ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Characteristics of Innovative Leaders and Organizations

Ferdinand (JR) Karbowski Jr
Capella University
March 17, 2015

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Characteristics of Innovative Leaders and Organizations

Introduction
When someone mentions visionaries such as: Herb Kelleher from Southwest Airlines;
Steve Jobs from Apple; and Lee Iacocca from Chrysler, most tend to associate the personalities,
the companies they helped to define, and the innovative products they delivered. In many cases,
these leaders had larger than life qualities which made them giants of the industry. Who can
forget Iacocca famously pitching, "If you can find a better car, buy it."; or Steve Jobs
encouraging us to Think Different; or Herb Kelleher stating that, A company is stronger if it
is bound by love rather than by fear. Although, each represents a completely different industry,
they all shared common characteristics that drove success. We will look closer at Southwest
Airlines who pioneered the low-cost-carrier model in 1971 and how the transformational
leadership model supports innovation in the global context of the airline industry. We will assess
how Kelleher used the five discovery skills of innovative leaders in his management approach.
We will discuss how he personally shaped the culture and business processes to drive innovation
at Southwest Airlines. Moreover, we will consider the most important DNA factor in leading his
organization. First, let us explore the transformational leadership model and global innovation in
the context of Southwest so we can better understand what has made Kelleher successful and
how he continues to influence his successors.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Leadership and Global Innovation

In the quest for business owners and CEOs to be a good leaders, they invariably chose a
leadership model and develop their own style. CEOs have adopted a number of leadership
models over the years, but perhaps one of the most established models is transformational
leadership. Given a leaders specific skills and traits particularly entrepreneurial-types,
transformational leadership is well-equipped to support innovation in organizations.
Transformational leaders are able to adopt a vision and motivate followers working toward a
common goal. Herb Kelleher has exhibited the four principal elements of transformational
leadership which are: Intellectual stimulation; Individualized consideration; Inspirational
motivation; and Idealized influence as he steered the airline toward success.

Intellectual Stimulation - As founder of the airline, he challenged the status quo, took
calculated risks and stimulated learning among followers by nurturing creativity and
encouraging opportunities to explore new approaches.

Individualized Consideration - As a leader, he provided support, empathy and encouragement

to followers almost as a father figure by always keeping an open communication channel.

Inspirational Motivation As a motivator, he has demonstrated the ability to articulate a

vision that is appealing and inspiring to followers (often in an amusing or self-deprecating
fashion) and provided an infectious energy to drive his employees forward.

Idealized Influence Herb Kelleher is well-known as a chain-smoking, whisky swilling

straight-talking (making frequent use of colorful language) individual. Some would argue
that because of these characteristics, he did not serve as a positive role model. However, he
embodied and displayed a high ethical character, instilled pride, and visibly demonstrated
respect and trust.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Bass and Riggio observed that an innovative leader using the transformational leadership
model can be an uplifting experience under the right conditions. These kinds of leaders have a
tendency to be very charismatic and put a tremendous amount of passion and energy into
everything they do. They genuinely display care about their employees and want them to
succeed. (Bass & Riggio, 2008, p. 3). Herb Kelleher displayed all of these characteristics (and
more) and helped define the global model for a low-cost-carrier (LCC). Furthermore, he
prepared his successors for the new challenges in the airline industry and allowed them to further
transform Southwest Airlines from a domestic LCC into an international player via the
acquisition of AirTran in 2011.
For the past several years, GE has published something they call a Global Innovation
Barometer. It is intended to disclose how business leaders around the world view innovation
and how those perceptions are swaying business strategies in an increasingly globalized
environment. The 2013 key findings were: Because of the challenging local economies, the pace
of innovation has slowed and business leaders are increasingly conflicted between an appetite for
globalization and protectionist tendencies; the biggest drivers of collaboration are the chance to
enter new markets and access to new technology; global business performance is ever more
reliant upon business model innovation; corporate policy environments in terms of innovation is
declining globally; and global business leaders seeking to strengthen innovation are more and
more focused on workforce preparation and talent mobility. (Harary & Pulizzi, 2013, p. 4).
Southwest Airlines has experienced the situations described in the GE publication, yet continues
to succeed by demonstrating leadership and global innovation. Next we examine the leadership
discovery skills at Southwest Airlines.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Leadership Discovery Skills at Southwest Airlines

