Air France-KLM flying high in innovation stakes
Vlerick alumnus (2005) Ignaas Caryn has an impressive professional track record. He is currently Innovation & Venturing Manager at Air France-KLM, a leader in supplier innovation within the aviation industry. Ignaas Caryn: “Air France-KLM wants to play a leading role in innovative and sustainable aviation-related services and technology. That’s why we can’t simply buy technology, products and services already available on the market, but must adopt a proactive open innovation model with innovative suppliers and others.”
No in-house R&D
Like other service companies, Air France-KLM has no in-house R&D department. Suppliers provide much of the service and infrastructure used in contact with customers: catering, aircraft equipment, ground handling and ground transport, in-flight entertainment content, etc. Air France-KLM uses various channels to attract innovative suppliers and let them know its needs and ideas. Ignaas Caryn: “We have a specialised venture department that ensures our exposure and briefs suppliers on what we’re interested in. We also keep in touch with institutes of higher technical education, which give us access to many start-up companies that can put their technical developments to good use in this way.”
Working with start-ups
Air France-KLM works mainly with young companies for its innovations. “Start-ups are dynamic, enterprising, flexible and they usually know full well where they want to go with their innovation,” explains Ignaas Caryn. “By working with them we can keep down the manpower and time costs of developing the technology and can also spread the risk.”
Air France-KLM can be an attractive launching customer for start-ups. Ignaas Caryn again: “We hope young businesses will make Air France-KLM their privileged partner and share their innovative ideas with us first. In exchange, we’ll invest in the start-up financially and intellectually.” This may be via a venture deal (stake in the company). “In that last case, we’re not just a launching customer; we’re also a strategic partner that can help with sales support, business development support, extra weight during negotiations with new financiers, setting up a financial structure, etc.”
At the end of 2008, for instance, KLM Venturing invested in an online travel services company that arranges online booking and payment of taxi services. They worked together to develop the company’s business plan, to detail its operational process and to approach several banks to discuss financing. In addition, KLM Venturing helped the company to set up its financial structure. By including the company’s services in Air France-KLM B2B (and later B2C) proposals and distribution channels, and by providing the company with important market information – for example on transport flows, pricing and the decision-making process of travel managers – KLM acts as both launching customer and strategic partner.
Interesting supplier?
Does Air France-KLM embark on a venture with every innovative supplier? Ignaas Caryn: “The innovation has to be compatible with your strategic goals. The question is whether the supplier is offering you a technology that gives you a competitive advantage, at least for a while, and whether it comes at the right time.” For Air France-KLM, Caryn looks for new ventures in the fields of ancillary services (services sold with the plane ticket), seamless travel, mobility, connectivity, security and green aviation technology. “Anyone taking a share in a supplier company would do well to check whether the business is scalable, whether it can keep developing in the future. There’s little point starting something with a ‘one-shot’.” Finally, it has to click with the management. “The supply company’s team needs more than technical skills. They also have to be able to run the business.”
Change
Air France-KLM has been involved in supplier innovation since 2007. Ignaas Caryn believes that the introduction of the open innovation model should not be underestimated. “Introducing supplier innovation is not a science. You can learn from the experience of other companies, but you’ve still got to negotiate your own learning curve.” New processes and routines have to be developed, but the greatest challenge lies in instilling a new corporate culture and mindset in your employees. “Supplier innovation has an impact on many departments, such as purchasing or IT. You’ve got to be able to surmount the ‘not invented here’ syndrome and the idea that innovation always implies exclusivity.”
Anyone who makes innovative knowledge exclusive restricts it to the supplier and the privileged customer. Yet the supplier can grow more quickly when allowed to sell to other companies. The launching company, in its capacity as financier and shareholder, also profits from this. Supplier innovation aims to create a win-win situation in which supplier and customer both reap maximum benefits. “Striving for the optimum mix of the supplier’s and customer’s strengths is an interesting exercise,” comments Caryn. KLM wants to expand on this open innovation model by setting up an innovation fund with other Dutch partners in the aviation industry. This fund would invest in start-up companies that focus on aviation or include it in their sphere of application.
Leader potential
Ignaas Caryn sees supplier innovation as an important development in the field of innovation in 2009. “It’s something companies are starting to look at in more depth and where traditional customer-supplier relations are shifting from being price-driven to being strategy-driven. For Air France-KLM, using supplier innovation means that we can take the lead in various technologies such as e-services, ancillary services and green aviation technologies.”
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Ignaas Caryn’s do’s and don’ts for supplier innovation Do’s:
Don’ts
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