Every morning, between 6.15 and 6.25 am, I listen to the BBC Today programme’s business slot. In between the froth of share prices and currency rates, there’s usually a story about the real economy and some firm doing well or struggling. I always feel sorry for the interviewer, trying to sum up in a few seconds what is usually a very complex business story. Although I allow myself a “tut” when they over-simplify, it makes me feel lucky really. As an academic working in the area of strategic management, I get more than 10 minutes each morning to think about why some companies succeed or fail. I get to study hundreds of companies and read lots of other people’s research too. So I ought to have a more rounded explanation of why some companies succeed and others fail. And I do, although I’d struggle to fit it into a sound bite.

I should start by saying that sometimes there’s no rational answer. Pharmaceutical giant Roche is flying at the moment due in part to being in the right place (the anti-viral market) at the right time (a swine flu epidemic). BA is taking a pasting due to a collapse in business travel. Neither can really claim much credit or blame for the market. But the area I’m interested in is when success or failure can’t be put down to luck. Why, for example, are the mighty Microsoft and the once-mighty Yahoo struggling to catch Google, who only a few years ago was a minnow? How come Apple has trounced companies like Sony and Nokia? Why has BSkyB thrived whilst ITV appears to be in terminal decline?

Well, the fundamental answer to the question about success and failure is “it depends”. Every business story can be explained from at least two angles. Ask one academic and they’ll explain it in terms of assets like patents and brand names. Ask another and they’ll tell you it’s to do with the intangible culture of the company. Yet another will explain it in terms of strategy. Truth is, each of the perspectives tells part of the story and none of them tell the whole story.

That said, some academic explanations of corporate success or failure seem to be better than others, in the sense that they are better at explaining what we see happening in the real world. For example, One of these strong explanations is called “dynamic capabilities theory”, which was first proposed by Teece in 1997. He defined dynamic capabilities as “the ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environments”. In other words, changing what you’re good at to suit the market. Sounds plausible doesn’t it? But like all good answers it begs another question; in this case, how do some firms come to have such chameleon-like ability?

Recently, Danneels has tried to figure that out. He narrowed it down to five factors:

• The willingness to cannibalize ideas from other people
• Allowing constructive conflict within the company
• Being able to tolerate failure
• Being good at understanding how the market will change
• Having a bit spare time to think and experiment

To me, that list makes a lot of sense. Not only can I see how those habits might allow a firm to adapt its capabilities to the market, I can also see how they point to differences between successful and unsuccessful firms. Just try reversing the list for a second:

• Our business situation is unique and different from other firms
• We’ve got to get everyone’s buy in and build consensus
• We must be held accountable for our actions
• We’ve got to focus on the here and now
• We’ve got to be lean and mean

I would guess that many people would recognise that second list as describing, at least in part, the thinking in their own firm. Uniqueness, consensus, accountability, focus and efficiency are the buzzwords of many executives. Yet if Danneels and Teece are right, they are a pretty good recipe for failure. Those five words, although they sound good, make firms into endangered species, unable to adapt when things change.

So, if I’m ever invited onto the Today programme and forced to come up with a sound bite about how to be spot the difference between successful firms and failures, I think I’d have the answer: Beware of buzzwords and read the research.

Find out more

"Dynamic capabilities and strategic management" by David J Teece, Gary Pisano, and Amy Shuen
In Strategic Management Journal, volume 18

“Organizational Antecedents of Second Order Competencies” by Edwin Danneels

In Strategic Management Journal, volume 29

About the author

Dr Brian D Smith is a Visiting Research Fellow in The Open University’s Marketing and Strategy Research Unit. He is the author of over 100 books and articles and runs PragMedic, a specialist strategy consultancy.

Subscribe to Brian Smith's posts

 

The idea of gait recognition has been around for a long time. In G.K. Chesterton’s short story The Queer Feet, Father Brown prevents a crime by “merely by listening to a few footsteps in a passage.” Gait analysis has been widely deployed in professional sports and medicine, enabling sports stars to improve their golf swing, running stance or cycling position and helping in the design of prosthetic limbs for example.

As a means of identifying someone at a distance, without any need to inconvenience the people being analysed, it would appear to be a useful proposition. It is important to note, however, that identifying someone in a crowded city square and verifying that someone is one of 200 people who have walked down a colourful corridor with clear contrast under carefully controlled laboratory conditions, are two entirely different problems.

Technically speaking, checking the gait of one person, in a psychedelic corridor with perfect lighting conditions, to find a match in a database of 200 recorded gaits, is relatively straightforward.

Detecting individual gaits in a dynamic, crowded city square, under less than ideal lighting conditions and pinpointing a baddie by attempting to match those (potentially) millions of readings against a database of millions of recorded gaits, is a much more difficult problem.

And we haven’t even thought about how we would get accurate measurements of millions of people’s (or indeed the baddie’s) walking styles on our benchmark database in the first place yet. Then if the baddie puts a stone in his shoe to change his walk to deliberately fool the software, as Dallas did with his funny walk on the first programme in the Bang Goes The Theory series, it becomes even more difficult.

From a security perspective, the notion that mass surveillance with advanced technology will magically detect the baddie, turns out to be fundamentally flawed. (It should be noted that mass surveillance is widely and wrongly promoted as an effective anti-terror tool but it is not advocated by the team at Southampton.)

Because terrorists are relatively rare, finding one is a needle in a haystack problem. You don’t make it easier to find the terrorist by throwing more hay (say the biometric data of millions of innocent people) on your data haystack. The technology doesn’t simply home in on the criminal as it does in Hollywood movies.

The police and security services end up spending so much time dealing with innocent people and false leads that their limited resources get swamped.

If each of the UK’s population of around 60 million were monitored once a day and our system was 99% accurate (e.g. flags 1 in a 100 innocents as terrorists and detects 99 out of every 100 terrorists), the police will have to process 600,000 false leads per day.

