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.

Why Not The Computer Business?

This analysis appeared February 24, 2014 in Cornerstone Information System’s “Insight & Opinion” section.


Travel and technology are very different businesses. While technology supports and enhances much of the travel and transportation industry, difficulties begin when the two are confused.

You need competent people to help you address technological challenges, but you don’t need to be in the computer business. There are enough products and services on offer now, too many developers who don’t know what they’re doing, and too much imprecision hiding behind innovation.

Because technology is an important part of travel distribution, it’s easy to be overtaken by the sights, sounds, and outright glamour of technology. In recent years it’s become much easier (though by no means simple) to find investors for technology companies.

We’re used to hearing about technology start-ups with modest resources and still more modest ideas, to the point that people start to believe they should be part of the fun.

The Essential Differences

Succeeding as a technology developer is difficult, time-consuming, risky, and costly. While the marketplace makes room for genuinely good ideas, finding them is almost always harder than building them.

I read a recent contribution from a travel technology developer who suggested a few strategies for starting a travel technology venture. Among these were “doing the opposite of what already works,” and “recycling old ideas.” i

There’s a certain logical flaw in basing development projects on practices that, by definition, don’t work. The notion of having a genuinely good and innovative idea is something that entrepreneurs frequently neglect along the way.

Nor is it more than a remote possibility that most technology start-ups will succeed. It’s true that some start-ups pay big rewards to a few early investors and employees, but most simply spend their early capital without delivering more than the most trivial results and products.

There is a significant difference between having what seems to be a good idea and transforming that idea into a commercially practical product or service. Most travel technology products, web sites, and related gadgets accomplish very little and quickly fail the consumer’s “why should I care” test.

Although this may seem to be a heretical view, most travel technology is neither good nor useful–never has been. Apart from the handful of start-ups who are struck by the lightening of unanticipated success, most travel distribution success stories are told by people who had the rare talent of discerning between what works and what doesn’t.

Travel is a service business and successful participants in the industry must never lose sight of their customers and what they really want to buy. Understanding and correctly answering that question usually means the difference between success and failure–and is the essence of delivering customer service.

Travel customers, as an example, want to take vacations, do business in distant cities, visit their families, and a variety of other things. They don’t want someone to give them data, collect their data to give to someone else, or offer them pointless Amazon-like product suggestions because of past purchases that are no longer relevant.

I’ve frequently observed that almost nobody in travel distribution delivers customer service, or is able to do so. ii We’re so obsessed with recycling old ideas and focused on what our customers have bought that we can’t discern what they will buy, and therefore act accordingly.

Suggestions

Here are my own ideas for you to consider as you look for ways to employ technology as a business tool in travel distribution, and profit from it. They may sound simple, but effectively putting them into practice is sufficiently challenging to assure their competitive merit.

1)  Become The Best User Of Other People’s Tools

Skilled travel industry managers decide what their business goals are, how technology can help them reach those goals, and what partners have the requisite expertise to make that happen. They then move forward with those partners and don’t let themselves be distracted by short-term events and new but irrelevant ideas.

I’ve been CIO of multinational travel and transportation companies more than once. It was always a challenge to convince other parts of management that being the best user of tools that other people build can be as much, and often more, of a competitive advantage than was our own technology.

We want to believe that access to proprietary technology in itself creates an advantage, while we overlook the expense and risk creating that technology imposes and assume that we can succeed at maintaining and enhancing it.

In most instances using technology and what it provides well is more important than proprietary tools. Your competitors are usually not good technology managers, and you can exploit opportunities when they assume technology risks that you don’t have to.

2)  The Best Tool Is No Tool

Technology is attractive and we are conditioned to believe that the solutions it delivers work better, last longer, and are more efficient than answers we find elsewhere.

The secret here that takes experience and insight to understand is that many problems “solved” through technology were really unresolved management problems that could have been cured more efficiently in other ways–or the problems never existed in the first place.

