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2021.9 - 2021. 12
The growing cruise market poses both challenges as well as opportunities. We proposed a solution based on interfirm system integration and interfirm collaboration to enable the seamless baggage-free travel experience from the cruise port to the airport.
challenge
Design the future state of the baggage processing chain in a new market
SITA is giving increasing attention to the cruise market and aims to extend its business, services & products (e.g., self-service kiosks, bag tag printers, platforms) there. How to design the future state of the baggage processing chain to create business value for SITA?
To tackle this challenge, we need to answer the following questions.
My roles
Dream the users’ dream: Provide the user-centered perspective
In a team made up of four people with different backgrounds (engineering, business, and management), I proactively brought the user-centered perspective to the table. I envisioned the user needs and behavior in a future context by initiating user research and conducting interviews. The resulting personas helped establish the team's empathy with the passengers as a concrete foundation for our solution development.
Craft the seamless journey: Bring an end-to-end process-driven mindset
I created experiences and service interactions addressing user needs. I guided the whole team to map the user journey to pinpoint the pain points and identify the design opportunities. I created the business process model and notation diagram (BPMN) to visualize the end-to-end service and elicit all-around considerations about the whole process.
Think out of the box: Innovate a new business context
I ideated different ways to generate additional revenue by utilizing the data as a strategic asset, which made our solution more economically appealing. I also backed up my ideas by leveraging an innovative existing solution named multi-party computation (MPC).
Unite the whole team: Constantly build team alignment via workshops
I played an active role in coordinating the collaboration and improving the communication efficiency across the multi-disciplinary team by facilitating various workshops for different purposes including project planning, opportunity identifying, analysis integration, solution ideation, etc.
vision
bridge the siloed systems by building an integrated data platform
"We want to break the silos of different systems to enable a seamless baggage-free travel for passengers and unleash the potential of the data asset to the greatest extent."
solution
An integrated system with different viewpoints
Based on our analysis, we prescribed a solution based on interfirm system integration and interfirm collaboration. The system integration enables a unified passenger identity which supports the seamless transfer of luggage from cruise ports to airports, thereby reducing inconvenience for passengers. Since different stakeholders would like to view the same solution from different perspectives, multiple viewpoints such as system viewpoint, data flow viewpoint, business processes viewpoint (BPMN), etc. were created. Based on the principles of Industry 4.0, we also proposed how the data from system integration can be leveraged securely to create additional analytic services for different supply chain partners thereby increasing the value.
system solution viewpoint
Change requirements and practical implications
To ensure the findings and prescribed solutions are of practical relevance, we considered the change requirements (e.g., technology adaptation) in the transition from the existing systems to the new systems. We also thoroughly discussed the relevant implications including the possible new development in supply chain partnerships, processes, the organizational structure of SITA, and the financial aspects.
Create value for users and business
In order to understand how the solution can create, deliver and capture value, a business model canvas was created that can be used to influence SITA’s business model innovation. The scope of this project is limited to addressing the problem of transferring baggage between cruise ports and airports and creating value for the same but we didn’t stop there. Based on our findings of the current research, new research directions are also proposed which would be conducive for SITA to lead innovation in the cruise line and airline industry. We also made a roadmap that provides a strategic plan by recommending different activities in three different horizons to achieve the solution and augment it further.
approach
How we got there
Use the Scrum method to manage the progress
We decided to use the scrum method to control our work progress in the upfront of this project. We had a sprint planning meeting every Friday afternoon in which we wrote down everything in our mind that probably needed to be done in the ‘backlog’, such as SWOT analysis and stakeholder analysis. Then we started our ‘sprint’. Every one of us was assigned several ‘backlogs’ to finish by the next Friday. During the week, we did 1-2 weekly ‘standup(s)’ to exchange our progress and help each other out. And finally, it turns out to be efficient to work in this way. We had a quite nice time management and task division. It not only allowed us to leverage our strengths to the greatest extent but also gave us opportunities to challenge ourselves to practice outside our ‘comfort zones’.
