How the Airlines Beat the Olympics & Your Business Can Too
August 1, 2012
There’s a problem at the London Olympics: it’s sold out, no tickets for love or money, but a lot of the games show row on row of empty seats.
Don’t be too quick to blame it on the Brits. Turns out this same issue cropped up during the 2008 Beijing Games. And in 2004 at Athens. There were even rumblings about it during the Vancouver Winter Games two years ago.
Maybe the Olympics should take a page from the airlines industry. You read that right; in this case, the airlines actually provide an example of how to do business right. In fact, an airline shares many of the same challenges the Games do: volatile ticket demand for varying destinations, long lines and security procedures for patrons, and a limited window of opportunity to push a high volume of orders.
In spite of these challenges, the airlines (unlike the Games) are very good at making sure every seat is filled. How do they do it, and what lessons can your business learn?
Don’t Stay Stuck in the Past
Sure, your business might have a long and grand tradition (even dating back to ancient Greece), but that doesn’t mean it should be chained to the old way of doing things. After all, in the good ole days the Olympics athletes were all male (and nude). As this story from Wired shows, the airlines of the 1950s were bogged down in a system that was primitive even by their day’s standards:
... reservationists kept track of travelers in much the same way that short-order cooks keep track of breakfast orders. They used lazy susans like this one.... Airplanes were flying with empty seats, and about 80 percent of them were because of bookkeeping errors in the lazy susans.
You can see a picture of this early “system” over at Wired’s website, and it looks every bit as impractical as it sounds. World War II had proven the benefits of technology and mass infrastructure, but the airline booking system was still rooted in the previous century’s workflow. Not only was it bad for customers, it was bad for aviation’s bottom line. Something needed to change.
Think Investment, Not Cost
Talk is cheap, change is not. The Olympic organizers have vocally embraced social media but (in a matter for another blog post) their actions are still hit and miss.
In 1961, American Airlines teamed up with IBM to create SABRE, a network to connect reservation consoles across the US and Canada. The price was huge: $30 million (which, according to Wired, amounts to $230 million today). Private industry partnerships with computer companies weren’t the norm but the exception, and this contract was the largest one IBM had ever entered into outside of the government.
But the investment paid off, literally:
By the end of 1965, SABRE was handling 7,500 reservations per hour. To get a sense of how much more efficient it was: It took American 90 minutes to process a new reservation under the lazy-susan system. With SABRE, this could be done in seconds.
That improvement’s the equivalent of shortening a race from a 30 K (current world record 1:26:47.4) to a 100 meter dash (clocked at a best time of 9.58 seconds). With SABRE and the other systems that were developed to compete with it, cancellations could turn into sales at an unprecedented speed and airline profits could rise.
Never Stop Improving
Lately SABRE’s sheen has dulled from its once rosy position, the same way prize athletes can be dogged by speculation about slack training and illegal doping. What happened? One word: the Internet. Airlines began marketing straight to passengers through their websites, and online ticketing services sprang up to make use of new online infrastructure.
This CBS story explains the rise and possible fall of SABRE and its ilk, ending with this warning:
Data transfer costs almost nothing today, so the old model of segment fees and incentive payments has too much cost sitting in the middle.... Sabre has two options. It can try to create this hub of direct connections that would eventually be able to replace the existing reservation system with much lower cost to the airlines or it can fight to cling to its existing business model. Its decision to pull American out of its system in August (oh, the irony) shows that Sabre is going to cling to its business model and try to use its current heft to prevent airlines from being able to use other options.
This is not smart. If Sabre won’t evolve, then others will jump in to fill the vacuum.
In the business world, like the Olympics, competition is fierce. No athlete can expect to remain on top without a lot of hard work, and no business can expect to get ahead staying still, leading to our final point.
It’s a Team Sport
Lots of small businesses worry that a “partnership” could end in lots of money paid out with little to show for it. Their current workflow might be bad, but it’s known. Change could be expensive in time and money, and going it alone can seem the only safe way to go.
We get it: trust is hard. The trick is to find a team member with the right expertise to handle the job. The Olympic Games relies on a whole planet of partnerships, but SABRE originally soared because experts from two different fields worked together to solve a specific problem: filling empty seats. While SABRE’s latest moves are questionable, the airlines (despite their other problems) have still managed to keep seats full by forming alliances with the right groups: ones that know the current technology and how to make it work for them.
At Cii we work in those kind of strategic technology partnership every day. Like a coach, we tailor our expertise to answer the specific needs of the business in question, listening to concerns and offering suggestions to improve performance. We’re proud of the success our clients enjoy through these partnerships, and we want to help your business exceed goals as well.
Contact us today to get your winning strategy started.