They say that digitalization encompasses all areas of our lives. But what does that mean for airports? As a visit to Munich Airport shows, it means a great deal of change.
Of saucepans and jet fighters
What do saucepans from Swabia, travellers from China, and the airport in Munich have to do with digital transformation? Not much? A reasonable assumption, at least until we meet Michael Zaddach and Konrad Best. The managers are quick to convince us that these things are, in fact, very closely connected and that digitalization is changing business thinking and activities at Munich Airport (Flughafen München GmbH).
The reason Michael Zaddach – we’ll come to Konrad Best and the saucepans later – has a lot to say about this isn’t just because of his position as Head of IT, where he manages 250 employees in one of the key areas of digitalization. He also has an enviable view of the big picture. From his corner office on the sixth floor of the administrative building at Munich Airport, you can see planes from all over the world taxiing, taking off, and landing on the tarmac. When Zaddach took the job 11 years ago, his son was pretty impressed: ”Dad was surrounded by all these planes!” Listening to his story and looking out at the planes lifting off the ground, you suddenly get the urge to travel yourself.
This in turn has a lot to do with our story: How does Munich Airport benefit from this desire to travel, and how does it combine this with digital change in a clever way? What challenges and opportunities does digital transformation involve, not only in technical terms, but above all with regard to responsibilities, employees, and processes? In short: How can an airport reinvent itself digitally where necessary and appropriate?
Travel, and consume, in comfort.
It has considerable potential: with 41 million passengers per year, Munich’s “Franz Josef Strauss” airport is the second largest in Germany. Only the airport in Frankfurt is bigger. 49 percent of all revenue generated at Munich Airport comes from what is called non-aviation business, which includes retailers, food and drink, parking, and real estate. Areas which, in contrast to aviation business (the revenue from the takeoff, landing, and cargo business) are currently experiencing growth and will continue to do so in the future.
550 different companies operate on the site, including dozens of shops, restaurants, and service providers. Almost two-thirds of all guests who fly into Munich don’t actually remain in the city; they are there for a layover before flying on to Paris, London, or Cape Town. Many of them have time to do some shopping and have something to eat.
At the same time, the airport faces competition from others. There have long been well-organized parking suppliers in the region that offer shuttle services, leading to the loss of car park revenue for the airport. Travellers waiting for their connecting flights can also shop on Amazon or similar websites around the clock, to the detriment of the airport stores. Passengers are a sought-after and highly contested source of revenue.
It’s about creating the right conditions.
Passengers, therefore, need to be provided with attractive options at the airport, that are presented in an elegant way. “Digitalization is the key,” says Michael Zaddach. The plan goes like this: The more time passengers have, regardless of whether they’ve just arrived, are taking off, or changing planes, the more relaxed they are. And the more they consume. It’s about creating the right conditions. In future, travellers can choose to receive useful information via smartphone app, email, the web portal or LCD screens in the terminal in real-time, always up-to-date and tailored to their needs.
Information that enables digital processes and tools to provide quick and helpful answers to key questions relating to the customer`s journey: Is the flight on time? Where and how can I park quickly and as close to the gate as possible? How far do I have to walk from the airport train platform to the gate? Is there a duty free shop, drugstore, or shower on the way? How much time will I need to change planes or go through security? How much time do I have until we actually board? Which stores have special offers right now? Thus giving rise to seamless travel: a journey without any uncomfortable breaks and delays, enriched with tempting opportunities for consumption.
Two types of digitalization
From a technical point of view, says Zaddach, the hurdles don’t look very high at first: the required hardware and software like apps or beacons (transmission modules for indoor navigation) as well as the necessary sensor, camera and WLAN technology are all available. The elements that require a lot of real work are located deeper in back-end IT systems and interfaces, because an increasing number of companies and other parties need to be involved. At the same time, the degree of automation is too low, there are heterogeneous technical systems, numerous ineffective processes, and other organizational obstacles.
Michael Zaddach sums this up with the term “internal digitalization.” “Sure, it’s a monumental task!” he says. But one that IT knows all too well. Modernizing and streamlining IT-supported processes inside the airport, on the runway, and in the passenger and cargo areas is, he explains, part of his department’s everyday business. There are currently 100 ongoing projects. “We are very aware of what needs to be done in the long-term to guarantee reliability and stability.” That is one reason why he sounds so confident.
Another is the man we mentioned at the beginning: Konrad Best. He is at the center of all activities at the airport that fall under the term “external digitalization.” For the last seven months, the “Vice President Digital”, the job title printed on his business card, has been managing a kind of creative cell. A team of five people targeting new business models, changes to the customer journey, and the opportunities for revenue that these bring. Best and his team could be described as the jet fighter at Munich Airport.
We put an emphasis on agile concepts that can be implemented, evaluated, and developed with minimum effort.
Top speed is a must, failure allowed.
He is allowed and even encouraged to try things out. Above all, Konrad Best has to be quick, as digitalization notoriously punishes those who are slow. But his approach doesn’t involve pouring vast sums of money into one large digitalization project after the next. “We put an emphasis on
that can be implemented, evaluated, and developed with minimum effort,” says Best. He is referring to an approach that originated in Silicon Valley: the minimum viable product (MVP). A product that can be realized quickly and inexpensively while still providing valuable insights and that, should it fail, doesn’t have disastrous consequences for the business. agile concepts
But what exactly does that mean in the case of Munich Airport? Best and his team see Wi-Fi access and the airport app for passengers as key. “They bring us into direct contact with the customers. The Wi-Fi service and the app function as a filter that helps us categorize travellers and provide them with tailor-made information and offers.” Best illustrates this with a specific example:
Each year, tens of thousands of passengers from China land in Munich for a layover which lasts a few hours. According to a number of surveys and market studies, these passengers are particularly interested in high-quality German products, for example saucepans made by the Swabian company WMF. “Wi-Fi access is ideal for bringing Chinese travellers and saucepans together at the airport,” explains Konrad Best. To access the Wi-Fi service, he says, passengers have to enter a few personal details and their preferred language, which allows them to be identified as a specific target group. The system then knows that these people are Chinese and that they like to buy saucepans. So it provides these passengers with corresponding information on their smartphones, or displays a shop at the airport that has the saucepans in its product range.
Communication and learning
Sounds easy, right? “It certainly seems that way,” says Konrad Best. But the scenarios are diverse, he explains. After all, the system can also recognize business travellers, millennials, or senior citizens and offer them custom information, too. He refers once again to the MVP philosophy: “Digitalization doesn’t have to mean launching expensive and lengthy Big-Data projects whose outcome is uncertain. It is often more effective to make small steps where you intuitively know the right path to take.” That, at least, is the path he is pursuing together with Michael Zaddach and other departmental heads at the airport.
This last point is particularly important to both managers. “Digitalization isn’t really an IT issue,” says Michael Zaddach. “It’s more about the basic question of how an airport actually works.” Because digital channels, he says, have one specific feature: they often don’t follow the traditional lines of decision-making in the established organization. For this reason, communication is essential for Konrad Best and his team. “We connect departments and colleagues, encourage innovative views and processes, and support new customer services.” It goes without saying that this is often the subject of intense and sometimes heated debate.
For Best, that’s no reason to hold back; on the contrary: “In the extended circle of our team, we have eight colleagues from various departments at the airport,” he says. This, he explains, helps to continually spread the idea of digital transformation across the company. Conversely, the digital unit is very well aware of the wishes and expectations in each of the departments. “We aren’t treated as a separate profit center,” says Konrad Best. Instead, they are business enablers whose goal is to increase the revenue of other departments. That, he says, is their task and reward. Nothing more and nothing less.