You recently installed a company-wide database to help determine the company’s most valuable customers. What was the genesis of the effort?
This concept is quite new for us. In the past we focused on selling a seat at the maximum profit, but now we’re focusing more on developing customers with maximum long-term value. To achieve this, we’re building a 60-million-customer records database, which links our various service points, from call center to check-in counter, in-flight service, etc. We’re also linking marketing data and other systems to provide a fuller view. Traditionally, we’ve identified our most valuable customers through our frequent flyer program. Our new strategy is to go beyond that. We intend to integrate social media and e-commerce marketing tools to develop both new frequent flyer members and stimulate potential high-value customers to choose our airline over our competitors.
Were the various functions in your company receptive to this idea from the beginning?
Marketing was the hardest to convince. We have been building a customer-service management database for many years across 151 global locations. The system can alert, for example, someone at a check-in counter that a customer experienced a cancellation last week and that we should apologize and offer an upgrade. But we’ve been surprised at how focused our marketing team is on traditional marketing such as newspaper, TV and radio campaigns. Only gradually have they realized the value of this new system, which can help them identify and reach our most valuable customers and prospects directly. We’re now in the stage of combining marketing’s customer-value database and the frequent-flyer database into this new system.
What have you learned about the complexities of bridging functions and cultures?
We discovered that marketing and service talk different languages and they disagree on some very fundamental things, like who is our highest-value customer? Service departments consider VIPs or frequent-flyer members to be the most valuable. But if you look at the data, you’ll see that the VIPs as a group actually provide us with very little additional value. You might have a passenger who travels 30 times a year on our airline but always buys the cheapest ticket. Another might fly only once, but buys a full-fare, first-class ticket to New York. Marketing thinks the most valuable customers are those who have the potential to bring us the most revenue, perhaps those who travel frequently on our airline but also on our competitors. So, really, we needed to start by coming up with a common definition for most valuable. This has been difficult.
You’ve become a mediator. Is that really the best use of a CIO’s time?
In theory, marketing and service should figure out what they need together and then tell us in IT. But in reality, IT brings them together. In fact, I’ve conducted many workshops to do just that. And when I do, I run into another problem. When I invite marketing to a meeting, it’s probably sufficient to have five people to represent the entire team. But service is a different beast. We have 10 separate service departments, so we need at least 30 people from service to attend. In fact, one of the biggest challenges is trying to integrate our multiple service departments to provide a consistent level of service to the customer. It would help if we had a chief service officer, but we don’t have that position yet.
How would you describe your relationship with the CMO and the marketing team in general?
This probably won’t be a big surprise, but traditionally our best friends have been engineering and flight operations. We work very well with pilots, for instance, because they are highly intelligent, follow the rules and are very disciplined. And engineering has the same mindset as we do. Now, marketing is another matter. I remember an informal survey of 100 airline CIOs that asked which department was the most difficult to work with. About 85 percent of them had the same answer—marketing. This is true at our airline, too. I find that marketing changes their minds about what they want every day. They always have a good reason. They say the market is changing and they have to keep up with it. But this has caused a lot of clashes. Things have gotten better since the current CMO took over a year ago. He has a very strong technology focus. In the last six months, he worked with his department to develop a three-year marketing/IT roadmap, so now we’re all on the same page.
It sounds like your technical acumen is becoming less important than your business acumen and even your interpersonal skills.
My role is definitely changing. In the past, I was only concerned about technology. But, now I’m just as concerned about business results. These new responsibilities constitute almost a new job for me. For the first time I’m no longer working strictly on technology. In fact, I think the title chief information officer is now more accurately described as a chief integration officer. I think that trend is only going to continue, where I’m called upon to integrate many departments. One example is with e-commerce, which now accounts for 45 percent of all revenue. E-commerce is technically part of the marketing function, but we meet together once a month as part of the e-commerce steering committee. And there are more and more channels like this, such as the mobile phone channel, which require IT not only to implement a specific software or hardware system, but also to help formulate better ways of doing business. IT’s importance in the company is definitely on the rise.
Do you have any advice for CIOs who are seeing the same sort of shift toward business strategy?
I always encourage my team to spend time on the best e-commerce sites, so that they can learn from the market itself. That’s the best training. I believe that IT will increasingly do what we call business process reengineering, so spending more time combining functions like marketing and service. And that role is even more necessary in China. China is still in the industrial age. That’s why China is the world’s factory. In this country, people believe that hardware and factories are the dominant economic force, while information plays only a supporting role. But that’s starting to change and now Chinese CIOs are instituting new processes and new systems in their organizations. In fact, I think CIOs are really changing the whole way that China works.