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ANSWER ALL questions for Case Study 1. What surprised you most about this case? 2. What is Continental's business strategy?
ANSWER ALL questions for Case Study 1. What surprised you most about this case? 2. What is Continental's business strategy? 3. . This case study tries to show how Continental's investment in a real-time BI is closely aligned with its business strategy. Give examples of business processes that have changed due to their enablement by real-time BI and discuss how they have helped its business strategy. 4. How is Continental making use of "analytics" in its operational decision-making? What more can they do? 5. . Real-time BI needs real-time as well as historical data - real-time data is needed to recognize a business event as it happens and historical data is needed to respond to it comprehensively. For each application described in this case study, discuss: the need for real-time response the decision/activity supported the real-time and historical data needed and the analysis performed the performance metrics to measure its effectiveness
Continental Airlines Flies High with Real-time Business Intelligence Introduction Real-time business intelligence (BI) is taking Continental Airlines to new heights. The company has dramatically changed all aspects of its business, resulting in industry-leading customer service and generating a considerable financial "lift." Continental's president and COO, Larry Kellner 2, describes the impact of real-time BI in the following way: "Real-time BI is critical to the accomplishment of our business strategy and has created significant business benefits." Some of the ways that Continental is using and benefiting from real-time BI are: • Flight attendants, gate agents, and all "customer-facing" employees know at all times who Continental's high-value customers are, and they provide outstanding service to these customers, contributing to Continental's track record of customer service. • The Operations staff at the hubs monitors on-time performance throughout the day and makes operational decisions about catering, personnel, and gate traffic flow, thus solidifying Continental's ranking as the most on-time airline. • Pricing specialists track in real-time the impact of price changes on reservations and make adjustments that optimize revenues. Company Background Information Continental Airlines was founded in 1934 with a single-engine Lockheed aircraft on dusty runways in the American Southwest. Over the years, Continental grew and successfully weathered the storms associated with the highly volatile, competitive airline industry. In 2011, Continental was one of the top 5 airlines in the USA measured by passengers carried, destinations, passenger-kilometers, etc. It carries over 100 million passengers a year to five continents (North and South America, Europe, Asia, and Australia), with over 2,400 daily departures, to more than 262 destinations.
An Airline in Trouble In the early 1990's, Continental was in trouble. There were ten major US airlines, and Continental ranked tenth in on-time performance, mishandled baggage, customer complaints, and denied boardings because of overbooking. Not surprisingly, with this kind of service, Continental was in financial trouble. It had filed for Chapter 11 bankruptcy protection twice in the previous ten years and was heading for a third, and likely final, bankruptcy. It had also gone through ten CEOs in ten years. People joked that Continental was a "Perfect 10." Gordon Bethune and the Go Forward Plan The rebirth of Continental began in 1994 when Gordon Bethune took the controls as CEO. He and Greg Brenneman, who was a consultant at the time, completely revamped the airline with a "Go Forward Plan" 4. It had four interrelated parts that formed the cornerstone of Continental's strategy. • Fly to Win. Continental needed to better understand what products customers wanted and were willing to pay for. • Fund the Future. Continental needed to change its costs and cash flow so that the airline could continue to operate. • Make Reliability a Reality. Continental had to be an airline that got its customers to their destinations safely, on-time, and with their luggage. • Working Together. Continental needed to create a culture where people wanted to come to work. Most employees bought into the plan, and those who didn't, left the company. With the Go Forward Plan and a re-energized workforce, Continental made rapid strides. Within two years, it moved from "worst to first" in many airline performance metrics. Analytics Continental's current position is dramatically different compared to those times. A key to this turnaround, the Go Forward Plan, continues to be Continental's blueprint for success and is increasingly supported by real-time BI and data warehousing. Currently, the use of real-time technologies has been critical for Continental in moving from "first to favorite" among its customers, especially among its best customers. Analytical capabilities give Continental a competitive advantage. But, these capabilities need to continuously evolve to maintain the competitive advantage that they offer. Initial applications in pricing and revenue management provided a variety of early, big "wins" for Continental. These were followed by the integration of customer information, finance, flight information, and security. They created significant financial lift in all areas of the Go Forward Plan. This mini case study describes strategically aligned applications of real-time BI in three areas: revenue management, customer relationship management, and flight operations. They are among the many that Continental implemented and illustrate how real-time BI is affecting almost all of the areas that Continental does business in.