Look for business opportunities and solutions that don’t depend upon new technology developments and you’re ahead of your more development-inclined competitors.

3)  Seek Scarcity, Then Exploit It

Forget recycling old ideas. If you’re looking for technology-driven opportunities, you’ll find them where people have demonstrable business needs that are not addressed in other ways.

These are difficult to find and still harder to develop, but unless you’re counting on that bolt of lightning, they are the only reliable path to successful products.

There’s plenty of scarcity, in ideas, management, products, and customer service throughout travel distribution to provide more than enough profitable opportunities that don’t depend upon starting a technology venture for entrepreneurs with the foresight and skill to pursue them.

Not Quite That Special

Here are a few final questions for you to consider:

  • When was the last time you heard a law firm say that the “LexisNexis” user interface isn’t what it should be, so it’s time to build our own legal database search engine?
  • Do you know of an accounting firm that is developing software because Oracle, Microsoft, Best, or SAP have nothing to offer and don’t understand the company’s unique business objectives?

Travel distribution has always been and remains a unique business but it’s essential to separate qualities that make business better from the costly specialization that it’s tempting to ask technology to make for us.

 

[i]     Alex Bainbridge, EUREKA! Where Could Your Travel Startup Ideas Come From?, (Tnooz, February 3, 2014).

[ii]    As many times as I’ve made that observation over the last 20 years, I’ve frequently been told what a shocking thing it is to say. I’ve almost never had anyone question whether or not it was true.

IATA and NDC Phobia–Update On the New Distribution Capability

This analysis appeared December 17, 2013 in Cornerstone Information System’s “Insight & Opinion” section.

IATA is listening–or so I’ve read in a number of published reportsi. To whom and about what is open to question.

The industry has been repeatedly assured that the NDC isn’t what you may think, and, that the NDC or something like it is inevitable in any case.

In his piece, “Fear and Loathing in Airline Distribution (aka NDC Phobia),”ii which a surprising number of observers have liked well enough to redistribute, IATA’s Aleks Popovich remarks, “today’s airline distribution network is changing with or without NDC.”

Mr. Popovich also says “Let’s get the posturing behind us and work together to address the heart of the matter.”

Surely that’s a sentiment everyone can support, but “NDC Phobia?”

NDC Phobia Described

I don’t myself believe that the majority of NDC’s critics are subject to whatever that malady might involve. I do believe that organizations advancing business and technology proposals have an obligation to adequately explain and defend them–and not keep shifting the scenery on stage so that the audience forgets how bad the play truly is.

IATA asks its critics to accept that criticisms of the NDC can be dismissed by statements like,

These are all legitimate questions that IATA recognizes must be answered if NDC is going to become a reality. But it is the market, not IATA, which must provide those answers.”iii

If that were true, perhaps IATA should consider whether it is wise to propose changes to the essential ways in which travel distribution operates in the guise of a proposal for technology standards and cooperation.

You don’t have to accept my analysis to come to that conclusion. According to IATA description of What is NDC about:iv

  • The initial scope is the shopping process.
  • In tomorrow’s new distribution, airlines will have greater ability to interact with who is requesting and provide tailor-made product offers.v

In order for that to happen, multiple changes to the structure of travel distribution must occur. That’s assuming we agree with IATA that this business structure is superior to the many others that are available and the inevitable financial and relationship costs its implementation requires are offset by whatever benefits will accrue.

IATA appears as unwilling to make a defensible business case now as it did when last I wrote about this topic.vi

Later, in the same IATA document:vii

Key Principles New Distribution Model

  • It is critical airlines construct/own their product. Need to connect to customers through indirect channels with interactive relationship.
  • Standards must facilitate authentication of customer identity, enable personalized offers through the whole distribution supply chain.viii

Whether you agree with these objectives and believe that the marketplace is asking for them (which I do not), they clearly focus on changes to business processes and not simply to the adoption of new communication methods.

