By Giovanni Donaldson, Mathilde Carraro, and Ezra Konvitz,

Key takeaways from our joint travel breakfast with Founders Factory featuring a star-studded panel talking about their experiences of corporates working with start-ups in the travel sector.

 

  • Robert Carey, easyJet’s Chief Commercial and Strategy Officer;
  • Michel Taride, Former Group President of Hertz International and Strategic Advisor;
  • Ana Jakimovska, VP of Product Management for Content at Culture Trip;
  • Irra Ariella Khi, CEO and Founder of Zamna (previously known as VChain).
  • Moderator: Cat Jones, MD Travel and Media at Founders Factory.

This was followed by eight pitches from travel start-ups disrupting the travel sector — from innovative hotel distribution management platforms to chatbots and challenger travel insurance products.

Every corporate wants to be innovative, but a select few are more successful than others. This is particularly true in the travel sector, where companies — airlines, hotel chains, and cruise lines — work in a highly regulated environment dominated by legacy players and where tech adoption has been traditionally slow.

In a world dominated by very thin margins, complex operations and legacy IT systems, innovation has centred mainly on driving efficiency and unbundling services to increase ancillary revenue — i.e, charging for services such as checked bags, meals, or late check-out — instead of initiatives that are targeted to improve the overall travel experience.

Customers today are expecting the same level of personalisation when they travel as they experience when shopping online. This was confirmed by a recent study which highlighted 90% of travellers worldwide claim that the standard traveling process is no longer fit for purpose. Incumbents that are slow to put the customer at the centre of their innovation strategies risk losing ground to tech players like Google, or OTAs like Booking.com and Expedia who are all investing heavily to provide personalised and frictionless connected-travel experiences.

But the reality is many incumbents lack the skills and speed to innovate efficiently and effectively in-house. “We’re living in a time of unprecedented level of disruption, consumer needs are changing. So with a 100 year old company, the question is — how do I change my core to survive?” noted Michel Taride, former group president at Hertz International.

There are at least three key benefits from corporate / start-up partnerships:

1. The skillset for disruption

The biggest advantage a start-up can bring to corporates is their skill-set to build disruptive products, according to Robert Carey, Chief Commercial and Strategy Officer at EasyJet. There are already many examples of start-ups transforming the industry — they can use AI to leverage on incumbent’s large pool of customer data and make personalised trip suggestions, and then travellers can make bookings through a range of new tech platforms, including mobile devices, chatbots, and voice assistants. “That is when it becomes interesting — when start-ups from the travel sector or outside come with an idea that can change radically the way we do business, not just incremental changes,’’ admits Robert.

2. Innovation at pace

Working with start-ups can help the corporate launching new products more quickly than building them in-house. Ana Jakimovska, VP of Product Management for Content at Culture Trip stated that “start-ups give the pace to build that competitive advantage”.

3. Adjacent opportunities

Many corporates deploy their scarce resources only for core activities — working with start-ups can provide a platform to tactically explore adjacent areas. While these adjacent areas might even become core in the future, they don’t yet merit the resource and attention they would need from the core. Michel Taride, former President of Hertz International, shared a good example in the partnership between Hertz and Zebra Fuel, an on-demand gas delivery service, which allowed Hertz to solve a non-core business problem by offering a more efficient way to fill up their fleet’s tanks and simplified operations while reducing costs.

“We realised very quickly that we couldn’t implement our innovation strategy because we did not have any tech, nor developers,” explained Michel Taride. “The bottom line is that you’ve got to bring fresh thinking — partnering with start-ups was key”.

Many travel companies have started to understand the gains of partnering with start-ups: Corporate investments in early-stage rounds in the travel sector increased by 20% since 2013 and made up 21% of all travel start-up financing in 2018. Together with corporate experimentation with internal accelerators and innovation labs, these trends show that travel companies view start-up collaboration as an effective innovation vehicle.

But collaboration challenges remain: a lack of understanding of the needs of both the start-up and the corporate, poor governance mechanisms and a lack of clear objectives and milestones are some of the roadblocks in the way of successful innovation.

