You may have noticed throughout our website copy and content that we speak of the importance of creating positive experiences during customer moments of truth.
Customer moments of truth has been a part of the Customer Experience lexicon for the past 3 decades, so what does it mean and where does the theory come from? The following piece tells the story of Jan Carlzon, former CEO of Scandinavian Airlines, a CX revolutionary and the man who coined the term. The piece in full was Extracted from the New York Times: 1988 . Enjoy.
STOCKHOLM— Jan Carlzon, the tall, blond 46-year-old president of Scandinavian Airlines System, is Sweden’s answer to Lee A. Iacocca: a charismatic executive who revitalized a major corporation and then wrote a runaway best seller about his managerial exploits.
As Mr. Carlzon’s punchy and preachy ”Moment of Truth” recounts, he assumed the helm of a money-losing S.A.S. in late 1981 and transformed the airline. He focused on business passengers, decentralized the organization, invested heavily in training, and improved service and punctuality dramatically. The bold and risky strategy worked: S.A.S. returned to profitability in Mr. Carlzon’s first year as president and earned a respectable $273 million before taxes on revenues of $3.9 billion last year.
Yet today Mr. Carlzon faces another major challenge: preparing S.A.S. for the more competitive, deregulated world toward which the European airlines are moving. He is ahead of his European peers in trying to adapt S.A.S. to unfolding deregulation. But it is still very much open to question whether he can accomplish his goal of making S.A.S. one of the five or so major carriers that are expected to dominate the European airline industry in the mid-1990’s. A Lofty Goal
The top-five target is an ambitious goal for S.A.S., an airline perched on Europe’s northern tier, whose three home markets embrace a scant 17 million people.
S.A.S., half-owned by the Governments of Sweden, Denmark and Norway, ranks eighth among European carriers in terms of average revenue generated by flying one passenger one mile, a key industry gauge.
Last month the European Community took a first step toward full ”liberalization,” as deregulation in Europe is known, when rules curbing discount fares were relaxed. The process is scheduled to be completed in 1992.
European airlines expect a rerun of the American experience: stiffer competition, lower fares, increased traffic and improved efficiency. With liberalization, market shares will no longer be fixed, as they essentially are now because of government-by-government restrictions on routes. Accordingly, a consolidation of the European industry seems inevitable.
Airline executives and analysts say that about five major European carriers – efficient and truly international – will emerge by the mid-1990’s. The others will be relegated to ”feeder” airlines, mainly transporting passengers from the less-traveled regions of Europe to high-traffic hub airports, where the major airlines will pick them up for transcontinental flights.
Agreeing with this view of the future, Mr. Carlzon is clear about his goal for S.A.S. ”We want to be one of the five big intercontinental European carriers in 1995,” he said.
That may be a tall order, but then Mr. Carlzon – who likes to call himself ”an enlightened dictator” – is known for tackling tough jobs. A Career in Travel
An executive who has an intolerance for unnecessary paperwork, Mr. Carlzon has spent his entire career in the travel business. After earning a master’s in business administration at the Stockholm School of Economics in 1967, he joined Vingressor, Sweden’s largest tour operator. When he became its managing director in 1974, the company – by then a wholly owned subsidiary of S.A.S. – was losing money. He cut its costs and within a year had it operating in the black.
After overseeing a significant expansion at Vingressor, Mr. Carlzon in 1978 became president of Linjeflyg, Sweden’s then-ailing domestic airline, which was 50 percent owned by S.A.S. He revived Linjeflyg by cutting fares and improving service.
Joining S.A.S. as chief operating officer in 1980, he became its chief executive less than a year later, vowing to earn the airline a reputation as ”the best airline in the world for the frequent business traveler.”
Mr. Carlzon has since gained international renown for involving S.A.S. employees in a successful crusade to improve service. His theory is that ”front-line workers” – those who have direct contact with passengers – are the company’s most important asset.
He argues that any employee ”not given information cannot assume responsibility, but anyone who is given information cannot avoid assuming it.” To that end, Mr. Carlzon put more than 12,000 of his employees through a service course. The courses themselves are marketed and have been used by dozens of companies, ranging from British Airways to the Ford modeling agency. Not a Cost Slasher
Mr. Carlzon is not a diehard cost-cutter. He revived S.A.S. without shearing away thousands of workers or drastic divestitures. He has actually increased S.A.S.’s operating expenses. In the quest to keep business travelers happy, he even restored olives in martinis.
The S.A.S. chief has become a favored speaker at business forums and a respected figure among the management cognoscenti. The congratulatory foreword to the American edition of ”Moments of Truth” was written by Tom Peters, the management consultant and co-author of ”In Search of Excellence.”
