Case Scenario: SwissAir Founded in 1931, SwissAir was the national airline of Switzerland until it was dissolved in 2002.For most of its existence, SwissAir was a very respected, stable, and profitable business, often nicknames "the flying bank". In the 1970s, Switzerland declined to join the European Union, and the airline industry on the whole experienced broad deregulation. This increased competition for SwissAir. Many other airlines had created alliances (and/or acquired smaller airlines) as a means of boosting their capacity to compete. SwissAir engaged it talks with some of the other major European airlines, but exited those talks when their demands were not met. To catch up in the alliance game, they contracted with McKinsey (a U.S. consulting company) in1994. McKinsey advised them to create their own alliance by connecting with smaller, regional airlines in Europe, rather than the other large airlines. To help accomplish this goal, SwissAir decided to replace their CEO with a new one in 1998 (Jeffrey Katz). That new CEO trimmed down the Board of Directors from 26 members representing a diversity of backgrounds, to only 10 members. The new Board of Directors consisted only of politicians and financial experts, all the airline experts were pushed off the Board. The new Board and CEO continued to ignore issues that kept arising at SwissAir, and ended up pursuing an inappropriate strategy. There were two major characteristics of the Board and CEO that led to their downfall. First, because of their past success and the political and financial abilities of the new Board, the Board felt they were unstoppable. They ignored technical problems and outsourced an important safety function to an external vendor in order to 'cut costs'. That decision led to the fatal crash of Swissair Flight 111 in 1998, which damaged their reputation. Afterwards, even though SwissAir and CrossAir were owned by the same parent company (SAirGroup), SwissAir began competing aggressively with CrossAir, perhaps to boost their image. Their efforts led to profit loss and did not undercut Crossair. In fact, when Swissair went bankrupt, it was absorbed into Crossair. Second, the CEO and Board were loyal to their own norms and values at the cost of outside expertise. Swissair's alliance of small European airlines was indeed an alliance, however, it was with firms that rarely raised a profit. They thought that bringing the Swissair brand to the small airlines would boost customership, however in the airline industry, branding is much less important to customers than is the cost and convenience of a flight.
Q1. What could you do to prevent SwissAir from over-estimating its power?
Q2. What could you do to prevent SwissAir from Experiencing closed-mindedness?
Q3. What could you do to prevent SwissAir from feelings pressure to conform?