Travel Tech Essentialist #122: Fail and Succeed
More than a century ago, the department store owner John Wanamaker reportedly coined the marketing adage “Half the money I spend on advertising is wasted; the trouble is that I don’t know which half.” We’ve found something similar to be true of new ideas: The vast majority of them fail in experiments, and even experts often misjudge which ones will pay off. Companies need to kiss a lot of frogs (that is, perform a massive number of experiments) to find a prince — Ron Kohavi
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0. The most clicked link in the previous newsletter
The most clicked link in Travel Tech Essentialist #121 was Arival’s article on trends and predictions in tours, activities & attractions.
1. The power of experimentation
Ron Kohavi is a leading expert on the art and science of A/B testing who has led the experimentation teams at Airbnb, Microsoft and Amazon. Two weeks ago, he had a very interesting conversation with Lenny Rachitsky (Lenny’s Podcast). I went on a Ron Kohavi rabbit hole and found a talk he gave at Amazon in 2021 (slides of his talk) about great ideas and controlled experiments with plenty of interesting and surprising examples. Another recommended link is a Harvard Business Review article he wrote in 2017, The Surprising Power of Online Experiments, about getting the most out of A/B and other controlled tests.
One of the examples he highlights is color experiments. Google tested 41 gradations of blue for Google pages. A Google designer quit because he was frustrated about debating such "minuscule design decisions." For some people, running experiments for tiny incremental improvements is a source of frustration. However, Google’s tweaks to the color scheme were worth over $200 million annually.
Bing's experiments with slightly darker blues and greens in titles and slightly lighter blacks in captions (see image below) improved the user experience and boosted revenue by more than $10 million annually.
Another small change with a huge impact was changing how ad titles were displayed on Bing by moving the ad text to the title line to make it longer. This simple idea increased Bing’s revenue by 12% (over $120 million in the US alone at the time).
2. Most great ideas fail
Ron Hohavi points out that companies launch new features because they believe they will be useful for users, but most features fail to move the metrics they were designed to improve. Ronny states that at Microsoft, only 33% of ideas were positive (statistically significant) ideas. Only about 10% to 20% of experiments generate positive results at Google and Bing. At Airbnb, the success rate was even lower: 8%. He refers to this failure ratio in the three resources I linked in the previous story. Triple your experiment rate, and you will triple your successes (and failures). Experiment and fail fast and often in order to succeed. Ron emphasizes that firms should build an experimentation capability and master the science of conducting online tests.
3. Rebels and trends in the travel industry
In a recent newsletter, I delved into the perils of trend-chasing and the imperative of being non-consensus in the pursuit of building a legendary company. In trying to understand how this applies to the travel industry, I reached out to a dozen industry leaders to ask them how these two concepts apply to innovation in the travel industry. I asked specifically for their thoughts on the following two topics:
Trends or consensus ideas that could undermine a travel startup's success
Non-consensus beliefs or assumptions that might lead to building a legendary business.
In Rebels and Trends in the Travel Industry, you can read my post with the insights of founders and leaders.
4. Expiring vs. Permanent Skills
Morgan Housel is a Partner at Collaborative Fund. He is also a great thinker, writer and author of ‘Psychology of Money’. In this post, he distinguishes between expiring skills and permanent skills. In the mid-1800s, Robert Walter Weir taught painting and drawing at West Point, which was essential due to the nascent state of cartography. Mapping skills were crucial for military officers in drawing maps and understanding battlefield topography. These skills were a necessity in one era but diminished over time as technology evolved.
This distinction between expiring skills and permanent skills applies across fields. Expiring skills, often the latest trends, receive more attention and drive short-term performance, while permanent skills, consistently important over time, are undervalued. Permanent skills compound over time. They are not tied to specific tools or trends and offer enduring benefits. Here are a couple of examples of permanent skills that apply to many fields:
Not being a jerk. Being a jerk offsets being talented one for one, if not more. They don’t teach this in school, but it’s the single most important career skill.
The willingness to adapt views you wish were permanent. Accepting when expiring skills have run their course. A lot of what we believe about our fields is either right but temporary, or wrong but convincing.