”Moments of Truth,” which argues that the lessons learned at S.A.S. have broad applications, was a No. 1 best seller in Sweden for months after it was published in late 1985 and has sold 100,000 copies – the equivalent, adjusting for Sweden’s population, of more than three million copies in America. A big seller in Norway and Denmark as well, it was translated into English and brought out last year in the United States, where it has sold 25,000 copies, a strong showing for a book by a European businessman. Counting on Alliances
To make S.A.S. a giant of a deregulated European airline industry, Mr. Carlzon hopes to form alliances with other airlines around the world whose flight schedules, computerized reservation systems and service standards will mesh smoothly. The notion is to create a network that will allow passengers to fly conveniently worldwide, with stopovers only at hub airports.
For S.A.S., the approach promises a way to sidestep the remote geography and limited market of Scandinavia in the more freewheeling, competitive environment ahead. ”We won’t be able to survive alone,” Mr. Carlzon said.
The Carlzon strategy is a good one, analysts agree. ”The middle-sized carriers like S.A.S. are the ones that will be most at risk in Europe,” noted John Eichner, president of Simat, Helliesen & Eichner Inc., a New York-based consulting firm specializing in airlines. ”So Carlzon is absolutely right in sizing up the situation and trying to become part of something bigger.”
If Mr. Carlzon’s alliance plan fails, S.A.S. will probably be forced to become a feeder airline to the big West German carrier Lufthansa, most analysts say. The transcontinental passengers headed for Scandinavia would be flown by Lufthansa and a few other international airlines into Frankfurt, where S.A.S. would pick them up. Ties on 3 Continents Sought
The Carlzon vision includes ”one or preferably two” alliances with other European carriers, two or three partnerships with United States airlines and links in Asia as well. To date, there has been more vision than action to Mr. Carlzon’s globalization drive, though he has held discussions with several American and European airlines.
Negotiations between S.A.S. and Sabena, the Belgian flag carrier, aimed at combining their airlines, hotels and service companies into a jointly owned subsidiary, broke down last summer. Sabena balked at the sweeping nature of the deal Mr. Carlzon proposed. S.A.S. hopes to get the Sabena negotiations back on track; the Belgian carrier is reportedly also discussing links with other airlines.
Mr. Carlzon has had a couple of modest successes. Last fall, S.A.S. signed an agreement with Thai Airways International to cooperate and increase nonstop flights between Scandinavia and Bangkok, with Thai carrying passengers on to other Asian destinations. In addition, S.A.S. has signed a pact with Varig Airways of Brazil for connecting service from Rio de Janeiro to points in South America. Setback on Caledonian
S.A.S. suffered its biggest setback last December when British Airways beat it out for control of British Caledonian Airways with a takeover bid of $455 million. Because of restrictions on foreign ownership of the British carrier, the S.A.S. offer of $200 million was for only 26.1 percent of British Caledonian.
Though financially troubled, British Caledonian has a few key trans-Atlantic routes and extensive landing rights at Gatwick Airport outside London. Gatwick is the world’s third-largest international airport, after Heathrow in London and Kennedy International Airport in New York, and would have provided S.A.S. with a crucial hub.
To succeed with his global alliance effort, Mr. Carlzon badly needs a link with an airline with a hub airport in central Europe and worthwhile links with American carriers. In Europe, the most likely partners for S.A.S. are Sabena and Swissair, according to analysts. In America, analysts say, the most likely partners for S.A.S. would be USAir and Eastern, whose strong East Coast presence would complement the five ”gateway” routes S.A.S. has already, to New York, Seattle, Chicago, Los Angeles and Anchorage.
Although Mr. Carlzon started his globalization campaign first, many airlines are now discussing similar partnerships. United Airlines and British Airways, for example, agreed to a limited pact. It is not clear that S.A.S., given its small home market, will be deemed a highly desired partner for a major international airline.
”Carlzon has been a leader and a radical in globalization, but he may be fighting a losing battle,” said Kevin Page, editor of Airline Business, a London-based magazine.
Still, because of Mr. Carlzon’s impressive track record, no one is dismissing S.A.S. yet. ”Carlzon is in a potentially very difficult spot,” said Daniel Kasper, an airline expert at Harbridge House, a Boston consulting concern. ”But then, S.A.S. was just a sleepy airline on the periphery of Europe until Carlzon turned it around.”
Photo of Jan Carlzon (NYT/Hans T. Dahlskog) (Pg. D1); graphs showing increased revenues and earnings for Scandinavian Airlines System since 1980 (Source: Company reports) (Pg. D5)