Given those of us who traverse public places are monitored multiple times a day you can see how that could quickly become unmanageable. It’s also unacceptable from a social, legal and economic point of view.

So it is probable that the use of gait recognition and other biometrics will prove to be more useful for small scale authentication - e.g. employee access to the workplace, rather than large scale surveillance e.g. picking a terrorist out of a crowd.

On small-scale authentication

Technically speaking authentication or verification is an easier thing to do than identification. Authentication (assuming we’re not trying to do it remotely) with biometrics merely asks whether a biometric belongs to the person presenting themselves for authentication. It compares their proffered biometric with the one on file under their name and determines whether there is a match.

Identification is much harder to do and is what security systems at airports or busy shopping areas or sports stadiums attempt to do – measure the biometrics of everyone passing through and attempt to check whether there is a match with a large (and not necessarily particularly reliable) database of biometrics.

The difference appears pedantic but is very important. In the authentication case one biometric is checked against one specific biometric on the database. In the identification case, millions of biometrics are checked against millions (potentially) of biometrics on the database.

Even with highly reliable technologies – say 99.9% accurate and none of the modern systems approach that yet – these millions of checks searching for matching pairs generate huge numbers of false positives (innocents flagged as malcontents) and dangerous levels of false negatives (real bad guys flagged as innocents and it only takes one to get through to cause serious security problems).

The police and security services then spend so much time, energy and resources dealing with innocent people they don’t have the time to deal with the real criminals.

Find out more

Floyd Rudmin, Professor of Social & Community Psychology at the University of Tromsø in Norway, explains why, statistically speaking, mass surveillance cannot work in this article:
The Politics of Paranoia and Intimidation: Why does the NSA engage in mass surveillance of Americans when it's statistically impossible for such spying to detect terrorists?
Counterpunch magazine, May 24, 2006

For those interested in the use of biometrics and security more generally I’d recommend:
Beyond Fear: Thinking Sensibly About Security in an Uncertain World
Bruce Schneier, Springer-Verlag New York Inc

Freedom to Tinker blog - hosted by Princeton's Center for Information Technology Policy.

Jerry Fishenden Blog - New Technology Observations from a UK Perspective.

UK High Court Judge, Hon Sir Jack Beatson explains the legal issues with the use of biometrics in crime detection in Forensic Science and Human Rights: The Challenges [pdf], his valedictory address as President of the British Academy of Forensic Science, 16 June 2009.

Nuffield Council on Bioethics report, The forensic use of bioinformation: ethical issues [pdf], published in September 2007.

Human Genetics Commission Citizens Report, July 2008.

Biometrics: Enabling Guilty Men to Go Free? Further Adventures from the Law of Unintended Consequences - Jerry Fishenden blog post

Digital Decision Making: Back to the Future - chapters five and six
Ray Corrigan, Springer-Verlag

Study information and communications technologies with The Open University

The Chinese symbol for creativity and destruction are linked with good reason, destroying one thing provides space for something new. A recession can provide a time when a large organisation becomes more open to change and willing to remove unnecessary procedures. It is also a time when many entrepreneurs set in place the means by which they make their fortune. For high wage economies such as the UK who find difficult to compete with the likes of China on high-volume low-end products, creativity can be critical in providing added-value. Dyson, for example, moved volume production of his floor cleaners to Malaysia but kept an expanded research and development group in the UK.

Creativity is often associated with 'thinking out of the box' but research shows creative people often spend longer than average deciding which question to devote their time to and which angle is the best to pursue. So allowing staff some time to pursue their hunches is one way to foster creativity.

Managers can make a difference by fostering a culture where staff feel able to challenge existing practice and voice new ideas, as opposed to an organisation where people feel obliged to look busy, watch their back and avoid steeping out of line for fear of being blamed.

An excess of internal procedure can induce a conservatism that makes it hard for creative ideas to be developed or sustained. Creative organisations often provide opportunities for creative endeavour by all their staff.

A suggestion scheme provides a simple way of tapping into the ideas of the workforce, locating substantive savings and possible process and product advances. Most organisations find the creative ideas provided pay for themselves in a very short-timescale - provided management publicise those they have taken up so employees know it is worth their while to participate.

Creativity is often associated with radical ideas provided by a select few, but the majority of products evolve from earlier models (the computers and cell phones of today are unrecognizable from their predecessors of thirty years ago).

Though we often associate a creative idea with an individual, it generally takes a team with different skills to realise its potential and bring it to market. People with different personalities may be better suited to different stages of the creative process.

People with wide interests can be better at coming up with fundamentally new approaches, whereas people who are better at detail and completion are often more drawn to improving existing products and practices. Entrepreneurs tend to be risk-takers willing to take chances most people would not. In organisations people with creative ideas often need influential sponsors to help get funding to realise their ideas.

For maximum impact managers may need differential reward strategies for different types of creative employee, scientists often place a higher value on freedom and job satisfaction than pay, whereas many entrepreneurs are interested in making serious money.

Find out more

The Open University course Creativity, Innovation and Change offers you the chance to explore ways of developing and fostering creative management. It includes a weekend residential school to help you develop your creative thinking and draw out the creativity in colleagues.

About the author

Jane Henry is an applied psychologist. She chairs the Open University Business School Creativity, Innovation and Change programme.

Subscribe to Jane Henry's posts

 

The financial crisis and global recession have made many commentators ask, "Are the prevailing business models bust?" Twenty years after the fall of Communism in Europe, has the last nail been put in the coffin of the market as the organising principle of civil society?

In a recent edition of The Bottom Line, executives of three companies reflected on how to plan for the long term in the face of the recession and the possible upturn. Simultaneously, a number of influential bodies, including the Engineering Employers Federation (EEF), are calling for the establishment of a national investment bank. Is planning back in fashion and will we see Indicative Planning regain favour? Furthermore, are there lessons to be learned from GOSPLAN, the Soviet Union’s economic planning committee?

