In the ever-changing landscape of global business, particularly in the context of the travel industry, understanding economic cycles becomes paramount. For companies, successfully navigating these cycles, particularly during times of crisis, often hinges on the ability to harness technology effectively. One such beacon of resilience is Derby Software, whose fortunes took a remarkable upward trajectory even as the COVID-19 pandemic gripped the travel sector. While many businesses were reeling from the shock, Derby Software not only managed to remain profitable in 2020 but also saw its operations quickly rebound to pre-pandemic levels by 2021. But what exactly enabled Derby Software to achieve this and what were the strategies that guided its journey through tumultuous times?

Founded as a data technology company serving hotel and airline product distribution, Derby Software’s influence extends across 197 countries, with over 97% of its business derived from international markets. CEO Zhang Huanjie attributes the company's success during the pandemic largely to continuous technological iterations, with significant support from Amazon Web Services. From the onset of the cloud era, Derby Software forged a collaboration with Amazon, laying a solid technological foundation and enjoying robust computational support, which proved crucial during the crisis.The travel industry has long been plagued by various forms of asymmetry—information, computational, operational, and credit discrepancies—that complicate interactions between consumers and enterprises. Traditional global distribution systems often suffer from a lack of flexibility, centralization, high costs, and poor performance. In response to these systemic challenges, Derby Software developed a Global Distribution Network (GDN) to create breakthrough solutions that enhanced its capability to serve clients and generate value.Strategic Transformation Across Four GapsZhang Huanjie identifies four critical gaps that have historically hindered the travel industry: information asymmetry that disrupts communication between consumers and companies; computational gaps limiting small businesses' data handling capabilities, thus stifling innovation; operational discrepancies that complicate the integration of global resources; and credit discrepancies that impede partnerships between small operators and larger corporations, ultimately undermining trust in the industry. He further critiques the traditional technological frameworks, pointing out four primary challenges: insufficient flexibility to adapt to market changes; the cumbersome process of updating hotel information; the high maintenance costs of centralized architectures leading to data silos; and poor performance that fails to support effective decision-making.Initially focused on the domestic market, Derby Software faced steep competition within China's travel sector, prompting a strategic pivot towards international markets. Recognizing the importance of global server distribution, the company migrated to Amazon's public cloud infrastructure in 2012. This transition, facilitated by Amazon's powerful computational capabilities and assured data security through PCIDSS compliance, allowed Derby Software to quickly establish a global presence and ascend to prominence in international markets.As it advanced its operations, Derby Software identified shortcomings in hotel digital marketing. Leveraging its technological expertise, the company developed tailored marketing strategies and support systems for hotels, enabling them to better understand and adapt to platform algorithms, thereby optimizing bidding strategies. This segment has become a significant revenue generator, with annual contributions of $15-18 million, further accelerating the digital transformation of hotels.Notably, Derby Software sought to expand beyond the hospitality sector into aviation, aspiring to integrate its hotel services with air travel provisions for a streamlined experience. To facilitate this transition, the company acquired PKfare for over $100 million, aimed at creating an interconnected service framework. Zhang elaborates on this vision, explaining that ticket integration means aligning airlines with ticket suppliers while combining airline and hotel offerings across diverse travel scenarios, maximizing consumer benefits. “Ultimately, we want every traveler to feel like their journey knows no bounds,” he added.“Widening the Road and Increasing Speed”Despite progress, the travel sector's digitalization and smart transformation remain in their infancy, with a pronounced lack of collaboration capabilities. Many hotels struggle to engage with emerging online platforms due to insufficient technical capabilities, resulting in frequent challenges during integration. Moreover, hotels often lag in understanding and applying new technologies to enhance their operations and services.Derby Software recognizes that to truly “widen the road and increase speed,” they must enhance the technical proficiency of vendors. This is pivotal for the overall growth of the industry.With a background in machine learning, Zhang has been integrating AI technology into operations for over a decade, applying algorithms to analyze hotel market data, accurately predict pricing fluctuations, and optimize data synchronization strategies. By reducing data collection frequency and time costs, Derby Software significantly improved the accuracy and timeliness of data, providing hotels with valuable market insights to enhance revenue management strategies while also lowering operational costs.As generative AI technologies emerged, including the likes of GPT, Derby Software swiftly recognized opportunities for innovation, exploring ways to merge real-time data with large language models. Their goal is to enable users to access bookable travel products effortlessly through natural language interfaces. While challenges related to technological maturity and applicable scenarios remain, Derby Software has adeptly utilized its capabilities