What's the point of spending money on IT if your customers don't see the value? The question is foremost in the mind of new Air New Zealand Ltd. chief information officer Rob Fyfe. Appointed in December and now in his seventh week in the job, Fyfe is wary of spending on projects that don't give customers value -- and that customers don't perceive as giving value. It's an issue which Fyfe recognizes from his former roles as head of ITV's pay-TV subsidiary in the U.K., manager of Telecom's consumer division and National Australia Bank's group general manager of marketing, distribution and electronic banking.
"It was the same in telecommunications and banking. We spent enormous amounts of money adding features to our products to create competitive advantage, but we didn't determine whether customers attributed enough value to those features in order to justify the investment.
"In telecommunications we spent huge amounts aggregating services but customers were still happy to have dis-aggregated services -- for example, land line from Telecom, mobile from Vodafone. In the airline industry airlines have spent money upgrading first class and business class cabins with lie-down beds, but while customers like the upgrades they aren't prepared to pay more for them. All the airlines have done is contract their margins."
Fyfe also points to Air New Zealand spending on items such as food, which people were prepared to forgo to get a lower fare. When the airline launched its Express low-cost service last year it looked at the cost of getting customers from point A to point B, and decided to cut costs from a number of areas where customers didn't perceive any value.
The money taken out of food was reinvested in allowing customers to automatically check in at the airport and book tickets online, he says. After just one year online bookings have jumped from 4 percent to 36 percent of all bookings.
"We're getting better load factors on aircraft and we're more profitable. That type of thinking will be the heart of where we will be making our IT investments. My big focus is to really challenge our investment profile, particularly in the area of IT."
Fyfe says the area he is most cautious about is over-investing in customer relationship capabilities.
"Most organizations that I observe use a fraction of the capabilities that they have created, and managing all that data is complex and constricts them from delivering a clear and continuous proposition to customers. We have a number of CRM capabilities but we are looking very clearly at how we go forward."
Fyfe is also cautious about replacing the airline's legacy reservation system.
"Reservation systems are the heart of an airline; they're what connects us to our customer. The reservation systems that airlines have traditionally used are incredibly complex. For example, they allow you to get boarding passes for all legs of a journey and make sure your luggage is checked all the way through. The cost of running a system like that is 10 times the cost of the sort of system that a Virgin Blue or Freedom Air runs, which allows you to make a seat booking to go from point A to B and that's all.
"The system we run is quite old and we're looking at replacing it, but we have to determine whether we need a system that will cost a few million dollars or tens of millions. It comes down to what customers want. We have to be careful that we don't get seduced into over-specifying."
Fyfe says he's not anti-technology -- surely a plus for a CIO -- but is cautious about technology being misused.
"Many organizations try to use technology to solve problems which aren't technology problems in the first place. I have pushed back hard to ensure we don't try and automate human intelligence. In fact, we should celebrate it. It's a philosophical stand I've taken in the organization. People know to ask whether technology is the real answer to the problem. I think you get a much more vibrant organization because people start to think laterally about solutions. IT starts to be less about pushing technology and more about offering alternatives and becomes part of business solutions." -- Computerworld New Zealand Online
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.