Today, most airlines offer a completely digital experience, from ticket purchase to pick up at your final destination. You can even navigate unfamiliar airports and get push notifications about flight delays. Lufthansa’s corporate incubator brings a new kind of digital transformation to the airline industry that goes beyond travel.
In fact, according to the Digital Transformation Initiative (DTI), by 2025, digitalisation in the aviation and travel industry is expected to increase profits by $305b. That same study estimates that these advances will cause a shift of about $100b to go from traditional players to new competitors in the market.
It all boils down to one indisputable conclusion: Digitisation is the future of travel.
In this week’s corporate incubator story, we’ll be looking at how Lufthansa Group is future-proofing its business, accelerating its digital transformation and appealing to a whole new subset of customers with its own incubator Lufthansa Innovation Hub (LIH).
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About Lufthansa Group.
With a revenue of over $40b in 2019 and 138,353 employees worldwide, Lufthansa Group is currently the leading airline in Europe (in terms of revenue). It’s made up of three main segments:
- Subsidiary airlines which include Austrian Airlines, Swiss International Air Lines and Brussels Airlines.
- Eurowings, its low-cost carrier headquartered in Düsseldorf.
- Other aviation Services with segments in logistics, MRO, catering, training, and IT companies.
Keeping up with disruptive new players, creating an innovative customer experience and achieving sustainable growth is by no means an easy task, especially for a company of this scale. As described in an LIH fact sheet:
“The ongoing digitalisation of travel opens up opportunities, but also brings significant challenges for airlines, especially because of the various new types of intermediaries between the airlines and their passengers.”
Lufthansa Innovation Hub (LIH) was created as part of the strategy to help Lufthansa stay on top of the industry’s digital transformation.
Meet Lufthansa Innovation Hub (LIH).
Founded in 2014, its main goal is to explore digital innovations and opportunities in the global travel and mobility landscape and use them to gain market share and accelerate new growth. Some LIH’s activities include establishing strategic partnerships with relevant tech startups, testing and validating new concepts and developing new in-house ventures from scratch.
Most LIH projects are focused on meeting traveller needs and pain points as well as elevating their customer experience. As described by Christian Langer, former Chief Digital Officer at Lufthansa Group:
“Whenever we think about digital, we start from the customer experience, and we go from there. Digital helps us to make travel more seamless, more easy, to create a better experience.”
The team at LIH has a wide variety of skills and expertise, including serial founders, venture capitalists, business strategists, and tech analysts. They design digital business models, invest in promising tech startups, and identify valuable new growth areas to further Lufthansa’s digital transformation.
So far, the formula has proven quite successful with the launch of several ventures including:
Aside from its many successful ventures, LIH has also expanded its operations from its original headquarters in Berlin, to include offices in Singapore and most recently, Shanghai. As described by Gleb Tritus, Managing Director of LIH:
“After two years in Berlin, we started to look at this pivotal development in travel and mobility tech in Asia. We noticed that it was accelerating quite fast and that it’s not all about Europe and North America anymore. That’s when we started more and more to approach the decision-makers at Lufthansa to say let’s take a closer look in Asia.”
How they work.
Under the mission: “We design the happy journey of tomorrow”, LIH combines five focus areas to achieve its stellar results:
A systematic and data-driven approach to identifying promising new growth opportunities in different startup ecosystems across the world.
Development and validation of new business models with customers at an early stage using prototypes developed in-house.
Strategic partnerships are sought out with innovative tech startups that have the capabilities to help Lufthansa improve travel for customers.
Investment in disruptive concepts and relevant digital players in the travel industry.
Fostering an entrepreneurial mindset and applying cutting edge techniques and technology.
What makes LIH so successful?
Having an innovation arm like LIH in place enables companies like Lufthansa to focus on their current business and priorities, without losing sight of their long-term growth goals. It also allows them to stay at the forefront of innovation by effectively leveraging their corporate assets. This dual approach combines the best of both worlds:
- The strength and expertise of a corporation
- The lean, flexibility of a startup
Here are a few of the things that make LIH so successful:
- Customer validation – All new concept assumptions are tested with real customers. Validated concepts are scaled, and those that don’t test well are shut-down.
- An entrepreneurial mindset – LIH has full autonomy to take on new projects and challenges. Most of the team was recruited from outside Lufthansa, bringing in a fresh perspective.
- A diverse skill set – Varied skills, backgrounds and competencies enable the team to move with ease between startup and corporate environments. Accessing the benefits of both is critical to their success.
- Corporate assets – By focusing on travel and mobility tech, LIH can leverage Lufthansa’s existing expertise and resources to gain an unfair competitive advantage.
Despite several setbacks for the travel and aviation industry this year, LIH is showing no signs of slowing down. Earlier this year, they were awarded “Best Digital Lab Award 2020” by Infront Consulting.
While the office in Berlin continues to strengthen Lufthansa’s position as a thought leader, the Singapore and Shanghai offices are moving towards those same goals. As described by Christine Wang, Head of Business Development at LIH Asia:
“We are looking to get connected to new and interesting Asia start-ups in this space, see how we can collaborate with travel players and find white spots in the market.”
With a growing team that expands from offices in Berlin to Shanghai and a whole new landscape to discover, the horizon is set for some pretty exciting projects.
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