Narrator
Welcome to the Velocity Podcast by management consulting firm Oliver Wyman. Join Jeff Leavitt, Konstantinos Varsos, and Robert Mather from IFS for this episode where they discuss the current system challenges for airlines and the value in modernizing MRO IT.
Jeff Leavitt
Hi everyone. This is Jeff Leavitt. I'm currently sitting in Dallas at MRO Americas, and I've been joined by Konstantinos Varsos, who's a partner in our transportation practice and our special guest, Rob Mather, who's a VP of aerospace and defense industries at IFS. He brings us 15 years of experience within the technology industry, who is going to talk today about the emerging technology trends within maintenance and engineering, and also the pre- and post-implementation best practices. Hello, Rob.
Rob Mather
Hi, thanks for having me.
Jeff
Of course. Thanks for being here. Obviously, the past couple of years have been quite challenging for the industry. How has this impacted your business and the airlines that were in the midst of modernizing their legacy systems.
Rob
It's pretty interesting, actually. So, for the most part, our customers that were in the midst of doing modernizations continued. Some of the project activities slowed down a little bit, but there was a view to the value that they were getting out of the system, so it seemed to be a priority to maintain even through other cost-cutting measures. But more broadly across the industry, we saw some interesting trends that sort of shifted over the couple of years. In the beginning with the inclusion of support programs from different governments and the lack of necessarily the need for immediate cost cutting, despite the plummeting of the international travel volumes, we saw a lot of traffic. Organizations were looking at how they could modernize, how they could become more efficient, how they could reduce costs. And one of the things that they were looking at was MRO IT modernization. That meant that we were busy responding to requests for proposals and doing demonstrations of the software in the beginning of the pandemic, but then as it started to draw on, a lot of those activities started to slow down or stall out. New engagements were not super plentiful in terms of actually being realized, but there continued to be a lot of RFPs going out. A lot of organizations were doing their groundwork, I think because they were being faced with the need to adjust their processes in the wake of what they were facing. So now, as we're sort of starting to emerge, a lot of that groundwork is actually starting to materialize in terms of genuine programs.
Jeff
What else do you think is driving the change to actually bring these modernization programs back?
Rob
There are a couple things. Obviously, there's still a lot of cost pressure on the airlines. We're not at full volume yet. It's going to be a year or more, multiple years, until the full international travel levels, the wide-body market, is expected to come back to 2019 levels. It becomes a lot about efficiencies and cost cutting measures in that kind of vein, but you got to bear in mind that even in 2019, the market was facing real challenges around labor shortages and workforce renewal with an aging workforce. And that's just been exacerbated, the buyouts, the furloughs, in some cases, layoffs, but predominantly, really early retirements have really impacted the workforce. So now, as we are ramping up, you've got a whole bunch of airlines that are trying to bring back their aircraft online to start flying more, to increase their operations, but they don't have the same level of staff they did before. So, that's driving that need for efficiency even more than it was before.
Konstantinos Varsos
Rob, what kind functionalities are they asking for?
Rob
That's actually interesting as well, because there are two big groups of how I would categorize the technologies that are being asked for right now. The first group is technologies that have been around for a while but have only really had uptake from sort of the market leaders or the organizations that are forward thinking in terms of technology but didn't get as wide of an acceptance in the broader marketplace as we might have hoped for. And now that's changing, because those organizations have sort of hit a critical point, which is soft of a tipping point in terms of, now they're looking for those technologies that were a little bit slowed for uptake before. Stuff like mobility, paperless, e-signatures, and even e-logbook, those have started to be included more in terms of the requirements that the broad base of customers are looking for. And then on the other hand, you've got the group of more advanced technologies that those forward-thinkers that we were talking about before, are looking at now. Some of that might be augmented reality or utilizing things like drones for inspection, stuff like that.
Jeff
Do you see AR having a meaningful impact on the industry or is this going to be isolated to how we train or very specific use cases?
