It is estimated that the recent IT failures afflicting BA will cost the company £80 million. That’s the number reported to shareholders by chief executive Willie Walsh as the airline tries to recover from the IT outage which stranded thousands of passengers during the last bank holiday.
In fact, the cost may be much higher than this already eye-watering number. The real cost might be the end of BA as a credible luxury airline.
This is not a baseless exaggeration. More than half of Sunday Times Travel readers say they will never fly BA again. Rather than a knee-jerk reaction, recent events are the final straw for customers who have complained that service standards have steadily declined while IT problems have become alarmingly commonplace.
Andrew Charlton, an aviation analyst, says that BA is burdened with clunky IT systems. But rather than investing to improve the situation, the solution in recent years has been to cut costs by outsourcing chunks of its IT overseas.
This is a familiar problem for businesses of all sizes. Without an absolute and quantifiable reason for investing in IT, BA appears to be opting for the cheaper option. In short, when BA should be pushing for digital transformation, it is steering towards digital destruction.
What damage does poor, ineffective IT cause? Poor IT slows productivity, stifles innovation and creates frustration for both staff and customers. This negative side of IT is easy to identify when you’re involved with it, but often difficult to quantify. An inability to clearly measure this impact is why, in all too many cases, businesses base their IT investment decisions purely on cost. The thinking is this: if you can’t measure IT value, why not make the bottom line look healthier by cutting costs?
As is the case with BA, the full impact of this decision is not seen until something fails in spectacular fashion. But when this happens, it’s very hard to backpedal and undo the decisions which have taken many years to play out.
Digital transformation rather than destruction
Digital transformation is about first understanding the value of technology. Rather than pushing it away and treating technology as a cost, you must be prepared to bring it closer to the fold and make it an integral part of the business and any future success. Why? You can start with the obvious – efficiency. But there are many other factors.
We only have to look at the business winners and losers over recent years to understand this dynamic: Netflix vs Blockbuster. iTunes/Spotify vs HMV. Uber vs taxis. Amazon vs every retailer. Airbnb vs hotels. Intelligently applying technology has altered the business landscape, disrupting entire industries and creating new leaders.
But even if we remove these upstart anomalies, there are many ‘traditonal’ businesses which have successfully harnessed digital to grow market share. John Lewis immediately springs to mind as succeeding in moving online while using technology to preserve its position on the high street. Autotrader has made an even more spectacular transition, moving from its print legacy to become an online-only sales engine.
Customer experience is also a hugely important consideration. Starting from first engagement, through to nurturing the lead, capturing the business, fulfilment and service, technology has a huge influence on how the customer is treated by a business. Customers are increasingly choosing automated service over traditional human interactions because when it is done correctly, it is often faster and more convenient. Technology is critical to meeting these heightened customer expectations.
Arguably the two biggest competitive differentiators available to business – innovation and customer experience – are defined largely by technology. Organisations refusing to consider IT as anything but a cost will find themselves falling behind their competitors. Ignoring digital transformation may not lead to high-profile failure on the scale of BA, but it could have dreadful consequences for a business of any size.
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