Tuesday, 21 April 2015

How to Prevent Complex Airline Systems from Drifting Into Failure

The daily life of an airline is a collection of myriads of activities that are happening simultaneously: aircraft are flying, flights are delayed, passenger travel is disrupted, aircraft are repaired, crew ran out of hours, reservations are made, new flight schedules are created, investment decisions are made, route profitability is scrutinised, existing network and sales strategies are questioned, prices are revised, a new cost saving program is in operation, hub connectivity is reassessed, negotiations with service providers are taking place, and on and on.

Each of the daily activities, peoples' interactions, and every decision made at every moment are shaping the company's future. However, these complex interactions are impossible to identify and measure by conventional means. They lack the human component and authenticity of information, essential for addressing the complex system issues, setting new goals, and making predictions, all of which has a big impact on the quality of management decisions especially in companies with traditional business models. 

These management methods, including backward looking decision making, worked well during the periods of relatively stable operating history, but are no longer up to the task. They are creating an illusion of stability because in retrospect, complex systems appear to be ordered and predictable. Decisions based on the past patterns while internal and external conditions constantly change result in costly misalignment from planned outcome which are hard or impossible to explain.

One of the visible consequences of these shortfalls is the deviation from planned operations manifested through on-the-day disruptions which can account for up to 3% of total variable costs. Much higher, however, are the hidden costs of wrong system decisions as they have a longer term impact. They are not as obvious as they may include decisions to invest in expansion through additional capacities and equipment without true understanding of infrastructural and resource limitations and the dynamics of change in circumstances that may have a serious impact on overall business performance. As a result, additional inefficiencies are built into the system, they become institutionalised and accepted as a new norm, perpetuating the whole process, and gradually drifting the company deeper into failure.

To make improvements at system level requires introduction of methods and techniques that combine computer-based and tacit information with quality attributes and a human component. This can allow executives to see the emerging real-world problems from a new, wider perspective and understand their causes and consequences.

Rejuvenating management practices by addressing hidden, hard-to-resolve problems at system level will help airlines to absorb uncertainty, create resilience, and detect weak signals on the go - things that conventional approaches would ignore.

These principles are ingrained in the leading-edge method and technique which are at the core of my work.