Annual AGIFORS Symposium – Dinner Speech

Operations Research… and May the Past be Prologue
Annual AGIFORS Symposium – Dinner Speech
Montréal, September 26, 2008 >>

Ladies … gentlemen … and O.R. Practitioners

You are at the end … of a few days of intensive discussions … on Operations Research models and their various applications.

In thinking ahead about this address … I was reminded of a good friend of mine … who was Chancellor of a Canadian University … He once told me … that a statistical analysis had been carried out … on the effectiveness of his speeches on various audiences.

The analysis revealed that …

A good start …. Either amusing or thought-provoking … could capture … as one would expect … the attention of his audience for about five minutes.

From then on … the attention span would start to stochastically decrease gradually over the next ten minutes of so.

By the end of that period … it was found … with a margin of error of 1 in 20 … that for ninety-five percent people in the audience … their brains would begin to drift … into a variety of erotic fantasies.

He would then conclude … “You know Pierre … Over my many thirty-five to forty-five minute speeches … you would be simply amazed at the amount of pleasure … I have induced to my audience!”

I wonder how much pleasure the Cuban people would have experienced … listening to a four hour speech by their great leader … Raoul Castro!

Joking aside … it would seem reasonable … to assume … that the attention of any audience decreases over time … and with it …. the absorption rate.

Of course … this would be modulated by the eloquence of the speaker … and the interest the audience in the subject.

Assuming … that we are not talking about politicians … – I apologize … if there are any in the room – … but about people communicating meaningful information …. such as operations research members of AGIFORS undoubtedly would … then the amount of real and valuable … information transmitted … should also increase with the length of the address.

With absorption capability decreasing over time … and the amount of information communicated increasing with time … we have a classical O.R. case … which should suggest … that the optimum speech length should be defined by the saddle point.

However … this by itself would likely be an incomplete model … without the introduction … of some measures… of value to the audience.

We need to introduce a third dimension … a subjective evaluation … of the audience’s measure of satisfaction.

We should assume that satisfaction increases with understanding … but this is unlikely to be a linear function … because having reached a peak … our satisfaction curve would start to decrease with the attention span … and boredom may start to creep in.

I have now managed to complicate my little model … and a new optimum would now have to be found … as a point in our three-dimensional space.

I will leave you to judge … in this particular case …. whether my remarks will come … anywhere close … to the kind of saddle point … which would achieve an optimum level of satisfaction for you … the audience.

Upon receiving the invitation from Lise Fournell to join you this evening … I was very pleased to see that AGIFORS is … in all evidence … still a vibrant group.

As a founding member of your Association … it is most rewarding to see … that the gleam that existed in our eyes at the time … has not only survived … but very much prospered … both in terms of talent … and importance.

The genesis of AGIFORS can be traced back … to an international IFORS meeting in Oslo in 1960 … (the International Federation of Operations Research Societies).

Dr. Sandiford … who was at that time head of the Operations Research Group in Air Canada’s Headquarters … and I … [ I was then heading a small group of Operations Researchers in the Operations Department of Air Canada ] … were the only two Canadian delegates attending this IFORS Conference.

We presented a paper on management simulation … of which several had already been developed in Air Canada.

A number of other airlines’ Operations Research practitioners were also present in Oslo … and the discussions that took place at that time … suggested that there could be some merit in creating an airline group within IFORS.

The choice of setting up a sub-set of IFORS … rather than a sub-committee of IATA … was quite deliberate …. We felt that there was more to be gained … by being part of a broader scientific community … than a sub-set of an airline-driven … commercial and operations association.

The first AGIFORS group met in October 1961 in Sun Valley … New York … and regrouped some twenty-five practitioners.

I undertook to organize the second meeting … which was held … as Lise may have pointed out … in Val Morin … in the Laurentians … just North of Montreal ….. in October 1962.

Right from the start … the airline operation with its complexities … network characteristics and the usual scarcity of resources … appeared to be a natural for O.R. applications.

The need to optimize the utilization and deployment of very expensive assets … the aircraft … the efficient allocation of crews … the need to develop commercial models to deal with the competitive nature of aviation … all of these dimensions were certainly fertile ground for a more rational examination of the factors involved … the various alternatives … and evaluation of potential outcomes.

I note from the papers which were presented at your conference … that schedule models … and revenue generation models …. for instance … are still popular topics.

Of course … they are addressing new realities … such as the optimized routing of air taxis … and operators of business jets.

In the case of revenue generation … the question of product segmentation … customers’ purchasing behavior … and effectiveness of channels of distribution … are still very interesting subjects.

Getting back to that first AGIFORS meeting … I believe that Air Canada was the first … to develop an airline management simulation game.

This computerized airline management game had been one of the papers… we had presented at the IFORS meeting in Oslo.

It has since been extensively used and refined … and today … a later version is a centerpiece of one of IATA’s Executive Management Courses … and still continues to be very successfully utilized.

I recall that … in order to test its realism … we challenged some well-known Canadian businessmen – … two brothers who had built something of an empire in the distribution field – … to play the game against our team of O.R. practitioners.

