The engine of the tourism industry

This morning I had a very interesting session with students of tourism. I was listening to their presentations on operation management systems in specific branches of tourism. We had an example from the airline insutry, the hotel industry and the event management sector.

The enterprise resource planning system (erp see http://en.wikipedia.org/wiki/Enterprise_resource_planning) is the engine of the modern corporation. However, when setting up a business we still work in a linear way: we start of with the business and after some time we start thinking how to bring in the IT (information technology). This is simply not enough, because many of present day businesses can not work efficiently without an IT system. Therefore we should design our business around the engine. We should start design from the engine.

Building a business around "the engine" is far more difficult because we first have to understand the potential of "the engine" to change the business i.e. we should ask ourselves how can we change the the rules of the game with our "engine".

When listening to the presentations, I realized that the events management sector is a new emerging sector, where IT is currently reshaping the structures and allowing for new business models to emerge.

The hotel sector on the other hand is an established industry, where hotels are thinking on how they should and could update their present operations systems. These hotels should look beyond the technology and beyond the immediate facilities provided by traditional hotels to emerging customer trends. As an example I showed, how on my mobile device, I open my mobile google, which immediately informs me of my location. I only need to type in "hotel" or "restaurant" etc and it will automatically find the hotels and restaurants in my immediate vicinity. Hence one could argue that the amount of ad hoc customers might also be on the increase and hotel reservations would be made whilst already on the road.

The airline has seen the emergence of low cost airlines and one could argue that these airlines have been very active in searching for a new position in their value network, including switching from high cost major airports to low cost neighboring airports. I would still argue that there remains a huge potential for change using IT systems. Think about the following example concerning the charter airline industry:

I could set up a web site in which I allow groups to make request for trips. For example a group of 25 students could request a flight from Helsinki to somewhere for the price of 400 euro per head on the second week of may. My web site would broker different request and negotiate them with charter airlines. As you might guess many students are making their end of term trips in may and hence the amount of requests might be huge. I would off course want 10% from every transaction made through my web site. Sounds simple, but I am sure you understand that this places some very fundamental requirements on how "the engine" should work. It will also need for the customer to understand that he has to have some ambiguity in his initial request i.e Helsinki to somewhere.

The Future of Yle - the Finnish Broadcasting Company

Lauri Kivinen, the CEO of Yle, was interviewed the other night and today a one page interview was published by Helsingin Sanomat.

According to Kivinen there are an estimated 250 thousand households in Finland, that do not pay their tv-licence.

The year 2003 was the peak year. Up to that year the number of tv licenses (fees) has followed the growth in the number of households. From 2003 the number of households has grown by 50 000 and the number of tv fees has decreased by more than 100 000. This gap has grown in seven years by 150 000 ( http://www.tv-maksu.fi/index/tietoa/tilastot.html , http://www.stat.fi/til/ktutk/2006/ktutk_2006_2008-08-11_tau_009.html , http://fi.wikipedia.org/wiki/Televisiomaksu ).

Yle needs to do something about this problem. Several possibilities are emerging e.g. cut downs in Swedish speaking programmes, cut downs in the Yle regional network and cuts in sports programmes were all discussed - but declined - on wednesday. Kivinen seemed to be putting pressure on the politicians. The mechanism is simple: I would assume Kivinen proposes cuts to the board and if they decline, they will have to come up with more money. It was not surprising that the board announced an increase of 3% in the Finnsih tv fee (last year saw an increase of 6%).

Helsingin Sanomat added to the list of possibilities and pointed out that Yle buys half of the entertainment content from outsiders and that the amount of entertainment content bought, will be cut down.

Kivinen, on his wednesday interview, also commented that the present tv eqipmnet based license fee is becoming iimpossible and that new ways of financing the service will have to be found. He put forward two possibilities: direct state budget financing and a media fee.

I believe that Yle will have to be financed through the state budget. Some European countries have recently (2000-) given up the tv fee (http://fi.wikipedia.org/wiki/Televisiomaksu) and I believe this is also the future of the Finnish system.

