With high levels of uncertainty in the market today, businesses need to survive in an extremely tough environment, where any strategic mistake can cost them their future. However, even if turbulence turns out to be more than just a few bumps, there are still ways to recover, with Qantas being a good example.
Speaking at the recent Strategic Planning Innovation Summit in San Francisco, Kieran Duck, Strategy Manager at Qantas Engineering discussed how despite drowning in multiple problems, Qantas, one of the oldest airlines in the world, has overcome challenges without losing face.
Founded in 1920, Qantas is not just an ordinary airline, but one with a rich history. 15 years after launch, the company started flying overseas to Singapore, and more than 60 years ago they started operating in the US and other destinations. Kieran says we should also recognize Qantas’ involvement in various rescue operations and its records for operating one of the longest flights in the world. Qantas’ safety record was even noticed by Hollywood, with the movie Rain Man, Tom Cruise and Dustin Hoffman referring to the company as 'Qantas never crashed.'
Preserving their legacy and retaining success, however, turned out to be a difficult task, and in late 2011, Qantas experienced problems which threatened their future. Almost every industry was affected by the global financial crisis and Qantas wasn't an exception, where Kieran refers to international markets being a complete mess. Moreover, at that unpleasant period for businesses, the company also had industrial disputes, followed by the rising popularity of their competitors in the market.
Qantas started looking for ways to recover - beginning with its inner structure. When they looked at the level of engagement in the company, Kieran told us ‘they found that 27% of their staff fell into the group that was annoyed with their job.' He added that having this situation today would usually end in employees seeking job opportunities elsewhere, but not at that time: 'People couldn't get paid elsewhere, and we ended up with 27% of our staff really annoyed and having no plans to go anywhere,' so labor unions got involved instantly, causing more problems for Qantas and damaging its spotless reputation.
'So we had the most experienced airline, with not very great engagement, a high-cost level and competitors on the rise,' Duck concluded. Today, Qantas has come back with a 35% cost reduction, an improved level of engagement and a better management structure.
What did they do?
The main focus of the new strategy was on simplicity, but although defined as simple, the process was far from it. Duck says 'the focus' must be followed by the right strategic thinking, and also 'operating like we had a future, like we are going to come out of this.'
Simplicity was not about simplifying and sacrificing the customer reach, but about simplifying the business itself. The first step was to restructure the existing fleet. Having 5 different types of aircraft, the aim was to detect what exactly was driving high costs. The aircraft maintenance was expensive, but it's not something where you can save money. It was the layout- the internal configuration which drove the cost, as it had an ineffective seat allocation, seat coverage, and not always efficient staff training. By changing the layout, Qantas went from 22 configurations to 6 - achieving the simplicity needed, reducing the cost, and retaining quality.
Simplicity wasn't about grabbing the first available option but spending time on figuring out the best solution - that's where the right strategic thinking played a critical role. Kieran believes that defining the problem was the key, outlining two types - tame and wicked. Tame problems are straightforward and well understood, and the solution usually lies on the surface, where no debate is required. The wicked ones, on the other hand, rely on different views, and their solutions depend on how you name problems. Once they are correctly defined, the solution can be brought forward. With Qantas, consultation with the unions was one of those 'wicked problems', because unions are responsive and reactive, so correctly addressing the problem is the key to benefiting all parties.
Regardless of how bad the problems were at Qantas, they managed to operate 'like they had a future'. Kieran points out that this was achieved because the company never lost a sight of their customers, so even in difficult times it invested in areas where it was necessary - continuously improving customer experience, whilst dealing with other problems. One of the examples was to reduce the cost of the catering processes, but instead of saving that money, it was reinvested in fresher ingredients and more efficient services, because that's what, Duck adds, was in the customers' interest. Also, It was critical to continue investing in human capital, by continuously training staff, that's how the management has become more productive, and better engagement within Qantas' corporate culture has been achieved.
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