Innovation Management at Airlines Industry

Executive summary

In a business context, innovation as a new idea means the creation of value proposition where customer’s needs are fulfilled through an integrated combination of goods, service, systems, process and technologies. This paper brought out an innovative idea for airlines industry, which could minimize the cost by reducing the cabin crew in order expand the market growth for the low cost budget airlines. The idea was the installation of vending machine in the aircraft. As a cross functional team, the idea would be implemented by the low cost budget airline: Easyjet, whose main objective is to be the best low-fare airline in the world.

As a cross function team of Easyjet, quite few ideas were assessed before come to the final one. By analysing feasibility and justifying, the team found that if Easy jet installs the vending machine in their aircraft, they could cut one of their cabin crews in an operation. It would reduce their cost as well as bring flexibility of customer service. The minimisation of cost paves the way to competitive low-fare by reducing the ticket price.

In this report, the team also sorted out the potential problem which could arise at start of the introduction of vending machine in aircraft as well as recommend how to overcome these situations. Setting up of vending machines requires a slight change of aircraft design as well as needs special version of vending machine, which is suitable for aircraft use. The team’s design unit made a probable design of the aircraft, which is displayed in the report. Additionally, the maintenance unit provided solutions for the future maintenance of this product.

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Introduction

Innovation is the commercialization of creativity. European Foundation for quality Management defined innovation more precisely, as ” innovation is the transformation of ideas into product, service, process and systems and social interaction. It creates new streams of value that satisfied stakeholders and drive sustainable growth” (cited in Mele, 2009). This is the new emerging phenomenon in business philosophy. In fact, innovation could be continuous improvements and radical or even discontinuous idea of any product, process or it could be any service industry (Stamm, 2008). Innovation is crucial for present competitive and ever changing environment.

As a mature industry, Airlines companies are encountering massive competition. As a result, innovation or creating a value for customer is the key in this business. However, continuous or regular changing is not quite possible for this highly expensive and risky industry. Although, the airlines industry which take an initiative to create a value for money, it can be a leader in this business arena. The selected company is Easyjet following the cost leadership strategy. Thus, the new proposed idea as well follows the cost leadership strategy. Before selecting this idea, a lot of ideas were generated. At the end, the installation of vending machine in aircraft is selected to create a new value for the Easy jet airlines. Why the innovation is crucial for Easyjet and viability of the proposed idea are explained in justification and reason for adopting innovative strategy section. Meanwhile, the proposed design of setting up vending machine in aircraft has been presented in this report. Later, the predicted problem is identified and recommended the solution as well. At the end, learning process will show how this idea was developed.

Preliminary investigation:

This is the first step to develop any potential idea at which stage project’s technical and marketplace merits are determined (Stamm, 2009). This project has centred the market of airlines industry. As a mature industry, airlines companies are generating and implementing different innovative projection in order to survive in a highly competitive market. One of them is the cost strategic innovation has been brought in the UK by the two airlines industry, namely: Ryan air and Easy jet. Easy jet is the proposed company in this project. Analysing its market share, market growth, consumer needs and priorities and core competencies, this project identified the cost effective innovative idea, which is installation of vending machine in the aircraft primarily for short haul distance. Logic behind this proposal is reducing the cabin crew in order to cutting the cost. On the other hand, it would bring the flexibility in customer service because customers need not to wait for food or drink. Furthermore, there would be variety of food and drink in the vending machine. Considering technical side of setting up vending machine, aircraft will be redesigned to a small extent.

Justification for the Innovation

Easyjet is currently the second largest low budget airline in Europe. In 2009 passenger numbers increased by 3.4% to 45.2 million this is as a result of Easyjet’s unique selling proposition of offering the lowest prices to the most convenient airports. It currently flights to 114 destinations on over 400 routes. It compares favourably with the model of Ryanair (currently the largest airline in Europe) which offers the lowest fares but to secondary airports (EasyJet, 2010). Easyjet’s strategy and business model is based on four key indicators (Appendix-2)

As suggested by Buckman (2007), the next big wave in automation, and travel technology overall, will focus less on “the process” and more on “the people.” Moving forward, it will be more about how technology can enhance and improve the travel experience from booking to baggage.

Low price, a variety of destinations, value for money and efficiency are core competencies of Easyjet. Those core values should not change regardless of environmental turbulence (Collins and Porras, 1996). Its strategies require cost reduction and other profit sources are more important than travel fares as a source of revenue.

The chart below shows an outline of how Easyjet compares to its nearest competitors in the airline industry in Europe.

Easyjet

RyanAir

British Airways

Quality of Service: The quality of Easyjet’s service compares favourably with that of Ryanair which is the leading brand in the low-cost Airline model. It however does not provide the same level of service as the network airline British Airways.

Destinations: Easyjet goes to fewer destinations than Ryanair. However, it does favour primary airports over secondary airports which give it a marginal advantage to customers who prefer to arrive closer to the city centres. It goes to more destinations than British Airways in Europe.

Price Advantage: Easyjet has a distinct price advantage over the network airlines due to its no-frills pricing model. Its prices are low but can be lower if it chooses more secondary airports like Ryanair.