The messaging standard itself isn’t particularly relevant, not is its potential efficiency, how related or unrelated it is to other protocols the industry might like to use, or how potentially rich a data environment might be created. The business processes that are both required to sustain the NDC and the processes it will potentially enable are more central to justifying the NDC.

The frequent suggestion that people still have to build business processes that use NDC capabilities, and that this is a marketplace function, is correct as far as it goes, but it doesn’t really address the quite rational business concern:

People don’t create “standards” without the expectation that they will be used as fully as they can.

My prior NDC comments inspired several objections to what I called “privacy compromises.” Privacy, is unrelated to communication standards–or so I’ve been told.

If the NDC’s business goals (described above) are to be realized, a far greater amount of specific, identifiable traveler data is required than is necessary for booking an air ticket. This is assumed to be collected by the NDC and is also assumed to be available as part of the traveler selling process.

The intent of collecting these data is to deliver “recognition by airlines and personalized products offers.”ix How does this suggest anything other than a fundamental change to the type and amount of data surrendered by travelers?

Specifics as to how this would work and why it has sufficient value are weak. Amazon is typically cited as the visual model, although nobody I’ve listened to bothers to explain why Amazon has any relevance to selling transportation.

The traveler is, therefore, asked to surrender data based upon promises that something valuable might, someday result. The best that can be said of that arrangement is to call it a “compromise.”

It isn’t the same thing, for example, as self-identification with a passenger-type that might be entitled to a discount or other services–the process is not self-initiated and the deliverables are unknown.

Who’s Talking and Who’s Listening?

According to published reports, IATA seems to have abandoned travel agents as “key” participants in the NDC pilot.”xIATA should have engaged travel agencies of all descriptions more skillfully from the start, and the lack of meaningful agency involvement needs to be quickly and wholly resolved.

In recent weeks a collection of trade groups announced an effort to develop alternative standards.xiThat initiative isn’t going anywhere.

The serious questions are about business, not standards. These are the questions IATA says it doesn’t want to answer.

It’s difficult to conceive of a standard that would be embraced by the airline industry being developed in competition with IATA’s standard, especially this late in the day. None of the interested trade groups has the technological or business capability to make that happen.

Putting the NDC Argument Behind Us

The industry’s energy is best spent not tinkering with alternative standards but insisting that IATA confront the real business questions the NDC raises.

This exercise represents one of several business process and strategic flaws that compromise the NDC. These have real strategic, implementation, and operation costs for all parts of the distribution system that are not addresses by the NDC’s proponents. There are direct and indirect costs for travelers as well.

I can’t agree with observers who suggest that it’s time to put NDC objections in the past and face up to business realities. It’s IATA that wants to walk away from business discussions–they’re so inconvenient and it doesn’t have good answers.

 

Notes:

i    Michèle McDonald, GDS Exec Says IATA Is Listening, (Travel Market Report, November 7, 2013).

ii   Aleks Popovich, IATA Senior Vice President, Finance and Distribution, Fear and Loathing in Airline Distribution (aka NDC Phobia), (Tnooz, August 26, 2013).

iii Popovich, op. cit.

iv   New Distribution Capability – Update, (International Air Transport Association (IATA), November, 2012), page 8.

v    Emphasis added.

vi   David Wardell, IATA’s New Distribution Capability (NDC), (Insight and Opinion, July 15, 2013).

vii  IATA, op. cit, page 9.

viii Emphasis added.

ix   IATA, op. cit, page 11.

x    Jay Boehmer, Agencies Absent As IATA Names NDC Pilot Participants, (The Beat, October 30, 2013).

xi   Kate Rice, Travel Groups Propose To Work With IATA On Distribution Initiative,(Travel Weekly, October 28, 2013).

Difference Engine: Obituary for software patents | The Economist

According to The Economist, something may finally be done about “patent trolls,” although I personally don’t agree with the view that no computer software should be patentable.