to pioneer initiatives across multiple sectors.Among these innovations are:The AI mapping technology effectively addresses the challenge of hotel data matching. Given the travel industry's inherent inconsistencies in platform descriptions of hotel room types, data integration can be particularly daunting. By leveraging natural language processing and machine learning algorithms, this technology can accurately identify and match information across various platforms, ensuring data consistency and accuracy. This not only enhances the data integration efficiency between hotels and partners but optimally improves the user experience by delivering clearer and more accurate hotel information.Furthermore, the ChatBI project represents a significant advancement in data analytics. When serving overseas clients, Derby Software taps into Amazon Bedrock’s access to leading industry models like Claude, which possess exceptional attribution, contextual understanding, and reasoning capabilities. ChatBI enables users to pose natural language queries for data analysis without requiring complex SQL syntax, effectively lowering the barriers to data analysis. In practice, hotel managers can input straightforward questions, with ChatBI synthesizing the user's intent, automatically generating SQL queries, and returning precise results. Moreover, it incorporates data visualization and intelligent recommendation functionalities. By assessing user query histories and analysis outcomes, it can provide operational insights that enhance strategic decision-making capabilities.AI as a Key Competitive VariableIn Zhang Huanjie’s perspective, as the tourist industry undergoes digital transformation, the demand for technological advancements from the supply side has become increasingly pressing. With its specialized technical team and extensive industry experience, Derby Software has emerged as a crucial collaboration partner for hotels looking to enhance their competitive edge. From the profitable ventures realized in 2020 amidst industry challenges, Derby Software has evolved into a stable revenue-generating entity, with AI playing a central role in this transformation.This significance of AI primarily manifests in optimizing enterprise operational frameworks. Traditional business models in the travel sector frequently encounter efficiency bottlenecks; for instance, in hotel data updates, delays and inaccuracies can arise. The incorporation of AI technology enables automated, precise data processing, thereby enhancing operational efficiency. Derby Software deploys AI algorithms to anticipate hotel price changes, making data collection more targeted while effectively cutting costs and amplifying accuracy. This efficient data processing capability provides enterprises with solid, reliable foundations for rapid decision-making and agile responses.Moreover, AI profoundly influences strategic decision-making and market adaptability. Given the complexity and volatility of the travel market, brimming with uncertainties, AI technology's powerful data mining and analytical capabilities allow enterprises to glean insights into market trends and promptly reevaluate strategies. For example, in hotel revenue management, AI can analyze multi-dimensional data, such as supply-demand relationships and consumer behavioral patterns, to furnish hotels with scientifically sound pricing strategies and resource allocation frameworks.In an era where innovation catalyzes industry transformation, AI’s capabilities signal numerous pioneering opportunities. With a growing demand for diversified and personalized consumer services, traditional service models struggle to meet market expectations. The advent of AI technology opens unprecedented avenues for innovation in the travel sector. The rising prominence of generative AI technologies compels enterprises to explore deeper integrations with their tourism offerings. Derby Software has identified and seized this trend, incorporating real-time data with large language models to aspirationally develop a more intelligent, accessible service experience for travelers.“Generative AI will undoubtedly revolutionize technology across the travel industry beautifully, significantly accelerating our core mission to realize the aspirations of providing limitless travel experiences,” asserted Zhang Huanjie. “The value generated by generative AI is inherently beneficial to all; nonetheless, those who innovate and harness these technologies will gain the most. The companies that excel will be those with technological prowess, diligently embracing technology rather than relegating it to an ancillary role.” In essence, he posits that the overarching battle for market supremacy will increasingly hinge upon one critical variable: the AI capabilities that define competitive advantage going forward.

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As generative AI made its entry into the spotlight over the past two years, the discourse surrounding its implications has been lively. However, what captivates Harvard Business Review China is not just the buzz, but the tangible outcomes of applications in business: how the competitive landscape framed by generative AI reshapes realities and introduces new challenges for companies responding to the demands of users and customers. What currently awaits Chinese enterprises, and what does the future hold?

Cooperating with Amazon Web Services, Harvard Business Review China is embarking on an exploratory project focusing on “Generative AI: Creating Visible Business Value” in the latter half of 2024. This initiative will involve an in-depth investigation of dozens of Chinese enterprises’ generative AI application scenarios, processes, challenges, and outcomes, illustrating the pioneering efforts of early adopters within the industry. As we stand at the inception of the efficiency revolution with generative AI, we anticipate that these 1.0 era trailblazers will inspire and illuminate the path for more Chinese enterprises in this efficiency-driven transformation.