Aeroplan Needs (Re)invention - 5 Ways to Make it Happen

Imagine if your entire business was dependent on a single partner. The partner was the foundation of and formed the core of your business. Now imagine if that partner decided to end the relationship, and compete with you head to head. This is exactly what happened last week to AIMIA, after their core airline partner - Air Canada, announced they’re severing ties with AIMIA’s coalition loyalty program, Aeroplan, to launch their own loyalty program (in 2020).

The announcement - a huge surprise to the market – was not well received. In a single day, AIMIA shares dropped over 57% ($8.93 to $3.33), erasing almost $1 billion, or 2/3 of the company’s market cap in a single day. It was the biggest intraday trading decline since AIMIA was listed in 2005. Analysts worldwide have downgraded the stock with a price target of around $4; down from previous targets of $10-$11. In short, the announcement has decimated AIMIA’s enterprise value, and has many claiming that the loyalty program faces a very dire future.

What many people don’t know, however, is that AIMIA has a solid enterprise business which provides products and services that power loyalty programs for some of the world’s biggest brands. But this business pales in comparison to the real bread winner for AIMIA; Aeroplan.

I believe the separation announcement could be a boon for AIMIA and the entire loyalty industry. The separation provides the spark AIMIA needs to reinvent itself. It also gives AIMIA permission, space (as it’s no longer tied to the legacy Airline partner), time, and a ‘blank slate’; some of the key ingredients needed for reinvention. This is likely the best opportunity AIMIA will ever have to reinvent itself, and the loyalty business. It’s an opportunity that can firmly plant AIMIA as the loyalty leader for the next 25 years, in a tired industry that is desperate need of innovation. As an industry, loyalty has failed to explore new business models, embrace modern technology, provide consistent and compelling value to stakeholders, and prioritize the customer and member experience.

Many parallels can be drawn between AIMIA and other modern reinvention examples. Iacocca did it with Ford. Immelt did it with GE. Gerstner did it with IBM. Nadella is attempting it with Microsoft. AIMIA, however, must innovate in a time when the pace of change has never been faster, technology entrepreneurs, machine learning and AI are disrupting entire industries, new economies (sharing, experience) are revolutionizing how people live, work and consume, and the battle for share of mind and wallet has never been fiercer.

To capitalize on this great opportunity, AIMIA needs to do 5 things well.

1.   Embrace the opportunity

Embracing the opportunity may seem obvious to some, but it’s probably a huge mind and cultural shift for the AIMIA. It’s not easy for traditionally successful businesses to innovate, and most fail to do so. It’s even harder for businesses to let go of who they are today, and their business models.

The first step in succeeding at innovation is authentic commitment to an innovation mindset and philosophically. It’s an imperative that must form part of the new DNA of the company. The innovation opportunity must be viewed as an essential journey in the evolution of the business. The opportunity should be energizing and supported by all, especially top executives, the board and shareholders. It’s the biggest opportunity the firm will have to forge a new, better path. To achieve this mindset will require a reset of strategy, culture, values, rewards, people, processes and the methods used to make decisions.

2.   Bring in outside talent to create an innovation team

To truly reinvent itself, AIMIA needs to look to the outside. Bring in talent who are passionate about technology, transformational change and understand the environment AIMIA now operates in. The new team should be from the tech start-up ecosystem. Tech entrepreneurs who will bring experience, knowledge, new thinking, proven start-up methodologies (lean, theses driven development), and the network of experts that can help AIMIA find a new, better path forward, faster.

This cannot be done with consultants or consulting firms. People who make up the core team must be passionate about the opportunity, have a significant stake in its’ success, and have a lot to lose if things don’t work out. In short, they need skin in the game – and their livelihood should depend on the. This can only be achieved if the team has the same pressure and upside of a start-up.

3.   A clear and compelling reinvention mandate

The team should be free to act in isolation of the challenges and constraints of the business. In this regard, AIMIA must be courageous. The executives, together with the board of directors, must empower the team to act, experiment and fail in relentless pursuit of an incredibly challenging mandate; how to reinvent AIMIA to become a global leader for the next decade and beyond.

The team must have the intelligence, experience, curiosity, autonomy, and freedom to form theses that could challenge the fundamentals of the AIMIA business. But they must do so, unencumbered by bias, the current situation, existing business models, obligations, the past and people. The team will need to be free and clear to challenge status quo and ask big questions like:

What are the unshakeable beliefs about loyalty? And what if the opposite was true?

How can we rethink our business to create more value for all stakeholders?

What trends, weak signals and examples of innovation can inspire real change in our industry?

If we were to build the best company in the world in this space, what would it look like?

4.   Create the environment, support and headspace to succeed

AIMIA needs an innovation lab space that is separate from the existing business and matches the work to be done. The environment should foster creativity, rapid experimentation, collaboration, iteration and failing.

Matching the environment, AIMIA will need to provide the team with the capital and people it needs to succeed. This means all hands-on deck. AIMIA executives and employees will need to make supporting the team a priority; part of their commitments. The board and shareholders must be willing to make significant investments in ideas, start-ups, partnerships and acquisitions to deliver on the mandate.

The board and executive team must be 100% supportive of the team and mandate.  This means that executives must reward the team for experimentation and failure. Reward risk and view failures as part of the learning process that’s required to fulfil the mandate. This will require a significant shift in the current executive headspace.

5.   Provide access to users and customers (no questions asked)

This is probably the single greatest gift AIMIA can give to the innovation team. The team will need to reorient itself around Aeroplan users, customers and partners to rediscover, and unlock potential value and new opportunities. These customers will need to be involved in the innovation process and available to test and provide feedback on new ideas and products. This access will allow AIMIA to ensure market/customer validation (or not) quickly, test and find winning ideas. Again, senior managers and executives will have to cooperate; potentially linking rewards (commission/bonuses) of current team members to making this happen.

If AIMIA executives can do these 5 things, they’ll have set up the fundamentals for a great way forward. Unlike the market, I don’t think the sky is falling for AIMIA – not yet. The bad news from Air Canada could be the spark that sets the company up for great success in the next 10 years. But it’s up to the company to seize and capitalize on this unique opportunity. Not doing so will be a great tragedy, and will probably result in a slow downward spiral of the brand.

Success or failure, for me, will depend on what AIMIA does next. Embrace reinvention and the innovation opportunity or not.

I’ll be watching with baited breath.