Ai Editorial: A methodical approach to digitalization – how to achieve tangible results?

First Published on 17th July, 2018

Ai Editorial: Team effort and an iterative and phased approach have stood out in the way the likes of JetBlue, Lufthansa and Ryanair have gone about digitalization, writes Ai’s Ritesh Gupta

 

Airlines that have embarked on the path of digitalization are open to recruiting people from different backgrounds – VC, start-ups, data science etc. and encouraging their staff to think autonomously to innovate and validate at speed.

There are certain carriers such as Lufthansa and JetBlue that have chosen to incubate new, stand-alone digital ventures of particular strategic relevance. Among others, Ryanair and Air New Zealand have chosen to transform the digital experience of passengers by recruiting specialists in the arena of user experience (UX design), data science, product designers etc. These carriers started their journey of digitalization 2-4 years ago. There are already signs of how dedicated resources and investment are improving upon the passenger experience. And the approach of these carriers needs to be considered:

·          Team effort: JetBlue, as a parent company, chose to assess the early stage start-ups via its arm, JetBlue Technology Ventures (JTV). The team at JTV not only evaluates the course of an early stage start-up but also links them with the parent company in take caring of pain points in the passenger experience. As explained by JetBlue in an interview with Ai, majority of the JTV’s portfolio “are companies that would work with JetBlue in 2-5 years”, even though some might begin commercial pilots in less than 2 years, and a small percentage of the portfolio includes moonshot investments. Among the list of companies that JetBlue has already chosen to work with includes Gladly for its customer service platform. The plan is to have continuous, real-time conversations through whichever channel they prefer at any given point of time. JetBlue chose to bank on a modern messaging interface that gives the airline the ability to communicate across channels. And Gladly asserts that the platform equips the airline with a passenger profile, not a case number. The customer service software captures the full history of every conversation. The output is a single conversation stream that brings human touch to serve a passenger in an earnest manner.

As for the approach of units like JTV or digital labs, the core team, including senior and experienced staff from the airline gets involved as early as possible. The work isn’t done in silos, expertise of various stakeholders involved – the airline, the VC arm or digital labs and the start-up jointly comes into play and eventually a specific solution for passengers is created.

·          Iterative and phased approach: Ryanair has come a long way from an airline that was associated with ways focused solely on reducing cost. In fact, the shift to focus on digital assets is gaining traction as the airline’s "MyRyanair” membership has grown to 43 million. It was at 20 million or so in March last year. Also, the revenue generation by refining of digital assets is paying off, too. According to Ryanair’s annual results, the mobile and digital platforms have delivered a 13% increase in ancillary revenues (+4% per guest) to over €2 billion. Ancillaries accounted for 28% of revenue. Even as Ryanair has been focusing their digital retail platform, it needs to be mentioned that there could be shortcomings if the structuring isn’t handled properly.

If a full-service carrier intends to embrace a digital retail platform, then how should they go about drifting away from a heavy focus only on their process-centric IT system and bring in a business-critical digital platform? It is imperative to go after continuous delivery while running legacy systems, get closer to a series of quick wins in order to instil confidence in the organization and the digital platform has to be decoupled from legacy release cycles. There is a need to recognize the distinctive nature of digital platform economy versus traditional IT systems. “This may mean that the internal team is split into two parts so that it does not lead to confusion. It is very likely that airline will need to look for external partners to initiate digital platform strategy, just like Ryanair did,” explained Marko Javornik, VP/ GM Mobility and Travel, Comtrade Digital Services.

Javornik also underlined that the strategy is very important.

“Airline should be realistic in terms of what it can achieve. This means it should not try to compete with giants directly, but it also means it should not run away from ambitious plans. Another point of consideration is the significance of iterative and phased approach. Amazon started with books and then went to CDs and other things. The same applies to airline. Having a very small vertical slice working well can be immensely powerful. Building a kingdom in one go will probably fail in the digital world,” shared Javornik.

In an interview with Ai, ThoughtWorks also indicated that from a technical standpoint, the early digital initiatives are sustained via digital technologies that act as a 'shock absorber' between two systems running at different speeds. This ensures that neither system compromises the other’s speed and performance.

 

Hear from senior industry executives about the significance of running a digital platform at the upcoming #MegaAPAC - Mega Event Asia-Pacific (Ancillary, Loyalty and Co-Brand Conferences) to be held in Bangkok, Thailand (28-30 August, 2018).

Follow Ai on Twitter: @Ai_Connects_Us

 

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