It was interesting to see that … once they had become familiar with the game … they were able to beat us thoroughly in a competition … demonstrating that their business acumen and experience … could easily outsmart our more limited knowledge … as O.R. practitioners … of operating a business.

The experiment did … however … confirm … – and it was their opinion – … that the simulation we had developed …responded well … to the dynamics of what they considered to be a real life environment.

During this period …I was also very active in the Canadian Operations Research Society … which was also affiliated with ORSA … the American society … as well as TIMS … the Institute of Management Science …

The Canadian experience was quite interesting … as some degree of similarity existed … in response to the problems being faced by the airlines … and some of the other major network operators …whether railroad … or telecommunications.

My involvement in the Canadian Operations Research Society led me to be Secretary of the Society in 1962-63 …and subsequently President of CORS … in 1967.

This invitation to speak at this AGIFORS Symposium … revived my curiosity about the evolution of the field.

Looking up the website of C.O.R.S. … the Canadian Operational Research Society … many of familiar names (subjects) are still being addressed – … scheduling … queuing … simulation … optimization modeling … are all familiar subjects.

Looking up the list of previous CORS Presidents … I saw another thing that had not changed.

They still do not know how to spell my name! … Of course … even mathematicians have their limitations.

Interestingly … I noted on CORS’ list of events … that from the 7th to the 10th of December this year … a conference on winter simulation is being held in Miami, Florida.

They might have considered holding it in Montreal at that time of the year … and experience the real thing!

Operations Research was not very well understood in the early days … and this may well still be the case today.

I remember once being asked … by a misinformed Committee of Parliamentarians … to report on our research into medical surgical operations!

On another occasion …I tried to explain to a U.S. immigration agent what operations research was … which was how I had identified my profession.

After listening to my explanation for about five minutes … he proceeded to write down “clerk”.

I chose at the time not to contest his decision … and simply be content with having been accepted as a visitor … to the glorious land of Uncle Sam!

Another time … I was the Co-chairman of a Joint CORS ORSA Conference in Montreal … I had to get through Customs some 1000 copies the program … which had been printed in the U.S.

Again … I attempted to explain what this pile of documents was all about.

The befuddled Customs Officer was trying to assess what he should charge in terms of customs duty … for this printed material.

In the middle of my explanation I said to him … that Operations Research was to Management like a new religion.

This instantly resolved his dilemma … as religious material was to be admitted … tax free.

With a sigh of relief … he cleared me and all my documents.

I have found … as I suspect many of you have … that the great military strategists … were a good source of inspiration in addressing some competitive situations.

A decisive battle is a zero-sum game … with winner takes all … and as General Paton was fond of saying … “In war there is no prize for second place!”

In a competitive arena … in any specific market … and whether there is only one … or many … competitors against you … good intelligence is paramount.

The basic rules followed by all great Generals … from Alexander the Great … to Napoleon … and even Mao Tse Tung … are amazingly similar.

They considered it to be absolutely essential … to have as up-to-date … and as complete … information as possible about the strengths … the weaknesses … and the basic strategy of their competitor.

They would always … take great care … to engage in a battle at a time … and on a field … of their own choosing … even if it gave the appearance of retreating.

They would take time to simulate ahead of time … the relative position of the respective players during the battle … along with the alternative moves … and likely counter-measures.

Those great Generals would attempt to avoid getting distracted on too many fronts.

When they would have decided to attack … they would concentrate the maximum of their capabilities … on what they believed to be … their competitors’ main weaknesses.

Speed of decision-making … and swift action… are always extremely important factors in ensuring success.

And finally … most decisively won battles … have included a surprise element … sometimes a carefully orchestrated deception …

Once again … good intelligence about what your competitor knows … or assumes … of your strategy … is essential.

Although the principles of military strategy have not fundamentally changed … in my view … the ability to get pertinent information precisely … correctly … continuously updated … has simply exploded.

Multi-sensor scanning … from satellites … from unmanned air vehicles … or from ground-based fixed and moving platforms… are able to provide continuous information through a network-centric capability.

Sophisticated data fusion … filtering and relevancy identification processes …provide valuable information which is transmitted … instantaneously to the field commanders … along with accurate identification of threat and alternative response.

Electronic warfare … an increasingly precise reality … is resulting in substantially increased efficiency of military capabilities.

Once again … processes and systems developed for military applications … are likely to find their way into the commercial world.

Thus … time and time again … the key word is intelligence …which is why the function of Chief Information Officer … the CIO … has become … such an essential member of the senior management team of most … if not all companies.

The variety … the volume … and urgency of issues that need to be addressed … by Executives … may often prevent the careful development of appropriate models to resolve any particular issue …

However … the mental discipline which has been acquired in the development of OR-type solutions … is undoubtedly … very useful in analyzing the issue confronted … and in making the right decision.

Indeed … I often found this type of disciplined approach to be useful during my days at Air Canada.

For example … as Head of Marketing … it proved a valuable tool in identifying …and evaluating … specific strategies … in the light of the competitive environment that we were facing at the time.

Later on … as CEO … a disciplined approach was absolutely essential in evaluating different strategic alternatives … in our efforts to privatize the corporation which … at the time … was State-owned.