The ability to be comfortable being miserable. Franklin Roosevelt’s Secretary of Labor, said the most remarkable thing about the president’s paralysis was how little it seemed to bother him. He told her: “If you can’t use your legs and they bring you milk when you wanted orange juice, you learn to say ‘that’s all right,’ and drink it.”
Most of the permanent skills are human-centric. They revolve around character qualities that a chatbot can’t compete with. Something to consider as we think about the skills that we want to learn or improve.
5. Top AI tools for innovators
Not all companies need to become AI companies, but they all need to be AI-enabled companies. The same applies to most professionals. We can use AI to be 10x or 100x better marketers, designers, engineers, customer service reps, salespeople, advisors or engineers. Combining Artificial Intelligence with Carbon Intelligence is the way to go. With new tools being launched daily, keeping track of what is and is not relevant is challenging. Philippe De Ridder (founder & CEO of Board of Innovation) shared his agency’s curated list of AI tools for innovators - across ideation, user research, digital design, product design, business design, and growth marketing.
6. Insurtech 2.0: moving beyond the hype
A few years ago, insurtech companies like Lemonade and Hippo were in the limelight. They raised hundreds of millions and went public, but their stock performance has plummeted by 70% - 80%, and there's growing concern about their viability. Elad Schaffer (co-founder and CEO of travel insurance startup Faye) gives his views on what the early insurtech companies got right and how insurtech 2.0 companies are using technology, innovation, and a deep understanding of customer needs to optimize for long-term returns and go beyond insurance. Read + Tech Times.
7. How Booking.com is transforming into a Fintech powerhouse
Marcel van Oost writes how Booking.com's transformation from a booking platform to a proficient payment processor signifies a significant new phase in its development. In 2017, Daniel Marovitz joined Booking.com as VP of Global Payments (now SVP of Fintech) and recognized a substantial opportunity. Being a fintech enthusiast, he was thrilled by the potential of joining a large multinational company with a broad customer base yet not directly involved in managing transactions. Acting on Marovitz’s vision, Booking.com set out to build its own payment platform. The company’s Fintech division was launched in 2021 and now has 700 employees. By Q1 2023, 45% of their bookings were managed through their own payment platform. while Booking.com solidifies its Fintech presence, Fintech rivals like Revolut and Nubank are eyeing the booking and hospitality platform sector. Read + Connecting the Dots
8. Hotels in the 2030s
McKinsey explored the future of hospitality in interviews with three Accor executives in which they envision a future where hotels become multi-purpose hubs for both travelers and locals. The concept of "augmented hospitality" highlights how hotels offer more than just accommodation. The hybrid model, where hotels cater to both travelers and locals and serve as living spaces, emerges as a trend with a provocative prediction that many people will choose to live in hotels instead of apartments by the 2030s. They also explore the changing nature of business travel, the growth of extended-stay accommodations and a strong focus on mental well-being. They discuss how technology enhances guest experiences and the potential of AI to reshape the industry, emphasizing creativity and human touch in marketing and brand-building. Read + McKinsey
9. Online Travel 25 years ago
It's interesting to observe how online travel was discussed years ago. A Los Angeles Times article titled More Travelers Are Visiting Web First, dated July 1998, mentions Preview Travel, Travelocity, and Expedia (Note: Preview merged with Travelocity in 2002, and later Expedia acquired Travelocity in 2015) making it to the top 50 travel agencies in the US (currently, Booking and Expedia hold the #1 and #2 positions.) The article also highlights that Preview had a surge in bookings in Q1 of 1998, reaching $35.9 million (for context, Booking and Expedia had Q1 2023 gross bookings of $39 billion and $29 billion, respectively.)
In 2050, people will look back and laugh at what we’re all currently saying about topics such as the metaverse and AI :-)
10. Job posts in this newsletter
2395 jobs have been posted on the job board since I launched it in May 2021. The five that have generated to most job applications are:
- Google: Global Travel Industry Partnerships Lead
- Mr. Alfred: Head of Growth
- Sensible Weather: Hospitality Business Development Manager
- ZYTLYN: Global Sales Lead
- Amazon: Travel & Hospitality Industry Advisor
One of the strongest drivers of job views and applications comes from the jobs that I feature in this newsletter. Moving forward, the newsletter will include a maximum of 3 featured jobs and there will only be two options for showcasing your open position in the newsletter:
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Mauricio
Intriguing insights as always