One universal piece of wisdom is that COVID-19 is driving digital transformation to unprecedented levels. This is true for numerous industries, but not for travel. While aviation, hospitality, and travel service companies had never been a forerunner in the race for digitalization, the gap to other industries has only widened in the last year. What went wrong? And how can travel companies fix this?
Obviously, the travel industry was hit particularly hard by the COVID-19 pandemic. In 2020, the number of airline passengers dropped by two thirds globally; closed borders and strict health regulations brought the tourism industry to a halt. Strapped for cash, travel companies had no other option than to cut back on their digitalization initiatives.
While this action is understandable from a company’s point of view, it will have a lasting impact on the competitiveness and ability to generate new revenues. Most notably, highly needed digital talent is leaving the industry due to a lack of career prospects. This creates a downward spiral which will further increase the digitalization gap in the travel industry.
Is there a way out? I believe so.
Three ways to achieve more with less
Even with minimal resources, travel companies can thrive on their digital transformation journey, if they get their priorities right and rethink their organizational set-up. Here’s how:
1. Create dedicated digital units
Today, every business unit has its own digital agenda, its own funding for digital initiatives and, in some cases, even its own developers. To be frank, this kind of particularism is a waste of money and resources. It creates redundancies and, even worse, leads to siloed thinking that follows internal incentives instead of working together and creating the best possible digital solutions for travellers.
Instead, travel companies need a strong digital powerhouse that bundles all digitization activities within the firm and defines joint strategic priorities. Dedicated digital units must be organized around value streams – a term coined by the Scaled Agile community – from retail to customer services. Their only job is to maximize value by developing the digital services that customers desire.
In doing so, the teams need to grasp the integrated nature of such services spanning the complete travel chain from the first customer interaction to the actual travel experience. Such a set-up will also help to keep digital talent in the firm by creating exciting career paths.
2. Simplify the architectural backbone
Over the years, monolithic IT architectures, acquisitions and various restructuring initiatives have led to a problem that can’t be solved by creating dedicated digital units: a highly fragmented IT landscape with hundreds of customized applications and processes. This legacy architecture is a huge burden for creating the digital services that travellers want. It creates highly frustrating experiences for developers who run into road blockers all the time – and it slows down time to market significantly. In addition, the costs for running such a fragmented system landscape easily get out of control as standard updates must be manually adapted to the special configurations of each system.
The only way out of this legacy trap is to radically standardize processes – and that’s up to 90 per cent of all business transactions – that don’t help a travel company to differentiate itself from competitors. Yes, that’s a pain and a tremendous change for Business and IT but it’s the only way to reduce complexity and provide required backend functionalities that enable the desired frontend solutions.
To get there, travel companies need to establish a decoupled digital core for all business units and subsidiaries. This core builds on standard solutions for most backend processes, such as the booking platform or an ERP system, and uses customized solutions – which are “decoupled” from the standard applications – only when it makes a real difference for the customer.
Or to put it very simply: Differentiate on the outside and simplify on the inside!
3. Fund value instead of projects
Even with less fragmented systems and a more agile approach to developing new solutions, one problem remains. Today’s portfolio planning process at travel companies is too static. I have seen planning processes that take half a year and longer. Throughout this planning cycle, initiatives are set on hold and resources are staffed to other projects.
Let’s face it, this kind of “planned economy” is the biggest enemy of agile development. At an imperative time for prompt reactions to changing market conditions, such a static approach is doomed to fail.
Therefore, travel companies need to establish a lean-agile portfolio management that fund value streams and thereby the digital powerhouse. The budget will still be allocated on a yearly basis – or whatever the actual planning cycle is – but the powerhouse may use this budget flexibly to fund initiatives that maximize value for customers.
In a post-pandemic world, a growing number of customers will expect convenient digital services along the travel chain. From a shopping-like experience during the booking process to convenient self-services in case of irregularities, customers see what’s possible in other industries and they expect travel companies to adapt.