Resurging Queen: Singapore Airlines and Its Open Innovation Scheme
Can crowdsourcing launch Singapore Airlines into the digital age amid competitors closing in?
Singapore Airlines (SIA) has long been considered the gold standard of the airline industry. The company’s superior passenger service and well-respected reputation among travellers has earned it numerous awards over the years. With the aggressive expansion of Middle Eastern airlines in recent years, however, SIA seemed to have quietly fallen into the background.
Financially, SIA’s performance had suffered despite the expanding airline industry. Between 2012 and 2017, SIA’s revenue remained flat with slim margins. Operationally, the breakeven load factor (the percentage of seats occupied by passengers) was higher than the actual load factor, suggesting that SIA was making losses on its operations [1]. A boost in profit in December 2017 came not from passengers, but from increased cargo demand to support heightened holiday online shopping towards year-end [2]. While there is no doubt that SIA’s service is still among the best in the industry, competitors have been catching up, making service less of a differentiating factor for the airline.
To remain competitive, SIA recognized the need to reinvent its competitive advantage and develop new competencies. Earlier this year, the company announced the Innovation Digital Blueprint with the goal to become the leading digital airline in the world [4]. In addition to working with governmental agency partners in the next 5-10 years, the blueprint aims to cultivate an open innovation culture through interaction with stakeholders inside and outside of the company in the immediate term.
Firstly, a Digital Innovation Lab is being set up to encourage employees to experiment new ideas that could tackle problems that they observe on the job. The lab offers a platform on which SIA staff can work with external partners such as startups, incubators, and accelerators to reduce maintenance costs and improve the airline’s service standards [5].
Secondly, the airline launched the AppChallenge for Singaporean university students and the global community at large. The program aims to crowdsource digital ideas to tackle 5 main pressing challenges that SIA is facing: [6]
- Improving mobile application engagement to enhance user experience throughout the travel journey
- Improving experience of offloaded passengers due to overbooking
- Enabling better inflight shopping experience to integrate e-commerce into travel retail purchases
- Tracking inventory usage to provide insights into usage patterns/demands and improve forecast accuracy
- Tracking Food and Beverages consumption to track F&B wastage and collect data about passengers’ consumption patterns onboard more efficiently
During the challenges, SIA provides technical support for contestants by granting them access to the company’s APIs (application programming interfaces) related to flight schedule, flight status, baggage check-in, and customer loyalty points, among others. Winning teams would receive monetary awards, mileage, as well as a possibility to collaborate on the proof of concept with SIA.
Involvement of the Singaporean and global communities in the idea generation process is a positive step towards launching SIA into the digital age. To strengthen the ideas’ impact, however, SIA could consider involving the public in the idea selection process as well. Ultimately, passengers are the most important stakeholders in SIA’s business and will be ones who decide what matters most to their travelling experience. Being able to place a duty-free order online 24 hours prior to flight time may not be as important to passengers as a better mechanism to predict the airline’s overbooking. SIA may find itself focusing its effort and allocating resources inefficiently without the customers’ input. Opening up idea selection to the public will also push the company to commit to implementing these ideas and signal to customers that SIA values their involvement in its re-positioning plan.
In the medium term, SIA could aim to tackle more complex problems by dividing them up into smaller components. The more granular and diverse the tasks, the larger the potential pool of participants in the challenge [7]. Offering smaller tasks and designing the competition to better encourage collaboration among participating teams could also enhance the agility and variability of ideas. For instance, a team in the competition thought the idea that they originally planned to pursue was too complex to be done by their own team members and ended up changing their target problem at the eleventh hour. They might have been able to come up with a small, yet brilliant, idea that could contribute to solving a larger, more complex issue had they had an opportunity to team up with people with a different set of background.
Open Innovation as Competitive Advantage?
As SIA grants contestants access to its several APIs, how could the airline determine how open is too open? At what point would open innovation allow other airlines to replicate the ideas? In addition, SIA also owns Scoot, a low-cost sister airline operating medium- and long-haul flights globally. Would open innovation be beneficial for Scoot amidst rising competition in the low-cost aviation segment as well?
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References
[1] Nitin Pangarkar, “What Ails Singapore Airlines,” The Business Times, May 25, 2018, https://www.businesstimes.com.sg/opinion/what-ails-singapore-airlines, accessed November 2018.
