Saturday, October 24, 2009

Turning around

This company had started off as yet another JRD Tata enterprise and started life off as Tata Airlines. Soon after independence, it became Indias national carrier. In 1962, it became the worlds first all jet airline - no mean achievement in those days. The Maharajah, its emblem is an icon in Indian marketing tomes. Probably one of the most recognized icons in India. Given the ubiquity of its mindshare, this airline should have been one of the (if not the only) preferred airlines for Indians. But clearly, something (or many things went wrong).

Today, the airline faces bad times with a loss of about 700 to 7000 crore rupees ( depending on whether you count the erstwhile Indian Airlines or not) and a debt of twice that amount. The airline is facing a government bail out (by the time this article makes it to print, it would have been predictably approved). And ask the man on the airport, if they think any of this will make a difference to the airline and whether they will travel on it given a chance, you will be surprised at how many people will say that they will.

The wiki entry on the airline lists out numerous awards that the airline has won but ask the casual traveler and most of them will tell you they won't fly the airline. People will cite a thousand examples (some of which I have experienced myself) on why they wont. Unclean airplanes, indifferent staff are just some of the examples. Culturally it is an even bigger mess.

None of the service mentality that you would see in a Jet airways would be seen on an Air India. People run scared of booking themselves on an Air India flight.

It is well known that globally the airline industry is going through troubled times for a while now. First it was the low cost airlines, then it was fuel prices, then recession, then wars, security checks and what not. The government prepares to give the airline yet another chance by infusing a billion dollar assistance.

So, what will fix the problem? As a management student, this is an ideal case study.

From a management perspective, you will find many Air Indias around you. In the form of people, in the form of projects, in the form of products and services. And these are places where tough decisions have to be taken. You may find yourself saving an Air India in the hot seat or find yourself on a committee that evaluates it.

First of all, employees (stakeholders and members of the project) need to buy in and agree that they will do whatever is necessary to execute the turnaround. If they are not willing, you will need to how much you need their assistance or if there is a need to get fresh blood. Without committed employees, no turnaround can be executed. This is a common occurrence whenever a company takes over a new enterprise. There is
fear, uncertainity, doubt (FUD) factor, people worry about their jobs and their future. They need to be told about it one way or other, yet done so in a sensitive manner.

A cultural change is expected and required. Will your present leader deliver or would need to drive change from the top? The leader may or may not be inspirational, but he needs to have the ability to take people alongwith him. More than leaders, you would need the support of various stakeholders with various levels of influence and needs. How the leader influences th em and has his right of way is very important. Ever
so often, we see a clear strategy, that fails because the stakeholders have not bought into the strategy. A lot of the ERP implementations in companies have gone this way due to the reason of not taking people along.

Do you need to run the business at all? Don't caught fooled by the sunk cost fallacy ("we have already spent so much money on this") or emotional attachments ("it was started as our first business") or delusions of grandeur ("it is prestigious to own this business") The question that you are faced with is, "Is the business in the best interest of the company today and the future"? Either answer demands a separate set of things to be done. For a lot of old world companies getting rid of non-core activities; indeed defining what is core and non-core and getting to it has been no cakewalk.

Even once you decide that you need the business a similar decision would need to taken with the product/service lines. Ever so often you see companies persist with product lines that are not in tune with the market. To me, PAL and Hindustan Motors persisting with their models comes to mind. And on the contrary, a Toyota has adjusted itself very soon.

Executing a turnaround is a tough job. Most businesses can turn around - with a sharp focus on strategy, market and customers, an eagles eye on execution and of course, assuming that you have the right strategy and support from all the stakeholders. We have seen government run enterprises successfully being taken over by private firms, both in India and abroad. Mittals turnaround of loss making steel plants is a
case study in itself.

Coming back to the Air India question, how does the fund infusion help when most of the other factors are not changing. The union appears to be as uncooperative as ever, the culture refuses to change? The government uses Air-India for its junkets. Presumably only the government and some destinations like Gulf are still profitable segments for Air India. And if that is so, do we really need an airline envisaged as a show piece to be in this situation? And is that what is national "prestige"? Would the private carriers not set a better example of service? Many other nations have privatised their national carriers...

Many a time, a turnaround requires a fundamental change. Telco at one time was a manufacturer of trucks and heavy vehicles - by and large. It was a permanent icon of Indian roads alongwith Ambassador and PAL. Today, Telco is still around. It managed to bring on the first 'Indian' LCVs (they are a hit even today), created the first Indian car (Indica), the pathbreaking mini truck (Ace) and of course, broke new ground almost simultaneously in two ends of the market with the Jaguar and the Nano and invested in some advanced truck making capabilities...

What will work for you?

(An edited version of this piece was published in Advancedge this month)

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