BLOG / Achieving Compititive Advantage through Strategic Learning & Development

Management Note

CAPA Advisory has continuously and strategically tracked the aviation industry in India and globally over the last close to 20 years. We have focused on identifying best practices and highlighting organisations that pursue initiatives and endeavours to constantly re-invent themselves. Our analysis is that successful businesses in the past and more importantly in the ‘never normal new normal’ future achieve their success through a relentless focus on three types of capital – financial capital, technology capital, and human capital.

Within human capital, two of the common attributes of these leading organisations are that 1) they recognise that people are key to their business model and its success, and 2) continuous learning and development (L&D) is central to their people strategy.

Singapore Airlines, Southwest Airlines, Changi Airport and Emirates, amongst others, are some global examples of excellence; companies that recognise that their people are as important a pillar of their business strategy as their product, operational excellence, and customers.

At these companies, COVID has actually resulted in an increased focus on L&D, in light of a recognition that strengthening human capital is a cornerstone of their strategy of enhancing customer experience, especially during a time of great disruption.

There is in fact a sense of urgency towards building a stronger institutional framework, and doing so in the near term, to deliver a strategic and notable difference in customer satisfaction and operational excellence. The results of this investment in L&D over the last two years will further strengthen the competitive advantage of these best practice organisations.

In India, employees have largely been forgotten in the growth equation. Aircraft are ordered without evaluating whether the necessary skilled resources e.g. pilots, cabin crew, air traffic controllers, security officers, regulators and inspectors etc. are available. Although this has been improving as of late, there is, in most cases, inadequate strategic resource planning for the expansion that is envisaged.

This is the reason that we have large and continuous gaps in the workforce and required skills. The impact that this sometimes has on growth has been evident in the past, especially in relation to pilot inductions. The shortage of skills has necessitated quick fixes, which ultimately cost more and deliver sub-optimal outcomes, especially if aircraft assets are grounded.

In a scenario where even fundamental resource planning is in most cases inadequate, expecting that there will be a strategic focus on L&D is perhaps unrealistic, especially in the face of genuine funding constraints that have existed.

The absence of a core L&D focus has a real impact on profitability, but this is not measured and therefore not managed. Industry leaders are by and large aware of the interlinkages between L&D, customer experience and financial performance.

The attention to L&D and competency is at best functional and certainly not strategic. Expertise to the level required may be visible at the very top, but there is no demonstrated evidence that this trickles down to the rest of the organisation. There is little or no attempt to develop core institutional strength through strategic L&D.

At times this has been because the pace of growth has been so fast that HR could barely keep pace with recruitment let alone focus on L&D. But this is exactly what the aviation industry needs. In a low margin and highly competitive business like the airline sector, it is people that can deliver differentiated outcomes.

Even in key strategic functions, like revenue management, which can make a tremendous contribution to profitability, training is relatively basic, just to get people started. The rest they learn on thejob. There is little or no focus on recurrent training orthe development of advanced skills and best practices. This is despite the fact that errors can and do result in losses of millions

 

of dollars. This is akin to sending an army into battle without any equipment. The result is untold revenue leakage and compromise of revenue integrity. But since it is not quantified it is not taken as a priority. Similar L&D inadequacies are glaring across functions – commercial including marketing and sales, finance including corporate finance and risk, operations, HR, IT, digital, data and analytics, ground operations, customer care.

The induction of an expatriate CEO or CXOs is often seen as the answer to a shortage of expertise. But a couple of highly experienced members of the leadership team cannot bridge the enormous deficit in the rest of the organisation. There is limited attempt to institutionalise the expertise that resides in experienced individuals. When they leave, the knowledge leaves with them since institutionalised succession planning is largely amiss. More worrying is that promoters often think that as long as the top 10-15 senior executives are capable and committed, weaknesses in the rest of the organisation can be managed. As a result, aviation does not attract the best candidates because it is not seen as an industry that builds talent.

Going forward, the impact of digitalisation and automation – as well as commercial, technological and regulatory changes – will accelerate across airline enterprises and will be faster than expected. This will require skills sets to evolve even more rapidly at each and every level of an organisation, which will necessitate much greater investment in L&D. The nature of future work and workplaces, as well as the evolving expectations of customers will have to be carefully thought through from now. Only businesses which establish an institutional mechanism now will be in a position to respond to these changes. Others will find it extremely difficult to manage so many simultaneous changes and disruptions.

In a services industry which is highly commoditised and competitive like India’s aviation industry, employees are key assets and real source of competitive advantage. L&D, therefore, is key to the future success the industry. And there must be a recognition that skills development is not a one-off activity. The rapid pace of evolution in the market and the ‘never normal new normal’ will require continuous investment in building skills, institutionalising them, and improving them constantly.

There are of course some Indian companies that are doing better than others, but overall the industry is under-performing when it comes to L&D. Following Tata Sons’ acquisition of Air India, and with strategic changes expected at IndiGo, L&D will undoubtedly become a core focus at Indian carriers. However, the key question that remains is whether L&D will evolve at the speed required given that the skills gap that exists is significant. Given its critical importance, even the board of directors must have a mechanism which helps govern the L&D agenda of their respective businesses.

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