There have been countless books and articles written about Southwest Airlines over the
years. It is famously said that Herb Kelleher created his initial business plan on the back of a
cocktail napkin. He had a vision and to execute it, he perhaps unknowingly employed the five
leadership discovery skills that researchers have described as: associating, questioning,
observing, experimenting, and networking. (Dyer, Gregersen & Christensen, 2009, p. 60-67).
Associating
In the airline industry, Herb Kelleher associated things that had not previously been done.
His model was based upon: Limited passenger service; Short-haul point-to-point routes from
mid-sized cities and secondary airports; Frequent, reliable departures; Lean, highly productive
ground and gate crews; High aircraft utilization; and Very low ticket prices. These attributes were
counterintuitive for legacy carriers.
Questioning
Most airlines have asked the question, Why do people fly? The answer is typically that
they travel for business, to see family, vacation, or school. However, Kelleher asked the question,
Why cant airlines serve the price and convenience-sensitive travelers who would rather travel
by bus or car? In addition, he asked several more questions like: Why cant I pre-pay for fuel in
advance at a lower price if I think that fuel prices will rise in the future?; Why do I need to feed
people on short-haul flights?; Why cant I fly just one kind of aircraft?. These were questions
that the legacy carriers had not asked and could not answer without compromising their current
business models. Answering those questions and developing a competitive strategy was key to
success. Innovative leaders like Kelleher take questioning a step further by challenging
assumptions and are not content with maintaining the status quo.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Observing
Kelleher and his team observed that by not providing meals, not assigning seats, and not
providing interline baggage transfers, Southwest avoided having to perform activities that slowed
down other airlines. Innovators focus on detecting small behavioral details and then suggest new
ways of doing things.
Experimenting
As CEO he was willing to try on new experiences to create a corporate culture and
environment that fostered experimentation. His airline was unlike any other in the industry at the
time, and because he focused on a single aircraft type, it allowed the flight crew, gate agents, and
ground crews to be very proficient with their jobs. Because his airline was new, he had flexible
union rules which allowed him to provide incentives (by way of higher-than-industry-average
wages) to those employees that demonstrated excellence and efficiency in productivity for their
efforts. This was nearly impossible to do at the legacy carriers.
Networking
Kelleher and his team were highly visible in the airline industry. Whether it was
interacting with government agencies regarding air travel regulations particularly at the Love
Field airport, to meeting with union officials working in the best interests of their employees, to
collaborating with Boeing to make the 737 aircraft a better delivery product all contributed to
Southwests success. It is recognized that most successful companies with innovative
entrepreneurs make a conscious effort to gain widely varying perspectives.
Charismatic leaders like Kelleher have a personal stake in shaping the culture and
processes that define their industry. Let us explore some of those characteristics next.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Shaping Culture and Processes

Shaping culture and processes in any organization requires a delicate balance of many
dimensions. In a recent interview, Robert Reid CEO of Intacct stated, If you create an
environment that inspires people in the good times and bad, they will figure out the right strategy
and will do the right things from an execution perspective. I used to think strategy, execution and
culture were a three-legged stool. Now I realize that if you create a great culture, the other two
will follow. (Bryant, 2014, p BU2). With respect to Southwest Airlines, Herb Kelleher has
frequently been described by industry analysts as a revolutionizing and straight-talking
individual. However, he has repeatedly attributed the companys success to a relentless focus to
the business, to the corporate culture and most importantly to his employees. In an interview he
recounted, We basically said to our people, there are three things that were interested in. The
lowest costs in the industry The best customer service and we said beyond that were
interested in intangibles a spiritual infusion because they are the hardest things for your
competitors to replicate they cant buy your spirit. So its the most powerful thing of all.
(Lucier, 2004, para 7). He demonstrates and reinforces the company culture by regularly
appearing in costume for company events, rewarding employees for telling good jokes, and has
been known to make up songs while presenting service awards. Even after leaving day-to-day
operations, these spontaneous celebrations are still commonplace at Southwest Airlines. In the
process, he transformed the airline from three jets to the countrys largest and consistently
profitable low-cost carrier. He placed a particular focus on one of the factors that form the DNA
of innovative leaders.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

