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According to our class readings about innovation, there are several key aspects that a company, particularly one in the airline industry, should consider if it wants to become "innovative." In Peter Drucker's article "The Discipline of Innovation," the author defines innovation as the effort that a company makes to increase a company's potential through focused and directed change. Drucker notes that there are multiple resources that a company can look to for innovation opportunities, including industry and marketing changes, unexpected occurrences, incongruities, process needs, changes in perception, demographic changes, and new knowledge, for which the accessibility of, as Friedman highlights, is expanding exponentially. Companies should examine these resources for potential innovation using the framework of Porter's "Five Forces that Shape Strategy." In the airline industry, big companies such as Delta have recently found it very difficult to attempt to counter the threat posed by new low-cost carrier entrants, whose fleets are made up of a single type of jet craft, which helps to counteract the bargaining power of suppliers, and who lack labor unions that they have to contend with. With these low-cost carriers and the advent of instant internet price comparisons, combating the bargaining power of customers has also proved difficult for the major airlines. To temper the threat of substitute products or services and limit price wars arising from rivalry among existing competitors, for which the major airlines cannot win, airlines need to offer products that differ significantly from competitors' products and provide wider accessibility. Since Delta cannot compete with the prices offered by the low-cost carries, it is putting resources into the expansion of its international travel, which is a market with minimal low-cost competition and few transportation substitutes. Airlines should also look to their core competencies for innovation. Though it did not last, the culture of teamwork between management and labor, which resulted under the leadership of Gerald Grinstein, can be viewed as one of Delta's core competences. These competencies represent the collective learning of an organization that, if aligned correctly in today's ever-evolving globalized world, can a create competitive advantage and allow for innovative developments Throughout the years, we have seen several examples of innovation stemming from airlines. Widely used today, hub-and-spoke networks were first pioneered by Delta in 1955 at its Atlanta hub. Launched in 1981, American Airlines' AAdvantage program was the first frequent flyer mile program for a major airline. American Airlines' was also the first airline to begin exploring the use of yield management techniques, including overbooking and dynamic pricing. Through innovation, an organization seeks to construct its own 'Blue Ocean,' in which industry demand creation grows instead of cannibalizing upon itself. There are two ways that such a market can be created, either with the formation of an entirely new industry or from within a Red Ocean, as Southwest Airlines did, whereby it pushed the set boundaries of the airline industry and has since managed to stay ahead of the game for a substantial length of time. While it is possible for an airline to look to innovation, it can be less risky, more cost effective and more realistic to aim for product renovation. As opposed to innovation endeavors, renovation efforts concentrate on renovating and revitalizing existing products and services. Many improvements that have been made in the airline industry might better fit under this classification, including introducing non-stop services
we discussed that there are five ways a company can grow its business. Airline mechanization used to be focused on the behind-the-scenes process of reservations. airlines were primarily focused on regaining financial stability as bankruptcies swept the industry. and major changes in the competitive landscape. and their associated websites. a year and a half after Delta closed acquisition on Northwest. in fact. In today's market. luggage fees. knowledge now has widespread availability and spreads more quickly than it has in the past. new products to existing customers. The "new" Delta. improving on-time performance. Peter Drucker notes that as opposed to genius. airlines have begun to focus more on people and how technology can be used to improve the entire travel experience. people throughout the industry assumed the carrier would take over a competitor. Luckily. Delta now has the added issue of a possible unionization of two previously non-unionized groups within Delta. drink. airlines have begun to return to renovation and innovation efforts in the last two years. When Delta Air Lines announced that it had chosen Richard Anderson to be its new CEO. with different passenger policies. not expected to be so until at least another year. The theory behind the majority of airline mergers is that they give the airlines some much needed capital by allowing for the implementation of measures to cut costs. assigned seating fees. which did not leave for many opportunities to reduce expenses in an effort to boost revenue. increasing fuel costs. digital 'identities' to speed through security clearance. Both the combination of two completely separated operations control centers and the integration of two massive. "Continued innovation represents an important . or release any hubs. it was a matter of when and which one it would be. and scheduling. and corporate cultures. or by acquisition allowing a combination of the previous methods of growth. and replacing first class with business class on international flights.' Renovations in reservations. but the merger has appeared to only accomplish creating a bigger company that is still plagued by the same record-high oil prices problems and now the possible creation of an even stronger labor union to contend with. which was just recently introduced by Virgin America in May 2009. has yet to be complete and is. airline companies need innovative thinkers to step up in order to be able to survive. payments.' in an age of globalization. however. As a result. there are improvements that fall into the category of technological innovations that do not necessarily carry a fee. and in-flight services have resulted in rebooking fees.S. new products to new customers. and food fees. seating. regulatory. The downside is that with these renovations often come an 'era of fees.in markets that previously did not exist. route structures. In class. innovative work requires knowledge. as discussed in The Lexus and the Olive Tree. shifts in consumer travel behavior. existing products to new customers. including e-ticketing. and Wi-Fi internet access on flights. personalized online itineraries. stated that it did not plan to make any job cuts. Thanks to 'information arbitrage. ticketing. the combined entity is still reeling with problems associated to the merger. by selling more of existing products to existing customers. reduce many flight legs. flight attendants and ground workers. and movie. complex reservation systems. Delta and Northwest Airlines were two major airlines that had operated separately for several decades. Delta may have been trying to "grow" its business by acquiring Northwest Airlines. After a long period in which U. With added government. and security issues.
2008 http://money." "Hub and Spoke Field" "Yield Management.com.com/money/industries/travel/2009-03-09-airlinemerger-Northwestdelta-N." Emory University's Goizueta Buisness School: Zyman Institute of Brand Science." Delta Website. REFERENCES Adams.com/zyman. Christian. http://en.fortune/in dex. 2009. Going forward. 21.com/money/economy/2007-04-15-1348203948_x.usatoday. http://www." Saabira Chaudhurt. Michael J. 31. 22. Harry R. http://dealbook. 16. March 10.nytimes. http://www. Kelly. "Why Delta-Northwest Won't Work. http://www.blogs. Jan. http://www.pl? document_id=2003847316&zsection_id=2--750727&slug=deltaceo22&date=2007082 Weber.com/2007/01/31/delta-committee-backs-standalone-plan/. 2009.htm Yamanouchi. "Gerald Grinstein" "Frequent-Flyer Program" "History of Delta.html? printArticle=y . Harry R. 2007.com/about_delta/deltas_restructuring/chapter_11_faqs/index." The Seattle Times.zibs. "Merger Rumors May Start Over Delta's Pick For CEO." The New York Times: Merges & Acquisitions. "New Delta Directors Must Choose CEO." USA Today. http://www. "Renovate Before You Innovate: An Interview with Sergio Zyman. staff writer for FastCompany. "US Airways Withdraws Delta Offer.html De la Merced. Nov. Marily." Wikipedia. Aug.delta. http://seattletimes. "Delta takes its time to get NorthWest Merger Right.nwsource.usatoday." USA Today. Feb.com/2008/02/20/news/companies/delta_northwest_analysis.ajc/buisness/union-issues-still-vex-199500.com/cgi-bin/PrintStory.wikipedia. 2007. 2007.com. April 15.cnn.shtml Weber. the biggest challenge for airlines is going to be whether they will be able to make the innovative changes that are necessary to meet the future needs of customers before they are swept under by globalization wave. "Union Issues Still Vex Delta.org/ Gimbel." The Atlanta-Journal Constitution. Barney.opportunity for travelers to get what they want while enabling airlines to differentiate themselves and build brand loyalty.htm "Chapter 11 FAQs." CNNMoney.htm Sarkar.
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