The higher order value business service providers

In transportation, there seems to be a saying that we all have to better understand the customer with big data applications. Before this year’s Innotrans, many new companies are popping up that want to do a railway ticket purchasing or transport ticket purchasing platform. What they are all seeking is the higher-order-value position – a position that sits between the transport provider and the customer.

While intuitively, this makes perfect sense and the theory predicts that with such a position, prices on the lower-order-value provider can be dictated, I also believe this intuition is horribly wrong and most of these providers will not survive more than the next 3 to 5 years.

The strategic concept on which these business models are based build on the idea of replacability along the value chain. In transport however, you often have an issue of scarcity, e.g. landing slots at an airport or available railway track access slots between two cities. These limitations often dominate the market, e.g. are impossible to breach entry barriers, and alternative modes of transport, e.g. the Fernbus, have their own system limitations as well. Therefore the overall strategic concept will not prevail on a long-term. I do not even think that any transport service providers will go bust because of these higher-order-value business models. Rather, the providers will eventually move into their terms and give themselves the better pricing.

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