Is planning back in fashion?

The recent dominance of financialisation, with its accompanying short-termism and reification of shareholder value, is deemed to be fundamental to our present difficulties. Not all sectors of the economy can plan for the longer term. Mining; oil and gas exploration and refining; engineering and industrial and commercial construction; project management and so on are subject to indivisibilities and long lead times, so planning in a technical sense is a must. The challenge is whether planning can be scaled up to the aggregate level of the economy in order to provide the critical mass on which business models can be built and sustained.

Herbert Hoover during his time at the US Department Of Commerce.
[image in the public domain, owned by US Department of  Commerce, accessed from  Wikimedia Commons]

Indicative planning involves co-ordinating the private and public sector’s investment and output plans, on the basis of forecasts and targets. It is most strongly associated with the development of the French economy in the post-War era, but its lineage can be traced back to the influence of Herbert Hoover in 1920, when he was US Secretary of Commerce. Today, one can see versions of indicative planning (in the form of sectoral targets) in the emerging economies, influenced perhaps by the organisational underpinnings of a number of advanced Asian economies.

In some senses, these later versions of indicative planning are voluntary versions of GOSPLAN, whose targets and plans were implemented using input-output analysis. Input-output models were invented by the Nobel Prize winning economist Wassily Leontief. They link the outputs of different industries in the economic system to show how change in one part affects all other parts. Perhaps, if the leading economies of the world had embraced indicative planning using similar analysis and decision-matrix techniques, some of the worst aspects of the economic and financial crisis may have been avoided.

This matrix approach is at the heart of Scenario Planning, which was developed by Herman Kahn to model the likelihood of thermonuclear war. It can also be seen as part of Indicative Planning and related to input-output analysis. It was versioned for large industries and organisations to undertake long-term flexible planning, based on a range of plausible scenarios.

...hoping for a return to normal based on "business as usual" appears to be very short-sighted, even for sectors whose market horizons are quarterly or seasonal.

It could be argued that the credit crunch and global recession are akin to a thermonuclear shock to the world economy. In this scenario, hoping for a return to normal based on "business as usual" appears to be very short-sighted, even for sectors whose market horizons are quarterly or seasonal. This response is about survival rather than sustainability. The cost of this survival is borne by the whole economy. There may be a revival of faith in induction (generalising from an individual perspective to make sense of the whole) but, in a complex system, one organism doesn’t account for everything.

John Maynard Keynes.
[image in the public domain, owned by the IMF, accessed from  Wikimedia Commons]

For the guests appearing on The Bottom Line, with their businesses in large-scale project management (trucks; and plumbing and piping), discussing the long-term did not engage with the epigram of the economist John Maynard Keynes from his masterly Tract on Monetary Reform of 1923: “In the long run we are all dead”. The full quote gives Keynes’s intention to show that the current state of affairs is no guide to the future

“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again”.

The insights of great economists notwithstanding, if businesses don’t attempt to plan and we have an economic system that appears indifferent to the future, then we all will have shorter life spans.

Find out more

These Open University Business School courses will help make your planning sharper:

Engineering the future
Making sense of strategy
Capacities for managing development

Image of John Maynard Keynes [© Wikimedia Commons]

About the author

Leslie Budd is Reader in social enterprise at The Open University Business School. He is an economist and has written extensively on the relationship between regional and urban economics, and international financial markets.

Subscribe to Leslie Budd's posts

 

Evan and Janette in conversation.

This week, in a change to our Bottom Line format, we’ve something a bit special for you: Janette Rutterford from The Open University Business School turns the tables and puts Evan into the interviewee’s chair.

You can watch two interviews on the Bottom Line website.

In the first, the managerial make-up, Evan shares his experiences from talking to numerous CEOs during his time on the programme. Are there differences between female and male management styles? Do Americans manage differently to the British? And are those large executive paycheques ever really justifiable?

Watch the managerial make-up

In part two, a different recession, Janette and Evan explore what makes the current world recession so unlike anything we’ve experienced before. And is there a way out?

Watch a different recession.

Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

The programme Supersave Me went through a list of different investment and speculative alternatives, from short-term savings products through shares and property to betting on the horses. It looked at different attitudes to investing at different stages in the ‘life course’, with younger savers more interested in setting money aside for a rainy day or a deposit on a house and older savers keen on having an income in retirement. It showed how most savers want to choose themselves, believing they have an edge in choosing cars, property, share or racehorses. And they were all aware that there is risk involved.

There are a number of simple ways in which you can get the risk return trade-off that suits you. Some people, say close to retirement, don’t want too much risk; others, younger, are looking for capital growth which only comes with risk attached. If you have a nest egg, or are saving monthly, just decide how much you can afford to lose. For example, with a £10,000 nest egg, would you be able to survive if it fell to £5,000? Or can you afford only to have it fall to £8,000, say? The smaller the fall you can afford, the less risk you can take on.

Lady holding a piggy bank
with dollar bills falling from the sky.
[image © copyright Photos.com

The stock market, for example, can, as we have seen, fall 40 to 50% in a single year, although that is a rare occurrence. So, decide up front, how much you can afford to lose. It’s likely that if you are in your fifities, you will have a higher minimum value on your nest egg than a thirty-something with years to go before retirement.

You also have to decide your time horizon. If you are investing for 10 or 20 years, and can afford to hang on to your investments, you shouldn’t worry about short term falls as, at some point in the future, prices will recover. That is true of property too, but the problem with property is that it tends to be a ‘leveraged’ investment. People tend to borrow to invest in property, so that a fall in the value of the property or in rents can mean that the loan is called in and substantial losses incurred. People tend not to borrow to buy shares so investing in shares is less risky than borrowing to invest in buy to let.

