Tuesday, March 26, 2013

All ANSPs are equal, but some are more equal than others

In the late 1970s, 35 French millers decided to come together to improve the quality of baguettes in the face of declining bread consumption and competition from supermarkets using cheap flour and low prices. Their complex organizational arrangement provides a sterling example of hybridization* for Air Navigation Service Providers. How can hybridization help?

The millers are currently a hybrid company with a sterling strategic center. They present 2 reasons for hybridization: to ensure improvement in the quality of baguettes and to create a strategic alliance. In exchange they receive a brand name and an opportunity to vote on decisions. Each miller gets the privilege of 1 vote per miller inspite of the uneven distribution of capital among the millers.
They are responsible for their own resources and strategies; each remains in control of his key asset: flour. Yet the strategic center is made up of several committees who are responsible for making policies about the brand name, while another committee sees about marketing the brand name; a third group is responsible for conflict resolution and a franchisor who monitors the bakers. There are currently at least 3000 bakers.

Hybridization is analogous to a symbiotic relationship. One of the best examples of symbiosis is that between the hermit crab and the sea anemone. The sea anemone is attached partly to the shell that the crab inhabits and partly to the crab’s shell. The crab is protected from predators by the stinging cells of the anemone, while the anemone is transported by the crab and so has a greater chance of finding food. It is the same with hybridization.
Firms form symbiotic arrangements and enter into a network of interdependence. They hybridize to form strategic alliances and partnerships to share supplies and organizational strategies. Other reasons why firms hybridize: to have a better reallocation of resources and to gain knowledge in addition to the reasons stated here.
Hybridization of firms has been around for decades in an unobtrusive corner of economics. Hybridization is beneficial particularly to these small, atypical firms because it creates opportunities that these firms would have not experienced had they remain as single entities. Not every firm is large and has a production line that makes a significant contribution to national GDP. Also, not every firm conforms to the norm of classroom market economy. These are our atypical firms like the French millers. If nothing else, the process ensures the survival of the firm.
These reasons substantiate the need for our ANSPs to consider strategic alliances and symbiotic arrangements with other ANSPs. Like the millers, they face the problem of closing Towers due to sequestration in the West and the pressure to form partnerships in the East. Recently ANSPs globally came under fire for lack of organizational progress.
Our ANSPs qualify for hybridization because they are small atypical firms that do not have a production line and they certainly do not conform to the textbook rules of economic lemmas but they can benefit in principle. For ANSPs, hybridization provides an opportunity to raise the bar of functional equality and the opportunity to invest their key asset: the social resources – the human factors.

* Special thanks to Professor Claude Ménard (Université de Paris 1 Panthéon Sorbonne) who provided the source material on economic hybridization. The material came from his chapter in a book edited by Robert Gibbons and John Roberts - The Handbook of Organizational Economics, Princeton University Press, Princeton and Oxford, 2012

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  1. Francois Bardin, Director Air Traffic Solutions, SITA, Paris, France:
    "Hum .. Interesting. Of course, ANSPs are already forming partnerships (between them) but FABs so far have not really delivered fantastic results. Now, European ANSPs sometimes also partner with the industry (Communication Service Providers such as SITA) in order to deliver concrete results like ready-to-use datalink infrastructure allowing them to comply with the EC Implementing Rule on air / ground datalink. http://ow.ly/jtWS8"

  2. Business Unit Manager - Strategic Business Development at Austro Control GMBH, Austria:
    "The answer to your question is: YES!

    I can tell you a true success story of partnership between ANSPs. 2006 the first 3 ANSPs signed a contract for cooperation named COOPANS. This was a contract between Denmark, Ireland and Sweden. The goal was to harmonise the requirements for evolution of the technical platform of the core ATM system and share the cost of development.

    On top of this a Framework Agreement was signed with the industry partner manufacturing the components of the ATM system with the emphesis to improve the core components from the harmonised requirements for benefit of the competitiveness of the core product.

    In 2009 and 2011 two further ANSPs joined the party and now COOPANS comprise 5 ANSPs, the 3 original plus Austria and Croatia. For the first time in Europe 5 ANSPs agree on common, harmonised requirements to be developed for their common technical platform of the core ATM systems in 7 centres.

    Since then the partnership has evolved from sharing development cost to also improve the processes for integration, deployment as well as maintenance and benefit from sharing of cost, resources, sharing of tasks in all areas like safety, engineering, operational and technical procedures, training and more.

