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When the Going Gets Tough ... (continued)

“While we were lucky to be in a position to exploit a countercyclical business opportunity, the bigger point is that it is important to develop a business, and a team, that can thrive in bad times by remaining disciplined in good times,” says DiGiammarino, who describes himself as a serial CEO. “This allows the team to execute during the bad times by responding to different needs by cross-purposing existing solutions and exploiting competitor weaknesses.”

“The business grew to $50 million in 1989 when that era's downturn caused revenues to flatten,” DiGiammarino recalls. “We had to ‘shrink-to-size’ by cutting growth initiatives and lowering support costs to make a profit even with no growth in revenue or even with lower revenue. These actions got us on to solid ground to drive new growth as things turned around. Our method was to systematically take existing products to new markets and to develop new offerings for existing clients … . We followed this model over and over to take the business to $175 million and 15 percent-plus net contribution margins with nearly 2,000 people around the world.”

Southwest defied the odds in 2001 and did what few others in the industry could do; thrive in the wake of disaster.

The months following 9/11 served as a testament to Parker's business acumen. While other airlines laid off 20 percent of their workforce and grounded 20 percent of their fleet, Southwest—a company high on customer service and low in price—was the only airline to hang on to both. It was also the only airline to show a profit in the fourth quarter of 2001, making Southwest “the little airline that could.”

“Southwest became an anomaly. We had newspaper reporters calling us up, trying to figure out how this little airline could be the only airline making a profit,” says Parker, who left the company in 2004 after 18 years, his last three as CEO. “Our competitors were losing billions in that same period, and several filed for bankruptcy.”

Years later, Southwest not only survived, but still outshined its competitors. In July 2008, for example, as other airlines were posting sizeable losses due to increased fuel costs, Southwest reported its 69th consecutive profitable quarter.

As Parker writes in his book, Do the Right Thing: How Dedicated Employees Create Loyal Customers and Large Profits, if you do the right thing and take care of the people who work for you, the rest will take care of itself.

“Our people were as tense and nervous as everybody else was after 9/11,” says Parker. “But once we were flying again, some of our pilots and flight attendants would announce to the passengers on their flights, ‘I know you're all nervous, but this is Southwest. So let's have some fun.’ We didn't have to tell them to say that. Our people were determined to succeed.”