The analysis above shows that Easyjet is not the market leader in any of its key competencies. it is therefore necessary for Easyjet to improve it’s position. This can be done through innovative change in customer service.

Reasons for Adopting Innovative Strategy

With the opening of political boundaries across Europe, the airline industry has seen tremendous growth in recent years. More and more passengers are travelling across Europe for business and leisure. This has allowed for the emergence of low cost airlines right across Europe. There has also been increased competition from the high speed rail industry with companies like Eurostar increasing their market share in the transport industry. The airlines have also been affected by the recent fluctuations in fuel prices and economic downturn.

In 2009 Easyjet was able to make modest profits of £54.7million despite these challenges. Moreover, there was a higher increase in revenue from ancillary sources (Appendix-2). As the company model is based on reducing ticket price, it is preferable to maximise revenue from ancillary sources while reducing cost.

In line with easyjet’s strategic priority of developing a winning customer proposition and its ability to use technology for innovative change it has been reviewed various possibilities for improving the customer experience to achieve growth. They include:

1. Offering a standing service for short haul flights. (Appendix-2)
2. Enhancing the EasyjetPlus card service (Appendix-2)
3. In-flight vending machine, which is explained below.

This product would allow customers a low-cost self service that is easily available once on the flight. It would also reduce the workload of the flight attendants. It opens avenues for direct sales of products from Easyjet and third parties. This option allows Easyjet the opportunity to increase revenue by providing advertising space for third party suppliers. This would help improve the brand and ancillary revenue. It would be innovative as it is a new product to the market and Easyjet could possibly gain additional revenue by licensing the product to other airlines once developed. It would however require investment in development of the concept and implementation.

Design

Easy machine (vending) are going to locate in some part of the Galley (kitchen) where not only food and beverages kept but also contain flight attendant jump seats, emergency equipment storage, and anything else that flight attendants may need during the flight. As below image indicate, normal aircraft like A319 has two galley areas which usable one for coffee machine and one for food and beverages. Easy machine in fact could be installed in galley area for more safety issue and as mention above just occupy some space and it produces from very light and strong plastic material. It is necessary to state that Easy machine totally redesigned and resized in order to fit and stick in galley. The colourful design of setup vending machine in aircraft and possible installation place is displayed below in two pictures:

Potential problem and related solutions:

In this part, the aim is to identify potential problems and threats, which could hinder the process of setting up the vending machine. At the same time, how to overcome these issues are explained here. In order to set up vending machine in an aircraft, Easy jet could ask some additional modification to their supplier for introducing compatible vending machines. However, setting up vending machine in an aircraft is not an easy task. It is estimated that, the following issues could be occurred when Easy jet will install the vending machine in the aircraft. These are broadly analysed as well as finding the problems with solution have been stated below.

Safety

Problem analysis: safety measure is considered to be the prime reason of concern while installing the vending machine. As there is a potential risk when plane taking off or landing and there is a possibility of vending machine to falling down on the floor. Furthermore, it could bring an enormous accident for the aircraft. It could also injured careless sort of passengers when they pass the vending machine. After analysing safety reason, two main issues are identified, which are potential threats for installing vending machine. The issues are:

· Stickiness of vending machine on the aircraft

· Indication of vending machine, where it would place

Solution: the proposed installation of vending machine in the aircraft should be designed especially as it could viable for aircraft use. For the first issue of safety, vending machine should be attached on the floor as well as stick in the aircraft ceiling. As it should be unmoveable, even if when plane taking off and landing on the ground.

Considering the second issue; a flashy sign can be tagged on the vending machine or around the vending machine. It would act as caution when anyone is passing by the vending machine. It would also remove traditional trolley as well as reduce congestion in the galley area, which has a potential benefit for in-fight staffs (Appendix-4).

Weight

Problem: The weight of the vending machine was discussed as one of the key issue and needed thorough analyses while setting up vending machine in the aircrafts. Since, many instances of plane accident indicate the underlying weight related problems; Easy Jet should consider it from plan to implementation. As a result, it should be viable for aircraft capacity. Also, the weight is related with carrying passengers as well as luggage. Thus, Easyjet should consider two issues for weight related problem. These are:

· The weight of the vending machine

· The weight capacity of aircraft

Solution: the proposed vending machine should be specially built for aircraft. Meanwhile, Average vending machine weight is 310 kg with 360 can capacity (Cokevending, 2010). It is built with metal and as a result, it is heavy. However, using plastic can reduce the weight. Recently, plastic vending machines are available in the market. Thus, it is feasible to think for installing plastic vending machine in the aircraft.

Legal

Problem: this potential threat might come from government approval. This is because; it is related with aircraft safety. In the meantime, public pressure could be arising as a new innovation process. Since, it is related with aircraft reengineering. Another question would be aroused about the cutting down of staff as there is standard ratio of staff should available in service operation. As a result, the following issues should consider before launching the vending machine in the aircraft.

· Managing related governmental department for approval

· Increasing public trust

· Staff reduction issue

Solution: for pursuing government approval, Easy jet could prove that this innovative changing is viable for aircraft. It is taken because of reduce cost. Since, it is not a radical innovation. Thus, it is not tough enough to make people believe that this change is feasible for aircraft carrying capacity. Consequently, easy jet can introduce advertisement campaign for bringing the trust on public.

