CEO Erik Venter unpacks how a 70-year old business can remain relevant and innovative in a highly competitive and commoditised market.
In many industries, the way to handle inflation and higher operating costs is simply to implement an annual price increase. If this is your strategy, there’s no need to be creative, efficient or innovative. It’s also a highly ineffective way to increase margins or build a sustainable business, particularly if your competitors are more focused on keeping their customers satisfied and adding value.
Comair operates within an extremely tight and competitive industry. Operating costs have inflated by 225% since 2001. Have any of these costs been passed on to the consumer? Sure. Since 2001 tickets prices have increased by 27%.
As a listed company beholden to its shareholders, how is Comair carrying these increased costs, while still posting a profit, not passing the costs on to its customers and enjoying impressive employee retention? In addition, more than 50% of the company’s 2 100 people have been with the company for over ten years.
Here are CEO Erik Venter’s five key lessons in leadership, innovation and remaining at the top of a highly competitive and commoditised industry.
1. Focus on what you’re doing, not what everyone else is doing
“In this day and age, your competitors know what you’re doing and you know what they’re doing. Be careful not to let that distract you from what’s important,” says Erik. “Keep an eye on your competitors, but don’t benchmark against them as a basis of action. Internal practices determine your success. Your level of competitiveness is a by-product of operating at the top of your game.”
In Comair’s case, internal practices are the foundation of long-term success. Everything the business does, including its interactions with shareholders, is based on a long-term view. The company has had four CEOs over the course of the last 70 years. Erik’s predecessor held the position for 30 of those years, and is currently chairman of the board. Comair’s institutional memory is second to none, and the business’s strength lies in a strong culture and a history of longevity.
Related: 6 Strategic leadership types in business you can learn from
The danger of course, is that while a wealth of experience and ingrained knowledge helps the current c-suite navigate competitive behaviour and understand what works and doesn’t work, the potential for complacency and legacy systems is heightened.
To counteract this, Comair focuses on driving a culture of innovation. “It’s a constant balancing act,” admits Erik, “but I would still choose an experienced team with a mandate to be innovative over an inexperienced team doing its own thing.”
The definition of innovation is making an existing product or service better. Not as a once off, but consistently. It’s this focus on constant, incremental changes that has allowed Comair to absorb a 225% cost inflation over the past 15 years without passing it on to its customers.
“If we were just focused on what our competitors were doing instead of reviewing each and every system and process in our own business, this would never have been possible,” says Erik.
2. A key role of leadership is stability
Press coverage tends to focus on charismatic leaders, and the role of stability is often overlooked. Yet consider the value of a truly steady and stable executive team. “Both employees and shareholders respond well to stable leadership, from the CEO to company directors, the board and management teams,” says Erik.
“This is particularly important in South Africa. There is so much instability outside the workplace that it’s important for your place of employment to be stable. We understand that people need to know where they stand. The need for transparency is integral to our business model. Without transparency, our company culture cannot function, because it’s based on a long-term view of the future and how we get there together.”
The process didn’t happen overnight. Once Comair’s leadership understood the value of transparency, and how it would form the basis of the business’s culture, all data, analytics and dashboards started moving towards a transparent way of doing business.
“Figures are short-term though,” explains Erik. “We needed a way to communicate long-term value and growth. We needed to develop a language that unpacked this for all 2 100 Comair employees, so that a call centre agent or baggage handler can understand and appreciate that when we purchase a new aircraft, it means there’s shareholder confidence in the business, which means we’re all doing our job well, and the company is financially healthy. And ultimately that translates to stability as well.
“It’s not just about having the same leaders year in and year out. It’s about understanding that if the company is doing well, your job is secure and there’s room for growth. You can’t expect your employees to know how the business is doing and where it’s going if you aren’t sharing that information with them.”
Over 50% of Comair’s current staff complement has been with the business for over ten years, highlighting a high employee retention rate as a product of stable leadership.
3. Effective company cultures are built on consistency
This was one of Comair’s biggest challenges when it began developing a company culture that translated the vision and mission into a set of values that the entire organisation could embrace.
“We needed to develop an overriding culture that could be embraced across departments, levels of education and personal values. It was no easy feat,” says Erik.
“First, to develop a framework and organisational language that would resonate with everyone, and second because successful implementation meant that everyone, from executives and managers right through to our cleaning staff needed to be subject to the same rules and treated in the same way. Consistency is critical. What complicates this is that managers also need to be able to have flexibility and use their discretion where necessary, or you’re creating a stagnant, stifling environment.”
Related: 6 Leadership styles you need to be the ultimate leader
This focus on consistency became a crucial component of Comair’s values and culture. “We wanted to unpack our company values and culture in a clear, concise way that laid the parameters and foundations of who we are, but still gave enough room for creativity so that everyone within the organisation is constantly on the lookout for better ways to do things.”
Comair achieved this herculean feat by taking a 50-page document and turning it into a clear and concise stratogram. “It’s one clear picture,” says Erik. “People respond to images. They’re simple and powerful, and so we needed a way to distil the culture into an image.
