Shahar Markovitch is Chief Digital Officer & Chief Information Officer of EL AL, Israel’s flag carrier airline, flying 6 million customers a year to dozens of destinations globally with over $2 billion in annual revenues. In his former role, Shahar was the Chief Digital Officer of Bank Hapoalim, Israel’s largest bank and, among other things, lead the initiative that created the groundbreaking payment app BIT. Before joining Bank Hapoalim, Shahar was a partner in the consulting company, McKinsey and Company, focused on digital, technology, and innovation.

Shahar’s role at EL AL 

I joined the company about 18 months ago with the purpose of creating a new division combining the IT division and the digital unit and leading a digital and technological transformation at the company. Our division’s strategy is to help build “the smartest airline for the startup nation”. A smart airline means to leverage technology to improve customer experience, internal processes, and business practices and to make the company more lean, agile, and innovative. Being part of the startup nation means connecting with the local ecosystem, including academia, hi-tech companies and startups, to generate business value and contribute to company IP. 

The three types of innovation

Based on my experience working with different companies, I categorize innovation into three types. The first type of innovation is incremental. For example, we have to constantly improve and innovate EL AL’s mobile app – my customers expect me to release new features as part of my ongoing practices. At a company level, this will take the form of opening new routes, like direct flights to San Francisco or Tokyo, and continue to improve our core products like WiFi on- board and improved in-flight entertainment.

The second type is disruptive innovation meaning innovation that is changing or disrupting the market. For example, the BIT app changed the payment industry in Israel as it allowed app-based payments. In EL AL, we “unbundled” our economy product to create fare families (i.e., lite ticket, classic ticket, flex ticket) to compete more effectively with low cost carriers. We are launching a new service which is currently still in pilot mode, called Taxi-pool, which allows passengers on a flight to share a cab from the airport.

The third type is experimental innovation. Innovation that tries to anticipate future trends and position a company to survive a future threat or even leverage it to its benefit. Those trends are so far into the future that innovation in that respect aims to try to see beyond the horizon and understand its long-term implications on the business. For example, in Bank Hapoalim we experimented with blockchain technology to be ready for it when it will start impacting the banking industry. In EL AL, we experimented with VR for inflight entertainment to better understand if it’s a viable alternative to existing entertainment solutions (the answer was “yes!”). 

It’s important to manage a portfolio of different innovation types. Today, most of our efforts are aimed at incremental innovation given the immediate customer and business value they generate. We also invest in efforts to generate disruptive innovation where it makes sense. Regarding the third type, we are currently very selective with efforts around experimental innovation, as it tends to return benefits over a much longer time horizon. 

How EL AL is becoming more innovative

EL AL is taking a three-pronged approach to tackling innovation:

1. External innovation/open innovation – Looking for innovation based on external ideas, research and technologies. 

• Startups – We run open events and hackathons with startups. In addition, we have Cockpit, which is EL AL’s startup based innovation platform. 
• Hi-tech companies – Joint efforts to create customer value through cooperation with hi-tech companies. For example, we recently did such an event with Microsoft where we thought of ways to leverage Microsoft’s Holo-Lens technology to experiment with the impact of AR on future operations. 
• Academia – We are starting to work with a few universities in Israel. For example, our Chief Data Officer is a lecturer in the Technion and is running big data and data science projects with student participation.

2. Internal innovation – Looking for innovation internally through ideas and execution that come from the company’s workforce. This involves hackathons and idea competitions.  We also allow experimentation and have innovation leaders embedded in the workforce that help drive innovation.

3. Changing our internal ways of working to be able to digest innovation faster – This is about creating an environment and organization that can effectively digest the various opportunities generated by external and internal innovation efforts.

• Governance – We have a clearly articulated innovation process with checkpoints and committees composed of senior management to make such decisions.
• Infrastructure – We invest in a backend that can sustainably support the dynamics of experimentation and constant change. In particular, the ease with which we can integrate various technologies (cloud-based deployments, open API, etc’).
• Increasing our technology development speed and flexibility – We invest in agile development methods.
• Making the supporting processes more flexible – We modify established work processes that traditionally might hold innovation back such as legal, regulation, purchasing and so on.