Monday, 5 October 2015

When Doing More Starts Making Things Worse

When we make plans we expect that most things will respond in a linear way, that more input will get us more output. If we want more passengers, we add more flights, fly to more airports (even if overcongested), squeeze more seats into the plane, pack more people in, run more ads. We also want to be bigger and stronger than our competitors. The bigger we become the more we are inclined to ignore the critical resource limitations and issues of quality.

In real life however most things don't respond in a linear way (quality in particular). This is why we fail to notice the critical point from which the quality of outcome turns downwards. From that point on, adding more flights or having more passengers only make things worse. This happens whenever the traditional way of thinking and doing makes us wilfully ignorant to what is happening now, when we are unable to understand early signals of this decline and are deluded by the occasional rise in profit. By letting physical limitations and wasteful practices go unnoticed, we unknowingly increase complexity and are later surprised by unexplainable losses, unforeseen disruptions, and loss of reputation.

The following chart shows dependences between growth, quality of outcome, money, and time. These relationships are essential for understanding the current state of business and its future prospects.

I suggest that you draw your own inverted-U curve and mark the point that best describes your company’s position now. Then find out how to do more without giving up on quality.

Monday, 28 September 2015

Managing Quality - from Abstraction to Reality

ISO 8402-1986 standard defines quality as "the totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs."

Business Dictionary described this by using the following example:
If an automobile company finds a defect in one of their cars and makes a product recall, customer reliability and therefore production will decrease because trust will be lost in the car's quality.

Using this analogy, if an airline flight is disrupted or cancelled, customer loyalty will decrease making further operation unsustainable because trust in service quality will be lost. It’s as simple as that… or is it?

We use the word quality as an abstract, subjective attribute to describe services we think to be appealing to our customers. This appeal is reflected in the price, flight punctuality, care, and relationship. However delivering such services is a completely different thing - turning the abstract into reality often becomes an unsurmountable obstacle.

At the core of this problem are the conflicting interpretations of local qualities restricted by local views limited by too-small-openings in organisational cubbyholes. Because quality cannot be measured in a conventional way it remains abstract to the decision makers, letting related problems grow so big that they overpower all other efforts in making a business profitable and prosperous. Despite the fact that quality is the key to long term success, current management practices and tools are not designed and organised to diagnose the root causes of quality related problems, nor to measure their impact on overall performance.

For companies opened to innovate, emerging EBM like practices and visualisation techniques that combine quality issues with cost and revenue can massively improve decision making processes in all parts of an organisation.  

Wednesday, 29 July 2015

How To Bring More Clarity Into Your Business

Grand visions and strategies are not hard to think up; making them work is the problem. We are all exposed to numerous daily destructions which make obstacles to achieving the company's goals more and more hazy and even invisible. To see the major problems more clearly they need to be examined not long after they occur - the only place where clarity can be found. Letting them retire in long arrays of corporate numbers, and various mental makeups takes the clarity away, brings more confusion and further diversions from desired goals. When left unobserved, the causes of complex issues become dissipated through multiple organisational channels and cubbyholes losing their wholeness and authenticity and breaking links between visionaries and doers. Decisions made in such circumstances make corrective actions (unknowingly) ineffective.

Improving clarity of decisions related to complex contexts like those of strategic and corporate nature assumes early recognition of causes with widespread consequences that can drift a company off course. It also requires a good understanding of their intertwined origins residing inside the company.

Committing to practice and technique for turning the complex, seemingly chaotic situations into more orderly and controllable ones allows executives to see things from new perspective, assimilate complex concepts, and address real-world problems and opportunities. It is an indispensable tool for learning, teaching, interacting and sharing the cross-cut knowledge with rewards that no traditional teachings and practices can offer - simultaneous improvement in profitability, operational performance, and safety.

Have a go by following the three basic underlying principles*:  
  • Simplify 
  • Focus 
  • Measure wide 
Feel free to drop me an email if you need a start-up push.

*Beyond Airline Disruptions, p97

Thursday, 16 July 2015

Back to Normal or Bouncing Forward

When flights get disrupted, people in Operations Control Centers take command over usually chaotic situations. They do their best to bounce the schedule back to normal as soon as possible.

The problem is that what is called normal could be flooded with errors and omissions made during the backward-looking, top-down planning processes excluded from disruption related scrutiny.

To improve normal and bounce forward instead of backward you need to be alert to opportunities arising from disruptions.

It is impossible to understand business reality and its true potential without understanding disruptions from inside out.  

