How FlixBus uses AI to make bus travel sexy

With my latest relocation to Munich, Germany, I have discovered a new way to explore all the exciting destinations across Europe for no more than a few euros in the form of FlixBus, a long distance bus service.Typically, there is nothing sexy about buses, but FlixBus has reinvented this traditional business model and this is certainly making ripples in the travel industry.

FlixBus is the leading long distance bus service company in Germany and has acquired 90% market share in just about 5 years. The market for long distance bus services was liberated in Germany in 2013, and as co-founder Jochen Engert commented in an interview with CleverIsm: “How often is it that a market is liberated? This was just an opportunity too good to miss.”

FlixBus’ Business Model

Germany’s largest bus company only owns one bus and employs no bus drivers. That might seem a little odd, but that is what makes FlixBus’ business model so interesting. FlixBus is structured similar to a franchise, where FlixBus takes care of Marketing, Branding, Sales and Route-Planning, but relies on 3rd party contractors for operations.

FlixBus sees itself as a technology platform that offers services to transportation companies. The typical contractor is family-owned businesses that knows a lot about driving and operating vehicles, but very little about acquiring customers, via web, mobile and other platforms. FlixBus has a revenue split with its contractors and one will argue that it is a mutually beneficial partnership, as both parties brings unique competencies to the table.

The technology platform

FlixBus is creating a competitive advantage with branding, but the true competitive advantage is their technological platform. With Artificial Intelligence (AI), FlixBus can plan future routes and through large-scale data collection FlixBus can accurately forecast demand. The ambition of FlixBus’ CIO, Daniel Krauss is to offer on-demand bus services, similar to the Uber concept. This would allow FlixBus to instantly offer a new route to meet demand. However, with the current regulatory body, where every bus route must be approved, this innovation is yet to be realised.

Consolidating a fragmented market

One of the things that FlixBus has done really well is to consolidate a fragmented market and make the bus booking system convenient for the customer. With hundreds of smaller bus service companies it used to be both expensive and inconvenient to take the bus, but with FlixBus it has become just as easy as booking a flight.

Consolidating a market has different operational benefits. When you control 90% of the market you can optimize for efficiency and you are not forced to operate half empty buses. Contrary to the general theory that competition is beneficial for the customer, the customer is actually benefiting from FlixBus having something close to a monopoly. The theory is that Flixbus has an incentive in keeping prices low to keep its competitors out of the market. The breakeven point for a bus route is something like 70% to 80% passenger capacity. If a competitor starts operating a competitive bus route he is expected to have 40% to 50% passenger capacity making the route unfeasible. Eventually it will be a matter of who has the deepest pockets.

Rapid market expansion

FlixBus is already targeting markets outside of Germany and in 2015 they moved into France. In the first half of 2017 FlixBus has transported 3.3 million passengers in France, an increase of 70% compared to 2016. It is currently 30% cheaper to ride FlixBus than to go carpooling. Today the network spans all across Europe from London to Rome, From Paris to Prague.

The biggest threat

All over, the business model of FlixBus appears bulletproof to the naked eye. However, even FlixBus is not immune to accidents and when a bus crashed into a car on the Autobahn on Sunday 17th September 2017, it was FlixBus in the headline, despite the bus not being operated by FlixMobility GmbH and the responsible driver not employed by FlixBus. The lack of control of the fleet and the inability to enforce control of the drivers might be FlixBus´s biggest threat, just as we have seen with Uber hitting the headlines in the past for similar reasons.

Why is FlixBus so fascinating

Just like AirBnB and Uber, FlixBus is a great example of how data has become the most valuable asset in the modern internet driven economy. In record time, FlixBus has become the dominating mobility company in Europe without operating its own fleet. Because of FlixBus’ market position and its intelligent technology platform, the company has successfully created a competitive advantage that is hard for its competitors to copy. When you know where the customers want to travel, it is easy to effectively meet demand and design or adjust your network accordingly.

FlixBus is such an interesting case study because it exemplifies how no industry is immune to disruption. Nobody thought bus travel could be sexy but FlixBus has proved everyone wrong. If you are a leader of a traditional business it is just a matter of time, before someone will make your industry sexy and potentially take you out of business. The takeaway is to stay nimble and constantly keep adapting to the ever evolving market forces.

February 22, 2016February 23, 2016

Lessons learned from the LEGO turnaround

As part of my Strategic Management course at the Nanyang MBA, I did a strategy report on LEGO’s turnaround in 2004. I grew up building LEGO and I have been following LEGO’s business for many years. When it came to pick a topic for my strategy report LEGO seemed like the natural choice.

LEGO is a fantastic case study of a successful turnaround of a failing organisation, attributed to selecting the right strategy. The LEGO management took less than 5 years to almost bankrupt what had taken 3 generations 70 years to build. In 2014, the LEGO group announced record net profits of DKK 7 billion after having turned around a net loss of DKK 935m and DKK 1931m in 2003 and 2004 respectfully.

These are my main findings and the key lessons learned from studying the LEGO turnaround.

