The CIO’s role within global 2000 companies has changed in recent years from leading big systems projects, like ERP deployments, to business transformation. The objective for a lot of big companies is to use technology innovations to drive business innovations, not just achieve cost and productivity efficiencies.
“Ten years ago, CIOs spent a lot of time getting transactional systems—the giant stuff—in place. But that’s not so much the job anymore,” says Robert Urwiler, CIO of Vail Resorts. “CIOs have more freedom to explore innovative ways to provide business transformation and more freedom to look around at emerging technologies. I feel like I have an obligation to do that.” If Rogers were to revisit the idea of early adoption in IT in 2008, that classical distribution curve might not look so bell-shaped anymore.
This article in CIO Magazine, link courtesy of Vinnie Michandani, caught my attention because it features the CIO of Virgin America, the airline that I have been flying a lot lately. Virgin’s in seat entertainment system, they call it “Red”, is an example of technology edge pushing in action and it’s great if for no other reason than it gives you a lot of control in what is an otherwise captive environment.
First and foremost, the entire system is built on Linux, which in itself is pretty cool but is also representative of a larger commitment to open source technologies by CIO Maguire. The focus on Linux is also representative of how technology is being used to drive business innovation at Virgin.
The entertainment system also has a food ordering system, which can be used to order everything from free drinks to box meals at $9 each. My personal experience suggests that the ability to select from a menu of food options instead of one or maybe two box options results in me spending more money per flight on food, probably on average $12 for a long flight.
The streaming video options are extensive and priced below the psychological threshold where you feel like you are getting ripped off. Throw in a movie and you are up another $6 or $8. There is a tab for online shopping that has yet to be activated, and I can imagine that being a popular service that results in additional affiliate revenue.
Essentially what Virgin America is doing is using technology to not only deliver a better in flight experience but also drive additional revenue per seat that is independent of arbitrary fees being tacked on by the airline. There are 140 seats, assuming a relatively constant load factor of 80% you end up with 112 butts in seats and if they can generate on average $8 per seat the revenue uplift is $900, roughly equivalent to 2 SFO-NYC round trip tickets.
There are 100 flights a day, assuming the short flights are less likely to produce additional seat revenue, let’s average that down to $300 per flight. Making some rough guesses about the flight schedule, let’s say that it’s 60/40 short to long haul which results in a combined additional revenue of $54k per day across their entire schedule. That’s an additional $20 million of revenue (no idea what the margins would be) per year that was enabled by a better piece of technology stuffed in the back of an airplane seat. Not bad.