Saturday, 25 April 2015

The Victory of Simplicity

Traffic figures for 2014 show that for the first time low cost airlines as a group in Europe carried more passengers on European and domestic routes than the airlines that are members of the Association of European Airlines by a margin of 51% to 49% (Airline Business April 2015).

This seems to be an unstoppable trend - the victory of simplicity over complexity, shorter vs longer travel time, on-time vs disruptive passenger experience.

Isn't it time to change the name of airline business models so that the confusing ‘traditional’, ‘network, legacy’, ‘low-cost’, ‘low-fare’ and so-on named models are replaced by 'complex', 'simple' and 'inbetweeners'. And, use colour codes to refine grades of complexity, disruptiveness, and time-waste associated with each airport and airline. Apart from benefiting the passengers this could shake-up even the most complex airlines and airports to shift their course towards simplicity, even by smallest initial steps. Then there will be no worries about the future of air travel.

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 output. However, all these complex, multidimensional interactions are impossible to identify and measure by conventional means. They lack the human component and authenticity of information, essential for addressing the 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 complex business models and sluggish management information. 

These old management methods, including backward looking decision making, worked well during the periods of stable operating history and relatively static environment, but are no more 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 deviance from planned objectives which are hard or impossible to explain.

One of the visible consequences of these shortfalls is the deviance 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 in the previous example as they include investment in expansion through additional capacities and equipment without true understanding of infrastructural and resource limitations. 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 into failure.

To make improvements at system level requires introduction of dynamic methods and tools that combine computer-based and tacit information with human component. This will 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 methods and tools of Event Based Management (EBM) which is at the core of my current work.

You can contact me for more information about EBM or to arrange talks and workshops at

Tuesday, 31 March 2015

The Value of Saying Sorry

(She is only dreaming...)
'As we've been busy commercializing, industrializing and lawyering the world, countless bureaucrats have forgotten what it means to be human, and have forgotten how much it means to us to hear someone say it, and mean it. "I'm sorry you missed your flight, and I can only imagine how screwed up the rest of your trip is going to be because of it.'
(Seth Godin)
Converted into business language, one heartfelt 'sorry' could be worth thousands of pounds later. One hundred sorrys can bring higher return on investment than things like happiness blankets, and so on.

Why is saying  'sorry' so hard when it is so needed?


Thursday, 19 March 2015

The Value of Seeing Things from Different Perspective

When your persistent, try-hard attitude to solve a difficult problem takes you nowhere, try stepping into the shoes of outsiders and try to think it their way.

In an attempt to refresh my thinking patterns about network congestion in airline industry, I borrowed the ideas from software engineers faced with the same problem (in a different context) and turned them the airline way. You may find this useful if you are a decision maker at strategic or operational level and anywhere inbetween.

Network congestion
In route networking and queuing theory, network congestion occurs when a hub is carrying so many flights that its quality of service deteriorates. Typical effects include flight delays, blocking of new connections, and passenger desperation. Network protocols which use aggressive flight cancellations to reduce network congestion can exhibit output known as congestive collapse. Modern networks use congestion control and congestion avoidance techniques to try to avoid congestion collapse. These include reduction in queuing. Another method to avoid the negative effects of network congestion is implementing priority schemes, so that some flights are transmitted with higher priority than others. Priority schemes do not solve network congestion by themselves, but they help to alleviate the effects of congestion for some services.

Congestion Management
Congestion management is the process of managing a congestion condition. Congestion management mechanisms include the use of buffers that can temporarily store flights in one or more queues until they can be forwarded further. As the buffers fill to capacity, flights can be discarded, perhaps selectively based on a priority or quality of service (QoS) mechanism. If a network is designed to absorb this impact, a skilled 'router' may have the ability to identify and exercise alternate paths if the primary path is suffering congestion levels that exceed definable parameters established in consideration of QoS objectives. Some network protocols provide for a 'router', for example, to advise its peers of congestion conditions and to instruct them to adjust their communication rates to avoid compounding the situation. Similarly, 'routers' can advise customers to take it easy, or even temporarily suspend their desire to travel by offered traffic until the congestion condition relaxes. Finally, a 'router' can simply reject a call or message by stranded passengers. In a voice network  a central office (CO) provides the rejected caller with a fast busy signal.

If this kind of technique doesn't help you solve the problem, you will at least have some fun along the way. I definitely did.

Thursday, 26 February 2015

Why Simple Software Brings More Benefits than Advanced Software Solutions

As software improves, the people using it become less likely to sharpen their own know-how. Applications that offer lots of prompts and tips are often to blame; simpler, less solicitous programs push people harder to think, act and learn.