Rob
The sort of easy use case so far has been training. One of the things that changed during the pandemic was the FAA permitted remote inspections in certain cases. What that allows organizations to do is have support to their frontline technicians in a different location. You can consolidate expertise. You don't necessarily have to have every kind of tier of support local at any particular base.
Jeff
You could call the maintenance controller, and they could have the AR headset on and walk through it with them?
Rob
Exactly. And so, we see that as the more meaningful use case now, because it can transform how you position your resources and what kind of support you're able to have. And bringing it back to that idea of the workforce renewal, where organizations have lost a ton of expertise, you now can have experts, like a certain number of experts in a particular area, or office, or base, or whatever you want, and they can potentially support multiple locations. Many different technicians that don't necessarily have that expertise at this point.
Konstantinos
How about some, you know, since we have you here, let me ask a couple of other technologies. How about blockchain, where do we stand with that?
Rob
Blockchain has a lot of potential. There are a lot of programs getting going, looking at blockchain, particularly around sort of maintaining a ledger of back to birth component records. That seems to be sort of the easy first use case that's being tackled in terms of blockchain. I think that in the end, blockchain is going to have a lot of value. I don't know how long it's going to take to materialize that value right now. And there's a few things working against it. Obviously, I come from a company that produces software to record maintenance and have all of your compliance information in the system and make sure that your data is accurate, but the blockchain is sort of guaranteeing, I don't know if I'm going to put this the right way. They're guaranteeing that the records that you have are the records, but they're not guaranteeing that the records were correct in the first place. The whole veracity of the blockchain is dependent on the inputs that you get in as the records in the first place. And if you don't have enough uptake broadly across the organization, sorry, across the industry, rather, you're going to be challenged, because there's going to be holes in the data. And if you have inconsistent quality of data being entered, then it sort of undermines what you can trust from the blockchain. You've got to get to a particular level of guaranteed quality before you can really trust it.
Konstantinos
Interesting. And we have heard a lot this past two years about predictive maintenance, right, where do we stand with that?
Rob
Predictive maintenance, that's another good one. For a long time, predictive maintenance was sort of looked at like the panacea for airlines in terms of reducing delays due to maintenance, like shifting everything to scheduled maintenance instead of unscheduled maintenance. And I still think there's a lot of potential there, but it's been slow to be realized. We talked about market leading organizations versus more slow to adopt organizations, previously. And some of those market leading or forward thinking in terms of technology organizations, already have built their own separate predictive maintenance mechanisms. There have been programs that have been proposed by OEMs or consortiums or individual technology players in the space, that have been slow to realize their potential. And part of that has to do, I think, with warranties and the OEMs themselves having to sort of play ball in it. Because I think I might have read one of your articles talking about the fact that predictive maintenance is basically a no fault found engine, but you got to get the whole ecosystem on board in order to achieve this shift. And if we can do that, then there's still a lot of potential. But I think that potential is going to be realized through the application of AI and in specifically machine learning, to be able to go through that. And it only really works, in my mind at least, when you've got connected sensor feeds from the aircraft. So, the advanced aircraft we've got now, have tons and tons and tons of sensor inputs, loads of data coming off every flight. And we can take advantage of that to do instead of just aggregated trend monitoring, do serial number specific predictive maintenance. And I think that's where the real power is going to come from.
Jeff
Yeah, I think that's right. I mean, if we just even think about power plant and even some of the new airframes, a lot of the AHM or even engine health monitoring is all in theory, supposed to be the AI and ML predictive maintenance, but we'll see what plays out. I wanted to switch a little bit and go back to the idea of modernization. When airlines are actually in the midst of modernizing, what do you see as some of the large hurdles to the implementation itself?