Screenshot of Sprint Board in Jira
Screenshot of Workshop Board in Miro
Understand the different socio-technical aspects
We conducted the cruise market study and investigated SITA’s current systems and processes, which provided us with a deep understanding of the context. We also analyzed different stakeholders of the supply chain, identified the strengths, weaknesses, opportunities, and threats (TOWS analysis) of SITA as a service provider, and considered the different competitive forces that control the market dynamics (Porter’s Five Forces). The findings were complemented with empirical data from user research and user journey mapping and resulted in strategic action points that influence system requirements and guide the new supplier relationships strategy. Further, investigating the current processes and systems and customers and journeys provides an understanding of the different socio-technical aspects that must be considered in the design.
scope
Background and the Problem Scope
The airport’s luggage handling system has an essential role in keeping passengers pleased, which is a critical component in the ability of an airport to attract or retain a significant airline hub (Nice, 2001). SITA is the world’s leading specialist in air transport communications and information technology. Currently, SITA is serving 95% of international destinations, including collaboration with over 2.500 airlines, airports, ground handlers, and governments (SITA, 2021). This means that SITA's services have a huge impact on passengers’ satisfaction. On top of that, SITA wants to extend its business by including the cruise line market in the customer journey ( see the elaborated version of SITA’s market here). The goal is to provide an effortless, secure, and cost-efficient baggage transfer experience for passengers in-between different destinations such as cruise ports, airports, and other locations like passengers’ homes and hotels. This project aims to provide a solution to achieve this goal and create a business model including its implications for SITA.
Location
In this project, the geographic scope is limited to the Netherlands.
Process
In this project, we only focused on the journey between the cruise ports and airports
System
In this project, we would mainly focus on the software systems
Scalability
In this project, we should also consider how to implement the solution on an international scale regardless the geographic scope.
position
Where is SITA located in the whole system
To understand SITA and its environment better, we conducted stakeholder analysis and TOWS analysis. A basic understanding of stakeholder dynamics is needed to develop a suitable solution that satisfies as many stakeholders as possible. Therefore, the complete system has been summarized in a map showing how the different actors are intertwined.
Stakeholder analysis
A stakeholder analysis was conducted to map out various relevant actors and understand them better. Relative stakeholders are plotted in a power/interest grid. Two things are noteworthy here.
Firstly, transfer agencies are added to the grid twice. The one in quadrant B is a
one-to-one
relationship with SITA, which means there is a single big company with which SITA has a partnership. The
one in quadrant D is a one-to-many relationship, which means multiple smaller transfer agencies are in
contract with SITA. The pros and cons of these relationships will be discussed later in the supplier
relationship.
Secondly, consumers (quadrant D) are the end-users of all stakeholders in quadrant B except for SITA.
All actors ultimately will try to provide value for their end-users to gain long-term benefits
themselves. SITA’s main customers/clients are mainly toB (e.g. airlines) and these clients have the
customers whom they provide services for.
System map
The different stakeholders and their connections have been visualized to better understand the whole system and the dynamics.
market analysis
The prospects for the cruise industry are optimistic
A detailed analysis of the cruise ship market is shown here, from which the following key insights were yielded:
The global cruise ship market is dominated by three key parent companies which include Carnival, Royal Caribbean International (RCI), and Norwegian. Carnival possesses the highest market share at 37.1 %. Other smaller cruise lines possess a significant market share of 29.2%.
The number of passengers grew by almost 60% between 2009 and 2019, until the pandemic resulted in a steep drop. The prospects for the cruise industry, however, seem optimistic as the economies emerge out of the pandemic, which can be validated by the two-fold increase in the number of passengers between 2020 and 2021.
Europe is the second largest passenger source with 3.5 million passengers. The passenger source can be further drilled down to Germany: 1,068,900, France: 374,100, and Benelux: 97,900.
Most cruises in Amsterdam port operate between May and October representing a predictable seasonal trend.
The market data we based on
TOWS Analysis
Know yourself
A TOWS analysis, or SWOT, involves identifying an organization's strengths, weaknesses, opportunities, and threats. On top of that, it will combine internal and external aspects to identify appropriate strategic choices that an organization may follow. It may help a firm identify opportunities, reduce threats, overcome weaknesses, and maximize strengths (TOWS, n.d.). Three critical strategies can be externalized from the TOWS analysis.
