Plug-and-Play, a Silicon Valley accelerator responsible for nurturing innovation in a wide range of industries, is building strong partnerships in the travel sector, especially with airlines.
It’s all about the benefits of outsourcing.
As once unprofitable operations that kept everything in house, airlines have improved their bottom lines by entrusting outside providers with maintenance, manufacturing of certain aircraft components, catering, aircraft cleaning, ground service, and dozens of other steps involved in making daily flights run smoothly.
That habit of outsourcing is the secret sauce giving airlines an appetite for the California startup rush.
What’s outsourced to Silicon Valley today is billed as future-proofing or disruption, but in principle it is the same as outsourced recruiting or outsourced inventory management.
That’s what startup connector Plug-and-Play has banked on.
Travel companies like Emirates, JetBlue, Lufthansa, Panasonic Avionics Corporation, Turkish Airlines, and Carlson Wagonlit Travel have become Plug-and-Play corporate partners, hoping to tap-in to new technologies — or at least appear to — without spinning their in-house wheels.
We spoke with Bo Sakowski, Business Development Manager for Plug-and-Play Travel & Hospitality who took us through the process, shared progress, and explained why airlines are more keen to jump onboard this wagon west than other travel industry counterparts.
“We’re trying to have a diverse set of partners across value chain ranging from hotels, airlines, GDSs, tours and activities, rental cars, offline travel, etc,” Sakowski says. “[We have the] most success with airlines right now. They are partners which have innovation as one of their core corporate goals.”
That’s marketing speak, to be expected from a person whose job revolves around persuading companies that the startups they preset are a good match.
It may be bit hard to swallow. Airlines haven’t maintained a reputation as cutting-edge since the jet age.
But airlines’ slow-to-change public image is out of step with their approach to outsourcing. For the past forty years the industry has aggressively cut costs, and reduced overheads by closing in-house shops and hiring outside experts. They will speed up to Supersonic to save money. That’s what accelerators, like Plug-and-Play, are pitching.
As Sakowski puts it: “Airlines are massive operations and there’s a cost with that and the margins are small. So any situation for them that we can put them in front of companies who will eventually cut their costs [is interesting to them].”
Sakowski adds, “I think that with all the airlines there seems to be an underlying problem that they’re all trying to solve: operational efficiencies; every thing that potentially links back to the passenger experience, where that’s baggage, booking tickets, providing customers travel experience enhancements.”
Who is Pitching Whom
We asked whether the Plug-and-Play accelerator pitch competes with the industry’s internal innovation programs. IATA, for example, has started rewarding independent startups with cash prices for solutions likely to catch-on, and is now holding Hack-a-Thons.
“IATA has an event that we’re co-hosting in April. We’re going to have 20 of their top airline executives coming for a little Silicon Valley trip. Any collaboration with them to show airline executives the best that we can find in partners,” Sakowski says. “The IATAs of the world love what we do. At the end of the day, we’re trying bring innovation to this industry,” he adds.
Sakowski suggests the three way partnership between Plug-and-Play, the travel company, and the start-up is a win-win-win.
“A good way to think about it is that we get value in our investment; corporations get value in getting access to these young startups that could potentially augment their internal innovation strategies; and startups, obviously, being put in front of a company like JetBlue or CarlsonWagonlit… those opportunities aren’t easy to get. So we’ve built a place where there’s three-fold value, where us as investors, corporations that are forward-looking, and start-ups that are trend can get to market.”
Plug-and-Play only invests in a limited number of the more than 6,000 startups they house. Knowing in advance that a start-up’s proposal has caught the attention of a corporate partner, Plug-and-Play can better pin-point what startups should get their money.
“If that startup strategically interacts with any of those companies, our valuation [of the startup] goes up,” Sakowski says. “So it comes full circle.”
Sakowski is optimistic that these innovations will prove fruitful, not only for travel companies but also for travellers.
“What we are trying to do is enhancing the passenger experience,” he says. “As a traveller, I feel we can do that.”