As companies evolve with the times, they are often dealing with external changes, such as shifts in the market, emerging trends, or even unprecedented calamities like the recent pandemic. But, another common trigger for change is when an expansion strategy no longer works because the market has been saturated, and the company must do something entirely different in order to keep growing.
This circumstance can push companies to stray from their roots. Generally, in situations like this, the only way to experience much growth is to move beyond a company’s roots to find new opportunities. When this happens however, companies face challenges. They are essentially forced to move beyond doing what made them so successful, yet they need to stray from their roots in a way that’s likely to succeed. Unfortunately, most attempts at pursuing something entirely new end up failing, and many companies make mistakes with this.
So, when it’s time for a company to stray from its roots, it is ever so important to pick the right new opportunities. According to my 25+ years researching business success and failure patterns, one of the best ways to for a company to stray from its roots is to identify those paths that do go beyond what the company did previously, but are not too distant. In other words, to successfully stray from its roots, a company shouldn’t stray too far.
A timely example of this is Southwest Airlines’ recent announcement that it will start offering flights from Chicago’s O’Hare international Airport and from Houston’s George Bush Intercontinental Airport. Previously, Southwest has been flying out of Chicago’s Midway Airport and Houston’s Hobby Airport, both secondary airports in those cities. Based on its roots, Southwest tends to fly from secondary airports when servicing the really large metro areas, rather than competing head to head with United, Delta, or American at primary airports serving those cities. A while ago, however, in Atlanta, where there is no secondary airport, Southwest started flying out of Hartsfield-Jackson Atlanta International Airport, after purchasing AirTran, a low cost airline already flying there.
When companies stray from their roots, challenges often occur. And, Southwest faced some challenges in Atlanta, according to published accounts of what took place back then. But, as I see it, Southwest’s entry into Atlanta had the advantage of entailing straying from roots, but not straying too far. To enter Atlanta, Southwest had acquired low cost Air Tran, thus operating there in a manner that’s a bit closer to its roots.
Southwest’s more recent straying from its roots to fly out of Chicago O’Hare and out of Houston’s Bush also appears to be a case of not straying too far. Southwest’s expansion in Chicago and Houston may stray from the company’s roots regarding type of airport, but it sticks to others aspects of those roots, such as the timing of when to expand. According to the October 19, 2020 Crain’s Chicago Business article “Southwest Turns Up Heat on United, American at O’Hare” by John Pletz, “says Cowen analyst Helane Becker ‘Southwest has historically grown during recessions and this seems to be what they are doing now, as well’” The article points out that Southwest is well positioned to do this since “Southwest had the strongest balance sheet among the big carriers coming into the pandemic, and it gets more of its business from leisure travel, which is going to recover fastest.”
Additionally, as I see it, the travelers Southwest expects to serve at O’Hare appear to fit its roots. According to the Crain’s article, “Southwest has been successful at luring leisure and business flyers, but many travelers in the northern suburbs have balked at traveling to Midway.” In other words, by offering service from O’Hare, Southwest can appeal to more travelers like those it normally serves, but who live where it is far more convenient to go to O’Hare than to Midway.
Yet, what Southwest is doing is still a move away from its roots. So, as with any move away from roots, there is the possibility of challenges.
Finally, I’ll point out that, in a previous newsletter, I have discussed Southwest’s situation of no longer being able to grow by doing things the way it used to. That newsletter contains material related to what is covered here.
In summary, businesses do well when they’ve got the right strategy and stick to the roots behind that strategy. Eventually, however, businesses may need to evolve beyond their roots. When straying beyond its roots, a company generally is best able to succeed by not straying too far.
and Houston may stray from the company’s roots regarding type of airport, but it sticks to others aspects of those roots, such as the timing of when to expand. According to the October 19, 2020 Crain’s Chicago Business article “Southwest Turns Up Heat on United, American at O’Hare” by John Pletz, “says Cowen analyst Helane Becker ‘Southwest has historically grown during recessions and this seems to be what they are doing now, as well’” The article points out that Southwest is well positioned to do this since “Southwest had the strongest balance sheet among the big carriers coming into the pandemic, and it gets more of its business from leisure travel, which is going to recover fastest.”
Additionally, as I see it, the travelers Southwest expects to serve at O’Hare appear to fit its roots. According to the Crain’s article, “Southwest has been successful at luring leisure and business flyers, but many travelers in the northern suburbs have balked at traveling to Midway.” In other words, by offering service from O’Hare, Southwest can appeal to more travelers like those it normally serves, but who live where it is far more convenient to go to O’Hare than to Midway.
Yet, what Southwest is doing is still a move away from its roots. So, as with any move away from roots, there is the possibility of challenges.
Finally, I’ll point out that, in a previous newsletter, I have discussed Southwest’s situation of no longer being able to grow by doing things the way it used to.
In summary, businesses do well when they’ve got the right strategy and stick to the roots behind that strategy. Eventually, however, businesses may need to evolve beyond their roots. When straying beyond its roots, a company generally is best able to succeed by not straying too far.
