Tale of Two Airlines in the Network Age: Or Why the Spirit of King George III is Alive and Well

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Tale of Two Airlines in the Network Age Or Why
the Spirit of King George III is Alive and Well!
Jason C. H. Chen, Ph.D. Professor of MIS School
of Business Administration Gonzaga
University Spokane, WA 99223 chen_at_jepson.gonzaga.e
du
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The Case

• Description Describes an airline service
  incident that ought not to have happened in the
  network (information/knowledge) age. Inadequate
  use of available technology creates service
  problems
• Learning Objective Introduces issues of new
  service standards in an information-intensive
  world.
• Subjects Covered Information technology,
  Operations management, Service management.
• Setting United States Airline industry 2002

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The Case

• This is an introductory case that surfaces the
  complex issues relating to increased service
  standards in the network age.
• The student comes to understand that
  inter-organization information systems, databases
  and global interconnectivity together create
  platforms for higher service levels and more
  complex tradeoffs which a firm ignores at its
  peril.

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General Environment

• Bad weather conditions with fog always holding
  the possibility of airport being closed.
• Significant flight delays. Probably flight
  cancellations, thousands of confused, angry
  passengers in terminal.
• Atlanta Hartsfield is one of the nation's busiest
  airport.
• General stress and pressure on all staff of
  airlines. Difficult decisions will have to be
  made.
• The key theme is it is a very difficult
  environment, with substantial pressures and
  opportunities to win long-term customer loyalty
  or remembered hostility through your performance

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Two Airlines

• London-based Airline (in Reality, British
  Airways)
• Atlanta-based Airline (in Reality, Delta)
• Q/A

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The Bottom Line of the case is

• The bottom line of this case is that in the
  information age, the expectation of what
  constitutes good service have increased
  dramatically.
• Making it happen seamlessly requires the
  integration of a large amount of different
  technologies and databases being passed across
  organizations in a seamless fashion, where there
  are always opportunities for abuse by another
  party.
• The new technologies require fundamental changes
  in training and attitudes. One airline had done
  it and the other had experienced a collapse in an
  outlying region.

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INTRODUCTION

• 2001 Expansion Internet - Old economy companies
  the future - .com much harder
• Digital convergence video - audio text (and
  different industries converged vision right -
  timing an issue)
• Explosion of broadband and wireless availability,
  plunging costs. A provider war.

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INTRODUCTION

• Massive growth digitally comfortable globally
  (2004 China passes USA)
• Entrepreneurialism - the bloom is gone Business
  as usual
• Societal resistance, bricks clicks
• Corporate culture "The Innovator's Dilemma"
• First mover, fast follower
• 15 vision - 85 implementation

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Application Areas

• Company boundary and value-chain decomposition
• Electronic commerce
• Service transformation
• Product transformation
• Organization transformation

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Business Model Framework
Performance Drivers
Financial Returns
Investor Returns
Strategy
Capabilities
Value
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Business Model Framework
Performance Drivers
Financial Returns
Investor Returns
Strategy
Revenue
Earnings
Costs
Capabilities
Value
Assets
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Business Model Framework
Financial capital (, Assets that can be
converted to ) Knowledge Capital (Information,
expertise, Intellectual property) Social capital
(stakeholder lifetime value and loyalty, band,
reputation)
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Business Model Framework
Financial capital (, Assets that can be
converted to ) Knowledge Capital (Information,
expertise, Intellectual property) Social capital
(stakeholder lifetime value and loyalty, band,
reputation)
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The Economics Of Computer
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Suggested Study Questions

• 1. What assumptions did Professor McPherson make
  about information technology support at the
  London-based airlines? Do you believe those are
  realistic assumptions in the technology
  environment of the mid-1990s?
• 2. What factors do you suppose lead to the
  difference between Professor McPherson's
  expectations and the reality? What alternate
  approaches could have been taken to resolve the
  situation?
• 3. What were the differences between the
  Atlanta-based airline's approach and that of the
  London airline? Did the Atlanta-based airline
  have any special advantages in approaching the
  problem?
• 4. What advice would you give the London-based
  airline's management?