One of the main objectives of the fitting up vending machine in aircraft is reducing the staff. Thus, this low cost leadership airlines industry can be bringing down their operation cost. However, there is a legal issue about the standard ratio of cabin crew, which has to be considered before reducing the staff (Appendix-2).

Space reduction

Problem: installing vending machine in the aircraft means shrinking the space of the aircraft. Length of existing vending machine of coca cola is 102 cm. Though, vending for aircraft would be customized, but it will take some space. Thus, potential issues could be:

· Occupancy of space by installing vending machine

· Reducing the space from aircraft

Solution: though vending machine will occupy some space, it has other potential benefits. Drink and food service will be self served. However, this space reduction could not impact hugely in aircraft. Meanwhile, it would be competitive trade off to be set up vending machine for aircraft, which would be customized only for aircraft.

Finance

Problem: Easy jet has to invest some money to restructure of its aircraft for setting up vending machine. Thus, following issues could be installing vending machine:

· Restructuring cost

· Set up cost

Solution: moderately less amount of money is related for installing vending machine. The proposed vending machine in aircraft would be specially made for Easy jet aircraft. Thus, its production cost will be split in such as; material cost, setting cost and other related cost. Considering all this aspect, it could be assumed that setting up vending machine would not be an expensive venture.

Consumer credibility

Problem: restructuring and redesigning the aircraft is more risky than ground vehicle. Public intimidation would be high if the restructuring will not be proved to be safe. Thus, significant threats of safety should be measured. These could be accounted below:

· Inconvenience for passengers

· Possible queuing for food and drink

Solution: Easyjet carries passengers for short haul distance. The installation of vending machine is primarily for short haul distance air travel. As a result, inconvenience of passenger would not be high. Rather, passengers do not need to wait for crew member as it is self service. Keeping attention of possible queuing, the member of staffs could check all over the flight as passengers could take food or drink without any hassle.

Maintenance of vending machine innovation

The Easyjet has to consider the following issues for the maintenance of vending machine:

Customer use of vending machine

Customer can buy any product by coin, paper note and debit or credit card (chip & pin). It is big issue for customer which currency will accepted by this vending machine. For solving this problem machine have to set the program that it will accept most of the familiar currency.

Vending machine supervising

Before start the flight, supervisor (cabin crew) has to visits machines and dispenses soft drinks, candy and snacks, and other items. They collect money from the coin and cash-operated machines, restock merchandise, and change labels to indicate new selections. They also keep the machines clean and appealing. Supervisor should have enough training to supervise this machine and to manage the passengers to assist them to buy their food, drinks or other things.

Break down and solution

If machine break down, it would be advisable that most of the control functions can be managed by an integrated circuit board (Appendix-2).

Managing vending machine food supply

Easy jet already has contracted with some brand food and drinks company. In year 2009 they started contract with world famous coffee company Starbucks (EasyJet, 2009). These types of company can supply vending machine food.

Reflection of learning process:

The new big innovative idea was developed by the four members. As it has been known that innovative idea always needs brainstorming and lots of challenges have to overcome before evolving any viable idea. Since it has been instructed that this potential idea should increase the opportunities of market growth for the selected company, the four members have worked through generating ideas related with different business. Officially, as it is assigned by administration to compile the report in six week period. The task was organised weekly such that the first two weeks was developing different ideas and subsequent researching as well as collecting relevant materials based on the selected idea and company. Meanwhile the team has contacted with different vending machine companies for the suggestion to setting up vending machine in aircraft.

Discussion of first meeting was basically organising the team members, structural format, assigning the role to the members, and deciding who would maintain the contact with all others members as a coordinator. The role of Coordinator implies by Crossman (2008) as ”this person will have a clear view of the team objectives and will be skilled at inviting the contribution of team members in achieving these objectives” (p.198).

The following meeting was to come in the point where the team decided to select an airlines company as topic to develop innovative idea. The session was garnished with quite a few exchanges of ideas, views, comments and critical discussion. Finally, the team has picked the idea of setting up vending machine in the aircraft. On the other hand, as a cross functional team, team members are viewed themselves as a members of their function (Crossman, 2008). Thus, this project work was split such as market and cost analyses for new innovation, identifying problem and related solution, design the aircraft for setting up vending machine and maintaining after installation.

As a completely new idea, the team faced a lot of challenges to prove the viability of project. All of the subsequent meeting held on bases of testifying the perfection of this project. While making the progress in setting up the vending machine for aircraft, the team encountered few key issues. As challenges grew more, the team rather focused on uses of the light weight plastic material, instead of heavy metal made vending machine. Furthermore, it has been estimated by the team that, this step would be suitable like low-cost strategic airlines mainly Easyjet. Because they can adapt the policy by reducing the numbers of cabin crew and recap the installation cost of vending machine. Additionally, it could sustain steady market growth. The team observed the innovation would bring about a competitive advantage even in the time of severe economic downturn.

The above development of idea and analysing process revealed the learning of the core motive of innovation for the team members.

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