Fyfe recalls the airline was then facing one of its biggest projects: a $260 million replacement of the reservation system, “the heart of the architecture of the organisation.”
This was the 30-year-old system called Carina, written in assembler language. “No one coming out of university was able to do programming in assembler language anymore,” says Fyfe, who was CEO at the airline from 2005 to 2012. “The fear was we will run out of human talent to be able to keep the system alive.”
The choices available were all large hosted solutions designed for airlines that were “far bigger and more complicated” than Air New Zealand.
They could adopt one of these systems “at very high cost” and also double their transaction costs, he says.
“We get a little more functionality, but in the ongoing evolution of that application you will be tied to the interests of much larger airlines and whatever priorities they have, because they were the ones that were paying the bigger bills and calling the shots.”
The then CIO found that unacceptable, as the airline “would become a hostage to that system and never be able to create any competitive advantage.”
“We need to find a way to make our own home-grown system last longer,” he says. Air New Zealand brought its website and store front development in-house, which was not possible if they were using one of the big hosted systems.
This critical decision allowed them to launch grab a seat, “one of our greatest successes”, says Fyfe. He says other successful projects that followed, like checking in through kiosks at the airport and RFID tags for self-checking of bags, were dependent on also being able to make changes to their core reservation system.
“Here we are a decade later, and we are still using that same system,” says Fyfe, smiling. “That is the reason why our main competitors in the region were not able to copy us and replicate those processes.”
Indeed, more than 10 years later, Fyfe could recall vividly how the ICT team at Air New Zealand rose to the challenge of its CIO who said “no”.
That CIO was Fyfe, who held that role for a year before becoming CEO. “I could go on with a number of other examples, but that one decision that I made as CIO gave me flexibility all the way through my seven years as CEO, which I just constantly leveraged so that we could adapt more quickly than our competitors.”
Fyfe states if there is one thing he has learned as a New Zealander, “You learn to exist in a space where you never got the scale, the global presence and the influence.”
“You are always a small player, and you have to compensate to that by being more nimble, being able to adopt more quickly, being more innovative, and ultimately taking a little bit more risk.”
This thinking, he says, can be applied even to very risk averse organisations like airlines.
“Airlines are dealing with flight safety and the risks to human lives if those safety principles are compromised,” explains Fyfe. “Yet when you look at commercial decisions and a number of other decisions we make, there are many parts of our business where we can take a lot of risks without putting lives at risk.”
“So I set out to try and create a level of confidence in the organisation to run two different risk profiles — a very risk averse flight and ground operation business; and a much higher appetite for risk in terms of the commercial side of the business.”
“If we make a decision that may have risk attached, as long as it is not betting the entire business then we should be prepared to at least explore taking a high level of risk.”
This means also accepting that mistakes can happen. “As long as you learn from those mistakes and adjust really quickly, then often you get more credit from your customers for being prepared to try and push the boundary,” he says.
In the same vein, Fyfe does not shy away from naming some of the “mistakes” they made. One of the early ones, he discloses, was deciding to serve the same meal to business class and economy class customers. At that time, there were only eight business class seats out of 150 seats in the aircraft, and the cost to produce the meal was more than the cost of the food.
“It was a disaster,” he admits, “and we got a very negative reaction from the business customers, because most were travelling to Australia and back in a day and that was the only time to get a decent meal.”
When he relayed this incident at a conference for travel agents, they told him it was the first time they heard Air New Zealand admit a mistake. “I came back to our marketing team and said, ‘We need to make more mistakes.’”
Another miscalculation was when they decided to put an extra row of seats on their 737 planes. Business class passengers were “outraged”, because they could not open their laptops any more in flight. “Not only did we take out that extra row of seats, we took out half of a row of seats,” says Fyfe. “We learned from that and now we have a march on our competitors and our customers are prepared to pay a premium, because we discovered this insight.”
From Hollywood to Silicon Valley
According to Fyfe, some of the “risks” they took during his term came from ideas outside the aviation industry.
“We are constantly looking for good ideas outside the organisation and I am happy to grab anyone’s idea, he says. “Ideas are easy — it is actually being able to execute and implement and adopt, that is what is hard.”
The idea for Grab-a-seat, for instance, came from Ryanair. He flew to the United Kingdom and saw the budget airline advertising one pound airfares. “I came home and said to my team, how can they do that? Why can’t we do one dollar airfares?”
He explains that when they thought of making a “bland” safety video into a “form of entertainment”, they looked at what is going on in television and the video industry. “How can we adopt some of that in the airline industry and break new ground?”
Fyfe shares that their safety videos — he had appeared in one dressed in nothing but body paint — have gone “enormously viral” and are getting up to 10 million hits on YouTube.
In the case of Ryanair, adopting the one dollar fare idea involved “figuring out how to make the economics work.”
He says the process involved a “huge crossover” between IT and marketing and at the same time they had an innovations team that was doing work in that area.
“I was always a strong believer in creating these ‘skunk works’, just putting some really clever people in the room and giving them the freedom to do amazing things,” he says, basically taking on “a start up mentality”.
