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15.571 Generating Business Value from Information Technology
Spring 2009
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Class 8: The Data Driven Organization
15.571
Generating Business Value
From Information Technology
Jeanne W. Ross
Director & Principal Research Scientist
Center for Information Systems Research (CISR)
MIT Sloan School of Management
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
The Delta Air Lines Story
ƒ
ƒ
ƒ
ƒ
1997 As-is
17 functional silos
17 IT units
17 major platforms
17 answers to a single
customer question
ƒ
ƒ
ƒ
ƒ
1997 To-be
Process view of the firm
Corporate infrastructure to
support cross-functional
processes
Standardized environment
Focus on customer
In 1997, Delta was worst performing airline on key metrics, such as on-time performance,
mishandled baggage, and customer complaints
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
Source: e-Business at Delta Air Lines, Jeanne W. Ross, MIT CISR
Working Paper #317, 2001.
1
Delta’s Unification Operating Model
Operational Pipeline
Allocate
Resources
Prepare
for Flight
Departure
Pagers
Load
Aircraft
Flight
Departure
and Closeout
Flight
Arrival and
Closeout
Monitor
Flight
Unload
Aircraft
Hand Helds
Kiosks
Gate Readers
Clean/
Service
Aircraft
Voice
Delta Nervous System
Video
Electronic Events
Maint.
Schedule
Flight
Location
Business
Reflexes
Employee Relationship
Management
Equip.
Employee
Aircraft
Ticket
Customer
Nine Core Databases
Cell Phones
PDAs
Desktops
Laptops
Skylinks
Skymiles
Reservations
Personalization
Travel
Agent
Scanners
Skycap
Ticket
Counter
Digital Relationships
Crown
Room
Reservation
Systems
Boarding
Inflight
Baggage
Loyalty Programs
Customer Experience
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR) Source: Adapted from Delta Air Lines documents. Used with permission.
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
2
Discussion Questions
ƒ What did Delta do right in its transformation efforts?
ƒ What risks did Delta take on as a result of the Delta Nervous
System project?
ƒ How did Delta's approach to going from Worst to First
compare with Continental's?
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
3
Comparative Financials for Continental and Delta
2007
2006
2005
2004
2003
Continental
Operating Revenue
$14,232
$13,128
$11,208
$9,899
$9,001
687
468
(39)
(238)
188
$13,3581
$17,532
$16,480
$15,235
$14,308
7961
58
(2,001)
(3,308)
(785)
Operating Income
Delta
Operating Revenue
Operating Income
Current Market Cap:
•Delta: $1.55 B
•Continental: $1.24 B
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
1
Delta 2007 figures are for first 8 months of fiscal year
Market Comparison for Delta and Continental
Delta Air Lines New
0%
-20%
-40%
CAL
-60%
DAL
-80%
Millions
-100%
60
May07
Sep07
Jan08
May08
Sep08
Jan09
40
20
0.0
as of 27-Feb-2009
Volume
Figure by MIT OpenCourseWare.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
5
Contrasting Approaches to "Fixing" Operating Data
ƒ Ripping out legacy and installing new systems presents the
challenge of the "big bang" (i.e. risky, high-cost
implementation).
ƒ Installing "fixes" like data warehouses and web services
presents the challenge of constant maintenance (i.e., costly
upkeep).
ƒ Fixing applications provides opportunities for operational
efficiencies. Fixing data warehouse provides opportunities for
decision support.
ƒ Both approaches allow a firm to operate the way it wants to
operate.
ƒ Both approaches demand business process changes to drive
value.
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
6
Key Findings on the Information Explosion
ƒ Data storage requirements are growing
– Granular operating data
– Unstructured data, video, wikis, email, images
ƒ Technology solutions can manage costs and risks—but that's
the easy part
ƒ Don't assume that putting good information in the hands of
smart people = business value
–
–
–
–
Identify what is sacred/core
Define clear business goals
Insist on definitive costs and benefits
Change something
Center
Center for
for Information
Information Systems
Systems Research
Research (CISR)
(CISR)
©
© 2009
2009 MIT
MIT Sloan
Sloan CISR
CISR -- Ross
Ross
7