The last time I spoke to Alfredo C. Tan, Chief Digital & Innovation Officer at WestJet, and Industry Professor at McMaster University, he was a fledgling WestJetter with grand plans and aspirations to bring this airline into the new digital world. He knew, as someone whose career resided primarily in technology, this move would involve endeavouring to move a few boulders uphill.
Alfredo C. Tan, Chief Innovation & Digital Officer, WestJet
The art of transforming a legacy-laden service industry has its own challenges. Compound this with the heightened reputation sensitivities as the airline industry remains susceptible to the blowbacks from guest experiences. Creating new experiences that strive to keep up with intensifying customer expectations will impact both the operational and cultural organization. This is colliding with the speed of innovation as data explosion through IoT emerges, alongside the clear vulnerabilities inherent in data hacks, breaches, and data misuse. All the while, the consumer becomes much more knowledgeable about these impacts on their individual freedoms. I reconnected with Alfredo to address the state of the nation and his views on these imminent impacts to WestJet and the market at large.
Fast forward to present day: 21 months later, WestJet has made significant progress in transforming both the guest experience and commercial business. The most recent quarter performance exposed the digital channel’s prevailing contribution to the incremental growth of the company. As per Tan,
The growth of digital channels means our guests are becoming more comfortable with these new capabilities we are building. We’re not reducing the capabilities from other channels; we are simply creating better self-service capabilities. Instead of having our contact center agents deal with the mundane cognitive tasks, we have enabled our digital channels to take care of that. What we’re seeing is a migration of things you couldn’t do on digital previously like booking through mobile. This has reduced friction as we’ve witnessed a dramatic increase in mobile app bookings from 2018. For our contact center agents, they now have the capacity to deal with much different and more complex guest challenges.
The launch of Juliet, WestJet’s newest Google Assistant, now has a front-end voice experience. Juliet’s core intelligence can now be exposed to other channels and interoperate with other applications like Alexa, Google Home, Instagram, WhatsApp, email and mobile etc. enabling a variety of inputs while collectively making Juliet perform better. It’s still early day and Tan acknowledges Juliet is very much still in the supervised learning stage. This means that if Juliet is unable to solve an issue, the session will be referred to a live agent to minimize guest frustration. Currently, 25% of guest queries are forwarded to a human agent. These instances are sent to WestJet’s partner Netomi to optimize the model.
Tan is resolved in WestJet’s move towards a product-centric organization. He acknowledges the best companies don’t focus on technology but rather focus on building great products and experiences for their customers.
My mandate is to pivot to product centricity so we can focus on the long-term view, not just features. We’re going to reimagine what the mobile guest experience should look like in the next two years. We’re doing the same thing for desktop, Juliet and all other digital touchpoints where we haven’t invested time and resources in for the last few years. You’re going to see a significant change in functionality plus the core design experience from our digital channels.
The goal is to bring product and engineering together to have a more guest-facing experience with more of a product-driven road map. What runs in parallel are data analytics, insights and research, which support the product vision with a mandate to prove or disprove direction of the initiatives. One area of testing is leveraging Fitbit technology to determine guests’ heart-rate reactions to their travel experience. Are they getting frustrated? Are they happy? While Tan admits this is not a sophisticated solution, this is an example of ways the team is thinking about measuring delight or frustration in their product experience and leveraging data to do this. More importantly, it contributes to the experimentation mindset his team is developing to try out new ideas.
With this move towards product centricity, Tan recognizes the data will direct the success by iterating within a customer adoption and retention environment. The Digital and Innovation Labs at WesJet are tasked with experimenting with technology to determine better solutions than what exist today. Built on hypotheses, Tan recognizes not everything can be properly business-cased,
In most instances there is no data, so it’s a let’s-build-it-and-try scenario. Our Digital and Innovation Labs team have the latitude to test, learn, and determine consumer adoption within a small user base. If proven successful, then we scale it. It’s this MVP (Minimum Viable Product) scenario with which we are getting more comfortable at WestJet. For our core products – the mobile app or website – instead of doing a complete overhaul, you can introduce little improvements to enable incremental adoption. If you do a complete overhaul, the backlash is somewhat greater than the benefit you get over time. Introducing features at speed within given intervals creates digestible acceptance levels optimized for the audience.
