New Thinking
1123 days ago
 

How organizational baggage weighs down travel innovation

Is there any real innovation in the travel sector these days?

Increasingly it feels like there is a lack of innovation and differentiation, with seemingly every site doing flash sales, social travel and travel inspiration etc.

Sometimes it seems like watching a kids’ soccer game. As soon as one company introduces a new feature or service, everyone else rushes toward the ball to give it a kick and copy it.

 

 

I’m not saying that keeping up with trends and competitors shouldn’t be done, but it generally doesn’t create any differentiation that drives preference with your customers.

What I mean is that innovative initiatives are few and farther between.

The stuff I’ve seen from Hopper looks great; TomTom’s integration of TripAdvisor content is very smart;  everyone raves about Everbread’s technologyHipmunk has used UI visualizations to great effect; and while less sexy, Concur’s mobile app has made expense reporting dramatically better (IMHO).

 

 

But let’s face it: Getting to innovation, let alone achieving it, is hard. We should acknowledge that. There is a tension in every product development organization: how do I effectively split my resources between:

  • Fixing yesterday’s problems (fixing bugs);
  • Adapting to environmental factors (e.g. updates to code for regulatory changes);
  • Finishing what you started (features that didn’t get into the current release); and
  • Introducing honest-to-goodness innovations

The cost of “keeping the lights on” (the first three bullets), according to a number of different research sources, can take in excess of 80-90% of R&D budgets.  That’s a terribly inefficient use of resources (especially in this economic environment).

An idea doesn’t have to be technically innovative to be innovative, but increasingly technology is the engine behind a company’s ability to drive revenue and optimize operations.  Many innovations may be new to the travel sector, but not inherently new. Many companies are simply applying technologies and concepts from the outside to travel (e.g. mobile, cloud, e-commerce/merchandising strategies).

While not an exhaustive list, these are three factors holding back innovation today:

Organizational Baggage
This is clearly not endemic to the travel industry, just epidemic to all industries. There are many types of organizations challenges that larger companies face which inhibit innovation:

  • Lack of structured processes to evaluate and incubate ideas. Many companies don’t have a good innovation management process. This is the probably the single biggest reason for failure to deliver impactful innovations and the most underrated aspects from an organizational perspective. If you don’t have a working funnel to evaluate new ideas and winnow them down to the few that get prototyped and implemented, you are left with a situation where you are hoping that the best ideas (or any ideas of merit) actually make it to your customers.  Worse yet, you lose the ability to track the value of ideas generated and implemented, calculate an iROI (Innovation Return on Investment), or build institutional knowledge of what works and what doesn’t to inform future investment decisions.
  • Unwillingness to make a sustained commitment to the innovation process.  Don Dodge wrote a great post this week about the importance of not giving up on an idea. You can learn a lot from your failures, and the final result is a much better product and perhaps a runaway success. But even when you have a good idea, do you often have people lying around to test those concepts and build prototypes? Some organizations have decided to fund an Innovation Lab. This video about Nordstrom’s Innovation Lab really illustrates the benefits of having such a team in place.

Imitation is the Sincerest form of Laziness

This is what one might call the “Keeping up with the Jones’” approach to innovation. Some might term this the fast follower approach and it certainly has merit. You don’t have to be first to be best. But it goes wrong when it becomes a crutch. Teams no longer focus on creative solutions to customer problems, but become comfortable implementing others’ solutions. It is activity without creativity and that does not bode well for a company’s long-term future.

Surely we have higher goals for ourselves than not losing ground.

A secondary problem ensues when we rally around adopting a trend, but the implementation is more akin to “window dressing” versus the holistic implementation that really allows you to change the customer experience or respond with a materially better solution to your customer’s problem.

That’s why some companies fail at being “social” by thinking that adding a Facebook “like” button is enough.

On the other hand, I think that TripAdvisor’s deeper integration of the Facebook Connect API delivers a better and more relevant result to the customer and allows the company to really differentiate its product.

 

Relying on Acquisition for Innovation
In the travel industry, we have seen a lot of companies being acquired. This is great for founders and VCs and healthy for the industry in general. In many circles if you ask whether it’s better to build or buy a solution, many times the answer is buy.

