How David Thodey put customers first at Telstra

David Thodey illustrates that good guys can finish first

In 2009, David Thodey rose to be CEO of Telstra. He stepped down in May 2015, having rescued the telco’s flagging share price and put smiles and service back into its culture.

Updated 19 November 2015. This article is from the April 2015 issue of INTHEBLACK.

Former CPA Australia chief executive Alex Malley spoke to outgoing Telstra CEO David Thodey in early February, just two weeks before he announced his shock resignation from the A$80 billion telecommunications company.

When word spread of his departure, staff, shareholders and the broader business community were united in praising Thodey as an effective and easygoing CEO who has built a formidable legacy. Telstra’s current chief financial officer, Andy Penn, succeeded him on 1 May.

Thodey was group managing director, mobiles, and later group managing director, Telstra enterprise and government, before assuming the captain’s chair in 2009. There he oversaw a steady and sustained climb in Telstra’s share price to a 14-year high. He implemented a company-wide cultural shift towards better customer service and resurrected negotiations with the Australian Government over the A$11 billion National Broadband Network (NBN).

In his interview with Malley, Thodey discussed his desire to build more business connections in Asia, to constantly innovate and deliver new services. He also talked about having to manage staff numbers and offload areas of the business that were no longer relevant to the telco’s future. Authentic and collaborative leadership was crucial to convincing shareholders and the public that the cuts were necessary for Telstra’s future, he explained.

"We are a utility but we are a service company and we had lost that focus."

Under his watch, Telstra doubled its value, and its 4G mobile network achieved close to 95 per cent penetration across Australia.

Thodey also spoke about the contribution made by his controversial predecessor, American businessman Sol Trujillo, as well as Ziggy Switkowski and Frank Blount before him. He admitted the first two years in the CEO’s chair were tough; with hindsight there were things he would have done differently.

David Thodey (left) discusses a point with Alex Malley

David Thodey

But what was most striking about Thodey was, and is, his easygoing manner. Sure, he had the minders, the top floor office and a staff of 60,000. But this is a man who doesn’t drive a fancy car. There was none of the hushed reverence you find on other executive floors. He remains the kind of guy who sticks his head into a meeting room to beg a few moments to catch his breath. That’s exactly what he did ahead of our interview. It was the manner of a man who had just made a very big career decision he was pretty happy with.

Malley: David, you lost your dad when you were very young, only nine years old. What were your reflections of those times as a boy?

Thodey: My father, I remember him well. He worked at AMP and used to coach the Churchie rowing eight [Brisbane’s Anglican Church Grammar School team]. We had a lot of fun. It was tragic at nine, and the older you get you realise how much you miss a father. But I was also very lucky, my mother took us back to New Zealand [she was a New Zealander]. We had a lot of family there and I was looked after.

Malley: When you took the role of CEO, I got the sense that someone organically in the business was going to take care of things. That was my early view, as a businessman and also as a customer.

Thodey: There have been different generations of CEOs and each one has put their own stamp on the company. I want to put on the record that Sol [Trujillo, CEO from 2005 to 2009] was an inspirational leader. He knew the industry really well. He made some big decisions along the way that helped us change, as did Ziggy (Zwitkowski CEO 1999 to 2004), as did Frank Blount (CEO 1992 to 1999).

"For any large company you need an insatiable appetite to learn, to put yourself at risk and be curious."

What I’ve been able to do with a great team is to set a direction and I couldn’t have done that without each of those. There are some things I’ve not done – look at [phone directories business] Sensis. We should have sold Sensis 10 years ago. My first two years were really tough. We had to get the NBN sorted out. We were not the flavour of the month; the share price dipped at A$2.50. The Future Fund [Australia’s sovereign wealth fund] was selling us off. There was a lot of pressure but it’s those hard times when you work through and you’ve got to have self-belief. You also need some support from a great board, which we had.

