Engaging tech start-ups for digital projects is a risk for travel companies, but both sides can reap the benefits
Innovation cycles have massively reduced in the digital world, with lead times for reaching millions of users cut to a matter of months.
This has led to a recognition from big companies in recent years that technology is evolving so rapidly they might need help to keep up. Some of the large airlines and hotel groups have admitted openly they are looking outside to the start-up community for that help.
Christophe Tcheng, vice-president of core products and platform architecture at American Express GBT, confirms this trend. He says large companies are making strategic decisions to work with start-ups.
“We decided we wanted to be open in terms of technology. We wanted to make sure we can embrace innovation from the outside,” he says. “That means APIs [application planning interfaces] so that any company can come in and consume our data. We’re becoming a platform for innovation rather than the sole innovator for our customers.”
Brandon Balcom, senior director of open innovation at Carlson Wagonlit Travel says the TMC is thinking along similar lines. “We’re on this path of transformation. The mindset is centred on changing from customer service to customer experience. We’re acting more like the best companies in the e-commerce space. We realise we have to develop a Silicon Valley-like mentality.”
Finding a start-up
But it’s not a case of simply saying, “let’s just find a start-up and work together”. There are some obvious issues and some more subtle ones. Where do you start? Tcheng says he gets lots of approaches via email and referrals, and finds it useful to meet start-ups at trade shows.
CWT, meanwhile, has a partnership with start-up accelerator Plug and Play. This gives it access to start-ups via special events. Once the TMC has decided who it wants to work with, it has a dedicated innovation team based in Silicon Valley to help it move the start-up quickly to a proof-of-concept phase.
This also enables start-ups to stay focused on development and not get dragged too early into business operations. It helps keep the fresh, innovative thinking alive and helps the business decide when, and if, to move to integration into the company’s existing systems. Balcom says: “We don’t want to spend time, money and resources. We want to make that decision and make it really quick.”
Having this dedicated team and start-up focused on specific projects also moves the start-up quickly from concept to minimum viable product and through to pilot stage.
A further challenge in the early stages is how much risk to take. Tcheng says the risk from a corporate point of view has to be far more calculated. “There’s definitely a difference in the approach to risk,” he says. “In small start-ups they don’t have the choice, whereas we are trying to find the balance. There’s risk versus the existing business you have.”
He also adds “human scalability” to the list of challenges. While start-ups thrive on forming small teams to develop products, big companies sometimes need a product delivered quickly. “In large companies we can divert resources, but in small companies it’s hard; it’s not part of their DNA,” says Balcom. “It’s a matter of the small company knowing that this can happen because when we find something that works we want more immediately.”
He adds that sometimes CWT encounters a lack of business maturity. Some start-up founders have built up and exited prior businesses, but others have less experience.
Balcom has also observed a lack of understanding about the potential of the corporate travel market. “The world of corporate travel is a significant $26 billion marketplace that we open them up to. We need to get them to shift off that consumer-only vision to corporate managed travel, and listen to the pain-points that you don’t need to account for in the consumer marketplace.” Then there’s the issue of when to involve other stakeholders so that start-ups can understand the dynamics of corporate travel.
Tcheng says some customers are already forward-thinking when it comes to innovation, and the TMC can use this community to pilot services, to become partners in developing the services from start-ups, or simply to provide valuable feedback. But not all companies will have “the time or the appetite” to work through pilots, some of which will fail. He adds that more mainstream customers seem to be happy to be presented with a fully packaged idea.
Others – the early adopters – will want to have input from the beginning. “The partnership starts really early,” explains Tcheng. “Assimilating them to the idea early is really important because it almost becomes their idea, and everything becomes a little bit easier because you’ve got the buy-in.”
Balcom wholeheartedly agrees on the importance of bringing customers in early for their perspective on ideas. He says the Plug and Play partnership enables CWT to have an innovation lab in Silicon Valley, where its team sits, and it can bring travel buyers in on a one-to-one basis.
Many large companies both within and outside travel are embracing start-ups, but what’s the experience like from the newbies’ point of view?
Touriocity may seem like an unlikely match for the corporate world but it has had some advances from TMCs recently because of the trend towards mixing leisure time with a business trip. Founder and CEO Alex Grant says the start-up is talking to large players who operate across both the leisure and corporate segments.
He believes it is not too difficult to get the attention of large companies if your product is interesting enough. London’s Traveltech Lab has also helped the start-up form partnerships and meet companies.
Grant acknowledges that large players are trying to engage with the start-up community but points out that, for many of them, it’s the first time, too, especially with incubators and accelerators. “They’re trying to be very careful in deciding what exactly their priorities are,” he says. “Companies are really opening up. It’s complicated and we still have to get in to the right people.”
Michael Riegel, founder of corporate travel start-up Comtravo, points out that the whole idea of digitalisation can be scary to large companies. He says that a start-up’s background, especially if it’s in technology, can go a distance in reassuring companies. Comtravo uses natural language processing to turn text-based enquires for travel into the best recommendations for travellers.
Riegel adds that once you start working with a company in a particular industry segment, you get recommended to others in the same sector. “Initially they can be pretty suspicious. The lead office manager making the buying decision will have done their due diligence. They look up our corporate history and ask questions about shareholders. It shows they deeply care.”
One of the issues that often comes up on both sides is the balance between that innovative, agile development versus the traditionally methodical thinking corporate culture.
At a conference in the spring, IAG chief Willie Walsh summed it up perfectly. “A large organisation operates at a pace that is glacial compared to some of these new things and being able to bridge that gap requires a change in attitude.”
Touriocity’s Grant stresses how difficult this can be. Corporates will always be looking for where the return on investment is going to come, no matter how good a product or service looks. “There is going to be a cost to somewhere in the business.”
But, if the start-up and larger company manage to find common ground quickly, then the benefits are many. The start-ups get access to a ready bank of mostly willing customers to test, learn from and prove their product and service.
They get the backing, often financial, advice and general support of a large name. And, whether the partnership proves fruitful or not, they have something to talk about with future perspective partners.
Large companies get smart-thinking people with ideas that could fundamentally change a business and add to its bottom line. As Balcom says: “It’s bringing in additional value to customers that was not there before.”
Amex GBT has been working with air and hotel pricing intelligence start-up Yapta, and launched a proprietary tool developed with the company in March. Tcheng says the TMC’s work with Yapta is a good example of when things go right. Amex saw a “limited downside” in working with Yapta. “It was not us being asked to invest US$10 million now with the possibility of getting US$20 million back. There was almost no upfront cost but there were also other reasons we decided to invest. We wanted a unique solution,” he says.
He explains that Yapta decided on taking a cut of future transactions that came out of the proprietary technology. “They are bringing expertise and the technology we don’t have.”
Top tips: How to get the balance right
• Start-ups need to focus on their idea and its application to the corporate travel world. Don’t talk about all the possibilities immediately – address one issue that needs your service.
• Highlight how an idea can save a company money, or add to the bottom line – essentially, what is the value proposition?
• Be prepared to consider tweaking, changing and even pivoting from the original concept. Also consider different commercial models that work for everyone.
• Start-ups need to have a professional appearance with an office rather than a back bedroom.
• Get stakeholders, such as travel buyers, involved from the start. This creates a feedback loop and helps everyone get to a product or service quicker. It’s also likely to foster support and buy-in from the corporate travel community.
• Large companies need to think about how easy they are to work with. Is their technology open for developers?
• They should also appreciate how complex the business travel landscape is and help start-ups adapt accordingly.
• Don’t suffocate innovation, nurture it. These are bright, passionate people whose product is their life. They are committed to getting it right.