412: Omnitracs CEO Ray Greer discusses innovations in the $800 billion trucking industry. Ray describes the issues that truck drivers face today, and he cites that the single greatest advancement Omnitracs can make for the driver is to automate their life so that they just have to drive. Truck drivers spend too much time finding the loading dock, going in and out of navigation applications, and waiting. To provide a more user-friendly experience, Ray has engaged third parties to accelerate the modernization of Omnitracs’ platform, to bring automation to the driver’s lives, and to migrate Omnitracs’ to a cloud-native platform. We also discuss Omnitracs’ usage of machine learning, why technologist focused on autonomy are not thinking about the potential challenges autonomous trucks would cause, the massive impact Omnitracs is able to have on the industry, among other topics.
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402: UPS CIO Juan Perez details how the company has taken data from simply being an input for descriptive analytics to prescriptive analytics, which goes beyond predictive analytics. Juan has played an integral role in developing the company’s on-road integrated optimization and navigation system [ORION], which helps optimize the delivery paths that the company’s drivers take to make sure that they efficiently satisfy their service commitments to its customers. Juan also describes an advanced big data analytics project, which is designed to constantly take the massive amount of data points the company collects, learn from them, and use them to better predict what volume is going to come into their operations. We also discuss UPS’ strategic pillars, Juan’s take on artificial intelligence, the cloud, drones, and robotics, how UPS is using digital to enhance the physical experience that the customer receives, and a variety of other topics.
A leading trucking and transportation technology company hired Metis Strategy to conduct a strategic assessment of the opportunity to enter and compete in a high-growth adjacent market.
Increasingly, businesses face competition from non-traditional players who have leveraged digital technology to simplify the experience for customers. A leading trucking and transportation technology company recognized a growing number of competitors and startups exploring a new service and business model that targeted its core customers with an adjacent offering. The company was considering developing its own solution, and hired Metis Strategy to conduct a strategic assessment of the opportunity to enter and compete in this high-growth adjacency.
Metis Strategy conducted a multifaceted analysis, which included analyzing competitors, sizing the market opportunity, and evaluating the strategic fit.
The client had already begun research into the opportunity, so Metis Strategy began by reviewing their existing collateral and interviewing stakeholders across the company. Metis Strategy then expanded the analysis though the following activities:
Documented business case and recommended go to market strategy to enter and compete in a high-growth market
Once Metis Strategy analyzed the strategic fit and evaluated the company’s ability to capture market share, Metis Strategy presented the client with a documented business case and recommended go to market strategy, which included:
Price matters, a lot. In an era of hyper price transparency, the subtlest price discrepancies will drive consumers to purchase on channels with the lowest price. Often consumers make buying decisions in two steps: first, what they want to buy; second, where they will buy. Especially for goods and services that are not substantially differentiated in terms of quality or features, your average consumer will naturally gravitate towards the lowest price. This has been felt in an especially acute manner for retailers such as Best Buy, where consumers go to window shop, but complete their purchases on lower priced ecommerce alternatives (i.e., Amazon, eBay, Jet, etc.). Best Buy has since woken up to the fact that without differentiating the customer experience, they were unable to create stickiness to convert foot traffic. When selling a commodity, or a good/service with a comparably substitute, price parity is arguably the most important driver in decision making. The challenge, of course, is that the manufacturers of a good, or a provider of a service, don’t always own the end touch point with the consumer. Many companies rely on a network of distribution partners to help market and sell their products. While this approach allows companies to scale revenue without the risk of building a massive salesforce, it also means that the manufacturer/provider will not be able to control all the variables that influence consumer’s buying decisions.
To strike the right balance, many companies develop a distribution strategy that comprises two dimensions: direct and indirect sales. Direct distribution focuses on selling directly to customers, while indirect distribution depends on intermediaries to complete a transaction. A distribution strategy needs to be married with a robust approach to inventory management, which may mean different things to a manufacturer than a service provider. Manufacturing firms typically have robust Sales & Operations process (referred to S&OP), during which they forecast sales and ensure there is enough inventory produces and physically distributed to distribution centers or shelf space to meet consumer demand. Service providers tend to look at inventory as an expiring asset: once time has passed, you can no longer sell that service (e.g., once a plane takes off with an empty seat, or a tee time passes without a foursome teeing off).
