Decision Making Scandinavian Airlines Green Engine Decision

Case Summary
In 1995, Scandinavian Airlines (SAS) updated t eir !leet "it a purc ase o! 55 #oeing $%$&s' ( e) ad not )et decided on t e engines t at "ould propel t ese aircra!ts t oug ' #engt*+lov ,as, SAS&s director o! aircra!t and engine anal)sis, "as pus ing !or a -green engine. a t"o*stage dual co/0ustor (DA1), " ic produced signi!icantl) lo"er nitrogen o2ide e/issions, and "ould t ere!ore 0e /uc 0etter !or t e environ/ent' 3o"ever, t e DA1&s "ould cost SAS an additional kr%'5 /illion per aircra!t onto t e total cost o! t e ne" !leet (4SD e5uivalent to 671 /illion in total)' 8ro/ a !inancial standpoint, t is /a) see/ like an eas) decision' 3o"ever, environ/ental issues "ere not to 0e taken lig tl) at t at ti/e, especiall) in t at industr) and in t at region' ( e S"edis 1AA, t eir govern/ent 0od) t at deals "it aviation, "as reall) !ocused on environ/ental per!or/ance and "as cracking do"n on regulations' Also, S"eden&s largest airport used c arges and ta2es as a "a) to reduce t e e/ission o! gases, like nitrogen o2ide, and ad i/ple/ented a cap on t e/, so t at t e level o! e/ission a!!ected tra!!ic !lo"' 8orecasters also anticipated increased e/issions c arges and ta2es, t oug it "as unkno"n to " at e2tent' Anot er i/portant ele/ent to consider in t e -green engine decision. "as SAS&s core co/petencies' ( e airline "as considered a !or"ard*t inking co/pan), " o 0randed t e/selves as t e environ/entall) !riendl) airline' At t at ti/e, t e environ/ent ad 0eco/e part o! t eir overall polic)*/aking structure, e2e/pli!ied in t eir appoint/ent o! t eir !irst environ/ental director (,iels Eirik ,ertun), and t eir

annual pu0lic and audited environ/ental reporting' ( eir 1E+, 9an Sten0erg, clai/ed, -A sound environ/ental pro!ile is pro!ita0le' #ut it is /ore t an t at' It is our contri0ution to a sustaina0le societ) and to !uture generations. (:)nes)'

Decision-Making Practices
#ounded ;ationalit) re!lects t e decision /aker&s tendenc) to select -less t an t e 0est. solution, undertake li/ited searc !or alternatives, and cope "it inade5uate in!or/ation' In t e a0ove case, t e 18+ is /aking a decision to not get t e ne", i/proved engines 0ecause t e) are costl)' < ile e is concentrating on keeping t e organi=ation&s 0udget in c eck, e is not considering t e long*ter/ 0ene!its o! t e e2pensive engine, t ere0) /aking a decision 0ased on 0ounded rationalit)' Evidence #ased Manage/ent entails /anagerial decisions and organi=ational practices in!or/ed 0) t e 0est availa0le scienti!ic evidence' Its roots are in evidence*0ased /edicine, a 5ualit) /ove/ent to appl) t e scienti!ic /et od to /edical practice' Evidence #ased Manage/ent is a0out using a 0etter, deeper diagnosis and e/plo)ing !acts to t e e2tent possi0le !or /anagerial decision* /aking' It recogni=es and atte/pts to reduce t e pro0le/s identi!ied t roug 0ounded rationalit)' In our case, SAS can /ake concrete decision 0) gat ering evidence 0e ind clai/s /ade, e2a/ining assu/ptions !or !ault) cause*and*e!!ect reasoning, and conducting s/all e2peri/ents to test t e via0ilit) o! proposed strateg)' >olitical decision*/aking involves t"o or /ore parties "it con!licting interests, so it is prevalent in an) /a?or corporate, decision, suc as t is one' < en

