Ifyou’ve never made the flight to Bentonville, Ark., you are missingsomething extraordinary. The smallness of your plane, the vista of anendless patchwork of farmland connected by country roads, hides thefact that you are entering Wal-Martcountry. The passengers to your right and left, now fumbling with theirseatbelts and grabbing warm coats, fall into one of two categories.They are either there to pitch something to the world’s largestretailer, going through their negotiation lines silently. Or they are there to extract the greatest value for their company and their loyal Wal-Mart customers.
WhenPeter H. Leiman and Cameron Odgen, two Harvard Business School MBAstudents, made the trip, they were probably rehearsing their lines.They were there to pitch a “proof of concept” they had beenworking on in school, an idea that could save Wal-Mart 25% on itsairline travel expenses. The pitch was simple: if Wal-Mart used small,inexpensive jets to shuttle its people around, and filled each jet with4 people, it could travel with greater flexibility at a lower cost.
Thepitch worked, but not in the direction one might expect. It served tobuild the conviction of these two young entrepreneurs that, despitetheir having no real business-building experience between them, theyshould launch an airline. They have since raised $30 million andlaunched 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.
Ihad a chance to interview Peter and Blink’s chief information officer,Jake Peters. As they laid out their strategy and business model, Icaught clear signs that they are thinking like outthinkers. They areexecuting 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
Fora workshop I did with Wal-Mart on my first ever trip to Bentonville, weanalyzed a fascinating Indian business case: a jeans manufacturer foundit could offer jeans at a far lower price by selling the fabric,pattern, and thread rather than finished jeans. Consumers buy the partsand have their local tailors assemble them. This is an example ofunbundling what your competitors bundle. When all your competitors areselling apple pies, sell apples and pie crust.
Blinkis attempting to do just that in two ways. First, Blink charges perairplane trip, just as a taxi does, rather than per ticket. Whether youare flying one person or up to four, the price is the same because youare only using one plane.
Thisallows them to help you find new ways to economize your travel. AsPeter says, “The competitors bundle their prices; they sell you aticket based on the average fleet cost.” Blink unbundles things for youand 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 suggestyou consider a different, less-expensive Parisian alternative. If yousay you want to fly at 3pm, they may inquire whether you are willing tofly earlier so that they can time an outbound flight with an inboundpickup and thereby reduce your cost further.
Gettingthat 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 airlineswill find this approach too expensive to copy.
Whenyour competitors have bundled pricing, ask yourself the questions belowto 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”?