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Innovative Ideas can Disrupt the Industry Value Chain

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Innovation can have far-fetched impact when it has the capability to disrupt the industry value chain.

IATA’s initiative, the New Distribution Capability (NDC) is a travel industry supported program to introduce a new distribution standard and modernize the industry value chain. APIs based NDC integration solution proposed by Airlines Technology is one such example. It is a cloud-based application that allows for faster and secured data flow between the airlines, travel agents and the consumers. It is fast emerging as a strong and rich contents distribution alternative to the legacy-based distribution systems that have been running for many decades now.

The NDC disrupts the existing value chain that has been in place in the airlines industry, as explained below. A large chunk of the industry is mapped onto the legacy-based distribution systems, but a cloud-based solution has been the real need of the hour.

Firstly, the NDC disrupts the aviation industry value equation. It gives the airlines the ability to design product options (seat + ancillary services) more efficiently, effectively and publish their inventory faster. it allows for a speedier data flow to 100s of travelling agents’ systems. It works on a single API being published that is not cacheable, which gives it the ability to be real time data exchange. Any change is propagated in real time. The airlines can now design products in multiple ways, based on needs of different market segments and operationalize those products with relative ease. In an industry where airlines face a double whammy of bearing the highly market driven cost elements on one hand and working at arm’s length with the customers as online travelling agents (OTAs) dominate on the other hand, an initiative like NDC is a big and disruptive innovation.

Secondly, it gives power to the consumers to decide on ‘seat + ancillary services’ according to one’s needs, giving the consumers real grip on their decision making. The application works on a real time basis, with no surprises springing up at the last moment in the consumer’s decision cycle. It also allows for the consumer to cancel, change booking directly, something that is not a norm today, especially for corporate customers.

Thirdly, since the system is real time, financial settlements can also happen faster, reduction in the float again favouring the airlines. The feature can have deeper implications on the current industry practices, e.g. moving away from commissions to performance-based bonus, a win win for both the airlines and the OTA’s.

Fourthly, the core system is extremely secured and designed for ensuring data privacy. Given the stringent requirements by the regulators, e.g. PCI-DSS, GDPR, the security and privacy features are real differentiators.

An innovation like NDC can disrupt the value chain, thus changing the older equations and the entire paradigm of customer experience. It may cause realignments as new strategic dimensions emerge and get exploited by the market participants.

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