If you are not familiar with the background of the LEGO turnaround, Economist and expert in Corporate Strategy John Ashcroft has done a very nice case study which is free to download online. www.thelegocasestudy.com

Know your core competencies and keep perfecting them. You core competences should be your competitive advantage and you don’t want to forget that. In the late 1990s LEGO experienced stagnating sales and stated to divest into new areas outside of its core competencies. The new product lines generated short term sales {DKK8,379m in 2000 DKK10,116m in2002 DKK9,475m in 2001}. However, the massive divesting was followed by large costs {DKK(9,000m) in 2000, DKK(8,554m) in 2001, DKK(9,248m) in 2002}. When the short term sales eventually failed to DKK 7,196m in 2003 and DKK6,704m in 2004, LEGO was carrying costs that it couldn’t bear.
Stay focused on your core business and ensure that your core business will always be your main attention. In case of divesting, don’t lose track of your cash flow and what puts money in your pocket. LEGO didn’t lose because it divested, but because it lost track of its core business.
Ensure you have the right measures to manage your business. LEGO’s accounting standards deceived the management and didn’t provide them with the necessary information to make strategic decisions. Instead of tracking the performance of individual product lines, the management was deceived by tracking country specific performance, hereby hiding alarming performance results of new product lines.
Listen to your consumers, but keep retailers first. LEGO has experienced impressive growth by constantly being close with their consumers. However, they don’t forget to keep their retailers happy with good margins and a well-structured supply chain. By ensuring that you vendors have the right quantity at the right time, you save them money and they will be happier customers.
Control you value chain. The value chain is where you create value for your customers and your consumers. Keep improving and optimizing your value chain to stay ahead of the competition.
Keep your organisation transparent and encourage communication. LEGO’s management was acting on wrongful information, due to lack of communication. As Jorgen Vig Knudstorp says: “a CEO needs every avenue to the truth that he or she can find”.

January 2, 2013January 10, 2013

8 secret tricks to write your CV

Writing a CV can be tricky. Therefore, have I made a short list of 8 secret tips that I have learned working side by side some of Denmark’s greatest recruiting agents.

1. You got 10 seconds!

You only have 10 seconds to make a good impression. Always keep that in mind!

Most job postings will have more than 300 applicants applying for the same position. This means you will have to stand out to get noticed. A professional recruiting agent will on average spend just about 10 seconds on each CV during the first sorting process. Do you make it to Second Round; you have made it very fare, because the recruiter will now take the time to get to know you, reading your CV. If you keep that in mind when writing your CV, you are good on your way to get a good job.

2. Your picture says it all!

Should I use a picture or not? There is only one answer and that is: “YES!” You should always have a photo of yourself, but not just any kind of photo.

There is an old saying :“a picture is worth a thousand words” and this is really true when we speak about your resume. Therefore, put always a great deal of care into selecting your photo.

Make sure to look professional in respect to the job you are applying for. If applying for a sales position, please dress business like. What happens is that you are assisting the recruiting agent imagining you working as a sales person.
Make sure that your picture, still looks great printed in black and white. The majority of recruiting agents print your resume, which means that colourful details vanish and so does your face. So make sure your picture appears great printed in black and white.

It often makes sense to have a professional, doing some good profile shots of you. The skill that a professional photographer has is to makes you look as good as possible and that will make a big difference to the look of your CV.

3. Make contact easy!

Don’t leave out your contact information. Make it easy for the recruiting agent to contact you, or to find more information about you. Don’t hide your birthday. For certain positions, age might be important. If your date of birth is not visible, you risk missing an interview.

4. Highlight the competences that make you unique!

This is the secret trick that too few people use. We have already established that you only got 10 seconds to make an impression. Which means you only got 10 seconds to sell your very best competences that make you stand out from the crowed. For example: if you speak 4 different languages, you should mention it in the very beginning and highlight the text as Bold and Italic. This naturally draws the attention of the reader and gives you a head start.

5. You have all the pages you need!

A lot of people think that they must fit their CV into one page or two. That is simply not possible if you just got a bit of skills to show off. Therefore don’t limit yourself by pages. Just keep in mind that first page is the most important one.

6. Make it chronological and structured!

There are a lot of different ways to structure your resume. However, there tend to be one preferable way and that is very simple and chronological. Help the recruiting agent easily read your CV in a chronological order. Don’t use too many unnatural sub-headings, as they tend to destroy the flow. Keep it to three sub headings: Languages, Work, and Education, and maybe a fourth one to cover awards, courses and events, which are of significance for your profile.

7. Don’t leave blank spots!

When the competition is rough, you can do so many little things that count as terrible mistakes. Therefore, try not to!

You might have been unemployed for half a year or more, and that usually isn’t very attractive for recruiting agents. Not that is has to matter, but it counts as deductive points. Therefore make sure just to use years when you structure your CV. For instance: from 2009 – 2011 Account Manager – from 2011 – 2012 Division Manager. In reality you were unemployed from February 2011 until November 2011. However, I as recruiting agent don’t know and then won’t care. Should you be asked doing an interview, you will of course answer truthfully. However, no reason to advertise it.
You should always be truthful about your CV, but too large blank spots are just naturally less attractive. So keep that in mind.

8. Sell your references!

A natural part of a recruiting agent’s job is to check your references. By references I mean former employers, teaches, or other people that in one way or another have worked with you and can give you a recommendation.
Because your resume should be a public paper and hopefully be changing hands of CEO’s and different potential employers, you might want to protect the contact details of your references. However, that doesn’t mean not mentioning them. Keep it to name title and company, and then kindly mention that contact details will be given on request. The more prominent references you have vouching for you, the more attractive you are to potential employers. Should you have a well known business man on your list of references. Then move references to the top and highlight the name, title, and company.

That was 8 simple tricks for you you to get ahead of your competitors. Applying for jobs is just like any other sales job. You got to stand out and you got to be Wise, however, don’t ignore the basic rules of simplicity, structure and readability. Good luck job hunting!