Jet Blue’s IT Strategy
No commentsDavid Neeleman, founder and former CEO of Jet Blue, an American Domestic Airlines Company, has had lot of experience starting and running a low cost Airlines business. He co-founded low budget charter Airlines Company called Morris Air in 1980s and then sold it to Southwest Airlines in 1993. He was also a high level executive at Southwest Airlines for a brief period. He quit that job after he had some differences with the Southwest executives. When he started Jet Blue, his mission was to provide a superior flying experience at an affordable cost , according to Harvard Business School (HBS) Case JetBlue Airways: Starting from Scratch.
Before analyzing Jet Blue’s IT Strategy, we have to understand it’s Business Strategy. Similar to Virgin America’s Strategy analysis as in my previous blog Virgin America’s IT Strategy, I have used Micheal Porter Generic Strategy Framework.
With strong experience in running a low cost carrier all his life, Neeleman understood how to run a streamlined low cost airlines operation. According to HBS case mentioned above, Jet Blue has successfully utilized IT to streamline most of their tactical operations. While, other airlines have a legacy mainframe systems and every pilot has to fill several documents before getting the flight route, Jet Blue’s pilot owns a laptop and downloads flight route with a single click. Clearly Jet Blue is using Cost Advantage Strategy and has aligned its IT Strategy to create a ‘paperless’ operations.
By branding themselves in subtle ways (unlimited satellite TV, leather seats, blue muffins etc.), Jet Blue has also gone out of its way to differentiate itself. But, according to Porter, A Differentiation Strategy is one that creates a perception that the product or service is Unique and is difficult for the competitors to copy. But, every differentiation gimmick by Jet Blue can easily copied by the Competitors. In fact, Virgin America has successfully copied Jet Blues differentiation technique when it announced its Airline route in the
So it’s evident that Jet Blue successfully uses only the Cost Advantage Strategy and not the Differentiation Strategy. In my view, an IT Strategy should always align with the Business Strategy to widen the economic moat. But, it appears that the Executives at Jet Blue are trying to implement IT infrastructure to create Differentiation also. Listen to Neeleman’s views on how they are using IT to create differentiation for Jet Blue.
It’s is tempting for the executives to extract maximum benefit from their IT implementation. But what they don’t realize is that if the IT implementation supports any non core Business Processes that does not enable the Business Strategy directly or indirectly, then that implementation is bound to fail. I think Jet Blue should focus only on implementing IT to streamline and reduce cost of operations. Focusing their IT resources on anything else is a distraction. Again, listen to Neeleman’s subtle confession in the video above (taped in 2003) in which he says that their IT implementation in operation has suffered because of their focus on online frequent flier program. Jet Blue’s frequent flier program is not unique (every other airline company has it), and implementing such a program can be outsourced. Why waste your IT resource working on a state of the art frequent flier application if it’s not your core business process?
This is the main reason why I think Jet Blue has lost its credibility lately and Neeleman lost his job as CEO. The main takeaway then is: Focus your IT investment ONLY to enable the Business Strategy. Investing and deploying IT resource in non core activities will erode your competitive advantage.
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Friday, November 30th, 2007 at 4:28 pm and is filed under Outsourcing, Business Strategy, IT Strategy, IT Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
