At the end of the discussion, Larson asked audience members what they were doing to market O.R. I could not keep silent. I stood up and told the crowd what we are doing at the Indian Institute of Management, Ahmedabad. Later, many people at the conference came up to me and wanted to hear more about the program. What follows is a detailed description of the growth of the Management Development Program (MDP) in revenue management at IIMA.

Brief History of RM at IIMA


IIMA first offered the MDP in 2004, marking perhaps the first time that a business school in this part of the world (Indian sub-continent) offered a MDP on a subject whose fundamentals are based on management science or operations research. It may be useful to share how it happened.

Revenue management was introduced at IIMA in 1998 through a quantitative methods-II course in the regular post-graduate program in management (read MBA program). The revenue management portion of the course consisted of one 70-minute session in which we discussed the American Airlines case. We introduced another course on mathematical modeling as an elective course for the MBA program in the 1999-2000 school year, which was described in an earlier article (Dutta, 2002). In this course, three to five sessions are allotted to revenue management-related concepts.

The idea of launching an MDP or full-fledged MBA course on revenue management was there for some time, but several problems slowed its debut. First, it was a new concept, always a difficult hurdle to overcome in many academic departments. Second, it was based on management science and operations research, making it difficult to market to business students who are looking for cases where revenue management has been applied in Indian industry. They would like to hear from a practitioner who has experience implementing RM solutions in the real world. While I have some experience using O.R. models in steel companies, I had no experience in the RM area, and there were no other faculty members at the Institute who had real-world experience in revenue management. We found the solution to this problem from a person of Indian origin who left academia and is currently working in revenue management.

Nilotpal Chakravarti is a former faculty member at Indian Institute of Management, Calcutta (IIMC) who quit his job at IIMC in order to work in the revenue management department at Singapore Airlines. Now a consultant in Singapore, he said he would help us as a guest faculty member. So, on a chilly evening in December of 2003, Dr. Chakravarti, Professor G. Raghuram and I met for dinner at a New Delhi hotel to map out plans to offer an MDP in revenue management at IIMA. Two months later, we created a program outline.

If "mathematics," "statistics" and "management science" are the most feared and/or hated words in business schools, how is it that mathematics, statistics and management science are becoming the core competency of so many organizations? Still, there were serious concerns that India was not ready for revenue management. Some suggested that this idea was too new for the country and that we should not venture into the field. Yet, it was hard to ignore the fact that discounted airline tickets and hotel rooms — both obvious signs of revenue management at work throughout the world — were becoming more and more visible in India. In addition, the service sector of the Indian economy (representing approximately $2 trillion in purchasing power) was growing at a very rapid rate, and IIMA wanted to use the full potential of this growth as a part of service sector management. Therefore, while the concern for the success of the MDP was genuine, the Institute knew that it was now or never for an MDP on revenue management. Based on these discussions, IIMA decided to take the risk and launch the revenue program in 2004 based on the course outline that we had developed in advance.

Indian industry responded well to the call. We drew 26 students from various industries, well above our break-even number of 15. At IIMA, we generally do not like to continue with a program that does not meet the break-even number. The participants came from Indian railways, hotels, telecoms and the transportation sector, as well as consulting companies that provide solutions to airlines. The response provided a sense of satisfaction to the faculty.

Gap in Course Supply, Demand


We found that India is, indeed, ready for revenue management. However, we also discovered there was huge gap between what the participants wanted and what we were offering. This called for serious corrections to our course offerings.

We wanted the program to focus on how to manage revenue in a better way. In order to do this, we had to study and understand the current practice of revenue management in the relevant sectors of Indian industry. Therefore, we decided to go to different parts of India and talk about revenue management and its principles, and study its current practices in Indian industry. Two major Indian hotel chains implemented revenue management systems in 2005. We decided to study them as a part of our effort to learn the best practices available in India. We also decided to study the existing literature on teaching of revenue management in INFORMS journals like INFORMS Transactions on Education.

We looked at the two possible course outlines that were offered in other parts of the world. The first was an article by Professor Robert Phillips (Phillips, 2003) describing a course at Stanford. The other outline we looked into was the one offered by Professor Ioana Popescu (Popescu, 2003) at INSEAD. While we looked into these two courses, we knew that the realities "on the ground" in India were a little different than those in Western countries. Therefore, we invited other guest faculty to share their experiences in Indian conditions.

