When is a Transformation not a Transformation?

When is a transformation not a transformation? When it’s a turnaround, says, Derek Quayle, COO at PM-Partners.

And with this, we must acknowledge Qantas as poster-child for a turnaround in Australia, but proudly, also as a shining example globally.

Many market sectors are facing disruption and change, none more so than the aviation industry.

Qantas has been no stranger to global market changes and has had a long running series of initiatives aimed at shoring up its business.

Most of us can recall with ease the high-profile story of Qantas, which in 2014 made a loss of $2.8 billion¹, grounded planes amid industrial disputes in 2011², and, at one point, considered looking to the Government for assistance³.

So today we must applaud the incredible work completed at Qantas under the leadership of Alan Joyce, his senior team, and their teams, together with all Qantas employees who contributed to this unequivocal success. It’s rare in Australia the business community can look within its own ranks to see a best practice case study of a turnaround.

Last week the airline announced the completion of its three year turnaround project, and reporting its second highest profit ever before tax⁴, of AUD $1.4 billion AUD, following the previous year’s record of $1.53 billion AUD profit before tax⁵.

Qantas has done some amazing work to make it profitable in what is the most competitive businesses in the world.

And behind that hard work, were some tough calls as well.

All of us running organisations should look at what we can learn from Qantas’ story.

There are lessons we believe to be learnt, and to start, some things to be understood, and we all face disruption, competition, market forces, unexpected events against increasing customer expectations.

Firstly, was this a turnaround or a transformation? The definition can vary but in our experience:

A Business Transformation programme can work well for an organisation that is looking to change its strategic direction or operating model to either prevent a financial downturn or to recover from minor to moderate performance issues. Transformation involves making fundamental changes in how a business operates in order to help cope with shifts in market environments. Indeed, in our own business, the shift of PM-Partners group to professional services required a review on our current business model because we are adapting to get in front of our competitors.

A Turnaround Programme is more targeted to an organisation that is facing considerable performance issues that need urgent and significant remediation. A turnaround is where a company acknowledges and identifies its problems, consider its changes in management and develops and implements a problem-solving strategy.

 

Would we call the journey Qantas has been taking as Transformational?  Yes absolutely, but would we go further and say that this has been a specific type of Transformation? Then based on the above, yes, this is a Turnaround.

Regardless of the definition there are a few critical success factors for any transformation or turnaround. What are the hallmarks that made this turnaround such a success?

1. CEO or equivalent sponsorship
2. A clear business strategy in place
3. A clear transformation strategy aligned to the business strategy with:

• Clear Vision
• Objectives
• Plan with Milestones
• A focus on people: the succession planning involved and the CEO’s ability to have people in the pipeline with experience across multiple portfolios to take over.

4. Transparency and governance

 

In Mr Joyce’s own words “We tackled some difficult structural issues, became a lot more efficient and kept improving customer service.” It sounds remarkably simple, but plays to a clear vision.⁶

Of particular note is that Qantas has signalled, post-turnaround, that its job is not done. The hard work did not stop last week.

Despite the recent completion of the three year $2 billion turnaround⁷, delivering up a shareholder return of $9 billion, Qantas is now shifting its focus to an ongoing sustainable program of works. So, we see, it now embarks on an adaptive mode, evidenced by its immediate intention to remain focused on customer service, innovation and shareholder return by investing in upgrading planes, new routes and new planes.

Smart organisations, like Qantas, are not only transforming but are creating a culture and talent trap for continuous adaption, creativity and change. For some this will allow them to thrive against the competition, while for others it will be necessary to survive.

Pete Swan

Director of Strategy at PM-Partners group

 

1 https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/full-year-results/mediaReleaseResults14.pdf
2 https://www.abc.net.au/news/2011-10-29/qantas-locking-out-staff/3608250
3 https://www.abc.net.au/news/2014-02-13/qantas-boss-alan-joyce-says-government-policy-must-change/5255772
4 https://www.qantasnewsroom.com.au/media-releases/qantas-group-full-year-2017-financial-result/
5 https://www.qantasnewsroom.com.au/media-releases/qantas-group-full-year-result-2016/
6 https://www.abc.net.au/news/2017-08-25/qantas-flags-16-hour-direct-flights-london-profits-slip/8841572
7 https://www.theaustralian.com.au/business/opinion/john-durie/alan-joyces-plan-for-qantas-takes-flight/news-story/bbfa042e338bc43d89424216f87fa2f8