Heard Here First

They sound familiar because they’ve come to be widely accepted by the travel and technology industries, or they have been proven right overtime.  You heard them here first in any case.

Here are just a few of the predictions, forecasts, and strategic assessments I’ve made over the years in print that gave you early warning of what was going to happen–if you were reading these pages.  Often you would have had five or ten years to plan and make adjustments to your business or technology position.

  • Proprietary operating systems were not the way and would be overtaken by UNIX (1984).
  • Projects for so-called “neutral” reservations systems were not going anywhere then (1984) or hence (1998).
  • The cost of replicating existing CRS functionality vastly exceeded the trivial amounts neutral system backers projected (1994).
  • ETDN initiatives were dead on arrival because customers didn’t want them (1991)
  • Ticketless travel was the future of the industry (1985).
  • Travel Management Companies (TMCs) that built their service profiles around ticket issuance could not survive and desperately needed reengineering (1991).
  • The long-term position of CRS technology in travel distribution should be seriously questioned (1989).
  • Travel technology offerings do nothing to boost productivity–a critical strategic deficiency for TMCs and their customers (1991).
  • Airline “fare simplification” schemes are short-term and will fail within months (1993).
  • The strategic technologies of major TMCs are ill-conceived and unsustainable (1993).
  • PCs do not boost individual worker productivity (1993).
  • Travel distribution will evolve, resulting in the displacement and disintermediation of TMCs unless they take immediate steps to redesign their businesses (1994).
  • The Internet is not the “great equalizer” of agency competitiveness; most agents will be big-time losers on The Internet; only a handful of major, well-funded entities will survive (1995).
  • No electronic travel distributor understands their customer or knows the first thing about what those customers will really buy (1998).
  • Internet travel companies need real customers and real earnings before they can be considered real businesses (1999)
  • The Y2K catastrophes predicted for travel and society in general won’t happen (1998).
  • On-line travel auctions won’t succeed (1999).
  • Without something to sell, techno-gadgets only cost you money (2000).
  • Well-managed travel companies (agents and vendors) would recover quickly from September 11, 2001 (2001).
  • IATA’s New Distribution Capability is a poorly conceived program that goes far beyond data standards–and it probably won’t work (2013).
  • Open Booking, Travel Management 2.0, and similar ideas are unproven, untested, and unreliable theories that pose serious business and operational risks to travel buyers that are not offset by speculative benefits (2013).
  • Travel distribution “ecosystems” have been tried before and don’t benefit the industry (2014).

 

Critiquing the Travel Technology Ecosystem

Aligning business operational models with ecological terms has become a popular pastime, especially in technology. Almost 20 years ago, Harvard academic James F. Moore developed the idea in his business strategy book, The Death of Competition.i

Refinements and corrections continue to the present day, but some of his fundamental premises have become part of the business landscape. The travel industry is no exception–albeit most people espousing the concept deviate significantly from the standard definitions and describe the ecosystem to meet their unique business objectives.

Travel Ecosystem 20140626.GIFEssentially, the basic theories say that businesses can best succeed when they consider their business environment, and not just their competition, or even meeting the needs of their customers. Various businesses and their services can contribute not only to delivering products and services that customers find valuable, but also toward making the business environment positive.

These disparate entities are often themselves suppliers and customers of each other, and hence form part of the ecosystem in multiple ways. Moore suggests that enlightened companies will enhance the ecosystem by creating mutually beneficial relationships not only with customers and suppliers but also with their competitors.

The accompanying graphic shows a simplified view of how the major components of the travel management process conceptually work together and reinforce both each other and the business environment.ii

Moore’s book also says that there is something called an “ecosystem leader,” which is a company that creates a shared vision that others can use to, for instance, align their investments. Much of the book is devoted to examples of how this sort of leadership has occurred.

Business Leadership Examined


The travel industry has never been in want of companies anxious to lead the ecosystem–almost always in directions and ways that they created and find beneficial. This is not a new idea, nor did it originate with Moore–much of whose work the travel industry amends so as to be unrecognizable.

Forty years ago a few large airlines with technology assets began projects that became CRS and later GDS. These represented the most tightly integrated ecosystems the industry has ever seen.

They were managed along the business strategies their owners desired to pursue, and they carried the industry to new levels of productivity that would not have been otherwise possible. Collectively, most of the CRS/GDS industry was also part of a larger ecosystem lead by IBM–which provided the tools that made them work.iii

The leadership position of the GDS has collapsed over the last 15 years, which most observers conclude was probably positive. Yet, some of our industry colleagues advocate assembling new ecosystems, of course organized around new leaders, as the best way to ensure innovation and proper attention to customer priorities.

Are they right? What can we learn from prior experiences in an industry organized in this way?

Ideas Aren’t Real


I’ve wondered why business ecosystems are such popular discussion points. Once you understand how they are supposed to work, and put the business school jargon aside, most examples are seriously flawed.

Ideas aren’t real, in that they are abstractions of how people think things should work, not how the do work. A few lessons from experience are in order:

  1. No one can guarantee that the vision held by the ecosystem leader is correct, or that the leader executes it properly. More often, that vision is deficient and in pursuing it, the ecosystem leader and its followers succeed in repressing competition and innovation.
  2. Remember, while the early advances of CRS/GDS brought undeniable benefits, innovation quickly became difficult, and usually grudging, especially elsewhere within the ecosystem. It encouraged that type of behavior and it was not until it partly collapsed that the broad product and service industry innovation we see today became practical.
  3. Most examples of ecosystem leaders and supporting business systems impose costs on the participants that would not otherwise be there. This is particularly true in the travel industry, where suppliers have complained about the costs of the GDS ecosystem for decades.iv
  4. Not all participants in ecosystems add value In travel, some companies that are assumed participants in fact detract from the value realized by other businesses and consumers.
  5. It is unnatural for a tightly-controlled business ecosystem to encourage the type of broad, aggressive competition that focuses on meeting customer needs, eliminating unnecessary costs, and by-passing non-contributors. The symbiotic business relationships ecosystems envision tend to perpetuate channels, intermediaries, and processes that competition would discard.
  6. Ecosystem abuses are frequent. Leaders inhibit or reject inconvenient innovations and competitors in favor of perpetuating the ecosystem they control.


Ecosystems Aren’t the Same As Progress


Despite the fairly infrequent examples of where ecosystems have benefited industries and their participants, the reverse is more common and more compelling: there are almost no commercially successful desktop operating systems apart from Windows because the Microsoft ecosystem is successful, not because Windows is better. Almost all TMCs use a GDS in some form, despite its limitations and costs to suppliers, not because there are no other ways to make reservations (many have been proposed) but because the remnants of the GDS ecosystem are with us still.

Travel management and technology needs more innovation, aggressive competition, and precise focus on real customer needs, not the artifices and limitations imposed by more business ecosystems. There are costs imposed by pursuing all of these things, but leader-based business ecosystems have never proven themselves to be cheaper or faster short-cuts, or effective hedges against inevitable business mistakes.

Notes:

i The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems, HarperBusiness, 1996, ISBN 0-88730-850-3.

ii This example is simplified to illustrate the concept and is not designed to be comprehensive. Contemporary illustrations of the travel ecosystem would be much more complicated and include lines of business with sometimes dubious contributions.

iii The extent to which IBM influenced the technological direction of the travel industry has never been fully appreciated.

iv There are other industry examples; this is just the most obvious and compelling.