When we spoke to former sales and marketing GM of Air New Zealand Tony Marks in mid April, he shared with us his predictions for Air NZ — he made this back in mid April 2020 and you might be surprised how accurate he was (clue: much of it looks to be coming true!)
This is part 2 in a series of 4 blogs, where we share Tony’s great yarns covering business lessons learned, challenges he’s faced and opportunities he has taken advantage of. If you missed part 1, which introduces who Tony is, click HERE.
LET’S TALK ABOUT PLANNING
The first thing about planning is actually having a plan — that always helps, even if it’s completely wrong and everybody laughs about it. I’ve worked for various companies over the years and the first thing I would do is get my management team and get a hold of the previous three or five-year plan. I don’t think many businesses do a five-year-plan these days but we did then. So say it was 1990; I’d ask for the five-year plan put together in 1985 and then I would contrast what the reality was in 1990 with what they had predicted in 1985. Now, there was normally at least a 50% gap between what had been predicted and what actually happened. And you may think, “Well hold on, that’s a bit cruel. Why would you subject the people who put it together to some form of humiliation?” It wasn’t that. What we went through was, “Guys, we’ve got to learn from this. What do you think went wrong? What were the assumptions you made when creating that five-year plan which didn’t pay off? Because you’re a good management team, but something went wrong. In fact, probably quite a lot of stuff went wrong. So let’s try and learn from that collectively so when we put another five-year plan together, under my watch, we try and minimise the cockups that we’ll undoubtedly make.
It’s always interesting to go back, not for any degree of self-criticism or humiliation, but just to try and learn from the assumptions you made that didn’t quite make it.
A lot of people are talking about planning in these difficult times. One of the mentors I had, he used to use a medieval castle example for your business. What he did there is he said, okay, let’s have a look at the medieval castle: they’re normally on hills and there’s one way in and one way out. A lot of the people back in medieval times lived outside the castle. So if invasion started or rival warlords came along, the villagers used to have to run into the castle but they weren’t part of the castle, they were outside. Then you had the moat which tried to protect you. Then you had the walls — and if they scaled the walls or blew a big hole in them, you had to retreat back into a secondary set of battlements. If they managed to do that part, you ended up in what’s called the keep. The keep is the one where there’s one door and that’s where you fight for your life. If you lose the keep, you’re dead. I mean it’s all over. So my mentor said, I’d like you to tell me everything from what’s in the keep to what’s in the fields outside the walls for your business.
I’ll use Air New Zealand as an example. We did this 20 years ago, and it’s interesting to see Air New Zealand are doing exactly that right now. What’s in the keep? Domestic services. That’s the one that if you lose that, you might as well close the doors and turn the lights out. Just outside the keep, in the first set of battlements, is the Tasman because it’s relatively uncompetitive. You’re not up against Emirates or Singapore Airlines or British Airways or whoever. The third area is maybe a little bit of Pacific Islands although Air NZ doesn’t make any money doing that; it’s almost a social service. But let’s cherry pick some of the long haul routes that make us money. Let’s cherry pick a few services to Los Angeles because that’s not particularly crowded, maybe cherry pick a service to Chicago, and one to Singapore or Hong Kong. Everything else is outside the wall — at the moment, if the invaders come in, it’s all over.
I think Air New Zealand are following that textbook right now. And I will forecast — and you can all laugh — but that’ll be the way that they go as things start to settle down. They’ll push domestic, then they’ll push the Tasman, then they’ll cherry pick a few of the long haul routes and the chances of going back to Seoul or London anytime soon aren’t happening. [Tony forecasted this during lockdown, in mid April.]
I think in these troubled times (or even sometimes when it’s not particularly troubled) focus is the key. I’ve found that there’s only really three tools that you can use in the business: time, people and money. I think those three capture most of what you can use. The thing about time, people and money is you run out of all three very fast. You never have enough time, for either you or your staff; you’ll never have enough good people; and you most certainly never have enough money. So once you understand that, you understand you’ve got to line those three up and get everybody on the same page to make it happen.
I’ll give you a Zespri example. Zespri used to sell a billion dollars’ worth of fruit into Europe. But 72% of that was going into one country: Germany. And Germany is the land of what they used to call the hard discounters: the Lidls, the Aldis, Kauflands and a bunch of others. So my concern, having taken over the company was, what happens if these guys don’t like us? Because there is nowhere else in the world that we can move a billion dollars of kiwifruit, or even half of that, or even a quarter of it, without destroying the pricing in a number of other countries.
