Undertaking Business Transformation


By May 2001, Stewart and his new leadership team realized the company’s profit was going to be significantly worse than what he had projected when he sold the company. In July, he convened his team and the company’s senior managers for a one-day ‘‘state of the company’’ meeting to get his people ready for what was to come. More than 300 managers arrived at headquarters expecting to hear the usual—that everything was fine. Instead, Stewart and his team promised to be truthful about the condition of the business. They announced that Thomas Cook was on track to lose 50 million ($83.2 million) that year. If it did, they said, it would not survive. They promised radical action.

Stewart believed that Thomas Cook’s performance problems started with management. To get ready to take on the transformation, he made several changes to his executive team, including replacing the managing director of tour operations and its airline, bringing in a new HR director, promoting the communications director and legal director to members of the executive board, and establishing a new post, group business transformation director.

To create a plan for transformation, the leadership team began an intensive series of sessions during July and August, fondly called the ‘‘bunker’’ meetings because they took place in a dreary basement office near the London headquarters. Their goals were to reduce the company’s cost base by 140 million ($233 million); to pull together its autonomous operations into a vertically integrated model; and to establish a clear brand strategy to drive sales growth.

Under the banner ‘‘Fixing the Old and Creating the New,’’ the senior management team crafted a new five-year strategy for Thomas Cook, as well as a new organization and a plan for consolidating the company and streamlining the cost structure. They laid out an aggressive agenda that included establishing a new branding strategy, rolling out a new corporate identity, and making capacity reductions in tour operating, eliminating unprofitable flying routes, centralizing cost centers, and using strategic sourcing (see Exhibit 6.3).

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Exhibit 6.3: Transformation agenda.

They planned to announce the transformation program on September 16, 2001, but the terrorist bombing of New York City’s World Trade Center on September 11, 2001, intervened. Stewart recounted: ‘‘It was a tragedy, but it didn’t change anything we had to do. It only made our radical actions more imperative. It also helped us with the message. The whole industry was in turmoil, and our people recognized that we had to take dramatic steps.’’




Outsourcing for Radical Change(c) A Bold Approach to Enterprise Transformation
Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation
ISBN: 0814472184
EAN: 2147483647
Year: 2006
Pages: 135

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