But the simplest way to make sure you maximise your expected return for a particular level of risk is to diversify across different kinds of assets. Put simply, don’t put all your eggs in one basket. Put some in cash, some in bonds, some in shares and possibly some in property or another ‘alternative asset class’ such as gold or even classic cars. By so doing, you will be making sure that at least part of your savings doesn’t fall. For example, when the stock markets were crashing in 2008, investments in government bonds were racking up capital gains of 30% or more. And if your pot is not big enough, there are plenty of investment trusts or unit trusts who will diversify on your behalf.

And, finally, if you are investing in the stock market, don’t invest it all at once. Regular saving, so called ‘dollar averaging’ means that you don’t put all your money in at the top of the stock market cycle and also that you do put some money in when shares are cheap. Regular saving avoids the classic small investor’s temptation – to buy at the high in the heat of a stock market boom and to sell when prices have gone down.

Take it further with Open2

• Saving time and pennies
• Is tax avoidance only for the rich?
• Private equity - who's paying for their profits?

Take it further with the Open University

• You and your money: personal finance in context
• Debt and borrowing in its wider context
• Introduction to bookkeeping and accounting

About the author

Janette Rutterford is Professor of Financial Management at the OU Business School, having previously worked in corporate finance and investment. Jannette's research includes pension funds, equity valuation and investment history, in particular the history of women and wealth.

Subscribe to Janette Rutterford's posts

 

A business situation.
[image © copyright Photos.com]

One effect of the global recession is that employees are being asked to work short-time or take unpaid leave, rather than being made redundant. Recent examples from the UK include Honda and British Airways, among others.

The management of companies who undertake this response justify their actions on the basis that they cut their workforce too deeply in the last recession, thereby constraining their ability to exploit the following upturn, when it occurred. This strategy is expressed in terms of being a win-win situation: management cuts costs and employees get to keep their jobs.

It is being reported in fairly uncritical terms, like much of the media coverage of the corporate sector which had tended to lionise the masters and mistresses of its universe before the financial and economic crisis. It could be claimed that this helped create an environment in which "business as usual" (despite a broken model) can be resumed in the upturn. Interviewing a few "business leaders"  appears to conform to the philosopher Betrand Russell’s epigram “personal experience is a bad basis for science” and does not greatly contribute to a public understanding of and education in complex business and management issues.

The key question is, whether this short-term response is the basis of a sustainable strategy and whether this is sector-specific or a general solution to the challenge of controlling employment costs.

At the aggregate level of the economy, this is not sustainable as lower incomes lead to lower demand, lower output and slower growth. At the level of the individual company, there are some more fundamental issues at play, particularly for managers in British-owned companies. Underlying this key question is a number of subsidiary ones:

• How does senior management stay in touch with its workforce, particularly in the threatening environment of a recession?

• Faced with the prospect of short-time working and unpaid leave, have the workers been asked what they think?

• Is consultation with the workforce a didactic (“we’ve told you what we are going to do, so you have been consulted”) or an interactive process?

People in the workplace.
[image © copyright Photos.com]

Talking to the staff appears to be an obvious thing to do but, in the absence of formal procedures and channels in which real dialogue takes place, one has to take management’s word for it that their talking is effective. Organisations that are smart at working are far more likely to be productive and sustainable, as the recent Chartered Institute of Personnel and Development (CIPD) report, Smart working: The impact of work organisation and job design, demonstrates. Among its conclusions is that process and management innovation are key components of productivity improvements. Yet, as numerous studies over many years have shown, there is a UK productivity problem. British-owned firms are less productive than foreign-owned ones operating in the UK.

One conclusion is that non-UK owned firms work smarter and view their workforces as a key asset and not a cost liability. Another is that the relationship that Masters and Mistresses of the Corporate Universe have with mere mortals may need to be changed or even reversed. If there is such a thing as the knowledge economy, this appears to be the bottom line for a restructured business world that is less volatile and sustainable in the longer term.

Find out more

Get under the skin of management issues with these Open University Business School courses:

Managing in the Workplace

Strategy

Creativity, Innovation and Change

About the author

Leslie Budd is Reader in social enterprise at The Open University Business School. He is an economist and has written extensively on the relationship between regional and urban economics, and international financial markets.

Subscribe to Leslie Budd's posts

 

Airbus 330 flying overhead.
[image by Abdallahh,
some rights reserved]

On June 1st, an Air France Airbus A330 on a routine flight from Rio de Janeiro to Paris crashed into the Atlantic Ocean. 228 people died in the worst air accident in French aviation history. The disaster was all the more shocking because one of the world's most reputable airlines had lost one of the most reliable airliners ever built. Until the crash of Air France 447, some 600 A330s had flown for sixteen years without a single fatality.  The aircraft crashed in an area of the Atlantic up to 3 kilometres deep leaving little evidence apart from a small amount of floating wreckage and some bodies.  The crucial flight recorders (often called the black boxes) now lie on the ocean floor and have not been recovered.

One month later, France's air accident authority, the Bureau d'Enquêtes et d'Analyses pour la Sécurité de l'Aviation Civile, released an interim report based on what little was known; the aircraft had hit the water intact at high speed in a steep dive and showed no sign of fire or explosion. This interim report stated:

"At this stage of the investigation, the only established facts are:

• the presence near the airplane’s planned route over the Atlantic of significant convective cells typical of the equatorial regions;
• based on the analysis of the automatic messages broadcast by the plane, there are inconsistencies between the various speeds measured."

Over a five minute period, the aircraft's computers began to report a series of equipment failures that began in the vital airspeed sensors which are necessary to keep the aircraft in stable flight.

Over a five minute period, the aircraft's computers began to report a series of equipment failures that began in the vital airspeed sensors which are necessary to keep the aircraft in stable flight.

Our knowledge of the last few minutes of the AF447 comes from automated messages radioed back to Air France's maintenance facilities using a system known as the Aircraft Communication Addressing and Reporting System (ACARS). Over a five minute period, the aircraft's computers began to report a series of equipment failures that began in the vital airspeed sensors which are necessary to keep the aircraft in stable flight. At the time, AF447 was flying through a series of intense tropical thunderstorms; it would have flown through lightning and extreme turbulence and may have also encountered freezing conditions. In themselves, these should not have caused the loss of a modern airliner. A number of other aircraft safely threaded through the same storms that night without serious incident.

