Renaissance at British Airways

2. Renaissance at British Airways Adapt to Survive Paul Beadsmoore Renaissance Architecture (role) Principal Business Analyst (job) Business Solutions (team)

3. Before we begin, a word from BA recruitment • Vacancy for a talented individual: • To turnaround the first loss since privatisation • To deliver a ‘tough strategy for tough times’ • To build a sustainable future • Must be focused on the customer • Must be in touch with the workers • Must be ruthless in cutting costs • Replacing the boss is one of the biggest changes a company can experience

4. Summary • There is now unrelenting pressure for the airline industry to continually change • British Airways is transforming its Revenue Management capability to enable a flexible future • Applying the technique of component based development (CBD) will facilitate this transformation • Smart-sourcing of components will deliver the most efficient and effective solutions

5. Some examples of change affecting British Airways • Capacity reduction - focus on high yielding business • New products - 4 cabins in longhaul • Deregulation in Europe - low cost carriers • Excessive global capacity - airline industry currently making a loss • Pressure on profit - strength of sterling, fuel • Selling - intermediaries embracing the concept of revenue management

6. Changes to the way BA Revenue Management reports • Now part of the Strategy Department • Part of a work stream called Capacity Management • Fleet Planning • Network Planning - includes Fleet Scheduling • Revenue Management • Managers will be appointed to a new structure on 3-Apr-00 to enable change • But what is most important is how the organisation is structured ‘at the bottom’ - where the work gets done

7. Major change to OR at BA • Keith Rapley has left BA • OR now part of the Strategy Department • Structured into functional and cross-functional teams • Work within a strong definition, i.e. strategic consultancy, to maximise value • Formalise the movement of OR people into the line • OR lost me!

8. Change to take advantage of e-Opportunities • e-Procurement (suppliers) and e-Working (employees) • e-Commerce (customers) - 50% on-line revenue by 2003 • e-Ventures (new internet businesses) • On-line ‘neutral’ travel agency • Air Miles on-line • Lifestyle portal

9. Renaissance progress • Mission remains to be world leading • Increased target - recognising that revenue management is critical to the success of our strategy • Completed the process and organisation design of the ideal capability (To Be) • Completed system architecture gap analysis (SAGA) • About to complete the implementation plan

10. Renaissance plan • Integrated implementation in 6-month phases • O&D Phase 3 will be embedded in the delivery • e-Initiatives will be incorporated along the way • Due to complete by end of 2001 • Establish an environment of continuous improvement

11. Transition Planning - focus on business capability and benefit delivery • Business Capability Streams • Improving existing capabilities • Developing new capabilities • Business cases with clear scope • Small focused teams enabled to make decisions • Whole department have opportunity to contribute • Transition Framework • Coordinates implementation • Manages dependencies between streams • Integrates new capabilities with existing ones • Prioritises work and recruits resources • Plans further work

12. Renaissance method • Objective - transform Revenue Management into a dynamic enterprise • Stages - • Solution Creation - turning ideas and theories into solutions within a creative environment • Model Office - use a process lab to eliminate the risk in the solution • Implement and measure performance • Techniques - CBD and smart-sourcing

13. Component based development (CBD) • An enterprise is a collection of capability components which cooperate by each using the services supplied by others • A dynamic enterprise is an enterprise which can evolve (new components added, old ones removed) without having to stop • A dynamic enterprise will operate safely and effectively if its components all obey three laws

14. 3 laws for a dynamic enterprise • A component, added to an enterprise, may not disrupt the behaviour of that enterprise • A component using the services of another, does so at its own risk and must protect itself from damage • A component offering a service does so at its own risk and must protect itself from misuse • Reference - Peter Henderson, University of Southampton, UK

15. Architecture Distribution Steering Infrastructure Forecasting Monitoring Partner Integration Optimisation Planning Trading Opportunities Management of Information Smart-sourcing Some examples of high level capability components Performance Management

16. Working Business Plans Business Plans & Financial Targets Market Area View Schedule • Flow Plans • Price • Demand • Yield • Cost • Channel Network Plan Optimisation Network View Route View Engine Numbers

17. Smart-sourcing • On-site - staff at LHR headquarters • Off-site - Telephone Sales in Newcastle • Off-shore - Revenue Management Support in India • Automation • In-house - O&D, GHOST (groups) • Third party - IDEAL (dealing), DSS (decision support)

18. Summary • There is now unrelenting pressure for the airline industry to continually change • British Airways is transforming its Revenue Management capability to enable a flexible future • Applying the technique of component based development (CBD) will facilitate this transformation • Smart-sourcing of components will deliver the most efficient and effective solutions

19. ‘Running an airline involves dealing with complex technology and logistics. Yet, in the public perception, this is a very straightforward business, centred on the simple proposition of bringing together a willing seller with a willing buyer.’ Colin Marshall Acting Chief Executive British Airways