Getting to the Goals

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INDUSTRY DIALOGUE
Getting to the Goals- Strategies for Managed
Travel
Sponsored by
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Scott Gillespies Background

• Founder and CEO of Travel Analytics
• Developed TANGO and BRAVO for airline sourcing
  projects
• Analyzed in excess of 20 Billion of corporate
  air spend
• Recipient of ACTEs Industry Professionalism and
  Distinguished Fellow honors
• Named by Business Travel News as one of the
  travel industrys most influential executives
• Previously A.T. Kearneys global expert in
  strategic sourcing of travel suppliers
• MBA, University of Chicago

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Learnings From Past and Current Clients

• Agilent
• AXA
• Bank of America
• Baxter
• Coca-Cola
• Chevron
• Dell Computer
• Deloitte
• John Deere
• Ernst Young
• ExxonMobil
• Ford

Hewlett-Packard IBM KPMG Lockheed
Martin Microsoft Procter Gamble Nortel
Networks Novartis PricewaterhouseCoopers Roche She
ll Tyco
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Getting to the Goals Strategies for Managed
Travel
Todays Agenda

• What Are We Managing?
• What Are Our Goals?
• How Do We Choose A Good Strategy?
• What Makes A Strategy Really Work?
• Some Provocative Thinking

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1. What Are We Managing?
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• Tough goals
• Tight budgets
• High-pressure bosses
• Complicated technology
• Convoluted industry dynamics
• Confusing and imperfect data
• Suppliers with agendas that dont always match
  our own
• Travelers who are not shy about complaining -
  and advising

Just Part Of The Job
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What Do Travel Category Managers Really Do?
Five Primary Functions

• 1. Demand
• Mgmt.
• Policy language
• Policy enforcement
• Pre-trip approvals
• Travel alternatives

• 2. Trip
• Mgmt.
• Shopping
• Booking
• Complying
• Fulfilling
• Changing
• Paying
• Complaining
• Reporting

• 3.Sourcing
• Mgmt.
• Airlines
• Hotels
• Agencies
• Ground
• Card
• Other Suppliers

• 4. Spend
• Mgmt.
• Data collection
• Analysis
• Audits
• Bench- marking
• Reporting
• Contract monitoring
• Reimburse-ment

• 5.Stakeholder
• Mgmt.
• Senior Mgmt.
• Suppliers
• Travelers
• Internal Audits
• Finance
• Human Resources
• Sales (reciprocity issues)

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2. What Are Our Goals?
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What Are The Big Picture Goals? (Hint Think
Shareholder Value)
Corporate Goals
Travel Implications

• More Trips

• More Revenue

• Lower Unit Costs

• More Trips

Happier Customers

• Lower Unit Costs

• Fewer Trips
• Better Trips

Happier Employees

• Lower Unit Costs

Lower Costs

• Fewer Trips
• Worse Trips

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Where To Start? At The End!

• Smart category managers will focus on the end
  the key goals they have established for their
  program

Without good goals, managers risk applying the
wrong strategies
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What Are The Fundamental Goals In The Travel
Category?
Goal or Enabler?
Senior Management Support
The Key Is Balancing Conflicting Goals
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Classic Travel Category Goal

• Minimize travel costs while maintaining
  appropriate levels of traveler satisfaction and
  business controls
• Whats wrong or right about this goal?

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What Does Senior Management Really Want?
You cant succeed without knowing the answer
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Characteristics of Good Goals

• Meaningful
• Aggressive but achievable
• Measurable
• Consistent with other key goals
• Supported by senior management
• Awareness
• Understanding
• Agreement
• Support

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3. How Do We Choose A Good Strategy?
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What Is a Strategy?

• A few principles used to guide future decisions
• A plan of action intended to accomplish a
  specific goal

Strategy blends into tactics Just a matter of
the level of detail
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What In The World Are We Talking About?

• A curvi-linear extractor of friction-based seals
  in narrow-necked silica-fused containers

• A single-use portable low-BTU short-duration
  ignition system powered by a friction-based
  chemical reaction

• A manually-powered torque applicator for
  light-weight metallic slot-headed fasteners

The point Strategies should be stated as simply
as possible
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Just As Form Follows Function
So Should Strategy Follow Goals
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Typical Travel Category Strategies

• Pursue traveler satisfaction over cost savings
• Educate travelers and management to do the right
  thing
• Pursue operational excellence based on global or
  regional standards
• Set reasonable policies and strive for high
  compliance
• Pursue cost savings over traveler satisfaction

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Which Travel Strategy Is Right For Your Firm?
The answer depends on two key issues
HIGH
Experiment
Radical Change
Tighter Compliance Operational Excellence
Control of Traveler Behavior?
Demand Management
Traveler Education
LOW
LOW
High
New Savings Needed?
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Strong Travel Policies Help Drive Down Costs
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But They Also Drive Down Traveler Retention,
Productivity And Satisfaction
Trips Purchase Cost
Type Of Travel Policy
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Whats The Right Travel Policy Level?
The Policy Level Which Minimizes The Total Cost
Trips Human Capital Cost
Trips Purchase Cost
Type of Travel Policy
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Goals, Strategies and Category Success

• Great Goals are
• Meaningful
• Measurable
• Aggressive
• Achievable
• Great Strategies are
• Logical
• Compelling
• Effective

Category Success Requires Both
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4. What Makes a Strategy Really Work?
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It Looks So Simple
Primary Functions

• Demand Mgmt.
• Trip Mgmt.
• Sourcing Mgmt.
• Spend Mgmt.
• Stakeholder Mgmt.

