Lufthansa is facing the challenges of digitalization with the help of the Innovation Hub it set up in 2014. In this interview, Gleb Tritus, the hub’s Managing Director, discusses the best ways for a global player to create ties to the world of start-ups.
Mr. Tritus, with the Lufthansa Innovation Hub, you have created a type of start-up in a global player that is more than 60 years old. Were the company’s existing structures outdated?
Lufthansa recognized at an early stage that it had to position itself more broadly than before with respect to certain digitalization topics. This meant, for instance, developing joint projects with start-ups and attracting people with a different type of talent. But no one in the start-up community was sitting around and waiting for us – we had to prove our bona fides two and three times. That’s because the start-up ecosystem initially assumes that large organizations like ours are lethargic and averse to innovation. Initially, we had to use the Innovation Hub as a way to demonstrate just how creatively and innovatively the organization can think and how effective it can be once we have found a structure that makes sense to both sides.
This also requires Lufthansa to provide the Innovation Hub with lots of breathing space, doesn’t it?
Yes. Fortunately, we had a guardian angel from the very beginning, which is not common at all. But it meant that we could try things out, let our minds run free and come up with our own concept, without the immediate pressure to subject all our work to the idea of profitability. We got the ball rolling in 2014. Eight of us settled into an Airbnb apartment and spent weeks working on an initial draft concept. Over the following years, we brought this concept to life iteratively and continuously adapted with it. Today, the Innovation Hub is much different than it was in the first hypothesis in 2014, yet it was exactly this ability to adapt and accept mistakes that shaped our evolution.
Can you cite an example of something that had to be changed despite intensive mental work on it?
In the beginning, we thought that we would basically set up partnerships between Lufthansa and start-ups. We didn’t realize that the ability to link digital companies to Lufthansa’s internal systems and processes couldn’t simply be pulled out of a hat. It was a lesson that both we and the start-ups that we brought to Frankfurt had to learn. As a result, we now focus more closely on developing our own digital business models.
Will the lab soon be talking about drones for freight and passenger transport?
You just mentioned the skepticism that large companies face. Weren’t you, as a start-up founder and expert, afraid of getting lost in the crowd at a global player like Lufthansa?
I was really attracted to the challenge of mixing the two worlds. Part of this appeal involved the entrepreneurial aspect of it, which we still cultivate at the Innovation Hub: We received funding for a limited period, and the outcome was uncertain. This was no different from the start-ups I had developed with the help of venture capital. Yet because we are part of a company with a global reputation and footprint, the projects that we implement have the potential to be rolled out around the world, from Singapore to Los Angeles, London and Frankfurt. At 130 million passengers, the effects of scale are huge. One other thing helped a great deal as well: In the beginning, half of our team members had extensive experience in the Lufthansa Group, including former Executive Board advisers who opened doors in the company for us.
You started work with an even mix of Lufthansa employees and start-up professionals. How has your team changed since then?
Ninety-five percent of our 32 employees now come from the start-up ecosystem. This is not something you can take for granted, because the battle for talented people in Berlin is tougher than ever. We have people from major lighthouses like
Rocket Internet, Project A and Zalando on our team. This shows that we’ve moved in close to the ecosystem, and that inspires us and sets us apart from similar initiatives at other major companies.
Digitalization in a travel and mobility context is just getting off the ground, and we are growing very consciously along with it.
Finding the right people is obviously a pretty tough job: What do you need the most?
The battle for specialized developers is already lost. The market in Berlin has been swept clean. Just like other companies, we’re focusing on small agencies that test prototypes for us and larger partners in nearby countries. Eastern Europe, for instance, offers a lot of capacity. I think we’ll have a new generation of coders in a few years because we now have more training centers and well-organized online courses and the standing of these professions is better than ever. Another area in high demand is business generalists who can play to the entire value chain of digital business models. We are particularly interested in hiring venture development managers who know the ins and outs of product management and online marketing.
You frequently talk about growing into the start-up world. Looking in the other direction, how do you grow into the Lufthansa Group?
We are playing a leading role in the development of the Group’s entire digital strategy. Then, there is the increasing digitalization of the
Lufthansa Aviation Center, our Group headquarters – from contactless building entry to the next generation of video conferences and voice-controlled meeting rooms. We bring start-ups into these projects as well.
Can you give us a few hard figures to illustrate the value of your work? What is your return on investment?
Our projects do not yet have a direct impact on the profit and loss of the Lufthansa Innovation Hub, but generate sales on the level of all Group subsidiaries involved. And we haven’t had to generate sales yet, because we consciously defend the freedom we have when we explore new fields – it’s what a broad issue like digitalization definitely requires along the travel chain. But the potential is huge, and this is reflected in the founding and financing momentum in this area: Last year, we saw an all-time record of €25 billion in venture capital that was invested in travel and mobility start-ups around the world – and if it continues, this figure will take another substantial leap in 2018. Digitalization in a travel and mobility context is just getting off the ground, and we are growing very consciously along with it.
Lufthansa offers a real-time data interface, which can be used for example by travel start-ups
Let’s talk specifics: What are you contributing to the Group?
First, with our explorative prototypes like the “
Linea” app that streamlines the compensation process for passengers whose luggage arrives late or damaged. Customers like it very much. This increases satisfaction and lowers Lufthansa’s process and administrative costs. Another product is our service AirlineCheckins.com: Customers from more than 200 airlines in over 130 countries now use this automatic check-in assistant for their upcoming flights. This group also includes potential new customers for Lufthansa’s core business: In addition to flights, we can offer them rental cars, hotels and local tours. Together with our IT colleagues in the Group, we have created a novelty in the aviation industry – the Lufthansa Open API. This is an open, standardized data interface that businesses such as travel start-ups can use to gain real-time access to our travel connection data – in accordance with the strictest data-protection requirements, of course. API provides data such as flight status, seat assignment or availability and ticket prices that developers can integrate into their own apps. Thus over the long term, we can create another direct sales channel by enabling other companies to sell seats in our planes.
How many of your projects do you actually carry out?
We have eight to 10 projects each year, of which about half are translated into daily operations. One example is AirlineCheckins.com. That rate is good, but at the end of the day, what really matters is scalability and the long-term relevance of such a product, and this is where we need to improve significantly. Another variant is strategic investments in start-ups whose advancement we are leading for various corporate units in the Lufthansa Group. For example, we provided extensive support to Lufthansa Cargo when it invested in the start-up Fleet Logistics– a U.S. company with an online platform that digitally connects international freight jobs with logistic companies that have available capacity. I assume we’ll make more investments like these in the future.
We have eight to 10 projects each year, of which about half are translated into daily operations.
What will we be talking about in 10 years?
We will still have traditional flights. That much is certain. But we will also have more alternatives like autonomous driving on certain routes that we will also serve. Or drones that take off and land like helicopters and are used for freight shipments and, at some point, human transportation as well. Or maybe even the much-talked about hyperloop, a type of “pneumatic tube for people.” At the same time, travel substitutes will become more relevant. Video conferences will improve or be supplemented by virtual reality or holograms. We are closely following these developments to ensure the Group’s ability to address and react to them.