Unlike what has been fairly typical for the airline industry, Alaska Airlines actually makes money, according to a Wall Street Journal article (An Airline That Makes Money, Really, February 4-5, 2012). The article described Alaska Airlines’ great success in an industry where many others landed in bankruptcy court. Alaska Airlines and its CEO Bill Ayer are to be commended for their impressive performance.
In the Wall Street Journal article, Alaska Airlines CEO Bill Ayer offers a valuable piece of business wisdom. Ayer said “When you’re profitable you can think longer term. You can make investments more confidently in things. If the industry is continually kind of hand-to-mouth in terms of profits, you’re not going to see big investments.”
Ayer is pointing out that how profitable a company is may shape the firm’s strategic choices. As I see it, his statement has profound implications for any company, from the most profitable to the biggest struggler. I have been researching business success and failure patterns for 25+ years, and here are some of those implications, as I see it:
- Making strategic choices that are good for the business delivers successful performance. These choices are driven by what’s good not just in the short term, but in the longer term as well. These choices reflect a business philosophy oriented toward building the business and being willing to invest in it. This doesn’t necessarily mean ignoring current profitability while pursuing the longer term, but it does mean not weakening the viability of the business merely to report short term profits.
- Being profitable frees companies to make strategic choices that are good for the business. Profitable companies are freed from pressure to do something, no matter how ill-fitting, just to give the impression they are correcting their weak performance. Profitability helps companies resist the temptation to do what might not be good for the business, but brings short term profits, or worse yet, the illusion of anticipated profits. Thus, profitable companies can be selective about their strategic choices and do what is in the best interest of the business.
- As described above, being profitable offers tremendous advantages. Yet, many profitable companies do not take full advantage of those advantages. Instead of making the wise strategic moves that profitability permits, they fall into a state of complacency. They essentially sit back, milk their current profits, and fail to evolve. This eventually leads to poor performance and pent-up need for change, as described in my November 2008 newsletter.
- Companies that are struggling or are not profitable should strive for the kinds of strategic choices that are in the best interest of the business. This can be difficult. Financial pressures may muddy the waters and encourage less than optimal choices. To achieve successful performance, however, these companies must strive to make wise choices that lead to Winning Moves, rather making ill-conceived choices out of panic, as strugglers often do.
In summary, being profitable can put a company in a position to make better strategic choices. But, profitable companies have to use this advantage and make wise strategic choices, rather than being complacent in their current position of success. And, struggling companies should do whatever they can to make strategic choices that are good for the business. The right strategic choices lead to Winning Moves and business success.
