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Archive for April, 2011

The Age of Yield Management

22 Apr

Yield Management (or Revenue Management) is what happens when we are about to book a flight or a hotel room.

Yield Management

Nearly all of larger airlines or hotel chains use such a (computer based) system for their price policy and the main rule is easy: Demand determines price. Once an airplane takes off, a lot of costs have to be paid by the airline (airport fees, gas, crew etc.). The overhead is huge. That is why it needs an intelligent price policy to sell as many seats as possible. After all, cost for the airline are the same regardless of the number of empty seats. However, a yield management system has a huge impact on the success of an airline (or a hotel chain). And here is how it works:

 

An airline has an airplane with 350 seats that goes from New York to Frankfurt in twelve months from now (April). As a huge fan of my favourite band, Joe just read an article of the world tour next year and the concert in April 2012 in Frankfurt – as a huge fan, he HAS to be there and will immediately book his flight. From the view of the airline, Joe is probable among the first passengers in that airplane. In addition to that, there are no ‘seasonal price impact’ predictions for New York or Frankfurt in April 2012. Ergo: Joe is happy because he spent a ridiculously low price on his ticket.

In November, it occurs that Dominiks responsibilities in his company increase – and so does his salary. He surprises his family with an announcement of vacations in Germany during April 2012 and immediately starts searching for flights and accomodiation. The flight tickets are still at a good price but nowhere near as cheap as Joe’s ticket. The yield management system has realized that seats are more and more filling up and increased the ticket price.

In February, Marcus celebrates the entry of his favorite soccer club ‘Eintracht Frankfurt’ into the European soccer competition ‘UEFA Champions League’ (granted, but a little far-fetched). As he is a huge fan and always wanted to travel to Frankfurt, he is immetiately checking airfares from New York to Frankfurt. Since the amount of available seats has decreased significantly since Dominik’s booking back in November, Marcus is confronted with very expensive prices. After some hours of price comparison on the internet and some ‘inner negotiation’, he finally books his flight to Frankfurt.

March 2012 – almost all seats are taken and prices increased to ridiculously hights. ‘Nobody would book a flight at this price’, Chris says to his girlfriend. Both study at the University of New York and want to travel to Germany – but if the fares stay that expensive, they could not afford the price.

In April – two weeks prior to takeoff – US business man Kevin gets to know this new company producing interesting stuff in Frankfurt, Germany. After some research, he found out that his former classmate Juergen works for this company. Juergen invites Kevin to take a facility tour and afterwards they want to talk business. Since this is a huge opportunity for Kevin and his company, he accepts the invitation and his secretary starts looking for flights. She books a flight for Kevin at the ridiculously high price that Chris commented with the words: ‘Nobody would book a flight at that price’. Apparently, there is…

Finally, two days prior to takeoff, the yield management system realizes that there are two separate seats left in economy class and lowers the price. Since Chris did not want to give up on the trip to Germany with his girlfriend, he kept checking prices every day – and every night – and now, two days prior to takeoff, he got the tickets at a barely affordable price. ‘I’m a lucky man’, he thinks.

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Mac Book vs. The Rest

21 Apr

Everytime someone considers to buy a new laptop nowadays, one of the most important questions during the process of selection is:

Mac or PC ?

Here’s a small hint in form of a direct comparison between a 17″ Mac Book Pro from the Apple Store (starting at $2,500) and a 17.3″ ASUS Notebook from another store ($1,849):

Table - Mac vs ASUS

For those of you who want to compare for themselves – here are the links to the reviewed products:

Mac Book: Apple Online Store

ASUS: NewEgg Consumer Electronics Online Store

Of course, we forgot about a couple of things for a direct comparison. For instance, take the awesome design that comes with all the Apple products – it is still breathtaking. Others would argue that the Mac OSX is worth the price difference of $650. After all, Mac Books are by far not an easy prey for Viruses, Trojans and other Malware while the common Windows user spends at least an annual $50 on internet security software.

Others again might argue that product warranty is an important factor – in fact, the components in these laptops are highly sensitive electronic devices and could easily break. And Apple provides only one year of warranty on all of its products whereas you can get a two-year warranty from a lot other manufacturers for consumer electronics.

It is really a question of purpose, which model and equipment to take. Unfortunately a little more demanding than the simple question “Function or Fashion?”

 
 

Is our language getting lost ?

16 Apr

Sup man, how u been ? Ima miss ya when you’re gone.

What? You did not get this?? Well this is how communication works today – and that was just an easy one. Here’s the ‘translation’ to the language that you are probably more familiar with if you are 29 and up:

What’s up man, how have you been doing ? I will miss you once you will be gone.

Don’t get me wrong – I am German and maybe I should not criticize the development of English language in the US. But this is – by no means – an issue only the US has to deal with. It has become a growing concern in many other countries as well – including Germany. One reason truly is our ways of communication. For some of us it might be hard to believe but there actually was a time where people wrote letters to each other to communicate. Once the letter was written, it was taken to the receiver by the next post coach. As an example, a delivery from Berlin to Frankfurt (~550km, ~340 miles) took approximately one week. Of course, there has been plenty of technological progress since that time. Today, we differentiate between two types of communication channels:

Direct communication channels such as Instant Messaging, a phonecall or face-to-face conversations provide the instant delivery of messages from a sender to a receiver but require a specific attention from all participants (eg. being in the same room or using the same protocol/client).

