Friday, July 09, 2010

Simulation as the Means to Integration

Chip and Dan Heath tell the fascinating story in Fast Company magazine of how JetBlue recovered from the February 2007 fiasco when the company angered customers due to its poor handling of disruptions associated with snowstorms in the Northeast. They describe how JetBlue created a simple simulation scenario in which thunderstorms forced the cancellation of many flights at JFK airport in New York. It brought together a cross-section of front-line employees in many different functional areas to examine how the airline would typically respond to such a situation. Here's the result:


In total, the group identified more than 1,000 process flaws, small and large. Over the next few weeks, the group successively filtered and prioritized the list down to a core set of 85 problems to address. Most of them were small individually, but together, they dramatically increased the risk of a dropped baton. JetBlue's irregular-operations strike force spent nine months in intense and sometimes emotional sessions, working together to stamp out the problems.

The effort paid off. In the summer of 2009, JetBlue had its best-ever on-time summer. Year over year, JetBlue's refunds decreased by $9 million. Best of all, the efforts dramatically improved JetBlue's "recovery time" from major events such as storms. (JetBlue considers itself recovered from an irregular-operations event when 98.5% of scheduled flights are a go.) The group shaved recovery time by 40% -- from two-and-a-half days to one-and-a-half days.


Many companies can benefit from creating these types of simulation experiences. In fact, firms can create these for a wide variety of situations, not just "crisis" situations. The key, though, is to get the people who actually do the work involved in such scenarios, and to make sure that you have people focused not just on what they do in their functional areas, but also on how on how they interact with others in various "silos" in the organization. You want to watch particularly for "fumbled hand-offs", i.e. occasions where critical information does not pass smoothly from one unit to another, thereby causing a lack of effective integration.

2 comments:

姵潔姵 said...

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Dr William J McKibbin said...

Well written -- simulation and stochastics are the future -- more at:

http://wjmc.blogspot.com/2010/04/stochastics-come-of-age.html

http://wjmc.blogspot.com/2010/03/financial-management-requires.html

http://www.mckibbinusa.com

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