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Join us for our third CXO of the Future Podcast here at Mayfield with Roland Schuetz, EVP Information Management and Lufthansa Group CIO, as he discusses his vision of the CXO of the Future in bridging business and technology.
Digital technologies are driving the competitive landscape of the airline industry and changing the way airlines interact with their customers. How will this impact the role of the CIO? Gamiel Gran and guest co-host former CIO of Emirates Group, Patrick Naef, interview Dr. Roland Schuetz, CIO of Lufthansa Group, to discuss the unique challenges of digital transformation in the airline industry for Mayfield’s “CIO of the Future” podcast.
Roland Schuetz has more than 20 years of IT experience and has been working for the Lufthansa Group since 2005. He started as Chief Operating Officer Infrastructure Services at Lufthansa Systems and in 2010, he took over the responsibility for the IT area of the freight subsidiary Lufthansa Cargo. He was appointed CIO of the largest business segment Lufthansa Passenger Airlines in 2014 and became the first CIO for all airlines in the Lufthansa Group in 2016.
Patrick Naef is currently a partner at Boyden, and was the former CIO at Emirates Airline from 2006 to June 2018. He also served as CIO for SIG and Swissair. He’s Director of the Board for Franke and sits on boards of start-ups and on advisory boards of technology companies and venture capitalist firms in the Valley.
Digital Transformation in the Airline Industry
Roland Schuetz talked about the unique challenges for digital transformation in the airline industry. “You can’t send a passenger over the internet. The core of our business model can’t be disrupted by the digital technology.”
The airline business is about moving people. While digital is not at the core of the Lufthansa business model, understanding the behavior of travelers and engaging them with modern technologies is critical. It helps prevent the threat of being squeezed out by intermediaries such as Expedia and the like, where most airlines sell large quantities of tickets.
Still, the threat of intermediaries is extremely challenging. When a customer has access to Google Flights and the many other methods of searching for travel options, airlines must build intimacy with customers and understand their needs.
“Get to know the traveler over time through mobility,” said Schuetz, “Know where they are through mobile booking. Keep face time with them and help them not just when things are going well, but when things are not. If a customer gets lost or feels uncomfortable in an unknown space and you help them, they will be grateful. Being helpful generates loyalty. This kind of benefit can’t be replaced by a website or an intermediary.”
The Role of IT and the CIO is Changing the Airline Industry
“As an airline,” said Roland, “we don’t build our own aircraft, but we deploy technology. That applies to IT as well. We are not that engaged in R&D–we are end-users of technology.”
He said that the role of the CIO is helping businesses embrace new technologies, supporting businesses processes and augmenting the product with new technology. It’s not about running a classic data center business, but about helping support business needs. Going forward, the focus of the CIO will be on collaboration models between business and IT. The traditional role of the CIO will vanish and become more of a bridge from the business side to the technology side.
Accelerating the Business
While organizations are moving their legacy applications to the cloud at a rapid pace, there are still many IT orgs that run traditionally with data centers and servers. When asked how to transform the traditional skills and resources from these organizations to be more business-focused rather than technology-focused, Roland Schuetz was clear.
Companies need to get rid of nascent technologies and replace them with modern service-oriented architecture.
“At Lufthansa, we outsourced legacy IT, which was very costly. Running a data center is not at the core of our business. It was a bold move that caused some pain, but we have to accelerate in terms of development. We have to be a data-driven company. We have to understand the behavior of our customer, we have to keep up with retailers and all others that are interacting with our customers. We are a service company, but retain an IT ecosystem for our business process people.”
The Customer Centricity Working Lab, for example, is Lufthansa’s online sales organization.
“We put marketing and sales and IT specialists together to build a new generation of customer interfaces,” says Schuetz. “In addition, management is working with research organizations and universities to invent a new algorithm for pricing and ticket distribution. We can only be successful when we have these joint teams.”
Innovation as a “Must-Have”
In many traditional companies, the senior management and boards have difficulty understanding the risks of getting up to speed and of undergoing technology driven transformation. Both Schuetz and Naef talked about how the CIO of the future should approach this issue.
“IT expertise has to move back into the core of the business,” said Naef. “It’s a challenge to help companies transform from a hierarchal structure into more of a network structure. The role of the CIO is transforming from being the leader of the IT organization to being more of a coach or a catalyst that helps the business take ownership over technology and helps them digitalize their processes and business models. It’s a different role than we had in the past.”
Schuetz agreed, adding that the purpose of the modern CIO is not only to is to support business processes, but to make them more efficient. As such, the majority of IT at Lufthansa is co-located to the business for close collaboration. He said that the IT department needs to help the business side be successful and to be attractive as an accelerator rather than lacking speed.
“We must be an enabler rather than sticking to the rules.”
Bringing Startups Onboard to Accelerate
Mayfield works with early stage companies with new ideas and transformative approaches. These start-ups try to work with large companies like Lufthansa and Emirates. Lufthansa, along with many other large organizations, have devised in-roads for these start-ups–The Innovation Hub.
The Innovation Hub at Lufthansa is and entity that is detached from the business that helps small companies have a playground to innovate. If a start-up has a promising technology that is deployable and scalable, it might be incorporated.
“The Innovation Hub augments the digital image of our company,” says Schuetz, “We don’t have KPIs. Instead, we encourage start-ups to follow their ideas, fail fast and allow for experimentation.”
Takeaways: Lessons for the modern CIO
- You can’t measure success based on the size of the organization you lead, it must be by your impact to the business.
- Networks are where the future lies. Leverage them.
- At a new organization, listening is the top priority. Listen to customers, staff, and if you perceive something unusual, find out what it is. You have to understand problems so that you can help transform them.
- Be business oriented. There should not be IT for the sake of its own. Everything requires economic justification. In times of tight budgets, you can’t drive IT initiatives as IT initiatives. Everything must be linked to the business. In the future, IT needs to be closer the business to accelerate transformation.