Norwegian Business School

Hv rd n IT sk pt m d rn Hv rd n IT sk pt m d rn Hvordan IT skapte moderne Hvordan IT skapte moderne banker og flyselskaperbanker og flyselskaperbanker og flyselskaperbanker og flyselskaper

INF0105 – Informatikkens verdenInstitutt for Informatikk, UiO5 april 20115 april 2011

Dr. Espen AndersenFørsteamanuensisHandelshøyskolen BI

www espen com

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www.espen.comself@espen.com

Mitt mål her i livet…

Teknologi Forretningsbetingelserpåvirker betingelser

Strategi

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Bank of America er den første IT-implementeringen som revolusjonerte en hel bransjesom revolusjonerte en hel bransje

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Sjekkens vei fra utsteder til kansellering

PPersonA

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BranchBranch

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ERMA skapte hardware- og algoritmeinnovasjon

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(3(d1 + d4 + d7) + 7(d2 + d5 + d8) + 1(d3 + d6 + d9))mod 10 = 0

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ERMA revolutionized bankinghttp://ed-thelen.org/comp-hist/ERMA.html

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New information technology use tends to follow a cascading pattern

Source:McKenney, J. L. (1995). W f Ch B i

cascading pattern

Waves of Change: Business Evolution through Information Technology. Boston, MA, Harvard Business School Press.

• 1: PROCESSING CRISIS– Crisis prompts CEO to find technical solution

2: INITIAL SOLUTION: • 2: INITIAL SOLUTION: – Solution raises the profile of IT and makes it an avenue

for solutions• 3: ALIGN STRUCTURE WITH SYSTEM:

– Organization changes as systems are institutionalized4 IT DRIVES STRATEGY• 4: IT DRIVES STRATEGY:– Captured data proves good for other purposes– Exploiting these uses yields new dominant designExploiting these uses yields new dominant design

• 5: IMITATION OF DESIGN: – Dominant design adopted and competitive advantage

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erodes.

American Airlines remains the canonical story of how to use IT for competitive advantageto use IT for competitive advantage

• American consolidated from 119 airlines under the leadership of C.R. the leadership of C.R. Smith in 1934

• Cleaned up network and standardized on DC3sstandardized on DC3s

• First airline to introduce jets 1959j

• First centralized reservation system (CRS) 19571957

• CR Smith retired 1968 to become Secretary of C

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Commerce

American Airlines 1972-80s: Corporate reinvention and the electronic customer interfaceand the electronic customer interface

• 1973 CR Smith back to clean up, appoints Bob Crandall as CFO (president 1980, CEO 1985)(president 1980, CEO 1985)

• 1974: Moved headquarters from Manhattan to Dallas/Fort Worth1976 JICRS d h i f • 1976: JICRS and the expansion of SABRE under Max Hopper

• 1978: Shannon-Kennedy act: Complete 97 Shannon K nn y act omp t deregulation of industry

• 1981: AAdvantage: First frequent flyer clubflyer club

• 1984-6: Renegotiations with unions (two-tiered system)

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Hub and spoke and why it matters

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Largest US airports

77 8822 66

7722

881010

99101055 66

77

1133

4455

1133

4499

88xx Flights

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xx Flights

yy Passengers

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1980s: American takes off....

N t l l t d i liNet sales, selected airlines(Source: Compustat)

18,000

Pan AmDeltaUnitedAmerican

14,000

16,000TWAContinentalBritish AirwaysKLM

10,000

12,000

llars

, mill

ions

SouthwestEasternUSAir

4 000

6,000

8,000

US

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0

2,000

4,000

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1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

1980s: ...and makes money

Operating Profit Margin

10

15US average American Airlines

5

10

0

-564 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95

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1989: Revenue management and IT as subsidiary

• Pricing to optimize yield per flight, per route, for the h l i liwhole airline

• 1990: Changes prices more than 1m times per day during fare war

• Customer segmentation, hub-and-spoke pricing, overbookingSABRE G s t 1992• SABRE Group set up 1992– 10,000 employees– 250,000 users of SABRE, 4,500 transactions/sec250,000 users of SABRE, 4,500 transactions/sec– CONFIRM hits 1992

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And then the disruption of And then the disruption of the low-cost airlines….

However:• Winner takes all?

Hard to expand• Hard to expand• Does not seem to

impact the major p jairlines (different markets)mar ts)

• Can they exist without the network airlines?network airlines?

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Source:Binggeli, U. and L. Pompeo (2002). "Hyped hopes for Europe's low-cost airlines." McKinsey Quarterly (4).

Don’t Plan – Learn!

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