The current mobile app has achieved a 4-star rating. Iterating on features makes it harder when performance reviews are already high. The team is mindful they don’t do too much too quickly to put the rating at risk. So a net new feature will move at a faster velocity and will be tested as a proof of concept (POC) whereas, with the core products, more methodical thinking and research is applied against a built-in user base to balance the market risk.
What happens when the global discussion on sustainability and the controversial discourse on oil & gas and alternative energy seeps into the very fabric of the business? According to this article, Air travel is surging. That is a huge problem for the climate.
The Rhodium Group recently released preliminary estimates showing carbon dioxide emissions overall surged 3.4 percent in 2018, with the transportation sector leading the way as the largest source of emissions for the third year in a row. Interestingly, the bump in transportation emissions didn’t come from cars… Instead, emissions from trucking and air travel helped contribute to the overall increase: Demand for both diesel and jet fuel increased about 3 percent in 2018.... But it’s also a clear sign of just how difficult it is to decarbonize the airline industry, for which surprisingly few low-carbon technologies or fuels have been developed so far.
“All-time-high air travel volumes' is contributing to the already 2 percent of global greenhouse emissions. This rate does not show signs of slowing. Tan asserts there needs to be an industry voice to address this and this is still in the making. However, at WestJet, they have been making strides to mitigate their carbon footprint by streamlining their fleet operations and ground infrastructure as efficiently and safely as possible. Since 2000, WestJet introduced one of the most fuel-efficient fleets in North America. Today the newest fleets are between 14-20% more fuel efficient than previous aircraft. As well, the company has put significant investment into fuel efficient aircraft, and have improved overall fuel efficiency by 50 per cent since 2000.
We have made the right choices to ensure that we continue to grow sustainably. Using fuel-efficient aircraft is our best hedge against rising fuel costs and improves our carbon footprint. If further emission reductions are required in the short to medium term, our best and biggest opportunity other than purchasing offsets, is to use sustainable aviation biofuels.
Tan affirms the company is making significant strides outside of fuel:
Can we create a movement where we don’t use the elevators on certain days? Can we carpool more? Can we agree that on certain days we consume less meat? These are things we could gamify and do locally, irrespective of the larger company. On our booking channels, we offer carbon offsets and onboard our fleets, we are phasing out plastic stir sticks with the target to eliminate single-use plastics from onboard catering by 2023. It’s not an exhaustive list, however we’re committed to sustainable and low-carbon air travel.
As a former Facebook employee, Tan has very explicit views on privacy, the discretion and use of customer information. Addressing the rising public view on privacy on the heels of Cambridge Analytics, the never-ending negative pulse of data collection, continued misuse and a very public conversation about whether our institutions are to be trusted, Tan acknowledges how Facebook has changed over the years:
I was there [at Facebook] throughout the early history of the company. They had a genuine desire to make the world a better place by connecting humanity. That’s what everyone is trying to do. If you think of privacy on a spectrum: On the extreme right–no privacy, and on the extreme left– complete privacy, the data shows the customer experience is better when it’s completely open [no privacy]. But no one wants the two extremes. The question is where do you draw the line? I frankly don’t know that anyone knows what that is, and that’s the big debate. How do you find the balance of providing a more personalized consumer experience and the value exchange required for consumers to share their information?
Tan recognizes, out of the very public call for more scrutiny on data practices, technology giants continue to wrestle with the tradeoffs between providing better experience and responsible data use.
Companies which are a complete digital service, meaning they have no physical presence, typically have a business model around audience acquisition and then generate revenues through advertising. In order to drive effectiveness in this model the collection and use of data is part of the value exchange. The more data is collected, the better the user experience should be from a personalization and contextual perspective. The advertising and marketing capabilities also, in theory, should increase in effectiveness, driving value throughout the ecosystem.