Although hospitality was one of the first industries to create robust distribution channels and networks through Online Travel Agencies (OTAs) to capture additional business, one of the consequences of that arrangement is that customers were conditioned to view hotel rooms as a commodity where price was the primary decision factor. While OTAs let reviews and minimal merchandising try to differentiate hotels, consumers also got lost in the noise of the difference between one chain versus another.
Over the past 5 years, intermediaries successfully crafted a narrative that they had the consumer’s best interest at heart by negotiating with the hotels, and only the OTAs could be trusted for the lowest price. Some of this was true; you could find lower prices for last minute deals, and there was benefit to both the OTAs and hotel operators that did not want to see a bed go empty. However, as OTAs further influenced the customer experience, and ate into profits with a greater share of bookings, the hospitality, airline, and other industries recognized that they would have to take decisive action to remove price disparity as the primary reason a consumer would purchase products or services on any indirect channel.
One compelling example is Icelandair and El Al who have begun experimenting with displaying sample prices of their competitors on their own websites, to show how competitive their direct prices are, and to hopefully prevent customers from “clicking” away to competitors and other price aggregators. With the explosive growth of options in the online distribution environment, there are two primary factors that companies should concentrate on: Price Integrity and Price Parity.
Price integrity is the concept of a customer being confident that they are purchasing a product of a certain value. While a customer may be willing to pay more or less, depending on the time and place of their purchase, there is a psychological range that they base their expectations on.
Price parity is the practice of maintaining a consistent rate for the same product across all distribution channels, including both owned and partnership channels. Nothing destroys trust more than being able to find a cheaper price on another website, or worse, when a company’s website is cheaper than its stores.
For industries that rely both on direct channels and distribution channels, there is a “co-opetition” relationship in which it is not uncommon for a firm to be competing with their distribution partners for sales. On the one hand, if a consumer wasn’t going to come to AlaskaAirlines.com, they would be more than happy with a referral from KAYAK, or a booking through Expedia to fill an empty seat. But if there was a chance that customer could have booked directly with Alaska Airlines, they would have fought hard to win that booking.
Hospitality and travel companies are in the middle of an ongoing competition with their distribution partners (OTAs and Metasearch engines – METAs) for the future of guest bookings. According to Hitwise, hotel direct booking only made up ~30.56% of online booking market share in 2017, at the same time OTAs continued to eat away further at market share, growing 60 basis points from 2016 to 2017.
While OTAs and METAs have become an invaluable component of hospitality marketing and distribution campaigns, there are contractual violations that stress the trust necessary for heathy “co-opetition” Some OTAs and METAs may display available prices that undercut contracted prices. Often these discounted prices are provided to the OTAs and METAs by wholesalers in violation of price-parity contracts, but the complex web of distribution relationships and flash-speed of online pricing engines makes it difficult for hospitality companies to really hold their distribution partners accountable.
Despite the challenges, companies must maintain a vigilant eye on how inventory and experiences are being displayed by distribution partners to ensure that consumers that may have the inclination to purchase on direct channels are not actively dissuaded from doing so. A successful distribution strategy must be aggressive and can quickly be implemented and maintained by following these six critical steps:
Metric tracking allows you to better understand if your chosen distribution partners are worth their distribution costs. For example, “NRevPAR” (Net Revenue per Available Room) is the industry standard in hospitality for calculating the revenue generated per available room, net of any discounts or commissions paid to intermediaries. Through the re-evaluation of their NRevPAR, hoteliers can evaluate their current distribution partnerships across their current distribution channels to ensure that their distribution costs are harmonized with their expectations for each partner. A significant drop in a key metric is a telltale sign that it is time to either renegotiate with your current distributors or start looking for replacements.
It is imperative that you monitor how and where your inventory is displayed across your distribution partners’ platforms. You want to have the ability to confirm that your partners are playing by the rules as well as ensuring that your offering is not appearing unofficially on other public channels with rogue prices that undercut you and your partners. If a partner determines that your inventory is floating around the public space at prices that undercut their contracted prices, it won’t be long before you observe your inventory being pushed to the bottom of their display pages—if they don’t remove you altogether for being out of parity.
