At the International Air Transport Association’s (IATA) Airline Industry Retailing Symposium in Rome, attendees spoke a lot about technology requirements for the shift to a “retail-like,” customer-centric airline. There was significantly less emphasis on the workforce to being a critical enabler of that shift.
The airline workforce must become more digitally enabled to deliver the retail experiences that we as consumers are seeing in other industries. However, this shift must happen holistically. Airlines cannot simply think about the business case for adopting a customer focus in isolation: e.g. this move will save X costs and drive Y in revenue. Executing on new disruptive commercial strategies is difficult and a variety of studies suggest that 50-80 percent of transformation fails and puts value at risk. Instead, airlines must ensure the right organizational strategy and alignment to enable successful transformation.
First, rather than spending time and money on good ideas, airlines must think more broadly about the implementation, planning, change management and labor needed to make good ideas stick. So, what can airlines do differently to navigate change and prepare for the future?
Getting change right
Historically, airlines focused on designing structures around operational processes, as they were looking to complete tasks in the most efficient way possible. Gone are the days of centering decisions around how to run an airline on time. Now it’s time to think first about the impact you want to have on the customer, and then design the strategy and structure around that goal.
Think bigger from process to product. As airlines shift to a more retail model to take advantage of new revenue opportunities and to better meet changing customer expectations, this means a shift from a product-oriented business model where you are selling seats (more like a commodity delivered in a consistent way to maximize efficiency and profitability) to a more customer-centric model focused on personalized experiences.
This new model not only requires more and better data on customers, but also requires your employees to deliver the customer experience in a different way: working together differently, which may mean different organizational structures, different skills, different ways of managing the workforce along with different and broader definitions of who the workforce is (including outside partners that deliver part of the experience).
- Make data organization a priority. Data is the lifeblood of transformation and understanding and serving the customer. Airlines must consider where they collect, store, analyze and consolidate customer, commercial and operational data. Typically, there is massive duplication across parts of business. Data sets are conflicting. Airlines must decide what is the single source of truth, and where that data should live within the organization.
- Strengthen the HR core. Existing core functions are important, but airlines may need to think about them differently. For instance, HR leaders will need to play a more substantive role in strategy development as people are at the center of any major airline transformation. Many airlines have been under cost pressure, seeing single-digit or negative margins. A cost reduction focus calls for a certain mindset. If the business is shifting toward a customer-centric focus that encourages innovation, HR may need to lead a cultural transformation, helping to foster new skills across the organization and demonstrating to employees how work will change in the digital future.
Labor: a unique challenge for airlines
Airlines face unique transformation challenges because of the large percentage of their workforces covered by collective bargaining agreements and how those agreements impact the ways in which work is performed. It is not as simple as adding a new offering or service and having the workforce support it. For instance, if an airline decides to enable pre-flight duty-free offering, allowing customers to shop via their mobile app rather than through the sales cart, it may take away a commission opportunity from the in-flight crew. The airline must also consider who would be responsible to bringing those items to the passenger at the (destination) gate.
When considering a new offering, airlines must think about the impact on the workforce and implications for existing and upcoming collective bargaining agreements. Negotiate smartly. Get the right language in the contract up front. Be wise about valuing what you spend versus what the airline gets as a benefit.
Airlines are different than other industries, and that requires new strategies and approaches for making a customer-centric, digitally enabled organization a reality. However, it can happen, and it must happen for airlines to compete and be successful.