[2] Kyunghee Park, “Singapore Airlines’ Profit Lifted to 7-Year High by Web Shoppers,” Bloomberg Business, February 13, 2018, https://www.bloomberg.com/news/articles/2018-02-13/singapore-air-has-biggest-profit-in-seven-years-boosted-by-cargo, accessed November 2018.
[3] Craig Platt, “Singapore Airlines Named Best for Customer Service by Australian Travellers,” Traveller, April 25, 2015, http://www.traveller.com.au/singapore-airlines-named-best-for-customer-service-by-australian-travellers-1muti0, accessed November 2018.
[4] “Singapore Airlines Forges Ahead With Digital Innovation Blueprint,” Singapore Airlines, January 29, 2018, https://www.singaporeair.com/en_UK/us/media-centre/press-release/article/?q=en_UK/2018/January-March/ne0318-180129, accessed November 2018.
[5] Eileen Yu, “Singapore Airlines Employees Urged to Innovate, Fail Without Fear,” ZDNet, November 9, 2018, https://www.zdnet.com/article/singapore-airlines-employees-urged-to-innovate-fail-without-fear/, accessed November 2018.
[6] “Singapore Airlines AppChallenge,” https://appchallenge.singaporeair.com, accessed November 2018.
[7] K. Lakhani and J. Panetta. The principles of distributed innovation. Innovations: Technology, Governance, Globalization 2, no. 3 (Summer 2007): 97–112.
It’s really interesting to see the 5 areas of improvement SIA is asking consumers for feedback on in its AppChallenge. In addition to your point about how these categories may not be the biggest issues facing consumers, I wonder how well positioned consumers are to provide solutions to these ‘behind the scenes’ issues like tracking inventory or tracking food and beverages. That is, these are business problems with data and proprietary internal analyses – is this the best way to leverage open source innovation and their AppChallenge? Perhaps more consumer-facing, in-flight experience issues are better suited for this feedback and idea submission mechanism.
SIA’s AppChallenge is a fascinating experiment in open innovation. Crowd sourcing ideas from the public is a brilliant way to get new ideas, but also recruit potential talent. The airline’s ability to give out awards (monetary or mileage) is also an excellent way to entice students to participate in the competition. I agree with the author’s question regarding how open is too open. I am surprised there is this much public information on SIA’s innovation projects because they could, and likely will, be emulated by the competitors they are trying to beat. Additionally, the Challenge showed the five pillars of SIA’s strategy to regain market share.
Thank you for the interesting read! With my response, I wanted delve into your question of ‘how open is too open’ and how this can impact SIA’s competitive advantage.
I would argue that SIA should go even further in their open innovation strategy and enter into ‘open innovation networks’ with other airlines. In such networks, not only does each company run their own open innovation initiatives, they share the resulting ideas/technologies with one another [1]. While I recognise this may concern you from a competitive advantage standpoint, I would propose that this ‘network’ comprise of non-direct competitors. For example, SIA could engage with other companies that they rarely compete with, but who are also struggling with the expansion of Middle Eastern airlines (e.g., British Airways).
By taking this network approach, SIA could both expand the number of ideas entering their product development funnel, and also gain access to additional resources to narrow down these ideas. At the same time, they would maintain a competitive advantage in the markets they operate. While industry experts agree these networks are liable to ‘gaming’, whereby some partners may try get out more than they put in, I believe the benefits outweigh the risks [2].
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[1] Deloitte, “Executing an open innovation model: Cooperation is key to competition for biopharmaceutical companies”, 2015, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-open-innovation.pdf, accessed November 2018.
[2] Torbjørn Netland, “The future of competitiveness is open,”, World Economic Forum, January 2018, https://www.weforum.org/agenda/2018/01/the-future-of-competitiveness-is-open/, accessed November 2018.
Thanks Colm! I think you made a really good point on opportunities to collaborate with other airlines who have seen their market share declining due to the expansion of Emirates, Etihad and Qatar. I also see a potential for Singapore Airlines to work with US airlines i.e. American, Delta and United, who recently expressed their concerns around an unfair competition due to the $40bn subsidies that the UAE and Qatar provide to their state-owned airlines. With the Gulf carriers entering the US market with large fleets of new jets and award-winning service, I think the US airlines would be more than motivated to innovate and win back their market share.
I loved this article!
I was particularly interested in the Digital Innovation Lab SIA established. It raised a few questions for me.
-Has the Lab had any notable successes thus far?
-Where is the Lab based? Given that SIA is an airline, I would imagine that it would be difficult for employees to participate if the bulk of activity happens in one location.
