On a Higher Plane | Article

The Effect of B2B Commerce on the Aviation Industry

ascending planeBusiness-to-business e-commerce (B2B) completely changes the way business is conducted. Innovation is now the name of the game. The infrastructure of the Internet is an unmatched forceful tool, and today’s forward-looking companies are finding a myriad of ways to use it. Entire industries are moving up to a higher plane-a level of operations and processes for ultimate success, based on the collaboration and sharing of knowledge made possible by technology and B2B alliances.

The aviation industry is a prime candidate for the use of B2B commerce, for this industry is being reshaped by speed, connectivity, and intangible value. Because of the Internet, airline customers focus more than ever on speed and on-time performance. Companies that figure out how to keep customers from wait periods will have a significant advantage. Connectivity opens the doors between manufacturers and airlines around the world, as well as travelers. The airlines also possess a wealth of intangible knowledge about its customers, which can be used to the customers’ benefit as well as by other industries. These three factors-speed, connectivity, and intangible value-are already beginning to affect the operations, strategy and structure of the aviation industry.

Imagine being a business traveler on an airplane in 2003. You would have electronic chips embedded in luggage tags; wireless communications; Internet/intranet services; your own personalized “travelspace” on a screen with an office link icon, a videophone, and real-time data. Other innovations, such as a digital dashboard with a map showing the flight’s progress, or the opportunity to use an interactive video with in-flight training program from your corporation, would be on board.

Imagine being a vacation traveler on that same flight. From your digital travelspace you could download movies, music, or a book; a virtual reality headset; and streaming-video offers for great customized package deals at your destination. You could even shop while on the plane, using the Internet and your frequent flier card with its credit card capabilities.

The lead mechanic would be able to download instructions to computers in the ear frames of his team’s safety glasses. The flight operations supervisor would be connected to a service that reconfigured aircraft returned by one airline and needed by another.

Current Progress and Challenges

It is not far-fetched for such innovations to be implemented by 2003, according to Ernst & Young, the consultancy firm advising many clients to transform their operations through B2B. The industry (including manufacturers, airlines and aerospace) is already responding and reshaping itself via the “connected economy.” To provide thought leadership to the industry, team leader of Ernst & Young’s Aviation eTeam, Christine Taylor, and Scott Nelson (senior manager) have written “The Connected Aviation Company,” with vignettes to illustrate how B2B commerce is already transforming the industry.

Much of the technology is available today. Allied Signal already has a chip that monitors engines and is similar to the lead mechanic vignette in the booklet. Boeing is already moving toward the satellite technology in the booklet’s vignette of the vacationing family on the airplane. Delta, Northwest and United already have the self-service kiosks described in the booklet

Still, there are challenges. Many of the aviation industry’s companies are conservative and are, in some cases, risk-averse and slow to move. Many in the industry are involved with the government and deal with large contracts and a lot of regulations. “In the industry we are dealing with,” says Taylor, “to really get some of this accomplished will take a couple of years.”

Another challenge in implementing technological innovations is the amount of time it takes to outfit the planes with the new technology as they go through the lengthy maintenance-repair-overhaul cycle. The tying in of the large, customized legacy systems of these companies is also challenging.

How to Become Connected

For executives who are unsure of how to get started in B2B, Ernst & Young describes a strategic approach. “There are so many different opportunities on how this can all come together,” says Taylor. A hotel, theme park, ground travel, and restaurants, for example, could form an alliance. “Also, the airlines have a tremendous amount of data on passengers, and the airlines can expand on that to the other companies. It creates opportunities for different types of start-ups,” she says, “but it really comes down to who gets there first with their creative ideas and approaches. The winners will be the ones who are bold and willing to take that step and pull it all together.”

The first step is to understand where your company is now. Determine your connectivity points with your suppliers, your customers, your different partners, and even your employees. Then take a look at where you need to enhance those connectivity points. At this point, Taylor advocates a portfolio approach-stepping out with small pilots in different areas and then leveraging off of those.

Some of those steps might be taken along the e-commerce landscape. If you are an e-information company (have a web site and portals), you might step into e-commerce (sharing of information across the Internet). A further step would be to e-procurement. The next move is to become an e-company (with virtual sales and distribution, or distance learning for employees). The final step is to move to an e-conomy. Nelson believes that part of this is involving your customers in research for product development. “If you do it collaboratively, it is all simultaneous and much faster and cheaper,” he says.

What’s ahead for the aviation industry-and all industries taking advantage of the potential of B2B commerce-is far more than a reduction in operating costs and an increase in speed and efficiency. Innovative changes by means of connectivity mean creative ways to generate new revenues. Taylor says that if you put your toe in the B2B water, you will find some areas to put your energies into, and the growth curve will be exponential. Ernst & Young is available to help companies run an e-commerce strategy diagnostic upfront and to advise along the way as they venture into further steps along the B2B path. To order “The Connected Aviation Company,” request a copy at [email protected].


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