Firstly, SITA should use existing capabilities to innovate and optimize the cruise port to airport delivery. Since SITA already has years of experience with airport luggage handling, similar systems can be used for cruise lines.
Secondly, the pandemic can be used to set up/negotiate new systems which will provide more value to passengers. Brand reputation and business expertise can be used to leverage the position of SITA.
Lastly, establishing innovation labs/skunkworks to enable creative and fast development. SITA will operate faster in the new industry as an incumbent company.
Porter's five forces
Know the enemy
Entering a new market is a strategic decision that requires a good understanding of the competitive landscape. While there are currently no direct competitors in the market of interest, the dynamics of the competition can be identified in the underlying economics of the industry (Michael & Porter, 1979). Porter’s framework analyses different competitive forces.
Threat of new entrants
The market under consideration has high barriers to entry.This can be attributed to three primary reasons: capital investment needed for development, process complexity, and the involved network of stakeholders. Given SITA's financial strength, experience in baggage management, and existing partnerships with airports and airlines, SITA can leverage this to its advantage.
Power of Suppliers
In this research, baggage transfer agencies are considered the supplier of interest. SITA must establish a balanced power relationship with its supplier. Furthermore, to ensure a sustainable relationship that allows for interaction between the people and systems, a strong emphasis must be laid on co-creation.
Power of Customers
Buyer-seller relationships are often driven by resource utility and market scarcity and can be controlled through coercive (punishment) and non-coercive (assistance) practices (Rehme et al., 2016). To maintain a power balance and positive relationship with buyers (both cruise lines and cruise passengers), SITA should focus on non-coercive practices. Distinctive product offerings and complimentary services can achieve this.
Threat of substitutes
Forward integration by delivery service suppliers and luggage shipping agencies like Eelway, Sendmybag, and Yamato transport can be recognized as significant threats. A service differentiation strategy (based on both technology and partnerships) can be used to develop and maintain a competitive advantage.
Supplier Relations
Build strategic collaborative relationships with suppliers
The baggage must be physically transported from the cruise ship terminal to the airport terminal. Considering SITA’s core competencies and the company's strategic vision, baggage transportation must be outsourced. Given this, baggage delivery service providers are the main suppliers in this research. The possible relationships are analyzed by using the Karlijk matrix, which serves as a framework for analyzing modern purchasing (Kraljic, 1983). Two feasible relationships were analyzed:
The analysis shows that the benefits of a strategic collaborative relationship outweigh the routine transaction relationship in this case. Further insights from market data emphasize a predictable passenger influx that does not require an ad-hoc service. Therefore, we recommend strategic collaboration as the preferred relationship model between SITA and the delivery service providers, which fosters reliability, resilience, and service excellence.
User research
Achieve overarched servitization in the B2B industry by knowing your end-users
SITA is a B2B-driven organisation. Logically, they investigate the interest and needs of their direct customers, such as airlines and airports. However, this would neglect a stakeholder, which is not significant at first glance with its low power and high interest, namely, consumers. Consumers, also known as cruise and airline passengers, are end-users. SITA’s direct customers do not only try to generate value for themselves in terms of reducing overhead cost but also try to improve passengers’ experience to improve consumers' loyalty and gain additional income streams. For this reason, we conducted deep user research to gain more insights about the end-users and their pain points.
Segment: Luxurious and travel-oriented
The four primary categories of market segmentation are demographic, psychographic, behavioral, and geographic segmentation. However, one can apply many additional tactics, including variants of the four main types (LOTAME, 2019). To come up with the different customer types and better scope our consumers, some desk research on cruise line consumers was conducted. Afterward, people who recently have been on a cruise trip were interviewed.
More information about interviews
Customer segmentation
The desk research and interviews resulted in a behavioral and partly demographic segmentation. Since the project's scope is within the Netherlands, the segmentation is geographic to a certain level by default. The matrix exists out of 4 quadrants and is divided by luxurious and economic on the Y-axis and vacation-oriented and transport-oriented on the X-axis. Luggage-free transport appeals to the luxurious quadrants. Also, vacation-oriented travel is more popular than transport-oriented travel, which is concluded by the interviews. Therefore, the target group of the solution for this project will be in Quadrant A (left-top). In order to gain more empathy with the consumers, we created different personas representing the target group.
