In late November 2016 Tom Bacon penned a story with a headline that asked what lessons revenue managers could take from the US president’s election campaign. After a turbulent year in office, he shares an opinion on what he knows now
Before this first month of 2018 is out, the first anniversary of Donald Trump as President of the United States will be upon us.
Trump as a campaigner taught us of the limits of big data analytics. Hilary Clinton relied heavily on statistical polls and demographic analyses while Trump eschewed polls, and carefully articulated plans. Clinton had detailed policy plans that accounted for every constituency while Trump that preferred catchy slogans do not guarantee elections. Emotions, instead, were a significant contributor to Trump’s electoral success. Warnings on too-heavy reliance on big data analytics abounded after the election.
Now that we’ve experienced a year of Trump in office, are there more 'lessons' from Trump for users of big data analytics? More specifically, can sophisticated revenue management teams learn from what appears at times to be a pretty unsophisticated leader?
Here are five:
· Macro KPIs can be misleading
Trump touts the new highs for the stock market and continually falling unemployment rates as “great news”. However, there are many reasons for this performance, especially strong corporate earnings that do not follow from any of Trump’s actions in office. Arguably, his general lack of legislative success and constant flow of distractions are a more relevant measure.
Big data analytics teams need to ensure they are using the right key performance indicators to measure results. The bottom line for US airlines has been strong for the past five years – but fuel prices moderated and industry capacity increased less than in other regions. Rather than simply touting strong earnings, RM needs to ensure they are monitoring metrics relevant to their functional mission, including ‘forecast accuracy’, ‘spill’ and ‘spoilage’.
· Real action requires teamwork/collaboration
One challenge the US president has in passing new legislation is getting approval from the multitude of factions, even within his own party. Healthcare repeal, for example, failed by one vote.
Of course, our analytical teams similarly need company-wide teamwork for real success. Revenue management relies on ongoing collaboration with operations, marketing and sales. Big data teams can’t drive change unilaterally. Big data analytics and revenue management, must be a corporate-wide initiative.
· There is opportunity by working with ‘the other team’
Trump has generally failed to get any Democrats, those from the other ‘team’, to support his initiatives.
‘Coopetition’, on the other hand, has produced some tremendous results for airlines in the past decade. ‘Capacity discipline,’ has arguably been the most important driver of new profitability; US regulators feared this was a collusive action but actually it is in the interest of each carrier to ensure that overall capacity doesn’t outstrip demand. Another industry initiative was the introduction of bag fees and other ancillary fees – led by individual airlines but now a key contributor to profitability across the industry. New Distribution Capability, an initiative to facilitate ancillary purchases on third-party sites, is now a collaborative initiative across airlines – this will ultimately benefit the whole industry.
· A tremendous legacy can be built around who you hire
Despite the many unforeseen challenges Trump has faced once in office, he has had lesser known but potentially even more impactful successes. Trump is reported to have over one hundred judicial slots to fill, including many openings left over from Obama. According to Republican leader of the Senate Mitch McConnell, these appointments are the biggest accomplishment of Trump so far.
Who we hire similarly can have a larger impact on our organisations than any of our specific policies or programme initiatives. One analytics middle manager at a major airline prides himself on recruiting and training analysts; among these there are now four major airline CEOs and multiple travel industry CFOs, each of whom continues to bring a disciplined analytical perspective to airline decisions.
· Constant communication keeps one’s agenda top of mind
Trump is probably most famous now for his constant tweeting, and although many seem trivial, or off- the-mark, they generally reinforce certain key positions. Trump keeps in the news virtually every day. Although previous presidents have been known for strong communication skills, and tweeting certainly jars many traditionalists, new technologies and new dynamics demand a new approach.
Big data analytics similarly needs to stay top of mind. Monthly reports on ‘denied boarding’ and ‘unit revenue’ will not keep RM alive among sales and operations staff. Dispersed field staff needs to have much more frequent, potentially real-time, reminders (metrics, success stories) to keep all aligned on revenue initiatives.
Trump’s presidency offers a totally different set of lessons than his campaign. While his unexpected electoral success was built on many unconventional approaches, success as an elected official relies on a more traditional set of initiatives including teamwork, persistence, and constant communication.
Tom Bacon has been in the business for 25 years, as an airline veteran and industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. His views are his own. Email Tom or visit his website
October 2018, Las Vegas