The story of Scandinavian Airlines System during the early 1980s is one characterized by a remarkable turnaround. For a number of years, SAS had been in decline, with a focus on technical proficiency and safety, but a deemphasis on customer service and "frills." In a competitive environment, the result was a loss of business and a loss in dollars of $17 million in 1979-1980. By 1982-1983, however, that loss had been reversed and there was an operating profit of $48.9 million.
This is largely attributed to the new corporate philosophy of president and CEO Jan Carlzon. Carlzon was a service-oriented businessman who reversed the focus on technology and cost-cutting, reorganized the company, replaced 13 or 14 senior managers, and emphasized the importance of front-line staff who dealt with customers. He focused on the frequent-flyer businessperson as the linchpin of his growth plan, and encouraged employees to innovate and respond creatively to customer needs. He also reduced administrative costs and encouraged employees to reduce costs that were unimportant, while providing excellent services in areas that the customers desired. His corporate structure was decentralized, emphasizing the development of entrepreneurial profit centers that operated more independently. He eliminated the detailed manuals, and emphasized a few simple principles in his "Little Red Books."
The contrast between Hagrup and Munkberg's tenures and that of Carlzon is instructive. The first two men attempted to follow traditional business practices, but did not succeed. Hagrup was focused on technical proficiency and cost-cutting, while Munkberg was particularly concerned with cost-cutting and profit-oriented management. He began the changeover toward an organization which delegated more responsibility and authority, but did not succeed rapidly enough and was replaced by Carlzon.
Kao (1989) noted that Munkberg sought evolution within the organizatio...