Incumbents shouldn’t despair — there are many solutions they can put in place to bridge the start-up/corporate collaboration gap. Our speakers offered a clear set of learnings and takeaways to overcome those barriers:

1. Corporates need a strategic roadmap

Corporates need to understand where the collaboration fits within their broader strategic plan and how to incorporate start-ups’ innovations. For instance, to counter the not-invented-here mindset corporates can rethink their incentive structures. JetBlue tied the compensation of senior leaders to the performance of its JetBlue Technology Ventures incubator resulting in greater cooperation between executives and founders.

2. Put yourself in the start-up’s shoes

Start-ups don’t have the infrastructure to support all the typical needs of a large corporate entity. Interviews with start-ups revealed that many are frustrated by the lengthy and costly partnership set-up process, which often require extended procurement and legal undertakings normally used for billion-dollar aircraft orders. Travel companies should provide resources and support and view their partners as equals, not subordinates to which they can impose their terms. “It is a two-way mentoring”, explained Michel.

It’s not only on the corporates to make this work — start-ups also have several ways to prove themselves and succeed. Irra Ariella Khi, CEO and Founder of Zamna, suggested three main strategies to win the corporate/start-ups collaboration.

1. Aim to deliver impact early

Quick wins help generate early buy-in from within the corporate. “Find small scale things that solve a problem for the corporate, can prove impact as fast as possible and carry a lower risk”, mentioned Irra.

2. Be transparent on deliverables

Start-ups need to set the right expectations of how they intend to deliver a successful pilot and what they’ll need to deliver it in practice. Robert explained “You need complete transparency of needs and a constellation of support with a dedicated point person on both sides to make it work.”

3. Get senior sponsorship from the start

It is key to quickly identify senior sponsorship to push for start-ups initiatives. “I spent so long briefing the wrong people because we didn’t know any better, and then you need to start over — the idea is to brief the right people right away and then have them sponsoring you internally” confirmed Irra.

At Founders Intelligence, we help companies craft innovation strategies than can address their sector challenges, develop new propositions by partnering and investing with start-ups and ensure the successful implementation of those collaborations. We’ve seen a lot of the challenges in driving innovation and we know what it takes to push an entrepreneurial agenda in major corporates. This conversation highlighted some of the key ways to forge ahead in the travel sector — we’ve also looked at how best to do it in other recent panels discussing incubating start-ups within corporates and corporate/start-up partnerships across industries.

List of start-ups

  • LuckyTrip: Awarded Apple’s Best of the Year in 2016, this innovative travel inspiration and booking app focuses on ‘quirky’ destinations with interesting activities allowing users to search by overall price instead of date/destination and simply book a trip in one tap.
  • Pluto: Winner of the “Pitch on a Plane” competition sponsored by British Airways and Founders Forum Pluto is a challenger travel insurance product allowing users to make all their purchases and claims seamlessly in a mobile application.
  • HotelRunner: HotelRunner provides a complete online sales and distribution management platform for all types of accommodations. HotelRunner also serves the travel agencies with its HotelRunner Connect division, providing supply acquisition and contracting, automated onboarding and more. They already partner with some of the largest global brands such as Booking.com, AirBnB, Agoda etc. present in 193 countries with 36,000+ accommodations.
  • Adrenaline Hunter: The world’s largest catalogue of adventure activities from shark cage diving in South Africa to dog sledding in Norway. With a selection of over 70 different sports in over 30 countries, Adrenaline Hunter partners with travel companies to offer a wide selection of unique in-destination activities and boost their ancillary revenue.
  • Howazit: A mobile-first customer communication platform powered by AI. Howazit allows brands to proactively engage with their customers at any point throughout the journey allowing companies to upsell/cross sell or to address any negative situations.
  • Ruuby: A digital beauty concierge offering wellness and beauty treatments in people’s homes, offices and hotel rooms via their website and app. Partners include the Nobu Hotel, the St James’s and Onefinestay with 24/7 treatments available.
  • Poplar: Augmented Reality content creation made simple. A brand or agency simply uploads their brief to the platform and a community of content creators complete the production faster and cheaper than current methods.
  • GroupDesk: Simplifies how travel agents sell group travel by allowing them to make bookings and manage their trips.