American Airlines
The InterAACT Project (A & B)
http://www.amrcorp.com
http://www.americanair.com
Suggested Study Questions (A)
 1.
How should InterAAct’s contribution to
American’s bottom line be measured?
 2. How does the implementation effort and
the technical architecture meet the
project’s objectives?
 3. What should tom Kiernan propose for
the Planning Committee meeting in
November?
Suggested Study Questions (B)
 1.
How does the new implementation
process address the problems outlined in
the A case?
 2. What problems does the new process
not address?
 3. What do you think will next happen to
the InterAAct project?
Why AA Case?
 The
project was notable both because:
– it was an early effort in creating an
organizational information infrastructure,
and
– it heralded a new era in organizational
computing, from large, monolithic strategic
computer applciations (e.g., SABRE) to
many small, non-plannable uses of IT
everywhere in an organization (claimed by
Max Hopper)
Learning Objectives
 You
should be able to learn how to
diagnose the implementation problems
and how to solve them (Case A).
 Study the pros and cons of SCS’s
proposals for intraorganizational
implemenation processes (Case B).
 Two approaches
– implementation focus, and
– strategic focus
Implementation Focus
 Focus
on diagnosing the
implementation problems and how to
solve them.
 Pros and cons of (intraorganizational
implementation processes)
– SCS’s or
– students’ proposals for implementation
Discussion Questions
 What
the InterAAct platform consists of?
 How and why it is being introduced?
 Was InterAAct a smart investment at
the time it was introduced and possible
changes in the techno9logy or the
implementation process.
Discussion Structure
 Why
is American Airlines putting in
InterAAct?
– To take advantage of cheaper technology
(mainframe vs. PC)
– to provide information access, analysis tools
and communication to knowledge workers
– productivity improvements
– strategic considerations
– to reduce systems development backlogs
 WHY?
*
 What
does the user (customers,
employees, travel agents) really
receive, and how is it received?
(Exhibits 6 and 7)
 How to achieve the productivity
increases - what should be done.
 B case and your strategies (Your
solution might be better than the
“business case” solution)
Learning Objectives of the
InterAAct Project
CULTURE
ORGANIZATIONS
Corporate
Strategy
TECHNOLOGY
fit
•Availability,
•Needs
Implementation
approach
Centralized based on
productivity measures
N
Three important aspects of the
InterAAct project
 Technology
– IBM PC
– word processing, spreadsheets, DBMS, email and access to mainframe system
 Implementation
approach
– centralized, based on
– productivity measures
 Link
to corporate strategy
– increase the productivity
– match the increasing growth
Issues of
Improving Productivity
 access
to corporate information
 education/training
 user-friendly tools (HW/SW)
 simplifying tasks of
– gathering,
– analyzing and
– communicating information
A “Savior” for American Airlines
 Information
Technology (IT) has been a
“savior” for American Airlines on at least
four other occasions:
– the original SABRE (1957)
– a crucial link to their customers and
information about the competition actions (first
version installed for travel agents in 1974)
– the first frequent flyer club (AAdvantage)
– yield management systems, using O.R.
methods to optimize
• pricing, routing, crews and flights scheduling
• sequencing of flights to maximize revenue per
seat-mile
A Moneymaker
 The
IT part of American has consistently
been a moneymaker.
 Bob Crandall, the CEO of AMR, joked
that, given a choice between the
systems and the airline, he would sell
– the airline!!
The decision to adopt InterAAct
 Senior
management was informed by
the understanding that PC’s would
make their way into the airline.
 InterAAct could be seen as a defensive,
not an offensive measure
– integrate a number of workstation
platforms into their overall architecture.
Technical Problems
 M/S
windows (not multi-tasking)
 M/S WORD
 E-mail was on HP-mini not on LAN
 LAN-based email was introduced in the
Spring 1994 and phased out HP minis
 Technology was young and slightly
underpowered
AA’s New IT Platform
Data
Processing
Office
Automation
Personal
computing
Networking
IT
Platform
(single/
integrated)
higher productivity
quicker and more decentralized decisions
(CSF in the highly competitive airline
industry
Implementation Approach
 Two
previous large systems: SABRE
and flight operating system (FOS)
 It was initially implemented in a
centralized fashion, relying on
productivity measures.
 Productivity was hard to measure.
 IT should change the way people are
doing the business, rather than, people
have to adapt to the IT.
Organizational Change to the
IT
change the way
New IT
Platform/
Infrastructure
People are
doing the business
But, not adapt to
Improve productivity
Streamline organization
operations and controls
Link to Corporate Strategy
 The
vision for InterAAct was
– “to provide E-communication tools and information
resources to all AMR employees” (Bob Crandall)
to link to corporate strategy, and
A
–
–
–
–
justification for the investment
a “tool to grow” the airline
a significant fuel price rise in 1990
“management for cash” mode
reluctant to adopt a technology, while having a
large potential
• significant startup costs (training, setup, and redesign of
routines)
• productivity outcomes would be hard to measure and
demonstrate
Logical Solution from the B Case
Up to the
organization
with
aggregate
data (e.g.,
EIS, ES)
Knowledge
specific
general
co-located
Managers of the
work groups
Decision
rights
Because the behavior is neither specifiable
nor measurable; consequently, the decision
rights have to be moved closer to where the
specific knowledge resides, i.e., to the
managers of the work groups that are
beginning to use the technology.
Move down
to the
employees
N
The InterAAct Project (B)
 The
goal of InterAAct is not to develop
stand-alone applications but to create a
technology platform
– an electronic nervous system-capable of
supporting a vast array of applications,
most of whom we hae not foreseen.
Max Hopper
Information Systems, Senior Vice President, AMR Corp.
InterAAct: The New Approach
 InterAAct
platform was based on a
concept of “information technology as a
utility”; instead of being centrally funded
and justified by productivity
improvements which were hard to
measure.
– It was marketed to the user departments as a
utility they could choose to adopt.
– Each individual user prepared a plan for how
s/he would use the InterAAct platform, which
was then evaluated by the local management.
 Marketing
of InterAAct
– from a focus on constructing project plans to do
marketing of InterAAct to potential and current
users.
 Technical
development
– a significant increase in reliability and userfriendliness software
– upgrade HW/SW platform
 Measuring
InterAAct
– 60% of time doing core work
– difficult to quantity the help form the system, but
can’t live without it.
– Improve communications throughout the company,
saving time and helping users manage projects
 Standards
– the standardization of InterAAct allow employees
easily transfer between departments
– simplified the user support
 Reorganizing
maintenance
– a new group was formed, Premise World-Wide
Operations Group
– installation, integration, controls and checkpoints will
be performed in a place
– the same set of efficiencies and controls and high
operating ability were done by the new group