Ten years ago, information scientists at Utrecht University in the Netherlands had a group of people carry out complicated analytical and planning tasks using either rudimentary software that provided no assistance or sophisticated software that offered a great deal of aid. The researchers found that the people using the simple software developed better strategies, made fewer mistakes and developed a deeper aptitude for the work. The people using the more advanced software, meanwhile, would often “aimlessly click around” when confronted with a tricky problem. The supposedly helpful software actually short-circuited their thinking and learning.

We are amazed by our computers, and we should be. But we shouldn't let our enthusiasm lead us to underestimate our own talents. Even the smartest software lacks the common sense, ingenuity and verve of the skilled professional. In cockpits, offices or examination rooms, human experts remain indispensable. Their insight, ingenuity and intuition, honed through hard work and seasoned real-world judgment, can’t be replicated by algorithms or robots.

Related posts/Slideshare:

Tuesday, 27 January 2015

Assumptions, Disruptions, and Validated Learning

The reference points for every budget plan are:

Assumptions based on records from previous year(s)
Assumptions based on records from previous season(s)
Assumptions based on factors that may influence the performance in the next year
Assumptions about costs
Assumption about revenue
Assumptions about profit
Assumptions about passenger numbers
Assumptions about weather
Assumptions about….

Too many assumptions lead to too many disruptions. We tend to make plans that look as smooth as possible, showing our aspirations and commitment to expand and do things better. And we are always surprised when our plans don't pass the test of reality operationally and financially. This is the time when wrong assumptions become visible, leading to bumpier road ahead with less control over the outcomes expressed through cost, profit, and other performance metrics including punctuality targets.
The majority of airlines miss this unique opportunity for learning on the go. 

The road of 'lean' airlines with simple business models is less bumpy as they can have an easier access to reality and learn about what works and what doesn't work for them. 
Traditional airlines, however, are more heavy - trapped in once successful but now hard to control business model accompanied with rising complexities. This makes them more and more susceptible to unexpected losses caused by even the smallest challenge.

Can we reduce number of assumptions and flatten the road ahead?

Yes we can, if we embrace the practice of validated learning and 

  • start thinking outside of boxed practices
  • become open to learning on the go, not only from the past 
  • start testing assumptions in an organised way, focusing on biggest diversions from flat lines created during the planning processes 

Validated learning is an invaluable tool for achieving resilient performance in the age of uncertainty - something that no business school or business course can teach us.

Monday, 1 December 2014

How to Overcome Limitations of Traditional Costing Practices

A decades-old system for cost classification and reporting inherited from industrial era still dominates management practices across the airline industry. Airlines continue to use this system partly driven by collective inertia and partly by the lack of alternative solutions that would empower decision makers with understanding of true origins of operating costs, essential for making informed cross-functional decisions of strategic and operational nature.

Traditionally, costs derived from financial reports are statistically distributed to segmented business units in order to be calculable at functional levels and easy to control. This practice ignores the fact that costs are more than just sums of numbers - they are nonlinear, interrelated, and consequently cannot be measured in a conventional way. This is why answers to questions related to true effectiveness of cost saving measures, route network, aircraft and hub operation, outsourced services, or investment in additional resources, remain stumbling blocks for improvement in cost efficiency and operational performance.

Answering these questions by using cost apportioned to operational units without knowing their true origins turns the decision making into a pretty risky process. This is not only because this information is simplistic, but also because it is just a historic snapshot of data collected mainly at the time of budget drafting. As soon as the ‘budget schedule’ starts to change (normally months before the start of a new scheduling season), it triggers changes in cost matrix, making the planned costs even less suitable for decision making.

This may, at least partly, answer the question why airlines with long established practices make so many changes in planned operations once the season starts. We have seen traditional and even some low cost carriers incurring significant losses in cost, revenue, and reputation by reducing the planned operation in the middle of scheduling season due to planning and strategic errors described as ‘overexpansion’, ‘overstretched capacities’ or ‘to avoid more operational problems'. What were the causes of such serious misjudgements resulted in change of decisions made just several months ago? How many of these changes and related losses were associated with wrong evaluation of disruption risks, or poor understanding of system limitations. How much does the cost planning process contribute to this situation?