In both the travel and the tech world it is a ready answer as attested to by Oracle’s acquisition of Endaca and RightNow last week – for a combined $2.6 billion.  So acquisitions aren’t necessarily cheap, but almost become a necessity when you’ve fallen so far behind that the time to market issues outweigh the financial costs.

Priceline’s acquisition of Bookings B.V. for $133 million in 2005 may have been the best $133 million ever spent, while Travelocity, anxious to widen its European footprint, spent years integrating LastMinute.com after paying an exhorbitant $1.2 billion for it in 2005.

The trick becomes determining the stage when you acquire the company. I would guess that Google is much happier with its acquisition of Android at $50M in 2005 than the acquisition of Motorola Mobility at $12.5B in 2011.

But for sure Google is happiest that Groupon didn’t accept its offer of $6 billion last year.

Do these issues resonate with you? How has your company encouraged innovation? Please feel free to share your stories and opinions in the comments.

 
 
Glenn Gruber

About the Writer :: Glenn Gruber

Glenn Gruber is a contributing Node to Tnooz and senior mobility strategist at Propelics, an enterprise mobile strategy firm.

Previously Glenn was AVP travel technologies at Ness Technologies, responsible for developing the company’s strategy and solutions for the travel industry.

Prior to Ness he held leadership roles at Symphony Services, Kyocera and Israeli startups Power Paper Ltd and Golden Screens Interactive Technologies.

He also writes a personal blog, Software Industry Insights

 

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  1. Link: “How Organizational Baggage Weighs Down Travel Innovation” « Tourism Branding Forum's Blog

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    [...] what holds back innovation in travel, specifically? There was a great article on Tnooz.com recently that explored this topic. Glenn Gruber argued that “organizational baggage” – most [...]

     
  3. Kevin Roberts

    Glenn ,Thank you very much for your post.

    It’s not very often that people in the industry share their pains, or thoughts. Instead of it you often get typical PR pitch.

    I can only talk from my own experience: being there, done that, got burned?, which boils down to the following:

    First, lack of Capital and the Quality (not only the depth of pocket) of your investor defines in many ways the type of team you will create and the product you will build.

    Second, limited resources. Related to the first but if we have to use R&D budget to Fix existing platforms, then well we work with what we have. Haven’t we all gone or actually live in that stage. It´s easy to say: let´s be creative, let´s reinvent the industry but if your day goes thinking and working how to meet the payroll, well it definitely limits your vision.

    Third, depth or level of the innovation you are trying to pull off. Even though at first glance the Nordstrom Innovation Lab look very cool and sexy I have to point out that in my opinion they are working on the last layer of innovation with a very focused and limited innovations window (at least in the example. Do not know more of them so I cannot judge!!). But there is no way we can compare this to developing a full product platform like for instance Expedia.com, Travelocity, Hipmunk, Machine Learning, Pluming needed to provide a Dynamic Packaging solution that works, etc.. We are talking scale and big development teams. Definitely not so easy.

    Fourth, Innovation is not easy and not everyone has it in them. For all the Scrum and/or Agile or whatever methods you may try or use, the blend between vision, insight, method and execution has never being easy. I came across a Tom Peters post the other day that probably sums up much better what I feel: http://www.tompeters.com/dispatches/012161.php .

    Fifth: Platform maturity: Though, we are very much aware of all the advances, new technologies, new tools, new products, etc.. A very big chunk of the business (corporate travel) is still working on 40 year all tech. (GDS’s) and the last ten years of change in the industry have largely affected the retail part of travel. Mind you it´s not the only industry: Tell me which bank organization is using very forward technologies for mission critical processes. I am not saying that changes are affecting this part of the industry. I just feel that it hasn´t reached critical mass. This of course hinders innovation. Look into this post in enterprise irregulars talking about tech. changes and adoption: http://bit.ly/vcy9xN

    So, where does this leave us?. I still think that travel technology is very much at the center of great and very interesting changes. Just go to Tnooz TLab s and just count the amount of companies and projects that have been featured.

     
    • Glenn Gruber

      Kevin,

      Thanks for your comments. Sounds like we are fairly aligned in our thinking.