Real-time BI Applications From its main operational systems to the warehouse, Continental moves real-time data (ranging from to-the-minute to hourly) about customers, reservations, check-ins, operations, and flights. This has transitioned Continental from analyzing and reporting what happened in the past to influencing current decisions and business processes. REVENUE MANAGEMENT The purpose of revenue management is to maximize revenue given a set of resources. An airline seat is a perishable good, and an unfilled seat has no value once a plane takes off. The warehouse integrates multiple data sources - flight schedule data, customer data, inventory data, and more - to support pricing and revenue management decision-making. Fare Design Continental understands how important it is to offer competitive prices for flights to desired places at convenient times. Continental uses real-time data to optimize airfares (using mathematical programming models). Once a change is made in price, revenue management immediately begins tracking the impact of that price on bookings. And, knowing immediately how a fare is selling allows the group to adjust how many seats should be sold at a given price. Continental has earned an estimated $10 million annually through fare design activities. Prior to the availability of real-time data, Continental's pricing was a less effective at filling seats and optimizing fares. CUSTOMER RELATIONSHIP MANAGEMENT In additional to the traditional CRM applications (such as, customer segmentation and target marketing, loyalty/retention management, customer acquisition, channel optimization, and campaign management), marketing has created other innovative CRM applications that leverage thewarehouse's real-time capabilities. A customer value model using frequency, recency, and monetary value gives Continental an understanding of its most profitable customers. Every month, the customer value analysis is performed using data in the warehouse, and the value is fed back to Continental's customer database. Although the value is not adjusted real-time, it is provided to Continental's customer-facing systems so that employees know who their best customers are. Marketing Insight With Marketing Insight, sales personnel, marketing managers, and flight personnel (e.g., ticket agents, flight attendants) can see customer profiles - what the person's value is to the airline. Flight attendants receive the information by reading their "final report," which lists the passengers on their flights, expanded to include value information. Gate agents are able to pull customer information up on their screen and drill into flight history to see which high-value customers have had flight disruptions. A commonly told story is about a flight attendant who saw a high-value customer's recent flight disruption and apologized on behalf of Continental. The passenger was floored that she would know about the incident and then care enough to apologize. FLIGHTOPERATIONS Operations is concerned with all aspects of getting people to their destinations safely, on-time, efficiently, and with their luggage. This is where customers have either a good or bad flying experience, and Continental works hard to provide excellent service. Good operations also can reduce costs by ensuring that ground personnel are in the right place at the right time. Special real-time applications have been developed to support this capability.
Flight Management Dashboard The Flight Management Dashboard is an innovative set of interactive graphical displays developed by the data warehouse group. These displays are intended to help the operations staff quickly identify issues in the Continental flight network and then manage flights in ways to improve customer satisfaction and airline profitability. Some of the dashboard's displays help Operations to better serve Continental's high-value customers. For example, one of the displays is a graphical depiction of a concourse, which is used to assess where Continental's high-value customers are or will be in a particular airport hub (see Figure 1). The display shows gates where these customers have potential gate connection problems so that gate agents, baggage supervisors, and other operations managers can assess where ground transportation assistance and other services are needed so these customers and their luggage avoid missing flights. It can be seen that Flight 678 is arriving 21 minutes late at Gate C37 and two high-value customers (3* and 5*) need assistance in making their connections at Gates C24 and C29, which are 20 and 12 minutes away, resp. On-time arrival is an important operational measurement at Continental. Therefore, another critical set of dashboard displays helps Operations keep the arrivals and departures of flights on time. One display shows the traffic volume between the three Continental hub stations and the rest of their network (see Figure 2). The line thickness between nodes is used to indicate relative flight volumes and the number of late flights so that the operations staff can anticipate where services need to be expedited. The operations staff can click on the lines and drill down to see individual flight information. Another line graph summarizes flight lateness. Users can drill down to more detailed pie charts that show degrees of lateness, and then, within each pie, to the individual flights in that category. In all of these elements of the dashboard, high-level views can be broken down to show the details on customers or flights that compose different statistics or categories.