“How we do business changes, but the fundamental picture doesn’t. At its core is the message that we all rely on each other. This entire business is built on inter-dependencies. Everyone knows and understands their role in the cycle. Our whole focus in creating the stratogram was to put the vision and mission into context. Management can’t push culture down to the organisation. The workforce drives culture. It’s a living, breathing thing, and everyone must feel pride and ownership in the business and the role they play in its successes.
“It’s not a quick process. It took five years for people to start using the terminology we created in their daily spaces. Five years — but then it clicked. Now the language of Comair is everyone’s language. I can leave my office at 7pm, and a call centre agent can walk out of his building at the same time, and he’ll make a remark about how we’re both dedicated to the business, and doing our bit, using Comair’s language. It’s an incredible feeling, and creates a real sense of camaraderie across the business. We both care, we’re proud of where we work, and we ‘get it’.
“That chain of understanding influences staff attitudes, which determines customer retention, which in turn determines profitability and reinvestment potential. It’s a long-term vision based on an entire value chain that continuously links understanding to value and back again.”
Comair transitioned to a new system in 2011, which was the perfect time to launch the stratogram as well. “The industry was in a crisis, and it’s my personal motto to never waste a burning platform. In the context of our survival, the oil price had topped out and South Africa was experiencing general financial turbulence,” says Erik.
“That’s the best time to implement change. No one likes change. We resist it as much as possible. But when there’s general fear, you can use that to show a better way, and to rally everyone around a common cause working towards a shared goal.
“The reality is that most people don’t understand profitability and the role of retaining customers as a means of driving growth. Don’t assume your workforce understands how the business really operates, and how their roles influence the bigger picture. You need to share that information, and show each and every person where they fit into the bigger vision. It’s that understanding that forms the basis of a strong culture.
“For us, there’s nothing better than people leaving and then coming back because they’ve experienced life outside Comair, and they didn’t like it. We’re like a family.”
4. Drive short-term results but be guided by a long-term vision
Short-term results are important, but if your goal is to build a sustainable business, you need to be guided by a long-term vision.
“One of the real benefits of our institutional memory is that we understand that the right upfront investments deliver huge savings down the line,” explains Erik. “For example, new model aircraft upgrades increase the hours between services and add seats, which increases revenue per flight, and decreases operational costs. The same is true of IT and infrastructure investments.”
In 2001, Comair invested R300 000 into kulula’s booking system. The next major upgrade took place in 2011, cost R50 million, and took a full year to transition the business onto the new platform. It was an enormous cost, but the benefits have already been clear.
“Over that period our passenger to employee ratio increased by 64%, and yet our service is better than ever. Better processes streamline our business, lower our operating costs and allow us to offer exceptional service. We recognise where we’re going and what it will take to get there.”
There’s a balance between a long-term growth strategy and a short-term vision though, and both are necessary ingredients of ultimate success. “In the long term you need to be investing in the business and have patience, but short-term things move quickly and you need to be flexible enough to move with the times,” says Erik.
“Your vision is long-term. How you get there is short-term, and it’s adjusting all the time.”
5. Have a conscience
“Even as a listed business with a responsibility to our shareholders, we believe we’re a moral entity first and foremost,” says Erik. “What are the implications to your organisation and wider community when you make a decision?
Related: 9 Roles of strategic leadership you need in your business
“You can’t have an attitude that disregards social implications. In a service industry in particular, you’re operating as part of a community, so how you operate within that community — from your employees to the community at large — matters. Either you are adding real value, or you aren’t, and if you aren’t, you don’t have a sustainable future.
“There’s more to life than money, and how you behave as an organisation tells your larger community what your values are. People are paying attention to this, and how they respond to brands and interact with them is changing, largely based on these perceptions.”
Focus on making consistent, incremental improvements across the organisation
Comair Limited’s operating costs have increased by 225% over the past 15 years, but ticket prices have only risen by 27%. The business has been able to carry the additional costs without passing them on to its customers because of a laser focus on consistently improving efficiencies throughout the organisation.
Develop an organisational language that everyone understands and uses
When Comair invests in a new aircraft, it’s entire staff complement of 2 100 people understands that this is an indication of shareholder confidence in Comair’s growth prospects, which is good for the company, and in turn, good for them. This is the result of an imbedded culture and language that permeates the entire organisation.
Cultivate transparency within your organisation
Many employees don’t understand profitability and the role of retaining customers as a means to drive growth. This can only become clear — and impact employee behaviour — once you start sharing top and bottom line figures with your workforce.
Three key components of success
For Erik Venter, technical decisions are easy. It’s managing the trifecta of culture, skills and tools to deliver objectives where the real magic happens.
Here’s the framework in action:
“Culture is extremely important,” says Erik. “The right culture attracts and retains the right skills.
If you don’t have a great culture in place, you’ll lose good people first and you won’t be able to attract good people down the line. This is true from your board and directors all the way down the organisation.
“With the right culture, you attract the right people, which means you have the best skills — or people who are able to learn the right skills.
“From there, you implement the tools necessary to do the job. All three levels work in conjunction with each other. The top tools are useless without the best people utilising them, and you won’t attract top people without a great culture. Get the basics right first, and success will follow.”
Copyright is owned by Entrepreneur Media SA and/or Entrepreneur Media Inc.
All rights reserved. Click here to read our editorial disclaimer.