OpenJaw CEO: 7 challenges airlines face in 2019
Airlines should learn from tech titans about the acquisition and use of data.
I have found that there are a set of common themes and common challenges that come through during conversations with airlines.
Many of these challenges are themes that are similar across all industries, not just aviation.
Our stated mission is to "open the world of travel," as part of our goal of "turning travel companies into travel retailers," so we hope you can use these insights when shaping your business plans.
Challenge #1 – Recognizing the asymmetrical threat from tech titans such as Google, Amazon, Facebook and Apple (GAFA)
Google, Amazon, Facebook and Apple (GAFA) in the west, and Baidu, Alibaba, Tencent and Xiaomi in China (BATX) are growing in dominance and setting the agenda across every realm they touch. Each of the big tech players are creating their own platform ecosystem – and the consumer is a willing participant.
The big tech brands such as Apple, Amazon, Google, Microsoft and Facebook are rapidly diversifying their propositions and expanding a whole range of services.
Think of Amazon Echo and AWS, Facebook’s Messenger and WhatsApp, Google and their connected home and driving cars initiatives.
Indeed, Gartner calls this mix of new interfaces, devices and content "the intelligent digital mesh." And this "digital mesh" is enabled by these brands’ powerful digital platforms, creative business models and data.
What is happening in the West is also happening in China. The vast majority of Internet activity in China runs through proprietary applications run by Tencent and Alibaba.
The explosion of e-commerce in China is almost entirely based on these platforms. Alibaba’s Alipay and WeChat Pay are now the dominant forms of payment in China – just as important as cash.
However, it’s not just the GAFA or BATX that are the challenge for airlines.
Technology-driven travel brands like Ctrip, Skyscanner, Booking.com and Airbnb have created an expectation of how travel can be researched, priced, purchased and experienced.
For 2019, the question airlines need to ask is: What if your customers get captured by these brands at the top of their decision-making funnel?
Challenge #2 – What can we learn from Big Tech? Use their special sauce - Big Data
If there is one thing we have learnt from the titans of tech, it’s their acquisition and use of data.
At the heart of all the press coverage about the big technology brands is data: Greg Williams, Editor of Wired magazine encapsulates this in one sentence: "Data is their key enabler".
Just like Big Tech, data can be the game changer for an airline.
Airlines are awash in terabytes of data drawn from different sources and different customer actions, for example, reservation history, fares and pricing information, PNRs, yields, ancillary preferences such as seats, cars or hotels, social media comments or complaints.
Each airline customer leaves this trail of real-time data across multiple channels and devices right through the customer journey: during research, planning, price search, comparison, booking, in journey and after their journey.
Data is a massive opportunity: what are your plans to acquire, keep and use your own data? How do you plan to unlock the value of your data to make it relevant and actionable?
In 2019, the real questions aviation CEOs need to ask is: "Are you ready to become a data-driven airline?"
Challenge #3 – Don’t start with trying to be the Amazon of Travel
Start with the Amazon ethos. People talk about the "Amazon Of Travel" - indeed, it is one of the most talked about themes in the airline world in the last few years.
But most airlines who talk about being the "Amazon Of Travel" are approaching it with a different mindset than Amazon.
They think that being the "Amazon Of Travel" means that they can sell more to their customers.
That’s not what Amazon is about: Jeff Bezos points out that Amazon does not simply "sell stuff." Instead, by putting the customer at the centre of everything it does, it helps "customers make purchase decisions."
However, there is another reason that talking about being the "Amazon Of Travel" is not grounded in reality.
Amazon has a set of structures and practices around innovation that enable them to put the customer at the center of everything.
Amazon CTO Werner Vogels wrote a blog post in 2006 called Working Backward, explaining the notion: "To ensure that a service meets the needs of the customer, we use a process called Working Backwards in which you start with your customer and work your way backward…. the goal is to drive simplicity through a continuous, explicit customer focus."
The challenge for airlines in 2019 should not be the goal of becoming the "Amazon Of Travel."
Instead, the aim should to understand and apply the mindset of Amazon – "continuous explicit customer focus" – in other words, customer centricity.
Challenge #4 – Aviation is lagging behind consumer adoption of technology
Forget seeing the world through the frame of a mobile strategy: mobile is the centre of the customer’s universe.
