Transformation Programme of a Leading FMCG Company in W.A
Table of Contents Background and Context What was their Ambition? What was their change framework? How did they apply the change framework? All’s Well that Ends Well 2
The Case for Change To build a truly Global business and create long-term sustainable growth, ABC Plc. needed to change the way it operated. Our competitors spend £536M less than we Costs do on Marketing and Overheads . Analysis of peer competitors showed that there were (Competitive Report 2008) significant opportunities for ABC to: • Reduce its marketing and overhead costs. • Improve its operating margins. Complexity and Scale ABC operated as a federated business. Each Market did things a little differently. Functions External Pressures were not fully integrated – they were not joined Their industry faced significant challenges which up. threatened future growth: This meant it was difficult: • Sharp excise increases. • To operate across geographic boundaries. • Growing illicit trade in many Markets. • Fully leverage our global scale. • Changing consumer behavior. • Increasing regulation. • Be nimble, agile and cost-effective. 3
GLOBAL CASE FOR CHANGE ABC has performed well Regulation erodes our value proposition Changing societal, consumer and industry environment Slice by slice, the value proposition is being eroded – the end game is clear GDB volume Adjusted Operating Profit (£bn) Tobacco control environment 208 De facto prohibition 5.0 of tobacco through 195 gradual de- Product 187 normalisation of the Ingredient bans Standard sticks Toxicant ceilings category 161 Display and 146 Brand 2.8 Comms. 9% CAGR Ban Ban 15% CAGR on on Outdoor comms one-to-one comms The question is not if, but when and Places where. While there HoReCa Parks Beaches Full outdoor bans may be delays or 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 challenges to some regulations, there are Packaging no obvious game changers in sight Source: Government websites and Ministries of Health, TobaccoLabels.ca, BAT An unbalanced consumer equation will NTO mix will shift even more towards constrain growth developing markets 2010 41 59 ? ? ? ? 0 0 0 0 2 2 2 2 £ £ £ £ C C ~ ~ ~ ~ H H A A N N G G I I N N G G S S M M O O PERCEIVED CUSTOMER PERCEIVED CUSTOMER PERCEIVED CUSTOMER PERCEIVED CUSTOMER K K C C I I N N H H G G A A P P N N L L G G E E I I N N A A G G S S U U B B R R E E R R A A N N D D VALUE VALUE VALUE VALUE I I M M A A G G E E 2030 30 70 H H I I G G H H E E R R R R E E T T A A I I L L P P R R I I C C I I N N G G Developed markets Developing Markets Consumer value equation in the future The changing commercial environment created a need to change
GLOBAL CASE FOR CHANGE Increase in total costs (Centre + Regions): £500 million (2000 adj.) INTERNAL £800 million (2011) COST REVIEW = £1200 million (54% in real terms) ...and growing RESEARCH ‘Back office’ is £ 500m more expensive than peers ANALYST REPORTS DEF is £500m cheaper in Marketing and Overheads ABC Operating Margin: 35.8% (2011) COMPETITIVE DEF Operating Margin: 44.2% (2011) COMPARISONS GHI Operating Margin: 42.3% (2011) “ “ Our cost base needs re-engineering. It is completely unacceptable that we can sit on a cost base that we know is not the most efficient in the industry Company Leader, 2011
WEST AFRICA CASE FOR CHANGE: KEY CHALLENGES FIERCE COMPETITION INCREASING ILLICIT EXCISE REGULATORY INSTABILITY IN SHOCKS RESTRICTIONS ENVIRONMENT This programme is a key enabler for West Africa. The programme will deliver the standardised processes, systems and organisational capabilities needed to simplify our business and to embed increased focus and discipline in support our Regional growth ambitions. - Senior Executive
Table of Contents Background and Context What was their Ambition? What was their change framework? How did they apply the change framework? All’s Well that Ends Well 7
New Operating Model It was not just about organisation structures… Upgrading IT End to End Business systems and process building new IT capability: Business process - APO, Nexus, Core SAP, BPC, etc. Opportunity to clean up Fiscal & redundant entities IT architecture corporate structures and structures Risks and controls embedded in the process Organisation Risks & controls design Transition plan to New Org structures Data & Key decisions & Consistent master information governance data: - e.g. Asset Class, Brand, Product, Pricing KPIs Clear governance frameworks - e.g. One Marketing Globally and regionally standardised KPI’s
WHAT DID THE CHANGE MEAN TO ABC? “ “ “ My expectation is to have a leaner, fitter, more agile and transformed ABC, growing with the backbone of our people, our brands and our products. Company President, 2011 ABC needed… : Broader missile launches through strategic portfolio Faster deployment and rollout of innovations Simplified and standardised ways of working Business insight for better decision making A truly global enterprise, global investment decisions and resource allocation “TRANSFORMATION”
CHANGE SUPPORTING TRANSFORMATION Major Challenges Major Successes Changing mind-sets and attitudes 58% Top management sponsorship 92% Corporate Culture Employee Involvement 49% 72% Honest and timely communication Complexity underestimated 35% 70% Corporate culture 65% Shortage of resources 33% Change Agents 55% Lack of senior leader commitment 32% Change supported by culture 48% Lack of change know-how 20% Efficient training 38% Technology issues 18% Adjustment of performance… 36% Lack of staff motivation 16% 33% Efficient organisation structure Change of process 15% Incentives 19% 0% 0% 20% 40% 60% 20% 40% 80% 100% 60% Four of the top 5 are people issues Top 7 relate to people Source: Summary of IBM ‘Making Change Work’ research, 2010. If the key to transforming the way we run our When I look at the Programme …. This scale of business was purely in deploying a single change management is new territory . instance of ERP – we would have done this a Executive long time ago. Executive
CRITICAL SUCCESS FACTORS Critical Success Factors 15000+ People trained and enabled to do their jobs effectively 5000 Managing the transition of ~5000 people into new roles effectively and minimising disruption 1000 Bringing 1000 leaders on board at the right time to lead the programme in the Regions 100 GMs and Top Teams who understand how their business is changing and 100 reinforce the right behaviours and ways of working to embed the change and deliver benefit
Table of Contents Background and Context What was their Ambition? What was their change framework? How did they apply the change framework? All’s Well that Ends Well 12
Global Change Framework
Change Outcomes Case for Change & New Leadership & Sponsorship Stakeholder Learning & Capability Direction Communication & Development Engagement • • • • Clear case for change for Leaders are aligned to the Buy-in and Employees understand the programme deployment case for change and commitment is new processes and ways of is defined and is demonstrate their visible achieved with critical working ahead of the understood by, and commitment by incorporating stakeholders, change, and are bought into resonates with, all key the messages at Leadership particularly within the the need for above-market stakeholders. Team meetings and functional Leadership Team, consistency of all meetings, and in discussions Finance, Operations, processes. • Vision of how the with staff. Marketing. • programme fits within Employees are trained in • • overall Company Leaders have engaged with All impacted the ERP and can perform Strategy is stakeholders to gain their personnel are their tasks effectively on day communicated. support for the change. communicated to 1 of the change. and engaged with, • • • People at all levels and Leaders role model the The required behavior effectively. across all Regions are desired behaviors and ways changes, such as working committed to the of working, in particular: collaboratively cross- change. collaborative interaction with functionally and adhering to impacted functions. standard processes, are • People understand the embedded. • role they need to play to People empowered for • achieve the planned Change, are prepared for Learning's are captured and benefits. their role and build energy for shared the change.
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