Rob
We asked our customers this question recently, and the overwhelming response that we had on that was selection of the delivery team, was the number one predictor of success. That breaks down into two different sides. First of all, is your internal project team, so your SMEs, your champions, everybody like that. But it also includes partners, because you need organizations that are going to support your leadership and enable the organizational change that is going to be required to take advantage of an MRO IT system. I'll come back to that in a second. But going back to the internal team, it's really hard to take your star resources off the floor. Those are the people that if you're a manager and you're being asked to give somebody to a project, you're not giving them your best person, because then your own KPIs are going to suffer, right? Like, "Oh, I can't give Joe or Tina because they're my best mechanics and our metrics are going to drop if I ship them off into this project for a year more." But the reality is that you're going to put your star resources on the project if you're going to succeed. And if you don't do it in the beginning, you're just going to have delays and then you're going to do it later, because they're the ones that are going to design the future of your enterprise. They're the ones whose input is going shape your processes going forward. If you're not putting your stars on that, you're going to get…
Jeff
Pay for it later.
Rob
Exactly.
Konstantinos
What about how you realize the actual value of the business case?
Rob
That's a really good point, because I was going to mention that the next most important thing and the most important thing that we say from a consulting perspective is around making sure that you have a good business case to begin with. And also, in the context of that business case, the measurements by which you're going to define and measure success and make sure that you have a view to achieving the value that you originally put forth in the business case. Because with any given project, there's going to be pressures on it to cut scope, either because of cost or time considerations. And what happens a lot in projects is the things that get cut are the things that are hard to do or the things that are not necessarily sort of core to the basic implementation, right? But those might have been the things that for your organization, we're going to unlock the value of the IT modernization in the first place. If you cut something complicated because it's hard to do in the timeframe that you've had already, then you've undermined your own business case. You have to keep that in mind all the way through the project, always keeping a view on what the value it is that you're trying to achieve. That brings me to something else, which is the idea of you're not done at go live. Of course, everybody's got to cut scope at some point in order to ensure the success of the project, but if you're really trying to get that value achieved, you've got to look at, okay, I cut this before, but when am I going to implement it? A lot of times you just get to go live with whatever scope you decided to forgo live, you've implemented the software and then organizations are like, “Okay, we're done. Everybody, go back to your day jobs and we can forget about this." But they're leaving that piece of value that could have huge impact on the business, just out there in the ether. Nobody's looking at it at that point. You've got to keep a view on, what are the things I cut? How am I going to implement them going forward? What are the next phases of my project that I'm going to achieve? And you've built up a ton of expertise in your project teams at that point. You've got to figure, how am I going to maintain that expertise to be able to achieve this stuff? Or am I going to have a transition plan to build up new resources, to be able to take over from my SMEs and my champions? Those stars that we talked about before. In order to make sure that at the end of the day, you're actually realizing the potential of the system and have executed sort of the change in your business in order to make sure that you're actually leveraging everything you can out of the system.
Konstantinos
What are those success factors for the adoption like after go live?
Rob
One of the major ones, and again, this we asked our customers about lessons learned and the number one lesson learned was to have spent more time and effort on change management. Some of our most successful customers have had change management teams involved even before they selected their system in the first place. All the way through the project, they're thinking about change management and what it's going to mean to the organization, what they need in order to get adoption, because nothing's going to block you from achieving value out of your system, faster than resistance to change. Having a good plan, bringing people into the fold, letting them take ownership of it, making sure that they understand why the organization is trying to do this, what they're hoping to achieve, the benefits of it, is important in order to be able to realize the potential of your project and your system that you're implementing.
Jeff
We've seen many airlines, especially on the mobility side, struggle to drive the adoption. Once you cut over in theory in the modernized system, what should airlines or MROs be doing day to day to make sure that they're continuing to drive adoption and it's not just during the project life cycle?