“AT LAST, it seems, something is to be done about the dysfunctional way America’spatent system works. Two encouraging events over the past week suggest the patent reformers are finally being heard.”

Complete article here.

An interesting piece that credits much of the current patent mess to miscalculations by President Carter in the 1970s.

IATA’s New Distribution Capability (NDC)

This analysis appeared July 15, 2013 in Cornerstone Information System’s “Insight & Opinion” section.


In an industry as diverse as travel distribution, there is rarely a shortage of controversial ideas. Recently, critical voices have been raised against IATA’s “New Distribution Capability” (NDC) initiative, variously asserting that its development was closed to most outside input, that it is unfair to travel agents, technology providers, and other stakeholders. It is claimed that the NDC harms consumer interests, and that its implementation requires unacceptable privacy compromises and financial expenditures from distributors and consumers alike.

Curiously, I’ve yet to hear the simplest and most concise justification for opposing the NDC from anyone:

It’s a fundamentally bad idea that probably won’t work.

As these posts must necessarily be brief, I’ll only touch on a few of the NDC’s strategic and business flaws–operational and technological shortcomings must await another discussion.

What Is the NDC?

According to IATA1 the NDC is a business and technological initiative best understood as a process that allows “indirect channels” to enable the same capabilities that exist on airline websites, while preserving an airline’s control of the product. It also proposes to enable product innovation, differentiation, and personalization by directly accessing expanded information as to a traveler’s purchasing profile and history.

The NDC’s “initial scope is the shopping process.” As an example of how this might work, supporters maintain that the NDC will modernize air travel distribution and benefitconsumers by giving them an experience similar to Amazon.

Perhaps, but the NDC mistakenly confuses multiple goals in a package that delivers capabilities few people want. It’s technical features represent one way, certainly not the only or necessarily the best, to enhance shopping data. Other intended benefits are more dubious.

Amazon is a poor service delivery model–air travel distribution has little to do with selling books or consumer products.

The personalized shopping experience, whether through Amazon or an airline, is largely a chimera without real-world application. Frequent Amazon shoppers are aware of the annoying and usually irrelevant suggestions the site continually offers–transferring this unhelpful dialogue to benefit air travel strains the imagination.

One Bad Idea Begets Another

IATA is criticized for failing to adequately consult with distributors and consumers as the NDC was developed–perhaps justly so, although interpretations disagree as to how meaningful the prior industry dialogue was. It’s worth noting that however worthwhile these discussions might have been, IATA isn’t obliged to hold them in any particular way, or to do so at all.

There is also a serious question as to who might participate. There are no industry-wide trade associations with adequate technology capabilities, credibility, and resources to represent even segments of distributors or consumers. Individual companies may have meaningful input, but are not in a position to speak for anyone else, or even their own customers.

Industry discussions to develop and refine technology policy are exceedingly rare–much more so that IATA’s critics would have us believe. Those who feel excluded would do well to upgrade the forums, expertise, and messages they might use to make meaningful future contributions.

Who Benefits?

Shouldn’t airlines know more about the consumer prior to booking so they can “personalize” the product offering, as the NDC promises?

If that were so, it should be easy to describe what that “personalization” would look like–but it isn’t. Beyond the vague “more like Amazon” promise, “personalization” sounds like a more technologically advanced bundling of the many obscure fees and charges no one likes or wants.

If the result isn’t higher consumer costs, what is it?

Many airlines have had access to personal data that were supposed to enable better offerings for decades (through frequent flyer programs, for example). The fact that these enhancements have been meager causes consumers to rightly question whether the new expense and privacy compromises the NDC imposes are justified.

The New Distribution Capability proposes to solve problems most consumers don’t see as problems and deliver ill-defined benefits they haven’t asked for and probably won’t appreciate–at an undetermined cost they are unlikely to embrace. Wholly apart from the clumsy way it has been developed and presented, this is not a formula for a successful project.

