WestJet parlays building blocks of competitive advantage.
Why do some firms succeed and others fail?
Air Canada lies in rubble, struggling to emerge from bankruptcy this month while WestJet rules the Canadian skies. The continuing battle between Canada’s titans of air travel offers lessons for small and mid-size Canadian businesses. The key to success lies, in part, in what strategists term competitive advantage.
But what is it? How do you get it? How do you keep it? Harvard Business School professor Michael Porter states that the generic building blocks of competitive advantage are superior quality, superior efficiency, superior innovation and superior customer responsiveness. If your firm develops and implements these competencies better than your competitor, your firm will succeed.
Intuitively, entrepreneurs understand the importance of providing their customers with superior quality. Think about the last time you flew with Air Canada and WestJet. Although neither firm publishes the statistics on lost luggage, most of us are able to provide firsthand evidence of the quality difference between these two behemoths.
In the 1970s, the Japanese exploited the same superior quality that they continue to exploit today over U.S. automobile manufacturers. Fortune Magazine recently reported the decline of all U.S. car manufacturers as they lose market share to Toyota’s innovative and quality product line, including Lexus, Prius, and the popular Echo. Toyota’s stock market value is reportedly more than General Motors, Ford, DaimlerChrysler, and Volkswagen AG combined.
Advocates such as W. Edwards Deming, the father of total quality management systems (TQMS), have been espousing the importance of TQMS to organizations for more than half a century. Increasingly, organizations are paying attention to quality and embracing standards such as the ISO 9000 series to gain a competitive advantage over others within their industry.
Doing more with less in a competitive global ecosystem is a necessity. Today, this underlying theme of superior efficiency is prevalent in the public, not-for-profit and private sectors.
Recently, on a trip from Victoria to Toronto, I booked my tickets electronically. The first leg of the journey was with WestJet. When I arrived at the WestJet ticket counter, they provided me with a receipt similar to the grocery store. It contained my seat assignment, departure time and other relevant details. I asked the friendly attendant how much the ticket cost WestJet. She suggested it was less than a penny.
On the next leg of my flight, I received the typical Air Canada boarding pass materials – the cardboard envelope, boarding passes and ticket receipts. When asked, the not-so-friendly attendant said that Air Canada would pay about 31 cents for this documentation bundle and that computer scanning documentation would cost more than a dollar.
WestJet shows us the way to wring pennies out of the value chain to enhance the bottom line. As entrepreneurs, we must look for these opportunities to find savings.
Superior innovation and speed of implementation are vital components of a firm’s competitive advantage. WestJet’s early strategy of not directly attacking Air Canada, combined with a unique corporate culture of friendly service (see Edge at Work on Page 26), continues to stand the firm in good stead.
Supply chain innovation of the kind conceived by Michael Dell, who sold and shipped his first computers from his garage using FedEx, and innovation of the kind adopted by the 18-year-old who built Napster and threatened the very heart of the music industry is illustrative of the new mental models required by organizations. It is a matter of form and substance. The substance of the industry is necessary; the form is flexible.
Consider banking. It is required, but the need for banks as the form is not. This type of innovative thinking is evident in WestJet’s approach to all aspects of its value chain.
Superior customer relationships have also received more attention from WestJet than Air Canada. According to the 2003 Air Travel Complaints Commissioner’s Report, of all complaints filed against all domestic and foreign carriers, 53.7 percent concerned Air Canada, while only one percent related to WestJet.
Limiting the view to Canadian airlines, 64.4 percent of the complaints received were about Air Canada, while a mere 1.3 percent focused on WestJet. Finally, of the 1,756 complaints to the national airline ombudsman in 2002, WestJet had only 20 complaints. That’s 20 complaints per 4.3 million guests – clearly customer satisfaction.
U.S. author and business strategist Gary Hamel advises us to “put competitors at a continual disadvantage.”
WestJet has taken this advice to heart. They have taken control and parlayed the generic building blocks of competitive advantage into a continual disadvantage for their competitors.
No doubt, this is a situation that resonates with the near-bankrupt Air Canada and its long-suffering shareholders.
Note: This article was originally published in 2005.