To better identify the design opportunities along with the whole user journey, we mapped out the complete user journey and brainstormed different ‘if’ scenarios to help us complete the user stories. We also considered the assumptions we based on that need to be checked later and the related regulations.
the 'if' scenarios mapping
The complete user journey maps can be seen here. Here are the main insights:
Luggage on the cruise ship can differ at the end than from the beginning. Therefore, there should be a control point on both sides.
Luggage destination can change. There should be clear deadlines for changing luggage which should be communicated with the pickup service.
Luggage should be traceable for the consumer. In other words, the process should be transparent.
Consumers should get notifications of important information such as luggage delays, if luggage reached the destination, or if the pickup service is on its way.
The technology should be easy to use, and there should be assistance available when the consumer is in need.
Selecting the luggage service should be togglable, and the service itself should be easy to understand, including payments.
Interesting consumer pain points are below:
Consumers do not keep track of the weight of bought goods on the cruise. Therefore, luggage weight can differ.
Consumers' agendas can change, especially when tickets are booked way in advance. Life happens, and last-minute things can occur, which can cause a delay in the luggage handling process.
It’s a new process that should be clear for consumers without reading too much or doing much external stuff.
Consumers might bring higher quantities of luggage now that they do not need to carry it anymore.
Consumers with kids want to use the service as a stress reliever. So, it shouldn’t give them extra steps.
define
Identify the Opportunities from the Current Process
Current process at cruise ports
Cruise ports and cruise lines are less digitalized than airports. Therefore, in some scenarios, generic handwritten bag tags are used.
The baggage handling and passenger check-in at cruise ports are not automated by using a local system that stores unified information about the passenger, luggage, and cruise ship.
Information about the baggage, passenger, and ship departure and arrivals is stored in the IT system of cruise lines. The Platform Management System (PMS) stores passenger and luggage information, while the real-time data about cruise ship departures, arrivals, and delays is stored in a separate system named Fleet Management System (FMS).
define
Siloed Systems of the Supply Chain Network
In the current setup, the cruise line and airline systems are not integrated. Instead, each system has its own passenger entity linked to the cruise ship and its corresponding arrival and departure times, luggage, and the source and destination cruise port. Similarly, the airline system used by SITA (L-DCS) consists of a separate entity of passengers linked to flight (and its corresponding arrival and departure times), luggage, and airport.
Current process at cruise ports
A coherent identity of the passenger is required to facilitate the delivery of baggage from the cruise port to the airport. The cruise line systems must be connected to the airline systems to share information. The system integration will provide delivery service providers with crucial information about the baggage pick-up (bag tag, cruise port, terminal, arrival) and baggage drop (bag tag, airport, terminal, departure). This connection is also essential for tracking and tracing luggage and mapping the luggage to the right passenger.
The key focus of the solution is to bridge the silos between the cruise line systems and airline systems. Further to facilitate end-to-end baggage delivery, SITA must integrate with the system of delivery service providers. Even though a single solution is proposed, different stakeholders would want to view different aspects of the solution. To serve this purpose, multiple viewpoints of the solution are created.
System Integration
The collaboration among the supply chain partners must be supported by an interfirm system. High-level interfirm system integration will facilitate the process of baggage transfer and increase the efficiency and effectiveness of the supply chain activities. It's also essential for tracking and tracing the luggage and connecting the luggage with the right passenger.
System Integration
The system viewpoint shows a core internal system called the baggage delivery application, which includes a local departure control system (L-DCS), a local maritime departure control system (M-DCS), and the application. One of the critical features of the baggage delivery application is its modularity, under which external applications such as cruise websites, third-party travel websites (like Expedia), and airline websites, and others can interact with it. A local M-DCS is proposed. It can mirror the existing DCS solution for airlines at SITA. The information from multiple cruise line M-DCS is aggregated into local M-DCS, which contains data about the passengers, baggage, departure, and arrivals at the cruise ports.
