To The Bone!
By: Cenk Akerson
The industry’s number one trending topic over the last 5-6 years has been ‘Digital Innovation’. Adoption has been slower that one would hope for, but COVID 19 has acted as a super catalyst to accelerate the efforts and open up the industry’s attitude for action…..
In the past eight months, how many of you took a moment to discuss ‘new strategy’, and how many of you kept discussing ‘margins’ and ‘cost sharing’?
Indeed, this is a situation where the oxygen is effectively cut off from the industry, so no one can genuinely condemn the efforts employed in the panic to survive.
But…. this is also a leadership opportunity. Vision is a crucial aspect for leadership as well as asking the right questions. So, stop looking for simple solutions to complex problems!
Pre- COVID 19, the industry was already facing difficulties, but it was always given what I like to call the ‘morphine’ of retail – Price Promotions – to ease the pain. Price promotions have been the number one ‘drug’ employed or demanded by retailers. Organisational strategy and focus have been built around this. No other value proposition to the traveller has been proposed.
Morphine has never cured a sickness and it was never designed to cure one, too. COVID 19 has pushed a transformation, and no transformation is painless.
Yet before providing solutions for transformation, we need first to truly identify problems and the new nature of the world of demand To The Bone.
The famous Gold Rush of the 19th century was full of dreams and promises to become rich overnight. Right now we are experiencing a ‘Digital Rush’ with the same kind of attitude to overcome the failing businesses or solutions without proper identification or the problems.
So let us now create a more positive hashtag: #reservesofgrowth.
As I said, very few of the Gold Rush adventurers and dreamers enjoyed any success. The same rules apply for the Digital Rush. Here’s an analogy that might be helpful of how a mining business operates in a nutshell.
Oil/Gas/Coal Reserves and making them profitable
- Proven (reserve is there)
- Probable (reserve most likely to be there)
- Possible (reserve might be there)
As the mining business has very high costs, successful companies focus on ‘Proven’ mines, then question execution costs of any such mines.
The rule of thumb is that if a reserve is declared to have 1 million tons, the factual reserve is 1000 times more. However, the company will analyse how deep the reserve is, what surface it occupies. As the depth and surface increases, the operation’s profitability decreases, so the mining company will only focus on these reserves profitable sections.
Both big data and digitalisation are like the ‘natural resource mining’ business. So far efforts or claims of ‘proven’ reserves have not truly succeeded in terms of bringing incremental, profitable and sustainable solutions.
Here’s a simple analysis of these reserves:
- Vision and strategy: what is our vision and our strategy to serve this vision?
- Customer acquisition cost planning: how to reach the customer and what investment is needed?
- Meaningful content: what makes the value proposition meaningful to the traveller?
- Overnight success goal: what sensible KPI’s should be employed and a realistic timeline
Single airport e-commerce and ‘click & collect’ have been put in place in the past five years with the likes of Dufry Red, Heinemann & Me, Krisshop etc. These are all good steps forward, but are these proven mines of #growthreserves for this industry?
Individual efforts to create unique benefits, forcing the shoppers/travellers to engage with over 100 different apps/websites do not seem to be a strong strategic move for the industry. Nor does a single platform to keep pushing the morphine of discounts and driving prices down via price promotions. Not to mention drive traffic away from highly invested physical retail spaces.
As to the future, yes, travel will resume in the next 1 to 3 years. But the question is: will travelling passengers come back to the stores? Are you ready to embrace them?
”The essence of strategy is choosing what not to do. Fit is the fourth test. Great strategies are like complex systems in which all the parts fit together seamlessly. Each thing you’ve chosen to do amplifies the value of the other things you do”. (Michael Porter).
Remember, for the average traveller, there is only one ‘Duty Free/Travel Retail’. This is a good moment for thinking how to create a global structure to best serve these ‘brand’ names, with a shared vision and execution as an industry.
