How To Align Operational And System Performance To Offer Better Service At Lower Cost
Times are hard for the airline industry. And yet, among the many challenges lies an opportunity to ask hard questions about ourselves and about people we serve and work with, to dig deeper into what it is we can do to improve things that matter to us.
Unpredictable market recovery, combined with inherent, hard-to-control business complexities, have put leaders and strategists under enormous pressure to find ways to keep their businesses afloat.
The huge indebtedness caused by the pandemic comes atop the strategic and technology debts accumulated over many years — a consequence of the application of habitual, static approaches to planning and management to one of the most complex and dynamic industries. The impact on airlines is so deep that adapting to a new world may well require rethinking the business size, structure, and operating models.
How are leaders to set the new tone?
Relying on coarse information made by aggregating data and measures that say nothing about true causes of differences between planned and actual result, can turn well-intentioned efforts into a source of new problems. To keep the company afloat, they will be forced to improvise, focusing on securing the influx of external funding and non-core revenues — thus letting the airline drift further away from its core values.
Companies are investing lots of money and time in reports and analyses that have little to do with what is happening inside the organisation or how it responds to daily challenges like disruptive changes in planned operations, associated cost and passenger experience. This causes costly oversights resulting in wrong strategic and corporate decisions. It is not just about economic damage, but damage caused by a huge waste of time, passion, and people’s skills.
But it doesn’t have to be this way — not least since the hard to predict market conditions and other related difficulties will inevitably lead to lots of experimentation and associated failures.
Improving what matters
To avoid or minimise subsequent losses, leaders need to ensure that they are regularly informed about strategic, financial, commercial and operational aspects of changes in planned operations, and ultimately about quality of service offered to passengers. This however is not the case and can explain things like strategic oversights, cost cutting measures that end up with rise in costs and inefficiencies and loss of passenger loyalty. The question is can we create a system where we can get closer to real life and learn the truth about which elements of our strategy are working and which don’t, something that is more accurate and faster than traditional planning?
The answer is in monitoring operational changes and focusing on the high impact disruption events, their true causes and consequences. This provides actionable ways to avoid mistakes and evaluate early signals of failures. Disruptions are the results of multiple interactions and can help us to identify emerging problems before they spread through the system. Their frequency, volume, and length reveal the level of our preparedness to face the unknown and, when it happens, the quality of interaction with customers. They allow us to better understand our business and have much more predictive power than the traditional gross metrics.
Making this process an integral part of decision making at strategic and corporate levels has been the main focus of my work for the last twenty years. What made me stick to this topic for so many years were my firsthand experiences spanning strategy to operations where I could see and feel how hard it is to make decisions short of data and communication channels that would make us aware of how our individual decisions affect other parts of the organisation and ultimately overall performance. And also, how we can collectively contribute to minimise the negative impacts of disruptions.
Creating the tool and technique to link the relevant information related to a particular context in real life situations expanded my views massively. I was able to help airlines to spot the problem areas that systematically and invisibly degrade their every effort to minimise costs, avoid controllable losses and improve service to passengers. I realised that organisational boundaries are not a problem if you know what you are looking for and why. People are ready to cooperate and even excited to hear about the results.
Let’s turn to practice. The following example can give you some idea of the gap in knowledge about the magnitude of disruption costs that can become a loss maker, and also how this can be prevented.
During one of my engagements with a major airline, I was asked to identify the full cost of disruptions caused by aircraft damaged in ground handling incident at outstation, normally not recoverable from third parties due to the lack of credible evidence. The aircraft was temporarily repaired and ferried back to its home base for full repair. It was out of service for six days. The airline originally came up with the figure of $260,000 in disruption losses based on the generic cost values normally used to perform the loss-of-aircraft-use analysis. After thorough analysis supported by the disruption diagnostic technique, and documented by hard facts actual losses came up to $890,000. Among them, costs of replacement aircraft, their positioning and repositioning, ferry flight of damaged aircraft, rescheduling affecting the network lasting days after the aircraft was back in service. It resulted in long delays, cancellations, passenger rebooking, cost of accommodation, transfers, and compensations.
During the process, I was given open hands to contact every single department that may help me collect the relevant information. What I didn’t expect was that I would be talking to 36 people from different departments to find out that some of these costs were duplicated, some didn’t match, some were inaccurate, some stored in local spreadsheets and some in local software applications. It took me quite a time to make sense of these data but along the way I learned a lot about what the disconnect of cost data really means.
Following the concerns in relation to the growing number of loss-making ground handling incidents at the base airport, managers were eager to find out if there are any internal issues that contribute to these losses and see if this can be improved. As a result, we came up with the following relational action map. It compared reported operational reasons of disruptions with cross-functional causes. It was the result of several cross-functional meetups organised to discuss possible actions and assign responsibilities for monitoring the progress.
This approach can be used to identify origins of disruption problems and make action plans in different situations for different needs of leaders, managers, and strategists.
Even though occasional insights are quite helpful, the full-scale benefits of this process can be achieved when they become an integral part of a company’s daily practices.
The following is a brief description of the framework for decision making that focuses on resolving the real-life problems seen from the system perspective, and the role of technology in making it work.
The framework for connected decision making
Due to its dynamic nature, the work on improvement in overall performance has to take place on neutral territory. Depending on the context of real-life problems, it engages people from around the organisation to learn from and contribute to resolving the same problems seen from different perspectives. By doing this, they develop a deeper understanding of their dependencies and connectedness with core values, no matter how far from the operational problem their work may seem to be. This is not about “who”, but “what” has caused the system to underperform, and how we can, together, make it better next time. In this way we can manage complexity and create more value with lower cost. We simultaneously improve performance, passenger experience and satisfaction at work.
Successful outcomes of these collaborative gatherings depend on skilled facilitators / integrators. They organise these events, bring people together around high impact disruption events caused by systemic issues, listen to them and synthesize the ideas and proposed solutions into the action plans presented in the form of relational action maps, from where it is possible to monitor progress. These are people with multidisciplinary knowledge and diverse experiences who are able to move freely between operations and senior management, translating the requirements of each into a language and behaviour that is acceptable to, and understandable by others.
This work requires close collaboration between executives, integrators, specialists, and technology experts. Smart computers can help us to expand knowledge beyond what we as humans can perceive. Working together is essential because this is the learning process for all. Here we connect dots and opportunities. The faster we understand and synchronise our diverse ideas and work, the faster we will start to benefit from results.
In the context of existing planning processes, this can be described as contextual planning and strategizing. It paves the way for a connected, adaptive, pattern-based decision making that learns from misalignments with reality. The very nature of this process allows for gradual implementation in parallel with the existing system. We still need an annual plan to set the strategic direction and communicate the core values across the organisation. But from then on, all of the attention of leaders and strategists has to move closer to the front line to ensure the constant fine-tuning between strategy and operations aimed to provide the best possible service to passengers. Running the scenarios based on the opportunity scans resulting from integrative outputs can be a great contributor to the decision making in particular at executive levels.
This can be described as an initial phase of transition towards a new breed of organisation, where work flows naturally and flaws are easy to notice and act upon at early stages. This is the way towards truly adaptive organisations.
First published by The Media Bulletin