Program Levers And Constraints
Viable Strategy
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The Best Strategies Balance Goals Against
Realistic Constraints
Sample Goal
Sample Constraints

• Reduce Air Unit Costs (e.g., Avg. Segment Price)
  by 7

• Full Run-rate results must be achieved within 6
  months
• Limited ability to switch key airline suppliers

Viable Strategy

• Turbo-Sourcing RFPs
• Tougher limits on Business Class
• Tighter enforcement of Lowest Logical Fares
  policy
• Strongly encourage more advance purchases

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High-level Strategies Are Fairly Predictable Once
You Know The Goal
Strategic Path
How Much Savings Are Needed?
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Travel Strategies Need Proper Alignment On Four
Dimensions

• Organizational Alignment
• Financial Alignment
• Supplier Alignment
• Operational Alignment

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1. Organizational Alignment

• How clear is the ownership of the travel policy?
• How clear is the process for making significant
  changes to the travel policy?
• How effective are communications with key
  stakeholders?
• How well is Travel organized? Do geographic,
  functional or sub-industry specializations work
  best?
• How well does procurement interact with
  operations?
• To what degree are Travel Councils or Centers of
  Excellence used successfully?
• How clear is the preference for outsourcing
  versus staffing?
• Career-wise, is a job within the travel
  department attractive?

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2. Financial Alignment

• To what extent are the goals of the travel
  department tied to the managers compensation?
• To what extent are travelers or their budgets
  charged for Travel services?
• How are commissions, overrides and incentives
  distributed?
• Are booking fees charged differently based on the
  form of booking?
• Is there any form of subsidization made to reward
  the most desired behavior?
• How effective is the process for obtaining
  project funding, e.g. for new technology or
  third-party services?

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3. Supplier Alignment

• How strong are your relationships with your main
  suppliers?
• What makes it so?
• How effective are your main suppliers at helping
  you achieve your goals?
• How well briefed are they on your goals?
• To what extent do you have practical goals for
  your key suppliers?
• How effective is the feedback and correction
  process?
• How successful are your suppliers at bringing you
  innovations that improve your travel program?

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4. Operational Alignment

• How well suited is your agencys configuration to
  your service needs?
• To what extent are your agency counselors trained
  to improve compliance to travel policy?
• How easy is it for your agency and self-booking
  tool to help shift share to the desired
  suppliers?
• How effective is pre-trip approval and
  self-booking for improving travel policy
  compliance?
• To what extent is your agency and card data being
  consolidated?
• How effective are your analytical tools at
  identifying saving opportunities?

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5. Some Provocative Thinking(Because traditional
thinking rarely leads to significant savings)
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Travel Policy
Traditional Problems
Non-Traditional Solutions

• Fly chairs by day, beds at night
• Segmented policies for travelers perhaps by
  department
• Create an intimidating exception approval path
• Publicize consequences of non-compliance
• Calculate costs of lost productivity and impact
  on employee retention

• Language
• Often standardized for all employees
• May specify unnecessary quality
• Enforcement
• Varies widely
• Usually too weak

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Savings From Time-based Cabin Policies
Show the Pain vs. Gain Trade-off
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Airline Sourcing
Traditional Problems
Non-Traditional Solutions

• Airline Turbo Sourcing
• 80/20 rule for scope
• Sequential non-competitive bidding
• No big changes to share goals
• Use low-cost distribution
• Spot Buy With No Goals in Short Haul Markets

• Time Consuming
• Often Difficult
• Costly but Valuable
• Slow Decision Process
• Changing Suppliers Creates Risk

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Spot Buy Airfares In Short Haul Markets and
Refuse All Goals

• Buyer tells all airlines
• If you dont like your level of business, feel
  free to offer a pricing program that you think
  will drive the right amount of business your way
• If the discount does not work for you, feel free
  to modify it at any time
• Buyer still influences travelers via policy and
  agency
• May keep informal goals as targets not
  requirements

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Agency Sourcing
Traditional Problems
Non-Traditional Solutions

• Standards-based Sourcing
• Buyer sets very clear standards and criteria
  e.g. data, configuration, service levels
• Should Cost Modeling
• Buyer develops cost targets for the specified
  configuration and services

• Too Many Options
• Configuration?
• Service levels?
• Additional services?
• Hard To Evaluate
• Highly Political

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Agency Consolidation
Traditional Problems
Non-Traditional Solutions

• Consolidate Standards, Not Agencies
• Why not use the best agency in each country
  capable of meeting the standards?
• Data Quality Standards
• Service Quality Standards
• Increases importance of data consolidation

• Highly Political
• Quality Varies Widely By Country
• Often Hard To Choose One TMC
• Doing so often sub-optimizes service and/or data

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Content Fragmentation
Traditional Problems
Non-Traditional Solutions

• Do you even need ALL the content?
• Grocery stores dont carry ALL brands
• Analyze what you buy to be sure you have the
  right distribution channels
• You probably wont miss the missing content
• Focus on multi-channel data consolidation
• TMCs, Credit cards, airline websites
• Only way to know what content you really need

• Travel suppliers want lower-cost distribution
  channels
• Fragmented content increases the cost of shopping
• TMCs likely to raise fees as their costs increase
  and rebates decrease

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In Summary

• Travel category goals must be aligned with
  high-level corporate goals
• Goals must drive strategies not vice-versa
• Goals must be balanced carefully against
  realistic constraints
• Use the right levers and good alignment to
  achieve goals
• Think bold thoughts traditional thinking rarely
  leads to significant savings

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Thank You!