Rosenbluth International

In the early 1980s, Rosenbluth International, a Philadelphia-based corporate travel management company, initiated a series of customer service improvements that identified and satisfied customer needs before dozens of competitors , who were slow to realize what was happening and even slower to mount an effective response, recognized that those needs existed.

The deregulation in the U.S. airline industry in the late 1970s created tremendous complexity in air travel where rigid simplicity had previously existed. Corporate clients needed considerable help in choosing among myriad routes and fares. A strategy based on reducing complexity was an ideal response to deregulation if an agency was able to see the need.

From 1980 to 1981, the period of time during which the change that accompanied deregulation was most intense , then “vice president Hal Rosenbluth, now president and CEO, assigned himself to duty as a travel agent rather than a corporate officer. Witnessing firsthand customers anger and confusion and his own agents inability to help, Hal devised and implemented a strategy to reduce complexity for his target market of corporate clients through superior information management.

His first move was a system for managing travel expenses called Readout , which enabled his agents to describe flights based on price first and departure time second. Business doubled the day that Readout was introduced, and before competitors were aware of this first move Hal introduced Vision , a system that enabled his corporate clients to track expenses incurred by individual, department, or project. Then came Uservision , which enhanced the capabilities of Vision by enabling corporate clients to download and analyze information as they saw fit. These system introductions had an added advantage, which further enhanced customer service: Rosenbluth International could actively capture customer profile information and record the preferences of hundreds of thousands of customers ”window or aisle seat, smoking or nonsmoking room, high floor or low floor, Marriott or Hyatt.

Competitors that might not have noticed each of these innovations could not miss their impact ”Rosenbluth International was large and growing larger. Caught off balance but desperate to participate in the new market for corporate travel that Rosenbluth had created, many competitors initiated knee-jerk responses, such as rebates that were relatively insignificant to travelers but devastating to agencies profits. These rebates ultimately undermined other agencies ability to compete : to retain business in the face of the superior Rosenbluth service, competitors had to increase rebates further, and a vicious circle of increasing rebates and decreasing service quality resulted.

While competitors floundered in their response to his initial moves, Hal launched yet another innovation. Designed with the close cooperation of United Airlines and the Apollo computer reservation system, computer codes, known as scripting languages, automatically combined airline, hotel, and rental car reservations and automatically featured offerings from preferred providers. Scripting languages effectively eliminated the possibility of reserving a flight into New York City s JFK Airport and accidentally reserving a car at nearby Newark Airport. Scripting languages also provided greater assurances that a corporate client that enjoyed a preferred relationship with an airline would make a reservation with that airline whenever possible, thereby maximizing discounts for clients and rebates for Rosenbluth.

With these steps in place Hal began to negotiate reduced fares for his largest accounts, and he was able to achieve discounts of 10 percent or more on many routes. Moreover, as the volume of Rosenbluth International s ticket purchases increased, the airlines rewarded Hal with commission overrides , which increased the amount his firm was earning even if the cost of tickets was lower. Reduced fares attracted more business, which increased Hal s ability to negotiate fares, and his business grew further. This virtuous circle, based on tight coupling among service improvement, growth in market share, and increased investment in technological support, stands in stark contrast with the vicious circle that competitors faced.

Once again Hal s moves caught competitors off balance. Most had neither the market share to justify requesting a discount nor the systems in place to assure that customers shared in the benefits of scripting languages. Indeed, although scripting languages were available to all agencies, only Rosenbluth International had participated in their development, and only Rosenbluth International was fully positioned to benefit from them.

Rosenbluth International s array of offices was once fewer than a dozen , tightly clustered around Philadelphia. Today more than fifteen hundred offices span the globe, and the company remains privately held, with no debt and no dilution of the original family s equity position.

Leadership Lessons

Rosenbluth International exemplifies tempo in a multiperiod encounter because Hal Rosenbluth unleashed not just one but a series of rapid moves on opponents, who fell further and further behind. Hal s willingness to lead from the front enabled him to observe market trends as they emerged. Long before executives at competitors sensed how deregulation would impact customers and agents, Hal had already identified the appropriate strategy ”reduce customers complexity. Rosenbluth succeeded by identifying customers true preferences and delivering better service and lower fares, while making firm commitments that the customer would always receive the best available fare for any ticket. While most of us cannot replicate this management style and assume the job of a frontline, first-level employee, all of us can certainly learn to listen to those closest to the action.

Although Hal was acting as an agent, he still had the authority of a corporate vice president, and he was still the CEO s son. When he made a decision, he did not have to wait for approval, and he was able to impact a broad scope of his company s activities. His decisiveness and propensity to act matched his speed in identifying market trends. Competitors could not hope to match his blistering tempo.