Exploring Innovation for Ryanair Airline - Case Study Example

 INNOVATIVE ORGANISATIONS: Ryanair Contents Executive Summary Introduction……………………………………………………………………… 4 The case of Ryanair……………………………………………………………… 4 Exploring innovation further…………………………………………………….. 6 The most innovative of Ryanair…………………………………………………. 7 Discussion of contribution……………………………………………………….. 8 Conclusion and recommendations………………………………………………… 10 Bibliography Executive Summary Ryanair is one of Europe’s leading low-cost, no-frills airline companies serving a wide variety of European consumers. The business is currently experiencing a 20 percent increase in net revenues in just the past year, which speaks to the firm’s ability to create high competitive edge and excess value for the company. Several of the airline carrier’s innovations include the development of an in-flight mobile phone service and the technologies to support this innovation as well as the removal of in-airport check-in services to remove excessive customer wait times and reduce costs. By virtually every measure, Ryanair has managed to develop positive leadership innovation, process innovation and product/service innovation by creating new business models and business structures designed to bring long-term value to the business. This report identifies Ryanair’s strategies in innovation, an assessment of these innovations, and also a description of how the author of this report could contribute effectively to the long-term future of Ryanair. Introduction Innovation is key to any successful enterprise. There are a wide variety of acceptable definitions of innovation, one of which is the successful creation and launch of a new product or service concept which provides significant competitive advantage to today’s firms. Competitive advantage means utilising this new innovative idea or concept and applying it using a market-focused methodology which outperforms competing companies and gains market share in the process. This report highlights the activities of Ryanair, the low-frills, discount airline company, which provide innovation in the airline industry and a stronger business portfolio. The case of Ryanair Ryanair was established in the 1990s as one of the first no-frills discount airline companies in Europe. The company, with this discount philosophy, has managed to increase its market share against major competitors such as Lufthansa and Air France-KLM (Done, 2009), which is not an easy task to accomplish considering how long these airline companies have been a staple airline carriers in Europe. When the company was first implemented, there did not seem to be a heavy consumer demand for no-frills services, or perhaps the company simply lacked marketing focus, as the business was riddled with heavy losses and an inability to seize a higher volume of market share than that of its competition (Done). However, today, Ryanair has managed to redevelop its previous business model, making it more adaptive to consumer needs, which is bringing the business significant financial prosperity even in the face of rising fuel costs and other uncontrollable external business risks. Despite this massive growth in market share against major competition, Ryanair’s innovations are not only in its ability to provide lower fares to customers by removing in-flight amenities, Ryanair is managing to put an end to the in-airport check-in process, eliminating the typical lines associated with most airport check-in processes (Done, 2009; Niththyananthan, 2009). Ryanair is utilising the removal of the airport check-in both as a means to sustain higher competitive advantage over its largest, higher-ticket competition and also as a means to reduce costs, as part of financial strategy. While other airline companies are having a difficult time ensuring a high profit margin due to the high cost of commodities (jet fuel), Ryanair continues to provide low-cost air travel by removing excess staff and streamlining check-in so that customers can be drawn toward the ease and convenience which Ryanair manages to provide as part of their innovative business model. Clearly, fuel prices, if they continue to rise, will be one of the main challenges to Ryanair in the future, but to the firm’s credit, executive leadership seems to be able to quickly redesign existing business structure to cut costs in other areas. This is evidence of innovation of leadership, which is described as being “able to cope with change” (University of Derby, 2009). From virtually all angles, Ryanair seems well-positioned to ensure that innovation, whether through leadership or through strategic actions, will continue to bring the company its fair portion of market share amongst competitors who are unable to restructure the business and change with consumer demands. All of these assessments are supported by the company’s CEO who identifies that total business net profit was up 20 percent from 2007 (Ryanair, 2008). This is at a time when competing airline companies profits are largely down. Exploring innovation further Innovation is further defined as “the process by which an entire organisation creates new inventions and converts them into novel and useful products or services” (University of Derby, 2009). The key phrase in this definition is entire organisation, which suggests that a business must act as a system of different divisions who, through collaborative work projects or creative brainstorming, create significant value for a business and help to launch a new product or service to strengthen the business long-term. Johne (1999) offers that product innovation is the most significant method, and most obvious, for ensuring higher financial profitability. The author also identifies how an organisation works as a system under process innovation which improves total business quality, performance, and financial cost-savings. With these definitions of innovation in mind, Ryanair definitely maintains all of these characteristics as they have a well-structured business hierarchy of leadership and are able to change process in the face of potential drops in consumer revenues. The company’s removal of the check-in stations at airports does not only force travellers to book online, but it also removes the inconvenience of airport delays when traffic volumes are high (the wait in line). Since process innovation improves total cost-savings, Ryanair’s flexible and adaptable business model which looks constantly to remove costs and delight customers points strongly to the firm’s high process innovation. This is supported by the firm’s aforementioned ability to outperform large-scale, high-ticked competition. Even above and beyond Ryanair’s removal of check-in stations at airports, the company is also launching the ability to use in-flight mobile phone services. This service will be incorporated into all 170 of the company’s airplanes (telecompaper.com, 2009). What this suggests is that Ryanair is making use of tools to look for methods to offer better technologies to customers, which other competing firms are not using, and make the investment into technological innovation to build higher customer demand. Additionally, the CEO stated that