IATA was ill-advised to start down this path and its airline participants are likely to see more customer grievances, direct and indirect program costs, and few of the NDC’s promised benefits.

  1. International Air Transportation Association (IATA), NDC Update, November 2012, page 8.

Five Important Technology Projects You Should Watch

This analysis appeared May 17, 2013 in Cornerstone Information System’s “Insight & Opinion” section.


However risky, making technology predictions is a popular and occasionally enlightening pastime. I’ve found it helpful to have a “watch list” of projects and products that might be influential or require some business strategy adjustment.

Here is my current travel industry-related list, in no particular priority. I’ve indicated why I believe each is important and what the effects might be. Some obvious choices such as IATA’s NDC initiative are omitted as they are the subject of future posts.

The Signal and the Noise

The title of a 2012 book by Nate Silver on statistical predictions and why they fail, this term refers to the fundamental engineering and scientific concept that, in order to perform any sort of reasonable analysis, it is necessary to distinguish between what is to be measured (the signal) and background noise.

In travel technology, it is frequently helpful to make similar differentiations to distinguish between what is truly important and what simply sounds important. There are innumerable noise-makers throughout the industry telling their own versions of what deserves our attention.

Three important tests you might use to validate such assertions are:

  • Why is this really important to more than a few people?
  • What is the time frame over which it might become important?
  • What special conditions might have to exist to make it important?
  1. Computing Platforms and MobilityWhile it’s true that consumer attitudes toward smart phones, tablets, laptops, and desktops are evolving, no one knows specifically how. People replace laptops with tablets partly because they enjoy their added mobility, but also because it isn’t a great sacrifice as most didn’t do much with their laptops anyway.
    It doesn’t mean that laptops and desktops are going away (there are things you simply can’t do on a tablet) but the consumer mix will certainly change.
    Experts have been predicting that mobile computing will revolutionize travel purchasing for so long that it eventually might happen–once the public can get past the fact that most mobile travel applications don’t do much.

    2.  ETS2

    The U.S. Federal Government’s new on-line travel procurement system, ETS2 is perhaps the least understood, most under-reported, and most confusing travel technology project to have taken place for decades. It directly effects thousands of people but is concentrated on those involved with government travel. Indirectly its influence on procurement practice and to some extent on technology design will be widespread and enduring.

    The travel trade press (on-line and print) earns an “F” for almost ignoring ETS2 over the past four years and for producing not a single insightful analysis of why the project evolved the way it did and what it means for the industry.

    3.  On-line Travel Agencies and Supplier Direct Sales

    Recently, by some measures, on-line sales to travel suppliers surpassed sales through online agencies. This is significant because the desire of travel vendors to deal directly with “their customers” is deeply felt and has been pursued by many suppliers for longer than The Internet has existed–it won’t be abating anytime soon.

    In a free market, people find ways to get at what they want. It would seem that more want what they perceive vendors can give them directly on-line than they can get on-line through intermediaries.

    4.  Social Media

    Sometimes people get the idea that whenever the Thor’s Hammer of Social Media is produced they must automatically lend their full attention and, should they choose to participate in the business schemes described, they are entitled to sit in some electronic Valhalla feasting on e-dollars with the gods.

    The reference to Norse mythology is not as far-fetched as it sounds: most Social Media projects are on similarly imaginative ground.

    Social Media are significant but, as with other electronic tools, you have to have real service-oriented products and something compelling to say.

    Beware those who tell you otherwise and look for projects that will enhance real business goals and deliver truly superior customer service.

    5.  Microsoft

    Pay attention to what Microsoft is doing, as it tries to keep pace with the direction its planners perceive the industry to be heading.

    Presently, this involves significantly changed consumer software licensing and delivery, changes to user interfaces and product design that most people didn’t ask for, and assumptions that you and I want the same “experience” on a tablet that we do on a desktop or a phone–I don’t; perhaps you do.

    The company’s size and scope mean that we can’t avoid its good and bad decisions, many of which can have expensive consequences.