Information Systems homework help
Question: Theory and Reality – Use 5 core ideas discussed in our course to analyze and explain Lufthansa’s case.
Business model innovation
Business model innovation help to reduce the cost and increase the competitive advantage in the business compared to process innovation [2]. Strategically invest in management practices in-line with business model innovation to have business agility. The study provides support to the argument that company who provides integrated products were higher performers compared to the company who provide product varieties [2]. In the case of Lufthansa renovation using Big Data, the company basically disrupted their existing conventional operation mechanism to a more technology-based data-driven operations optimization, decision process and customer intelligence and innovations in product and services [1]. Using the Big Data technology, Lufthansa transitioned to a renovated airline industry business model enablement. The article called “Amazon in the Air” {AIA).
Lufthansa was one of the oldest Airline industry in the Europe, many acquisitions, merging and changing airlines business, challenged Lufthansa. The profit margin reduced and expenses increased. The only way to sustain the industry is using business innovation. Strategic imperatives are important for Lufthansa to reduce the operational expenses to make a profit. Lufthansa implemented Big Data technology to drive the business decisions processes.
The few important information about business model innovation and how Lufthansa aligned with this principle are:
Lufthansa performed business model innovation based on three business model innovation elements: content, structure and governance:
New novel activity(is) – creating a new activity system by providing content using Big Data.
Linking existing activities in a novel way(s) – Creating a new activity system by structuring the business in a sequence of customer experiences, handling irregular situations, predicting maintenance, predicting departure delays and irregular situations in the airports
Identify who perform the activity(is) – creating a new activity system by governance, Lufthansa engaged in Big Data vendor management and outsourcing
The value drivers for Lufthansa business model innovation?
Novelty – the newness of the business operations and decision-making process using Big Data technology and Machine Learning.
Lock-in – innovate linked products consists of related technology applications such as products aligned with customer engagement cycle and cost distributions
Complementariness – business enhancing and profit-making support services with services dominant products of Lufthansa for providing software products for the customer to utilize their idle time in the airport or airplane and to sell ancillary services to make additional business opportunities.
Efficiencies – Cost saving using value chain mechanism of products aligned for customer engagement cycle and cost distributions
The business world is increasingly innovating in the digitization process. The Lufthansa case provided the insights about the digitization innovations challenged the industry for creating new opportunities by disrupting the existing. In other words, Lufthansa introduced additional customer engagement using Big Data Analytics business opportunity for innovations to venture into new business.
Digital Innovation:
Lufthansa developed Big data based algorithmic capabilities for various internal and external operational efficiencies and predictive based business decision process. The digital innovation is an organizations capability, not a technology platform innovation. A recent study proved that in near future half of the existing companies lack business and digital innovation preparedness to face digital disruptions [3]. To plan for the digitalization innovation companies should be rethinking following interrelated and mutually correlated digitization innovation principles. Anyone of the missing principles during the implementation process can have an impact on the digitization innovation and result will be a failure. Lufthansa was a success in the following [3]:
Organizing the business
Decision-making process
Identifying the partners
Management of partnership
Incumbent companies the business is institutionalized [3]. The new way of business using the digital innovation infuse new features into the business services for business agility. Also for these companies the development of the digitization capabilities can be implemented by maintaining the core business principles. So, they should know what to preserve and want to change during the digital innovation process.
Digital innovation and core set of principle for the incumbent companies who are planning for disruption processes to attain digital innovation by maintaining the core product innovations and core business capabilities [3]. Lufthansa senior executives didn’t think that digitization innovation is a risk and low-rewarded. To overcome the concern of the risks, vision and the effective communication within the Lufthansa was a success factor during the digitization process.
To accomplish the digital innovation by maintaining the existing core business principles, Lufthansa had the following interrelated competing concerns to balance their business: Innovation capabilities, Focus Collaboration, Governance collaboration [3]. Lufthansa developed governance practice to collaborate internal and external collaborates to provide flexibility values creation in the digitization process. Established a long-term commitment and sustainable relationships in business.
Digital Vision:
Digital Vision is a fundamental business decision-making strategies and cornerstone for digital transformation. Lufthansa capitalized the digital vision principle to disrupt the airline industries operation efficiencies and the predictive analytic for decisions making processes in the field operation and in corporate management using Big Data and Machine Learning technologies. This digital vision came from the corporate management and spread into the company [1]. Digitization can help a company to transform their customer experience, enhancing the efficiencies and improve the employee collaborations. Developing a transformative vision is the key success in the business model innovation and there are. The dimensions of digital vision in terms of digital strength and management strength of a company [4]. Also, the digital vision should come from top to bottom rather bottom up. That means the leaders and senior executives should deliver and engage the employees to align towards the success of the digital transformation based on the digital vision. The two key dimensions of digital visions are:
What – represent the digital intensity, a measure of the strength of digital activities of an organization
How – represent transformation management intensity, a measure of organizations vision, governance and skills
The good digital strength of a company and the management ability to transform the digital vision together make the digital transformation in a success and benefit maximum out of it. In the case of Lufthansa, the digital intensity and transformation management intensity are strong and they succeed in the renovation process
The perspectives of digital vision at Lufthansa:
Digital operation processes – Digital vision for operational efficiencies and productivity by integration of disparate processes of creating a customer engagement cycle, by interconnecting shopping, ticketing, manage booking, flights and post-flight activities.
