Two Moves Ahead

Anticipating Your Competitors’ Response

StrategyIn any extended conversation with airline executives I inevitably hear complaints about frequent flier programs.  They lament:

            • Lost revenue
            • High operating costs
            • Customer dissatisfaction over error and restrictions (particularly dangerous with today’s social media)

And just what do airlines get in return from their loyalty programs?

Woefully little loyalty. Schedule and price still drive most purchase decisions as most passengers enroll in several programs.

Despite these frustrations, no airline will dump their program. While there’s little advantage to operating a program, not offering a program would be disastrous.

Thanks A Lot, Frank!
Credit for this mess goes to Frank Lorenzo, the CEO of Texas International Airlines in the ‘70’s and early 80’s. Frank thought he was creating a brilliant competitive advantage for TIA in 1979, but it was short-lived. Seeing TIA’s success, American Airlines launched their program in 1981 as did virtually every airline since then.

Similar debacles occur across all industries: price cuts are immediately matched (or exceeded), expansion into a competitor’s home territory triggers an identical attack on your own, and more.

These bloody battles where everyone loses could be avoided by asking the simple question, “What would I do in their shoes?” Unfortunately, it’s not easy to answer that question… our brains just don’t give 100% effort toward proving our own ideas are wrong (see “Sheep In Wolf’s Clothing”).

Doing It Right
During the cold war, the pentagon needed answers to how the Soviets might react to American military tactics, so they created “Red Teams.” These teams immersed themselves in Soviet military history and how they current leaders behaved. Then in battle simulations, they doggedly attempted to defeat the strategies and tactics the Americans were considering.

This Red Team approach can provide critical tests of initiatives you are considering to anticipate and avoid highly unpleasant competitor responses.

But to work, your Red Team must be as fiercely motivated as your competitors will be – fighting as if for their next bonus or perhaps for their very survival.  

Membership qualifications are:

  • Strong business acumen – these should be some of your best people.  After all, your competitors will have their best people on it!
  • Highly competitive – this is no mere academic exercise.
  • Completely free of bias – they cannot be from the project team, nor benefit in any way if the project goes forward.

It’s a brutal acid-test, but one of the most powerful tools for avoiding painful the surprises of competitor responses.

© 2013 Verax Point

About Dave Wittenberg

I am all about equipping business teams to enjoy greater payoffs on their biggest bets. I bring a unique combination of evaluation expertise and behavioral insights developed over the course of more than 300 major strategic initiatives. Applying a highly effective, disciplined framework, teams unleash their full capabilities to generate better solutions, wring out hidden waste, and deliver superior returns. Specialties: Investment Evaluation, Decision Excellence, Strategic Analysis, Mergers and Acquisitions, Investor Relations, Leadership Development, Education & Training
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