Escape the race to the bottom
Will ANSPs find themselves in years to come in a market filled with competitors offering identical services? Will they have to continuously lower their prices and face a "race to the bottom"? Considering the commodity lifecycle, at the one end there is innovation, a fast-changing market where suppliers of similar services offer very different solutions which continuously evolve to provide the customers with new tailored solutions. At the other extreme is the commodity market, where solutions are identical with very little innovation, suppliers are interchangeable, and the price of the services is low.
ANS has historically been a specialised service and has not really changed significantly over the last decade, but there are signs that it is moving up the commodity lifecycle slope. Indicators of this transition include the increasing competition for terminal services, and the emergence of lower cost suppliers. Of course, there are barriers to the effects of commoditisation such as sovereignty of the state, and protectionism driven by security as well as socio-economic concerns. However, interoperability and standardisation and the increasing push towards competition is moving ANS up the curve towards commoditisation. What's more, new technological advances are being introduced that support this trend: data centres, virtualisation, remote towers, FDP as a service, to name just a few.
So how can ANSPs escape this "race to the bottom"? The answer is to differentiate themselves and increase innovation, for example through customisation, segmentation and service bundling:
1. Add value to the service through customisation and segmentation
Focussing on a particular service aspect can make you stand out from the crowd. One energy provider introduced "digital electricity" to big businesses, offering resilience with no fluctuation. This allowed it to target an important sector of its market, differentiate itself from its competitors and charge a higher rate for the services provided. Translated to ANS this could be for example a decision to focus on en-route, providing the capacity, resilience and safety which will attract customers, and leaving airport ANS to others.
Offering a variety of services as a bundle can make your offering more attractive to customers. Cable companies commonly bundle highly commoditized landline phones with internet and television services. For ANS this could be a bundling of services provided across several airports or combining different types of services, ie ATC, surveillance etc.
The biggest impact comes from combining both measures above. Investing in new technology to help this happen can disrupt the market and should be a focus for any supplier trying to reverse the trend towards a commodity service. There are no quick fixes, commoditisation will continue to challenge ANSPs, but to avoid a "race to the bottom" the answer lies in innovation.
For more information, contact Isabel Franke-Chaudet.