From silos to top down: why change itself needs changing

10 September 2015

Over the past 30-40 years, the airline sector has consistently recorded one of the lowest average returns on invested capital among all industries. As the environment in which airlines operate becomes ever more competitive and subject to increased regulation, the pressure on margins can only become more intense. Airline CEOs recognise that their businesses face some big challenges in the years ahead. They cite shifting economic power, advances in technology and demographic shifts as major drivers of change 1. What’s more, they need to address the changing demands from more aware and informed consumers who expect services to be built around them. Taken together, these all point to the need to make major, strategic change in order to improve business performance. Standing still is a one-way ticket to oblivion. 

The airline industry runs on very low margins, with highly constrained resources. Delivering change programmes is therefore inherently challenging. As a result, what we tend to see today is change happening in various, siloed, parts of an airline’s business. Very rarely do we see airlines driving strategic change from the top of the organisation. To overcome this, it’s critical for airlines to start developing a comprehensive portfolio view of change – and the realisation of its benefits – making sure that this is tied via well-designed processes to align overall change activity to a singular, shared and clearly understood strategy. This approach helps cultivate increasingly essential responsiveness and agility, so when the strategy develops in a fast-changing world, the business is able to respond quickly and align its activities with that new strategic direction.

Equally important is the need to establish clear communication and open channels to make sure that the whole business understands the change required and why it matters. PwC’s research clearly shows that when individuals charged with making or managing the change on the ground are empowered with a clear remit to drive the changes through, the chances of project success increase significantly.2  In practice, this means pushing down the authority to make change to where it is needed, rather than all decisions having to flow back to the top which inevitably causes delays and stalls progress.

And in today’s airline industry context the need to make effective and rapid change is more acute than ever. The demand for lower-emissions, more fuel efficient and quieter aircraft is driving multi-billion dollar investments in fleet replacement programmes. Industry consolidation and the resulting competition are forcing established carriers to respond more rapidly and with greater agility. Advances in technology – from consumer interfaces and passenger handling to maintenance and scheduling – offer great opportunities for efficiency gains but are complex and costly to implement. And overarching all of these are the unique regulatory and safety demands placed on the airline industry. 

Maintaining profitability in the face of these pressures is unquestionably a considerable challenge. The ability to execute effective transformational change is the only solution. Finding the way forward calls for a new approach. Effective governance, and programmes clearly linked to strategy realisation and benefits are key elements. Engaging and empowering staff to drive rather than resist change is equally important. Planning must be detailed, firmly fixed on future objectives and clearly communicated to achieve all stakeholders’ consensus on the journey ahead and their role in reaching its destination.

Helen Campbell |  Senior Manager, Consulting
Email | +44(0)20 721 31121

  


1  PwC Global Airline CEO Survey 2014

 PwC 4th Global Portfolio and Programme Management Survey 2014

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