Lessons Learned from the Southwest Holiday Failure

• Jan 26, 2023
• By Chris Sachse

At the end of 2022, amidst peak holiday travel, the mid-west was under blizzard conditions which grounded air traffic nationwide. While most airlines were back up and running after flight conditions improved, Southwest Airlines remained at a standstill. For days. Passengers missed holiday celebrations, connecting flights, cruises and more. A combination of Southwest’s unique operating process and outdated software, they were unable to get crews and planes back on schedule. Southwest has neglected to update old technology systems for years. They seem to have made this decision for several reasons: the current one was working despite pleas from employees for updated software; digital transformation is particularly complex within a highly regulated industry; change is really hard especially the people part; and it’s expensive. In an article from the Wall Street Journal about the Southwest situation, Jahan Alamzad, an airline analyst at consulting firm CA Advisors shared that “the most serious IT challenge airlines face stems from the applications developed in silos by vendors or the airlines themselves. When carriers upgrade to newer analytics software to improve the routing of their aircraft, for example, those systems aren’t connected with software they use to manage the crew who work those flights. While that lack of connection isn’t usually a problem in airlines’ day-to-day operations, it can become disastrous during severe disruptions like the holiday storm.” The technology silos mentioned in the article, along with the regulations, expense, and failure to secure buy-in from all stakeholders, mirror similar challenges faced by the financial services industry. Southwest, however, was able to survive on its brand legacy. They didn’t need to innovate with their competition because they dominated market share, experienced sustained growth and benefitted from strong brand loyalty. Unfortunately, while they depended on their brand reputation and positioning, the rest of the airline industry, including Spirit, invested in technology systems that improved experience and provided agility and nimbleness. In one week, we witnessed one of the strongest brands in America crumble because they ignored the role technology plays in their business. Financial services institutions have a lot they can learn from this event.

1. Don’t rest on your laurels with technology.

Your technology may be sufficient and serves its purpose today, but that doesn’t mean it will be an efficient or useful system tomorrow. Your competitors are investing in technology and your lack of action may leave you years behind, and it may be too late by the time you notice. Frankly, if you haven’t noticed by now, you aren’t paying attention.

2. Strive for nimbleness and flexibility.

Many credit unions and banks struggle because of their reliance on vendors and long-term decisions made in the past. Like the airline industry, the financial services industry builds and manages its technology in a siloed manner, preventing them from being more strategic or being agile. As you transform, financial services leaders must look for more flexible, nimble options like cloud services as well as demand open access to data and shorter-term contracts which will allow you to pivot if and when you need to. You need to be able to respond.

3. Build for resiliency.

Don’t let the next winter storm, atmospheric river, or breach take down your technology and your operations. Today’s technology capabilities leave no excuse for credit unions and banks to not build a cloud-first, resilient architecture, no matter your size. Through strong foundational architecture that leverages the cloud for recoverability, you will be able to withstand the chaos that will inevitably come. Most importantly, don’t take your brand for granted. Today, brands, especially financial services organizations, are intrinsically connected to the technology they offer. The pace of change in the needs and wants of consumers along with the advancement of technology solutions, it is expected that credit unions and banks, like other brands, respond and adapt quickly. Financial services leaders need to constantly evaluate the experience that your organization and your technology provides to the humans you engage with – members and employees. That human experience must drive your innovation and need for change constantly. Southwest forgot all of the rules and is paying a heavy price – credit unions and banks should use this event as a case study for how to improve your IT strategy and advance your digital transformation. Chris Sachse is CEO of Think|Stack, a managed services CUSO specializing in cybersecurity and cloud solutions. He can be reached at chris@thinkstack.co. For more information about digital transformation, cloud adoption and cybersecurity practices that improve member experiences while protecting member data, visit www.thinkstack.co or contact us at info@thinkstack.co .

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