David Thodey on culture, leadership & change

Change is constant. Rapidly developing technological and cultural norms are forcing businesses to create strategy on the hop, placing added pressure on leaders to innovate.    

At a recent ANZ retail banking summit, bluenotes sat down with former Telstra CEO David Thodey to talk about a wide range of issues including customer-centricity, workplace culture, and leadership through change. Below is an edited transcript of the discussion.

We started by asking him about the importance of the customer and what he learned from his time at the helm of Australia’s largest telco.

David Thodey: When I first started at Telstra I learned a lot about customer centricity.

When I was first announced as CEO I walked into [a press conference] and someone at the front said ‘Mr Thodey, [your predecessor Sol] Trujillo was an agent of change, what do you stand for?’ 

“Customer advocacy impacts financial performance – this is not a soft target or just another KPI.” – David Thodey

It was a moment which can’t be rehearsed where I said “Yes, he was an agent of change but I will be an agent for the customer.”

It came from somewhere quite deep down inside me – it was what I believed. That set the tenor for everything we did from that point. 

It’s really easy to say but really hard to do. In any big organisation, alignment is the most powerful thing you can achieve. Alignment of the team you work with, alignment between the board and the senior executives – alignment to the big aspiration of serving customers. 

We ended up deciding customer service - or in our case customer advocacy - was our number-one priority. Number one!

People often ask me about that because it’s unusual. We made it our core strategy – and we decided this after significant analysis.

We determined it was the best for our shareholders. It wasn’t just that we wanted our customers to feel good - although it’s far better dealing with a customer that’s happy - we realised it was our most-fundamental financial imperative.

Customers who are your advocates buy more products, churn less and their lifetime value is far higher. To win a customer costs you nine times more than to retain a customer.

We lose customers because of poor service, poor products and we had to commit to the board that if we adopted a strategy of customer service it would drive shareholder value.

If I said to the analysts  ‘I’m really pleased to tell you our NPS has gone up twenty points but our profit had declined,’ guess what the market would have said to me?

Customer advocacy impacts financial performance – this is not a soft target or just another KPI.

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Paul Presland: How do you hold your nerve through the transition process? How did that play out? 

DT: The second year we missed our targets and internal social media hit a new peak.

Our sales teams were saying it was the product teams, the product teams said it was the engineers and the engineers said it was the accountants. Everybody was blaming everybody else.

It was a moment of truth when we realised we were all in this together. That’s a powerful thing.

To your point around staying the course, you really have to go through the tough times and really work the small things as well as well as the big issues.

PP: Without picking that apart, what was that lightbulb moment? You said there was a moment of truth for everybody -what happened? 

DT: The moment of truth was every part of the organisation had to work together to achieve our advocacy targets – we were all inter-dependent. Customers don’t care whether you work in the business group or the consumer group – they just see ANZ, Telstra or the organisation…and they don’t care about our internal structures.

They don’t care about internal organisational structures; whether they talk to the shop, the branch, or to someone on the phone. Yet we often have great delight in sharing with our customers all the intricacies of our internal organisations. They’re just not interested. 

PP: It’s true.

DT: It's a defence mechanism – as opposed to saying ‘We care about our customers, we’ve had some problems, leave it with me, I’ll handle it’ and taking ownership.

PP: When you looked at your customer journey did you start with customer or with staff?

DT: There are many elements that you have to get right for the business to be successful. You need good products, good distribution and good partners.

You have to work with your staff, while focusing on the customer. You also need marketing that is true, authentic and not idealistic. And you have to have a good culture.

We did all of that - but customer-centricity was the driving force because it forced us to look outside rather than looking internally.

The problem with any big organisation is you just end up looking internally too much. You have to to be driven by the market and attuned to what you customers are saying. That drives change, drives reinvention and in the end drives innovation.

PP: How did you start thinking about changing culture?

DT: We determined we wanted to build a customer-centric culture. We looked at our values and our behaviours.

Our employee opinion survey like most big organisations would always say ‘I really trust my immediate manager but those people up the top I’m not so sure about’.

Management would say ‘we really want you to be accountable and make decisions on the spot’ but that was never really implemented. We determined in the end one of the biggest issues was a lack of trust between each other.

In many organisations we create environments which are not trusting. We have a lot of controls and a lot of rule books. But you can’t write rules to determine how a person responds in that moment of truth.

So we went back and reviewed our values and asked ‘what do we need to change?’ One of them was rather than saying ‘be accountable’ – we changed the value to ‘we’re going to trust each other to deliver’. We said the default is going to be ‘trust’.

PP There are lots of parallels in banking I can assure you.

DT: It’s true of any big organisation. We do need controls, but you want people to be able to put themselves at risk a bit to get behavioural change. Culture is the hardest thing to change.

PP: Listening to you I note you haven't once said ‘I’, only ‘we’. Given you had to come in and set the scene with Telstra in a state of flux, how did you as a leader do that without being autocratic?

DT: Leadership is a fine balance. You need to have a vision for what it is you stand for and who you are without making it about the individual. The very idea any individual is all knowing and all wise is just not true.

When I say ‘we’ I do mean ‘we’ and I include the board, the senior leadership team and everyone in the organisation. That’s why I think customer-centricity is such a powerful way to align people.

PP: During a huge mindset shift sometimes good people struggle to make that change. People leave or adapt. How did that play out?

I mean, it was a completely different way of thinking and quite a paradigm shift. Not everyone buys the dream right?

DT: It’s really interesting. I think it was a mostly a self-selection process – though we did occasionally need to step in and make a decision when someone’s not right culturally.

You give people the opportunity to perform but it’s interesting how people self-select. I think generally that happened and we did have a big turnover in the first couple of years.

There were people who we determined were just not the right fit - and you need to have honest, authentic discussions with them. You do need to have a harder edge as well.

I think if you’re clear about expectations, what you stand for and the behaviour and values you expect, it becomes a very powerful way of driving a high-performance culture.

You have to re-engineer every process you have. People have to take ownership, move forward, drive innovation and be at the cutting edge - and not accept the status quo!.

PP:  How do you build a sustainable culture which continues on long after your gone?

DT: I think anything you do has to have authenticity.

Every leader is different and has a different character. But you hope they have those good fundamental values.  Now I know those values are still at Telstra and they are still very customer-centric focussed.

I think there is a legacy but at the same time I don’t define myself by the legacy because everyone has to re-invent themselves. You can never stand still, you can’t live by what you did yesterday and you’ve have to be focused on what you’re going to do tomorrow to make a difference.

Too many people get caught in what was yesterday. Yes legacy is important, sustainability and truth are important, but it’s also important to be able to re-invent yourself.

You never stop. One of the things I learnt is a customer –centric organisation never stands still because if you truly strive to serve your customers – you never really arrive at the end – it is the never-ending journey.

That is the wonderful thing - you can always do better, you can always be more involved, you can drive product differentiation and you can create unique experiences. It’s just this continual drive and it’s the most-satisfying thing you can do. This is what makes it so enjoyable and challenging.  It’s really great.

Paul Presland is General Manager, Retail Distribution Network at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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