Some examples for indirect communication channels are letters, eMails or text messages. They do not provide the opportunity of a ‘real’ conversation but allow participants to consider and think about a received message before answering it. That being said, it seems like indirect channels are much more comfortable for both sides while participants of direct channels always feel that certain pressure pushing them to a quick response.

Currently, the most common channels used in businesses are eMail, the phonecall and face-to-face meetings. However, international operating corporations are more and more facing problems with – both internal and external – communication. The eMail has become more important than ever for today’s businesses and we have already discussed the issue of saying things right in an eMail.

So now we are facing the impacts of our fast-pacing life – the 2010 Plantronics study ‘How we work’ speaks for itself:

 

Today’s text messages among younger people look like described above and the question is if this simplification and abbreviation of language is a phase or if it might have an impact of actual language development in our society.

However, in a couple of  years – once the arising Generation Y aka Millennials has taken over the business world – they will also demand for new ways of communication. Another related challenge for this generation will be the fight against the informational overflow. A 2008 article of the New York Times “Struggling to evate the eMail Tsunami” and a 2010 article on GigaOm “Is eMail a curse or a boon?” have been the first forerunners announcing an arising issue.

 

How to say it right ?

14 Apr

Have you ever thought about how to let somebody know that he sucks at his job? Surely, it is an option to say it straight to his face. But imagine that this person is on your team, sitting in an office that is thousands of miles away from yours – not an unusual outcome of globalization. You and this person regularly communicate via eMail and phonecalls – how would you phrase nonproductive work now?

Usually, it begins with appreciation followed by a big fat ‘but’ and some recommendations for further improvement. This is how you learnt to criticize in college. So you have a big text eMail or a long phonecall in which you cushion your criticism. But what if it is not an exceptional case? How often would you try to express your criticism that way until you say: Enough!

The problem is that our usual ways of communication nowadays are limited. Take the phonecall as a first example: Beside the actual speech, the sender usually communicates subtextual content such as body language and personal emotions because he is actually concentrating on the issue the phonecall is about. Now see what happens:

Phonecall Barrier

Phonecall Barrier

All the effort spent by the sender to create message quality is interrupted by the barrier of the phone. The receiver just receives the actual speech. However, a receiver skilled in communication is able to recognize certain subtextual content in the speech sent by the receiver. But the general case is: A lot of important information is lost. This problem is also part of the known studies by German researcher and professor Schulz von Thun who developed the four sides model (aka communication square or four ears model) in the 1970s. He is considered to be the pioneer of communication psychology.

So how to say it right in case you cannot say it right?

Many corporations invest in development of communication skills among their employees. But in my opinion there is clearly a lack of research on this area. Many companies outthere offer training on general eMail writing – but the recommendations are always more or less the same: clear structure, no emotional icons, no typos, appropriate salutation etc.

I could only find a few companies focusing on the actual content and its design. My guess is that it strongly depends on the matter of the eMail. The other day, a colleague told me about his method: He writes up a nice text with all his criticism and deliverables for the receiver cushioned in it. At the end of his eMail, he outlines the core deliverables once again (or the core message of the eMail). This time in a very distinctive way – as a conclusion, he says.

What about an eMail that just says its message straight away? Would it make people feel offended? Could it influence peoples’ motivation? Or would it just be easier (and faster) to process for the receiver? Answers to these questions would require further psychological investigation – my guess here is that it depends on the individuals’ psychology how the actual message comes across.

Ultimately, all the skills about how to say it right are only the first step to successful communication in nowadays business. Another important barrier is the informational overflow that many businesses have to deal with. How are you supposed to read, understand, process and answer a daily average of 30 eMails? But that is a whole new story…

 

Intercultural communication in intl. Joint Ventures and M&As

12 Apr

It’s official: after some days of decision-making I finally chose the topic for my bachelor thesis:

“Challenges of intercultural communication in cases of international Joint Ventures or M&As ”

Take just the field of intercultural communication – an issue the pioneer Geert Hofstede started realizing just in the early 70s. So still a pretty young issue. Soon, others got an idea of new research in this field with Hofstede’s student Fons Trompenaars taking the lead.

According to my opinion, this topic is about something that many international businesses are dealing with – or have been dealing within the last decade. In a world of temporarily isolated applications, where acquisition of possible competitors is becoming more and more an attractive solution to dominate the market, many international operating corporations face The Cold Hard Truth: it’s time for internal globalization. And it is simply ridiculous that there are managers outthere who think that it is enough to repaint the buildings, sending over an IT associate who installs the new software and has the latest issue of the CI-catalogue in his briefcase . An acquisition always requires a subsequent integration of business processes, applications, strategy and other procedures. This is where many corporations fail.

Sometimes they say: Let them run their business as it used to be. Let us not change their core procedures. It might affect their profit – negatively. That might be a short-term solution. But in the long run – especially if products or services are similar – the real merger has to be done – not only to avoid competing with each other.