-How does the company incentivize employees to participate in the program?
You also raise a great question about managing competitors’ access to your ideas. In order to avoid copy-cats, it seems that the more specific the innovation challenge is to your business the better (to the extent possible). I also think (1) maintaining a constant funnel of new innovation ideas and (2) structuring/preparing your organization to rapidly implement these ideas can help you remain a step ahead, even as copy-cats do arise.
Great article! Open innovation is everywhere!
I wonder at what degree this open innovation of SIA truly aims for solving its critical issue(stagnant growth). I agree that a Digital Innovation Lab can convey some untapped, small, yet important issue in daily operation to be resolved. However, I am a little skeptical about AppChallenge. I think this type of problem-solving could deal with a consulting firm or an outsourcing firm. Is AppChallenge for cost saving? talent acquiring? or else advertising?? As the article suggested, I would recommend SIA open up AppChallenge to the broader audience including actual SIA passengers and narrow topic down to be more specific.
Thanks for your post! That was a question I had in mind as well i.e. whether this was all just for advertising and whether SIA would actually implement the ideas. I think it is definitely a great way for them to attract talents both from local universities and a wider pool of people who participated.
I really enjoyed reading this article! I flew Singapore Airlines frequently in 2011-2012 when I lived there, and I always thought of them as “best-in-class” among airlines at that time. I actually had no idea that their performance has been suffering over the past few years. I think Open Innovation is an interesting way to stay competitive and respond to customers’ needs. In particular, I like that Singapore Airlines is empowering their front-line employees to come up with new ideas to tackle some of the problems that they experience and observe on the job. I hope to have the opportunity to fly Singapore Airlines in the near future and see how they’ve implemented some of these changes!
Thanks so much for the post – it was fascinating to see that open innovation is being applied to an industry that is so often seen as being traditional and slow-moving. A concern that I might have with Singapore Airlines’ initiative is thinking about the immense pressure that its customers may apply to the company to implement suggested improvements. Airline customers are notoriously particular, and quick to air their grievances online. If a customer believes that Singapore Airlines is dragging its feet on implementing a promising new customer-service innovation, and posts about it online, how will Singapore Airlines respond?
Open innovation is definitely a great way to identify new ideas for SIA, but I wonder whether SIA has given the public poor guidance on the problems worth solving. Open innovation is only as effective as the problems it is asked to solve. In this case, if SIA has been losing market share to other airlines, I think it should be focusing on the most important problems (e.g. overbooking, delays, route availability, pricing), rather than spending time tweaking the mobile app and the inflight shopping experience. As such, open innovation at times seems like a panacea, and may not actually lead to any real solutions.
This is really interesting. Something I struggle to understand is how do you incentivize users to share their ideas. How do you manage IP when the idea came from crowdsourcing? Would the person that submit the suggestion have rights over its IP or they forfeit their right? How are people being incentivized to submit their best ideas?
In Colombia a low cost airline was launched a few years ago and they crowdsourced the logo creation. It was a competition and a friend of mine won it. He has been traveling for free in this airline for the past 4 years! This is a very good incentive for people that could bring even more innovative ideas on board.
Thanks, Emilio! For the winning team among local university students, SIA would sponsor a trip to Silicon Valley for all team members. They would apparently get to meet executives at companies e.g. Airbus, Google and IBM. The winning idea from the global participants pool would win round trip tickets to any destination of their choice, plus monetary rewards. Runner-ups would earn some mileage and monetary prizes.
To answer your question on IP, contestants would get to keep their IP if they do not win in the competition. Winning teams would hand over their IP to SIA, but are given an opportunity to work alongside the company to implement the ideas.
That’s really cool that your friend gets to travel for free for 4 years!!
This article is interesting because SIA used to be the leader in the airline industry, and it is attempting to regain the leadership position with open innovation in digital. I think SIA should be careful in what they reveal to the consumers. I do agree with you in that openly innovating with the consumer will keep SIA accountable in releasing the features, but sometimes what consumers want and what is achievable by the company do not intersect.
I agree with some of the points raised by Colm above—I think there may be a space for non-competitive airlines to collaborate on common challenges. However, I would be concerned that if the contest was open to the public, it would be challenging to facilitate an innovation process in which competitors would not share equally in the ideas. With this issue in mind, I find it hard to believe that Singapore Airlines would be willing to contribute the necessary internal data for people to be able to contribute valuable ideas. Furthermore, I think Singapore Airlines would need to be creative in incentivizing their customers to participate in the project—something like free airline miles could work.
