How Uber is like Southwest Air: The art of reinventing an industry

“It was the worst of times. It was the best of times.” – Un-Dickens

There is a looming sense, a dark narrative that America’s best days are behind it. Why? A clash of civilizations. A sense in many pockets of the country that we are living in a time of anomie, inequity and worry.

Everywhere you look, there is disaster. At ground zero are the remnants of a 100-year flood known as the 2008 financial crisis; it’s a flood that never completely receded.

Put another way, whether you are politically right or left, believe in trickle down or trickle up,  the hard truth is that there are few catalysts for significant job growth in America right now.

Take a look at that one great wonder and power of our age, broadband internet. In many ways it has been an engine of growth and created whole new industries. Yet it has also set off a wave of painful disruption, through the triumvirate forces of:

  • Digitization: Anything that can be turned into bits, will be.
  • Globalization: Where location can be rendered moot, it will be.
  • Commoditization: When bits and logistics can commoditize, they will.

In its wake it has permanently broken or even destroyed multiple industries. In fact, Bureau of Labor Statistics data shows quite clearly how such industries that were rocking and rolling prior to broadband are now sucking wind, including electronics stores, book stores, electronic components, employment services and information services, to name a few.

Less obvious, but equally troubling, is the fact that when these industries break it also disrupts the ecosystems that surround them as well, cascading in a domino effect. Here’s how it works: When an industry like print media goes sideways, not only do publishers and the employees housed within them go away, but so too do printers, production houses, delivery trucks, book stores, newsstands, book reviewers, sales reps and publicists. Worse, this hits regional hubs especially hard. And we now know those jobs are not coming back. Ever.

The immutability of this dynamic hearkens to a signature line in Oliver Stone’s ever timely, ‘Wall Street,‘ when broken trader Bud Fox (Charlie Sheen) asks corporate raider Gordon Gekko (Michael Douglas), “Why do you need to wreck this company?” Gekko retorts, “Because it’s wreckable, all right?”

The Age of Indivisibility

Now, to be clear, I come at this as neither Luddite nor Futurist. In fact, my career straddles brick-and-mortar and digital, having cut my teeth professionally in retail real estate before embarking on a 20-year career in tech (eight startups, exits to Apple, Intel and IBM).

But, the simple math is that one Amazon, Apple or Google does not even remotely replace the jobs lost in the industries they disrupt. Yet, specifically because necessity is the mother of invention, we can look to Apple, Amazon and Google to see what a successful business looks like when it treats those three essential disrupters— commoditization, digitization and globalization—as indelible truths that are indivisible from their core.

From this light, a heartening takeaway from tech’s gold standard companies is that there is no one true way to proceed. The Google way is decidedly different from the Amazon way, which is decidedly different from Apple’s approach. Google’s model is built around the construct of turning information into a ubiquitous commodity, that is discoverable and monetizable by search and ads. Amazon, by contrast, is all about securing their customers’ lifecycle-spend via superior pricing, friction-free logistics and a latticework approach to consumers, sellers, enterprises, developers and content. Apple is singularly focused on delivering the best possible user experience via tightly integrated hardware, software, service and content platforms, and harnesses that differentiation to generate jaw-dropping margins.

This level of strategic diversity suggests that there are plenty of models for finding success in the digital age for both tech-centric upstarts and old economy businesses alike.

Those reasons for hope aside however, there is still grave cause for concern. I would assert that sustainable job growth won’t occur until indivisibility takes broader hold within our economy. Simply put, there are far too many companies that view the trend towards commoditization, digitization and globalization as a cost-cutting exercise (e.g., to cut spending on business travel, postage and delivery services), and too few that embrace it as a catalyst for re-invention. This will have to change to re-start our jobs engine.

The Rise of Integrated Systems Design

In saying that a business is indivisible, it also means that it has been tightly integrated into a unified system. Beyond the technology, resource and sourcing implications is a larger human truth: namely, that companies must explicitly design an organizational and cultural model that yields more than the sum-of-the-parts outcomes. This is the domain of integrated systems design.

In basic terms, integrated systems design is the embodiment of an organizational philosophy that treats market, message, creative, product, tech, sales and support as one composite entity. Mind you, this is a significant departure from the silo-ed business unit structure that predominates in corporate America.

Two examples of how this dynamic plays out in both new world and old world businesses are Uber, the on-demand private car service, and Southwest Airlines, the highly respected low-fare airline.

You might think, what does Uber have to do with Southwest, and vice versa? Both are examples of companies that channeled the precepts of integrated systems design to re-invent the industries that they play within.

In the case of Uber, they found a way to re-think the old-world, undifferentiated service of a taxi, and exploited its fixed scarcity and vanilla service model through a combination of mobile-first technology, the creation of a dynamic marketplace model and the identification of a wedge market between taxis and private car services. In doing so, they created a highly scalable, highly personal premium transportation service—all without needing to own a single taxi or town car. Talk about bending the laws of physics to your benefit.

Meanwhile, Southwest correctly recognized that airline passengers deeply desired a lower cost approach to air travel that was reliable, enjoyable and which delivered consistent service. This required a corporate culture and organization design that reduced the barriers between management and field personnel (pilots, ticketing, flight attendants, ground crew), so that on all levels the entity acted as one. Further, it projected a corporate image of folksiness that maximized humanity while minimizing frills, and required an integrated systems model that dictated which planes to fly on what routes, which customers to serve at what price, and the turnaround logistics to make it work. Ironically, with the rise of the Internet, Southwest’s position has only strengthened, as the company has built multiple online systems that make the process of pricing, purchasing and managing travel seamless and customer-friendly.

Both of these companies have achieved scale by intelligently segmenting the market so as to identify more potential opportunities—more jobs— that consumers can hire them for. And through this process they’ve both ensured that the experience is push-button seamless, which is the very ethos of integrated systems design. There are two takeaways from this. One is that the success of Uber and Southwest is illustrative of the range of industries ripe for transformation, and ultimately, job creation. The other is that the success of such companies provides a recipe book of best practices that can be applied to different contexts in different markets.

I think of it this way: When Safeway, the local bar and the neighborhood dry cleaner embrace this tenet of re-thinking the various jobs their target customer hires them for—and creates new ones in the process—that’s when you’ll know the next wave is upon us.

As Winston Churchill once said, “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.”

By purpose and position, that moment is upon us.

Mark Sigal is founder and Chief Product Officer of Unicorn Labs.

Photo courtesy of Shutterstock.