Looking at other sectors and other regions can help assess the impact of disruptive technology
We now live in an age of fierce business competition that spans the globe. Change is the only constant, the pressure to digitise and automate processes has never been more apparent, and the drive for innovation has never been more important.
At present the fourth industrial revolution is turning the manufacturing industry on its head. Fintech is not just whispered in the Square Mile, but shouted from the rooftops as it disrupts the financial services sector. Legal tech and automation has junior lawyers worried about their jobs, while hyped-up artificial intelligence and machine learning appears to be charging like a bull at just about every other sector, from retail to telecoms.
But when a journalist lamented recently at the GBTA Convention in Boston that “the future of corporate travel is basically the same as the past” and that “the structure of the industry precludes any sort of widespread transition,” you’ve got to question why disruptive innovation isn’t making as much headway closer to home.
So many articles describe the effects of disruptive innovators, such as Uber or Airbnb, on the industry, it gets boring after a while. Why isn’t there a whole raft of radical start-ups queuing up with exciting new options for the travel buyer to sign up to in this multi-billion-pound industry?
“Innovation is somewhat restricted in moving apace with other sectors because of the legacy systems employed in the supply chain,” explains Ken McLeod, director for industry affairs at Advantage Travel Partnership. “We can only innovate if the surrounding elements also keep pace with change. One doesn’t work without the other, because of the integrated nature of airlines, hotels and others in the supply chain.” Basically, the industry is the sum of its parts; a behemoth that’s hard to steer.
What it means for this straitjacketed line of commerce is that any fast-paced innovation is occurring at the fringes rather than at the core. It’s why some business travellers use an Airbnb rental as the exception not the rule, or we see developments in traveller tracking or new apps. These are easier sectors in which to innovate. At this year’s Business Travel Show, the finalists of the travel tech Disrupt Awards focused on revenues, payments and security – again all lower-hanging fruit.
Ask travel buyers about technology and innovation, and a number recognise these constraints. Their expectations extend to innovations in fully integrated services, consolidation and improved booking services – hardly disruptive. “I’m looking for a seamless booking workflow across all technology,” says one travel manager – radical innovation doesn’t really figure. Then again, disruption is hard to spot. Who would have second-guessed the arrival of the smart phone or the apps industry? “Developments in the business travel sector are usually enhancements of solutions that are already in existence such as online booking, expense or reporting tools. Rarely does a supplier in the business travel industry do something totally different or ground-breaking,” says Chris Gamlin, head of mobile product at FCM Travel Solutions. Another issue is that travel buyers are constrained on one hand by the cost-saving objectives of the corporation, and on the other by the needs of the business traveller. This balancing act means that change often occurs at a more granular, stepwise level. The travel management business is, in effect, more about renovation than deep-seated evolution. “For innovation to occur, travel managers need to see new tools as a way to both support travellers in their journeys and actively contribute to the company’s goals and successes. This is not always easy,” says Concur senior marketing manager Roberto Scolaris.
It’s also a challenge to understand what’s genuinely beneficial and what might be a costly gimmick. Insightful data can be important, when it helps prove the case for change in an inherently conservative industry. When you have to articulate the effectiveness of a new service to a myriad of stakeholders such as finance, HR and procurement, getting buy-in can be an issue. It certainly dulls any radical change.
“Travel managers must be clear on what value innovation provides. If new technology improves process, creates efficiency or makes travellers more compliant and productive, there would be a case for adoption,” says Amex GBT vice-president John Lyons.
Seeing the future
Beyond the conformist confines of the managed travel industry, the world is changing rapidly, as are people’s behaviours – and this includes business travellers and their managers. Head to Chongqing or Chengdu and just watch people’s behaviour to see the future and how disruptive innovation can be. In some places in China you’re already seeing a cashless society. Digital payments now account for nearly two-thirds of all noncash transactions, far outweighing those made by debit or credit card. The phone can now be used as a digital wallet by 450 million people in China. These types of services were accessed over one billion times last year.
According to Forrester Research, China’s market for mobile payments topped US$5.5 trillion in 2016. This is roughly 50 times the size of the US market. One of the disruptive fintech companies that helped make this happen, Ant Financial, is valued at US$60 billion – around the same as Lloyds Bank, one of the UK’s biggest institutions. All this has happened in the past few years.
“These platforms have revolutionised the way that individuals conduct their finances on a daily basis,” says Zennon Kapron, director at market research firm Kapronasia. “People are using them for buying coffee in the morning, for ordering food online and for any number of things that have really transformed the way the average customer in China behaves.”
And this widescale disruption will head to Britain at some point. Successful companies that have turned markets on their heads in one part of the world will look for other markets. They also have deep pockets and global ambitions. Ant Financial, with its Alipay platform, is expanding elsewhere in Asia, including India and Thailand. It won’t be long before it’s eyeing up Europe.
“The biggest challenge is cost. In simple terms, the way the industry is changing comes down to who can afford to innovate and resource the changes that are required,” says Advantage’s McLeod.
One of the other main drivers is the speed of developments in the B2C markets across the globe. This is increasingly driving greater expectations in B2B markets, and this is set to continue unabated.
“I think more of our needs and the experiences that we have in our day-to-day life are setting the expectations for how we want to receive, say, banking products and services,” says Ken Moore, head of Mastercard Labs. “From that perspective, we’ve seen tremendous change in the types of services and the expectations we have as consumers or as corporates. We have definitely seen a shift where fintech companies and new technologies are driving change.”
The rumblings of disruptive innovation are also being felt in travel management, particularly in the distribution of travel products. IATA’s New Distribution Capability (NDC) is viewed by some as a potential upsetter of apple carts (see feature, page 76) – although the jury is still out on this. “There are a lot of conversations taking place. But we have yet to understand the value it brings. As it stands we see increased costs and no improvement,” says Amex’s Lyons.
The new British Airways surcharge on the GDS, if followed through in November, could change the face of fare distribution. Anything that incurs more costs or saves travel managers money has the potential to disrupt, since margins are so fine.
“More direct contact and information flow between the traveller and the supplier means less control for the corporate customer,” says ATPI managing director Adam Knights. “It isn’t necessarily bad at all, but the focus right now is that airlines are pushing it, the industry is asking whether TMCs are ready and what they are doing. But few travel managers are asking about the disruption this will cause to their programmes and goals, and whether this is good or bad.”
Think like a disruptor
More of us should be thinking like a disruptor (see panels) to pre-empt the changes that are likely to occur. One strategy that’s helping corporations forge a competitive advantage is teaming up their junior digital natives with older analogue elders.
“I think we’ve set a good example encouraging different age groups to work together and support each other,” says Karen Lopez, strategic business manager at Corporate Travel Management. “Younger employees share their technology knowledge with older employees. Creating this mentor role gives them a sense of responsibility and empowerment, and allows travel managers to build a stronger team.”
Changing company culture is a major issue, especially in larger ,traditional firms. “Businesses need to create a culture that nurtures innovation,” says Jo Dobson, senior director of business development at Carlson Wagonlit Travel. “We have an internal innovation challenge, which crowdsources ideas from across the company on certain topics to help us to get every employee engaged.”
Certainly, disruptive innovation doesn’t happen in a vacuum, especially in an industry such as managed travel. Partnerships, supply chains and whole ecosystems will need to change over time. It’s not about if; it’s when – are you ready?