Andrew Sheivachman of Skift pointed out that in 2017, global digital travel sales were projected to reach $189.6 billion in 2017, of which 40 percent was to be attributed to purchases made through mobile (4% gain over 2016). With such a rapid rise in the adoption of mobile booking and shopping, you cannot let your mobile channel development lag. You must work proactively with your distribution partners to refresh user interfaces and user experiences to optimize their mobile shopping experience. Rich content, descriptions, and high-quality photography also allow you to differentiate your product when it is sitting on a digital shelf with comparable products.
Dynamic yield pricing allows you to base your pricing relative to demand and other variables. Dynamic pricing is being employed across various industries to match supply and demand to move expiring inventory: preventing waste in grocery stores, ensuring that there are enough drivers on the road for ride-sharing platforms, or driving loyalty by generating customer-specific fares for airlines. Within the hospitality industry, dynamic pricing allows for inventory to be priced appropriately in response to the timing of a booking, local events, or any occasion that could cause fluctuating demand. Just make sure that your dynamic price is not undercut by a distribution partner or cached by that distribution partner and out of date when prices go back up.
While channels you directly manage (a website, a social presence, in-store), may not be the first point of interaction between you and your prospective consumer, you still can convert customers to complete their purchase through your owned direct purchase channels as you get to know them and earn their attention. In 2015, of booking journeys that were initiated on OTAs – over 34% of bookings were completed through supplier websites. Bolstering your available offers for customers through loyalty programs, subscription email campaigns, and social media can help drive customers from your distribution partners to your direct-booking channels.
Legacy backend systems may cause you millions of dollars in system outages and will almost certainly inhibit your ability to proactively adjust your distribution network. These legacy platforms cause transactional friction during the process in which a supplier’s prices are sent out to the systems of distribution partners, which in turn forces revenue managers to spend hours a day manually validating that prices and inventory are being migrated accurately to various distribution channels and partners. Rate monitoring platforms are now available that allow for revenue managers to monitor the behavior of their distribution partners using automation. The use of these platforms also increases transparency of your distribution partners’ networks. These platforms can be used to not only monitor the integrity and parity of pricing for your own inventory, but they can be used to quickly determine if you are competitively priced across the globe. With our earlier example of Icelandair and El Al, technology can also automatically allow revenue managers to know when their rates are being advertised by competitors (either accurately or inaccurately).
While your distribution partners can help you reach new customers and markets, you must ensure that their role as an intermediary does not equate to them “owning” the customer. It’s the incentive of your distribution partners to provide you revenue, but they are unlikely to share customer information that can be used to convert a customer into a loyal patron (i.e. personal email address, mailing addresses, etc.). Providing an amazing customer experience is the best way to overcome a consumer’s bias to make decisions based on price. If a company can pair a differentiated customer experience, with an enticing loyalty program that rewards purchasing goods or services through direct channels, there is still hope to maintain a balanced distribution strategy.
Schneider National CIO Shaleen Devgun asserts that in the age of instant gratification, every company must be a technology company regardless of industry. Even as a trucking company, Shaleen highlights how Schneider’s ability to present timely information is crucial for their success, and how every aspect of Schneider’s value chain is impacted by technology. We also discuss how great competitors can make great customers, how they leverage technology to optimize load assignments from 373 trillion combinations, and the relationship between the CIO and VC communities.
Shaleen is the Chief Information Officer of Schneider National, a premier transportation and logistics provider with revenues exceeding $4 billion. Along with traditional CIO responsibilities, Shaleen has accountability for the companies business transformation, logistics engineering, and corporate venturing efforts. Shaleen was recently the recipient of the Forbes CIO Innovation Award, which highlighted the company’s in-cab telematics toolset.
Among other topics, Cynthia discusses the following issues with Metis Strategy:
Cynthia is Executive Vice President and Chief Financial Officer of Norfolk Southern, a $36 billion class 1 railroad. Since becoming CFO this past August, Cynthia has leveraged her financial and IT background to deliver value back to shareholders, as well as deliver productivity throughout the business.
