DISRUPTING YOUR COMPANY – LEAVING YOUR ABC

– Google figured it out, they are disrupting their own core business and they understand that the “era of search” as we used to know it, is coming to an end, and, that they are vulnerable for “disruption”. They have successfully been dividing their business and industries into various fields for some time now (Calico, Nest Labs, Google X, Google Fiber and numerous others through Google Capital and Google Ventures) and they continue to invest and do so and have moved from their ABC to “ALPHABET”.

Most brands eventually, or should I say all brands in the 21st Century, come to a point where they are vulnerable to competitors and new fast-paced players to turn around the industry.  We can look at Nokia, Kodak and Blackberry to name a few that have failed to re-shape and successfully maintain in the 21st Century. If you visit their management and talk about “disruptive creativity”, they all know what you are talking about.

So many would say “Google has easy talk given all their money”, but it is not (mainly) about the cash, more about what Clayton Christensen calls the Innovator’s Dilemma. Also Google and also Facebook understands that unless they create something that will kill them off, someone else will.

“The most complex thing in the 21st Century is Simplicity.”

6 STEPS for Disrupting your Brand / Company / Industry:

1. Go with Simplicity – the most complex thing in the 21st Century is Simplicity – You need to radically reduce complexity
2. Cut your prices to 1/10, or even more, 10% reductions do not help, in general a disruption means something 10 times different than in the “old” world.
3. Kill off all customer pains – yes all. You need to know whom you are disrupting for, customers disrupts industries, not technologies; technology is only the tool.
4. Connect & Communicate – Train your organization on connection (talk with people instead of just to people)
5. Build Trust – make it easy to trust you, simplify trust and honesty in the organization – make telling the truth easier than lying – embrace truth – how will that impact your culture and industry? Think about it! (Volkswagen is feeling this now)
6. Target Transparency – To stakeholder, clients and partners – FULL Transparency

SO WHAT COULD BE THE STORY FOR LUFTHANSA?
From my viewpoint Lufthansa is now in “that particular spot” and can, or should I say have to disrupt their core business or risk disappearing or eventually getting bought by Turkish Airlines or some other… hmm. Lufthansa as the largest airline in Europe is struggling on home turf and hardly make money on domestic or short travels and are up against competitors such Ryanair which despite having just 1/12 of the employees (10.000 vs 120.000) has a market value of 3 times more than Lufthansa (Market cap 6,4 Bn € LH, 19,5Bn € Ryanair).

Some key pointers:

• Lufthansa is still making a lot of money, despite all the strikes and the problems faced in the local market.
• They have already successfully divided their company providing logistics and various services such as catering, cargo and travel-booking.
• The airlines industry is growing at a very fast pace and new players are entering the market, particularly markets in Africa and Asia will be at the front when approx. 1 billion passengers are expecting to book their first flight over the next 10 years, these will also be the new customers targeted for the airlines competing for oversees travels.

FIRST KILL OFF PASSANGER TRAVELS
Say what? Yes, rip it off like one of those bandages. It will hurt for a short period, but will be the key to success. Put it ALL in Eurowings (or any new brand) and load it up with low costs and efficiency and digitized experiences to keep up with international competitors (basically copy everything the competitors do best – even though that is not German..).   “If you don’t cannibalize yourself, someone else will.“ Steve Jobs said in his autobiography.

So for starters Eurowings outcompete Lufthansa and take over all the business of passenger travels whether winning on costs and efficiency or if it being a strategic risky move of killing of the brand all together. Steal-Steal-Steal, but remember to give credits, and put the organization into a continuous light war-mode while trying to act like Robin Hood. Ideally it is done within the core brand like till example Netflix, which has successfully disrupted their own business twice, however in case of Lufthansa I believe a new / different brand is the way to go.

“Put the organization into a continuous light war-mode while trying to act like Robin Hood.”

No good news for striking pilots, but a company like Lufthansa need to face reality. I am not saying you should neglect the people, but the future will have new and/or other jobs as 2 billion jobs will be lost or changed in the next 20 years. “Fachkräftemangel Adieu” as the skills required in the future will be elsewhere. The Lufthansa brand as we know it today can then stand for Logistics and Cargo and they can build on the other services that are tied to the airline industry but they have to start by disrupting their passenger travels.

SECONDLY BUILD ONE HUB
Lufthansa needs to re-think it, focus on one strong European Hub, get Politicians and Frankfurt (?) onboard, it is all interdependent now. It is a core for driving the multiple services and brands through one strong hub. It makes it easier for the brand to stay relevant and to get the attention required staying alive in a hyper competitive market.

In Europe they have been struggling to build multiple hubs for routing traffic. Rome used to be an international renowned Airport, now hardly anyone talks about it anymore, and in Germany you see it, deliberately or not, that Etihad, Emirates and Turkish Airlines are even dividing the German market supporting multiple airport initiatives like Berlin (thank god for the problems that they are facing), Munich, Düsseldorf, Hamburg and Stuttgart to have their own small hubs set up.

While in Istanbul at a much more geostrategic location what will be the largest airport in the world almost 3 times the annual capacity of Frankfurt is being build, Germany is struggling to keep up with the pace. The challenge in Germany is regulation and politics while a new runway and terminal takes 10+ years to get approved in Germany, in China or in Turkey it is being build, because the demand of the customers are there. And other regulatives such as nightly flights is a separate topic. Customer does not want to stay overnight for 200€ in Frankfurt while travelling from the US to Asia or via Germany to Africa when you in Istanbul or Dubai can just route through and fly on with the next plane during the night. Customer do not care if that is Amsterdam, London, Paris, Berlin, Munich or Frankfurt, they don`t – It is all about the strategic stop-over, the costs, and the convenience, and that must be the focus or else you will lose. So Lufthansa and Germany need ONE strong Hub.

6 TAKE-AWAYs ON WHEN TO DISRUPT YOUR COMPANY/INDUSTRY?

1. NOW
2. When you have successfully build a multi-brand strategy or/and have various revenue streams (which makes it easier to take “small bets”)
3. When you have CORE business coming in from various services in your industry
4. When you are successfully providing services growing out of being “just” a products company or vice versa
5. When you (still) make enough money to stand through times of change and restructuration and you have the cash to accept failures and to changes. Which also means you have stamina and knowledge to load a new brand with values and credibility.
6. When your brand is in a position that it can be disrupted. What does that mean? – Totally new players are entering the market, you are making money of physical object, there are ways to digitize some of the things you do – so basically all.. Industries still to come are Insurances, Banking, Oil, Automotive (e.g. Volkswagen in the automotive being in the wrong spot towards Google, Apple or Tesla)

As for Lufthansa, if they want to transform they need to leave the old world, everything, behind and spend their cash on exactly that. It is a bold move and they need to figure out how to tame the shareholders. It can be a strategic slower move, just like Nike has on more of a slow revolution moved from being an athletic shoe company to moving into fashion, entertainment and eventually health, but the transition must be there at the heart of the organization. When is the right time to disrupt? NOW

So I say: LUFTHANSA: Just Do It!