Digitizing customer experience – Providing integrated solutions for better customer experience and multi-channel coherence and personal experience. Lufthansa developed AIA by goods-dominant logic to service-dominant logic. Customer will have a system to engage in the idle time also selling ancillary services.
Both – New business model that provide operational efficiencies and customer experiences.
In Lufthansa, the digital transformation is a tectonic shift and vision come from the senior executive of the company how they wanted to position their business in the competing market. Then, the vision transferred to the rest of the company.
Clear target – Leaders should have a clear vision what to accomplish from the digital transformation, what value will be benefited, the company, its customer and employees. Also, the transformation is not considered only through the lens of technology, but is a change in the business operations. This will help employees to visualize the company’s business alignments in the future
Engage organization – One the digital vision is clearly formulated and transformed that knowledge into the employees, the leaders engage the employees to align based on the company vision and make them innovate in that direction
Evolve vision over a time – The digital transformation is a journey. The vision starts with the executives, then engage the employees to take that into the next levels in the company to make the vision to grow
4. Business alignment
Lufthansa’s Big Data implementation was aligned with the business. The alignment and efficiencies are high along with business growth and value propagation. The complexities of implementing the overlapped and fragmented IT implementation for different business units is one of the disasters during IT implementation in the larger organization. In this situation, the alignment will not be achieved and more cost with negative business benefits. Sometimes due to the complexities, the IT implementation can stall and go forever to complete the project [5]
As part of the Big Data implementation, Lufthansa success in the adoption of IT-business alignment capabilities, which encompass three aspects: Communication, architecture and governance. These are described in seven critical success factors for innovating Big data:
A formal top-town value discovery process
Direct involvement of CEO
Service-dominant guild lines for deploying Big Data
Business-case-driven decision-making process
An IT Architecture foundation for Growth and Integration
Effective outsourcing and vendor management
Data governing and Talent Planning process.
The companies that don’t consider highly aligned are making good business growth compared to the average growth, spending very less money investment for IT.
Investing ineffectiveness, emphasizing simplicity and right sourcing (outsourcing with accountability) capabilities will help to avoid alignment trap in IT implementation. This brings accountabilities in the IT implementation and shared responsivities will make the efficiencies and effectiveness [5].
This article provided principles that companies to practice for improving the efficiency and alignment for business advantage and to avoid alignment trap in IT.
5. Self-tuning and Reinventing the Enterprises
Using the Big Data for Business renovation Lufthansa developed data-driven self-tuning mechanism for managing the existing business and innovating new business area and operations performance to make a profit. Self-tuning is an algorithmic approach to reshape the business by modulating the experiment and calibrate business strategies very often. Leverage the real-time data and learn the behaviors provide services to the millions instant approach [6]. Lufthansa developed data-driven software technology using Big Data and Machine Learning to predict business opportunities.
Reinventing the Enterprises: The self-tuning transition the enterprise as a set of nested strategic processes. This requires a new management practice with new vision and direction. The main characteristics of high performing organization are making good decisions and making them happen quickly. Consistency and speed are the essences of decision making [6].
These principles derive the business from the behaviors of the data or the data-driven business to compete in the market. The repeated experiment can provide a new strategy and vision.
Lufthansa is a pioneered airline industry. The business world is increasingly innovating in the digitization process for operational efficiencies and technology-based business innovations. The increases in the digitization innovations help for creating new opportunities by disrupting the existing. Lufthansa implemented the Big Data technology for operational efficiencies and developed use cases for:
personalizing customer experiences,
handling irregular situations,
predicting departure delays and proactive IRREG recovery,
predictive and preventive aircraft maintenance.
This digitization also helped for new opportunities, leverage strong customer relationship and increase the cross-selling opportunities. Lufthansa developed business ecosystems to support customers for better business agility and competitive advantages. The business moving more towards the metric-driven to know what customer is looking for. Amazon sees all customer activities in an ecosystem and identifying new opportunities. Amazon’s digital innovation enables them to be broader, collaborated, continuous and informed by extensive business purchasing and search habits. Deep knowledge about the customer demography, history, and life events information help to determine the need and provide options and choices to have product diversities and financial benefits. Hence the Lufthansa Big Data implementation for business renovation terms as Amazon in the air (AIA).
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