As the Internet revolution continues, airlines are having to address the need for strong IT leadership under a chief information officer (CIO), argues Michael Bell, managing director of the Global Aviation Practice at executive search consultants Spencer Stuart
Few industries rely so heavily on IT as air transport and the advent of the Internet revolution has only increased its importance as a competitive tool in capturing and retaining customers. Yet despite this reliance, it is not clear that the information technology function has "found its home" in the airline organisation. Nor is it clear that the airline chief information officer (CIO) has secured his or her rightful place on the top leadership team. A couple of ongoing studies help shed some light on this leadership challenge. One is the Airline IT Trends Survey carried out jointly earlier this year by Airline Business and SITA. The other is conducted within Spencer Stuart as a joint project between its Global Aviation and Information Officer Practices.
Without question, the biggest leadership challenge facing airline CIOs today is the lack of skilled IT personnel. Airlines are finding it increasingly difficult to attract and retain such talent in the context of more appealing career opportunities in other industries. That shows in the Airline IT Trends Survey 2001, where lack of skilled IT people was cited together with investment as the key barrier to success. (see graph page 96). One CIO canvassed in the Spencer Stuart study summed it up well: "We worry about retention. In IT, professionals and managers have lots of career choices; unlike jet mechanics, our people can work in other industries."
Complicating this situation is the fact that airline information systems are becoming increasingly more complex and demanding, requiring industry- or application-specific knowledge in many cases. Almost 40% of Airline Business-SITA survey respondents cited lack of IT personnel with airline experience as a significant obstacle.
Owning the problem
Compounding this personnel issue has been a potentially thornier internal problem - securing line "ownership" of the IT problem. While airline IT professionals should bring the requisite technical expertise, it is also critical that the line executives "own" the problem and the IT solution that solves it. As one airline CIO suggested: "There has been too much abdication of responsibility by the user community and too much acceptance of responsibility by the IT function. The goal should be to get line executives to manage information technology directly as they would any other asset - people, money, aircraft."
The issue of ownership has been exacerbated in recent years by the emergence of e-commerce and its vital role in many key airline processes. Who is responsible for the development and deployment of e-commerce solutions in an airline? What role should IT play? There has been little clarity on these issues. Some CIOs are adamant that e-commerce should be a line responsibility: "You can't have someone running e-commerce ventures who's not perfectly capable of handling the key strategic decisions."
Others are troubled by the fact that e-commerce has found a home outside of IT and often for the wrong reasons: "Most airline e-commerce organisations today are not in the IT business; they are into wealth creation through launching new businesses. I call it 'priceline cocaine'. Everybody has been chasing it but there hasn't been one since."
The facts seem to bear out this concern. Among seven major US carriers, only two (American Airlines and America West) have the e-commerce function organised under the CIO, with the others grouping the function under marketing (Continental, Delta, Northwest Airlines and US Airways) or finance (United Airlines). Similar trends are emerging in major carriers in Europe and the Asia-Pacific.
The CIO role
The CIO's reporting path seems to be another issue hindering IT function in its efforts to secure the "voice" it deserves at the top of the airline hierarchy. The reality is that few airline CIOs report today directly to the chief executive, organised instead under the chief financial officer, chief administrative officer, or other top management team member (see table below). Even among the US majors, where a CIO role is the norm, almost half do not sit on the main board.
Such subordination can lead to the IT unit taking on a "functional spin" that reflects its organisational home as opposed to the more integrative position it should hold in an airline.
Another recent survey of CIOs determined that the single most important thing their chief executives could do to be more supportive of IT work was to "support the CIO among senior management". Why has this been the case? Have airline CIOs failed to convince their chief executives of the need to be part of the top team? Have they simply not had the right backgrounds or profiles to earn such elevation? There are clear signs that the profile of the airline CIO is in flux and that the major trends affecting it will work in favour of elevating the function to the top team in the near term.
The more traditional airline CIO profile featured a career built in information technology and destined to stay there. In the words of one CIO: "An airline committed to IT would not entrust the function to someone who doesn't understand it." Other airlines have been more active in experimenting with the function, rotating non-IT professionals in an out of the role through more liberal career paths.
A good example is United. Until the recent recruitment of IT professional Eric Dean from Arthur Andersen, the CIO at the carrier was Andy Studdert, a former banking executive who served in the function and then went on to assume the senior vice-president fleet operations and executive vice-president and chief operating officer roles as part of his preparation for general management. Clearly, United was seeking not only to broaden Studdert through the CIO posting but also to bring fresh thinking to the function from an outsider's perspective.
Fellow Star Alliance partner Air Canada has undertaken a similar but different experiment. The carrier took the bold step of putting its former CIO, Lise Fournel, into the executive vice-president commercial post, with overall responsibility for sales, marketing, planning, regional carriers and cargo. Fournel, an operations research/information systems professional by background, brought a strong analytical focus to an increasingly data-intensive function in the commercial arena. In so doing, she has blazed the trail for other airline CIOs with broader-than-IT aspirations.
In the Asia-Pacific, Singapore Airlines has tried to obtain the best of both worlds. In its recent search for a new CIO, the carrier clearly defined the "spec" for an individual who is "first and foremost a business person who is keen to develop the function in such a way so as to support and enable, rather than lead, the businesses that are its customers." In recruiting David Richardson from Australia and New Zealand Banking Group, SIA secured a technology-proficient but business-savvy leader with a track record of working closely with internal customers. His prior stint at Ansett Australia certainly did not hurt in positioning him well to adapt to the tough airline environment.
Looking ahead, airline CIOs appear to be faced with three fundamental challenges which are likely to determine their success in the years ahead:
Positioning their airlines as attractive places to work as they continue to compete in the increasingly fierce war for IT talent. Finding a way to play an integral role in the e-commerce revolution in the airline sector while engendering a stronger sense of ownership among line executives. As described by a prominent airline CIO: "Building strong relationships with those who run the business. It's imperative to get on an equal footing with other functions and not to have IT buried in finance, marketing, or other areas."For an industry so reliant on information and so capable of using that information to secure competitive advantage, the airline sector should bring the IT function, and its leadership, more into the centre of the action. Airline CIOs can, and must, do their part through taking action as suggested above. Equally, airline chief executives should appreciate that the "I" in CIO stands not only for information but also, if properly supported and profiled, for intelligence, integration, and innovation. With both parties doing their part, the day of the airline chief executive with a CIO-background may not, in fact, be that far away.
Source: Airline Business
