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.

What makes a YouTube video go Viral?

Youtube Viral Video

We should all be familiar with the concept of Viral Marketing, but what is it that really makes a video go viral?

There is no unique formula for what is needed for your content to go viral online, but there are tons of theories about it. I have chosen to present YouTube Trend Manager Kevin Allocca’s findings on what it takes for a YouTube video to go viral.

Kevin is listing 3 main characteristics that a YouTube video requires to become an online phenomenon.

1.       Tastemakers

For a YouTube video to go viral tastemakers or opinion leaders are a key element. What Kevins research shows is that the boom in traffic to YouTube videos comes just as opinion leaders, usually with a large following base, starts to share the content. This attracts the follower’s attention and the reach of people is suddenly unbelievable.

2.       Community Participation

Kevin highlights another key element: Participation of the community. A successful viral video has a tendency of allowing for interaction and participation. The video might inspire people to replicate it or build on top of it, and again the reach of people is suddenly unbelievable.

3.       Unexpectedness

Last and final element is the absolute uniqueness or unexpectedness of the video. Only videos that present something new, or present something better than previous videos, will experience the audience’s willingness to share and interact. Unexpected presentations of usually uninteresting material is usually the key to a successful viral YouTube video.

Here is an example of a viral video with more than 42 million views on YouTube. The video is of a guy named Matt that is dancing, and he is not in particular good at it. Why should you want to see it? Because it got some unexpected; it involves the community and inspires, and it has probably at some point been shared by tastemakers for it to reach its massive audience.

If you want to see Kevin Allocca’s  full keynote from Ted Talks on the matter of Viral YouTube video. Watch the clip here. In the end it is the audience that defines the popularity!

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?