CRIC Project - Innovation in Service Systems: Airports (Project completed)

• The Problems Addressed
• Empirical Work and Data Sources
• Key Results and Outcomes
• Significance of Results and Outcomes
• Key Publications
• Other References

The Problems Addressed

Our interest in airports stems from our interest in systems of innovation, or systemic innovation, in services. Innovation studies, including those within the 'systems of innovation' tradition, have tended to focus on manufacturing, and particularly the importance of scientific and technical knowledge, and how this is applied to the supply side. Here, we focus on a service activity - air traffic management, especially in relation to runway operations - and on the search for incremental innovations which are 'found' through changes in practices or procedures rather than through 'radical technological innovations'.

Empirical Work and Data Sources

We have undertaken empirical investigations into the growth of runway capacity at London's Heathrow airport, as well as at London Gatwick and Manchester International Airport. We are now extending our analysis to include airports in Europe and, to a lesser extent, in the United States. We have gathered a large amount of data - through interviews with managers at Gatwick (in the Research Department of the BAA plc) and in air traffic control at Manchester. We have also gathered statistical data from the BAA, Airports Council International, IATA, and from individual airports, often via the Internet.

Concerning Heathrow, our research has focused on the remarkable fact that, despite retaining the same basic runway infrastructure that it has had since the 1960s, and despite repeated fears that the airport has reached saturation, incremental increases in capacity (that is extensions to the airport's ability to handle arriving and departing aircraft) have been found on a year by year basis. Whilst this is partially due to technological improvements (such as secondary surveillance radar systems) and to improvements in the layout of taxiways, holds, etc., an important component in this improvement in the airport's efficiency is due to 'learning by doing' and 'learning by co-operating' activities of pilots and air traffic controllers. The figure and table below demonstrate this increasing capacity, whilst the section below expands on our conceptual understanding this system of innovation.
 

Development of Capacity at Heathrow: Availability of Slots the 14 hr day - 1981 - '98

Key Results and Outcomes

Above, we report that Heathrow (and other congested airports) have been able to discover incremental improvements in their operational efficiency (i.e., capacity to handle traffic). In understanding this process of development through incremental innovation, we employ four inter-related 'framing concepts'. These are:

1. Co-production
2. Instituted Practices
3. Learning by Co-operating
4. And the significance of Incremental Innovation through Procedural Change

In more detail:

• Co-production. Runway operations, particularly high intensity runway operations, are classic services activities because they are produced jointly (or 'co-produced') by the service provider and the service user. Although physical entities are involved (such as the runway itself), the core of the activity does not have an independent physical existence but involves, at once and consciously, both the service provider (Airport Authority) and the service user (Airline) in the execution of the service. This is not the case with all innovation in services, for example with transport services, the passengers' seats are fundamental to the service provided and have an independent physical existence. Also, with medical surgery, the surgeon (i.e., provider) operates on bodily organs as objects, whilst the patient (i.e., user) is passive and not consciously involved in the execution of the service.
   
• Instituted Practice. Partially because the service is co-produced, and partly because resources (of time and space) are limited yet valuable, they become contested. Durable and acceptable 'Rules' have to be instituted which give the users certain rights, such as rights of access or use. These rules provide benefits, particularly to the service users, in that they provide guarantees through the stability of practice - transaction costs are thereby reduced - permitting users to invest with a high degree of certainty about the future. For the service provider, these rules are also advantageous because they provide stability of demand/consumption. However, another feature of these rules is that they build rigidities into the system. Habits or behavioural norms also provide rigidities, but arguably formally instituted rules provide more serious rigidities because their existence generates vested interests for those who derive ownership rights over resources from them, and rigidities arise because the right holders will not accept any change which reduces their welfare from the operation of the system. But note that participants are not just concerned with their own welfare; they may also consider how any change will benefit (or otherwise) actual and potential competitors. Thus, overall, the operation may not be Pareto optimal, not because changes are unavailable to allow the welfare of each participant to be increased, but because those that dominate an inefficient systems may prefer this outcome to a relatively reduced role in a more efficient system. Thus, although each participant might improve its welfare through reform, the extent of improvement may be less for those that currently dominate the system than for the more marginal players, and thus those that dominate may resist changes that they themselves would benefit from. Because the service is co-produced, the service provider is not in a position to dictate the form of the service and to therefore provide, through unilateral action, the most efficient service possible - i.e., the Pareto optimal solution. Note that high level authorities, such as government or the statutory regulator, may ultimately have to intervene to improve the overall efficiency of the system.
   
