Symbiotic strategies in enterprise ecology : modeling commercial aviation as an Enterprise of Enterprises

Abstract

We investigate the effectiveness of strategic alternatives that are designed to dampen the cyclicality manifest in the commercial aviation (CA)-related industries. In this research we introduce the conceptual framework of Enterprise of Enterprises (EoE) as an extension and special case of a System of Systems, to facilitate the design of strategic alternatives in an enterprise ecosystem characterized by loosely coupled enterprises. The constituent enterprises in an EoE exhibit managerial and operational independence and have diverse value functions that are often viewed by the enterprises as zero-sum games. We argue that this may not always be the case; for example, in the CA EoE both airline and airframe manufacturers constituents would benefit from a steadier influx of aircraft that counters the current situation that is characterized by relatively stable demand growth rate for air travel while airline profitability and aircraft ordering fluctuate intensely. A strategic alternative geared towards this EoE-wide desired state is "symbiotic". In order to identify such strategies, we use the EoE framework to analyze the CA-related industries and to specify their local value functions and the salient interfaces among them based on an extensive review of the literature on commercial aviation. We develop working hypotheses about the driving mechanisms of the cycle in the CA EoE informed by the literature on economywide and supply chain cyclicality. To test these hypotheses, we extend a system dynamics model of commercial aviation. After testing several individual strategic alternatives, we find that capacity management is key to cycle moderation. We then compare two diverse, non-collusive ways for capacity management: faster aircraft deliveries and semi-fixed production schedules generated by long-term forecasts.

(cont.) While both are promising, only the latter alternative is shown to be Pareto optimal. We also examine the potential synergistic effects from combining more than one strategic alternatives for which we also discuss implementation implications. The EoE framework and some of our findings can be applicable and generalizable to other industries facing intense cyclical behavior.