Quirky fact
In the history of commercial air travel (since early 1900’s) if you add up all the profits and all the loses; the industry has made net loss of $1.4 billion.
Two lessons:
- Don’t try and start an airline
- Don’t invest in airline stocks
Why Ozjet failed
It’s often a powerful reminder to look at some failures rather than simply try and emulate hero brands. Australia has a recent example of what not to do. Ozjet – A recently launched business class only airline.
Ozjet came in November 2006 and disappeared in March 2007, in an industry plagued by price cutting, discount players and crumbling customer service and satisfaction. It stands to reason that the market was ripe for the opposite of what’s currently available. So what happened? Where did they go wrong?
Here’s the start up blog assessment:
Launch timing: Launched pre christmas aiming at business markets! Who all went on leave for 6 weeks…empty planes can really hurt cashflow.
Schedule: Only had a few flights available each day. Business travelers need flexibility of schedules. Insufficient frequency – 4 planes simply wasn’t enough to provide the regularity of flights required to keep business travelers happy. Why would I pay a premium for my ticket to wait at the airport for 5 hours for the next flight back to Sydney?
Product: 30 year old Boeing 737’s 200’s. Not exactly a premium offering. Yes, regular flyers notice what plane they’re flying in.
Branding: Look at the photo of their plane and logo. Not exactly premium. Looks more like a discount airline, as does the name ‘Ozjet’.
Advertising & positioning: Skywriting? How many business executives, wealthy individuals are looking up on an idle Saturday, thinking, I really must book a flight on Ozjet? They also had a launch TVC with Murray Walker screaming “Ozjet is GO, go go, go go…”
Again this misses the mark and does not espouse ‘premium service’.
Loyalty Schemes: No frequent flyer programme. No club lounge (a must for business travel, especially with 5 hour waits for flights!), no alliances with international carriers.
Terminal Access: If you like pretending you’re the beatles, then I guess it’s OK to have to walk on the tarmac to get to your flight - not if you’ve paid a premium. You want to directly from the business lounge, to the flight.
I’m all for bootstrapping and improving as you go. But in an established market with certain benchmark demands, it just doesn’t cut it. Where your point of difference is your offer, rather than innovation, you need to have the total package upfront. One that’ll make a consumer switch worthwhile. Air travel isn’t an industry where a half baked offer can survive, capital requirements and overheads will kill anyone who gets it wrong by the slightest of margins. It’s graveyard is littered with failures.
Put simply, the Ozjet business class offering couldn’t even compete with Qantas domestic economy, and that isn’t saying much.
Newton’s laws & marketing
Physics and business are more closely related that one would imagine. Take Newton’s laws of motion. Markets are motion. Interacting bodies pushing and pulling in a constant state of flux. The principals are the same, but more complex as our laboratory ‘is’ the market, in which nothing stands still.
Law 1: An object in a uniform state of motion or will remain in that motion unless acted upon by a net force.
Start up blog interpretation; Change doesn’t just happen, it is made to happen by things and people doing something.
If we want our start up to improve, we’ve got to do something about it. Vary the marketing mix. Our start up will remain performing as is (good or bad), unless we, the market, our audience or our competitors change what they are doing.
We must change to improve
The market might change for us, without telling us
Our audience can shift behaviour, without telling us
Our competitors can vary their marketing mix, without telling us
Our market, audience, competitors will change. We ignore it at our peril. Or better, we embrace and create change, be the ‘net force’ so the state of motion is moving in our favour.
Trophy ideas
Trophy Ideas shouldn’t be your first attempt at a start up.
Definition: Highly original and ‘expensive’ business concept which could change the behaviour of consumers, business or the world and make you rich in the process.
Trophy ideas are typically capital intensive and have long lead times to get up. They usually involve external capital. They’re often the domain of inventors.
The reason that trophy ideas are onerous is that they don’t succeed very often and they take up the two most valuable tools we have, time and money, and lots of it. Sometimes people dedicate large portions of their life to trophy ideas. But we only ever here about the successful ones. An example might be the Dyson vacuum.
Here’s my advice if you want to go for a trophy idea. Do it after you’ve had some smaller successes first. Do it when you already have passive cash flow from another startup, business or investments.
We should all pursue things that are worth doing, the trick is knowing the right time to chase them.
