Founders – #322 Herb Kelleher (Southwest Airlines)

Intro

In this episode of the “Founders” podcast, host Patrick interviews Herb Kelleher, the founder of Southwest Airlines. Kelleher shares his unique approach to entrepreneurship and the strategies that led to Southwest’s incredible success. From challenging industry norms to prioritizing customer service, Kelleher’s insights provide valuable lessons for aspiring founders.

Main Takeaways

Unconventional Strategies for Success

• Founder Herb Kelleher believes traditional strategic planning doesn’t work well in chaotic situations.
• Kelleher’s approach is to “just do things” rather than getting bogged down in analysis and debate.
• Kelleher was a fierce competitor with a hard work ethic, working 100 hour weeks at the beginning of Southwest Airlines.

Building a Successful Airline

• Southwest Airlines was profitable for 47 straight years, while the next most successful airline was profitable for only five.
• Kelleher believed that serving customers was the most important aspect of Southwest Airlines, stating “We are a service company. We just happen to fly airplanes.”
• Southwest questioned assumptions in the airline industry and discovered a huge untapped market of Americans who had never flown before.

Innovative Marketing and Pricing Strategies

• Southwest perfected system-wide, two-tier peak and off-peak airline pricing, which was copied by every single other airline.
• Southwest introduced a $10 fare for a Friday night flight to generate revenue for an empty plane, which quickly caught on with passengers.
• Southwest created two fare structures to cater to both time-sensitive business travelers and price-sensitive leisure travelers.

Focus on Cost Efficiency

• Southwest exercises discipline not to stray from its strategy and maintains focus on its fundamental reason for being.
• Southwest is obsessed with keeping costs low to maximize profitability, rather than increasing market share like other airlines.
• Southwest only flies the Boeing 737, which reduces training requirements and simplifies record-keeping, resulting in cost savings.

Creating a Passionate Company Culture

• Kelleher placed a strong emphasis on dedication, devotion, and loyalty in his employees, which he believed were key to success.
• Southwest’s success is attributed to telling the truth in ads, communicating person to person, and sticking to their vision.
• Southwest’s main competitor is ground transportation, not other airlines.

Summary

Building Southwest Airlines

Herb Kelleher, the founder of Southwest Airlines, built the most successful airline in history by challenging industry norms and focusing on customer service. Kelleher’s unconventional approach to strategic planning and his belief in “just doing things” rather than overanalyzing, allowed Southwest to thrive in chaotic situations. By prioritizing dedication, devotion, and loyalty in his employees, Kelleher created a passionate company culture that drove Southwest’s success.

Innovative Marketing and Cost Efficiency

Southwest Airlines revolutionized the airline industry with its innovative marketing and pricing strategies. The introduction of system-wide, two-tier peak and off-peak pricing became a widely emulated marketing innovation. Southwest’s commitment to keeping costs low, from flying only one type of aircraft to maintaining a focus on cost efficiency, allowed the airline to maximize profitability. By forgoing revenue-generating opportunities that would increase costs disproportionately, Southwest maintained its competitive edge.

Creating a Passionate Company Culture

Southwest Airlines differentiated itself from competitors by prioritizing customer service and creating a passionate company culture. Kelleher’s emphasis on telling the truth in ads, communicating person to person, and sticking to their vision, built trust and loyalty among customers. Southwest’s main competitor was ground transportation, and by offering affordable fares and superior service, the airline tapped into an untapped market of Americans who had never flown before. Southwest’s success can be attributed to its unique company culture and unwavering focus on customer satisfaction.

Conclusion

Herb Kelleher’s entrepreneurial journey with Southwest Airlines showcases the power of challenging industry norms, prioritizing customer service, and maintaining a strong company culture. By thinking outside the box and focusing on cost efficiency, Southwest became the most successful airline in history. Aspiring founders can learn valuable lessons from Kelleher’s approach to entrepreneurship and apply them to their own ventures.