arly in the second quarter of 2001, at
the true beginning of the travel industry's long economic winter,
profit numbers, like flocks of birds sensing a change in the
seasons, started heading south.
Because travel revenue and bookings, like birds, are supposed to
be moving north in the early spring, this was cause for concern (at
that point, only quiet concern -- many companies couldn't quite
believe that there simply wasn't something wrong with their
calculators). It took the shock of Sept. 11 for them to realize
that their companies were no longer riding a hot economy.
What to do next wasn't obvious. But if the numbers were headed
in the wrong direction, it seemed logical to call in numbers
experts -- mathematicians. Bean counters ascended to their place in
the sun while marketers, their budgets frozen, went into
hibernation.
The airlines led the way: Costs were cut, people were cut,
advertising was cut, customer service was cut. Of course, for the
carriers, with their high fixed costs, a cash-flow crunch is a
critical issue.
But large swaths of the industry adopted a flock mentality that
led to an obsessive focus on numbers, metrics and margins, as
though these corporate vital signs provided a business with life
rather than reflected its health. If margins are paramount,
subtraction on the cost side will move a company in the right
direction with a degree of certainty -- it's much riskier to add
marketing costs with the hopes of seeing results on the revenue
side.
There are signs that the industry's economic winter is ending.
Uncertainty regarding Iraq and SARS is abating. The stock market is
rising. And, as reported in this space last week, research is
showing that people plan to travel again.
If your business is in danger of closing its doors, you must
give priority to the financial viewpoint among your council of
advisors. Decreasing discretionary spending and cutting operations
costs can keep a company alive and give it a stronger position for
recovery. But as the major airlines are demonstrating, these
tactics are not a prescription for growth.
If things are taking a turn for the better, which organizations
are going to be the first out of the gate? My money is on those
that never forgot that business has more in common with chemistry
than math. These are the companies that agonized over layoffs
because they saw their workforce as an asset, not just an expense.
These are the ones who gave careful consideration to the lifetime
value of a customer when reviewing savings in customer service.
These are the companies whose focus remained on their core mission,
and wouldn't vary from it unless they felt their very company's
life was at stake.
There's a Harvard Business School study showing that graduates
motivated by a desire to follow their passions end up much
wealthier than those who say their primary career motivation is to
become wealthy. I think the same is true of companies. Those whose
primary focus is simply wealth creation, and for whom creating
value for customers is secondary, will perform more poorly in the
long run.
The signs of spring are here. Those who learned the wrong lesson
from their time in the deep freeze -- that they can save their way
to profitability -- may not yet know it, but their number's up.