How and why business travel is helping the sector recover from the COVID crisis
Travel’s pathways to recovery in the wake of COVID-19 and scaling digital transformation were among the latest ideas shared at IMD’s OWP liVE program.
Travel’s journey back to health
After 18 months of industry disruption, the travel industry is seeing the green shoots of recovery. But the journey back to health will demand agility, harnessing digitalization and awareness of the changed customer mood.
Jane Sun, Chief Executive Officer of Trip.com Group, addressed her audience on day three of IMD’s Orchestrating Winning Performance program with good news from her industry.
“Business travel is booming and growing faster than leisure,” she said, ascribing the development to the need for face-to-face meetings. Despite the popularity of teleconferencing, Sun said in-person events were difficult to replicate online. “If you’re addressing more than 100 or 200 people, that’s very hard to replace by Zoom if borders are open,” she said.
But while travel within China has recovered sharply and may even be exceeding pre-pandemic levels, international movement remains severely depressed, acknowledged Sun.
“The real challenge is cross-border transactions. Structurally I think demand is still pent up for travel abroad. Normally, more than 50% of our high-end customers would go abroad,” she said.
Much of Trip.com Group’s success stems from technology that enables outstanding service and keen pricing. So vast are the group’s databanks that bespoke packages – complete with Michelin-starred restaurant booking and a one-day city tour – can be curated instantly, highlighting the value proposition of an integrated business model.
How the pandemic will change tourism remains uncertain for now. But some trends are already apparent, said Sun. Post-pandemic bookings show a preference for small-group travel and a greater emphasis on packages offering flexibility and no-fuss cancellation, in case of last-minute border closures or regulatory changes.
Organizational culture change is crucial for successful digital transformation
IMD Professors Didier Bonnet and Michael Wade focused on four important strategies for successful digital transformation: first, aligning the top team to drive success, secondly, building a good transformation objective, thirdly, choosing the right digital governance model and finally how to scale digital initiatives.
Bonnet recommended exposing the senior team to cutting-edge thinking from external experts. He advised that organizations deal with contentious assumptions by clarifying them through fact-led research. “It reduces the gap between strategy and execution,” he said.
Without well-defined transformation objectives, Wade said the path to successful digital transformation could become “too general and fuzzy”. A far better policy was to “figure out where you’re going, and then how to get there”.
Bonnet’s research found that governance was the key driver of profitability in companies that have successfully transformed digitally. Successful digital governance, he said, required balancing the scope of the transformation with the dominant company culture. In digitally mature firms, looser structures were preferable.
“If you’re starting for the first time ever, I would encourage some form of centralization to kick the program off,” Bonnet said. “If you’re in the seventh incarnation of your transformation, then you can loosen the reins to give more decision power to a decentralized governance structure.”
When it comes to scaling, Wade said that 83% of companies are in the planning, design or tinkering stages of transformation – only 17% had scaled their digital initiatives. But by applying four resolutions, he said, companies could ensure scalability.
- Think about scale in a way that does not inhibit innovation
- Isolate a successful digital initiative, and then adapt it to different parts of the organization so that it remains responsive across all contexts
- Communicate successes across the business to enable other parts of the organization to see the benefits
- Plan for scaling across the value chain by engaging customers, partners and the workforce.
Balancing exploration and exploitation is the key to sustainable business
Just 2% of companies are “ambidextrous” in the sense that they are both able to run themselves and reinvent themselves. More companies must find this sweet spot in order to be sustainable.
And with businesses increasingly at the heart of society, they have a responsibility to do so. At the same time, “we need the governments [to act] in a stronger way,” said Knut Haanaes, the Lundin Chair Professor of Sustainability at IMD.
Only by embracing the challenge of renewing themselves will businesses remain relevant, survive in the long term and be sustainable. By interweaving sustainability concerns as diverse as non-discrimination, a relevant mindset and a concern for the environment and packaging, into their financial and business growth strategies, firms could ensure improvement, he said.
“We don’t scale unless we have business growth,” said Haanaes. And for businesses, getting to a place where they can call themselves sustainable is the only trajectory that makes sense.
Haanaes urged businesses to utilize different lenses to discover the sustainability opportunities in their companies.
“It’s about dealing with the megatrends and the here and now. There is a top-down but also a lesser known, bottom-up strategy on sustainability that might include newer, lower-cost ways of doing business and solving local problems,” he said.
“Exploitation is necessary for short-term success, exploration for long-term survival. The challenge is to balance the two,” said Haanaes.
If businesses, and indeed individuals, let themselves get lost in the tyranny of everyday life, he said, the capacity for exploration fades away and you lose a much-needed ingredient for sustainability.
Haanaes’s advice to businesses was to place themselves in an imagined future and then to look back and chart the most plausible journey there.
To reimagine your business, reimagine your succession and leadership development strategy
Leadership development and succession management are under the spotlight like never before. As technological development continues to reshape and disrupt industries, more is demanded of senior leadership teams as they navigate a continuously shifting landscape.
“Most boards now see leadership as a strategic issue and a risk, so most require a view of the composition of the top team, on CEO succession candidates, and on next-level C minus-one succession. They want to see a process or evaluation, and they want to know they will have candidates ready in the next one to two years,” said Ric Roi, Professor of Leadership & Organization and Co-Director for IMD Voyager.
By integrating and updating leadership development and succession management strategy programs, a business can grow its own leadership talent. For this, new tools are needed as today’s leaders must be capable of switching roles to both reposition the core business of the firm while at the same time create the new business for the future. The dual transformation challenge requires the ability to context shift and applies ambidextrous thinking to business strategy.
As a result, organizational leadership development and succession management strategies must be updated to meet and measure current leadership capabilities. Linear competency models must be replaced with new tools able to offer multi-dimensional views of a candidate’s ambidextrous capability and tracking their progress in coaching and development programs.
“Many of you are experiencing this in your corporations right now. The dual transformation challenge is tripping up so many CEOs and senior management teams because most leaders are either really good at the core, and repositioning the core, or they’re particularly good at creating and transforming. Less than 5% of the leaders that we assess and work with globally can do both skillfully,” said Roi.
By integrating otherwise discrete streams of leadership development and succession management into one leader progression platform, overseen by a single talent progression committee, organizations can ensure their leadership stream is informed by the overarching strategic business needs of the organization. In doing so, it can ensure that succession candidates carry the best of the organizational culture and strategic vision forward and safeguard its longevity across senior functions.