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).