My highlights from the book:
1. This eccentric and outlandish company has established a consistent pattern of deviating from convention. When other airlines were creating big hubs, Southwest was flying point to point. Instead of serving expensive meals, flight attendants pass out nuts. Instead of wearing stuffy uniforms, they sport polo shirts and shorts.
2. Convention is boring. Nuts are exciting.
3. “Herb, let’s start an airline.” “Rollin, you’re crazy. Let’s do it.”
4. The Texas Aeronautics Commission approved Southwest’s application to fly. In doing so, it unwittingly started a war that would last more than three years, severely test Herb Kelleher’s litigation skills, and almost drive Southwest Airlines out of business before it put a plane in the air.
5. At this point, Kelleher’s street-fighting sprit surfaced. “Gentlemen, let’s go one more round with them.”
6. I will continue to represent the company in court, and I’ll postpone any legal fees and pay every cent of the court costs out of my own pocket.
7. Kelleher didn’t mince any words: “I told Lamar, you roll right over the son of a bitch and leave our tire tracks on his uniform if you have to.”
8. They would put twelve to fifteen lawyers on a case and our side there was just Herb. They almost wore him down to the ground. But the more arrogant they were, the more determined Herb got.
9. The company simply didn’t have the money to go head-to-head with the majors. Southwest would have to outthink and outmaneuver.
10. The airlines operated as though there were only two market segments: those who could afford to fly and those who couldn’t. This assumption guided the operating strategy of the major carriers. Southwest believed that it could stimulate a tremendous amount of new travel with low fares and superior service, challenged this assumption from day one.
11. Southwest’s innovations were not the outcome of sophisticated planning; they were the result of trial and error.
12. No carrier knows its niche as well as Southwest.
13. Southwest exercises the discipline not to stray from its strategy. It does not buy jumbo jets, fly international routes, or go head-to-head with major carriers.
14. While other carriers have been lured by the temptation to step outside their niche, Southwest has maintained the discipline to stay focused on its fundamental reason for being.
15. Southwest is obsessed with keeping costs low to maximize profitability instead of being concerned with increasing market share. Kelleher believes that confusing the two concepts had derailed many firms. “Market share has nothing to do with profitability,” he says. “Market share says we just want to be big; we don’t care if we make money doing it. That’s what misled much of the airline industry. In order to get an additional 5% of the market, some companies increased their costs by 25%. That’s really incongruous if profitability is your purpose.
16. Southwest is successful because it is willing to forgo revenue generating opportunities in markets that would disproportionately increase its costs.
17. Southwest’s shareholders approached Kelleher and asked, “Don’t you think we could raise our prices just two or three dollars?” “You don’t understand,” said Kelleher. “We’re not competing with other airlines, we are competing with ground transportation.”
18. Don’t diversify. Flying one type of aircraft has a strong impact on the bottom line. Training requirements are simplified. Pilots, flight attendants, and mechanics concentrate all their time and energy on knowing the 737— inside and out. With only one type of aircraft, the company can reduce its parts inventory which also results in savings. Sticking with the 737 also helps the company negotiate better deals when acquiring new planes.
19. In the meeting where executives were debating the issue, an obvious alternative to a multimillion dollar system that produced the traditional multilayered airline ticket was proposed. “Why don’t we just print THIS IS A TICKET in big, bold, red letters on the receipt?” Instead of spending $2 million to follow the rest of the industry. Southwest modified its ticket stock with the caption and it worked.
20. A company is never more vulnerable to complacency than when it’s at the height of its success.
21. We must not let success breed complacency; cockiness; greediness; laziness; indifference; preoccupation with bureaucracy; hierarchy; quarrelsomeness; or obliviousness to threats posed by the outside world.
22. We don’t care whether we fly to Paris. We don’t care whether we have a 747. What we’re focused on is being profitable. If people didn’t pay much attention to Southwest because it appeared to be a much smaller regional carrier, it was just immaterial to us. We set ourselves up to go into a specific niche.
23. I want flying to be a helluva lot of fun. Life is too short and too hard and too serious not to be humorous about it.
24. When we look back at the last twenty years, it is obvious that a number of large companies were so set in their ways that they did not adapt properly and lost out as a result. Twenty years from now, we’ll look back and see the same pattern. —Bill Gates
25. One plan — no matter how well laid out — couldn’t possibly respond to all of these situations. This is why Kelleher does not put much stock in traditional strategic planning. When the plan becomes gospel it’s easy for people to become rigid in their thinking and less open to new, perhaps off-the-wall ideas.
26. Kelleher explains it this way: Reality is chaotic; planning is ordered and logical. The two don’t square with one another. When USAir pulls out of six cities in California, they don’t call me and tell me they are going to do that. If we had established a big strategic plan that was approved by our officers and the board of directors, I would have to go to the board and tell them we want to deviate from the plan. They would want to know why I want to buy six more airplanes. The problem is we’d analyze it and debate its merits for three months, instead of getting the airplanes, taking over the gates, and dominating California. The meticulous nit-picking that goes on in most strategic planning process creates a mental straight jacket that becomes disabling in an industry where things change radically from one day to the next.
27. When a financial analyst chided Kelleher about not having a strategic plan, he said, “We do have a plan. It’s called doing things.”
28. If you are going to be small you have to be fast. Kelleher illustrates the alacrity with which Southwest moves by telling a story about Don Valentine, former VP of marketing. Valentine had just joined from Dr. Pepper when the marketing group met in January to discuss a new television campaign. Valentine was ready with his timeline for producing the spots: script in March, script approval in April, casting in June, shoot in September. When Valentine finished, Kelleher said, “Don, I hate to tell you, but we’re talking about next Wednesday.” He quickly became accustomed to the speed with which Southwest operates.
29. Success must be earned over and over again, or it disappears.
If you like reading stuff like this, you will like listening to my podcast Founders. Every week I read a biography of an entrepreneur and find ideas you can use in your work.