Customer Centric Business Model Innovation in the airline industry

My travel experience onshort haul ﬂights

A word of warning I’m not an airline expert witha long lasting track record ofoperating an airline. I’m just aknowledgeable customer ofthe airline industry.

Introduction •  Dr. Patrick Stähler, Partner @fluidminds – the business innovators •  Expert on Business Model Innovation •  Passion for customer experience & authenticity 196 cm •  Passionate Mystery Shopper 6”6’ •  Managing Director of Internet Firm Experteer (90 FTEs) •  Born, when the Boeing 747 made its maiden flight •  First website 1996, digerati ever since •  CO2 footprint for flights = 9.421t (not sustainable)

3 disciplines to master air travel Running Yoga to reach •  to store my self connecting into the seat and ﬂights •  to learn to accept what I cannot change Weight Lifting to bring luggage on board so it does not get lost

1Thesis: Airlines are Masters of TransportEconomics not of Customer Experience

Follow me on a booking trip1st moment of truth for airlines Zurich Hamburg

Wow! 3 differentprices for the sameflight (same plane@same time)

50% difference in price for the same flight. That confuses me!400 350 300 +50% 250 200 150 100 50 0 Swiss Swiss Lufthansa eBookers eBookers eBookers ﬁnaly Center booked

2Thesis: Airlines have trainedcustomers to huntfor price bargain not for value

Let‘s take a look whatGoogle (or the people)think about airlines Cheap is associated with air travel. Bad for the industry

Let‘s take a look whatGoogle (or the people)think about cheap = travel

3Thesis: Airlines have used IT to maximize yields. Now, customerstake revenge with systems you can’t beat

In the past you had the IT power to run sophisticated yield managementsystems. You had the power to do all the optimization of your yields

Times are changing The power of the cloud will always be larger than your IT system That’s you

Thesis: The digital and mobile 3customer is aknowledge customer Please treat her/him this way

Times are changing: Thecommon customer has access tomore computing power than youwill ever have. Be prepared. Why should the customer trust your app?

4Thesis: Airlines will becomecommodities unless they create business modelsthat customers love and that are difﬁcult to copy

What will happen when youloose your direct sales channel? What will happen to your proﬁtsif customers outsmart your yieldmanagement systems?

Why shouldcustomers be excited about you?

Why are customerwilling to pay so muchfor a coffee fromStarbucks?

Why so little forairtravel? Is it reallyonly the competition?

Would yo u dare t say this? o Wh be the a at would nswer of your boss ?“Well, I know we are in acommodity market where theprice is key, but I believe we cansell the good for 10x as muchas before.”

Is it just their brandor George Clooney?

The magicformular for Customer utility great ﬁrms customer + value price company + proﬁt costs

To develop a great business model, is toDo the rightthings andnot to do things right The airline industry is the champion of optimization

„What is a business model?“

Are you aware o f your DN A?!The business model is theDNA of your business

The business model givesmeaning to your employeesand customers

1.  What value/ beneﬁt do we create for whom? 2.  How do we do it? 3.  How do we earn money? 4.  What values do we pursue?

Components of a business model Value Proposition What value or beneﬁt do we create for our customers and partners? Value Architecture How do we create the value? Revenue Model How and with what do we earn money? Values/ Culture What values do we pursue?

Value Proposition/ customer Wertschöpfungsarchitektur customers Where is your Value Proposition/ Kunden Angebot Distributionskanäle uniqueness?? Kunden §  Wie sieht mein Angebot §  WhoWie erreicht das Angebot §  are our §  Wer ist mein Kunde? aus? meine Kunden? §  Welchen „Job“ customers? übernehme ich für §  What job do we solve meinen Kunden? Wertschöpfungskette for our customers? §  Was sind die wichtigsten Schritte der Aktivität 1 Aktivität 2 Aktivität 3 Aktivität 4 Kunden Aktivität 1 Nutzen Wertschöpfung? §  Welchen Nutzen stifte ich für meinen Kunden? value proposition §  Welchen Nutzen stifte Kernfähigkeiten Partner ich für meine Partner? §  Welche Kernfähigkeiten §  What value do we create §  Welche Partner brauche ich? benötige ich? for our customers? §  What value do we create for our partners? Ertragsmodell Kostenstruktur Ertragsquellen §  Die Kostenstruktur wird durch §  Womit verdiene ich die Wertschöpfungs-architektur Geld? festgelegt. Kultur/ Werte Führungsstil Beziehungskultur Werthaltung §  Welchen Führungsstil §  Wie gehen wir §  Welche Werte prägen uns? pﬂege ich? miteinander um?

A good business model is allabout being different

And this how the airline industry looks to meBut if everybody is doing thesame, you have to ﬁnd a newbusiness model

5Airlines can learn from ﬁrms that have customer value& trust build intotheir business model and thereby escaped competition

Optimal is when differentbusiness models exists and allhave devoted customers

No hiddencharges atAmazon.

Building trust byhaving no specialdeals.

Trust build intotheir businessmodel

Transparent pricingin the telco industry= innovation Swisscom Mobile •  Simpliﬁed price structure. 0.50 CHF per call for up to 1 hour. Still more expensive then competitor for average call •  Simpliﬁed general terms & conditions (GTCs). No mandatory contract duration •  Result: greater trust and growing market share for the incumbent

Swiss railway (SBB) •  One price regardless of time •  No prebooking, No reservation •  Taktfahrplan (rigid time table with planable departure times like every 30 minutes) •  Actually pretty slow trains; No high speed trains •  Result: Highly trusted

Business model innovationis all about breakingaccepted rules. Beprepared for opposition. „Scary to be this nail. Where will the hammer hit next time?“

More Information onhttp://blog.business-model-innovation.comDr. oec. Patrick Stähler fluidminds GmbH Patrick.Staehler@fluidminds.ch www.fluidminds.ch blog.business-model-innovation.com

Airlines: Master of Transportation Economicsbut not of customer experienceThe need for business model innovation 17th International Airline Symposium, Seattle October 6th, 2011 Dr. oec. Patrick Stähler

http://www.scoop.it	189
http://paper.li	178
http://www.fluidminds.ch	163
http://a0.twimg.com	11
http://www.unap.edu.pe	11
http://us-w1.rockmelt.com	8
http://www.onlydoo.com	1
http://www.linkedin.com	1
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Customer Centric Business Model Innovation in the airline industry

by Patrick Stähler on Oct 06, 2011

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Customer Centric Business Model Innovation in the airline industry — Presentation Transcript