Another group of airlines sees disruptive innovation as “a threat to existing revenue streams.” And a third group believes the industry is “immune to disruption,” due to the existence of regulatory policies for reasons of “safety and national security.”
However, there is a small group of traditional airlines (including British Airways, Delta Air Lines and Qantas Airways) working on significant transformational changes. Having improved their balance sheets and hoping that the recent financial performance is sustainable, these carriers are now focusing on technology and retailing strategies to decommoditize their products and services, identify marketplace segments to pursue, and commit financial resources to enhance the customer experience.
And there is yet another group, less than 20 years old, basically “business teenagers” with no allegiance to conventional pricing, revenue management or scheduling processes for airplanes, crews and loyalty schemes.
These “teenagers” include Ryanair (which could initiate trans-Atlantic service with narrow-body aircraft and websites enabling comparison shopping), Virgin Australia (which could leverage its partnerships with other airlines to become a “virtual” global player), and Etihad (which could synchronize its physical and digital operations, and “virtually” extend its operations through the networks of its partners).
And from outside the airline industry, platform-focused entrepreneurs could emerge who might attract other players in the ecosystem, including eager investors, to disrupt the non-core business of the airline industry.
They could leverage new points of integration, the exponential and converging technology revolution, comprehensive information on the needs of existing and potential customers, and powerful customer and predictive analytics to provide high-impact “travel solutions” and “total travel care” to all travelers, not just those in the top tiers of loyalty programs.
Transforming To Compete
Some traditional airlines, such as British Airways, Delta Air Lines and Qantas Airways, are focusing on technology and retailing strategies to decommoditize their products and services, identify specific markets to pursue, and dedicate financial resources to enrich the customer experience.
Through disruptive innovation, they could rapidly expand the market by facilitating, with the use of apps, information and services, end-to-end services for customers who are not only connected and influence-driven, but are also looking for (and willing to purchase) personalized and self-controlled services.
Disruptive innovation in business has typically been brought about by entrepreneurs, not by existing traditional businesses.
Outside the airline industry, look at Jeff Bezos and Amazon.com, Reed Hastings and Netflix, Guy Laliberté and Cirque du Soleil, Dietrich Mateschitz and Red Bull, Mark Zuckerberg and Facebook, and Salman Khan and Khan Academy.
From within the airline industry, think about Herb Kelleher and Southwest Airlines in the early years, Tony Fernandes and Air Asia, Bjørn Kjos and the Norwegian Air Shuttle, and David Neeleman and Azul in more recent years.
Disruptive innovation in the airline industry will happen, perhaps more slowly than in other industries due to institutional constraints such as regulatory policies, constrained infrastructure, and control by traditional airlines of hard assets. It will likely be started by a few traditional airlines, plus some that are the unconstrained “teenagers” with no legacy baggage, in the areas of networks, products and operations.
Unencumbered outside-the-industry entrepreneurs first see distribution as a ripe area for disruption, specifically through initiatives to provide travelers exactly what they want, when they want it and how they want it throughout the entire trip. Examples include websites that incorporate search engines that take into account not only past transactions, but also user shopping behavior and expectations.
Customer Behavior Is Key