      I specifically like your fourth point about the whether individuals are comfortable innovating v. executing and the chasm that exists between vision and execution. Thanks for the link to the Tom Peters post.

      The other element to add perhaps is not just the legacy technology, but the legacy business processes that inhibit innovation. I think back to meetings I’ve had with travel execs who didn’t want to embrace mobile and social because they could not fully control what their users do, rather than try to adjust what they do to fit the needs and desires of their “customers”.

       
      • Kevin Roberts

        Glen; Thanks for your reply.

        I could not help but smile at your last comment about “Legacy Thinking”.

        Also, even when I acknowledge a Love/Hate relationship with the industry my mind keeps going back to a guest post in Tnooz written by Murray Harold,last September 22nd. and titled:

        There is no money in travel – so why do so many want to get involved?

        It really struck a raw nerve.

        I have to say at the outset that I do not agree with the main line of thinking of Murray´s argument, though, some of his statements sure ring a sour bell.

        I quote below some parts of the post:

        “There hasn’t been any money in travel for some time…

        “Airlines haven’t got any money either…

        “Tour operators don’t have it, …

        “And don’t forget hotels, many of which are hardly swimming in piles of cash.”

        “So, why do people (especially from the tech end of business) want to get involved? The only answer I can come up with is that “travel”, as such, has nothing to do with it at all.”

        “The travel industry has rather successfully managed to make itself the most tight-margined, complicated business in the world. There is no travel person who is going to go to work, do five trades and nip out to buy a Porsche during their lunch break.”

        “This is also why technology in travel is often said by outsiders (and by outsiders, I also include technical types) to be “backward” – but note this simple fact: no-one is going to write fancy expensive systems for an industry that can’t afford to buy them.”

        “That said, I don’t actually remember anyone asking for new technology….

        I will say that Murray left out the one layer of companies that are making end´s meat: Distribution.

        Of course there are other sectors, very focused technology providers that happen to get more that fairly well, thank you very much but it is true that extracting value is not easy and here comes why I feel the industry is still in a sort of a conundrum:

        At first there seems to be a lot of room for innovation in the travel industry. This of course attracts investors and new comers.

        But, I have the feeling that innovation does not come easy (or cheap) in this market.

        At first glance it might seem that this is not true to fact, given the amount of players that get into the space.

        But have you noticed how many of these are in the retail part of the market and putting together many smart apps that cater to the travel consumer.

        Of course social oriented tools are a given and the sector is crowding fast.

        Again, the trend in providing better and better content to the hands of the travelers but in the most part, retail type of consumers. Indisputable value.

        At a deeper level of course it makes sense agree with the trend in developing the minimum viable product model of product development consistent with agile processes.

        And of course those who pay for these innovations, VC´s and seed capital providers are probably happy with this model.

        But the hard part is still to come and will not come neither easy nor cheap. I am talking about the business / corporate part of the market and deep in the real value of the GDS value chain.

        It´s an easy shot to bash the GDS´s, but not so easy to replace or see value to what they provide. Even if the technology platform in not brand new. It´s simply reliable.

        Just to make a point, how many Banks do you know that use cutting edge tools for the real mission critical processes?

        But this, I feel is the area of the industry were the real innovation and the hard one is going to come from. Here is where I feel Agile and the minimum viable product are not easy apply.

        Probably AA with their Direct Connect gamble will once again show the road as it did creating SABRE, putting revenue pricing into real practice, developing their frequency program into a real marketing machine.

        Meanwhile, while I am getting ready to get into it again I would like to share a couple of links that a picked up in the last days that might much better explain part I am might be failing to convey:

        Minimum Viable or Insanely Great? We’ll Miss You, Steve Jobs (thanks to enterprise irregulars)

        http://bit.ly/uOMxCU

        When “minimal viable product” doesn’t work (Thanks to Seth Godin)

        http://bit.ly/rExbbm

        Last but not least, thanks Tnooz and all their contributors. You are a must reading everyday.

        Regards from the other side of down under.

