Inflexible enterprise systems face digital nemesis
- Summary:
- Inflexible enterprise systems built when change was costly and efficiency trumped customer choice face digital nemesis from the likes of Airbnb and Uber
This very even-handed terminology obscures a darker truth, that the older systems of record are no longer fit for purpose in a world where speed of reaction and adaptability to change have become mission-critical attributes of any successful enterprise. Sclerotic, inflexible core systems are holding back established businesses from competing effectively against fleeter-footed rivals.
These older systems were designed to bring efficiency to previously manual or paper-based processes. Automating these core processes brought competitive differentiation in an era when computerization required massive investments to achieve at scale. It didn't matter that the automated processes were rigid and difficult to change, because every significant competitor faced the same barriers to change.
Suddenly, enterprises that have prospered for years from running their business on these highly efficient but inflexible core systems now find themselves at a disadvantage as new digital platforms emerge. Newcomers are offering customers choices and options that exploit weaknesses in the incumbents' propositions. The rigid automation of those earlier systems makes it practically impossible to respond.
I encountered some specific examples of these dynamics in the course of a family vacation from which I've just returned. The inflexible online reservation systems of the global hotel industry drove me to become an Airbnb customer for the first tme, while the rigid automation of the Hertz car rental service led to a frustratingly unsatisfactory customer experience. And of course, how else would I get all of us back to the airport from a residential district of San Francisco than by UberXL?
These experiences with the travel industry are ones that we can all relate to as consumers, but they also illustrate the challenges faced by every established industry in adapting to the competitive realities of the digital age. Computerization of core systems used to be about productivity and internal efficiency. Today, digitalization of the enterprise is all about agility and external responsiveness.
Interconnecting rooms
As a family man, a longtime frustration I've had with online hotel reservation systems has been the inability to definitively book adjacent rooms. If I'm traveling with my wife and kids, I'm willing to pay for two separate rooms so the kids can share one room while the adults have the other. So long as they're next to each other — preferably with an interconnecting door — the kids are properly supervised but the adults can nevertheless have some privacy.
There's clearly demand for this type of accommmodation because two-room family suites are always the first to get booked up in the US, often months in advance. And there's clearly supply, because there seems to be an interconnecting door built into practically every hotel room I stay in when traveling alone on business.
But the online reservation systems aren't capable of connecting those dots. It's not possible to search availability for 2 adults and 2 children sharing 2 adjacent rooms — you can only book for two rooms with one adult and one child in each, and no guarantee they'll be anywhere near each other.
Before Airbnb came along, this was not a problem for the hotels, only for their customers. But as I explored the options for this year's vacation, I realized I now have a choice. I found that with Airbnb, I could rent an entire 2-bedroom home and give all of us a taste of what it's really like to live in San Francisco rather than stay in an anonymous, globalized hotel room.
So the hotel industry lost my custom, not just for those four nights in San Francisco but probably on future occasions when I'm staying on business. I needed to be pushed to become an Airbnb customer — it meant taking the time to think about the profile I should create, as well as taking a calculated risk on the apartment living up to its description. Now that I've cleared those hurdles and also begun building up a track record as a guest, it's become an easier choice for my next trip.
These were four nights when the hotel industry needed to capture my custom. San Francisco hotels have no problem filling rooms during the week when conferences are taking place, but they often have spare capacity over the weekend. If their booking systems were up to it, they could have offered me adjacent rooms as a package that would have been less than I paid for my Airbnb apartment. Instead, those inflexible reservation systems pushed me into the waiting arms of Airbnb.
How many businesses in other industries are allowing inflexible systems that date from another era to push customers towards alternatives that perhaps never existed in the past?
Exchange of Hertz
Rental car companies don't yet face the same kind of competition. I needed to drive my family from San Francisco to San Diego and various trips from there including two visits to Los Angeles and the return trip to SF. These long-distance itineraries were not the sort of journey Uber or Zipcar are designed for. Perhaps that explains why I had a frustrating customer experience, due to a core system at Hertz that's designed to optimize the single core process of allocating available cars to reservations and has no flexibility to accommodate common exceptions. It's only a matter of time before a digital competitor begins to disrupt this market.
The problem I encountered was an unsuitable vehicle. I specifically booked a mid-tier class of 4-door car because there were four of us, traveling with two weeks' worth of luggage. But when I turned up at the Gold service desk at San Francisco airport to collect the car, I was disappointed to discover I'd been allocated a 2-door Dodge Challenger. Here was another case of a reservation system designed to fulfil orders rather than truly accommodate customer preferences. This powerful saloon car may have corresponded to the class I'd requested, but despite its massive external proportions, on the inside the passenger compartment still contrived to be cramped for a family of four.
I drove off with it rather than stand in the lengthy 10am line to request a change, as I had a 500-mile drive to San Diego ahead of me. The attendant at the exit assured me it was straightforward to exchange the car later in my rental.
The problem is, there's no online process for exchanging a car mid-rental, nor even a computerized process you can access via the call center. As I discovered when I finally called at a time when someone in the San Diego airport location was available to pick up the phone, the only way to exchange was to rock up sometime in the afternoon and hope they would have something suitable. Compared to the usual Gold member experience at the start of a rental, when you simply turn up and drive off with no wait of any kind, this was deeply disappointing.
I did in the end follow this entirely manual process and make the change. The family were delighted with the battered Hyundai Sonata that the San Diego airport team quickly found and prepped for me, but I couldn't help reflecting on how poorly Hertz had lived up to the Gold service moniker during the exchange process.
Perhaps it's just my personal bad luck with Hertz — I have previously had occasion to vent online about the firm — but I think I'm justified in citing this as another example of an automated process that was good enough back in the day but which falls short by today's more advanced digital standards of customer service.
Uber sets the standard
Compared to the archaic reservation and change management processes of the hotel and car rental industries, I have to say that my experience with Uber on the final day of my vacation was a delight. Whatever one might feel about the management ethics and business model of this company, it has to be said that its app is outstanding.
In the past, I would have had to phone up a cab company or airport transfer service and trust that it would arrive on time for my journey to the airport. With Uber, I simply waited until we were ready with our bags packed to leave the apartment and within minutes I had secured a ride, despite having only ever used the app once before.
I needed to use a different credit card, but that caused no delay as Uber has a built-in function that reads credit card details with the iPhone camera, and it was set up in a second. That kind of thing matters when your family is standing there waiting impatiently.
I could then view the service options and see how many vehicles were available in the local neighbourhood for each service. I selected UberXL, knowing (unlike with Hertz) that the vehicle would comfortably accommodate all four of us and our luggage. Rather than waiting helplessly, I could track the vehicle's progress to our address in the Presidio (it took less than five minutes). To cap it all, the journey cost not even twice what we'd have paid for the four of us taking public transport via bus and the BART.
My take
The world of business is changing, and few enterprises are changing fast enough to keep up.
They are hamstrung by systems designed in an era when efficient systems that satisfied internal objectives were enough to keep them ahead for several years at a time. But technology has moved on. Today's systems are designed to satisfy far more complex customer objectives and can be tweaked within months, weeks or days to adjust to market imperatives.
Every enterprise must develop a plan to substitute more agile, responsive and change-ready systems that allow them to move on from the rigid, automated systems of old. Today, there is a still a market that is willing to tolerate the limitations of those familiar systems. But it is being eroded, day by day, as customers silently move on to newer, more agile competitors.
Image credit: Justice statue with blue sky and white clouds © davis – Fotolia.com.