Change seems to be particularly difficult for politicians.

Over 40 % of web page downloads by mobile is done with IPhone in Finland

The Finnish economic daily news paper Kauppalehti (30.8) has an interesting article on the use of mobile phones in accessing the Internet
(http://www.kauppalehti.fi/5/i/talous/uutiset/etusivu/uutinen.jsp?oid=20100815231&ext=rss)
Over 40 % of the downloads are done with an IPhone. The market share of IPhone phones on the market is far far lower. Thus IPhone is over represented. I have a Nokia E71 and I am happy to notice that it is placed second on the list. I have been relatively satisfied with my phone and have used it for c 2 years already.
The article also notes that one of the greatest bottle necks from the perspective of service providers, is the lack of an efficient billing system. I am off course happy with free content, but I understand the need for service providers to find business models other than advertisement based.
An interesting observation is also the fact that there are superusers and that these super users are very important. You might want to look into my PhD thesis or to comments on a Howard Rheingold email interview way back in 2004 titled "email, scale free networks and the mobile internet" (http://thefeaturearchives.com/topic/Networks/Email__Scale-Free_Networks__and_the_Mobile_Internet.html). Super users or super popular services (e.g. Facebook or YouTube are no suprise to me.
Another interesting observation of the article is that some services are becoming "sticky" i.e. users continue to use certain services and stick with the service. The concept of "stickiness" is well described in Malcolm Gladwells book "Tipping Point". Personally I am stuck with the Sports-Tracker service (http://www.sports-tracker.com/#/home) and was prepared to migrate with the service once it recently changed from a beta service to another site, which ment downloading the service a second time and going through some installation phases.

Finland admits failure in building the information society and starts to act?

The Federation of Finnish Technology industries (http://www.teknologiateollisuus.fi/en/) has published a report Digital Finland (in Finnish digitaalinen Suomi -http://www.teknologiainfo.net/content/kirjat/pdf-tiedostot/Sahko_elektroniikka_ja_tietoteollisuus/digitaalinen_suomi-ekirja.pdf?from=11376748755378896).

The report makes an interesting read. First of all it admits that the Finnish Society has to a large extent failed in adopting digital technology and failed in building the information society. I agree with this statement and believe that admitting the fact is the first step to creating change. Secondly the report goes on to show how the Finnish industries can build both products and services, which will help in building change i.e. it argues that this is a potential growth market to Finnish companies. In these respects the report is great.

However I am concerned about the market. I would argue that the potential customers in Finland (and possibly also abroad) do not understand the potential of these new products and services. The potential customers do not know how to build efficiency with information technology. These potential customers need to be educated.

Suvi Linden, the minister of communications in Finland, does not admit failure in building the information society (http://www.digitoday.fi/yhteiskunta/2010/06/25/suvi-lindn-puolustaa-parjattua-tietoyhteiskuntaa/20108959/66). What else could a politician answer when her area of responsibility is attacked. In this respect I understand her answer. However she goes on to argue that many of the elements of building the information society are not and should not be her responsibility i.e. the responsibility of the Ministry of Communications, but the responsibility of the respective ministries e.g. the Ministry of Education and Culture (http://www.minedu.fi/OPM/?lang=en) and the Ministry of Social Affairs and Health (http://www.stm.fi/en/frontpage). I feel that this comment goes along my thinking that the customers - in this case the mininistries representing - the Finnish public sector need to be educated on how to use the possibilities of information tools.

My observation is that there is a need to educate the customer. Lets see if and how this need will emerge.

Are Operators Thieves

Ilpo Mattila accuses operators of thieving (Helsingin Sanomat 10.7.2010). He is fed up with expensive dataroaming prices despite recently anounced price caps by the European union (http://ec.europa.eu/information_society/activities/roaming/regulation/index_en.htm).