• Learning by Co-operating. Importantly, co-operating here exists in a dual sense.

1. The first is the harmonious activity of searching for mutually agreeable solutions. This can occur, but, as we have pointed out in relation to instituted practices, the lack of harmonious co-operation can be equally or even more important to the way the system operates, and to limiting the scope for changes in the way the system operates.
2. The second is the literal meaning: operating jointly. This is a direct product of the co-production of the service as discussed earlier. Learning by doing is an activity of the producer, whilst learning by using is an activity of the user. In both of these the producer or user has autonomy over how the artefact is produced or used. The user does not interfere with the learning by doing of the producer, and the producer does not interfere with the learning by using of the user. However, when services are co-produced, learning is a joint and interdependent activity. The learning by the doing of the producer is affected by the behaviour of the user, and the learning by using of the user is affected by the behaviour of the producer. But beyond this, neither the producer nor the user has autonomy over how the service is co-produced. Thus changes (normally) have to be negotiated rather than merely implemented. As we have already discussed, vested interests can reduce considerably the number of possible paths that can be taken to the improvement of the system as a whole, and this generates a line of learning through co-operating, or learning through mutual understanding of each other's (vested) interests.

• Incremental Innovation through Procedural Change. Finally we come to incremental innovation through procedural change. We emphasise the importance of procedural change as a compliment to technical change based around the introduction of new hardware technologies. We also emphasise the negotiated nature of procedural change in co-produced services, in which co-operative learning is interactive between the user and producer, and in which instituted practices introduce important rigidities (as well as benefits) into the system.

Significance of Results and Outcomes

This work, which has focused on the incremental creation of additional capacity at congested airports provides valuable case study material with respect to classic service innovation activity. It also provides an example of a new approach to studying distributed innovation processes through a view of 'systems of innovation' which places 'the problem' at the very heart of the analysis (although this approach has a clear antecedent in Rosenberg's (1976) notion of a 'focusing device'). We stress that 'the problem' may not exist ex ante, but may come into being through processes of construction, negotiation or institutionalisation. The relationship between 'the problem' and demand is therefore significant, and the political/regulatory framework can also be significant in defining the nature of 'the problem' (and the permitted solutions). Communities of practitioners are those responsible for tackling 'the problem', and notably this community may evolve over time (in terms of its skills mix, for example). Firms are also important, in translating 'the problem' into an appropriable profit stream (in the present or in the future). Finally, external sources of technology and knowledge can be significant to the provision of solutions. The diagram below represents this system, although, as with all such diagrams, there is a danger that 'the system' appears static rather than dynamic. Yet, on the contrary, we place the dynamic and the way in which 'the system' is reconfigured over time at the heart of our 'problem' based approach to studying innovation processes.

Key Publications

B. Andersen, J. S. Metcalfe and B. S. Tether (2000), 'Innovation Systems as Instituted Economic Processes', in J.S. Metcalfe and I. Miles (eds.), Innovation Systems in the Service Economy, Kluwer Academic Publishers, Norwell, MA, USA.

B. S. Tether and J. S. Metcalfe (2000), 'Horndal at Heathrow? - Innovation through Procedural Change at a Congested Airport' in J.S. Metcalfe and I. Miles (eds.), Innovation Systems in the Service Economy, Kluwer Academic Publishers, Norwell, MA, USA.

B. S. Tether and J. S. Metcalfe (2000 - forthcoming), 'Horndal at Heathrow? - Co-production, Instituted Practice, Learning by Co-operating and the Significance of Procedural Change: A Case Study of Service Innovation' - this paper is a revised version of the paper published in Metcalfe and Miles (eds., 2000) which was presented at a Workshop on Systems of Innovation in Europe and is in preparation for submission to Industrial and Corporate Change (by invitation of the editor).

Other References

Rosenberg, N., 1976, Perspectives on Technology, Cambridge University Press

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