The justification and expectation from consumers that the more data they provide, the better experience they should have, may be a fallacy. Consumers, for the most part, may not realize the extent to which their data is used. So while WestJet’s intention is to gain an understanding of guest satisfaction from their Fitbit experience to optimize their product, the consumer realization that the company has access to this information, which may inadvertently be used for other purposes, is the prevailing mentality companies like WestJet will continue to encounter.
I asked Tan to respond to this recent article from the NY Times Privacy Project:
The companies profiting from our every move can’t be expected to voluntarily limit their practices. Congress has to step in to protect Americans’ needs as consumers and rights as citizens. Until then, one thing is certain: We are living in the world’s most advanced surveillance system. This system wasn’t created deliberately. It was built through the interplay of technological advance and the profit motive. It was built to make money. The greatest trick technology companies ever played was persuading society to surveil itself
Tan counters that the minute that trust is eroded or the experience degrades, that is where problems arise. Degradation of trust is due partly to education, and partly to how effectively the information is communicated. Until recently, organizations saw little need to inform the public, but the urgent public calls for transparency continue unabated. Stronger consumer data controls and effective consent mechanisms are being mandated through the GDPR and impending privacy legislation around the world. In Canada, this will be an inevitability.
The challenge becomes the communication around the privacy policies, the intended use of the data in the present and future use cases, and what are the guard rails in place to prevent companies from not using the data for other purposes. I am extremely supportive of customers having more control over their information, and [customers] having the right to revoke and consent at any point in time, however, they need to be educated on the tradeoffs. People should have the right to say, ‘Here is what I’m not willing to give up under these circumstances. The company has the duty to say, “By not providing XYZ you don’t get ABC”. Today what the confusion is for what I give a company today, is what do I get in exchange. That’s the piece that’s unclear. Tech companies need to get better at allowing consumers permission to their data sets.
Technology, inherently, is not malicious. However, with innovation comes opportunism and that’s where negative outcomes arise. Tan confirms, from a privacy perspective, his team is using the minimal amount of data to give guests the experience they want.
We’re not trying to collect any additional information than we need to improve experience. The team is conscious of determining what we really need via the data to make those decisions.
He also recognizes that transparency is a huge process undertaking. To provide more disclosure they have to determine at what point in the experience should this be handled: at sign-up, at log-in intervals? The other side of the coin is ensuring the consumer reads and understands these disclosures. Tan agrees these need to be done but how to execute this at a level that’s scalable is the challenge.
Tan understands the difficulty of instilling agility in the face of a rapidly changing market. For larger organizations this will continue to be the strongest impediment to remaining competitive:
Data has shown it is harder for big companies – the larger, the more capitalized – to be able to move and adapt quickly. Apple, Google, Facebook, and Amazon operate on agility-as-a-core business strategy and they’re running experiments at massive scale that are 10-20 years out: like solving immortality or neural links. They don’t have a two-year horizon. They have a decade’s horizon. Most traditional companies are focused on the next quarter or three year incentive plans. Who wins the long game? Answer: The company already playing the long game.
From Tan’s standpoint, the only way to compete is through culture. Culture becomes the differentiator. By changing the cultural mindset to think long term and becoming more dynamic, an organization can begin to exploit what they’re good at and start experimenting in other areas they have fully yet to understand, in areas yet to be proven. This will fundamentally change process, performance objectives and create an environment that rewards new thinking:
Here’s a hyperbole: if Google is working on research around immortality, Facebook is working on new brain to computer interfaces, or Tesla building fully autonomous vehicles, where they are solving some of the hardest problems, what makes you think they can’t solve the business of banking or the business of aviation? The moment any of these FAANG companies want to make a move in any business [vertical] they want, that makes them a competitive threat to WestJet and the airline industry at large.
The culture of moving quickly and adapting and exploiting the things they do well is not where big companies can compete, at least not today. This is because they’ve enjoyed decades long dominance in their bailiwick with no threat of competition. Today, everything becomes competition and that is the lens of urgency with which they should view the world.
For Alfredo Tan, it’s adopting this new lens of urgency that will propel WestJet to effectively compete within the digital landscape over the long haul.