Technically speaking operators are not stealing, but if users start to rebel and with pressure coming from the EU, operators will have to reconsider their strategy or they risk to loose both brand value and market share.

One of the problems with operators is that they do not understand the business they are in and in particular they do not understand how and why the business model will change when migrating from telephony to data applications. There is a fundamental reason for the existence of flat rate data plans and why flat rate will spread. You might want to look at my YouTube video in which I argue the logic of flat rate (http://www.youtube.com/watch?v=hIiBPil4tKI)

I believe that international dataroaming will also migrate toward flat rate data plans. If the domestic data plan is 20 euro´s per month which is c 0.6 euro per day, I would predict that paying triple price i.e. 2 euro´s per day flat rate, when roaming, would be more than adequate. However it will take some time before the operator world reaches concensus in this, despite pressure from the Eu. In the meanwhile I will allways check that my hotels abroad have inclusive (free) internet and preferably wlan and will use those services instead of the overpriced international dataroaming

Business models of Facebook

I have recently been observing where the posts of my friends on Facebook are coming from. This is proving rather interesting.

Some friends are posting "via Mobile web" others "via Mafia Wars Game" and some "via Facebook for iPhone". This leads me to wonder is Facebook earning money form e.g. iPhone or other suppliers. Facebook could e.g. try a business model of x cents per mobile phone. The x cents would be embedded in the sales price of the phone and the buyer would not be aware of having paid to Facebook. I have a Nokia phone and when pasting on Facebook my friends see "via Mobile web", which looks kind of dull compared with "Facebook via iPhone", which is nicely cobranded.

I also noted that Facebook is openly advertising its mobile applications with a "Try Facebook Mobile" icon, that is easy to click and proceed to become a mobile Facebook user.

Practical experience with e-social security and e-payments

The Social Insurance Institution of Finland Kela ( http://www.kela.fi/in/internet/english.nsf) has a relatively nice e-service web site. You sign in using the services of your local bank i.e. the bank acts as your authenticator.

This of course has some moral issues. Your bank basically knows that you have been using their service for authentication and you don´t really want your bank to know how sick or poor you might happen to be. In the long run this will have to change, but for the present I trust my bank and I am not too concerned. However markets need competition and I am some what concerned that there are no independent authentication services and regulators should be concerned: are the allowing for an authentication monopoly to emerge? Are they allowing that authentication is a business only allowed for local banks?

However, I was more concerned with the fact that I could not access the e-service account of my under 18 son. He would need to go to his bank to get his authentication codes. The same would also apply if he were a baby. I think Kela will need to change this - parents will need to have access to the e-accounts of their children.

I was more concerned with the fact that I could access my son´s information just by making a telephone call. All I needed to give was his social security number and say that I am his dad. Access to social security numbers is relatively easy and hence missuse of the telephone service is very easy and possible. I would predict that Kela will some day have to adopt better authentication on its telephone service and hence it will be the higher level of security (authentication) that will "force" first Kela and then its customers to adopt e-services.

On a second note on e-services: I was arranging my holiday plans and reserving a hotel on the internet. I use the http://www.hotels.com/ service and regard it as rather nice. This time I studied the payment service more closely. I was rather surprised to note the low level of security related to payment with e.g. a Visa card. All you basically need is the card number and then the payment code on tha back side. Every time I hand over my card to somebody e.g. in a restaraunt abroad I give this person access to my codes. This makes e-payments very unsecure and I predict something will need to be done to make e-payments with e.g. Visa cards more secure.

On a third note on e-services. There was a very good article/column in Helsingin Sanomat 8.7 p 20 by Timo Iivarinen from the Bank of Finland on network payment methods. He is saying that the local banks and the local ecosystem are doing nothing to develop new payment methods and hence new methods will come from the outside. He is basically wellcoming competition from abroad. Finland has now been declared - by a memeber of the bank of Finland - an underdeveloped e-payment market! So, welcome all you pioneers of e-payments!

Testing how to blog directly from my mobile. As you can see the local streets have been full of snow.