Rob
Okay. This is a little bit off the board, but personally I'm a big stickler for the right KPIs. When you set KPIs for people, you are influencing their behavior. And if you're measuring the wrong thing, you're going to achieve the wrong behavior. If what you're doing is you're saying, How fast am I completing my task on my tablet? Right? If that's the measurement that you're being measured for, then the technician is just going to hit the buttons that they absolutely need to. And then it becomes a downstream problem because they don't understand the implications of that to tech records and what's going to happen. And we talked about paperless, the next level in the context of paperless is real-time compliance, right? If you're doing electronic acquittal, you don't release the aircraft until all of the records are in and done and dusted. And if that's the case and you’re not, as the technician, you're not being encouraged to everything properly there in terms of the data entry because, “Oh, it's just data entry and they'll catch it on the back end." You are in a serious situation because it's not reflecting the organizational change you've had to get real-time compliance and electronic release of the aircraft. Like I said before, your teams know why they're doing things, know the importance of it, understand the implications to other people in the organization, because they don't necessarily know that, “Oh, it would've taken me 30 seconds, but me not taking the 30 second task, it's actually 10 minutes for those people downstream, or an hour for those people downstream to backtrack and figure out what the heck I did in the first place." If they understand the implications, usually human nature is, "Oh, I'm not going to mess them up. I don't want to be that guy." But also reinforcing how you're measuring that person in their day-to-day job. Is it just about speed or is it about speed and accuracy or what is it that you're trying to measure to influence the behavior? And we talked about that from the KPIs in terms of the business case, but setting your KPIs properly across your organization is important in all cases, in all things, right?
Konstantinos
How about leadership as a driver?
Rob
Yeah. Leadership, for sure, is absolutely key in a couple ways. So, when you're talking about the implementation project itself, then it's important in part to speed up decision- making. So, one of the things that really affects the timeline of a project, and the success of a project is the speed with which decisions are made. So, if you're humming and hawing over every little detail, a), you don't empower your team and, b), you're slow as a leader to agree to decisions or set up a system where things are agreed to quickly, then that will delay your project. It's also important from the leadership's perspective to reinforce that idea of value. Making sure that essentially your team is keeping the eye on the prize at all times. It's easy for an SME that works in their specific world to lose perspective on sort of the bigger activity that they're trying to achieve and say, "Oh, I've got this customized process today. I want to achieve exactly the same thing going forward." Not knowing what the implications of that is to the rest of the organization or how that's going to impact the cost-to-value of the whole project. All that comes from leadership. And then we talked about post-go-live adoption and the KPIs, leadership becomes imperative there because you need to have your leaders reinforce the right behaviors inside of their organization.
Jeff
Manage the KPIs and make sure they're actually at building momentum behind the system.
Rob
Exactly. And if your leader or your mid-level manager doesn't support what's going on in the project, then you're not going to as the person, the end user at the front of activities, right? And that mid-tier manager isn't going to support it unless their boss is supporting it, who's not going to support it unless their boss is supporting it. It all comes from the top in terms of making sure that people believe that leadership is behind this program and supports these changes for it to become effective.
Jeff
And obviously not just during the project life cycle, right? This needs to continue for years after.
Rob
Exactly. Yeah. And then in particular like bringing that back to that idea of continuous improvement that, "Yeah, we've had this massive change, but we're also trying to continue down this road of even getting more benefits to our organization out of this, so there's going to be some additional change as we go." And staying behind that.
Jeff
I know we've talked a lot about the new and emerging and fancy technology, but you did mention earlier, there's a category of technology that's existed for a while, but is just now gaining traction. I'd like to go back and understand what you meant there.
Rob
Yeah. There are lots of things. A good case in point there is paperless maintenance and electronic signatures. Electronic signatures have been around for a long time, we've had solutions there for over 20 years, but they've been slow to be adopted by the majority of airlines that have still utilized paper processes to this point. There are a couple of drivers, I think that are creating a shift there, so that now we're seeing that in more and more lists of requirements from prospects. One is, there's a sustainability angle around it and a cost measure because it costs money to maintain paper records and you're consuming a ton of paper in order to do that unnecessarily, potentially. But the other part is a mind shift and part of it is the context that we talked about in terms of pandemic effects around workforce renewal. We were already facing this challenge in 2019 of the aging workforce, but that's been really exacerbated through the pandemic, through the early retirement programs in particular, you've lost a lot of brain power there in your organization. You want to embed more information inside of the system. That's part one. Part two is, the people that you're replacing them with tend to be younger. Part of the mind shift is anybody through this pandemic, like I don't know if you're like me, but I've had to sign a bunch of contracts online, using digital signatures, in my day-to-day life, which is different than before the pandemic, right? So, broadly across all the demographics, people have now seen that you can do these things electronically as part of their normal life.
