A few months ago, I listened in on a Stanford-IATA Aviation Strategy Program webcast of the future of airport from a operations and business model perspective, as well as the airport transformation through technology – Strategy Execution for the Air Transport Industry. If you’re not already signed up to receive webcast offerings from Stanford’s Continuing Education Program, you should be – they’re all free!
For this webinar, experts discussed how innovation, strategy execution and business model change can apply to the challenges that face the air transport industry:
- Dr. Raymond Levitt – Director of the Collaboratory for Research on Global Projects, Professor, Civil and Environmental Engineering
- Dr. Haim Mendelson – Kleiner Perkins Caufield & Byers Professor of Electronic Business and Commerce, and Management Director of the Stanford Global Supply Chain Management Forum
Phase 1 of the Airport Transformation
The first thing that the experts discussed was the changing landscape of public vs. private airports – the airport transformation. In particular, the hub and spoke airport model is leading to more privately operated airports that can support more services and concessions that government-run airports cannot.
For example, adding in more “experiential” and “customer oriented” services such as:
- Taking showers
These are amenities we’ve seen explode overseas, but not so much in the US. In fact, Latin America and Asia were first, finally now the US is starting to catch up. Why shouldn’t airports be offered as a long-term service, where a private operator can do this globally? We at tripchi agree, and we’re betting strategically on this to happen – that’s what we’re building our whole app concept and platform around. That more private operators will run airports, offering more services that focus on value creation and revenue generation, capitalizing on the passenger experience. This is Phase 1 of the airport transformation.
However, from a policy perspective, Some people feel that public goods should not be operated for profit, especially by foreign companies (water supply, power, etc.) – should an airport be thought of as a “public good?” Is it every individual’s right to travel? I’m not sure it is….
These problems can be partially overcome with hybrid models, and structures such as alliance contracting – offering incentives that come at the end of the engineering/construction contract. This was used in Heathrow Terminal 5 very successfully.
Phase 2 of the Airport Transformation
Another aspect that was discussed in airport transformation was the Airbus changes in capacity and 911 – and how this changed the way airport capital facility contracting was done. New technological infrastructure had to be put in place to cope with new security measures, while at the same time simplifying passenger travel. At the same time, technology is helping with logistics/supply chain. Take a look at the cargo side – we’re seeing more electronic and paperless innovations and adaption of technology. Check out my article on Smart Beacons used in the airport if you need convincing.
As the tide is turning on technology in airports, benefits of scale can begin to be seen – this is what the experts called Phase 2 of airport transformation. Technologies are lowering in cost per capability offered – even though current technologies do “roughly the same thing” as before, now they can do more of it, cheaper faster, even though qualitatively the process or application of the technology isn’t changing.
Phase 3 of the Airport Transformation
The third stage of airport transformation (and transformation in general) is where we change the process and we change behavior (of everyone in the system). We can begin to take advantage of what new technologies can actually do, a change in scope. This is a true transformation (revolution vice evolution), where new technology actually transforms the way things are done in aviation, and, sometimes beyond the industry.
Think about the introduction of a car. When it was first introduced, it was a substitution – the car was used in the same way people used the carriage (the horseless carriage) – traveling in roughly the same way, but could now we could travel a little more, faster, and at a lower cost. There was no change in the process. As scale increased (because we had the ability to travel longer distances in a shorter amount of time) people started traveling over longer distances, traveling more, spending more time out etc. – and eventually technology adoption of the car led to a fundamental change in behavior. Now, people don’t need to live where they worked, could move to the suburbs, and change their lifestyle. This created a cultural shift –and transportation changed the nature of retailing, of shopping malls, infrastructure, and the way people lived.
We Are Now Entering the Third Stage in Aviation and Airport Transformation
But the complete transition hasn’t occurred – we are gaining efficiency, but the scope is only changing in minor ways. Now, we can assume that all travelers have a smartphone (hence tripchi). Also today, everything is connected – decisions can be made real-time, which changes how travel bookings are done. With new sensors and ways of interpreting data, Big Data has exploded – we are flooded with information and can sometimes even act on it, and predict where we’re going, with a vision of the future that is actionable.
Finally, with social technologies – leisure travel in the social dimension is huge. Just study the example of what TripAdvisor has done through recommendations from social connections. In fact, the market value of TripAdvisor exceeds the market value of Expedia ($14B versus $10B). Social connections are worth more than the entire set of computer relationships that Expedia can perform.
Traveler centric real-time sets of solutions is what the future of travel is all about, blurring the lines of leisure and business travel. Leisure travel – has typically been thought of about discovery, but we think that business travel could and should ALSO be about discovery. This happens when we move from a process of “I want to go from x to y” to a process that dynamically suggests new places currently unknown.
Where we can create group travel in a more seamless way and use correlation with other activities that may not be obvious to us. For example, through analysis we may discover that people who use Ebay prefer JetBlue, and people who don’t use Ebay prefer United Airlines, and other similar real-time predictions that might fall out for interesting data sets like these. By monitoring peoples’ identities and behavior in context, we can match both content from a marketing perspective as well as content from a value/solution perspective.
Phase 3 of travel and aviation is when technology and analytics discover what we want to do – based on profiles, previous transactions, activities, location where we are right now, combined with our calendar, our customer’s calendar, etc (in context of business travel). This is the secret sauce of tripchi. This is Airports 2.0.