considering t e political decision /aking process, it is necessar) to kno" t e organi=ation&s culture' Scandinavian culture, !or e2a/ple, is lo" in po"er distance, so a decision like t is one "ill involve opinions and anal)sis !ro/ a range o! e/plo)ees, including t e environ/ental director and t e director o! engine anal)sis, as "ell as t e 1E+ and 18+' As noted in t e case stud), " en entering t e SAS ead5uarters, -E5ualit) o! e/plo)ees "as visi0l) present@ !or instance, t e o!!ice o! t e deput) 1E+ did not look /uc di!!erent t at t at o! a /iddle /anager. (:)nes)' ( ere!ore t e negative ele/ents o! political decision* /aking derived !ro/ sel!*interest principles, "ill not 0e accepted in t is culture' 3o"ever, !ro/ t e standpoint o! ,as and ,iels, t"o stake olders " o are de!initel) in !avor o! t e -green. engine, t e) could e!!ectivel) use so/e o! t e in!luence strategies o! political decision*/aking' 8or e2a/ple, t e) /ig t use rational persuasion to e2press t e do"nsides o! not getting t e DA1&s (regulations, ig er ta2es and c arges)' +r t e) /ig t use inspirational appeal to address t e 0oard "it ele/ents o! SAS&s past pioneering and t e i/portance o! t e environ/ent, /a)0e even using t eir 1E+&s co/pan) goals' 1reative decision*/aking is t e a0ilit) to i/ple/ent ne" ideas, or ne" links 0et"een e2isting ideas' In t e a0ove case, ,iels is ackno"ledging t e idea t at t e ne" engines, t oug e2pensive, are de!initel) "ort considering, and is tr)ing to 0rainstor/ "it ,as, as to o" t e) /ig t overco/e t e e2pense issue and i/ple/ent t e i/proved engines' ,iels recogni=es t e i/portance o! i/ple/enting t e ne" engines in order to contri0ute to t e environ/ent, and in

t e process, e is su0consciousl) overco/ing is perceptual, cultural, and e/otional road0locks, 0) tr)ing to do so/et ing t at is di!!erent !ro/ t e nor/'

Alternative Solutions
EBM Alternative 4se Evidence #ased Manage/ent to test assu/ptions and co/pile evidence !ro/ relevant depart/ents and outside e2perts ,as s ould !or/ a cross depart/ental tea/ at SAS to test B ?udge t e pro0a0ilit) o! assu/ptions and provide ot er possi0le solutions' ( e tea/ "ill 0e c arged "it ans"ering t e !ollo"ing diagnostic 5uestions, " ic in addition to t e evidence e supplies, can 0e used to provide !acts and evidence to /ake t e 0est decision' 1. List assumptions a0out SAS core goals, !uture actions o! regulator) agencies, SAS&s custo/ers, DA1 engine vs' standard engine, costC0ene!it anal)sis 2. u!ge"test an! re#ine assumptions, e'g' Marketing runs surve) to anal)=e i/portance o! environ/entall) advanced airline to custo/ers " en purc asing tickets $. Analy%e i# DAC engine solution is &ene#icial '(en assumptions are 'rong. ). *at(er !ata #rom 'it(in " outsi!e o# SAS to test accurac) o! assu/ptions, and retest against input !ro/ airline industr) consultants' +. ,in! ot(er solutions - 1 arge t e tea/ to 0rainstor/ ot er possi0le engine scenarios t at "ould satis!) t e revised assu/ptions' Advantages o! E#M Alternative (ea/ !indings, evidence B !acts raise level o! satis!icing'

Input !ro/ depart/ents "it e2pertise increases pro0a0ilit) o! success and allo"s ,as to use rational persuasion as an in!luence strateg)'

Disadvantage o! E#M Alternative (ea/ e!!ort B outside consultants "ill take additional resourcesCti/e' Decision /aking is co/plicated since 0) di!!erent interpretations on i/portance o! evidence B contradictor) evidence resulting !ro/ uncertaint)