Let's see how the typical process of cost planning looks like.
'The typical process of cost planning starts with projected traffic, cost, and revenue for the coming year. The company’s finance director then sets a target figure for net results including the necessary return to shareholders. This is further broken down into management units and transmitted to senior directors, responsible for squeezing the savings out of their respective departments. The initial figure may be adjusted several times during the year. There are reviews after the IATA slot coordination meetings and regular refinements in the light of information received on forward bookings, interim revenues, and yields. These adjustments can result in even tighter cost controls. The intense cycle of setting targets and searching for further departmental cuts is giving an early warning if a director is going to exceed the budget. If this happens, there are generally negotiations between the director and the CFO’s office to reach a satisfactory result. The process could be tightened further if necessary using various management techniques.' (Described by a senior manager of a major network carrier)

There are the two major setbacks in this process. The first one relates to the sources of information used for cost projection for the coming year based on too many assumptions. The second is the management aspect of cost control. Led by the nature of traditional cost information, managers put too much emphasis on cost control of departmental performance rather than on interrelated problem areas. As unforeseen problems start to emerge, senior directors have no other choice but to put even more pressure on middle managers and, through them on other staff to save more. The next round of ‘unexpected’ events includes the reset of targets, and continual search for new cuts from already well squeezed departmental cost - good for justifying efforts, but not good enough for improving business performance.

How can we overcome limitation of these costing practices?

Take the fuel saving measures as an example. The process is usually assigned to the Flight Operations department. There is a whole set of principles used to minimise fuel consumption on the day of operation. They include things like flying at optimum speeds and flight levels, fuel tankering policies, careful weight and balance control or flying the ‘cost efficient’ air routes (not necessarily the shortest ones). In reality, however, most of these principles cannot be applied. Fuel consumption will be increased every time when flight cannot operate at optimum flight level, ATC diverts the aircraft to a longer route or put it on hold over a busy airport, and in many other situations. According to industry research, about 10% of fuel consumption is attributable to changes in operational performance. Reducing it at busy airports is becoming more and more challenging. Still, the fuel-saving programs circulate mostly around these traditional measures.

Much bigger potential for reduction of fuel costs, however, comes from inside the airline. It comes from people who decide which airports and routes to fly to, which aircraft can best serve these routes, how many hours it should fly, when to replace old aircraft or introduce new aircraft type. Then, there are schedule creators that have to make all these ideas workable by balancing requirements coming from many different sides inside and outside of an airline, people who negotiate fuel prices, repair and maintain the aircraft, provide service to passengers, and many other specialists and generalists – the cost architects. The impact of this process of creation and preparation for service delivery remains invisible to senior decision makers focused primarily on cost output expressed in numbers. Reinstating the connection between numbers and their origins requires a refined, selective approach based on identifying the cost critical operational problems, bringing them to the attention of cost architects that have knowledge and power to fix them, and finally pass it on to senior decision makers who can balance their acts to achieve what is best for the organisation.

The same principle can be applied to every area of business management. Costs allocated to departmental units shouldn't be an obstacle if we don't stop there. Departments are integral parts of the company's organism. When problem arises in one part of the body and its root causes are not identified, the treatment applied to the wrong part will harm other parts of the body and weaken the organism. This reminded me of the case of a European Airline where crew shortages were being reported as a cause of costly disruptions for about four months, starting at the beginning of the new season. The C-Officers decided that saving company's reputation surpasses the investment in additional crew, and some time later 24 new crew members joined the company. To cut the story short, as there were no signs of improvement, the top team required a more thorough analysis of the root causes of problems. The analysis showed that crew shortages were only the last in the chain of disruption causes triggered by problems with aircraft maintenance, which was related to tight schedules, which appeared to be the consequence of strategic requirements for increased aircraft utilisation (a bit over tolerable level). The sunk investment could have been avoided if the magnitude of disruption costs and associated causes of problems were diagnosed at early stage.

To inject more life into the planning processes, upset by limitations of traditional costing system, senior executives need to be regularly informed about the cost critical but avoidable changes in planned operations and their root causes. This will bring profound changes in the way airlines plan and control their business resulting in measurable improvement in operational and cost efficiency.

Friday, 21 November 2014

The Tragedy Of The Last 10% or How Far To Go With Cost Reduction

Here is the latest Seth Godin's blog post 'The tragedy of the last 10%' . 

'In a competitive market, if you do the work to lower your price by 10%, your market share grows.

If you dig in deep, analyse, reengineer and make thoughtful changes, you can lower your price another 10%. This leads to an even bigger jump in market share.

The third time (or maybe the fourth, or even before then), you only achieve a 10% savings by cutting safety, or quality, or reliability. You cut corners, certainly.

The last 10% costs your workers the chance to make a decent living, it costs your suppliers the opportunity to treat their people with dignity, and it costs you your reputation. 
The last 10% isn't worth it. We're not going to remember how cheap you were. We're going to remember that you let us down'

As for the airline industry, the second step is far from achievable. This is not because airlines don't try to dig in deep, analyse, reengineer, and make changes, but because their access to the right cost information is limited. Not to mention self induced complexity and uncertainty that only exacerbate the problem.