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