Disruptive Digital Business Models in Travel
10 years ago no-one imagined Google would be a competitor of travel service companies with their wide ranging network of agencies and on-location travel agents. Today, people use Google searches such as “NY to LA” and instantly get a Google-powered interactive chart of the cheapest airfares between the two cities.
Google, Expedia and other companies do not need an expensive network of agencies and on-location agents. They use their digital assets (the search engine) to provide their customers the cheapest option. Consumers inform themselves using the various information platforms that have pictures and ratings, but book where it is the cheapest. Digital pioneers build their business models on the high margin areas of various industries, so called “cherry picking”.
The challenge for digital players is to extend their business models into traditional areas. Existing players will need to become digital. This game is very different for both sides. It needs to be played thoughtfully, with foresight, and will have to be based on flexible business models as new, disruptive changes appear exponentially.
Analytics and the continuous pressure to be cheaper
Profit margins in the transportation industry have been under pressure since global competition and capacity increased dramatically over the past 15 years. For industries like road transportation, labor costs per tonnage in western countries are easily 400% higher compared to players from Eastern Europe. Companies have to be extremely efficient and need to come up with smart solutions to stay in business.
Transportation companies see the need to remain relevant for their customers. They can no longer wait until someone calls to pick up a shipment. Integration and innovation are key elements on the agenda to continuously add value within the value chain.
As an example, logistics providers take over parts of their customers’ business (component assembly for automotive manufacturers). But increasingly they will also need to take over even more risk commitments such as on-time delivery, fixed rate despite potential volume flexibility, etc.
The required solution to the increased need for efficiency, reliability and the possibility to take more “controlled” risk to a large extent lies in a company’s ability to conduct analytics.
Connecting, processing and interpreting all available internal and external data quicker and better will provide the necessary competitive advantage. Take the stock exchange as an analogy, models today analyze patterns and predict the next best buying moment. Companies who outperform others have better models. For transportation this can be translated to better routes, better commercial propositions, etc.
Today companies often use a limited part of the information they already have available internally to create sound descriptive information (post event). But increasingly best in class descriptive report building will not be sufficient. Leaders will need to know what will happen next – they need predictive analytics.
The internet of things
Digital and analytics is further accelerated by the evolving “Internet of Things”, proven by the unparalleled increase in global connectivity. People are online almost everywhere – but also human interaction is often no longer required to have machines interact with machines.
Cars are now allowed to drive without a human driver in California, United States. Companies make their products smart by adding chips and connectivity to centrally collect information about how the product is used. A good example of how this information is turned into a service was the live traffic information customers could purchase from navigation companies (created by tracking the position and speed of cellphones). This model was only successful for a short time because today it is freely provided by Apple and Google on their smartphones (along with free navigation).
The availability of key information (what, where, condition, etc.) enables companies to provide new innovative business models that will further shake established industries. Car and Truck OEM’s will stop selling products but instead customers will ask for a simple price / km. Freight and Logistics providers will need to offer their customers 100% transparency and either the lowest price or full process risk ownership for delays.
Companies that consistently achieve best results will need to quickly adopt the internet of things and deeply implement it in their digital enabled business model.
Transportation, Travel & Tourism: Experience across a wide range of industries and processes
Dicitas Consulting offers its customers an extensive amount of experience from projects in and around the Transportation, Travel & Tourism industry from strategy to implementation, from starting-up to sustaining, from realignment to turnaround.
We have worked successfully with top- and front-line management in industry segments like freight logistics providers, passenger / cargo airlines and global travel agencies.
Selection of capabilities and processes:
– Sales and After-Sales Excellence
– Marketing, CRM and Digital Transformation
– Customer Service
– Order to Cash, Purchase to Pay
– Inventory and Warehouse Management
– Supply Chain Planning & Execution
– Agency Integration
– Product Lifecycle Management
– Project Portfolio Management
Please contact us to discuss your situation and let us show you the value Dicitas Consulting can add for you.