Fyfe adds that, “We found out the traditional IT team had all these protocols about development, about how things should interface with the mainframe.”
“They are all barriers to us in creating this leading edge website.”
So they decided that the new project would be outside the existing IT team.
He relates that they went to their IT partners like IBM and Datacom and told them: “We want to second your best and brightest for 12 months.”
“We came out with an amazing solution and interestingly it caused us a few issues for us down the stream, because we hadn’t worried about the robustness and the architecture and about some of the security issues early on.”
“We had to go back and we re-engineered and we made the infrastructure more robust to ensure now that we have become so dependent on this distribution channel that it didn’t let us down,” he says. “But it was absolutely critical that we took those shackles at the outset to create the innovation and the progress we needed.”
He, however, found the other airline CEOs did not necessarily share that thinking.
“I found the willingness to trial, that acceptance of risks, that approach to innovation was very, very rare amongst the fellow CEOs I was interacting with,” says Fyfe. “The typical CEO was poring over big decisions over what aircraft to buy, how to manage the balance sheet, or influence the government policy or regulation.”
He recalls the time he spoke with another airline CEO, and they compared what their typical week looked like. This CEO “is sitting in his office poring over spreadsheets, flying on aircraft but never talking to the staff on the aircraft because they always complained to him.”
“I described a typical week for me — 70 percent of my time I was out of the office out there talking to people around the business. It could be in IT, with flight engineers, helping people understand what we are trying to achieve, listening for ideas.”
His most difficult decisions?
Fyfe says he can “power through” actual strategic decisions like resource allocation. “It will come as no surprise the hardest decisions for me were always the ones that affected people’s lives negatively.”
This happens when he has to let people go, because the business “is not performing in the way you like or you need to adapt or adjust the business which you need to do at speed.”
“I never shied away from making those decisions, because if you are not prepared to make those decisions to constantly evolve, then you put the whole enterprise ultimately at risk.”
He says he had some “very difficult conversations” with the affected staff.
“I think it is really important that you front up to the personal consequences and you are prepared to talk openly with people. They deserve that respect if [these decisions] are having such a large impact on their life.”
Fyfe left Air New Zealand in December 2012, and is on what he calls a “12-month sabbatical”.
“What that means is I am on a few boards and doing consultancy work, and doing some travelling,” says Fyfe who is director at Icebreaker and Ecoya and is on the board of Antarctica New Zealand.
As Air New Zealand CEO, he spent three to four months of the year travelling. “But I never got to see anything. You are just in hotel rooms, in meeting rooms, in conferences”.
He is going back to those places to explore and experience the culture. “At the final quarter of this year I will start thinking about what next [to do].”
As for his next role, “I am not going to run another airline, I have crossed that one off,” he states, despite several offers to do so.
If he had wanted to run an airline, he says he could have stayed on at Air New Zealand. “I was running what I felt was the best airline in the world.”
His next role will not necessarily be in a large corporate. “I would like to work with companies that have the potential and the aspiration and the self belief that they can be world-class, based on a sense of a New Zealand identity.”
No finish line ahead
As one of the few enterprise CEOs who was a former CIO, Fyfe talks about what makes an effective CIO. Fyfe says having an effective relationship with the CEO and other members of the executive team is important. “The success of the IT division in the organisation is highly dependent on how effective those relationships are with the executive team,” he says.
Communications also play a crucial role in managing that relationship. He shares that when he joined Air New Zealand as CIO, “I was fielding weekly groans and gripes from most of my peer groups in the executive team about not getting all the IT priorities. People wanted to do so much and there is only so much money.”
When he was CEO, though, the CIO Alastair Grigg (now Xero chief operating officer and predecessor of current CIO Julia Raue) had less capital expenditure. Yet, he says, the satisfaction of the people around the business “had gone up enormously.”
“I wasn’t hearing any of the gripes and grumbles about not getting my project done.”
He discloses it was because Grigg “was such a good communicator so there was less money to go around, but he had developed really good processes for how we set our priorities and he communicated well. Everyone understood why their project was not on this year’s list.”
“That was the secret,” he says. “We were really clear about shifting the emphasis to make sure as much of our development work was focused on customer systems, rather than internal systems and so on; and people understood what we were trying to do as a business.”
His message to a would-be CIO is simple: “Ultimately, any business is about people.”
“If you are a CIO, look at how you can make a difference in people’s lives, and they may be your employees, the entire organisation and communities.”
This may be about applications, the environment you are managing, and how this supports the objectives of the organisation.
“But it is more than that,” he states. “It is actually about how your IT community affects the overall outcomes of the company, how they interact with other people within the company, and how they actually become a community that is respected within the organisation as people; rather than just respected as a community that delivers the IT functionality.”
Attaining these goals is no signal to taper off or remain static.
“You are always evolving, you are always adapting, you always have to earn that right,” he states. “You can never take those outcomes for granted because they can disappear away again in a flash.
“It is not like you ever get to the finish line.”
Follow Divina Paredes on Twitter @divinap
Related:Flight path to CEO
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