By Stephen A. Rutan

For this edition of Course and Direction, I thought about the companies that meet my needs as a traveling consultant, with a family of four children living in suburban Rochester, New York. Here are a few of my favorite businesses, along with an examination of what makes them successful for me in the business world of 2004.

Best Buy - Willingness to Change

Best Buy was named 2003 Company of the Year by Forbes magazine in their January 12th issue. They achieved this distinction by cashing in on the current craze in technological gizmos and entertainment-centered electronics - pricey and, for now, profitable items in the still booming market of consumer goods.

Back in 1984, when they opened their first superstore, they were dwarfed by the original "category killer" electronics player, Circuit City. Through a series of internally driven makeovers, Best Buy surpassed Circuit City in 1995 and has been number one in the category since that time.

In my town, Best Buy is located literally across the street from Circuit City and I must confess that I have grudgingly changed allegiances since the store with the bright yellow tag opened several years ago. I liked shopping at Circuit City. I was initially offended that upstart Best Buy had the gall to open their store in outright defiance of my chosen place to shop.

But Best Buy does it better. The environment is open and more inviting, with plenty of opportunities to try out the goods before I buy. The selection is better for the items I want, the staff is consistently knowledgeable and eager (the big determining factor for me), and I am confident that the prices will be competitive. I can easily coordinate my gadget research with my shopping activity through their user-friendly website - choosing to buy online and waiting for shipment or satisfying my techno-toy urges immediately by finding the product in-stock at the local brick and mortar outlet.

As the Forbes article highlights, Best Buy has succeeded primarily because they have been willing to overhaul their stores and their business model four times in their 37-year history. What's more, they know that, with Wal-Mart opening more stores than they are planning, Best Buy will not win by "trying to chase the customer out of Wal-Mart". Their current experiment with "bundling high-end electronics with service and installation" could be just the path to creating higher revenues and margins and avoiding a commodity slugfest with the worldwide retail behemoth.

US Airways - Dare to be Different?

I fly a lot for business. US Airways is my airline of choice. Honestly, this choice was made easy due to the fact that US Airways occupies more gates that any other airline at my home airport in Rochester, New York. So, in the interest of scheduling convenience, concentrating my frequent flyer miles and achieving elite status and the perks that go with it, I have "chosen" US Airways. You may be in the same position with another airline.

US Airways takes very good care of me. As a Chairman's Preferred member of their frequent flyer program, I have access to upgrades to first class whenever space is available. I can check in for flights at the shorter ticket counter aisles set up especially for elite status members (and didn't that come in handy for my family last year when we arrived at the Orlando airport and found at least two hundred people already lined up at the standard check-in counters? Number of people in line in the first class/preferred status line: Two!). My luggage is tagged as a preferred customer for expedited handling for connections and "early-off" status at my destination. It does not escape my attention that the US Airways employees always seem to be especially polite and grateful for flying their airline, as they acknowledge the Chairman's Preferred status imprinted on my boarding pass.

In addition to this, I even have my household and business Visa cards affiliated with my US Airways frequent flyer program. Every dollar that I spend becomes another valued frequent flyer mile to eventually be used for personal travel for that cherished family vacation each year. Six free plane tickets allow me to set aside a lot more money for lodging, meals and entertainment while we are away!

Overall, it's a nice array of benefits, but I am sure that many of you are now thinking, "I know about all of this. I enjoy the same benefits with my own preferred airline." Well, that's my point.

US Airways succeeds in doing a great job taking care of me and providing me with all of these additional benefits to encourage my loyalty. But so does every other major airline for their respective customers in the same position. These special customer services are the same efforts that are being practiced by everyone else in the crowded airline industry - the net effect is an undifferentiated strategy. No wonder we expect that consolidation of players in the domestic and worldwide airline industry will continue for the foreseeable future. Quite selfishly, I am hoping that US Airways is one of the players left standing after the final bell.

Hilton - Earn my Loyalty

At a recent neighborhood party, the conversation eventually wandered around to vacation plans in the weeks ahead. I explained where my family intended to go next and then, I made the mistake of giving more information than required: I announced to my friend that our choice of lodgings was determined by the fact that we own a Hilton Grand Vacations Club time-share. This announcement is usually met with either a volley of questions about the details of ownership or an awkward pause and an expression that indicates that my soundness of mind is being re-evaluated.

To quickly address your concerns in this matter: With four children (a traveling head-count of 6), we need to book 2 hotel rooms or a suite for family trips. Another key logistics issue is resolved because we can enjoy most breakfasts and lunches in the room - young children do not want to sit in restaurants 3 times per day. It works quite well for us, thank you.

The important strategy observation in this case revolves around the fact that, all things being equal, I prefer to stay in a Hilton franchised hotel (see the previously mentioned reasons for concentrating my airline frequent flyer miles!). The lesson here is that Hilton's actions in the last five years, serve as an example of an acquisition and subsequent integration move that worked much better than so many "corporate growth through acquisition" tales of disaster.

In a recent Business Week article, the magazine praises the foresight of CEO Stephen Bollenbach for making the bold move in 1999 to purchase Promus Hotel Corp. - a franchiser of mid-priced chains (Hampton Inn, Doubletree Suites, Embassy Suites and others). This increased their hotel holdings (owned or franchised) from 269 to 2,185 properties. Financially, this move is paying off due to the Hilton franchising income generated without the burden of up-front construction investment.

What matters to me is the success that Hilton has enjoyed by presenting all seven of their hotel brands in one spot on their website. I book my own travel and lodging online. I simply search for the city in which my business travels take me and the site presents me with all of the Hilton options available. It is extremely convenient.

Hilton's efforts and expenditures in the technology required to knit the whole system together is a brilliant example of a well-conceived and executed vision for growing the business and blending the different hotel families into a single, cohesive unit.

Netflix - Look for the Niche that Others Miss

Confession number four: Our household does not subscribe to cable or satellite television. Yes, it's true. For our viewing entertainment, we rely on the humble set of rabbit ears perched atop the TV. Whatever comes across the common airwaves is all that we watch - well, almost all that we watch. We have become diehard subscribers of the online DVD rental service called NetFlix.

For a little more than $20 per month, we select the movies we want to see via an online movie queue. All DVD "rentals" come in the mail. We watch the movie, slip it back inside the prepaid mailer and, a few days later, receive our next requested movie per our prioritization in the online queue.

With 3 movies always in rotation, as long as we ship our most recently viewed movie back the next day, it seems we always have something available to watch if network television lets us down on any given night (which, to be honest, happens most nights, but that's an entirely different essay). No inconvenient trips to the local video rental store, no late fees and we can keep and watch a favorite as many times as we like before returning it.

I fully expect that someday soon, the technological marvel of online delivery will be perfected and it will offer even more convenience than I am currently experiencing with this simple, flawlessly executed service. But it has not happened yet. This is a great example of a company identifying a very successful niche between changing technologies: one mature and destined for the scrap heap (video store rentals) and one certain future winner that is not quite ready for prime time (online delivery).

Stephen A. Rutan is a Consultant with Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at

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