The Lufthansa Innovation Hub has evolved significantly since its inception in January 2014. The initial customer experience focus for the Berlin-based business has expanded to also cover B2B developments as the travel market constantly moves.
Milestones for the hub since it was set up, according to its managing director, Gleb Tritus, include becoming a “solid part of the Lufthansa Group, which is sustainably shaping the digital future of the whole organization.”
He views the above as probably the biggest achievement. As hundreds of digital labs in travel and other fields struggle to find their way, Tritus says it took the hub four years to get to this point and that it’s here to stay.
Further proofs of its success are around its ability to attract technology talent from the likes of Rocket Internet and Zalando - “entrepreneurial-minded people” who would not usually be drawn to the corporate environment.
“Attracting talent is more than ever make or break, and we have managed to have steady flow.”
Meanwhile, on the project side the hub has developed and launched the Lufthansa Open API, which Tritus describes as a market standard “with the potential to become a solid direct distribution channel in the near future” for the Lufthansa Group.
We have developed and launched the Lufthansa Open API, which is a market standard with the potential to become a solid direct distribution channel in the near future.
Gleb Tritus - Lufthansa Innovation Hub
Other consumer-facing projects have also progressed within the hub, including Linea, an app-based service to help consumers whose baggage has been lost or delayed, which has now been rolled out in Germany and the United States. The service not only boosts the airline’s Net Promoter Score but has also meant a two-digit euro saving in processing those claims.
A second initiative, Flightpass, is a fixed-price subscription model enabling frequent travelers to purchase 10 tickets at a time.
“It sounds easy, but it’s heavily complex on the revenue management and network side but we have tested it with Eurowings. We have had very high acceptance from the customer and looking to establish it for the long-term for both Eurowings and Swiss.”
As a further achievement in the hub’s four-year journey, Tritus points to its learnings in the venture capital world. Last year it participated in a Series A funding round for cargo startup Fleet Logistics.
B2B and blockchain
Now as the hub evolves, it is turning its attention to B2B projects in addition to addressing customer-facing challenges - a move it recognizes is necessary for long-term success. Tritus says it’s a natural evolution but the customer-facing developments are “more accessible and easier to conquer.”
Along the B2B focus, the hub is exploring a number of projects. One initiative is Yilu, a travel operating system, which started as a partnership with BCG Digital Ventures and is now a standalone company . Although Tritus won’t say much about the initiative, he says it’s about consolidating the various travel and mobility data interfaces onto one platform.
“This will enable developers to build on that layer more efficiently and flexibly. It’s a standalone company in Berlin with a growing team from the technology ecosystem as well as seasoned personnel from the Lufthansa Group.”
He adds that initial results from Yilu are likely to be revealed in the next two to three months.
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A further area of development is blockchain, with the airline group recently announcing its Aviation Blockchain Challenge, in partnership with SAP, seeking ideas in the field that help improve the customer experience as well as processes including maintenance and supply chains.
Blockchain has not been a particular focus for the company up to now, but it sees opportunity there to rise above the hype to learn what use cases might be relevant.
“It’s largely noise on the peak of the hype cycle of blockchain, and the same applies to machine learning and artificial intelligence," Tritus says. "We want to be an active part of the development to learn, so with the blockchain challenge, we’re looking to filter that noise and expand our network in the blockchain community. This is one of our very first steps, and time will show how sustainable its footprint is going to be.”
Tritus adds that there are also focus groups going on around AI, learning and early projects looking at the vertical takeoff and landing space.
Lufthansa Group announced a partnership with Winding Tree in October 2017 and participated in the Switzerland-based blockchain startup's cryptocurrency token sale.
Tritus says both Winding Tree and the Lufthansa Group are on “a steep learning curve,” with the startup learning about traditional airline distribution and the airline group learning about how the evolution of passenger name records (PNRs) might evolve to blocks.
Asia expansion
More recent news came in the hub’s announcement of expansion into Asia. The airline group already has a strong presence there via a joint venture with Air China, and Tritus talks in terms of adding a “digital layer” to this partnership.
The company is now “testing the waters” just as it did with the Berlin hub and talking to entrepreneurs and startups in Singapore and Shenzen. By November of this year, it hopes to have decided its approach to the Asia market and is looking to establish small entities in both cities.
Explaining the thinking behind the expansion, Tritus says:
“When assessing the market in terms of its travel and mobility technology and innovations strengths, we look along two dimensions - how many new tech companies are being established and how much venture capital is being deployed in that context. As of 2017, Asia is by far spearheading travel mobility investment. Out of the $25 billion invested in travel mobility technology, almost 60% of venture capital invested in 2017 was in China. If you take India into account, it is around about 70%.
“The Asian consumer is above average in acceptance of digital innovation. They are way more likely to drive around in autonomous vehicles, way more likely to pay with smartphones and way more likely to be digitally assisted on a journey. We expect certain travel and technology-related innovations to take off way faster than in our home market.
“It’s also interesting dynamic on the supply side. We see more and more giants participating in travel and mobility assets. For example, Ctrip invested in China Eastern Airlines in 2016 and recently in Boom. Tencent invested in the Germany-based Lilium vertical takeoff and landing startup and is also developing promising autonomous vehicle technology. This might be a true game-changer: large technology players which own predominantly consumer ecosystems of online customer touch points venturing into transportation metal, which has been our own turf for decades.”
Innovation approach
When it comes to deciding how to approach projects along the four pillars of the hub - build, partner, invest, discover - the starting point is whether it sees a “clear opportunity or clear pain point” for customers or within the organization. The next step is to dive further into the issue to see what exists already in the marketplace and whether it can partner with someone successful in a respective field.
“If there is no way to partner, no deal to be found or no player to approach then we would consider to build the solution on our own. Many fields so far are quite new, so there has been no startup ecosystem dynamic worth mentioning, which is why the focus has been on build.”
If there is no way to partner, no deal to be found or no player to approach then we would consider to build the solution on our own
Gleb Tritus - Lufthansa Innovation Hub
About 70% of the resources so far have been allocated to the build pillar, but Tritus says there is a growing focus on investment. The group learned from its first investment last year about how it might implement a venture capital strategy and is now “digesting those learnings into a long-term VC strategy.”
“The goal is to enable the group to invest systematically in the travel and mobility technology context both in the early and growth stage of startups.”
The group also continues to monitor and seek out partnerships with startups and is already “fostering two to four startup partnerships a year on a commercial level." The plan is to ramp this up to between six and eight a year.
As to whether creating its own digital hub was the right strategy, Tritus points to how complex the aviation business is, making it hard for third parties to address.
“We believe there is a clear need for an entity speaking both languages - the one of the established market-leading carrier and the travel mobility technology ecosystem. It’s one of our core assets, and we’re respected from both sides.
“Third parties will never be able to get this level of detail in the respective industry verticals. There are many reasons to work with them in building up the digital strategy and learning about a specific industry, and we have learned a lot from Plug and Play, for example. It makes a lot of sense to partner in the beginning, but further down the road, when the solutions get deeper and deeper into the core, you have to have your own standalone entity, in my opinion.”