Using the details from the Local M-DCS and Local DCS system, a unified passenger identity is created which represents a single source of truth.
Unified passenger identity
Following this, a shipment is created by making an API request to the endpoint of the delivery service provider. This request schedules timely baggage pickup by the delivery provider on the passenger's arrival. Rolling requests for the tracking endpoint of the delivery service provider send the status and real-time location of the shipment. When the baggage is successfully delivered, the delivery system signals the application with a complete shipment request.
Additional Services: Using Data as a Strategic Asset
The system integration solution puts SITA in a unique position to leverage data as a strategic asset. The local M-DCS and airport Local DCS data can be aggregated into an integrated data platform. This data platform creates a unified identity for the passenger. It also enables additional services by using an analytic engine that draws insights from cross-functional information. We suggested several simple yet actionable B2B insights that SITA can offer its supply chain partners.
Data as a strategic asset
Technology Adaptation
We identified the missing products in SITA's portfolio: the integrated system we proposed and a Local Maritime Departure System (M-DCS). Furthermore, based on thorough research on SITA's current systems, we also singled out the digital (software) and physical (hardware) products of SITA that can be directly used or quickly adapted to realize the new process. Besides, we also picked out the products that can potentially be adapted to optimize the process.
Technology Adaptation
Elaboration on technology adaptation solution
Business Model
How SITA can gain revenue out of our solution can be easily understood through a Business Model Canvas. It is based on the value proposition which can be seen here.
Business model canvas
Change Requirements
Partnership
A completely new partnership must be formed with delivery providers in strategic collaboration. The business environment of both parties - SITA and delivery providers – are complex. Therefore, the relationship must be clearly defined (De Backer & Rinaudo, 2019). Core reasons for joint-venture success need to be taken into account.
To build this clear foundation, SITA needs to develop a platform where the concerned delivery company gets the needed data including but not limited to delivery moments, places, and quantities. Furthermore, there should be confirmation when the order is settled since passengers might have the possibility to change or cancel their order. On top of that, delivery companies need to generate profit through the partnership. Within the current scope of the project, the delivery distances are the same for all luggage, namely, the distance from the cruise port to the airport. In this case, a fixed price per volume can be considered. However, a price per volume per km should be considered if the service extends to more destinations.
Suggestions for delivery providers are worldwide players with experience in international deliveries and well-developed infrastructure such as DHL, FedEx, and DB Schenker. SITA should create a platform that communicates information and makes monetary transfers between the delivery company, passengers, cruise lines, and airlines automatically.
Cruise lines are customers of SITA, but they are also partners. The existing partnership with cruise lines needs to be expanded and further defined. In addition, cruises have increased collaborations with the airline industry, which means collaborating with SITA could be a logical transition. The first partnerships can be used to co-develop the IT software solutions and perform beta runs of the technology. The goal should be to create a transparent ecosystem that facilitates trust and data share.
Structure
Some structural changes within SITA need to be made to facilitate the new service and its
development, also known as transformational change. A clear definition of the changes needs to be
structured (Alsher, 2018).
First, the expertise, which currently includes knowledge about
borders, airlines, and airports, can be extended to cruise and luggage-free travel. This
implies that new departments in charge of the M-DCS and a system integration team need to be
established. The department in charge of the integration can be divided into sub-departments as it grows
categorized by the different software solutions. Second, the
already existing L-DCS department should be expanded. Furthermore, a department in charge of the
platform allowing passengers, cruise lines, airlines, and delivery service providers to communicate
automatically should be created. Essential requirements that need to be addressed are:
Structure
SITA is a B2B hardware company for the aviation industry. At the first glance, entering the cruise market, which requires similar solutions as the aviation industry regarding luggage handling, does not seem to require significant changes. However, in order to achieve overarching servitization to create true value for end-users, a passenger-centered perspective should be taken. SITA’s products will provide value for both customers and passengers. This means that both the passenger and the customer need to be kept in mind in the design process. Besides, the proposed solution focuses on the software instead of hardware. For this, we recommend looking into User-Centric Design Method and the lean startup model. A more elaborated explanation of these two methodologies can be seen here.
