It’s December 3, 1787, and you have been chosen as one of the “first 48” a group of hand-picked men selected to be the first American pioneers. You live in Danvers, Massachusetts and you’re going to relocate to the Northwest Territory. Your new found friends and you make your way across the Allegheny Mountains to Sumrill’s Ferry in Western Pennsylvania on the Youghiogheny River.
There, your pals and you build:
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one forty-five ton flatboat
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one three ton flatboat
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three log canoes
The boats carry you down the Youghiogheny River to the Monongahela River, then to the Ohio River, and onward to the Northwest Territory. You arrive at your final destination at the confluence of the Ohio and Muskingum rivers, on April 7, 1788, 126 days from the day you left Danvers, where you establish the small settlement of Marietta, Ohio.
Typical Buying Decision
Fast forward to August 24th, 2012. You live in Danvers, MA, which is located a little more than a half hour drive from Boston’s Logan Airport. Your wife and you are taking your only son off to Marietta College in Marietta, Ohio. You’ve been waiting for this day almost since the day he was born. But you were worried you might not be able to make the trip. Your most important client is coming into town the following Monday, and you were worried he’d want to come on Saturday to play golf. So you waited until the last minute to book your airline ticket.
How Do You Define Value?
You get on U.S. Airways website, and you punch in Boston and Wheeling, WV. Wheeling is only about an hour and a half drive from Marietta. The fare comes up, and you’re ecstatic; it’s $317 round trip. But wait….that’s a flight that leaves at 6:00 am from Boston. Worse yet, you’d 
have to come back on a flight that leaves at 5:30 am from Charleston, which means you’d need to get up at some ungodly hour to get to Charleston in time for the flight. Besides, you’ve got to get on the same flight as your wife and son.
You remember that the default box was set for “search for the lowest fare.” So you punch in your wife’s and son’s flight numbers and it comes up $408 round trip. You’re miffed because in addition to the exorbitant premium you’re paying for booking late, you’re going to have to pay an extra 50 bucks for each of the four bags your son is taking. You walk away from the computer thinking, “These guys must really be ‘raking in the dough.’”
Airlines: Money-Losing Industry
In point of fact, they’re not. The airline industry as a whole has operated at a cumulative loss throughout its 100 year history. There have been 49 airlines that have filed for bankruptcy in the United States alone. Air travel has survived largely through government support, whether in the form of equity or subsidies. According to U.S. Airways 2011 annual report, consumers of their service valued it at only 3.4% greater than the operating costs it took to deliver the service.
Is Buyer Or Seller Capturing Value?
Who then is capturing the value that airlines are creating? The airlines valued the planes they got from Boeing at 9.9% more than the operating costs to produce them. They also valued the fuel they purchased from Exxon Mobil at 17.8% greater than the operating costs to extract, refine, and deliver it.
Capture The Value—Or Else
How about you? Do you really value so little the ease of the journey it takes you a nanosecond of the time it took the first settlers to travel to Marietta, or have you captured most of the value that the airlines have created? The lesson here, especially for an emerging growth company trying to cross No Man’s Land, is that a business owner must not only create and deliver value. She must capture the value she creates. That is not always the easiest thing to do. Just ask the airlines.
