Unbundle Your Business

If you’ve never made the flight to Bentonville, Ark., you are missing something extraordinary. The smallness of your plane, the vista of an endless patchwork of farmland connected by country roads, hides the fact that you are entering Wal-Mart country. The passengers to your right and left, now fumbling with their seatbelts and grabbing warm coats, fall into one of two categories. They are either there to pitch something to the world’s largest retailer, going through their negotiation lines silently. Or they are there to extract the greatest value for their company and their loyal Wal-Mart customers.

When Peter H. Leiman and Cameron Odgen, two Harvard Business School MBA students, made the trip, they were probably rehearsing their lines. They were there to pitch a "proof of concept" they had been working on in school, an idea that could save Wal-Mart 25% on its airline travel expenses. The pitch was simple: if Wal-Mart used small, inexpensive jets to shuttle its people around, and filled each jet with 4 people, it could travel with greater flexibility at a lower cost.

The pitch worked, but not in the direction one might expect. It served to build the conviction of these two young entrepreneurs that, despite their having no real business-building experience between them, they should launch an airline. They have since raised $30 million and launched Europe’s first air taxi company, Blink, based in London with hubs in Geneva and the Channel Islands. Their vision: to redefine the world of short-haul travel.

I had a chance to interview Peter and Blink’s chief information officer, Jake Peters. As they laid out their strategy and business model, I caught clear signs that they are thinking like outthinkers. They are executing strategies across multiple dimensions of their business that, if successful, will make it difficult for competitors to wrestle with them. Here I lay out a few the most important elements so that you may borrow them for yourself.

 

Unbundle your competitors

For a workshop I did with Wal-Mart on my first ever trip to Bentonville, we analyzed a fascinating Indian business case: a jeans manufacturer found it could offer jeans at a far lower price by selling the fabric, pattern, and thread rather than finished jeans. Consumers buy the parts and have their local tailors assemble them. This is an example of unbundling what your competitors bundle. When all your competitors are selling apple pies, sell apples and pie crust.

Blink is attempting to do just that in two ways. First, Blink charges per airplane trip, just as a taxi does, rather than per ticket. Whether you are flying one person or up to four, the price is the same because you are only using one plane.

This allows them to help you find new ways to economize your travel. As Peter says, "The competitors bundle their prices; they sell you a ticket based on the average fleet cost." Blink unbundles things for you and thereby enables you to make smarter choices.

Secondly, Blink gets the consumer involved in booking his or her trip. When you dial Blink, the customer service representative asks you, "Where would you like to go?"  If you say, "Charles de Gaul Airport," the representative might suggest you consider a different, less-expensive Parisian alternative. If you say you want to fly at 3pm, they may inquire whether you are willing to fly earlier so that they can time an outbound flight with an inbound pickup and thereby reduce your cost further.

Getting that involved in your flight bookings may not be for all of us. But just as eTrade carves out a segment of self-directed investors in a market filled with savers who prefer to leave the decision making to Fidelity, Blink’s approach will appeal to price conscious frequent flyers. And traditional airlines will find this approach too expensive to copy.

When your competitors have bundled pricing, ask yourself the questions below to see how you undermine their approach and create new value.

1.    How are your competitors bundling services?

2.    Is there a way to unbundle our offerings to save customers money?

3.    How can we present an "a la carte" menu when your competitors are offering a "prix fixe"?

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