So they tell me, “We do a little bit in France, we do a little bit in Italy, a little bit in Spain, a bit in Portugal”, and so on. And I said, “Not good enough. We got a one-legged stool here. We can’t survive on a one-legged stool. We’ve got to build something else.” So we took Spain as the country we would focus on. I said, how much money did we spend in advertising? Half million euros? Let’s make it one and a half million euros. (I picked it out of the air.) How many people have we got in Spain? Two? I want five or six. I want them in every major city, to call on every major supermarket, regularly. How often do we go to Spain from Antwerp? (This is where head office was.) Once a year? Fine. I want you to go at least three times a year. And then the four trips I make to Europe every year, three of those I will be going to Spain because I have to walk the walk as well as talk the talk.
Anyway, the greatest compliment I got was sitting in the toilet about a year later in Antwerp. A couple of guys came in and I said, “Oh, did you hear that Mr Marks is here today?” “Yeah, yeah, I heard he was in town.” “Well you don’t sound very pleased? “No. All he wants to talk about is fricking Spain!” Well it worked. Spain is now is Zespri’s single biggest market in Europe. And it was all about focus. I did talk about Germany, I did talk about France and Italy, but nobody was under any illusions that I had personally said that we were going to have a crack at Spain, that I put my own reputation on the line. It was all about one single focus.
The other thing I think about planning is, what’s the end game here? Take a company we bought called Old Mout Cider down in Nelson. When we bought it, it was a $3 million company. It did a million in cider, a million in fruit juice and a million in vinegar. When some friends of mine bought it, I took a small stake and chaired it. They weren’t entirely sure why they bought it; they just thought it was a good idea to buy a company as opposed to work for a corporate. But we thought that we could build all three of those. In the end it turned out that there was a limit to the vinegar market. There was an even bigger limit to the fruit wine market. And so all we were left with was cider.
So we had no money, an unpronounceable brand name, and we were selling it in 1.25 plastic bottles and saying it was premium… Yes, premium 1.25 PT plastic bottles, yeah right. But we didn’t have enough money to reinvent the brand so we thought, sod it, we’ll just go with the brand as it is and we’ll make a joke out of the fact that people can’t pronounce it and drive it very hard.
Our end game was to get out of it in five years’ time having made reasonable sums of money. So we had two plans: one I would term an operational plan and the other one a shareholder plan because we knew ultimately we’d probably be involved in some form of beauty contest and we’d try and see if Lion Breweries or DB wanted to buy us. As it turned out, we managed to get a deal where we did all of DB’s cider so when we decided we want to get out, it was relatively easy for me as Chairman to see the chief executive of DB and say, some of us are selling out, you’d probably like to buy it, wouldn’t you? He didn’t have a lot of choice, I don’t think!
The same with a company I chaired called I Love Pies. They sold about 18 months ago. But again, it was about what we were trying to do. It was a $3m company when I joined it. We tried to build up the business, get into Countdown, get into frozen foods as a diversification, tidy a lot of stuff up, and at the same time, we had a plan to sell. The ladies who owned it had been in it for seven years and when I left, they’d been in it for 10 — bluntly, they were getting tired. And when I first joined I asked them, why do you want a chairman? They just wanted someone to talk to because there was just the two of them, plus a sales manager, and a PA doing the accounts. That’s it. That’s all there is. So we got through all that and I’m pleased to report we did get involved in a mini beauty contest and the ladies have done very well out of it. Know what your end game is.
Plans are good but you do need to test them on your staff as well. So we weren’t making enough money on Air New Zealand and the 747 because we were all tourist seats or economy seats and not enough business. So I chucked out 60 economy class seats and put in 28 business class instead. We’d like to have done more but it was dictated to some extent by the catering and the toilets. Do you know how much it costs to move a toilet in an aircraft? $9 million. That’s because of Boeing’s requirement to re-certify the aircraft. $9 million. So I didn’t move any toilets in the end.
