We’re currently experiencing a clash between two worlds. On the one hand, we have those of us who think ‘physical’. We run airports, airlines and hospitals, make houses and cars and advise on financial, legal and strategic matters.
We see the world in very tangible terms and technology is an enabler – it’s there when we need it, but it’s not our core business. Ours is an analog world where incremental improvement is the norm.
Those on ‘planet physical’ are now on a head-long collision course with a new world of people and organizations who think ‘digital’. They don’t see airports, airplanes, cars, or hospitals – for them everything is just data.
They believe every problem and opportunity can be addressed by finding the right software algorithms and then applying the right science and technology. Digital thinkers understand the potential to scale rapidly and hence pursue goals that will deliver improvements of 100% or more in core areas of their business from customer acquisition, to process speeds and revenue growth.
That's why firms such as Facebook could become the world's biggest consumer bank and Alphabet (Google) is equally happy with the idea of building cars, doing life extension research or running airports as it is conducting internet searches.
For these new ‘masters of the universe’ it’s all about having mastery of the data and building a deep understanding of, and relationship with, the end customer.
The clash between the physical and digital worlds – and how the former learn to embed digital in their DNA – will shape the competitive landscape over the next decade, and drive the transformation of literally every business sector, including air transport.
According to what’s often called ’Moore’s Law’, computing power doubles roughly every 18-24 months. Innovators are seeking to extend this idea of exponential growth from the digital to the physical domain and are using it to drive dramatic changes in strategies and business models, in sectors as diverse as hotels (Airbnb), car manufacture (Local Motors) and banking (Tangerine).
These new entrants are using exponential thinking to shake up the status quo in established industries – not by changing the rules but by changing the game itself.
Take telecommunications. Who‘d have thought, 10 or 15 years ago, we’d have free Internet telephony? Then Skype came along and started giving away the industry's core product – telephone calls – for free.
This was unheard of. They now handle 40% of all international call traffic – and with just 1,600 staff. Most telecoms organizations have more than that in their customer service centers!
The financial returns for those adopting exponential thinking can be staggering. For example, Uber is a capacity recycler with no assets of its own. It takes unused cars and unused people and recycles them into a taxi service. It doesn’t own a single asset. And yet its valuation went up 20-fold over three years to reach US$40bn in 2014.
The challenge with our industry, then, is how should
we respond to the quickening pace of innovation? Is
it sensible to base our strategies on the hope that
regulators will protect us, customers will stay loyal
and that no disruptive new entrants will emerge? What
happens if we do nothing?
Rohit Talwar, Chief Executive Officer, Fast Forward Research
The air transport industry has traditionally been shielded somewhat from Moore’s Law because regulation has meant we don’t have the same level of competition as other sectors. There’s relatively little choice for passengers. Will an airline lose business because it lacks a certain app? Probably not. But in other sectors, there is more choice, and thus a higher pace of innovation.
However, relatively straightforward legislative change could see the emergence of an Uber for domestic air passengers with the capacity being provided by private planes and smaller airports. Similarly, superfast next generation surface transport services such as Hyperloop could dramatically reduce the time, cost and environmental impact of getting from A to B.
Perhaps the biggest threat comes from a small number of players like Apple, Samsung, Google and Facebook who act as the interface between customers and the world. All of these firms are looking to insert themselves in the transaction flows and capture a bigger and bigger share of the revenues away from the underlying service providers such as airlines.
The challenge with our industry, then, is how should we respond to the quickening pace of innovation? Is it sensible to base our strategies on the hope that regulators will protect us, customers will stay loyal and that no disruptive new entrants will emerge? What happens if we do nothing?
Open to change
Clearly, we have to plan for, respond to and embrace innovative technologies. Failure to embrace digital thinking and the need for constant reinvention could leave the way open for disruptive thinkers with innovative business models to enter the marketplace, change the game, and leave us on the sidelines.
For those open to change, the technology on its way holds solutions for real-world challenges faced in the air transport industry. Decision-making is one of them. When there’s an unusual incident – a plane is late or there’s a weather delay –the knowledge on how to respond is largely held in the heads of key people.
Rapid advances in artificial intelligence (AI), and machine learning in particular, mean that we could soon have systems which can learn how we addressed similar situations in the past and advise almost instantaneously on the best course of action for a new incident.
Underlying this rise in AI-supported decision-making is the growth of big data. Increasingly, I believe we’ll see two types of organizations in the world: those who know how to manage and master their data and those who drown in it.
The rise of the Internet of Things (IoT) means we’ll see far more objects which have the capacity to generate data and the intelligence to use it. As a result, we’ll see the emergence of a range of smart objects and 4D printed materials that can change their shape and performance over time. Just imagine the implications of this for air transportation.
A matter of choice
For players in the air transport sector, it is a matter
of personal choice whether we will be massive victims
or major beneficiaries of the changes coming our way.
Rohit Talwar, Chief Executive Officer, Fast Forward Research
There’s a ‘natural’ evolution in the size and performance of computers underlying all this digital disruption, and it’s increasingly going in one direction: mobile. We’ve gone from the mainframe to desktop computers, to ‘luggable’ devices and ’portable’ computers to smartphones.
We’re already in the next phase of evolution as computing devices become more wearable– witness the popularity of smart watches and personal health monitoring devices.
It’s not such a big leap to go from wearables to embedded devices. Millions of people already have implanted pace makers, hearing aids, and sight enhancers. Next we’ll see devices such as GPS trackers and memory for our mobile phones embedded in our bodies.
If airport security systems have issues processing people with wearables, how are they going to handle someone who has five or six devices embedded in their body? A whole new era will be upon us shortly, and I have yet to see a single airport that has a plan for it.
Technology and the internet in particular create the potential for ’near infinite’ consumer choice. What could that mean in the context of transport?
Right now we have the technological capability to extend the range of options and break with the narrow confines of three or four classes of travel. People are already starting to experiment with unbundling the standard product offering and giving the passenger greater choice over the design of their experience.
This ranges from where they sit in the plane, the food they eat and how it is served, to entertainment options, air mile rewards, use of lounges, ground transport, and auxiliary options. Ever more sophisticated technology capabilities will allow for an increasingly personalized and customized proposition.
It’s becoming clear that our ability to differentiate and add value will depend on our ability to master the intangible information component of physical goods and services such as air travel. This means we can also expect to see far greater competition from technology centric players with deep expertise in using data, and a more intimate relationship with the customer. The likes of Apple, Google and Facebook are only just beginning to appreciate and exploit the true value of being the interface between people and the planet, and the data being generated through the resulting interactions.
For example, on a daily basis over a billion Facebook users now share details of their lives, views and preferences with the rest of the world. Facebook in turn is beginning to understand the true value of the consumer insights contained in those interactions.
I believe that the pace of scientific and technological advancement means we will see more change in the next five years than in the last five hundred. In many key ways society, government and business will look very different in 2020.
For players in the air transport sector, it is a matter of personal choice whether we will be massive victims or major beneficiaries of the changes coming our way.
Digital transformation will be at the forefront of this next wave of innovation. Hence a good place to start is to stop thinking of ourselves as physical entities that have to use technology, and start re-imagining and reinventing our organizations as digital entities that happen to do physical things.