The Productivity Machine: The Story of an Airliner

We keep talking about this term ‘productivity’ without actually understanding the broader sense of it. Let’s delve into some perspective on this one.

Technically productivity means increasing output and maintaining or decreasing input. I am talking with companies in mind. These are companies that generate more revenues per employee per annum accounting for outsourced work too. They think of productivity with respect to operating income per employee per annum and return on investment capital or return on equity per employee per annum.

I am writing this out of San Francisco and happened to meet a very interesting analyst, who advices a Great Britain based airliner named Ryanair. It is one of the largest low-cost airliners in Europe. The story is very interesting and an example of the famous John Naisbitt belief of opportunity seekers. According to him the world is divided into two kinds of people—problem solvers and opportunity seekers. He is a strong supporter of opportunity seekers.

Now, Ryanair beats the famous and well-known Southwest Airlines by a four-is-to-one ratio on all operating metrics. How is it that a low-cost carrier is able to beat a giant like Southwest? Is it because they are leaner and meaner and working in different market dynamics? Maybe. Well, I would like to think otherwise.

Let’s just go a bit deeper. Ryanair straight away puts 25 cent of every dollar earned in revenue into its bottom line (pardon my conversion here!!). During the turmoil that followed the 9/11 attacks, most airliners announced elimination of jobs, dumping of aircraft, slashing of rates, etc. Basically it meant millions of dollars in losses. In contrast, two days after 9/11 Ryanair bombarded Europe with huge posters with the picture of Bin Laden on it with a heading that read, ‘Don’t let them win. 500,000 seats at 10 euro each’.

Ryanair showed huge profits in each and every quarter post 9/11 that left most carriers eating dust. In fact they have placed the largest order ever with Boeing for over 150 aircraft.

What causes this transformation of companies to absolute productivity machines while others can’t seem to catch up? The answer is ‘abandonment’. The most productive companies in the world have mastered the art of abandonment. They let go old stuff that no longer works. And that seems to be the key.