Limitations of low-end disruptive innovation strategies

Abstract

Using qualitative data, we build a case study of differentiation and cost containment based on personal interviews from top management team members, secondary data, and media reports from AirTran Airways and analyze these data from both strategic management and human resource perspectives. From a strategic perspective, AirTran Airways offers service attributes for which customers, at least so far, have been unwilling to pay a large price premium. Nevertheless, AirTran Airways' efficiency has positioned it near the top of the industry in terms of profitability. From a human resource perspective, AirTran Airways blends flexibility and control in an effort to increase labor productivity. This builds on the disruptive innovation literature by suggesting boundary conditions especially when such conditions are swayed by legacy labor practices. Still, given the intensely competitive structure of the airline industry, AirTran has managed to sustain a competitive advantage. However, AirTran Airways illustrates the limitations of a low-end market disruptive innovation strategy and illustrates how industry structure places intrinsic limitations on the profitability of new entrants pursuing such strategies.

Keywords:

• airline
• disruptive innovation
• human resource strategy
• low cost

Notes

1. Technology in this sense refers to all the processes by which a firm produces its goods and services.