Performance Through Time

Read these sections. Think about the evolution of technology over time and how many technology delivery tools have changed in your lifetime, from computing devices to smartphones. Consider the author's claim that management does matter. As the competitive landscape and technology change rapidly, s you saw with Moore's Law, consider how a business can use strategy to take a proactive approach toward strategic growth over time.

Problems With Existing Strategy Tools

What About Nonbusiness Settings?

The last main criticism that can be leveled against existing strategy methods is that they have little to offer the large number of managers who run organizations that are not primarily concerned with making profits. Public services in many economies have been made quasi-commercial in recent years through privatization, outsourcing, and other structural changes. Nevertheless, substantial fractions of all developed economies are still accounted for by public services. Charities, NGOs, security services, and other organizations also have objectives to pursue and resources with which to pursue them.

Current strategy methods are of little help to such organizations, being almost exclusively built on economic analysis of competitive markets. Yet there is a remarkable similarity between the challenges faced by managers in business and nonbusiness settings (Figure 1.3 "Performance Questions in Commercial and Noncommercial Settings"). In all cases, they are expected to have sound answers to three key questions:

  1. Why is our performance following its current path?
  2. Where is it going if we carry on as we are?
  3. How can we design a robust strategy that will radically improve this performance into the future?

Figure 1.3 Performance Questions in Commercial and Noncommercial Settings


Case Example: Ryanair

An example of the failure of conventional industry analysis - and a testament to the success of a resource-based approach pursued over time - is provided by Ryanair. This low-cost airline operates a business model similar to that of Southwest Airlines in the United States. Its success came at a time when the global airline industry faced increased costs combined with static or declining passenger numbers. There was sympathy for the comment from Richard Branson of Virgin that "the safest way to become a millionaire is to start as a billionaire and invest in the airline industry".

Ryanair, like Southwest before it, and easyJet, another budget European operator, challenged the industry situation when it started offering short-haul flights from Ireland's Dublin airport in 1995. The airline focused on creating an ultraefficient operating system, allowing fares way below existing levels in the market and maintaining high levels of customer satisfaction. So dramatic were the low levels of fares that awareness among the public increased rapidly.

Ryanair's success built on the business model originally developed by Southwest, with one type of aircraft (Boeing 737), short-haul travel, no in-flight meals, and rapid turnaround times resulting in aircraft utilization up to 50% greater than the industry average. Ryanair took this approach further, avoiding travel agents, not issuing tickets, selling food and drink on the plane, and building sales through the Internet. These measures developed and reinforced the strategic priorities of efficiency, awareness, and customer satisfaction, and made the airline popular, distinctive, and successful in a fiercely competitive market.

In a sector where intense competitive forces have made the global industry endemically unprofitable for decades, Ryanair, easyJet, Southwest, and a few other determined players have managed to do very nicely indeed.