Disruptive innovations are defined as those products or business models which “offer little in terms of performance, but plenty in terms of cheapness, convenience and ease of use”.
Definition
They are also considered to not initially satisfy the high end market demands, but are used by only unsophisticated customers at the low-end markets.
Therefore, it is suggested that large companies appear to have troubles when dealing with this type of innovation as they are not aware and prepared to respond to the changes disruptive innovations create.
As what the term is defined, Southwest Airlines’ business model apparently represents as an example of “disruptive innovation”. The company creates a new market niche including people who desire an air travelling service that is “cheap, convenient and easy to use”.
As mentioned in the previous discussions, Southwest applied a lot of changes in a traditional airline’s business model which helped it serve the niche target customers and at the same time earn significant profits. These changes include:
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Reducing the number of cabin crew’s members to only three
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Using only one type of aircraft
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Flying point-to-point and only 25 minutes turn-around after landing
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Cheaper prices
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No in-flight meals
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Having only one seating class choice
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Effective on-land service and generous cancellation policies
Specifically, Southwest did cut a massive amount of operating costs when applying (1), (2) and (3) from the list above. For example, the cabin crews with only three members will save the company great expenditure on personnel. In addition to this, by using solely Boeing for its service, Southwest does not have to spend any extra dollar on training its staff for other kinds of aircraft. The company also minimizes the time an aircraft has to stay at an airport slot so that it may reduce the airport fee.
By using these strategic initiatives, Southwest Airlines was able to provide its customers competitive prices and maximize the value they receive.
Adding to its attractive pricing (4), Southwest challenged other airlines by completely changing the service basis with (5), (6) and (7) from the list above. It offers a service which perfectly fits the basic needs of its targeted customers – to travel from one place to another in a fast, convenient, and cheap way. Recently, low-cost air travel has become a common preference for passengers willing to travel by air.
Southwest Airlines successfully created a blue ocean strategy with its unique business model. It had introduced a new market where there was little competition in which the company could pursue a value creation strategy.
To pursue this strategy, Southwest conducted a high level of strategic focus reorientation by reducing, raising and eliminating as following:
Raise
Friendly Service
Speed
Frequent Departure
Reduce
Price
Meals
Lounges
Eliminate
Seating Class Choices
