Singapore Airlines’ Balancing Act Asia’s premier carrier successfully executes a dual strategy: it offers world-class se

1. Singapore Airlines’ Balancing ActAsia’s premier carrier successfully executes a dual strategy: it offers world-class service and is a leader

2. Introduction • Singapore Airlines is highly famous with its competitiveness with high quality service in commercial aviation business • It won award from : • Conde’Nest Traveler, 21 out 22 as The World’s Best Airlines award • Skytrax’s Airlines, 3 times as Airlines of the Year • Amazingly as not well known, Singapore Airline is one of the industry’s most cost effective operators.

3. The Data From 2001 to 2009, SIA costs per available seat kilometers (ASK) were just : 4,58 cents, meanwhile the industry : • European airlines : 8 to 16 cents • US airlines : 7 to 8 cents • Asian airlines : 5 to 7 cents • American budget carriers : 4 to 8 cents

4. The Issue The SIA’s strategy is unusual, even management experts, such as Michael Porter, argue that it's impossible to do so for a sustained period since dual strategies entail contradictory investments and organizational processes

5. The Strategy • Pursue service excellence and continous innovations and cost leadership • Other companies in Asia use the same strategy are : Banyan Tree, Haier, Samsung and Toyota, other that contradicting, they compement each other • But the best company executes it is SIA, since its founding in 1972, never posting annual loss.

6. The Four Paradox • Providing service excellence cost effectively • Innovating in both centralized and decentralized manner • Being a technology leader and a follower • Achieving standardization and personalization in its process

8. Achieving Service Excellence Cost-Effectively • The fleets are always s young (74 months old ; industry : 160 months) • Recruiting young people from first-class graduate university • Investing heavily in training employees (4 months training ; industry 2 months) ; 14.500 employee for 110 hours training annually • Cost consideration in every decision (avoiding waste of meal ; outsourcing ticketing )

9. Fostering Both Centralized andDecentralized Innovation SIA has earned the reputation of being a serial innovator, bringing many firsts to the civil aviation industry: • On-demand entertainment systems in all classes • Dolby sound systems • A book-the-cook service that allows business – and first-class customers to order their favorite meals before boarding • The widest business-class seats • And so on.

10. Fostering Both Centralized andDecentralized Innovation It follows 4-3-3 rules of spending • 40% on training • 30% on revising processes and procedures • 30% on creating new products and services every year

11. Fostering Both Centralized andDecentralized Innovation SIA sustains innovation by using structured, rigorous, and centralized process along with an emergent, distributed, and local processes. The former is the skeleton, the later the flesh and blood, together, they provide customers with a body of novel services at a low cost. • The Product Innovation Department (PID) follows a highly structured process that includes opportunity identification, concept evaluation, design and development, and launch. • SIA engages frontline employees, customers, competitors, and the media to create multiple feedback channels. • A small number of executives rotate in and out of the department every three years. • Only in megaproject, most employees regard being involved in new product development as prestigious and an opportunity to shine.

12. Fostering Both Centralized andDecentralized Innovation • At the same time, SIA uses its distributed innovation approach for efficiency. The company fosters the idea that employees—especially those in customer-facing functions such as in-flight services, ground services, and loyalty marketing—must innovate if SIA is to stay ahead. • Every function is responsible for improving its services, and department heads must implement new ideas out of their budgets. • Not only the cost-effective, but the process insures that innovations are developed in accordance with operational realities, making it easy to implement them. • Tensions sometimes erupt between central and local innovation, but SIA encourages both because they complement each other. • Distributed innovation helps sustain service excellence, which requires that every part of a customer be outstanding. • SIA doesnt try to overwhelmingly best in class on every count. It focuses on incremental innovation in most areas because the overall experience matters most. This approach enables the airline to make a profit, without pricing itself out of the market.

13. Being Both a Technology Leader and Follower • Engages in only small improvements in function that don’t touch the customer • Technology leader for differentiation related to customer, follower in the back office contribution to cost leadership • Stop the use of technology that cause problems or that customer don’t like • Outsource IT function (data centre)

14. Using Standardization forPersonalization • Highly standardized lead ; • To Predictability • Safety • Lower Cost • SIA combines standardization with personalization to delight customers.

15. Using Standardization forPersonalization The Airline Institutionalizes personalization by creating a service culture, sustain through ; • Recruitment • Training • Rewards • It Instills in employees a certain pride in working for the company and they come to identify with its reputation. • SIA’s crew members and manager alike say that service is in their blood.

16. Using Standardization forPersonalization SIA personalizes the customer experience by ; • Relaying information about birthday • Preferences from its CRM system • Detect frequent flyers by name and favourite drinks and magazines • Transforming customer service teach cabin crew how to anticipate customer need and enhance employees ability to delight customers.

17. Using Standardization forPersonalization SIA’s service processes, like those of most other airlines, are highly standardized. Thats central to high-volume service operations, because it leads to predictability, safety, and lower costs. It also leads to customer satisfaction, but it cant deliver a “wow” experience, partly because once customers have experienced something, they tent to discount its value. That’s why SIA combines standardization with personalization to delight customers.

18. Using Standardization forPersonalization The airline institutionalizes personalization by creating service culture that, as mentioned before, it sustains through recruitment, training, and rewards. It instills in employees a certain pride in working for the company, and they come to identify its reputation. SIA’s crew members and managers alike say that service is in their blood.

19. Using Standardization forPersonalization Keys of “standardization that enable personalization”: • Simple processes • Trains people well • Followed by procedures Example: Instead of “say assalaamualaikum”, use “give greetings warmly”

20. The How-to of Dual Strategies • Harness the power of your people and culture • Make good use of technology • Utilize the power of business ecosystems • Make investment decisions strategically

21. Executing Dual strategies is difficult – that’s what make the approaches so valuable. By being different in ways that customers like, companies that do so rise from the pits of commoditization and make profits even in highly competitive industries