In the absence of a clear cause, some reporters and bloggers have begun to blame the disaster on the use by Airbus of computerised, "fly-by-wire" technology. It has been suggested that the computers on the aircraft, if they did not actually cause the accident, may have made it impossible for the crew to avoid disaster.

How aircraft are manoeuvred
So, before we have a look at why aircraft use computers and what they do, perhaps a small diversion is in order. Airplanes manoeuvre using a combination of "control surfaces" - sometimes (incorrectly) called flaps - located on the wings and tail. You've probably seen these devices working during take-off and landing. The outer parts of the wings contain the ailerons controlling the amount of roll (or banking) used to turn the aircraft on to another heading. The horizontal surfaces in the tail are called elevators and are used to change the pitch - the nose-up or nose down attitude of the aircraft when it changes height. The vertical surface on the tail is known as the rudder and is also used to turn the aircraft, this time without the sometimes disconcerting tilt of banking. The aircraft wings also contain the flaps which are used during take-off and landing to provide additional lift or drag.

The control surfaces are driven from the cockpit. In very small aircraft this can be achieved using manual linkages not too different from the brake cables found on bicycles. When the pilot moves the joystick, it directly pulls or slackens a cable, the other end of which is attached to a control surface. However, as planes become larger and faster, the amount of force needed to move the ever-larger control surfaces becomes greater and greater, until it is not physically possible to move them at all.

During the 1950s and 1960s aircraft designers increasingly switched to hydraulic linkages similar to those found in cars. In these more modern aircraft, movements of the joystick were transferred to the control surfaces through pressurised hydraulic fluid. Pilots did not need to be especially strong, the hydraulics did all the work. The weakness of hydraulic systems is that the plane needs to be threaded with pipes which must be regularly inspected for defects; a leak could result in disaster. To reduce the risk of any one system failing, the hydraulic system was duplicated - each control surface could be moved by any one of three (sometimes four) independent hydraulic circuits; the hydraulics were said to be multiply redundant. There are only a very few cases where all of an aircraft's hydraulics have failed in-flight, and the technology continues to be used on many modern aircraft.

The weakness of hydraulics is that they are heavy and maintenance intensive. If reliance on them could be reduced, or dispensed with entirely, aircraft could carry a more useful payload and spend longer in the air - both of which make them more profitable. Fly-by-wire is the solution to this; the long, complex hydraulic links between the joystick and the control surfaces are replaced by sensors and electrical cabling. When the joystick is moved, sensors read the changes and send electrical signals to hydraulic pumps located near the control surfaces. These pumps then move the surfaces as if they were directly linked to the joystick. Fly-by-wire technology was developed in the UK and US during the 1960s for military aircraft and received its first commercial use inside the Anglo-French Concorde in 1969, but it was not especially well known until Airbus chose the technology for the A320, unveiled in 1987.

The A320 revolution
Airbus had been founded for political motives with the intention of combining the expertise of various European airspace manufacturers to build a rival to the American airline industry, dominated by Boeing and MacDonell Douglas (now part of Boeing). Although Europe, and especially Britain, had led the world in developing airliner technology throughout the 1950s and 1960s, it had been the Americans who had gone on to dominate the World market for airliners. Airbus' first airliner, the A300, had become a successful twin-engined plane but had used relatively conventional technologies; the A320 would be a huge leap into the future. It was designed to compete both with the world's best-selling airliner, the Boeing 737, and also to replace the older, thirstier, noisier 3-engined Boeing 727.

The A320 was a revolutionary aircraft, not only including fly-by-wire technology, but also being one of the first airliners to be built using substantial amounts of composite materials such as carbon fibre. Its cockpit was equally novel; there would only be two flight crew - the engineer was no longer needed, their role being taken by a highly automated "glass cockpit" that replaced switches and dials with computer screens. Aggressively marketed, the economical A320 family of jets has sold nearly 4000 aircraft, making it the second most successful airliner in the world, and is likely to be built for many years yet. The success of the A320 allowed Airbus to plan even more ambitious aircraft including the twin-engined A330, the four-engined A340 and the enormous A380 double-decked super Jumbo which entered service in late 2007. This family of aircraft has allowed Airbus to rival, and sometimes supplant, Boeing as the world's largest manufacturer of airliners - much to that company's disgust.

Interior of Airbus A340 cockpit.
[image by Storm Crypt,
some rights reserved]

As well as emphasising the comfort, reliability and economy of their aircraft, Airbus have been keen to stress their exceptional safety, made possible by computer technology. Airbus took a decision that computer technology could be used to protect the aircraft from any action by the pilots that could damage or destroy it. The safe operation of an aircraft is constrained by a "flight envelope" which describes factors such as the maximum and minimum speeds, the tightest turn it can make and so on. If an aircraft exceeds its flight envelope it can result in injury to the passengers, damage to the airframe or a complete structural failure. The flight envelope is not a simple, static object; rather it changes on a number of factors such as the altitude. In theory, a computer can ensure that the aircraft remains safely inside the envelope at all times - the aircraft is said to have "flight envelope protection". The consequence of flight envelope protection is profound; the pilot no longer has absolute control of the aircraft; the computer will veto any action that would take the aircraft outside of the flight envelope.

But, before protection can be guaranteed, it is crucial that the computers are completely reliable and accurate.

