Singapore Airlines (SIA) started its digital transformation in 2016. Since then, hundreds of millions have been invested in IT capex with the vision of creating a “future where SIA remains a prestigious proposition but becomes a smaller part of the whole entity, and the other seeds would have become saplings.” Yeoh Siew Hoon finds out what’s been done the past three years, and what lies ahead.
Timeline: When it began and how
It was a journey that started in 2016 – the digital transformation of Singapore Airlines. On the surface, two words that roll off fairly easily off the tongue but in actual fact, carry an awful lot of weight.
The weight of responsibility – you’re dealing with a sacred cow, Singapore’s most prized national brand, an entity many stakeholders care about. The weight of execution – a legacy, traditional business that’s run successfully for all its life since 1972. The weight of results – will the hundreds of millions of dollars needed to invest in IT capex yield returns?
There wasn’t a choice though. SIA’s leadership, under CEO Goh Choon Phong, knew that “if we didn’t go digital in a big way, the future world would be very challenging”, recounted Campbell Wilson, senior vice president, sales and marketing, who returned to SIA from Scoot where he had been CEO for five years..
Choon Phong, a MIT graduate with degrees in artificial intelligence, launched SIA into a comprehensive, top-to-bottom transformation, a key pillar of which was digital. This supercharged existing initiatives, such as the devices used by cabin crew to better serve customers, tech crew in planning flights and finance in automating processes, but more importantly allowed dozens of new initiatives to flourish.
Ranging from e-commerce to distribution, customer insight to personalisation, sales to operations, HR to finance, there’s barely an area that has remained untouched by digital.
So what things have happened since then?
• Investment in people – it hired 200 inhouse developers.
• Investment in IT – it built a vertical stack which allowed it to chop and change by modules so that any upgrade could be done without major disruption. “This is not revolutionary for a digital business but is for a legacy airline, which is at core a mass-transportation industrial business historically built on very stable, relatively inflexible, technology.. This led to a sharp improvement in speed and allowed us to reiterate and innovate.
“It’s starting to show in the business results, we are outperforming in load factors and revenues. It’s starting to manifest in the customer experience. You will see it in the beta version of the app which will be launched soon.”
• Investment in an AI/machine learning stack that will support three functions:
- Kris NLP (Natural Language Processing) that will expedite the gathering of customer feedback and reviews and response
- Facial recognition – for access to its Service Centre and lounges, opt-in
- Recommendation engines – destination recommendations for promotions, ancillary products and services, KrisShop goods and Next-best actions by staff
• Investment in blockchain
- To underpin the foundation and evolution of KrisPay into a digital lifestyle app. “It will be more than a place to burn frequent flyer points but an ecosystem where customers can book, digitise their boarding passes, buy from Kris Shop and spend miles and their vouchers.”
- To underpin its end-to-end fulfilment service (Parxl) by SIA Cargo where the airline can deliver any ecommerce goods to the customer’s door. Kris Shop will become an ecommerce omni-channel retail store. You can buy on the web, buy on the ground and have it delivered onboard within 60 minutes of flight, or delivered to the belt or buy at home.
This “George engine” core tech will be patented by SIA and will be used to build out a broader SIA ecosystem and marketplace based on the airline’s 35 million passengers a year.
“We can sell access to other partners in Singapore and make available booking capabilities for any attraction or activity, for example,” said Wilson. This is one reason why SIA is incubating and investing in Traversel, a startup that is solving the problem of automating in-destination tours and activities.
Wilson sees a time when SIA will be able to recommend someone who’s bought a Chateau Lafite from Kris Shop a tour of the winery and a $200 discount on an airfare to Paris. “This will create a customer experience with more emotional touchpoints. We’d be happy to give those (extras) away at zero margins if it convinces people to use our core product.”
In essence, SIA is monetizing its customer base the way tech companies like Grab and Go-Jek are. Commented Wilson, “The unfair advantage we have is we acquire customers through our own business everyday while they have to spend to acquire customers. Our core business is profitable, the rest can be loss leaders.
“The other unfair advantage is our loyalty programme – the most attractive item in redemption is travel.”
Other areas it is testing:
• Dynamic pricing and revenue management – it is launching a pilot around personal pricing based on these factors – what are other carriers charging, how many seats do they have left and what is the price elasticity of the customer. “Based on that, we can either offer a lower or higher price to you.”
• Distribution – last year, it rolled out KrisConnect, whereby the digital APIs that underpin its website and app capabilities are made available to third parties. From April 1, 2020, it will launch new content exclusively via this API technology. This differentiated content will be offered through SIA directly or through parties like Travelfusion and GDSes. “We are excited by the new technology and the capabilities and benefits it offers and we want everyone to get onboard. This gives everyone access to new content and better personalization capabilities. It democratizes access to functions and information – what you do is up to which APIs you consume and how you combine them, rather than following something prescribed by an intermediary. It puts power in the hands of whoever wants to innovate.”
SIA’s intent is clear – it wants to move a bigger proportion of its sales towards digital. “The more we can have digital sales, the more we can digitize the airline,” said Wilson. “Right now we have infrastructure that’s built around the paper ticket and its digital twin and we have kids in the company who don’t know what a paper ticket looks like.
“The more you sell digitally, the more you can transform.”
Wilson believes it’s when you reach 50% that “people sit up and take notice”.
“It is inevitable we will get to that mark, so let’s invest in it now.”
2020 & Beyond
Wilson sees two developments that will impact travel and raise questions.
• Data security and a need for consent management
“It’s why we built IT inhouse and built security in our core infrastructure rather than layer on top. Customers will want more visibility over who does what with their data. When you have two parties collaborating, one relies on the other to get the consent, and that can be tricky.
“There may be a need for a trusted hub where customers can access to give consent, on the one hand, and companies can access the database, on the other.”
SIA is participating in “some exciting POCs, anticipating future trends, such as data consent management”.
So who will be the trusted hub? Could it be airlines, telcos or banks or someone else? “No one company will own that space, our industry has the responsibility to solve the problem given the right infrastructure.”
• “As a service”
Having built the infrastructure, could SIA offer its payment network, retail and personalization tech “as a service” to other companies? “Why build your own ecommerce platform, why not sit on our platform where you will get technical support, rates,” said Wilson.
Much like Amazon offers its Amazon Web Services …
For example, Kris Shop could become the etailer for locally-made craft as an extension of its “I Heart Singapore” merchandise which showcases Singapore-produced crafts. Think of a Shopify-like platform for local artisans from Bali to New Zealand.
With all these changes, it is clear SIA will look very different five years from now. “I hope it will be different, yet not so different. Consider this, five years ago, SIA was perhaps a little staid and conservative, sitting on inflexible legacy technology,with four Singapore-based airlines. Today it has two airline brands – SIA and Scoot, serving clear market segments yet coordinating and cross-leveraging their respective strengths. It is commercially bold and performing well, its tech has caught up and in many areas is leading the pack. If we can leverage these strengths into other businesses, then we will have a future where SIA remains a prestigious proposition but becomes a smaller part of the whole entity, and the other seeds would have become saplings.”