Similar approaches have been useful … in my more recent role as Director General and CEO of IATA.

To give you an example of a typical strategic approach …the following anecdote could serve as an illustration.

Towards the end of the last decade …, traffic was growing rapidly between Europe on the one hand … and Japan … Hong Kong … and South Korea on the other.

Unfortunately North Korea … which controlled a rather large flight information region … would not permit any aircraft to cross its designated airspace … thus forcing all airlines to fly around at considerable cost.

This was an increasing source of frustration … and every effort by the international community to influence the situation had failed.

North Korea had a small national airline called “Air Koryo” … which was anxious to achieve some degree of international recognition … and Air Koryo approached IATA to join our Association.

Air Koryo being State-owned … this provided an opening for us to begin discussions with the North Korea government.

We now had a basis for negotiation.

There were two immediate hurdles in suggesting the opening of the North Korea airspace.

The first was that the Pyongyang air traffic control centre … was not adequately equipped … to provide the necessary oversight and control of flights going through its region.

Secondly … communication between North and South Korea was strictly prohibited.

This would become a major impediment … as it would be necessary for the air traffic control centre of Pyongyang … to pass on information to the Seoul Air Traffic Control … as any aircraft crossed its airspace.

An additional factor in our favor … was the fact that North Korea was rather short of foreign currency … particularly US dollars … and they had not been aware that air traffic control centers … guiding airplanes through their airspace … could charge an appropriate fee … and thus earn valuable foreign currency.

We were able to demonstrate to the North Korean authorities … that opening up their airspace to very specific corridors … jointly defined … could be carried out with virtually no security risk to them.

These corridors would enable the international airlines … to achieve considerable savings in time and cost … by crossing that airspace.

As the North Koreans were short of U.S. currency … we offered to advance the funds … to train their controllers … and to adequately equip their air traffic control centers.

We arranged for an appropriate charge formula … collected the fees from the airlines … supervised the upgrading of the North Korean control centers … and thus got the centre to be fully operational.

But there remained a major difficulty … which was the lack of communication between North and South Korea … and North Korea was absolutely rigid on that point. … Under no circumstances could there be any direct communication between North and South Korea.

To overcome this particular constraint … IATA offered … – and subsequently received authorization –… to set up and operate the telephone lines between Pyongyang and Seoul … so that North Korea could continue to feel that they had not established any link with South Korea.

With all this having been agreed … it was implemented. The result was a typical case of Minimax:

Minimum giving in on the part of North Korea in terms of their self-imposed constraints and restrictions … with the maximum amount of benefits derived in terms of improving the functioning of their ATC …generating foreign currency … and achieving international recognition for their airline.

For the international airline community … the ability to fly through the admittedly still restricted North Korea airspace … was providing them with savings in fuel and operating costs of around $150 million a year … well worth the relatively reasonable fee for air traffic control which North Korea charges … and which was based on IATA’s recommended formula.

This was clearly a win/win which … as you would certainly recognize … required the identification of the various factors involved … and the search for the optimum compromise … which finally led to a satisfactory solution.

Finally … I believe … that Operations Research has been … a great incubator for the development of executives … and that this is still largely the case.

In Air Canada … out of the twelve or so … members of the O.R. group at the end of the 60’s … six eventually progressed to the level of Vice President … or Senior Vice President … and your humble servant even made it to the level of President and CEO.

Air Canada is not a particularly unique case in this regard.

Lise Fournel is a good example that … starting as a fairly junior O.R. practitioner less than twenty years ago … one can still become a Senior V.P.

Ladies and gentlemen … the airline industry has always been under stress … and probably always will be … as the current crisis affecting our industry is a good example … of what aviation faces periodically.

There has never been a shortage of issues … and there have always been too few resources.

It is a natural field for O.R. applications.

Over the years … as an O.R. practitioner … I have learned that the KISS principle is useful to keep in mind … (Keep It Simple Stupid).

I have designed models that have virtually collapsed under their own complexity.

Mathematical elegance may be academically attractive … and indeed useful … in getting your papers published … but it may be useless to your airline … if the implementation is overly complicated … and does not yield real results.

I remember that when Yogi Bera was asked … if there was a difference between the theory and practice …. he said …

“Well … in theory there is no difference … but in practice there is!”

O.R. practitioners can be very useful internal consultants … but must remember … that not every problem requires a sophisticated solution.

All too often … executives do not have the luxury of time … They must act quickly … now.

A simple quick analysis … today … with its stated limitations … may still be of better help … than a more thorough analysis … produced too late to impact a decision.

Finally dear colleagues … I guess that it may be permitted to use that term … as a former O.R. practitioner … I feel that … by now …. I may have been sliding down your retention curve … way past the saddle point!

On the basis that no speech is entirely bad … if it is relatively short …I would like to thank you for the opportunity you have given me … to get back to my O.R. practitioner roots.

And to reminisce about AGIFORS … and O.R. in general.

I wish each and every one of you … much success in your respective careers … as O.R. practitioners of course … and also … undoubtedly for a number of you … as airline executives.

Thank you!