Ai Editorial: Assessing building blocks for becoming a platform-enabled retailer

First Published on 14th November, 2017

It is imperative for airlines to be in as many winning digitally connected ecosystems as possible, while protecting their value add. Either you will be part of the new digital API ecosystem, or you will be fighting for survival in a small niche, writes Ai’s Ritesh Gupta

 

Making the most of every digital trail for a favourable business outcome is what digital enterprises are after.

But connecting the dots pertaining to a fragmented shopping journey isn’t just restricted to one organisation’s data. Of course, capitalising on the 1st party data, working out a core data asset around own transactional systems is an integral part of a connected data architecture. But what about leveraging “open innovation and open algorithms” as part of the platform strategy?

For instance, a traveller is allergic to a particular food ingredient or loves a particular cuisine as per the shopping preferences logged with one retailer or within one ecosystem. Can the same traveller be served food or rather be delighted with what he loves as part of onboard flight services? If seen this way, every click or tap is an opportunity as there is data that is resulting from every interaction and experience.

Of course, issues such as security, privacy, ownership of data are key considerations, but with policing and governance, entities are looking at transforming their capabilities via an astute platform strategy. The connectivity facilitated by such plug-and-play business model is paving for interactivity among the stakeholders, and resulting in exchange of “value”.  Airlines, like any other business striving to embrace digital transformation, are gearing up for an API-managed environment, microservices architecture and artificial intelligence.

Digital economy works through a platform economy model

Reflecting upon how how a travel e-commerce player needs to prepare for a platform strategy, Marko Javornik, VP/GM Mobility & Travel, Comtrade Digital Services, says, “Digital technology is all around us and has a major impact on all industries. It also has impact on virtually all aspects of our business. However, this impact is largely different when we talk about operational aspect versus revenue generation aspects.”

Citing an example, Javornik mentioned that airlines are using PSS platforms for decades to optimize the operational aspects of handling passengers. “However, only in very recent years airlines are recognizing that their core business in the future will be digital platform business and that the top level structure will change. This has enormous impact on airline organization as a whole. This is a truly deep change that deserves to be characterized as “transformational”. We are talking about airlines becoming digital technology companies where handling planes is now becoming just a supporting business (even though undoubtedly very important one).”

Javornik underlined that airlines need to finalise their respective digital strategies to survive the commoditization of their core market.

“Airlines that will focus only on core business will not be able to survive outside of niche markets. Core business has become commodity and yields no profit. However, if airlines can leverage core business and build a digital platform on top, they have a great opportunity to claim a large piece of the pie in the new emerging digital travel ecosystem (s). Airlines do have some unique unfair advantages over all other digital players and today they are simply not using this appropriately to their benefits,” said Javornik. “Here it’s important to note that digital economy works through a platform economy model. If airlines will not deeply understand this and will not adopt this business concept and mind-set, they will not be successful. Digital API economy will not make an exception for airlines. Either you will be part of the new digital API ecosystem, or you will be fighting for survival in a small niche.”

Digital transformation requires action on several fronts – embracing cloud native architecture for managing and running digital assets, APIs etc. So where does a platform model fits in for digital businesses in order to embrace innovation and agility? 

According to Javornik, the first thing to understand is that digital transformation goes really deep.

“One can go and visit few champions of digital economy and observations should be obvious and immediate. It's certainly not about assets, it's not even about processes and methodologies. It's about culture. The digital world brings significantly different complexity and speed as we are used to in the classical economy,” Javornik said. He added that embracing this natively means to fundamentally change the management approach that we have been taught in management schools even just few years ago. The basic management control processes which enabled success yesterday is today the biggest inhibitor of embracing the new culture that is needed for digital companies to be successful. “In this respect, start-ups have a huge advantage. They don't need to think about how to transform the existing business. They don't need to think how to deal with thousands of employees that are executing outdated processes, don't have appropriate skills and don't have the right culture. They just jump into a new market opportunity and build the needed culture from scratch. Nevertheless, the easy simple mobile app business is now taken by new players and also digital economy is now understood much better. Therefore, also bigger organizations have a good chance now to succeed in this second wave of innovation in the digital API economy.”

Some points to consider

·          In order to be a platform-enabled retailer, the role of microservices is vital. “Whatever you are building today needs to follow this architectural pattern with the clear understanding that you have no idea how microservices will be assembled in the future. However, the more flexibility you have in the architecture, the more successful you will be in fast changes that will inevitably be part of your daily life.”

·          Leveraging transactional systems: This (extracting and managing data out of the transactional systems) is the core issue of airlines today, said Javornik. “They (airlines) are not a start-up that starts from scratch. They are deeply connected to outdated rigid systems. And it will take years to convert to a new architecture. They need to do it step by step. Here it is important to look at the big picture and find layers that are critical and therefore first priority versus other parts that can be changed at a later stage.”

·          Differentiation via sharing of data and APIs: “Software does not have a physical form. In the decades of development on the market it turned out that the most efficient model to benefit from digital technology is to position it in a form of a platform that enables so called two-sided marketplace (or multi-sided marketplace). This means that you eliminate all non-IT middlemen and start customer journey with a digital system on top,” said Javornik.  “In a form of a platform that connects end users to other systems that provide them important services. It is fundamentally important to understand that this is the prevailing business model that is winning today on the market. Not being fully integrated in this new ecosystem is a very dangerous strategy in my opinion. Not understanding difference in complexity and speed of this new ecosystem is a danger as well. There are no friends and enemies in this new ecosystem. Almost every other microservice in the ecosystem will be both at the same time or so called “frenemy”. Companies that will be better connected and will have ability to change business models faster, will win,” concluded Javornik.

So, as Javornik, also asserts there won’t be any single customer journey. It is imperative for airlines will need to be in as many winning digitally connected ecosystems as possible, while protecting their value add on the other hand.

 

What is the significance of being a platform-enabled retailer? Here from experts at the upcoming 8th Mega Event Worldwide, to be held in Palm Springs, CA, USA (29 November – 1 December, 2017).

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