Cynthia joined Norfolk Southern in 1985 and has held a variety of senior leadership positions at the company, including Chief Information Officer, Executive Vice President Administration, Vice President Human Resources, and Assistant Vice President Accounting Operations. Prior to joining Norfolk Southern, Cynthia was an accountant at Ernst & Young’s predecessor CPA firm, Ernst & Whinney.
Cynthia holds a Bachelor of Science degree in accounting from the University of Missouri and has completed the Advanced Management Program at Harvard Business School.
Among other topics, Serge discusses the following issues with Metis Strategy:
Serge Leduc’s Biography
Serge is currently the Chief Information Officer of Canadian National Railway. Serge has gone through a transformation at CN, taking the company from a federated structure, to a more homogeneous one around business engagement, applications management and delivery; infrastructure and telecommunications; and planning and strategy
Prior to joining Canadian National, Serge held various senior positions for Canadian and UK-based organizations, including Alliance Forest Products and British American Tobacco. At British American Tobacco, his responsibilities included implementing SAP and global supply chain management solutions in various countries around the world, and also ran a major enterprise infrastructure program.
Among other topics, Angela discusses the following issues with Metis Strategy:
Angela Yochem’s Biography
Angela is the Global CIO of BDP International, a leading privately-held global transportation and logistics management firm. Among other responsibilities, Angela oversees the setting and implementation of the corporate strategy and several aspects of governance and operating committee functions. In addition to her role at BDP International, Angela serves as a member of the Board of Directors at the Federal Home Loan Bank of Pittsburgh.
Before her tenure at BDP International, Angela served as the Chief Technology Officer at AstraZeneca, the multinational pharmaceutical and biologics company. Among many key responsibilities, Angela was responsible for the development of the company’s Innovation Network composed of external partners, technology companies, research institutions and various other thought leaders, investors and start-ups.
Angela has also served as the Corporate IT executive and Divisional CIO at Dell, a positions she undertook after serving as the SVP, Technology Executive at Bank of America and Vice President Information Services at SunTrust Corporation. Angela also served as the Lead System Architect at UPS and a Solutions Architect at IBM among other roles in the early part of her career.
Along with her Board position at the Federal Home Loan Bank of Pittsburgh, Angela has served as a member of the Industry Advisory Board at the University of Tennessee, Department of Electrical Engineering and Computer Science, the CIO Council, DEMO – Emerging Technology Launchpad, the Advisory Boards at Patients Matter and cWyze and is a Fellow of the International Association of Software Architects.
Angela holds a Bachelor of Music degree from Depauw University and a Masters of Science in Computer Science from the University of Tennessee.
Among other topics, Rob discusses the following issues with Metis Strategy:
Rob was named to Fortune magazine’s Executive Dream Team, Rob was also ranked 18th on Fast Company magazine’s “100 Most Creative People in Business” 2010 list. He received Information Week magazine’s Chief of the Year Award in 2000, 2001 and 2005. He is also a seven-time recipient of CIO magazine’s CIO 100 Award and was a charter inductee into the publication’s CIO Hall of Fame.
Rob is a member of the Saks Incorporated and First Horizon National Corporation Boards of Directors.
He earned his bachelor’s degree in computer and information science from the University of Florida and his master’s degree from the University of South Florida.
Chris is the Chief Executive Officer and President of Schneider National Inc., a multi-billion dollar provider of truckload, logistics and intermodal services. He has held that role since 2002. Prior to that, Chris served as the Chief Operating Officer of Schneider National, and he has also served as its Chief Information Officer and Chief Technology Officer.
Prior to his time at Schneider National, Chris held engineering and management roles with Symantec Corporation and Motorola Inc.
Chris serves on the boards of Schneider National, the American Transportation Research Institute, CA Technologies, the School of Industrial and Systems Engineering at the Georgia Institute of Technology, the Green Bay Chapter of the Boys and Girls Club of America, and the American Trucking Associations Inc.
Chris has a bachelor of science and master of science degrees in Industrial and Management Engineering from Montana State University and a Ph.D in Industrial and System Engineering from the Georgia Institute of Technology.