Malley: Do you remember a particular moment where you literally went to bed one night thinking “Wow …”

Thodey: “… why did I take this job?”

Malley: We all have those moments! But in terms of thinking: “This is a real obstacle. I don’t think I’ve ever faced this before.”

Thodey: Yes, there were times, if all leaders are honest, we say: “Gee, can I get this thing done?” I don’t think I ever waivered in the belief I had in Telstra as a company and the people in here. Because I saw what the technicians did every day. I saw the people in our shops. I saw the commitment. I saw the quality of the people that was not being represented fairly.

But was I the right leader to do it? And you also say if I can’t get it done, I’ll let someone else do it. So you go through those periods and thankfully we got through it. You have opportunities and you’ve got to grab them. We had a couple of moments where things went our way and we just said, “OK, we’re going for it” and made the bet.

Malley: Moving to your role as chief executive of Telstra, your predecessor [Trujillo] was known as the agent of change, you’ve said you’re the agent of the customer. Attention to the individual, attention to service – that’s a huge cultural journey isn’t it?

Thodey: Yes it is. [It comes from] 22 years working at IBM where customer service was a very big part of my background. At Telstra it’s even deeper. We touch so many people every day and there is such a dependence on connectivity. Look at your mobile phone and how it’s completely changed the way we live. We are a utility but we are a service company and we had lost that focus. It’s very easy to say the words “customer’s interests”. It is really hard to do it, really hard.

It has become a key strategic pillar for us. Customer service is a means to get returns to shareholders. The other impact it has in a large corporation is that it moves the attention from internal to external. If you make the customer the final arbiter in everything you do, firstly, you become more responsible to the market; secondly, it stops you being worried about internal factionalism and it rallies people to something that is bigger than any individual.

Customer service is really about culture. It’s about process improvement. It’s about change. It touches everything you do.

"I really do believe that leaders need to make big change."

It’s also about authenticity in leadership. You can’t ask a person that is dealing with a customer to do things if the processes fail. It’s like you signing up a new member and the membership doesn’t work; you’ve got to get the process right. Every day two million people go to our websites, half a million callers and 100,000 at shops. So 1 per cent failure impacts literally thousands of people.

Thodey leaves a big seat to fill when he steps down as CEO

Thodey will step down as CEO

Malley: A big part of that, too, is validating this. How do you manage that validation?

Thodey: Well 47 per cent of my [salary incentive scheme] has been dependent on how well we do, as with anyone who is on an incentive. I go there because you’ve got to put money where your mouth is, but it’s more than that.

You’ve got to keep it real. It’s very easy in large companies to get disconnected from the reality of what’s going on. We work pretty hard to make it authentic and be really responsive.

Now I have to say we have not by any means achieved where we want to get to.

Malley: A company like Telstra must continually find new areas of growth. How does Asia fit into that scenario?

Thodey: We need great Australian companies working in Asia. We have the capability to do that. Companies have tried it and haven’t been successful, but that shouldn’t stop us wanting great Australian companies that operate globally. Go to Sweden, go to Norway; many European countries have got international companies. Why doesn’t Australia have more international companies?

Australian executives do really well overseas. They assimilate well. If we are clear about what we are good at doing and we are considered about how we do it, we should do well. We think Asia is a wonderful market. All you need to do is be in a growing market in a growing sector, if you’re average, you do OK. We’ve been in China now for 15 years. We’ve been in two online businesses and IPO’d both of them. The last one, the car sales one, is valued at A$4-4.5 billion, the other one was valued at A$3 billion. We have 5500 people working in Asia.

Malley: How do you see leadership today in terms of what you see politically in business? Do you think they have succumbed to the shorter picture?

Thodey: Yes, there’s no question about that. Firstly, I really do believe that leaders need to make big change. You’ve got to make some big bets and go after it with everything you’ve got. Culture enables the company to come with you on that and it is really important because you can’t just dictate it, you’ve got to get momentum around it.
I do believe that the very essence of leadership has changed forever. Due to technology you can’t manage messages anymore. The great leaders today are people who have great thought leadership, great values who can take people and inspire people.

