Departures sign at an airport

Data is the Glue of Value Networks

Together with an estimated 8.2 million EasyJet customers this July, my daughter is off on Monday, bound for Barcelona to join a friend and her family for a week of supervised adolescent fun and sun.

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From 310 million air passengers worldwide in 1970 to 3.6 billion in 2016, air travel has become so commonplace it’s easy to forget what a complex thing it really is.

If you are EasyJet, how exactly do you get the equivalent of London’s population up in the air and down again in a different place safely and happily every month? How, for that matter, do you do that with half the world’s population in a year, across 5,000 airlines?

At a conceptual level, it’s all to do with value chains and value networks.

Aeronautics companies such as Airbus work with engine manufacturers, like General Electric, to build planes which they sell to airlines, including EasyJet. They in turn work with airports to offer a travel service to my daughter. This takes place under the auspices of public authorities, who will check her passport, attribute licences to the airlines and ensure the sky is clear for take-off, flying and landing.

And then there are all the extras, visible or not to passengers – travel agents, maintenance, in-flight entertainment, food, baggage handling, frequent flyer programmes and the IT systems that keep it all running.

At every step, a value network is at play.

EasyJet flies just over 250 Airbus planes. The airline is Europe’s largest Airbus single-aisle fleet and a perfect illustration of how a vertical value network delivers success: pilot training, maintenance and a host of other operational activities are standardized, lean and generate cost advantage. Air traffic control, collaborating seamlessly from country to country, is a classic case of horizontal value networks. Airlines compete, fiercely, and collaborate at the same time through code-share. This is perhaps one of the most striking examples of coopetition, since Adam Brandenburger and Barry Nalebuff codified the notion in 1996.

And while we have to thank Michael Porter for the value chain and Clayton Christensen for the value network, concepts that help us understand the theory behind the air travel industry, the thing that will make my daughter’s Catalonian week happen seamlessly is data.

Data is everywhere in air travel.

According to General Electric’s former CEO, Jeff Immelt, a flight between New York City and Chicago produces a terabyte of data. This is only going to increase when you consider that there are now 400,000 data parameters on the Airbus A350, compared with only 20,000 parameters on the older Airbus A320. This is not data my daughter will necessarily see, use or care too much about, but it is the glue that holds together the sector’s value network and, in this case, binds Airbus to its airline customers. By understanding how the aircraft engine is performing in real-time, preventive maintenance can be organized before it’s needed – an obvious benefit of data analytics.

What about passenger data?

Yes, there is plenty of that too in the aviation value network. Some is in the form of frequent flyer miles. In 2004, frequent flyer award liabilities were estimated to exceed $3.2bn in the USA. In 2015, there were £3.7bn-worth of unused air miles in the UK, across just three airline loyalty programmes: British Airways, Virgin Atlantic and Lufthansa. These schemes hold personal data – passport numbers, for example – that is shared with government agencies. This allows for a frictionless travel experience, which could become even smoother. According to IT and telecommunications firm SITA, 57% of passengers would definitely use biometrics instead of passport or boarding pass across their journey.

And behind the scenes, a number of IT players keep the value network humming and expanding. An interesting example is IBM, which is working with Airbus to deploy Watson’s AI capability in building a new generation of connected aircrafts. Another is Sopra Steria: Thomas Cook, EasyJet and Airbus are three of its clients in the travel sector. This potentially puts the IT services firm, and others like it, in a strong position to orchestrate the flow of data that enhances the value network.

“In God we trust. Everyone else, bring data” is a quote variously attributed to Michael Bloomberg and to statistician W. Edwards Demming. The air travel sector is certainly doing its part in generating new data. I’ve no doubt my daughter’s trip will be all the more enjoyable for it.

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Vincent Rousselet

Author: Vincent Rousselet

Vincent is founder and MD of V Rousselet & Associates. With more than 20 years of strategic and operational marketing experience, predominantly in IT and telecommunications, he is an experienced global marketer and strategist who has worked with some of the world’s most recognizable organizations and brands in Europe, America and Asia. Vincent is passionate about customers, who must be at the heart of strategy and transformation.