I recently read an interesting article in Fast Company magazine on a start-up airline called Surf Air. Surf Air has a unique business model. It basically is the first all-you-can-fly airline. For a flat fee per month, you can fly anywhere they fly, which right now is just four regions in California. They plan on expanding from there. They utilize small, regional airports with no waits and no screening since the FAA considers them a charter service.
The article and the story of this airline illustrate three important aspects of new product development that is worth reflecting on. First, is the concept of disruption. The large carriers, the article claims, are ripe for disruption because of “bad profits” being earned from nickel-and-diming passengers. As airline profit goes up, passenger satisfaction goes down. Is Surf Air’s model really going to be disruptive, or will the airlines as they have done in the past with upstart carriers find a way to crush them? Surf Air may avoid that fate by their focus on small regional airports.
The second concept illustrated is what Roger Martin in his book “Design of Business” describes as moving up and down the knowledge funnel. All new products start as mysteries, then move to the heuristic stage, and finally companies are able to codify the model into an algorithm. That is certainly where the airline industry is, and what most companies strive for. Being able to turn a business model into an “algorithm” provides for reliability of results which is certainly what financial markets reward. Every business needs to balance the need for reliability and looking for new mysteries to solve, otherwise someone else will. Of course, this is just what the concept of disruption is all about. That is what Surf Air is doing. They looked at a “mystery” associated with the airline industry which led to a new business model. Note that in this case, the “mystery” is not associated with technology, but with the business model and the market itself. I believe companies who manufacture highly engineered industrial products, for instance, tend to ignore these opportunities to gain competitive advantage.
Finally, the story illustrates the concept of iterate and learn when faced with a high level of uncertainty in product development. As the article describes, they are starting with a small user base that will be capped for three months at 500 members each paying a set monthly fee. They will use that to assess passenger behavior. Whether you are dealing with uncertainty in the business model, or in the technology associated with a new product, iterate and learn is a powerful way to manage the project.
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