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KQ’s dilemma: Continue with Current Strategy or Craft New One

  Aug 5, 2015
 

KQ'S LOSS MidsizeBy Dr. Fredrick Ogola

Story Courtesy of Standard Digital

Last week, KQ reported a loss of Sh25.7 billion. The management attributed this mainly to external factors, including competition from Middle East carriers, travel advisories, runway closures for renovation and the Ebola outbreak in West Africa. In other words, KQ is blaming the external environment. An expert in strategy and execution knows only too well that strategy formulation must consider the opportunities and threats from the external environment. This is a basic thing anyone who calls himself or herself a manager knows. So how much more would one expect from the executives of KQ, who comprise some of the best money can buy The airline’s predicament at the moment is whether to continue with its journey on the road it is on, or make a turn and go back to the road that will lead to its desired destination, which is to be “The Pride of Africa”. Big challenge

Sadly, KQ is no longer the pride of Africa in terms of competitiveness, as experienced by many and attested to by Dr Bitange Ndemo in a commentary last week. It is a pity that KQ comes a distant fourth in terms of pricing. The strategy dilemma, therefore, is real, and I hope the CEO sees it as it is. Scholars on strategy implementation, such as Robin Speculand, believe that the big strategy challenge is execution. Others like Edward Freeman, in his enterprise strategy approach, hold that the challenge is to get stakeholders’ buy in. But can these help in a situation where a firm like KQ came up with a strategy with the help of consultants, presented it to the board, got it approved and after the first quarter, the expected results didn’t come This happened between 2011 and 2015, with an accumulated loss of Sh36.94 billion as the result. In such a scenario, any CEO would be left asking: “Am I pressing for execution when what I needed is a sound strategy, or am I crafting a new strategy when execution is the true weak spot” This is KQ’s current dilemma, though it is not unique to the national carrier; Coca-Cola went through it and survived.

The soft drinks firm introduced a reformulated Coca-Cola in 1985, marking the first formula change in 99 years. This led to a firestorm of consumer protests that ended with the return of the original formula, now called Coca-Cola Classic. In effect, the marketing strategy was approved but it did not deliver the expected results. Eventually, the management realised they were pressing for execution when what they needed was a sound strategy. But the damage had been done. Kodak, on the other hand, made it clear that the future of photography was digital. Most camera firms opposed Kodak’s strategy. However, since they could not beat the digital wave, they eventually joined Kodak. Soon, they were benefiting more. Kodak stuck with the film-based business, while Sony produced the first electronic camera. Kodak, realising that it was on the path to bankruptcy, commissioned research to establish if digital photography was the way to go. It was too late when Kodak’s management realised it had poorly executed its ‘digital strategy’

Tough choices KQ can still be salvaged with clear, hard thinking and tough choices. The biggest strategy decision the airline’s management needs to make is whether it is making the mistake of pressing for execution when what is needed is a sound strategy, or if it is crafting a new strategy when execution is the true weak spot. This dilemma will for sure grant CEO Mbuvi Ngunze sleepless nights. Mr Ngunze, you may be listening to consultants, but remember that they may be assuming that you know where you are headed, and have done your homework. You owe it to us not to allow KQ to go down. Good luck.

The writer is MBA academic director and senior lecturer, strategy and execution, at Strathmore Business School. He is also director, Institute of Strategy and Competitiveness.



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