Continuous Improvement
Is not a Japanese buzz word from the industrial 1980’s. It is actually an important marketing principal all entrepreneurs should keep in mind.
The reason it’s an important tool is this:
The product ‘is’ the marketing.
Always has been, always will be. Brands are simply a written or visual descriptor of a product and its credentials.
Terrorism & Strategy
Right now, terrorism is the best example of start up strategy. The thing that is so compelling about the current strategies of terrorists is that they are taking on an establishment, and winning comfortably with far fewer resources.
The unlimited supply of firepower of the competitors (Western Governments), has not created any advantage. It’s irrelevant because the strategy of the terrorists is to create a new playing field. They don’t compete on the terms of the incumbent.
Don’t confuse what I am saying here, I am not espousing the virtues of terrorism. I’m simply pointing out their tactical brilliance in the form that a start up company should take heed from.
Let’s consider a strategic review of terrorism:
Product.
- Their main product is fear.
- and guess who feeds on that? Mainstream media. Great, wont need to spend any money on communications or advertising to the target. CNN and FOX will do that for us. Seems the revolution might just be televised
- 911 global brand awareness for Al Qaeda in 1 hour.
How do they take their product of ‘Fear’ to the market place?
- Focus on core markets and dominate them – New York,
London. - Large launch events (September 11 for Al Qaeda)
- Which create free media & publicity (3 weeks live coverage)
- Huge brand awareness generated through ‘newsworthy & outrageous’ activities (911)
- Networking using technologies such as the web to evangelize their cause.
- They recruit ‘believers’ to evangelize the brand to the point that they are prepared to die for the ‘brand’. And you thought Apple had loyal followers.
- You can’t fight what you can’t see. They are ensconced within the enemy populous. So how can they be attacked?
- They perpetuate their organisation more strongly by creating increased racism by operating within enemy territory. This breeds support with potential new recruits.
- Learnt skills from their competitor (CIA) before going out to launch against them.
- They think small. But have a BIG IMPACT. They don’t try and dominate the world at launch, just important parts of it – World Trade Centre.
- They use the competitor assets against them. Classic insurgent strategy (Art of war). Boeing 767’s, mass transport, US flight schools, CIA, Halliburton, Hotmail, Youtube, Google Earth. Significantly reduces capital for launch & overheads.
- Venture capital from passionate radicals. Non traditional banking. The money comes from believers in the cause.
- The cost of entry to the market was low. They did the opposite of the competitor. They invented a new competitive landscape. Attacked from within. Not over boundaries. This was unexpected from the incumbent and it was impossible to defend.
- Terrorists have a Single Minded Proposition. Disrupt the western way of life. Instill fear & maintain it.
In short, the US, UK and Australia governments still haven’t realized they can’t win this battle with traditional methods. The battle is never won with resources, it’s won with strategy and creativity.
As an organization Al Qaeda or terrorism in general, sadly has many lessons for any Entrepreneur.
Sale of the century
Are you prepared to knock on doors, engage everyone you know and sell any chance you get, or would you be too embarrassed to do so?
We need thick skin if we want to champion a start up. And that involves selling every minute of the day, in every conversation. If we’re not prepared to do this, maybe we haven’t got what it takes, or worse, we don’t believe in what we’re doing.
What business are we in?
Ask anyone what business they are in and chances are they’ll give you a myopic answer. They haven’t really thought it through or they don’t really know.
Starbucks Coffee – no, social facilitation, everyday indulgence
Coke Beverages – no, distribution of hydration
Amazon Books – no, virtual distribution
Nokia know this, they are ‘connecting people’. We need to define our start up in terms of consumer utility, not what we sell.
The most important article on marketing, business and entrepreneurship ever written is here. The Marketing Myopia.
Sure, there is a fine balance between single mindedness and over diversification, but sometimes it’s better to diversify than die.
Selling the valuable
As soon as something becomes more valuable the human inclination is to sell it. How many times have we heard;
‘the shares doubled in value, then I sold them’.
‘Our house has gone up in market value by $500k, We’re putting it on the market’.
If an asset has become more valuable, so has the ROI. The interesting thing about ROI, is that your internal ROI is related to what it cost you, not the current valuation. If we ‘Sell the valuable’ the replacement asset can’t have an equivalent ROI. So we lose out.
The same goes for a start up. When we have offers to sell out, maybe we should consider why and hold on.
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