The digital shift and transformed competitive landscape
Who are your real competitors? This is a key question for travel, leisure and hospitality companies trying to get to grips with the digitally-driven world. Companies that have not embraced digital maturity are geared up to deal with yesterday’s competitive challenges, and not the real threats to their continued growth and profitability.
A previous blog post, titled “The benefits of digital maturity in the travel industry”, developed the concept of digital maturity as a result of the great shift to digital that has occurred over the last decade. Below takes a look at how to stay ahead of your competitors in the digital landscape.
Ten to fifteen years ago, it was relatively easy for a business to identify its competitors: for the most part, competition was direct. TMCs competed with other TMCs, hotel groups with other hotel groups, airlines with other airlines. Today, it’s much more complex – because competitors can come from anywhere, and those that have mastered digital maturity will be moving rapidly and with purpose. In today’s digital and global world, indirect and substitute competition are more significant.
Suppliers in travel, leisure and hospitality tend to still focus on direct competitors. However, substitute competition is a growing threat to more established travel, leisure and hospitality players. In hospitality, for example, the growth of accommodation rental has created technology-driven brands like Airbnb and One Fine Stay, representing private accommodation. Initially, these players were not seen as a concern by incumbents. Indeed, they view them as expanding market demand (just as network carriers once viewed Low-Cost Carriers, opening new routes and broadening the market).
Now, however, brands like Airbnb are defining product standards for the sector – and beginning to muscle in on conventional hospitality by starting to represent small, independent boutique hotels, and by retailing their product alongside conventional hotels (on platforms like Expedia, for example).
Understanding the new competitive environment starts with research to understand the evolving competitive dynamics and identify emerging opportunities and threats. A business needs to assess its own strengths and vulnerabilities, then identify industry trends, such as changes to its structure, influence and growth, and connect the dots. This helps a business become more conscious about what opportunities exist and what changes it needs to make.
So how can businesses drive performance and stay ahead of the curve (and their competitors)? By implementing digital elements needed to automate the customer experience and operating processes, (i.e. investing in digital maturity.) Here’s a three-step process:
1. SEE THE LIGHT
The next step is about strategy. This is about the CEO and management team re-gauging their level of ambition, and understanding the speed at which they need to execute.
Businesses will need to pivot strategy around being customer-oriented, rather than being product or internally-oriented. This means thinking carefully about the basis on which they compete. They need to identify what customers really care about, and then focus innovation on these areas. In other words, companies need to re-do their legacy thinking and become human-centric.
2. SET A NEW DIRECTION FOR THE BUSINESS
The next step is about strategy. This is about the CEO and management team re-gauging their level of ambition, and understanding the speed at which they need to execute.
Businesses will need to pivot strategy around being customer-oriented, rather than being product or internally-oriented. This means thinking carefully about the basis on which they compete. They need to identify what customers really care about, and then focus innovation on these areas. In other words, companies need to re-do their legacy thinking and become human-centric.
3. EXECUTE EFFECTIVE TRANSFORMATION
The third stage is transformation: it’s all well and good being ambitious about change, but businesses can break if they are not ready for the complexities that can arise from transformation. For example, a company will set out to adopt agile ways of working – only to discover that their technology is inflexible and will not support change. Incumbents are particularly prone to this kind of error: an incumbent may hire new digital and data science talent, expecting the business to gain a rapid advantage. But the new arrivals may not understand the fundamentals of the incumbent’s business or how to overcome the barriers that need to change.
Understanding the digital landscape, the competitors – including the not so obvious ones – and how they are (re)presenting themselves in this sphere, is crucial to achieving and utilising digital maturity and improved performance. Looking at what they are doing allows room to reflect on what works, what could be improved, and quickly follow whilst building on the unique strengths and basis of competitive difference that exists.