As a result, travel brands need a shift to see the world of customer experience through their lens.
"The customer has become a monster through mobile" encapsulates how this world of mobile-immersed passengers have developed expectations of immediacy and capability that airlines are simply not fulfilling.
Catching up with the customer is an ever more challenging target for airlines in 2019. Customers are exposed to new user experiences and new capabilities every day.
The questions for airlines in 2019 is whether they want to get left behind or embrace reality?
Challenge #5 – Conversational interfaces: Welcome to your new (digital) employee
Many airlines have created a direct strategy on the basis that the typical consumer is sitting diligently on a PC or laptop using a browser.
A quick look around our daily lives should disavow us of that notion.
The smartphone has changed that thinking forever: the travel customer is on WhatsApp, Facebook Messenger or WeChat, and wants to interact with somebody directly, not wait for 45 minutes for a call center to answer.
Facebook Messenger and WhatsApp are generating 100+ billion messages a day and WeChat in China is generating 230+ billion messages a day.
In 2018, the aviation world has figured out that the consumer is using messaging – including voice messaging – in all aspects of their daily lives.
And they recognized that conversational interfaces can add value to a passenger at the same time as reducing cost.
Today, conversational interfaces are live, in action and working today for passengers from Mexico to Manila and from Chengdu to Copenhagen.
Consumers want to communicate via their preferred social preferred channel. The challenge for airlines in 2019 is to recognize the channels that the customer is engaging with and "fix for that."
Challenge #6 – NDC: no longer a messaging standard, now a game-changer
In 2018, the aviation industry finally realized that NDC is not just a messaging standard, it is about becoming an airline retailer.
The spirit of NDC is well captured in IATA’s slogan – "Together, Let's Build Airline Retailing".
Becoming an airline retailer means expanding distribution channels and products, controlling the offer, enabling full transparency of the shopping experience and product differentiation.
However, until recently, airlines did not see the opportunity of NDC.
Airlines largely saw NDC as a cost-saving device, instead of seeing the opportunity to unlock a comprehensive retail capability.
In 2018, OpenJaw created an NDC Centre of Excellence to fast-track NDC in the market, as we saw more and more airlines realizing they could challenge the current distribution model and take back control of offer creation.
Research by the OpenJaw NDC Centre of Excellence suggests that in 2019, the adoption of NDC by airlines will continue to accelerate with the effective use of NDC standards to introduce new products and offers to travelers gaining traction.
The challenge with NDC for airlines in 2019 is this: get started on the NDC journey if you have not done so yet. And, if you are already making tentative steps, commit fully to NDC and you will start seeing results this year.
Challenge #7 – Understand this number: 99.99%
What does the number 99.99% represent?
The percentage of the smartest people in travel who DON’T work for you. Yes, the people who DON’T work for you!
Let me explain: Bill Joy, one of the founders of Sun Microsystems framed the principle that "no matter who you are, most of the smartest people work for someone else.”
Bill Joy argued that "it's better to create an ecology that gets all the world’s smartest people toiling in your garden for your goals.”
The stark reality is if you rely solely on your own employees, you’ll never solve all your customers' needs. Think about it: every technology company in the world is in a race to get the best talent.
They can afford to pay higher wages than many other businesses – including airlines.
Here is the challenge for airlines in 2019 who wish to get the world’s smartest people working for them:
* Look for opportunities in your business model or your technology to build-in co-creation with users, suppliers or others in your network. In other words, design for an ecosystem.
* Drive an innovation culture within your airline: having an "Innovation Mindset" will transform your culture, your practices and mindsets.
* Think collaboration both internally and externally: Few great products are developed by a single employee brainstorming in a cubicle.
At OpenJaw, we still see a lot of airlines focused on making one offer: a seat for sale.
This "seat selling" approach has led to price-driven competition, commoditizing the airline’s offering, and making them indistinguishable from the competition.
When airline seats are a commoditized product, the opportunity for revenue and margin growth is limited.
By adopting a retailing mindset, more sophisticated airlines can have a new strategy: "I have this set of customers, so how do I fulfill as many of their end-to-end travel needs to capture the maximum share of wallet?"
Airlines are rapidly implementing more and more sophisticated retailing strategies.
Read Original Article