Thodey and Malley

Thodey and Malley

We take a billion dollars of cost out of this business every year. We lay off about 2000 people every year, because our business is changing. You can do cost austerity but as long as people know there is a vision of where we are going, and we are about creating a brilliant connected future, we believe that we can help Australia be a better place. That’s what inspires people. But they’ve also got to understand parts of our business are dying and we’ve got to restructure.

Thodey on innovation

Malley: How do you try to do the best with innovation, with staffing around innovation, to allow you to move into the areas that are the best choice? 

Thodey: We do an awful lot. I’ll start with culture, because for any large company you need an insatiable appetite to learn, to put yourself at risk and be curious. It can then always reinvent itself. You need to do the basics well – I’m a great process guy as well. We do lots of little things, like hack-a-thons [where computer programmers collaborate], we run technology leadership days, we do reverse mentoring, run an innovation hub, we fund innovation projects. We believe that innovation is not about the big idea, it’s about doing things literally every day.

"Innovation is not about the big idea, it's about doing things literally everyday".

Telstra is known in the telecommunications sector, and even in Silicon Valley, as one of the most innovative telecommunications companies.

We’ve got a lot of mobile apps with which you can manage your account and we hope to have others so you can be interactive with your technician. We’re very alive on social media in terms of servicing customers. We’ve been doing crowdsourcing [to answer their technical queries] now for three years.

Our aspirations are big. We like people a little bit on the edge; people who are going to challenge us and push us forward. We bought a software company for A$300 million dollars out of Silicon Valley, [and] we run a whole division out of the US now. It’s still early days but software is going to eat the world, it’s a software-driven world. So how we do that?

E-health is something a company like Telstra can do really well. We’ve invested about A$150 million in buying about nine companies in the past 12 months. 

IBM vs Telstra

Malley: You were CEO at IBM for two years. If I was talking to David Thodey as the CEO at IBM, as opposed to talking to David Thodey today, what would have changed? 

Thodey: Well, they are very different roles. One is the CEO of a wonderful multinational company that is very successful with a strong support structure, but you’re the country manager of a company that is listed in New York.

Telstra is one of the top 10 companies in Australia. You’re listed, the buck stops here. It’s a very public role and comes under a lot of scrutiny, very politicised, heavily regulated. So they are different roles.

[Today] I have been a CEO of a publicly listed company. I was a CEO of a branch office before.

I learnt a lot from IBM around good management. American companies are great, they have great management styles. It was a great technology company. I love technology, always have.

Telstra embraces e-health

In his interview with INTHEBLACK, Thodey confirmed that Telstra had acquired or formed partnerships with nine innovative companies over the past 12 months in a A$100 million bid to become Australia’s leading provider of integrated e-health solutions.

Telstra launched a new health division in October last year, announcing a joint venture with Swiss online health company Medgate, with plans to give patients round-the-clock access to doctors via phone or video. This new Telstra division now holds stakes in e-prescription exchange provider Fred IT and health appointment generator Health Engine, and licensing agreements have been signed with Dr Foster, iScheduler and InstantPHR.

Telstra has recently bought into information management technology and applications for general practictioners and hospitals with its acquisition of Australian e-health cloud software developer CloudMED (formerly known as Cloud9) and Indian health software developer IdeaObject.

The telco has also picked up iCareHealth, a primary software provider to the aged care sector, and linked with in-home health care provider Silver Chain Group to help it remotely monitor changes in a patient’s condition after leaving hospital.

Telstra sees a revenue growth opportunity in building a digitally connected health system, with health spending tipped to hit A$200 billion by 2020 as the population ages and chronic diseases rise.

This article is from the April 2015 issue of INTHEBLACK.

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