Creative Decision Making Alternative - 4se lateral B reversal t inking and cross* !ertili=ation tec ni5ues to generate ne" ideas In an e!!ort to test t e DA1 engine solution ,as s ould ave is depart/ent 0rainstor/ ot er solutions' Doing so can provide !urt er evidence to " ) DA1 engines are a superior solution and /a) generate ot er ideas C scenarios to use in con?unction "it t e DA1 engines' 1' :ateral ( inking * c arge depart/ental anal)sts to individuall) generate alternate approac es and co/pare to DA1 engines 7' ;eversal ( inking ave depart/ental tea/ generate ideas " ) t e standard engine design is 0etter !or SAS and t eir environ/ental goals' %' 1ross*8ertili=ation (ec ni5ue ave auto and s ipping industr) vie" pro0le/ and suggest solutions' Advantages o! 1DM Alternative 1ounters aspects 0ounded rationalit) including li/ited searc B pro0le/ !ra/ing'

Ma) provide ne" ideas on " ) DA1 engines are 0est solution andCor o" DA1 engines can 0e used in con?unction "it standard engines'

Disadvantages o! 1DM Alternative (oo ti/e consu/ing at t is stage E2pensive to pa) consultants !or cross*!ertili=ation /et od'

Conclusion
SAS as spent )ears researc ing t e 0est engine design !or t eir ne" $%$&s and in /aking t eir decision need to rel) on t e 0est evidence, predictions and a 0road range o! input !ro/ t eir in* ouse e2perts' I! SAS !ollo"s t e E#M reco//ended alternative t e) "ill ave t e 0est c ance o! /aking t e rig t decision on engine c oice !or t eir airlines' SAS needs to take a calculated risk " ile giving proper "eig t to Scandinavian culture, t eir custo/er&s desires and et ics, corporate culture, regulator) !orecasts, e/ission c arges, and 0rand i/age' I! SAS "ere to 0u) t e less e!!icient engines in order to save on costs, it could 0e detri/ental to t eir 0otto/ line in t e long run, 0ecause i! t e) !ail to !ul!ill t eir ig environ/ental standard, t e) "ill lose custo/ers and su!!er penalties !ro/ regulators' 1learl) SAS cannot rel) ?ust on ,as&s intuition or solel) on t eir 1E+&s support !or /aking environ/ental concerns a ke) co/ponent o! decision*/aking at SAS t oug ' ( e decision /ust 0e a group decision since it re5uires a 0road range o! ig * level in!or/ation and kno"ledge'

8urt er/ore, SAS as invested corporate resources in tec nolog) and practices ai/ed at reducing t eir i/pact on environ/ent, " ic is indicative o! t eir Scandinavian countr)/en and increasing o! t eir corporate custo/ers' <e reco//end t e) "ould 0e

"ise to utili=e -G;EE,. engines' ( oug t e decision "ould not see 0ene!its "it in t e s ort or /ediu/ ter/, it "ould 0e 0ene!icial !or SAS to i/ple/ent -green. engine in t e long run' SAS "ould reap t e 0ene!its as eco*!riendl) corporate i/age, esta0lis leaders ip role as !irst /overs and "ould also gain co/petitive advantage over !orecasted regulator) re5uire/ents'

.e#erences
1' :)nes, 9enni!er, Scandinavian Airlines Green Engine Decision, ;ic ard Ive) Sc ool o! #usiness, 4niversit) o! <estern +ntario 7' 4'S Depart/ent o! (ransportation, A Guide to Transportation Decision Making %' Ed/und, <, ,or/an, A Guide to Creative Decision Making and Creative Thinking A' 1le/en, ;o0ert and Gregor), ;o0in, 1995, Creative Decision Making A Handbook or Active Decision Makers 5' 9ones, #r)an D' -#ounded ;ationalit)'. Annual !evie" o #olitical Science$ 7 (1999)E 79$*%71' >rint' D' Go"d), 9o n' FAvoiding Sel!*organi=ed E2tinctionE (o"ard a 1o*evolutionar) Econo/ics o! Sustaina0ilit)'F International 9ournal o! Sustaina0le Develop/ent and <orld Ecolog) 1A'1 (7GG$)E 7$*%D' >rint'