Nothing excites a management consultant than helping a company with its business model transformation. So when I heard the news of IBM selling off its PC business to Lenovo, I knew it was the final step in the business model transformation (products/services to high-value solutions) of the company. (Related article: The pharmaceutical companies in the US badly need business model transformations)
Now comes even bigger news of Delta Airlines announcing a business model transformation even though the company only used the term "transformation". Apart from another attribute that I love as a management consultant: simple (a word used several times by the company), Delta says that it will make other changes "...including improving customers’ online experience at delta.com, revising its onboard food product and unveiling new employee uniforms, as part of an ongoing company-wide overhaul to make the passenger experience more comfortable, affordable, simple, stylish and inviting." I love it and if they can pull it off, they might literally change how the airline sector looks in the United States.
Why did the partial business model transformations at other airline companies did not go so well?
When the major carriers launched their discount airlines they were essentially trying to compete with the likes of Southwest and Jetblue. As any management consultant will tell you, no business model transformations are easy and more companies fail than succeed. The ones that have even greater likelihood of failure are those that are partial. "Let's change what is easy" types. They are bound to fail because the resistance to change is so high that what really needs to be changed does not get changed. Literally a change management consultant's nightmare.
So what is the probability that Delta Airlines will actually succeed in transforming its business model?
Delta Airlines has finally concluded that if they want to survive as an airline, there is nothing else that can do except change fundamentally the way they do business. Southwest and Jetblue have set new rules of the game and using an old business model, airlines like Delta simply cannot compete. No wonder it is hard to track of what airline is under Chapter 11 protection.
Delta has made a very bold move and that is the only reason it might actually pull it off. The company has tested the robustness of its business model by implementing it through Song Airlines and at its hub in Cincinnati. (Related article: How to develop competitive strategy?)
A key element of success of a business model is that all of its components should support and reinforce each other. When you run a small division on a different model and the rest of the company on an obsolete business model, the overall result is complete chaos. By following this approach of an enterprise-wide business model transformation, Delta might succeed.
Yes, it will be extremely painful to executives and employees alike. I am not sure that any airline can lay any more employees off but change is not going to be easy. Major carriers all have very high cost structures and Southwest and Jetblue have demonstrated that there is enormous scope for cost reduction. I am sure change management experts would enjoy their project at Delta.
Related article: Business process redesign framework
Now comes even bigger news of Delta Airlines announcing a business model transformation even though the company only used the term "transformation". Apart from another attribute that I love as a management consultant: simple (a word used several times by the company), Delta says that it will make other changes "...including improving customers’ online experience at delta.com, revising its onboard food product and unveiling new employee uniforms, as part of an ongoing company-wide overhaul to make the passenger experience more comfortable, affordable, simple, stylish and inviting." I love it and if they can pull it off, they might literally change how the airline sector looks in the United States.
Why did the partial business model transformations at other airline companies did not go so well?
When the major carriers launched their discount airlines they were essentially trying to compete with the likes of Southwest and Jetblue. As any management consultant will tell you, no business model transformations are easy and more companies fail than succeed. The ones that have even greater likelihood of failure are those that are partial. "Let's change what is easy" types. They are bound to fail because the resistance to change is so high that what really needs to be changed does not get changed. Literally a change management consultant's nightmare.
So what is the probability that Delta Airlines will actually succeed in transforming its business model?
Delta Airlines has finally concluded that if they want to survive as an airline, there is nothing else that can do except change fundamentally the way they do business. Southwest and Jetblue have set new rules of the game and using an old business model, airlines like Delta simply cannot compete. No wonder it is hard to track of what airline is under Chapter 11 protection.
Delta has made a very bold move and that is the only reason it might actually pull it off. The company has tested the robustness of its business model by implementing it through Song Airlines and at its hub in Cincinnati. (Related article: How to develop competitive strategy?)
A key element of success of a business model is that all of its components should support and reinforce each other. When you run a small division on a different model and the rest of the company on an obsolete business model, the overall result is complete chaos. By following this approach of an enterprise-wide business model transformation, Delta might succeed.
Yes, it will be extremely painful to executives and employees alike. I am not sure that any airline can lay any more employees off but change is not going to be easy. Major carriers all have very high cost structures and Southwest and Jetblue have demonstrated that there is enormous scope for cost reduction. I am sure change management experts would enjoy their project at Delta.
Related article: Business process redesign framework