Sunday, February 8, 2009

The Virtue of Simplicity: A Call to Action

One of the simpliest ways to beat your competitors is by being just that. Simple.

Not simplistic.


Take a vexing problem that people face and ask yourself, a) how can I make the solution as simple as possible and b) how can I make the business model as simple as possible.

Unfortunately, too many companies take the opposite approach. They seem to believe that complicated problems require complicated solutions.

Take airlines. Over the past 20 years, most American airlines have invested billions of dollars in yield management systems and complicated hub and spoke systems which were designed to wring out the last possible penny from the traveller.

This is why
  • two people on the same plane sitting next to each other almost never pay the same price for a ticket
  • if you don't have a Saturday night stay, you have to pay three times and much, and
  • one way tickets costs twice as much as round trip tickets.

Has all this complexity succeeded?

Not at all.

These airlines have failed to realise that complexity comes at a great cost ... both to the company and to their customers. These airlines have basically yield managed themselves to death.

Companies like Southwest Airlines and Ryanair now are worth more than most of the traditional airlines combined. Part of the reason is that their business models are much simpler. They don't need to pay Accenture billions of dollars per year to run their CRM systems. And their customers know exactly what they are getting.

No, they do not provide the best service in the world, and you do not get in flight meals included with your price. But as an example of business success in an incredibly difficult industry, they cannot be beat.

Perhaps we should all rethink how we can simplify our solutions and business models?