I agree with Riju that Singapore Airlines may not be focusing on the most significant problems here, and the public may not be well equipped to help answer operational questions. If anything, open innovation contests may be useful from a PR perspective in that it gives the impression that the company is listening to consumers and is open to improving. Post-flight customer survey emails are now a ubiquitous industry practice, so airlines clearly want feedback, or at least give their customers an opportunity to be heard, regardless of if their feedback results in any action. Airlines are the type of industry where there are many users and these users may have intense opinions about customer service, making it an ideal area to solicit innovative ideas from the public. Airlines are such a complex business with many interconnected parts largely unseen by the public, so public feedback may not be able to accurately weigh the tradeoffs involved in adopting ideas.
I think that collecting ideas for app optimization and offloading compensation are good areas for comment and exploration — these are areas that are acutely felt by the customer and critical to the overall experience as an airline passenger. While there may be a few dozen employees (at most) working on this at Singapore Airlines, there is large potential for radical and unexpected ideas when pooling the collective wisdom of thousands of customers.
I’ve always LOVED flying Singapore Airlines, and wish I could do that more while being an unemployed grad student. Regarding the question on how open is too open – idea generation may be the easier part of the funnel to crowdsource, but business results are behind excellent execution that Singapore Airlines is known for and difficult to replicate. Open innovation might also be more useful as SIA continues to play much more in the luxury segment. Sourcing inputs from extreme consumers (Solitaire PPS club members, business travellers that optimize for points collection) allows the power consumer base to co-create the product and thus increases customer loyalty for a very lucrative segment. The high investments required to upkeep and innovate on first class and above also create a natural barrier to entry as many airline players are choosing to drop first class from their offerings.
To me, it feels like SIA’s crowdsourcing is a bit of marketing ploy. As you mentioned in your article, idea generation may not be enough to give SIA an edge in the very competitive world of airlines. I believe that a big reason why SIA’s business has declined in recent years, despite great service, is because of competition. Furthermore, I know that segmentation is key for airlines: business vs leisure travelers, with each segment having very different demands. What are the pros and cons of open innovation as they apply to different travelers? Are these in one particular segment? That’s interesting that cargo shipments gave SIA a nice boost, another segment I had previously not considered.
Really enjoyed this article. Great work!
One thing that struck me in your recommendations for SIA is the idea of breaking down the innovation topics into more granular problem areas. I’m sure the tension between sharing narrow and broad problems inside and outside of the company for an open innovation question is a difficult one – it sets up a hard trade off between feasibility of solution and uniqueness/revolutionary nature of the innovation.
On quick glance, I think I agree that they should be more granular for customer-facing problems that an airline traveler can think through in-depth. For internal problems shared through open innovation (which are likely less likely to find an innovative solution to begin with), perhaps the broader approach is more useful, especially if the likely result of open inno on those problems is nothing more than creating a radically different but less sophisticated potential solution to test the status quo.
This is a great piece and very interesting to see how SIA is applying open innovation to help solve its most pressing challenges. I wanted to address your question around ‘how open is too open’. It seems to me that it would be advantageous to put greater structure around what SIA is trying to solve for (the 5 most pressing challenges outlined must have varying degrees of urgency and ramifications for the business). I would then do a more targeted ‘recruitment’ of people who can then help solve these challenges, versus just students at Singaporean universities, even though that is definitely a great place to start! Perhaps partnering with a select group of start-ups or entities in the aviation industry that are also grappling with these challenges? I too wrote on open innovation and continue to question how the ideas generated can be translated to business-altering solutions. In your last paragraph you raise the example of a participating team that abandoned an idea because it was too complex. I would argue that this is where a select group of SIA employees have a key role to play in guiding these teams.
Interesting read! Agree with many of the previous commenters above that it seems more like an advertising / marketing play than true innovation. But irrespective of whether it is a marketing tool or not, I think crowdsourcing ideas is still a great way to innovate and improve some processes. Assuming that this program doesn’t cost too much for SIA, it serves a great purpose: good PR and potentially a cheap source of innovative ideas. However I would not depend on this program to help me in maintaining / gaining market share in a very competitive industry; I would think of it as a small, inexpensive side project that has the potential to deliver strong value.
Very interesting read! I never thought open innovation could apply to an airline. At the end of the day, I don’t believe open innovation will be a long-term competitive advantage for SIA as competitors copy the idea.