AXI executives faced three key issues in summer 2000: (1) determining how to deal with slow end-user adoption of AXI Travel; (2) determining how to deal with the various American Express Interactive online services as they gained traction in the marketplace; and (3) deciding what role CSI should play (if any) now that the company had evolved its online strategy to the point where individual business units had begun to take responsibility for building and growing online businesses.
While over 250 companies had adopted AXI Travel, the number of users within each company was much smaller than anticipated. AXI executives had demonstrated that corporate travel managers could expect to reduce the cost of booking a travel reservation by over fifty percent. Thirty percent of the savings came from reengineering travel processes inside the company and the remaining twenty percent came from using the AXI Travel service. AXI executives found that companies could not expect to achieve these cost savings until over thirty percent of business travelers began to use the service. Herein lay the problem. While the corporate travel manager played a key role in the decision to adopt AXI Travel, unless use was mandated, the business travelers within the organization were free to decide whether or not to use it to book travel. And, unless it was used, the benefits to the organization—and to AXI—would not be achieved.
As students and executives discuss the dilemma, they naturally turn to a discussion of the benefits of the system to the different stakeholders. These are listed in the case as: the corporate travel manager: the business traveler and travel arranger; the head of information technology (IT) within the adopting company (called the chief information office—or CIO); and the AXI travel agents who operated within 1700 travel offices around the world. May of these travel offices were owned by AXI’ others were operated by independent affiliates. Most students and executives recognize that efforts to quantify the benefits of AXI Travel (and its other online services) have primarily been directed toward the corporate travel managers. Many believe that this is appropriate given that corporate travel managers were the key decision makers in the adoption decision. At this point, it is important to ensure that students and executives recall that, initially, the CSI team had tried to sell the new online service to the person running the IT function within target early adopter companies. These efforts had failed and served as a major stimulus to the decision to partner with Microsoft. Later, as AXI Travel neared launch, AXI executives and the CSI team invited corporate travel managers and IT executives within the top 150 companies (which together accounted for over 12% of all corporate travel in the United States) to a focus group and information session in Redmond.
Clearly, AXI Travel provided benefits to those corporate travel managers that were able to redesign internal processes and stimulate adoption. Given the pricing policy discussed in the case, transaction fees for travel booked using AXI Travel were up to 40% less than the fees charges for agent-based booking. By ensuring better compliance with preferred supplier contracts, AXI Travel reduced the cost of an airline ticket by an additional 20% and the cost of a hotel reservation by an additional 10%.
But, the benefits to the business traveler were much more difficult to quantify. While AXI Travel had been designed to provide special features, such as choosing a seat, locating the most convenient hotel and confirming whether a flight was on-time, business travelers could get these same services from readily-available consumer travel services, including Expedia (which at the time was owned by AXI Travel business partner, Microsoft). Indeed, many business travelers and their travel arrangers had already begun to use these services.
Other business travelers and travel arrangers were more comfortable dealing with an American Express travel agent. Why learn to go online and make travel arrangements when it was much easier to just call an agent and let them deal with the reservation systems? In fact, this was a particularly difficult problem for AXI executives. Since the launch of AXI Travel was not intended to do away with the agent-based channel, executives had to be careful not to do anything to make the traditional channel any less attractive. AXI travel agents—especially those agents whose offices were onsite in corporate travel customer locations—were key to helping a customer reengineer travel processes to achieve cost savings through use of AXI Travel. These agents had developed close relationships with business travelers and their travel arrangers. The new system threatened these relationships. In addition, while corporate executives were quick to point out that the new system would not replace travel agents, many agents believed it was only a matter of time until their job would be eliminated.
The decision to launch the AXI Travel Bonus Point program—much like familiar frequent flier programs—was designed to provide an attractive bonus to both business travelers and travel arrangers. The program provided a free airline ticket to the traveler or travel arranger that accumulated a certain number of AXI Travel Bonus Points. While the bonus helped stimulate adoption, it was unable to overcome the many barriers to adoption that came when, to be successful, a new system required process and work redesigned and threatened established roles and relationships.
Before leaving this discussion, it is important to ensure that students and executives fully understand the implications of implementing new online businesses that require the two-stage adoption model discussed above. First, a customer organization must agree to adopt the online business service. Second, individual users within the company must decide to use the service in their day-to-day work. It is helpful to have students and executives consider other online services and technology products for which a two-stage adoption model is required.
Capture recommendations under three categories: Changes to the product/service or business offering, changes to the people using the offering (includes organizational incentives); changes to the work people do and how it fits into the larger organizational and interorganzational processes. See Exhibit 3, which depicts the key components of the two-stage adoption process.
Integration American Express Interactive Services within Established Lines of Business
One of the key purposes of the American Express Interactive case is to enable discussion of the choices executives make when pursuing a business opportunity that exploits the value of the Internet and related technologies. The decision tree in Exhibit 4 helps frame these choices. Appendix B provides detail to support the discussion of the decision tree’s three implementation choices: Venture Development; Venture Integration; and Strategic Initiative/Project Implementation.
In 1995, AXI executives recognized that it would be best to consider the launch of an online travel service as a new venture. While the company was familiar with the process used to launch new product and services, it was less familiar with the process of launching a new venture—often called the entrepreneurial process. Years before it had become fashionable, it was decided to form a team composed of well-respected AXI executives that provided the range of talents and expertise that would be required to build and launch AXI Travel. To achieve the focus, flexibility, and speed required by entrepreneurs, the CSI team moved their offices to a location outside the company. In the case of the business development team, the offices were close enough to enable frequent face-to-face interactions with the AXI operating executives and employees that would be needed to help with the eventual integration.
Discussion in this section highlights the activities and roles required to implement the New Venture Development and Venture Integration Processes. Instructors can expect that most students and executives are supportive of the process used to launch AXI Travel but are concerned that the integration and future product spin-offs will be less successful. As discussion progresses, debate about how to facilitate integration falls into two camps—those supporting the creation of a new unit reporting to the CEO and those who suggest transferring all new business initiatives to established business units and spinning out of portal businesses ( as was done with Market Mile).