InterAAct use
– platform stabilized, the tools improved, and the user
base grew, ItnerAAct became a natural feature of
many users’ everyday work lives
 Organizational
use
– as the InterAAct platform gained acceptance in the
user community, a number of innovative uses of
the technology had surfaced. They were:
• personnel office (automated job application)
• medical office (two systems were “talked” to
each other)
• E-information exchange
• E-mail (faster information collection and less
internal phone calls)
• automatic and quick generation of general
manager’s report
– the project was recognized outside the company
• an example of a company upholding its
commitment to IT despite economic pressures
 Justify
InterAAct
– the increased demand for InterAAct combined with
the tough economic times in the airline industry
led to a focus on cost both within the user
community and within the InterAAct project.
– Still there are many people have not been able to
change the way they operate in the business.
Future of InterAAct
 Upgrade
issues
– investment infrastructure (in a very
constrained environment)
– InterAAct is organizational infrastructure in
the sense that it is only visible when it
breaks downs
 operational
necessity
 competitive advantage or necessity
 computing resources allocation in the
workstation and mainframe environment
Next ...
 Strategic
Focus
Suggested Questions on
Strategic Focus
 Is
InterAAct a strategic information
system? Why or why not?
 Is InterAAct a pioneering information
system? If so, how?
 How does the InterAAct platform help
American Airlines gain a competitive
advantage? How should the platform’s
effect or contribution be evaluated?
Why Study Strategic Focus?
 Learning
the case (InterAAct) of a
strategic initiative fitting in this mold,
illustrating the difficulties in supporting a
highly communicative organization and
especially the problem of knowing how
well you are doing it.
Why Study the case with
Strategic Focus?
 Gaining
an understanding of the
competitive structure of the airline
industry.
 Understanding something about AA’s
past in using IT to gain a competitive
advantage (through AA’s strategies)
 The scope of your extent to which
InterAAct is likely to succeed.
Discussion Structure
“How do you succeed in the airline industry?”
 How do you choose which airline to take?

– Availability
– price
– reliability

Base on the fact that most of airlines now
have reservation systems, frequent flyer
clubs, and the prices are roughtly the same
everywhere, how can AA (esp. InterAAct)
accomplish anything for American
strategically?
*
 What
does American’s top management
hope to achieve by implementing
InterAAct?
– Wholesale buying
– what extent InterAAct provides a strategic
advantage (based on Porter’s model)
– competitive advantage or competitive
necessity (then and now)
– “if it is internal, it can’t be strategic” -- by
Hopper
 Is
cost savings really the important
issue? (how InterAAct support the issue
to be understood and measured?)
Porter’s FIVE COMPETITIVE FORCES
MODEL
NEW
MARKET
ENTRANTS
Threats
SUBSTITUTE
PRODUCTS
& SERVICES
??
THE
FIRM
TRADITIONAL
COMPETITORS
SUPPLIERS
IT-based products:
video conferencing,
E-communication
CUSTOMERS
Bargaining power
It is very substantial and
cost leadership is the most
viable strategy
N
Analysis using Porter’s model and Internal
organizational matters
Competitive Forces:
1. Traditional competitors
2. New market entrants
3. Substitute products and
services
Bargaining power of
4. Customers/buyers
5. Suppliers
Two strategic weaknesses:
1. No really large, centrally positioned hub
2. No operational or marketing alliance
with a European airline
Competitive Strategies:
1. Product differentiation
2. Cost leadership
3. Innovation - operational
and marketing innovations
IT-Based
•SABRE
•AAdvantage (Frequent flyer Club)
•Yield management system: price-setting
•Hub-and-spoke (pioneered by Delta Air)
•Maintain flexibillity - no Jumbo Jets
•Cost-conscious- actions are not undertaken
unless the NPV is positive
Strategic Focus
 Movement
of strategic analysis
Structural analysis
(e.g., Porter’s
competitive forces
model)
Internal organizational matters - concerned with creation,
sustenance organizations that
are flexible, adaptable, and
quick to learn (e.g., InterAAct)
Conclusion
 American:
the on-time airline
 InterAAct: the on-line machine (system)