There is no consistent definition of digitization. Every industry and every department perceive it and react differently. What does digitization mean to the Miles & More GmbH?
Ralf Gernhold: Digitization has three dimensions: it includes (i) business models, (ii) processes, and (iii) products/services. Foremost concern, and at the same time the most challenging one, is determining the fit of our current business model to the changing environment in which we will be operating. This requires developing a deep understanding of the market dynamics we anticipate being confronted with – a task of utmost intellectual challenge. This is addressed at top management level. It is important to understand that the products we offer to our B2B partners is 100% digital. As also increasingly the services we offer to the Miles & More members. We are a digital company per definition.
Having laid out the road map in regards to the business model, we need to adjust our processes to reflect the new challenges. Customer-facing as well as B2B processes are scrutinized. Our goal here: to achieve a high level of efficiency while maintaining our flexibility. Balancing these dimensions is an art in itself, as they are negatively correlated. And finally, we are constantly looking for new products and services which can be delivered in digital form (“atoms to bits”) and generate more value to our customers.
Alongside this top-down approach, innovation and imitation is also spawned within the organization and need the suitable environment to percolate upwards. In addition to offering a fitting physical environment and appropriate working conditions, we are also addressing the cultural change necessary for innovation to come to fruition.
Digital innovation projects require different departments to cooperate in an extremely interdisciplinary manner. What are your key factors for a successful collaboration between IT and innovation department?
Culture is one important success factor: All departments here at Miles & More GmbH are tasked with innovation – it is an integral part of our company DNA. Innovation goes beyond any department boundaries. Everybody, from managing director to staff member, all are encouraged to contribute. Knowledge regarding innovation is disseminated throughout the company and new ideas are continuously injected into the company as a whole.
Another factor is to establish a well-functioning, efficient process: We scout the markets for opportunities to imitate and we introspect to find new, innovative approaches to meet the customers’ needs. An idea generated in the mind of one employee in one department is quickly exposed – via the Innolab – to an interested group – spanning departmental borders.
If the initial challenges are met, prototypes are built and first experiences are collected. If additional criteria are met, we feed the prototype into more traditional processes, such as the portfolio board and push to release as quickly as possible. This is facilitated with state-of-the-art DevOps, Agile Dev, Rapid Prototyping and a considerable portion of risk taking. This all contributes to a radical shortening of the time-to-market.
As a platform you are highly reliant on your and your partner’s information systems. What is the role of IT in developing new value propositions in your business? Do you catch-up innovation impulses from the technology side?
First, from our perspective it is a precondition that business development and IT live an intensive collaboration – this is what we are proud of. Thus, IT is collaborator and driver – we partake early in the blossoming of new ideas, as most have a digital root. The business side has an idea which needs to be translated into a solution, generally a digital solution. Although we strive to share as much knowledge as possible, we still remain a step ahead of business in regards to technical feasibility of an idea. On the other hand, our scouting and deep IT knowledge forces us to drive such market observations and innovations into the business areas.
In all truthfulness, creating true innovation is very, very difficult. We did not “discover” i.e. Blockchain or deep learning, but we evaluate and adapt these to our requirements as best as possible. Always with the aim to provide additional value to our programme members and partner companies.
Miles & More GmbH is aligned with a broad eco system and a high number of different partners. Regarding this, how would you describe the challenge to still keep innovation at high pace?
Complexity is the major obstacle. In order to keep complexity at a manageable level, we have isolated our IT systems from partners’ IT systems via an open API – our own as well as through the Lufthansa OpenAPI.
Internally we have done the same by modularizing monolithic IT systems and allowing for interaction via a common bus. This allows us to change in inner workings of Miles & More’s IT landscape while at the same time permitting third parties to be agnostic to such changes. We can bring in new technology as deemed appropriate without impacting or partners.
Thus the speed of innovation is no longer a function of our complexity.
What are your personal goals regarding digital innovation for the next 12 months?
I have more or less digested most developments in the IT sector, at least down to a level where I can comfortably claim to understand the opportunities and limitations. This is not so for the broadly expanding field of artificial intelligence and more concretely the realm of deep learning. I have a gut feeling that this will have a very significant impact on my professional as well as my personal life. I will be spending considerable think time grasping the opportunities in this exciting new field.
Concerning the goals within our company: We believe in personalisation and customised communication and will step into a new era after intensive investments into this special field. Based on that, it’s our ongoing goal to understand our customers’ needs (be it B2C or B2B) and create new services and business models around these.
About the interviewee
Ralf Gernhold, CIO of Miles&More GmbH, Frankfurt, Germany has charted a career from early-day innovations in the 90’ties up until most recently being responsible for innovation at Miles & More. Initially employed as in a global full service IT provider, he has been responsible for setting up a state-of-the-art national satellite-based highway toll system in Germany, conceiving and implementing the first fully digital media archive system for a public TV network, has architected and implemented the digital omni-channel marketing platform to serve Miles & More’s 30 million members, designed and managed the development and deployment of a next generation mobile shopping tool including state-of-the-art image recognition and machine learning facilities.
For which he was recognized as CIO of the Year 2016, the most prestigious award offered by the Computerwoche, IDG. He is currently member of the Lufthansa Group IT Board.
About Miles & More
Miles & More is the largest frequent flyer and award programme in Europe. More than 20 years of experience and collaboration with 300 partners make the Frankfurt-based operator, Miles & More GmbH, an expert in successful customer loyalty.
On behalf of the manager magazine, Miles & More was awarded as overall winner within the comparison of the best frequent flyer programme 2016 the second time in a row. In addition to good results in all relevant areas as ‘earning miles’ or ‘fleet and targets’, Miles & More scored highest in the category ‘redeeming miles’. Members are not only able to earn and redeem miles when flying, but also with sophisticated brands in all areas of life, such as those offered by our partners in the areas of shopping and lifestyle, telecommunications and electronics, as well as hotels and car hire. They enjoy participation in an exclusive world of selected premium products as well as exclusive premium offers, for example in the Lufthansa WorldShop stores, popular flight awards and our secure Miles & More credit card portfolio. Particularly in its core markets – Germany, Austria and Switzerland – partner companies benefit from access to a sophisticated target group, and use award miles for customer retention.
Together with seven partners, the frequent flyer and award programme commenced in Germany on 1 January 1993. Since September 2014, Miles & More GmbH has been an independent company and full subsidiary of Deutsche Lufthansa AG.