Reliable computers
The Airbus contains five main computers divided into two main roles. Three of the computers are designated the primary flight control computers and are in day-to-day control of the plane; reading the pilot's instructions, monitoring the aircraft's position, speed and attitude; making the necessary calculations to keep the aircraft safe, and sending commands to the engines and control surfaces. These are backed up by a pair of secondary flight control computers which are constantly monitoring the aircraft, but only act if one or all of the primary flight control computers become unavailable. These computers are distributed around the fuselage so that an impact or hull breach should not disable more than one machine. Likewise, multiple cables link the computers - cutting one, or some of them, will not disable the entire system

In normal use, the computers each read the data from the pilot and sensors built into the aircraft and individually calculate the appropriate response. At preset intervals the responses from each computer are compared. If the result from one computer differs from the other two, it is automatically disqualified from further operation and a backup computer is switched in to make further decisions. Likewise, if one of the computers fails to respond in time for one of these votes, it is disconnected and a replacement called in. In fact, the aircraft can be safely flown and landed using only one computer, so there is massive redundancy built into the computer systems.

The designers of the Airbus computers went to enormous trouble trying to imagine all of the possible problems that could occur. Their first problem was the certainty that computer hardware and software is almost never completely free of bugs that could cause a program to crash and the to computer become unavailable. Therefore the primary and secondary flight computers not only come from different companies, but they must contain different components - so a hardware failure should not spread between the two computer systems. This diversity is replicated inside the software; with the primary and secondary computers each running different programs coded in different languages. These programs were developed by teams with exceptional records of producing high-quality software, using special software tools that should capture bugs long before the programs are ever used in real life.

Airbus's designers then went on to consider what would happen if the aircraft hit trouble - such as some of the vital sensors became unavailable. Just like Isaac Asimov's robots, Airbus aircraft are governed by three Laws.

The designers of the Airbus computers went to enormous trouble trying to imagine all of the possible problems that could occur.

The first is called Normal Law and applies when the aircraft and its systems are healthy. The flight control computers interpret the commands from the joystick and guarantee that the aircraft remains safely within the flight envelope; they also ensure that passengers remain comfortable by reducing the rate of changes in direction or altitude.

If some of the sensors fail, the hydraulics become unreliable or more than two computers are unavailable, the computers switch to Alternate Law. Here some of the protections are removed or relaxed, the aircraft can make more extreme manoeuvres but cannot exceed its flight envelope. This might sound counter-intuitive, you may be thinking this is the sort of circumstance where the pilots need more help from the computers; but Airbus' thinking was that, if the sensors or computers could no longer be trusted to read or interpret data correctly, then it was time to pass more control to the expertise of the pilots.

Further failures would force the aircraft into Direct Law. At this point the aircraft can no longer offer flight envelope protection and the Airbus must be flown like an older generation aircraft.

In the event of a catastrophic failure resulting in the total loss of power, the Airbus has a further mechanical backup mode which could be used to make an emergency landing, but would most likely be used for a few minutes whilst the flight crew tried to recover power. This is extremely unlikely to happen as the aircraft would have to lose both engines, the auxiliary power unit in the tail, have flat batteries and not be able to deploy the ram air turbine (a wind generator which can be swung out from the underside of the aircraft).

Wheels of Boeing777.
[image by Diorama Sky,
some rights reserved]

Flight envelope protection became a huge difference in philosophy between Airbus and its rival, Boeing. The American company was reluctant to remove ultimate control from the human and could cite a number of instances where an aircraft was only saved by exceeding the flight envelope. In 1985 a China Airlines Boeing 747 flying between Taiwan and the United States suffered a relatively minor engine failure over the Pacific. The crew did not follow the proper procedures for restarting the engine and the aircraft eventually tipped into a vertical dive. Disaster was only avoided when the pilot forced the nose up using the elevators. The aircraft vastly exceeded its envelope and suffered severe damage to its control surfaces and undercarriage but it was able to land safely with only two injuries. Airbus countered that such incidents were exceptionally rare and, besides, flight envelope protection would have ensured the aircraft never entered the dive in the first place.

Did the computers have anything to do with the loss of AF447?
The ACARS data sent back to Air France during the last few minutes show that the airspeed sensors mounted on the aircraft were registering as faulty. Following incidents on other Air France A330 and A340 airliners, the company had entered into discussions with Airbus, who had determined that certain sensor designs were prone to becoming clogged with ice or water and recommended that they be replaced as part of scheduled maintenance. Although the aircraft had not received the improved sensors, it had been declared safe to fly, but it is entirely possible that the airspeed sensors had developed a fault. As soon as the computers realised the airspeed readings from the sensors could not be trusted, they switched to Alternate Law, disengaged the autopilot and switched off the automated thrust systems. The computers would continue to keep the aircraft within the flight envelope, but the crew would be in charge of steering and maintaining the correct airspeed. The very last minute of the ACARS data suggests that the problems had continued to spread through the computerised systems responsible for maintaining the aircraft's speed and orientation. The very last message warned that the Airbus had entered a steep descent. Crucially, the data does not suggest that the computers had ever entered Direct Mode or indeed failed all together. The evidence is that the computers were battling to keep the aircraft in the air until disaster was unavoidable - they were working.

Previously, in 2008, an A330 belonging to the Australian operator Qantas experienced an in-flight emergency when one of the computers used to collate sensor data developed a serious fault which resulted in unexpected violent pitching and false stall and overspeed warnings. Fortunately, the computer was deactivated, but not before 115 people on board were injured. Airbus revised their instructions to pilots on how to deal with such an incident which proved useful less than three months later when a second Qantas A330 flying in the same area encountered a similar fault with the same computer in a different aircraft; fortunately, this time, no one was injured. Airbus and the computer's manufacturer are still trying to ascertain the exact cause of the problems but pilots have blamed radio interference from a powerful naval transmitter in Western Australia. Could a similar problem have befallen AF447? It is possible, but Airbus point out that the doomed aircraft used different computer hardware and software from the Qantas jets and it is extremely unlikely a similar bug could exist in both sets of equipment.

