Southwest Airlines is taking a big business leap entering a new market, my home state of Hawaii, next year. Entering a new market can be a great strategic move if the market is big and sustainable, you have clarity on how you can be distinct and the new move builds on the health of your business.
Many startups often wrestle with the strategic question of do I stick with my core business in my core markets, or do I think about moving into new businesses and new markets?
Certainly, mainland to Hawaii flights checks all three criteria I laid out earlier, but Southwest is known as a smart, savvy strategic player who thinks multiple moves ahead. Is this just about the Hawaii market entry? My belief is there is clearly a plan behind the plan.
Thinking multiple moves ahead like a grandmaster in chess is the far superior strategy when it comes to market entry. Specifically, there are three questions to ask of your startup to create a strong one-two punch strategy to build winning strategies like Southwest Airlines.
Does the market entry make my core business stronger?
New markets always seem exciting, but there's a huge risk that it can be a distraction to the core business. 'Shiny new object syndrome' happens to the best of companies as they launch into a new market and realize afterwards that someone else grew at the expense of your core business.
This is why Hawaii is a great move for Southwest Airlines, in that it will make their core business even stronger. Going to Hawaii is a dream for most people and is often the core reason why customers are loyal to particular airline, so that they get enough miles to make their dream vacation come true. Now that Hawaii is will become an option in the Southwest Rapid Rewards program, it will make their extreme customer loyalty even stronger.
The best way for startups to mitigate this is to ask the question "does this new move enhance my core business" before you move into a new market and ensure the answer is always yes. Is market entry great? Sure. But a new market entry that makes your core business stronger is a chance to have your cake and eat it too.
Does the market entry make my brand more compelling?
Branding is not just a conceptual, emotional exercise, but a huge strategic weapon if you use it to drive pricing power and/or use it to more cheaply enter a new market or category (e.g., mega-branding).
For Southwest Airlines, the notion of freedom is a key part of their brand. Whether it is freedom to move about the country, freedom from baggage fees, or freedom from some of the frustrations that the unexpected curve balls travel can throw. The ability to fly to all fifty states is a logical fulfillment of their brand promise.
Many startups have an inherent branding advantage over big companies by simply not being big, but the scrappy up and coming company that might care just a bit more about their customers. But there in lies the branding trap for startups, as too many of them define their brand as what they aren't--a big, faceless, uncaring corporation. Not enough startups are clear about who they are, who they want to be and where they want to go. Don't just rely on your inherent branding advantage, but build on it by ensuring your business backs up your brand promise through all your products and services to the fullest extent.
Does the market entry set me up for another compelling market?
The best new market entry moves are not just great moves in it of themselves, but set you up for even better moves down the road. It's the hockey assist that leads to a goal down the road.
The equally exciting opportunity for Southwest to fly to Hawaii is the opportunity to fly within Hawaii. Hawaiian inter-island travel is huge business, with more people flying from Oahu to Maui than Boston to New York City. Inter-island travel is also attractive given that they are short hops with easy weather and use interchangeable planes, which is right up Southwest Airlines alley. Plus Southwest has a lot of success moving into a market with a virtual monopolies, as Hawaiian Airlines dominates most of the interisland travel.
Plus, Hawaii may be the gift that keeps on giving. If Southwest is truly enables us to be 'free to move about the country', how long will it be until we are now 'free to move beyond our country'? Flights to Japan and New Zealand from Hawaii are only eight hours. Is it any coincidence that Southwest is rolling out new 737 max airplanes?
Think strategically like Southwest Airlines, and your startup will be in great shape.