Financial
We discussed the possible payment plans for the new service SITA will provide for the stakeholders.
M-DCS
The M-DCS can be licensed
to the cruise industry in
a similar way as the L-DCS systems are licensed to airports. The costs associated with it are
R&D and IT operational costs. Additional sources of revenue are
additional analytic services based on a subscription model.
Delivery service
The cost associated with the delivery service per
delivery does not increase with more
luggage (unless it exceeds the limit of each delivery). The cost is directly associated with the travel
distance. When the quantity of luggage is high, the cost of delivery per luggage drops.
This requires a different earning model than the licensing model that SITA is used to. The cash flow
direction is shown below.
There are two possible payment plans. The first one is to pay per luggage using a fixed bulk price calculated by using estimations of the amount that will be delivered that year. With this option, the risk is at the delivery service when passengers are not willing to take the service for whatever reason. The cruise lines and airlines do not require a profit on this since they can provide extra value to their passengers for free without taking any effort. The second option is, pay per vehicle, where SITA pays for the number of vehicles needed for the luggage. This way, the delivery service provider earns a profit margin each time a vehicle and a delivery man are needed. The risk is on SITA when the service is not used efficiently. Therefore, we recommend a pay-per-luggage plan that generates profit with a low level of risk.
Up-sales
The cruise lines and
airlines will get more information about the passenger's whereabouts. Therefore, up-sales such as
providing the lounge service when there is a delay can be made. However, these profits are
not directly generated by using SITA’s software but indirectly due to the decision-making based on
insights generated by SITA. The pricing model for this software
can be similar to the pricing models of CRM systems which includes a flat subscription fee for the
enterprise with unlimited numbers of users. On top of this flat fee, modular pricing can be used for
each integration, feature, or anything specific (Pingrey, 2021).
Roadmap
The solution we proposed for SITA mainly focuses on horizon 1, system integration. While we also envision this solution in the long run to show its potential for future development. Two road maps are created. The tactical roadmap shows the values of different stakeholders, needed data and technology, and partnership aspects of the provided business solution. This roadmap can be used for operational use within SITA's internal department. The strategic roadmap can be used for a more general and high-level perspective, which can be showcased to SITA's stakeholders.
Tactical roadmap
Strategic roadmap
Future
Creating an integrated platform introduces socio-technical challenges related to trust regarding data sharing, especially when users are competing with one another. One innovative solution for generating functionality of shared data without having to share to reveal the data is secure multi-party computation (MPC). MPC is a cryptography technique in which the output of the computation is visible to all parties. However, the inputs of each party remain encrypted and private. The solution mentioned in section 7.2 is based on data regarding arrivals and departures, which is less sensitive. However, valuable insights can be drawn if organizations choose to share sensitive data so that privacy is preserved (Evans et al., 2017). Research in developing MPC protocols can play a vital role in attracting new and existing partners to adopt SITA’s data platform. As a facilitator of an MPC-based data platform, SITA can serve as an essential value creator for its partners and potentially monetize the data-sharing and computation services.
As the number of partners and their willingness to share data securely increases, more sophisticated techniques of predictive modeling, machine learning algorithms, deep learning neural networks, and other statistical methods on shared information can come into play. With this, SITA can provide cruise and airline partners with insights into the future and aid autonomous or semi-autonomous decision-making. This research direction focuses on using advanced analytic techniques on shared information for partners in the supply chain network, which aligns with SITA’s strategic focus and existing competencies in artificial intelligence (Isson Jean-Paul, 2019).
As the number of partners and their willingness to share data securely increases, more sophisticated techniques of predictive modeling, machine learning algorithms, deep learning neural networks, and other statistical methods on shared information can come into play. With this, SITA can provide cruise and airline partners with insights into the future and aid autonomous or semi-autonomous decision-making. This research direction focuses on using advanced analytic techniques on shared information for partners in the supply chain network, which aligns with SITA’s strategic focus and existing competencies in artificial intelligence (Isson Jean-Paul, 2019).
Delivery service optimization roadmap
What I have learned ...
