Value of Consulting - Ian Bolger - Thames Water
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  • 1. Delivering Transformation – getting the best out of consultants“Some lessons from the front-line….. “
  • 2. ContentsBusiness ContextHow we ensured maximum value for money3 main lessons 2
  • 3. Largest Customer Base Biggest Asset base13.5 Million customers 70,000 KMs sewers1 in 4 UK adults 31,000 KMs water mains£1.5 Billion revenues 349 STWs and 265 WTWsCapital city with 300 yr old 2530 pumping stationsinfrastructure 58 Reservoirs UK’s largest Water and Sewerage providerHighest daily activity levels2.8 Bn litres of water daily Highest quality standards2.6 Bn litres of sewerage treateddaily 99.98% of EU Water Standard200,000 highway excavations pa 100% STW compliance1300 miles of new mains laid inLondon pa 3
  • 4. Strategic Context• Fixed 5 year income set by Regulator (Ofwat)• £5 Billion Capital programme with big in-built efficiencychallenge• TW acquired by PE in late 2006 (McQuarie Bank)• New Executive - challenge the norm – no sacred cows• Ruthless business focus on cost & performance– OPA from 23rd (of 24) to 2nd in 3 years• All key stakeholder targets met 4 years in row• “Tired” procurement function – dis-engaged from business 4
  • 5. AMP 4 AMP 5 No programme – project by project  Business in control “chasing the game”  High-calibre procurement team Dis-empowered under-weight  Well defined asset programmeprocurement team  Fully aligned contractors Contractors in commercial control  Client in commercial control No cost transparency  Full cost transparency 5
  • 6. ContentsBusiness ContextHow we ensured maximum value for money3 main lessons 6
  • 7. We placed consultants at the heart of the transformation –their staff need to role-model the “new brand” and executewith real “pace and passion” Clear Procurement AAA Strategies Excellent PMA High Strategic Sourcing Performance Process Staff & Teams Delighting Specialist High-quality Data Customers ConsultancyTEC Active Support DWYS Savings Baked into Supplier Business Plans Management Strong Smart Drive Culture Policies & Processes change Procedures & Systems NBDB WEIT “Aspire, Excel, Enjoy” 7
  • 8. Consultancy is now core to our procurement service delivery – we haveoutsourced our team to the professionals – a revolution not anevolution, to “turbo-boost” capability and service to internal customers LAY FOUNDATIONS – TRANSFORM – EXCELLENCE ON-TAP Functional up-grade and Capital Procurement Managed Procurement OPEX Sourcing Transformation Service “Accelerate” “Game-changing” “Bigger, Better, Faster”  Deep opportunity analysis  Create factual Baseline  Innovative “in-sourced” & functional competence from 840,000 original market model assessment documents  Procurement as a service  Clear deliverables agreed  Control of T2 - 72 function - with flexible categories tendered with resources on demand  98% OPEX addressed in 3 over 1000 suppliers sourcing waves  Control over £500 M pa of  New delivery & procure direct and indirect spend  Integrated teams with TW strategy main T1 contract staff  Total integration of  Detail bid analysis on resources with TUPE of  Coaching and up-skilling 1000s of bid variables TW staff to Efficio in best practice strategic sourcing tool kit  Embed HUB concept  Co-location with key stakeholders at TW HQ  Category expertise  Embed / train new skills and processes 2007 2009 2011 8
  • 9. We have focussed hard on being an “organised client”ensuring active formal sponsorship to clear road blocks &make quick decisions COO Sourcing Steering Group BU Mgt Teams ¼ ly Monthly Using project disciplines to drive pace Weekly Cross-functional Teams 9
  • 10. Both parties have benefited from the success of thetransformation – a real strategic fit is important so you arenot just “another client” 2010 CIPS Senior Management WINNER Professional of the year Finalist FINALIST 2010 CIPS “Step change” Award FINALIST 2010 Utility Week Supply Chain Excellence award 5 Categories – Best procurement FINALIST Team; Best X-functional project; Overall Excellence; Innovation & Partnership. 10
  • 11. Excellent Results at each stage gave the businessconfidence to repeatedly invest and eventually partnerlong-term• Business critical savings over £1 Billion delivered to helping stretch limited funding and offset unavoidable and unplanned adverse costs• 320 sourcing projects over 98% spend re-tendered• OPEX - 23% average cost reduction worth over £100 Million• CAPEX - 20%+ cost reduction vs AMP4 supply cost-base• TW Control of the extended supply chain increased from 15% to 53%, and on target for 85%• Full transparency of actual cost• Co-ordinated continuous improvement of Service levels, Quality and Innovation ROI of 5:1 on OPEX and over 30:1 on CAPEX demonstrated the real value for money delivered by engaging top professionals 11 11
  • 12. ContentsBusiness ContextHow we ensured maximum value for money3 main lessons 12
  • 13. 3 main lessons learned1. Pick best of breed consultants – “horses for courses” – be suspicious of “jack of all trades”– Focus on “end to end” excellence – the strategy and the delivery - only pay for results not abstract ideas and reports– Try an identify the best strategic fit – don’t be just another account– Focus on long-term value creation not just short-term rates & costs (NPV, ROI)– They must have “Skin in the game” – fees at risk linked to the what (deliverables) & the how (style)– Crystal clear scope, objectives and deliverables2. Real teamwork – “success has many parents, failure is an orphan”– Be a good “Client” – consultants aren’t magicians & time really is money so get the whole client organised– One-team – assign your best people & work as co-located & fully integrated teams– cultural fit is crucial – they are representing your “brand” in the business and in the market– Don’t be a spectator – this is a contact sport – management must “own it” & be actively involved– Leave a lasting legacy - long-term process change, tools, techniques and up-skilling of staff3. Company-wide transformation is like a battle – having trusted partners allows you to really lead from thefront without worrying about the delivery.– baseline is critical to drive fact – based influencing & decision making– Get finance to sign-off baseline and deliverables – only the P+L counts, procurement savings are a distraction– Business unit sponsorship & wide x-functional engagement & governance– Don’t delegate the Stakeholder engagement…. especially the difficult ones 13
  • 14. Contact details:ian.bolger@thameswater.co.uk07747641063 14