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 / Spring 2008 / Issue 50(originally published by Booz & Company)


Recent Research

On Southwest’s new IT strategy, reputation as a crime deterrent, the value of self-disclosure, customer perception of offshoring, and more.

 Just Enough Tech?
Title: Building Business Agility at Southwest Airlines
Authors: Jeanne W. Ross ([email protected]) and Cynthia M. Beath ([email protected])
Publisher: MIT Sloan, Research Paper No. 4664-07

Photography © Museum of Flights/CORBIS
In 2006, Southwest Airlines racked up its 34th consecutive year of profitability, outperforming every other airline in the world and solidifying its position as the largest U.S. airline by number of passengers flown. Interestingly, for a company that proudly carries the reputation of a brash, innovative startup, Southwest eschewed the use of information technology as a competitive tool during much of its history. With some notable exceptions, including its introduction of the industry’s first paperless ticketing system in the 1990s and early adoption of online sales in March 1995, Southwest’s success was built on ex­tensive one-on-one customer service and traveler amenities as the key to consumer satisfaction.

By 2002, however, Southwest was facing pressure from new low-cost airlines such as JetBlue. In response, Gary Kelly — then CFO, now CEO — decided that only by embracing technology would Southwest be able to remain competitive as a low-cost airline. Since then, the carrier has undergone a transformation based on an ap­proach the company calls “just enough.” A particular feature is the adoption of extremely disciplined processes for prioritizing and delivering new IT systems.

By 2007, for example, 80 percent of the company’s IT projects were driven by seven company-wide business strategy teams, with 50 percent designated as strategic projects critical to the future of the business. As a result of this effort, the number of employees per plane dropped from 90 in 2002 to 68 in 2006. has also become the most visited airline Web site, and improvements to the company’s information technology infrastructure have cut baseline IT costs by 10 percent. 

Bottom Line: Southwest is bucking the trend again. Although many companies complain of the failure of so-called IT transformational efforts to do anything but add headaches, costs, and a few en­hancements to the organization, the authors show that Southwest is proving that a well-planned and well-managed IT implementation can deliver significant benefits.

Crime and Punishment

Title: Why Managers Fail to Do the Right Thing: An Empirical Study of Unethical and Illegal Conduct
Authors: N. Craig Smith ([email protected]), Sally S. Simpson ([email protected]), and Chun-Yao Huang ([email protected])
Publisher: Business Ethics Quarterly, vol. 17, no. 4

In recent years, the prosecution of C-suite felons and the establishment of a new regulatory framework to deter future miscreants, led by the Sarbanes-Oxley Act, have drawn plenty of media and legal attention to white-collar crime. Borrowing heavily from criminology and management literature, this paper probes the reasons for cor­porate wrongdoing and analyzes whether current penalties and regulations fit the crime or, indeed, lessen the possibility of future incidents.

The authors presented 78 corporate executives with three scenarios in which a manager decides to take part in an unethical and illegal act (although the respondents weren’t specifically told that the incident was criminal): price-fixing, bribery, and violation of emission standards. They first asked the executives whether they would do as the manager had done under the circumstances. The study found that the threat of legal action does not directly affect the probability that misconduct will occur. Factors that the executives considered more important were their personal evaluation of the ethics of the act — legal or not, their expectations of harm to their reputation if they were associated with the act, and whether the act was ordered by a superior.

Bottom Line: Executives are moved primarily by the amount of respect they gain or lose as a result of their actions, so for sanctions for corporate wrongdoers to be effective, they have to be associated with damage to an executive’s reputation.

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