane and fly. Yeah, I like it. I like traveling. And so what we're arguing here is that if you're an airline company in order to preserve that part of your business that does get these certain jobs, like vacationing and experiencing new cultures done incredibly well. Then you need to diversify your product solutions so that you don't lose the really profitable jobs, the really big markets that other new solutions that are becoming a threat to you.

Jay Haynes:

Yeah. And what I think is incredibly important is that even at the board level of these major companies like United, they have to become more educated about these type of innovation opportunities and threats. And, imagine you're the CEO or board member of United and you're hearing this discussion, you're saying, wow, should United be in the CRM business to help people acquire customers? That's kind of crazy, or broadly web conferencing. But it doesn't look so crazy now. Because ultimately the end of the day companies are trying to create equity value. They're in the business of creating equity value. That's it you don't create equity value, you get fired by the shareholders. We can come up with different ways to structure companies. But the way it operates today is that is the key metric. So, if you had been at United and you said, Let's acquire this small company called Zoom, that's building, new web conferencing, that’s, easier to use faster, people like it, more than WebEx and the alternatives. Let's buy this company, and then it added $70 billion dollars of market cap, you would look like a genius. And the logic you would use isn't, oh, we're just going to become some diversified conglomerate. Which really didn't work. The United States went through the diversified conglomerate to kind of decades ago. That didn't really work because you are diversifying, not from a customer perspective. You are diversified from just like a portfolio of assets you were going to own that sometimes went together sometimes didn't. But if you really were customer focus, purely customer focused, and you had the job and you said yes, sometimes people can inherit, hire an airline to acquire customers, but other times they can hire, web conferencing. Okay, that makes a lot more sense. You're not diversified just for a diversification portfolio strategy. But you're diversifying because you want to be the one who's going to grow the platform that's going to be the most profitable and create the most equity value for that market. In other words, for that customer that job, and clearly that is what's happening with web conferencing. Web conferencing is going to continue to explode. I would bet any amount of money that we look 5 years from now and even look 10 years from now, the market cap of the all the players in the web conferencing I'd say remote connection markets. However you want to define that from a, platform standpoint, are going to be at least 10 x higher than the airline's just given the nature of the business, how much capital is involved, and the value delivered at lower costs for customers, you're going to see those broadly web remote connection platforms be worth a lot more than the airlines.

Jared Ranere :

Yeah. And I like your point that it's not crazy for airlines to go after that. Because even thinking through the customer acquisition strategy, imagine you're booking a last minute flight to go do some business somewhere and the airline on the on the website says, an alternative could be to use our video conferencing platform and see if you can get that deal done today before you booked this flight. It seems counterintuitive because the web conferencing platform would probably cost much less than the flight would, but it's recurring revenue over time at incredibly low cost of customer acquisition. And it's a nice play and you're creating customer value.

Jay Haynes :

Yeah, and much higher margin. That's right way higher margin.

Jared Ranere :

You have channels already. It kind of makes sense when you start to think through the tactics of it, we’re already there. We're already working with this customer. The bottom line is if you don't have a list of what your functional jobs are, that people are using your platform to do, you are at incredible risk. And you could miss out on huge innovations.

Jay Haynes :

Yeah, I think that's great. And that's probably a good place to end that. If you're thinking about how would beat United, you'd want to start with that list of functional jobs. You want to look at the consumption jobs, and make sure that you really are thinking what's available today. That could take share and take those customers from those airlines by helping them get the job done better. Thanks for listening to our How Would You Beat podcast. Visit us at thrv.com. That's thrv.com. To get our free how to guides and try our jobs-to-be-done software for free.