AirAsia lands on Google Cloud to build a frictionless digital travel business

I've long been writing about the notion of frictionless enterprise as the goal of digital transformation. I recently had the opportunity to learn about AirAsia, where, according to CEO Tony Fernandes, "the buzzword is frictionless." He defines this as:

Using data to create less friction for our customers, our staff and our partners.

Having grown from just 2 planes and 200 staff in 2001 to now 250 planes and 20,000 staff seventeen years later, AirAsia clearly has a winning formula. Here are seven crucial elements in AirAsia's story, as told at this month's Google Cloud Next event in London, that illustrate several of the key principles of frictionless enterprise.

Break free from functional silos

One of the fundamental traits of frictionless enterprise is cross-functional collaboration. Large enterprises have traditionally divided people into separate functions to do their work. They did this because expertise was segmented and paper-based processes were easily disrupted. Digital connection removes these barriers to opening up information and processes, creating new opportunities for efficiency and innovation. From the start, Fernandes says he was determined to break down barriers at AirAsia:

Airlines are so compartmentalized... pilots don't talk to cabin crew that much, engineers are in another building, commercial are in a downtown office. We wanted to create an airline that was one airline, and collaborate. We saw so much wastage of cost by people not talking together. I was so maniacal about it, I put everyone in one building and had no doors.

Foster a collaborative culture

Connected digital tools have widened the scope of collaboration by making it easy for people to connect across different locations and timezones — there's no longer any need to base everyone physically in a single open-plan building to enable effective collaboration. An organization that fosters a collaborative culture and supports it with the right mix of digital tools can keep that sense of open communication at any size and scale.

For AirAsia, G Suite provides those digital collaboration tools, along with Facebook Workplace for messaging. At Fernandes' instigation, the company first adopted Google Drive for file sharing and has since implemented the full G Suite set of online productivity tools, delivered on Chromebooks. Fernandes explains:

When we had 200 people it was tough enough. Now we have 20,000 people, so [G Suite] is just the second coming of my initial dream of collaboration ... We have a very flat structure because everyone's transparent, knows everything and trusts everybody. We're the only airline of that size that has not a single union, and I credit Google with helping us as a team to enable that communication.

Harness on-demand resources

Frictionless enterprise is about breaking down barriers externally as well as internally. Digital connection removes the transaction costs that led industrial-era enterprise to internalize as many operations as possible. Resources provided on-demand and at scale by third parties are typically cheaper, faster and better than doing it yourself. This is especially true of IT, as Fernandes realized from the start:

Initially when I started this airline, I never wanted anything to be on-premise. I thought that was our advantage.

I thought as an airline we shouldn't invest in technology that we would never be able to keep up with the investment. It was always better to allow someone else to do the investment.

Using Google for collaboration and data management holds no security or data privacy concerns for Fernandes, as it's not in Google's interests to get it wrong, he reasons:

I've got no issue because it is Google's lifeblood. If they screw up that privacy, then their business is over. If I screw up on safety, then my business is over. To me, I have no problem with that it's residing somewhere else.

Unleash your data

The ability to access and analyze data from across the business is one of the main reasons for AirAsia moving its data and IT infrastructure to the Google Cloud. For example, the airline has been able to improve its on-time performance by six percentage points through the use of Google data analysis tools such as BigQuery and Data Studio. When the data was in separate silos, it wasn't clear whether delays were down to ground staff, cabin crew or air traffic control. Now, says Fernandes:

We have very good data to analyze those issues and solve those issues. So process and making the airline better is a large part of the cloud as well — getting accurate data to make the right decisions, when before a lot of it was guesswork.

Go paperless

Using paper locks you into processes that date back to a pre-digital age. Once everything is digital, you have access to so much more data that you can use more effectively. AirAsia is instrumenting its fleet with as many as 20,000 onboard sensors per aircraft. It's also rolling out on-board wifi with the aim of collecting as much data as possible throughout every flight. The airline hopes to eliminate paper entirely, says Fernandes:

We will put everything electronic very soon. You won't have a paper-based product in AirAsia. Our magazine will be online, [and] provided the regulators allow us, a lot of other documents will be online as well.

Our pilots now we have a paperless cockpit already — that took a long time to persuade the regulators.

Once the data is connected, it can be analyzed and queried, he explains:

We have a unique opportunity to capture a lot of data on the aircraft when you're flying with us. That of course will go into BigQuery, that will go into the analytics, when we're getting to understand our customer better and to provide them the right service.

Engage your customers

Digital connection means that enterprises can build engagement with their customers over time, monitoring the interaction to learn how to continuously improve their offer. This cycle is called the XaaS Effect and it's a core part of the business model of frictionless enterprise. As Fernandes explains, creating a frictionless customer experience is not just about reducing overheads. It also builds engagement and loyalty:

Eliminating that friction also means that people are prepared to pay a little bit more for our fares versus flying with someone else. It's not just about the fare.

That's why AirAsia is looking at how to use digital processes to create a better customer experience at the airport and onto the aircraft, for example by creating a trusted traveler program based on facial recognition, and exploring the potential to use self-updating luggage tags:

If you have no bag, we envisage just using your face to go through the gates and we hope that's integrated with immigration as well. So you walk all the way through.

We are wifi-ing all our planes. So our crew will have all your data and we will have a much more personalized experience.

We want to avoid printing out baggage tags, we'd like to create a permanent baggage tag. It should be very simple. At the end of the day, we know where you're flying, the tag that's on your bag should automatically change to the flight you're going to.

So really the word I'm using in AirAsia a lot is frictionless, to take out friction as much as possible from the journey, to allow more personalization through the experience, whether it's food, whether it's your seat, whether it's at your destination.

Become a network business

The next step for AirAsia is to build on its existing connections to customers to open up extra revenue streams. Fernandes says the goal is to reinvent the airline as a "digital travel business" that will sell much more than its own airline tickets:

We have 90 million flying with us, hundreds of millions coming to our website, but yet we were only selling flights. And so now with the ability of Google Cloud, with the ability of knowing our customers better, we're able to start beginning to sell other things on our platform, and start to begin to be more of a platform company.

This is the ultimate goal of frictionless enterprise — to provide an optimized network platform that eliminates friction between providers and buyers.
It's now all about execution, working with partners such as Google and also Palantir and Salesforce to realize the plan, says Fernandes:

The key is implementation and having the right people with the right vision. We are focusing on the fact that we have a very strong platform in AirAsia.com, which principally only sells our own airline tickets, and we have a very strong loyalty platform in BigLife. So we've got two big platforms that we want to monetize and Google in this helps us along with other partners, in harmonizing that data into new product directions.

My take

AirAsia is taking the message of digital transformation to heart, and in doing so has adopted many of the principles of frictionless enterprise. Technology plays a big part in this, but an open, collaborative culture and a readiness to adapt to constant change are equally important to fully realize its potential.