But anyway, I went around the world telling everybody we were moving into business class in a big way. We had all the sales team in LA and Singapore and Japan all clapping and thinking it was wonderful. The same in London. But the regional manager in London said to me, “Look, I’m sorry Tony, I can’t take you out tonight. I’ve got a function I do have go to.” I said, “That’s alright Bruce, I grew up in this country, I lived in London for seven or eight years, I think I can find the way.” And he said, “Some of the lads are going to the pub after this, so they’ll take you.” So I went with the lads and the sales manager, a lovely Londoner called John Fitzgerald. After a couple of beers, John said to me, “Tony, you know I’ve done 10 years with British Airways and 10 years with Cathay? So I know a bit about flogging business class. Well, I know what I said in the meeting, but I have to tell you, if you carry on at the moment, you’re screwed.” So I said, “Oh, well thank you John for your vote of confidence. That’s very kind of you.” And he said, “No, you don’t understand. Air NZ flies to Gatwick. Gatwick’s a holiday airport. No self-respecting businessman will be seen dead at Gatwick. You have to go to Heathrow.” Now, do you realize how expensive it is to get into Heathrow? Do you realize how difficult that is? But John said, “I know, mate, but you say you want to sell business, you’ve got to go to Heathrow” There was a lot of eyerolling when I went back to my team in Auckland and told them I was thinking we needed to fly to Heathrow.
Anyway, to cut a long story short, a year later we went into Heathrow. The point of the story is not how clever we were to go in the Heathrow. The point of the story is, do have you got enough trust whereby someone of a relatively junior status can come up to you, the big kahuna, and say, “I heard what you said but you’re wrong” and for you to give them the time of day…
I’ll give you one other great story from Air New Zealand. I had a very nervous Moira come to see me. It was the PR lady for the New Zealand region. In fact, she brought somebody with her because she was too nervous to see me alone, which I felt was unfortunate. And she came in and she said, “I have an idea”. This was 1995. She said, “We’re just about to win the America’s Cup. The crew and Peter Blake are all booked on our flight back to Auckland once they’re done. Do you know that the flight lands at six o’clock in the morning, when it’s dark? So what will happen when they arrive is they’ll be put in a bus and taken to downtown Auckland for a celebration and we’ll get nothing out of that at all.” I said, “Yeah. So what’s your idea?” She told me she wanted to take a 767 and send it up to San Diego to pick them up. I asked her if she realised how expensive sending an empty 767 to San Diego would be. She said no. I picked up the phone, talked to planning, and it was $250,000. I said, “We haven’t got that kind of money, Moira.”
“That’s ok. I mentioned this downstairs and somebody said you need to talk to Tony about it. I thought I just needed to tell you so that is that and thank you very much,” she said. Well there I am, driving home, having rejected the idea. I couldn’t get it out of my head that she was right. So I went back in and had a paper drawn up and then went to see my boss, the chief executive and said, “Hey Jim, here’s an idea.” And he said, “Do you realize how expensive that is? We haven’t got that kind of money.” And I said, “I know we don’t, but I still think it’s a bloody good idea. Just think about it, Jim. It’s our aircraft. We can decide when it flies back to New Zealand, we decide which part of the airport it will land at. We won’t have an air bridge, we’ll have steps. We have seats where you and the chairman and the prime minister can be, to greet the America’s cup crew when they come back….” 15 minutes later, he comes back: we’re on.
If you ever see pictures of Peter Blake arriving back in Auckland with the America’s Cup, he comes out of an Air New Zealand aircraft and stands at the top of the steps holding up the America’s Cup to a load of people cheering away. Where did that idea come from? Well, you wouldn’t even find Moira on the organization chart. She wasn’t high enough to get there, but she deserves all the credit. It’s just a small example that within your team there are generally people who are quite creative and quite thoughtful. If you make an effort to listen to them and get to know them and let them use their initiative, you can learn a lot.
I’m reminded of a story of the British SAS where one of the training exercises for these 12 guys was to break into a nuclear power plant and bring something back to show that they’ve been there. Well, they all returned to the SAS base after three or four days. Four of them have been arrested, a couple are being detained, and none of them had come back being able to break into the nuclear plant — except one guy. He came back and he put the ashtray of the managing director of the nuclear power base on the table of his commanding officer. “There’s your proof. If you ring that guy, he’ll tell you he’s missing his ashtray.” “Well, you’re the only one who got it. How did you do it?” “I rang them up and made an appointment.” The point being, sometimes the easier solutions are the most effective.