August 25, 2019

Auto 3: One Future of Auto is Airlines

This is the third installment how data analytics is rapidly transforming the auto business.

Part one, Auto 1, launched with the shift of industry revenue from selling vehicles & parts to digital services.

Part two, Auto 2, focused on the rise of data as a source of advantage in this shift.

This third part drills deeper and illustrates how to create data advantage specifically with decision support systems (DSS), such as yield or revenue management systems (YM). These systems were pioneered by American Airlines more than four decades ago to respond to new low cost competition. It’s former CEO, Robert Crandall, coined the name and saw them as the single most important innovation to advance transportation management. Airlines back then – like automakers today – had to change their business model to survive. They succeeded by shifting from “revenue per route” to “revenue per seat” using YM. As automakers shift toward mobility and from “revenue per vehicle” to “revenue per trip” they can benefit from lessons learned to quickly build the right DSS.

DSS have evolved from the Nobel Prize winning work of Herbert Simon. A key DSS pioneer was Paul Gray who founded CGU’s information sciences program across from the Drucker School. This third installment draws from our own experience developing DSS with machine learning (ML) and artificial intelligence (AI) for mobility-as-a-service (MaaS) offerings (see Blog on “Calculator Powered by ML: Mobility-as-a-Service”).

Langdon, C. 2019. One Future of Auto is Airlines – Yield Management Systems to the Rescue. Working Paper, MGT 317 Smart Products, Peter Drucker School of Management, Claremont Graduate University, LA county