    The COOPANS ANSPs also have a master plan for implementing the roadmap and pursue the evolution of the ATM system from the individual contract type of business to a product oriented one, toghether with the manufacturer.

    This is a true change of paradigm with true advantages and benefits for all."

  3. Francois Bardin, Air Traffic Solutions at SITA, Région de Paris , France:
    "Gerhard - indeed, COOPANS is also another excellent example of industry / ANSP partnership creating real added value. We also see increasing initiatives of joint procurement at FAB level."

  4. Thank you guys! This is good feedback! I will add these and send a copy to the professor! He'll be happy to add a recent example to his collection outside of the food and vehicle industry.

  5. It will be nice if we can have an example on organizational strategy as the launching platform for a partnership and what the eventuality was.

  6. Peter Pennie, ATM Expert, Reading, Royaume-Uni:
    "ANSP partnerships are good and bad. National providers have European financial fallback and so can join alliances for the better European goal. Private ANSPs are a little bit different in so much as they have to survive and compete in low cost, profit driven environment against the large guys. Large equipment companies should join up and provide ANSPS as well as other new ventures in the ATM arena. It is only healthy competition that can drive down costs and get rid of dominating monopolies that take ages to change.Lets have more industry partnerships not government monopolies."

  7. Marian Malis,CNS expert - project manager at LPS SR
    "Many European ANSPs are keen to form different forms of partnership, primarily with their neighbours. But they can act only within their legal and institutiinal environments which vary from country to country. And majority of them are still state-owned, so their capabilities to make a substantial progress in short time is very, very limited.
    Europe is neither unified, nor uniform. And this cannot be resolved within a decade."

  8. Thank you Marian! And this is an important fact that we must remember. Perhaps we need to take a closer look at what happens during negotiations and maybe the implicit effects of organizational, national and even the political culture.

  9. Abderraouf Beldi, Head of Control and Investigation Department at O.A.C.A, Tunisie:
    "Yes, ANSPs partner partnership is a good objective to enhance ANS safety, but the success of this partnership depend on the recurrent economic interests. Each ANSPs look to drag more traffic to their concerned FIRs and in some cases, to preserve these interests’, they follow concurrent strategies."

  10. And this creates conflicting interests which kill partnerships. The underlying reasons for the partnership, whether economic or otherwise must also either be compatible, or in sync, or symbiotic! Whatever the motivation for the partnership, it is good wisdom to consider the transaction cost of the motivation as well as the opportunity cost in the short and the long term. The procedure should also be transparent enough and clearly defined so that other organizations can benefit by learning from failed attempts at partnerhips and how to view risk. Thank you everyone!

  11. Hitler Adikiny Olwenge, Air Traffic Services at Civil aviation-Kenya:
    " Well to survive they have no choice; look at the infrastructure for instance, you only need to pull up resources to be able to reduce the charges (hehe.. SITA for instance is quite expensive). So once we fully implement PBN and other new concepts that come with aircraft ANSPs have no choice but to collaborate or share resources."

  12. Arthur James Bradshaw, owner at ATMS Advisors, Johannesburg Region, South Africa:
    "You really need to get to grips with the ICAO ATM Operational concept as It's all about partnershipping (collaboration). By the way, PBN in NOT a new concept by any strech of the imagination, but rather a more recent terminology applied to what has been around for decades. Need more detail, happy to take it off line."

  13. Allen (Al) Barnett, Professional Aviation Consultant Experienced in Airport, Airspace, ATC and Airline Competencies, Toronto , Canada:
    "Arthur is right on. Collaborative strategies will always increase efficiency by breaking down silos via the cross-pollination of understanding."

  14. Thank you Hitler and Arthur. I also like the term "collaborative strategies" from Allen.

  15. Razvan Prunean, Aviation Creativeness, Management and Engineering, Brussels, Belgium:
    "FABs are already existing within Europe: http://ec.europa.eu/transport/modes/air/single_european_sky/fab/"

  16. Thank you for the article. I plan to examine the ANSP alliances for the last half century in a future post. If anyone has articles, links, copies of documents that they would like to share, please feel free to send them via email etc.

  17. The above comments are informative and current with the issue of sequestration in the West and the exponential increase of air transport services in the European and Eastern nations. In a future post, I will examine the pros and cons of ANSP alliances.