It is not impossible, but increasingly unlikely, that AF447's flight recorders will be recovered from the floor of the Atlantic Ocean. If they are found, air accident investigators will be able to examine the operation of the airliner's computers and sensors on a second-by-second basis and listen to the words of the flight crew. If they are not located, then we might never know precisely what happened on the flight. Instead, Airbus and the French authorities will have to make a reasoned judgement on what might have occurred and make recommendations to avoid their recurrence. Even before any report, Air France has replaced all of the airspeed sensors on its A330 and A340 aircraft.

The most likely explanation for the loss of AF447 lies with the failure of those airspeed sensors. If an airliner loses too much airspeed it loses the lift necessary to keep it in the air; it is said to have entered an aerodynamic stall. Stalling can also be brought about by sudden rises in the temperature of the air and by banking the wings. Pilots are trained both to recognise the potential for stalls and to recover from, them. But perhaps the crew of AF447 were overwhelmed by a series of events that began with what should have been a routine sensor failure. As they responded to the imposition of Alternate Law and their new responsibilities for maintaining the aircraft's speed, they would also have been quieting the various alerts appearing on their screens and fighting the storm. This would not have been the first time humans were unable to keep up with a computer in an emergency; the operators of the Three Mile Island nuclear power station in the United States were overwhelmed by so many alarms that they failed to identify a relatively minor problem that could have been easily fixed before it became a near disaster. Even now, Airbus will be examining how air crew are alerted to problems and determining if these might make circumstances worse rather than better.

...flying is still statistically safer than the drive to the airport.

Although much ink and vitriol has been spilled by supporters and detractors of Airbus' highly automated airliners; the accident records for aircraft with flight envelope protection are quite clear. Whilst highly automated aircraft  show improved performance and reliability and economics, they are neither more nor less likely to be involved in an accident. So perhaps it is the economic benefits that drive this technology. Even Boeing, so long a sceptic over fly-by-wire and envelope protection, is adopting it for the Boeing 777 and 787 Dreamliner airliners.

The statistics are also clear; modern aircraft are much safer than those of previous generations and flying is still statistically safer than the drive to the airport.

Find out more

Follow the unravelling of other disaster stories with forensic engineering:
Collapse at Kinzua
Silver Bridge
Tay Bridge
Concorde

Images

The images used in this blog are copyright. All are from flickr.com under the following creative commons licenses:

Airbus A330 flying overhead by Abdallahh - Attribution
Interior of Airbus A340 cockpit by Storm Crypt - Attribution/Non-Commercial/No Derivative Works
Wheels of Boeing777 by Diorama Sky - Attribution/Non-Commercial/No Derivative Works

About the author

Mike Richards joined the Open University in 1996 to help trial teaching over the Internet. Since then he has taught courses ranging from an introduction to robots to the engineering works of Leonardo da Vinci; but has spent most of his time writing about security - everything from the Enigma machines to e-shopping. He is currently working on a new course exploring the world of ubiquitous computers; imagine a world where computers so small and cheap they can be put in everyday objects - smartphones today, smartclothes tomorrow.

Subscribe to Mike Richards's posts

 

Blogging about

The Bottom Line

Evan Davis gets to the heart of the big finance stories at The Bottom Line.

Prices for many everyday goods such as clothing and groceries have dropped radically, in real terms, over the past 20 years. Globalisation and more open trade have led to efficient commodity and product sourcing. The effect of this has been multiplied by improved logistics and comparatively cheap fuel for moving ships and goods around the world and within countries.

The proportion of unskilled jobs has dropped in Europe and the number of 'knowledge workers' with higher salaries has increased. New hotels and flights to foreign destinations have opened up to supply the demand as people find themselves having to pay less for the basic necessities and more for leisure. But what was once a satisfying situation of supply and demand for businesses has now become a problem of over-supply and falling consumer discretionary spending.

In this world of over-supply and rising unemployment, it is not surprising that prices should drop. The theory of price elasticity teaches that by lowering your price you will make more sales. However there is a limit to what the market can absorb. The idea of competitive advantage contains within it the idea that any price advantage one business holds over another will eventually be whittled down to zero by competition and some businesses will then cannibalise their capital base to stay in business. Customers realise that many retailers, airlines and hotel companies have their backs to the wall and they want the feeling that they are getting a fair deal.

Until the middle of the 19th century in France and the advent of the department store, as described by Zola in his novel Au Bonheur des Dames, prices weren’t displayed. The norm was to bargain for everything you bought, as in the markets of many developing countries today. In the UK, it was the Quakers who introduced the idea of the fixed price as part of their rule to ensure honesty and fairness in business dealings.

"there has always been a consumer segment that needs a hefty 'deal' before it makes a purchase"

Consumers in Western Europe and in the United States, by challenging the 'normal price' are reverting to type and doing what most other parts of the world have always done. David Roche, the President of Hotels.com said on the programme that there has always been a consumer segment that needs a hefty 'deal' before it makes a purchase. That percentage used to be 20 per cent and it is now above 50 per cent.

So, how should businesses react to this situation, in which there is no such a thing as “the normal price” but more than half the market wants an obvious fair deal?

In some areas of purchase, prices remain fairly constant. Nobody would accept to pay £5 for a box of 100 teabags one day, and £15 for the same teabags the next day, or even £15 one day and £5 the next. They would feel that they were being diddled. Yet we accept the fact that if we buy an economy class airline ticket for Spain four months before a trip we will probably pay £50 and if we wait right up until the last minute we will pay £250 or more. The way in which airlines and hotel companies have introduced revenue management and yield management has accustomed customers to the fact that prices will vary according to the time of year they make the purchase or the date of their holiday.

But other industries cannot use yield management. They have to lower their prices but avoid the perception that they are 'conning' their clients.

Expensive restaurants will do everything to maintain the usual price in a downturn, but the restaurateur will probably offer you a free bottle of wine to go with your meal. If he maintains his prices and doesn’t throw in an obvious gesture of good will, you will feel that he is not giving you a fair deal in a time of recession. This does not apply to places where there is a lot of pass-through traffic and no attempt to keep your loyalty. On a recent trip to Budapest, I saw that many restaurants in the tourist areas were displaying price cuts of 30-40 per cent in their windows.

