The Digitally Transformed Airline

What does a Digitally Transformed Airline look like?

Airlines worldwide are experiencing significant change because of the spread of new digital technologies, the emergence of disruptive business models and the advent of asymmetric competitors. Many of the assumptions and rules of operating an airline in the pre-digital era are no longer valid. The rise of digital technologies represents both a threat and an opportunity for the airline industry.

What are the potential effects of the rise of digital technologies on existing travel incumbents?
To understand the potential effects, you must first understand platforms: Andrei Hagiu and Julian Wright in the Harvard Business Review write about the platform as a business model that creates value for the owners of the business by facilitating direct interactions between two or more types of customers.

At the most fundamental level, such platforms have two key features:

  • They enable direct interactions between two or more distinct sides i.e. two or more distinct sides (supplier, consumer etc) retain control over the key terms of the interaction, as opposed to the intermediary taking control of those terms.
  • Each side is affiliated with the platform i.e. that users on each side consciously make platform-specific investments that are necessary in order for them to be able to directly interact with each other (e.g. a fixed access fee, using an API to access the platform, an opportunity cost such as having to drive to a shopping mall or lodging the details of a credit card for payment purposes).

So let’s think about the travel industry in this context with some examples of platform businesses:

  • Airbnb – linking hosts with renters.
  • Kayak – linking flyers with airlines.
  • Uber – linking riders with freelance drivers.
  • Booking.com – linking guests with hotels.

Why are platform businesses so important now especially in the travel industry?
A substantial number of platform businesses are described as asymmetric competitors and have badly disrupted the old order e.g. airbnb does not own any property but competes directly with hotel chains while Uber, likewise, has no cars or drivers but competes directly with taxi firms and other ground transportation providers.

Digital technologies are enabling near zero cost distribution, friction free customer acquisition and on-demand scalability through the cloud.

Finally, existing players in the travel ecosystem beware – platform businesses, many of whom are purely digital, can scale extremely quickly using network effects and this leads to ‘Winner Takes All’.

Why are platform businesses so important now especially in the travel industry?
There are three fundamental changes from the consumer perspective that are forcing digital transformation:

  • Consumer empowerment: Mobile and Social have given consumers power to research and interact with airlines and take control of the conversation from the airline and broadcast media.
  • Channel proliferation: Consumers now have an abundance of devices and channels to interact with brands and purchase products, which in turn is forcing the hands of airlines, who have traditionally been laggards of new technologies. This has dramatically increasing the complexity of meeting customer expectations for airlines
  • Customer Experience: The rise of as the key to differentiation has forced airlines to create a single view of customers to address them as individuals and deliver the right offer to the right traveller at the right time and place.

Why are platform businesses so important now especially in the travel industry?
With the rise of platforms, mobile and consumer empowerment, airlines are now embarking on digital transformation projects. However, capturing this opportunity means fundamentally rethinking how to develop their strategic mindset, as well as deliver a series of IT infrastructure projects.

The airlines who wish to digitally transform must think about customers and competition, about data, innovation and their evolving value proposition.

Digital transformation is not an ‘á la carte menu’ of IT projects but about leadership being able to reimagine and reinvent the business for the digital age, and these fundamental leadership questions include:

  • What business are you in?
  • Who are you customers?
  • How do you create value?
  • What digital processes and assets can be used to sustain and grow your organisation?

It is interesting to consider what separates airlines that successfully transform themselves to airlines that fail to prosper in the digital age. Review the list below and think about how digitally transformed your airline is.

With this in mind, what does a digitally transformed airline look like? At OpenJaw, we believe that there are 19 distinct strands to think of:

  1. Offers omni-channel customer service either online or via the call centre;
  2. Provides social customer service with resolution in-channel through the likes of Facebook Messenger
  3. Has a data driven digital supply chain to streamline operations;
  4. Extensive use of data science and analytics, both offline and in real-time;
  5. Uses a plethora of marketing automation tools (‘the marketing cloud’) to fully manage the customer lifecycle;
  6. Supports multiple retailing models such as air and ground ancillary cross-selling, up-selling and redemption;
  7. Uses paid media, retargeting, programmatic advertising and intent data;
  8. Has a mobile optimised website and app;
  9. Shopping cart is persisted and available across multiple channels such as web and mobile;
  10. Supports a wide variety of payment models across multiple geographies and cultures;
  11. Aggregates all data sources to provide a single customer view;
  12. Provides a consistent customer experience across all online channels;
  13. Can practice ‘clientelling’ at various points in the customer journey such as check-in, lounge and on-board by accessing customer history to allow enhanced service;
  14. Product recommendations based on personalisation techniques to leverage web journey, prior history, location, demographic and intent data;
  15. Creates compelling digital content to attract and retain customers to facilitate new and follow-on sales;
  16. Manages an online community through social media integration for loyalty and advocacy;
  17. Uses agile methodologies to deliver successful projects both in IT and business;
  18. Permission to fail, design thinking and entrepreneurial culture; and most importantly…
  19. Digital vision lived through leadership and operations, top-down and bottom-up.

To succeed in any transformation, an airline must not only be able to develop new ideas, new processes and new ways of thinking in the digital realm but needs to have the dedication and the resources to spread and sustain such ideas throughout the business over a long period of time. This is particularly challenging for any large organisation with an embedded ‘business as usual’ culture.

But there are examples around the world. OpenJaw customer, British Airway have embraced many of the above strands, including a wholehearted adoption of airline retailing best practice, which has resulted in in a 10X increase in British Airways Holidays in just five years.

You can transform and prosper in the digital age. What’s important is to start.