  18. Ivan Iliev, Municipal councilor at Sofia Municipal Council, Expert P&P, Bulgaria:
    "Perhaps you should examine A6, CANSO, CEAP etc. to see how they work."

  19. Hitler Adikiny Olwenge, Air Traffic Services at Civil aviation-Kenya:
    "OK paula, just remember that in any alliance there must be a nagging problem that needs to be solved between two or three parties. A good example in East Africa is CASSOA where the five EAC states have come up with a solution of solving inspectorate (flight ops, airworthiness and in future ATM) issues by pooling together their own manpower. This has worked and ICAO was impressed by the initiative."

  20. Thank you Hitler for the example, I will like some more information on this. I will send a message when I am ready to research this topic further. Looking forward to discussing about CASSOA with you.

  21. Richard Seaman, President, CEO at Beacon Leadership Development, Inc
    Région de Salt Lake City , USA:
    ""Partnership" has many meanings. If you are talking about alignment of procedures, risk mitigations, alignment of goals and values, then partnering is definitely the answer. Collaborative leadership, training, and universal policy-making is going to mitigate a vast amount of confusion, inconsistencies, and, ultimately, introduce risk in the system. However, there are repeated examples in government and business history where collaboration of business process (user fees or costs, profit sharing, etc.) leads to trouble, both economically and politically.
    Open, consistent, all-inclusive conversation is by far the best, proven defense against organizational drift and complacency in the workplace. It would make sense to transcend the political boundaries, just as aircraft in the system cross through those borders. Meeting often and consistently, without preconceived agendas, to collaborate best practice stories, in-depth incident reviews, and policy decisions, will lead to improved, safer service to the aviation community.
    After 30 years with the FAA as an air traffic controller and manager, I retired last year, and now teach collaboration, interest-based communications, and leadership, so I am obviously a fanatic about open, honest, communication between all parties. I have seen many organizations experience dramatic change and improvement through collaboration. In the U.S. our collaborative efforts extend to users, navigation maintenance as well as aircraft maintenance representatives, airport owners (city governments, most often) and, of course, our labor organizations representing those that actually perform the work. Interestingly, they all share common goals - principally SAFETY!

    Thanks, Paula, for sharing the article, and starting the discussion. I would love to continue, and look forward to others' opinions and feelings. If you have any questions, feel free to contact me."

  22. Thank you! Yes I have questions for a future post on the same topic! I will send a message then.

  23. Carter Brockman,Senior Analyst at NEXA Capital Partners Région de Washington D.C. Metro , États-Unis:

    You have posed an excellent question and the responses offer valuable insight on many of the important elements regarding ANSP partnerships. There are many challenges involved when considering the formation of partnerships between one or more monopolistic type service providers such as ANSPs. We are currently witnessing the struggles to overcome some these challenges with ANSP partnerships around the world today.

    Your question, as well as many others like it, was the genesis behind NEXA Advisors' recent global market study, Air Traffic Infrastructure Global Markets. The study explores in great detail the many components of our modern air transportation industry, including the formation of partnerships among ANSPs and industry. The study also includes an in-depth assessment of the top 60 ANSPs around the world, which may be of particular interest to you. You can find additional information on the ATI Global Markets study at www.atiglobalmarkets.com."

  24. Zlatko Bayer, ATM Systems Specialist at CroatiaControl Ltd.Croatia:
    "It is not completely accurate to call ANSP a monopolistic type of service because for some time national boundaries do not protect your air space from economically more efficient competitor. To answer the original question, ANSPs in the light of centralized services will form partnerships or they will perish. It is not an option any more."

  25. Thank you Carter and yes Zlatko, it is not an option any more but it will be a challenge for the ANSPs who as yet have not defined their organizational structure. The situation is more complicit when we also have to deal with the perceptions and irrational fears of executive management plus stakeholders with conflicting goals. Carter, thanks again for the info, I am looking to develop a model that will be as close as possible to reality and the examples will help me. I will add these comments to what has already been posted on the blog. You guys might find the post for this week interesting even if you may not be very familiar with stakeholder strategy. Thanks again.

  26. Neil Cosentino, FASTA Florida
    Tampa/St. Région de Petersburg, Florida, U.S.:
    "21st century <> Next Gen <> Global airports - are the nexus for the ATM/ANSP community.
    Q - When will your country build a Global Airport[s] and where will the first one be located?"

  27. Alas Neil, my country is a very long way from there even though attempts are being made in that direction.