         
  4. Krista Caldwell

    Thanks Glenn,
    I agree that there is a lot of innovation to be desired in the travel industry, and the three points you brought up make sense. I think the third, relying on acquisition for innovation, is a result of the first two and I’m not quite sure why you listed it as a factor holding back innovation. There is space for new companies to take advantage of their lack of “organizational baggage,” and bring new products to market. I agree that the entry costs in the industry are high, and appropriate this largely to the high switching costs for corporations to make major changes to their travel policy. For my startup, the key has been finding a real problem that current solutions just don’t address. We’re using new technology to solve it and we’ve found that businesses are willing to go outside of their existing supplier network to meet their need (even though we’re not a full-service policy solution). Whether or not we end up integrating or even merging with one of the bigger players, we’re bringing innovation to the industry and solving a problem that the incumbants aren’t incentivized to address.

     
    • Glenn Gruber

      Krista,

      Excellent point. I realize that the LargeCo’s in any sector are the ones who will do the acquiring and that this opens up opportunities for others to come in and deliver solutions in the white spaces. For sure it’s entrepreneurs like you that help push the market forward.

      I guess I was looking at the third point as an inhibitor from an individual company (a larger one) perspective, rather than an sector-wide perspective. But for the established companies they perhaps should consider being more progressive in their innovation spend (and clearly some are more aggressive than others) rather than waiting for the next acquisition target to float on by. I think that the recent revelation that Steve Jobs tried to buy DropBox but was rebuffed shows that you can’t rely on acquisition as a strategy — sometimes people don’t want to sell. Or you have to make a “Godfather” offer that starts to make the economics dicey.

       
      • Krista Caldwell

        Thanks for your response Glenn,
        You’re right that there should also be ways for the LargeCo’s to innovate. I like Evan’s idea of investing in their own internal portfolio of innovations/letting many flowers bloom. They’re also in the privileged situation of having much closer relationships with corporate buyers than smaller companies. They could be using the feedback they receive about holes in their offerings as signals of what’s to come and build the solutions.

         
  5. Evan

    Great post Glenn, I think all of that is true and also applies to most any industry. In travel, I would add that we have some additional structural elements that slow innovation, namely the high cost of entry when it comes to travel technology and distribution.

    In many industries, innovation start externally from start-ups or players outside the core, and then get bought (or copied) into the mainstream.

    For travel, this is true also, but with extreme limitations. Cost of entry of travel distribution is too high, and technology barriers are huge. As a result, most start-ups tend to play in the same space (as you highlight) and we see a lot of variations of similar products. Very few start-ups can actually tackle the core issues unless they are extremely well-capitalized and founded by industry insiders, which defeats some of the external perspective that is so valuable.

    And since that status-quo tends to protect many of the big players, there isn’t much of an incentive on anyone’s part to break it. And on top of that, new entry threats are one of the main drivers to justify R&D and investment in innovation internally in big companies. So together, this really stifles innovation.

    That being said, with more APIs and (dare I say it) collaboration possibilities, this is starting to break-down….at least somewhat.

    One final note: The notion of an iROI is preposterous. You don’t see a start-up doing ROI calculations on their product before they begin. You see them attack, iterate, and attack again until they succeed. Results are generally binary, and probability of success is the only thing that matters. If large companies want to truly bring innovation to the industry, they need to view their innovation activities as a VC would view their portfolio — lots of investments, hoping some of them work out — and they should invest both internally and externally. But maybe that’s for another discussion.

     
    • Glenn Gruber

      Evan, thanks for the comments.

      I completely agree that iROI is not something that a start up cares about. But start ups are not the only source of innovation (though more often than not, the source of disruption). But as an organization grows and matures, it must being able to measure the impact of the investments they make. You can’t have a sustained innovation investment strategy in a larger company without supporting metrics to show progress and sustain funding for such activities into the future.

      There’s a whole other conversation to be had about what metrics should be used to measure innovation and it goes well beyond iROI and # of patents (which is the only measure that many companies use — erroneously).

       
      • Glenn Gruber

        Let me also add that iROI is but one possible metric and that I’m not advocating a 1-year investment horizon.

        It has to be longer term, but you need to start tracking it and look for evidence that what you’re doing is working and perhaps determine to increase the amount of resources you put behind innovation activities. Some stuff may have a very quick payoff, others make take years to nurture.

         
 
 

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