they would monitor its success ratio and will even scrap the project if consumers do not find value in it (telecompaper.com). This again shows that the business leadership is quite aware of what drives consumers to want to frequent Ryanair as their travel carrier of choice and will spend money appropriately or restructure business operations to satisfy these demands. This is innovation of leadership. The most innovative of Ryanair The removal of the in-airport check-in stations is clearly the most innovative service innovation in today’s highly-competitive airline industry. This is also classified as a process innovation as it changes the internal operations of the business and realigns staff to different functions in order to make strategic innovations a reality. This at-home check in business model is the company’s most innovative product because the company recognises the importance of satisfying financial expectations, in terms of profit and in spending, which creates value for both the business and customers. This also points toward leadership innovation because Ryanair seems to be able to draw on the talents of its staff to make sure that strategic goals are met. If Ryanair did not have a flexible business structure and flexible business leaders, they would likely not be able to change and adjust business tactics so quickly to continuously outperform, financially, other competition. One drawback to this check-in removal innovation is in its expected service life cycle. If other competition recognises that Ryanair has found significant increases in customer volume because of this removal, other airline carriers will likely adopt this same business model. This innovation will likely maintain a life cycle of approximately two years at maximum. This takes into consideration the likelihood of other airline carriers being able to create a new staff alignment (organisational hierarchy) quickly enough to establish an at-home check-in service ready to compete with Ryanair’s business model. However, since Ryanair has been able to make a wide variety of innovations in its business model since the 1990’s, it is likely that the strengths of process innovation and leadership innovation which exists at Ryanair will allow for new invention to outperform large competitors. Ryanair’s check-in removal has helped the organisation to compete as it removes the stigmas often associated with many airport processes by eliminating wait in this process. It also makes use of relatively low-cost Internet services, rather than expensive payroll obligations associated with excess staff members, to give customers a more interactive experience with Ryanair. These changes are giving Ryanair the ability to continue to offer low-cost, highly-competitive travel fares when other companies are being inundated with rising fuel costs and other uncontrollable global financial issues. Discussion of contribution Ryanair has clearly illustrated the ability to remain flexible and adaptable in a variety of external business situations and has established process innovation, leadership innovation, and service innovation all at the same time. This suggests a strong organisational culture who is ready to work together to make strategic goals a reality and a strong recognition of what drives consumer behaviour. My personal contribution to Ryanair would come largely in the form of leadership and process innovation by being able to use various motivational theories to build a stronger business task force. I recognise the importance of cost-savings in a business and also how very important it is to satisfy customers who provide the largest portion of business revenues. When a new concept, such as the check-in service removal, manages to accomplish multiple business goals, my best contribution would be to scan the external business environment and create new concepts which can be proactively developed for launch in the event of competition developing similar services. This would be part of leadership innovation by identifying potential risks to profitability and then presenting new ideas to build a new team-based effort to always have contingency innovations ready to launch at short notice. This would build a stronger organisational unit and likely improve relationships between different levels of staff at the same time. Because innovation is not just a singular product, my contribution could come in multiple levels to make sure that innovation is on the forefront of the staff consciousness at Ryanair. My contribution could also come in technical form as part of technological innovation by being active in different project teams when implementing new innovations such as the aforementioned in-flight mobile phone service. Though I may not always have the technical skills to provide superior contribution to all technological projects designed to build competitive advantage, I can provide the leadership innovation of sharing knowledge across the organisation by creating motivation in others to excel in learning and understanding of multiple business functions. For example, I might volunteer to oversee Ryanair’s development of the software designed to support the new mobile service innovation and offer suggestions regarding how consumers might perceive specific options built into the software programmes. This would give me the role of software mentor by helping to design a customer-friendly, functional mobile phone or software system. Conclusion and recommendations Even though Ryanair is finding success in its internal and external innovations, the business should focus on strengthening its brand by putting heavier promotion on its service innovations. This would suggest taking a more marketing-focused approach to getting consumer demand levels raised. It is further recommended that Ryanair consistently look for methods to build a more novel airline company while assessing opportunities to remove business risks and develop contingency invention/innovation in the event of failure to current business strategies. There is clearly the expertise and flexibility necessary to build an innovative powerhouse in the airline industry already in existence at Ryanair and these strengths will carry the business well into the future in terms of profit and higher consumer volume. Bibliography Done, Kevin. (2009). “Runway success – Ryanair”. FT.com, London. 20 Mar. Done, Kevin. (2009). “Ryanair to abolish check-in desks”. FT.com, London. 24 Feb. Johne, Axel. (1999). “Successful market innovation”. European Journal of Innovation Management, Bradford. 2(1), p.6. Niththyananthan, Kaveri. (2009). “Ryanair will drop routes, eliminate airport check-in”. Wall Street Journal, NewYork, NY. 25 Feb, p.D.3. Robertson-Begg, John. (2009). “Innovation and Civil Engineering an Introduction”. Powerpoint Lecture. Robertson-Begg, John. (2009). “People in organisations”. Powerpoint Lecture. Ryanair. (2008). “Annual Report”. http://www.ryanair.com/site/about/invest/docs/2008/Annual%20report%202008%20web.pdf (accessed 13 Apr 2009). Telecompaper.com. (2009). “Ryanair enables in-flight mobile phone service”. http://www.telecompaper.com/news/article.aspx?cid=659356. (accessed 14 Apr 2009). Read More