We found that it is not possible to develop a MDP with one or two people. Fortunately, one of the advantages of being in a business school is that you have multiple disciplines represented on the faculty. If you want a well-balanced cricket team, you can't expect one person to do the batting, bowling, fielding and wicket-keeping. Likewise, if you need a discussion of the legal aspects of revenue management, it is better to give it to a faculty member who is trained in law. Professor Anurag Agarwal, who was trained at Harvard Law School, was given the task of teaching legal aspects of RM. Similarly, Professor Satish Deodhar, who has a Ph.D. in economics from Ohio State University, took the sessions on pricing theory. Professor Raghuram, who has a Ph.D. from the Kellogg Business School, discussed the portions on market segmentation. Professor Rajanish Dass, a graduate in electronics engineering and a doctorate in information technology, did the session on revenue management applications on telecom sector. We also had introductory sessions on probability concepts and forecasting taught by Professor Arnab K. Laha, who did his doctoral studies at the Indian Statistical Institute, Calcutta (now called Kolkata). My sessions were limited to optimal pricing theory and hotel revenue management and railway revenue management. In addition, we have developed a game on pricing. In the game, participants are divided into four teams and each team is running an airline and competing with the other teams. Their job is to set the best prices so that they can maximize their revenue.

Our invited faculty member, Chakravarti, did the introduction, valedictory and another session on EMSR concepts. We invited the vice president of IDEAS (a revenue management software company in India) to demonstrate the software related to RM, and the managing director of Computerized Reservation Information System to discuss the possibility of using revenue management at Indian Railways. A total of nine faculty members participated in the four-day course.

The participants for the second program in 2005 were similar to the first program held in 2004. We experienced an increase of 42 percent in the number of participants (37 participants turned up for this program). There were 15 participants from hotels and 10 from Indian Railways. The others came from the telecom, consulting, broadcasting, health care, software service providers and manufacturing sectors. Looking toward the future, we intend to limit the class size to 40 students; if demand exceeds the capacity, we could choose our profile of participants.

Future Looks Bright


The future of revenue management in India appears to be very bright. Most of the supply chain problems can be viewed as a pricing and revenue management problem.

It typically takes about five years for an MDP to stabilize. We are confident that this MDP will be successful in India. If so, it will help create opportunities for management science teachers and researchers, as well as software system developers. Software solutions providers like SABRE and IDEAS are already in India. Once revenue management becomes a part of service management, other software solution providers will enter the market in India. India already boasts world-class software development companies such as TCS, Infosys and Wipro. Some of them attended our program. They now have another area to work on.

India is not only ready for revenue management, but there is a need for trained people in RM. As IIMA is a role model for many management schools in India, we hope that other schools in India are likely to offer this program in future.

The Science of Better campaign is one way to promote O.R. in the United States. We think another way to promote O.R. is to create courses in MDP and to show managers how it works. Revenue management offers one of the best opportunities to showcase O.R., whether or not you wear a Science of Better hat.

Acknowledgments


In April 1993, Professor Yahuda Bassok and I first presented the case on American Airlines to a class in India. That was my introduction to teaching revenue management. INFORMS President-Elect Mark Daskin later taught me the basics of transportation system analysis, where I leaned more about revenue management. It was during this time that my classmate, Brian Monteiro, was working on his dissertation on network revenue management. As time passed by, my friendship with Brian grew. As I started learning more and more of what Brian was doing, my interest in the topic grew. Later, while developing the course, I interacted with several people, including Professor Peter Bell, who motivated me even more.

I would also like to thank several people who helped me in developing this program. Andrew Boyd shared his slides that describe his experience with German railways. Peter Bell came to Ahmedabad in 2005 and gave a very interesting presentation. He also helped two MBA students of IIMA to develop a good case on implementation of revenue management. I attended a talk given by Professor Ioana Popescu in Instanbul in 2003 and immensely benefited from the course she designed.

References

1. Dutta G., 2002 "Practical Project: Teaching Applied O.R. in India's Harvard Business School," OR/MS Today, Vol. 29, No. 2, pgs. 28-31.
2. Popescu I, 2003, "Dynamic Pricing and Revenue Management," EURO INFORMS Conference, Istanbul.
3. Robert Phillips, 2003, "Teaching Pricing and Revenue Management," Informs Transaction on Education, retrieved from http://ite.pubs.informs.org/Vol4No1/Vol4No1toc.php.

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