Innovation at KLM?

The past seven months I spent most of my days at KLM headquarters. Here I conducted my graduation project to finish my master in strategic product design. My original assignment was to develop a vision for KLM on what the flight of the future should look like. This vision should have resulted in a bunch of relevant innovations, focused on the interior of an airplane.

And that’s where things went wrong. Coming up with meaningful innovations that add either value to KLM or its customers was not a problem.

But then what?

KLM lacks any product development capabilities and the recently established innovation department has an opportunity development process which exists only on paper. My work would have resulted in a one time exercise of what things could look like in five years. That’s it.

So I developed a co-creation innovation routine, focused on the complementary competences of KLM’s suppliers. By combining their product development capabilities and expert knowledge with KLM’s extensive knowledge of passengers and role as launching customer, a true win-win situation can be created. Of course this will involve a large learning-by-doing part, where failure is not a problem, but a rich source of how to improve the developed routine.

But just as Rik noted earlier in one of his random thoughts, developing a co-creation routine and coming up with great ideas is easy, implementation is the hard part. This is especially true at KLM, a heavily asset based company which is mainly concerned with having its airplanes fly as efficiently as possible, with as many payload on board as possible. In order to achieve this efficiency, everything is subject to processes and procedures. Implementing innovations means disrupting these processes and reducing overall efficiency.

In the past ten years, KLM used to maintain a follower strategy. Products that had already proven itself on the market were introduced at a time when uncertainty was low and implementation could be copy-pasted from partners or competitors. But after the merger with AirFrance, KLM deemed itself large enough to conquer a leading position on identified strategic themes. That’s where the idea of the flight of the future came in. FotF should become a platform, enabling a move from follower to leader on these strategic themes.

All nice and stuff, but this means doing things that no one has done before. It requires a clear vision of what this future looks like. And as Seth describes the difference between a manager and a leader in his new book Tribes: a manager is trying to structure daily business; a leader is about how to create change. KLM is literally a company filled with managers. But in order to change they need leaders!

A few question marks can also be raised at the identified strategic themes. One of these is improving customer experience. They want to add more value to the passenger while travelling. Seems like a good plan, but in what bigger strategic picture does this fit? KLM has a pretty difficult market position. Less than 20% of passengers are from the Netherlands. For all other passengers a hub and spoke system is used, where passengers are first flown to Amsterdam and from there on to their final destination. This means competing with other airlines in their home market, a lower perceived value for passengers (longer total flight time, stressful transfers) and higher costs for KLM. How can you become a leader in customer experience in this situation?

Customer experience is a theme that is already taken by airlines like Singapore Airlines and Cathay Pacific. They have followed and succeeded in building a product differentiation strategy. KLM however doesn’t even have a first class and definitely does not offer the best product available on the market. And although they are pretty efficient, on-time and achieve the highest load factors, they can not compete on price with the real price fighters either, which offer only the very basics. In short, KLM is stuck in the middle.

So yes, KLM can very well create a flight of the future platform, develop a co-creation routine and come up with relevant innovations, but my advice: take a better look at the larger strategic picture first.

Good luck!