I like to fly Southwest Airlines. Not because they have the best cabin services, or the most luxurious seats, or the most legroom or the best chance of an upgrade to first class. In fact, there’s exactly zero possibility of an upgrade to first class because Southwest’s jets don’t come with a first class cabin. What’s more, they offer no customized services whatsoever. Last time out I don’t believe I even got my little bag of pretzels.
But I still like to fly with Southwest. Why? Because when you do business with them, you know exactly what you’re going to get, and that’s the same as everyone else gets. Everyone sits on the same kind of seat, there are no seat assignments, it’s always the same kind of plane (Southwest flies only Boeing 737s), and nobody gets a meal. In fact, the only reward you get is frequent flyer miles, and that’s available to everyone who flies with them; there’s no way to buy yourself into better status. (Yes, you can buy Business Select, but all that does is bump up your boarding position; it doesn’t even get you an assigned seat.)
Despite all this, Southwest consistently gets very high ratings for customer service. That’s because its customers know about those constraints when they book a flight and they know that Southwest is going to deliver on that defined, relatively narrow value proposition better than anyone else. So they don’t go in expecting to get a first-class upgrade, or a meal on a long flight. What Southwest has realized is that nobody flies for the food. So they’ve chosen a value proposition that they can excel at, which is defined as much by what they don’t do as by what they do.
Amazon and the other pure digital players are the Southwest of the ground. Digital disruptors often talk about their “customer obsession”, and while that’s true, it’s true only in a limited sense. After all, it’s difficult to obsess about a customer when you never actually meet them, talk to them, or have any contact with them other than transmitting their order or pulling their items off shelves in a distribution center. So, to put it more accurately, what disruptors are good at is obsessing about serving customers in ways that fit well into their core competencies. They’re obsessed with customers without actually having any contact with customers in the course of taking and fulfilling an order. Within the context of online ordering, and good fulfilment, and great assortment, they are obsessed with meeting customers’ needs and they do it better than anyone.
But in doing so, they’re also defining what they’re not obsessed with, which is doing things outside of those core competencies. Like Southwest, they’ve chosen a limited value proposition that is clear and that everyone understands, but it’s as much about what they’re not doing as about what they are. They do it better than anyone else, but they don’t step outside of those boundaries.
That’s going to get them a lot of share in B2B distribution. But it also leaves a lot of room for distributors to customize services, employ people who interact with customers, offer white glove services and show up in person when needed. Digital disruptors by and large are not interested in doing those things.
So in this new distribution industry landscape, legacy distributors can no longer afford to think like Southwest. That seat has been taken. What they can do, however, is think like Singapore Airlines.