With regard to the luxury goods industry, even in a downturn everything is done to maintain the price, the perceived integrity of the vendor and the value of the brand. If one customer remembers proudly paying £15,000 for a watch two years ago and meets a friend who paid only £5,000 for the same watch last week, he will feel cheated and vent his wrath on the seller of the item or on his own foolishness, never to visit that shop again. The well-known luxury goods providers will do anything to avoid a drop in price and accept a decrease in sales for quite a long period in the effort to maintain their reputation and the promise of their brand.

Find out more

• Watch Evan Davis on market prices
• Watch Evan Davis on market power
• Sharpen your management skills with The Open University Business School

About the author

John Gaynard is a management consultant and associate lecturer with The Open University Business School. He is based in France and tutors on the Creativity, Innovation and Change course in Brussels. He also does some teaching on the Master's programme at the ESIEE School of Engineers in Paris.

Subscribe to John Gaynard's posts

 

Blogging about

The Bottom Line

Evan Davis gets to the heart of the big finance stories at The Bottom Line.

“How brutal do you have to be as a manager?” is a leading question that seems to expect an answer ranging from "slightly brutal” or “only occasionally brutal” to an extreme of “very brutal”. Many young managers, before they learn better, think that brutality has to be a part of the job, probably encouraged in that viewpoint by Alan Sugar in his TV job as the prototypical, patronising dictator on The Apprentice television show. Sugar’s viewers take sadistic pleasure from hearing him bark, “You’re fired!” at his hapless candidates for entrepreneurial stardom.

"brutal managers, who live in a black and white world, usually lack the skill of self-regulation"

The real world of management is very different. Daniel Goleman has argued that the difference between good and bad performance among leaders in the 21st century is down to their 'emotional intelligence', a term which encompasses self-awareness, self-regulation, motivation, empathy and social skills. Brutal managers, who live in a black and white world, usually lack the skill of self-regulation – defined by Goleman as “having integrity, accepting ambiguity and being open to change.”

As we heard on the Bottom Line, one managerial style will not fit all situations. Good managers, with a fairly high degree of emotional intelligence, all adopt "a contingency approach to management," in which their style varies according to the circumstances.

In 1991, Gareth Morgan highlighted the competencies that were then becoming evident for the modern manager, such as being able to read the environment, the ability to manage complexity and what he termed 'contextual competencies' – related to appraising the situation in which you find yourself and doing what is effective in that context.

You do not manage an apprentice in the same way as you manage a very competent and trusted colleague, who has come up with you through the ranks. But there was a strong opinion amongst The Bottom Line panelists that both should be treated with the same respect.

In the UK, at difficult stages of a company’s life it does seems permissible to shout, as long as it doesn’t become a habit and lasts only briefly, for example when a large company has become complacent and it needs to be brutally shaken out of its torpor in order to save it from itself. Such 'barking' should be used with parsimony and never descend to the level of brutality.

In companies that have to move extremely quickly all the time – for example those selling discounted hotel nights over the internet, or empty airline seats, where what is not sold today will never be sold – it also seems acceptable for a manager to raise his voice occasionally, especially when business has to be executed at a certain pace: when “slower than that won’t do”.

Is shouting at a colleague ever acceptable?
[image © 2008 Jupiterimages Corporation]

But in Japan shouting at a colleague of whatever rank is simply not done. In Japan, all is civility. Quite apart from the Japanese aversion to losing face, or making somebody else lose face, managers and employees know that it pays in the long run to be deferential to their colleagues of whatever level in the company. Companies, like trees, can die.

As explained by John McLaren, when a big change is to be decided, the metaphor of 'root wrapping' is used. Before a tree is moved its roots are wrapped in bamboo matting. The idea of change is carried around the company and its roots wrapped with increasing levels of consensus to protect it. Only when there is total agreement at the lower levels of the company will it be taken to the board. The role of the board is not to reject brutally what has been decided elsewhere, but to rubber stamp what has already been agreed by middle management, who favour a middle-up-down process such as that described by Nonaka & Takeuchi in their 1995 book, The Knowledge-Creating Company.

Boards do not act in the same way in the United Kingdom. But even here, there is also a wish to avoid conflict. If there is latent conflict that could lead to use of brutal language at a board meeting, it will usually be sorted out over dinner or drinks the night before. In fact, the governance of boards may be too 'clubby'. Important and valuable debates can be avoided out of the desire to not annoy people.

However some boards and business owners do seem to encourage brutality in their senior managers, feeling that there are (unproven) advantages from management by fear. These managers may seem to get good short term results – as in the case of Al Dunlap, who made himself a reputation in the 1980s and 1990s as a brutal turnaround artist, but most of the companies he purported to have saved went out of business a few years later; nearly all of the reductions in cost and workforce cuts he had conjured up proved to be value-destroying and ultimately fatal.

"talent has options, talent can walk"

The manager of an enthusiastic, growing company needs all the talent he or she can get, and she knows that even in the midst of the present downturn, as I heard on the programme, “talent has options, talent can walk”. And that is why the style of management recommended in today’s knowledge economy is one where the manager is first among a group of equals, for whom she is responsible but without whose willing cooperation she will not be available to get her job done. Brutality will be a hindrance, not a help in getting that job done.

Find out more

• Watch Evan Davis on Alpha Male bosses
• Watch Evan Davis on the value of constructive negative feedback
• Sharpen your management skills with The Open University Business School

About the author

John Gaynard is a management consultant and associate lecturer with The Open University Business School. He is based in France and tutors on the Creativity, Innovation and Change course in Brussels. He also does some teaching on the Master's programme at the ESIEE School of Engineers in Paris.

Subscribe to John Gaynard's posts