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.

Ask the What if Question?

Sunshine Coast Innovation Centre

Innovation starts when people ask the What if Question? Today I attend a great lecture in connection with the 10 year anniversary for the Sunshine Coast Innovation Centre. The lecturer was Steve Huff, form managing director of Typefi, an automated publishing too used by companies such as Apple, Lonely Planet and Telstra.

Steve Huff was sharing his entrepreneurial experience, which he did really well. In 1999, just after the IT bobble busted, he founded Typefi, after asking the question; What if we could automate book publishing and save the publishers money by shortening the editing process from several days to today’s just 3 minutes. The entire lecture was framed by this question of: What if? Because as Steve said, that is the main question entrepreneurs ask themselves.

Steve shared a great story of an episode with an online conference call with Apple in Cupertino, where they experienced constant fall outs. The Apple employees became pretty frustrated about the situation and Steve Huff and his team had to admit that they did not have broadband.

Even though Steve’s story was pretty amazing, he underlined that being an entrepreneur is a hard job and he also had a few stories to about sleepless nights, extreme frustration and fear. But as he stated, if you are passionate about what you do, you don’t want to take a break from it.

Today Steve has asked himself the question: What if we could supply refugee camps in Africa with lightning and by that minimize the risk of assault and rape of women and children? With this question has Steve set out to create jobs in a whole new industry of lightning under the name of Doble.

The anniversary also gave the opportunity to say hello to Gideon Shalwick, an online video marketing entrepreneur specialized in turning online videos into cash. I had the pleasure of sitting in on a guest lecture held by Gideon just a week earlier on Campus. It was a great lecture, and I was happy to be presented with the opportunity to have a little chat about Gideon’s book publishing history.

All over a regular Thursday turned into an extraordinary Thursday. Now I am about to ask myself the What if Question? And so should you?

Have you heard about Everplaces?

Everplaces

Everplaces is a web based bookmarking service, created to make it convenient for everyday users to save and share unique places they like, to be rediscovered on a later entry. Everplaces is still very young, and is still in Beta, which is very common for technology businesses.

So what is Everplaces and what can it be used for?

Well, Everplaces is as simple as it sound just very good a bookmarking your places. So when you go out for dinner somewhere new, and you have an enjoyable time, you will be able to save the location, an image and a short description, for you to find it later. This can be applied to all sorts of categories that you might find interesting and it is all operated via your Iphone, or you can go online on your labtop and access the service online.  Furthermore, Everplaces allows you to share those places with friend and followers on Facebook and Twitter. It is as simple as that, So Far!

So why is Everplaces different?

I’m not so sure that Everplaces really is that unique, as a lot of different services out there allow you to save or bookmark stuff. However, Everplaces approach might be just be what separates them from the crowd. What Everplaces have done is to aim at the later adopters of the geo location service and make the product very simple for everyday people to use.

Everplaces have in a short time become very good at bookmarking, and is now moving on to bigger adventures. Everplaces is extending the service to now include the opportunity for exploring the places of ones friends. This is a necessary strategic move for Everplaces to become a real service and not just a cool feature, mainly centred on an App.

Near future for Everplaces!

No one should ever try to predict the future. However, looking at the challenges Everplaces is facing, a very interesting future is ahead of them. I’m not to say whether or not the service will be a success or a failure, but for me it is very clear that for the service to evolve, the development of its “Explore” feature is very important. Everplaces must look into how to utilize all these bookmarks and make them beneficial for the user, in relation to exploring new areas.

Without knowing, I could hope that Everplaces over time will make it possible to pick up the bookmarks of friends, and via GPS location be able to tell me what the people I trust liked in just that place. Still without knowing, I could imagine that this is what Tine Thygesen and the rest of the team at Everplaces is working on.

I’m on Everplaces…

I have been playing around with Everplaces online service and if you want to take a look yourself, visit my Everplaces profile here.

You can sign up and start adding your favourite places, so you won’t ever forget them.