UK-based Britannia Airways has done just that, showing how IT can add significant extra value. Organisational issues were important, but leadership played a critical role.
Under managing director Roger Burnell, the company has refocused on its core business of running a charter airline. Moreover, all aspects of the business have been closely scrutinised to decide whether they are performing effectively.
The change in information systems was part of that process. Initially, the company operated its information systems with a department of about 25 people. There were some useful systems, notably in engineering and stock control, but there was very little coherence in the approach to new systems development.
In fact systems had literally just grown up, especially in those parts of the business where managers had pushed for computer support. As a result they tended to support divisional business functions, such as stock control, rather than cross-functional business processes, such as planning and flight operations.
Peter Buckingham, formerly the carrier's systems director, but since appointed director of planning and operations, identified two main problems. First, computer support was uneven across the business. There were a few useful systems but these resembled isolated islands of automation. Second, the systems did not support the core business processes in a coherent way. Buckingham believed that future systems investment should be focused on these processes.
Buckingham clearly identified the need for a new systems strategy. 'The starting point for that was the classic stuff of reviewing existing systems, good and bad, and putting in place a strategic infrastructure framework. We had to ask ourselves what systems ought to be placed into that infrastructure,' he says.
The key to carrying this out effectively was first to get a clearer picture of the key business processes in the company and then to understand which of them was really driving the business.
It was clear to Britannia's management team that the core process was planning and managing the flight programme. Yet clearly that was a cross-functional business process involving flying staff, aircraft planning, engineering, finance and other functions. And, as Buckingham points out, 'there was no one system that drove that process'.
'When you crossed a divisional boundary, the only way information went from one division to the next was by paper,' says Buckingham. 'And if there were systems in those two divisions, they wouldn't communicate with one another.' The key finding of the system strategy study was clear: 'We needed an integrated system that supported the scheduling and flying process.'
The conundrum was how to translate this vision into working systems that delivered real business benefits. The first step was to build a business model which charted the main business activities. Britannia's planning cycle starts with the production of an outline flying schedule which is then discussed at an annual Iata conference at which airport take-off and landing slots are agreed.
After this a revised schedule is produced from which the operations, crew, engineering, procurement and finance portions of the business make their plans. Then an analysis of the business plan arising from this is carried out and the implications for finance, customers and operations are assessed.
The management team wanted to develop a core system that would integrate and automate the different elements of this process. However, this needed to be translated into more specific requirements before it could be discussed in information systems terms.
In order to develop a high-level specification for the system, Buckingham's team undertook a scoping study which involved a structured approach to gathering requirements for both the hardware and software that was needed. The study identified the need for a central business process system to interact with both a finance system and an engineering system. These three main systems would require support from a new technical infrastructure - a database architecture on which the new systems could run.
The new IT strategy set a formidable agenda of work, not only for the systems department but for key managers in nearly all the divisions of the company. But there was also a need for business as usual: 'We didn't want the three major divisions of the business all to be occupied with implementing major systems at the same time,' says Buckingham. The systems development was therefore prioritised in order of the core business system, finance and engineering. And of course, the new technical infrastructure had to be in place to support the first system.
The scoping study, which Buckingham's team carried out, took the core business process and deconstructed it into more detail. The result was a high-level specification of the kind of system needed. Scoping the system was fraught with pitfalls. 'If you are not careful, then the scope becomes too wide and you end up doing nothing. We had to be clear about what we wanted to achieve and about what we weren't going to do. We had to focus tightly on the central process,' says Buckingham.
This involved a lot of discussion over priorities with managers and agreeing on key business drivers and on what would be included in the system. 'Everybody needs to understand why they are doing this and to accept decisions about what is included and what is left out.' However Buckingham says that winning top management support for the project and having it recognised as top priority proved to be 'relatively easy'.
In choosing a system for the core business process, Buckingham did not want to managers to be constrained by questions of technical architecture. 'I didn't want to say that the system should run on an IBM mainframe or AS/400s or whatever because I didn't know what the business needed.'
Instead, a team of managers conducted a worldwide search for a software package around which to base the core system. An initial trawl of 45 possible vendors was whittled down to first seven, then four, before Dallas-based Sabre Decision Technology, a subsidiary of AMR, was finally chosen.
It was clear from the outset that decisions about the integrated flight plan software would drive the technical architecture. As a result Buckingham had some worries about whether that might tie the company into a proprietary architecture which would constrain future decisions. In fact, the technical architecture is based on open systems.
Britannia's core business system was first installed and used in 1992. The finance system has since gone live and work is well advanced on the engineering system. The investment in the new core business systems, including the hardware and software and development work to tailor the system to Britannia's precise needs, carried the hefty price tag of £6.5 million (US$10.3 million). While there were some clear indications the system would deliver benefits, particularly in the labour intensive area of scheduling and operating the flying programme, have these matched up to what was hoped?
One of the perennial problems of calculating the value of information systems is comparing before and after situations. This is because many different factors, including the systems themselves, tend to change.
However all Britannia's strategic systems are now shaving useful slices off the company's operating costs and boosting revenue. Take, for example, the core business system, where Britannia has compared the planning process for 1994 with 1995. The 1995 programme is making an additional 1 per cent to 2 per cent contribution to profit, a significant amount in an industry which traditionally operates on slender profit margins.
Just how has the system helped? The key is a better evaluation of different plans. Each proposed schedule is studied by a 'schedule evaluation model', a key part of the new software system. In this way, draft schedules can be tested and fine tuned in a way that was never possible before.
The long-term planning of schedules is supported with a similar range of computer-based tools for on-the-day decision making - for example, to decide what to do if aircraft are diverted, delayed on take-off, affected by an air traffic control problem and so on. 'We need the ability to make optimal operational decisions under pressure,' says Buckingham.
The financial system is also delivering substantial benefits. Again, Britannia chose to build a bespoke system - tailored to its specific requirements - in-house to run this. A key element is a 'direct operating cost' system based on a large database with information about the tariffs charged at all the airports Britannia uses.
The tariff information includes everything from parking an aircraft overnight to loading it with breakfasts for passengers. This system is now used to check invoices which arrive from airports. Some of these invoices are very large and contain dozens of different items. By checking the invoice against operational information from the core system database, it is possible to verify whether the correct charges have been applied by the airport for all the services used.
Buckingham estimates this system is making a contribution of about 1 per cent a year to the bottom line. This is partly through picking up invoice errors that might otherwise have been nodded through, and partly through the use of electronic data interchange (EDI) to exchange documentation with suppliers.
A significant by-product of this activity is to produce an information database to aid decision-making. For example, it is possible to segment the business more easily and determine the profitability of each part. This contributes to management understanding of the costs and revenues on different routes.
A critical element of the engineering system is to help schedule aircraft maintenance work so that there is minimal time-wasting between completion of one task and the start of the next. These are early days but Buckingham believes the system could save a further 1.5 per cent a year on maintenance costs.
Overall Buckingham believes that Britannia is now close to having a full set of strategic information systems that support the company's business plan. With the role of these systems well accepted by both top and divisional management, Buckingham sees the traditional role of the systems director changing. 'My role is not driving what the business needs, but making sure that we retain the technical cohesion - such as technical architecture, data sharing and so on - to make sure all systems dovetail.'
Source: Airline Business