Jeff
Getting much more familiar with it.
Rob
Exactly. It would've been foreign before and now it's just part of day-to-day life. That's some of the decision-makers have now been exposed to electronic signatures in day-to-day life. But the other factor is, you've got younger technicians coming in that are used to doing everything on their smartphones, right? The other flip side of e-signatures and paperless maintenance is really mobility. We've been pushing mobility for years, but paper processes were maintained, but now that you've got these new, younger technicians coming in, new, younger technicians are forming a bigger part of your workforce. They're used to doing everything on their smartphones, right? They'll come in and say, "Hey, I can do everything else on my smartphone. Why can't I do maintenance on a mobile device? Why do you have to have me scribble down on paper? I don't even know how to do cursive. What are you talking about?" So, that has been like an organizational mind shift that has allowed people to think that "Oh, maybe this is actually possible and it's going to provide me value."
Konstantinos
What new and exciting is coming up in the industry?
Rob
Oh, from my perspective, I'm excited about the advanced air vehicles, like the e-VTOLs and air taxis, the electrification of aircraft, all of the different sustainability angles. That's what we see really revolutionizing the whole industry down the road. Over the last couple of days, we talked a lot about, or I heard a lot about sustainable air aviation fuel, and that's one angle, but it's only getting you so far. And the electrification of aviation is something that I'm personally really, really excited about. If you look at the air taxis, that's going to revolutionize micro travel inside of urban centers and all kinds of stuff, which doesn't really impact airlines, it's sort of changing the whole aspect of aviation, extending the market in terms of where it can be used. But the part that really affects airlines is electrification and hybrid aircraft in the sort of short and regional distances. It's probably going to be a long adoption, but that has the potential to really revolutionize that short and medium tier in the not too distant future. It's going to take a longer time to get to long-haul and transoceanic flight, but the potential there is going to be revolutionary.
Jeff
The day that I can fly over traffic is a good day. You know, Rob, we've talked a lot about adoption, but as we think about maintaining a good and healthy system, what are some of the things that airlines should be doing after cut over, to make sure they maintain their upgrade cycle, maintain adoption, so on and so forth?
Rob
Well, I think you hit on it there with the upgrade cycle. Historically, a lot of airlines have taken systems and then have customized the heck out of it. And then they've been orphaned on that, because it's been cost prohibitive to upgrade at that point. So, then you're not taking advantage of improvements in your system or new and emerging technologies that get included in the system through upgrade. We're trying to get our customers to move towards an evergreen attitude towards it, and we've done that for the most part, all of our customers are on for our maintenance solution are on the most recent family, the most recent major and minor releases. They might be a couple service packs behind, but they're right there. And that's hard to do, right? Because particularly in this industry, there's a lot of view towards customization and trying to make the system sort of conform to your existing processes instead of changing your processes to take the most advantage of what the system is capable of. The least amount of customization that you can do, means that it's much, much easier to take those upgrades as they come and make those upgrades actually easier every single time and cheaper, to be quite honest. And then in the long run, that pays huge dividends because you're able to take advantage of all of those improvements, all of those new technologies that come out every time that a new release goes out.
Jeff
Fantastic. Well, this has been a very, very interesting discussion and I want to thank you both for your time, chatting with us today.
Rob
Well, thank you guys for having me. It's been great.
Konstantinos
Thank you for joining us.
You've been listening to the Velocity Podcast by Oliver Wyman. You can find more podcasts in this series at Oliverwyman.com. Thank you for listening.
This transcript has been edited for clarity.