The Most Important DNA Factor

An interesting observation from researchers is that the DNA of innovative organizations
centers on the founders DNA. The authors of The Innovator's DNA package it into a
framework they call the 3P framework. That is; People, Processes, and Philosophies. (Furr &
Dyer, 2008, p 6). Herb Kelleher has personified this and has shared common traits that have
defined the success of innovative leaders. He created the Employees First, Customers Second
management philosophy for the airline. In 1971, it was considered an extremely controversial
first principle management philosophy. Kelleher considered the People component of the DNA
framework as the most important factor. He rationalized that in the service industry, when you
build a company around the idea of taking care of employees and take care of them, they treat
the customers well, so that they use the companys products and services again, to make the
shareholders happy, which enables the company to have the resources to take care of the
employees to continue the cycle. (Lucier, 2004, para 6). In essence, he recognized that he needed
to treat people right, train them to execute the processes in an efficient manner so that they
personally adopt the same philosophy as the company to drive success. This DNA was
exemplified by Kelleher which was then infused to all employees within Southwest Airlines.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

Conclusion
Various leadership models and practices encourage innovation and take into consideration
the global context of industry. Visionaries and innovative business leaders are unique, but share
many common traits that have defined their success. As founder and CEO of Southwest Airlines,
Herb Kelleher used the transformational leadership model as a guide to drive his entrepreneurial
spirit. As we studied the principal elements of the transformational leadership model as he
applied it, we also delved into the so called DNA of these innovators. We explored the leadership
discovery skills in the context of Southwest that support and continue to support innovation. We
assessed the actions that Kelleher took to shape his companys culture and business processes to
be more innovative. Through analysis, we suggested that the People component of the three
organizational DNA factors is a significant contributing element to Southwests future success.
At the end of the day, disruptive innovators such as Kelleher seek to transform organizations. In
his case, he was actually able to transform the airline industry. Leaders like Kelleher inspire
employees and exude an infectious enthusiastic energy to achieve great things.

ASSESSMENT3-1 APPLYING THE INNOVATOR'S DNA

10

References
Bass, B. M. & Riggio, R. E. (2008). Transformational Leadership. Mahwah, New Jersey:
Lawrence Erlbaum Associates, Inc. Retrieved from
http://www.amazon.com/Transformational-Leadership-Bernard-MBass/dp/0805847626#reader_0805847626
Bryant, A. (2014, December 20). Robert reid of intacct: the culture always comes first. New York
Times. Page BU2. Retrieved from http://www.nytimes.com/2014/12/21/business/corneroffice-robert-reid-of-intacct-the-culture-always-comes-first.html
Dyer, J. H., Gregersen, H. B., & Christensen, C. M. (2009). The innovator's DNA. (cover story).
Harvard Business Review, 87(12), 60-67. Retrieved from
http://ezproxy.library.capella.edu/login?url=http://search.ebscohost.com/login.aspx?
direct=true&db=bth&AN=45361658&site=ehostlive&scope=site
Furr, N. & Dyer, J. (2008). The innovators method - bringing the lean start-up into your
organization. Retrieved from
http://learn.theinnovatorsmethod.com/assets/innovators_method_ch12411aeacbd0800d5dce412a351be347f.pdf
Harary, A. & Pulizzi, U. (2013, January). GE global innovation barometer - global research
findings & insights. Retrieved from
https://www.ge.com/sites/default/files/Innovation_Overview.pdf
Lucier, C. (2004, June 01). Herb Kelleher: The thought leader interview. strategy+business.
Summer 2004(35). Retrieved from http://www.strategy-business.com/article/04212?
pg=all