Marketing versus technological innovation

Louis Proyect lnp3 at SPAMpanix.com
Sat Feb 17 07:10:57 MST 2001


[About 4 years ago I heard a memorable talk by Dave Kotz on socialism and
market competition (co-author of "Revolution from Above", an analysis of
the fall of the USSR) at the Socialist Scholars Conference. He noted that
technological innovation is not necessarily an outcome of capitalist
competition and that, in fact, some of the most important innovations--like
the transistor--came from the phone company when it was a monopoly. When
the phone company was broken up in order to force it to compete, Bell Labs
moved away from technological innovation and into marketing. Apparently the
same thing has been happening in the airline industry, according to John
Newhouse, author of "The Sporty Game", a truly brilliant study of the
airline industry that first appeared as a series of articles in the New
Yorker magazine in the 1970s. Newhouse, whether consciously or not, had
written an anti-capitalist classic. Unfortunately, it is out of print but
it is worth the effort to track it down in a library. I have read few books
that make a better case for the irrationality of capitalism.]

Taking the airplane for granted is a tendency that troubles a great many
technical (and nontechnical) people in the aircraft and airline industries.
Joseph Sutter, who has had a role at Boeing of the kind that Wells and
Pennell had, feels strongly about this. "An airplane," he says, "is a
compromise. People have to understand that." He means that there is no such
thing as a wholly safe airplane. The wit of man cannot anticipate, hence
prevent, everything that could go wrong with an airplane in flight. John
Borger recalls a cautionary saying of one of his predecessors and former
bosses at Pan Am: "Aviation is not inherently unsafe, but, like the sea, is
terribly unforgiving of any carelessness or neglect."

Airline maintenance operations cannot, obviously, be cut back as much as
engineering departments have been. But economy programs have put
maintenance sections under heavy pressure to find methods of reducing their
costs. This, too, is a tendency that worries people. They see the style of
the airline industry changing, and rapidly. Experienced people recall a
time when the top management in airlines understood and had a feel for the
equipment; in the case of many airlines, that is no longer true. Willis
Player, a senior and prominent Pan Am executive until his recent
retirement—and not an engineer—says: "Philosophically, senior management in
the airline industry has moved two levels up from direct equipment
considerations. These [levels] are marketing and finance. It didn’t used to
be that way." Two of the most conspicuous airline executives are Richard
Ferris and Robert Crandall; their companies, United and Amencan, are
respectively the largest and second largest of the domestic airlines.
Ferris and Crandall are alike in that both are in their mid-forties,
aggressive, voluble and known as marketing people. Ferris came to United
from its subsidiary, Western International Hotels, and, after serving first
as head of the food services division, became chief marketing officer, then
president and later chief executive and chairman. Crandall was American~ s
senior vice-president for marketing prior to becoming president in July
1980. Ferris and Crandall are considered typical of the kind of executives
who are taking over much of the airline industry. Deregulation, because it
intensifies competition and puts additional stress on marketing
considerations, will strengthen this trend in airline management.

Another experienced airline executive, also a nontechnical person, talks
with feeling and eloquence about a problem that he says he cannot define. A
lengthy comment which he recently made about his trade could be summarized
as follows: The industry is heading toward a watershed, but he doesn’t know
what it will be. He worries that the "dirty fingernail" people are being
squeezed out by the marketing and financial types. The airlines are losing
that cadre of people who care first about the airplanes and their quality.
He worries that deregulation will erode standards. He worries about the
human factor, noting that all the questions of safety and reliability can’t
be entrusted just to the people who operate the airplanes and maintain
them. Standards of safety and reliability should concern all of management.
The manufacturers are making and delivering much better airplanes, which
are easier to operate. But within the airline industry, he senses a
declining concern for standards. He hasn’t seen concrete evidence yet, but
if he does, he says, he will get out of the business.

A tendency to take the equipment for granted and to put greater emphasis on
marketing did not begin with deregulation; it is hard to say exactly when
the current style took over, but it does seem that nothing has been quite
the same since the era of wide-body airplanes began. In May 1968 Aviation
Week & Space Technology printed an article about the competition between
the DC- 10 and L- 1011; the article, which appeared about two weeks after
United Airlines had selected the DC- 10, had this revealing comment from
its president at the time, George Keck:

"Keck noted the industry has changed from a 'technically oriented' venture
to a marketing and merchandising business. He explained that the technical
efficiency of the jet transport, longer daily utilization of aircraft and
improved flight schedule completions now permit a change of emphasis from
operational problems to passenger service."

Louis Proyect
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