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My travel experience on
short haul flights
A word of warning	

I’m not an airline expert with
a long lasting track record of
operating an airline. I’m just a
knowledgeable customer of
the 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
1
Thesis: Airlines are 	

Masters of Transport
Economics	

not of Customer Experience
Follow me on a booking trip
1st moment of truth for airlines 	





      Zurich	

                        Hamburg
Wow! 3 different
prices for the same
flight (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
2
Thesis: Airlines have trained
customers to hunt
for price bargain	

not for value
Let‘s take a look what
Google (or the people)
think about airlines	





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

cheap = travel
3
Thesis: Airlines have used 	

IT to maximize yields. 	

Now, customers
take revenge	

with systems you can’t beat
In the past you had the IT power to run sophisticated yield management
systems. 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
                                    3
customer is a
knowledge customer	

Please treat her/him this way
Times are changing: The
common customer has access to
more computing power than you
will ever have. Be prepared.	





                                  Why should the
                                  customer trust your
                                  app?
4
Thesis: Airlines will become
commodities unless they 	

create business models
that customers love	

and that are difficult to copy
What will happen when you
loose your direct sales channel?	

What will happen to your profits
if customers outsmart your yield
management systems?
Why should
customers be excited
     about you?
Why are customer
willing to pay so much
for a coffee from
Starbucks?
Why so little for
airtravel? Is it really
only 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 a
commodity market where the
price is key, but I believe we can
sell the good for 10x as much
as before.”
Is it just their brand
or George Clooney?
The magic
formular for                          Customer	

                                        utility	

great firms	

                        customer	

                 +	

     value	


                                        price	


                        company 	

                +	

     profit	


                                       costs
To develop a great business model, is to


Do the right
things                  and

not 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 the
DNA of your business
The business model gives
meaning to your employees
and 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 all
about being different
And this how the
                                airline industry
                                looks to me




But if everybody is doing the
same, you have to find a new
business model
5
Airlines can learn from firms that	

have customer value
 trust build into
their business model 	

and thereby escaped competition
Optimal is when different
business models exists and all
have devoted customers
No hidden
charges at
Amazon.
Building trust by
having no special
deals.
Trust build into
their business
model
Transparent pricing
in 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 innovation
is all about breaking
accepted rules. Be
prepared for opposition.



                            „Scary to be this nail. Where
                            will the hammer hit next
                            time?“
More Information on
http://blog.business-model-innovation.com

Dr. oec. Patrick Stähler	

fluidminds GmbH	

Patrick.Staehler@fluidminds.ch	

www.fluidminds.ch	

blog.business-model-innovation.com
Airlines: Master of Transportation Economics
but not of customer experience
The need for business model innovation	





17th International Airline Symposium, Seattle	

October 6th, 2011	

Dr. oec. Patrick Stähler

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Customer Centric Business Model Innovation in the airline industry

  • 1. My travel experience on short haul flights
  • 2. A word of warning I’m not an airline expert with a long lasting track record of operating an airline. I’m just a knowledgeable customer of the airline industry.
  • 3. 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)
  • 4. 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
  • 5. 1 Thesis: Airlines are Masters of Transport Economics not of Customer Experience
  • 6. Follow me on a booking trip 1st moment of truth for airlines Zurich Hamburg
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  • 10. Wow! 3 different prices for the same flight (same plane @same time)
  • 11. 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
  • 12. 2 Thesis: Airlines have trained customers to hunt for price bargain not for value
  • 13. Let‘s take a look what Google (or the people) think about airlines Cheap is associated with air travel. Bad for the industry
  • 14. Let‘s take a look what Google (or the people) think about cheap = travel
  • 15. 3 Thesis: Airlines have used IT to maximize yields. Now, customers take revenge with systems you can’t beat
  • 16. In the past you had the IT power to run sophisticated yield management systems. You had the power to do all the optimization of your yields
  • 17. Times are changing The power of the cloud will always be larger than your IT system That’s you
  • 18. Thesis: The digital and mobile 3 customer is a knowledge customer Please treat her/him this way
  • 19. Times are changing: The common customer has access to more computing power than you will ever have. Be prepared. Why should the customer trust your app?
  • 20. 4 Thesis: Airlines will become commodities unless they create business models that customers love and that are difficult to copy
  • 21. What will happen when you loose your direct sales channel? What will happen to your profits if customers outsmart your yield management systems?
  • 22. Why should customers be excited about you?
  • 23. Why are customer willing to pay so much for a coffee from Starbucks?
  • 24. Why so little for airtravel? Is it really only the competition?
  • 25. Would yo u dare t say this? o Wh be the a at would nswer of your boss ? “Well, I know we are in a commodity market where the price is key, but I believe we can sell the good for 10x as much as before.”
  • 26. Is it just their brand or George Clooney?
  • 27. The magic formular for Customer utility great firms customer + value price company + profit costs
  • 28. To develop a great business model, is to Do the right things and not to do things right The airline industry is the champion of optimization
  • 29. „What is a business model?“
  • 30. Are you aware o f your DN A?! The business model is the DNA of your business
  • 31. The business model gives meaning to your employees and customers
  • 32. 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?
  • 33. 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?
  • 34. 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?
  • 35. A good business model is all about being different
  • 36. And this how the airline industry looks to me But if everybody is doing the same, you have to find a new business model
  • 37. 5 Airlines can learn from firms that have customer value trust build into their business model and thereby escaped competition
  • 38. Optimal is when different business models exists and all have devoted customers
  • 40. Building trust by having no special deals.
  • 41. Trust build into their business model
  • 42. Transparent pricing in 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
  • 43. 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
  • 44. Business model innovation is all about breaking accepted rules. Be prepared for opposition. „Scary to be this nail. Where will the hammer hit next time?“
  • 45. More Information on http://blog.business-model-innovation.com Dr. oec. Patrick Stähler fluidminds GmbH Patrick.Staehler@fluidminds.ch www.fluidminds.ch blog.business-model-innovation.com
  • 46. Airlines: Master of Transportation Economics but not of customer experience The need for business model innovation 17th International Airline Symposium, Seattle October 6th, 2011 Dr. oec. Patrick Stähler