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Making Turnarounds Work !
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Making Turnarounds Work !

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The 6 critical keys that make Turnarounds work !

The 6 critical keys that make Turnarounds work !

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  • 1. Making Turnarounds WORK by Erik Van Rompay FIRST DRAFT – © 2008
  • 2. Note
    • This presentation was made for an audience of young net-entrepreneurs. The style reflects the spirit of the audience.
    • All illustrations were used to tell an animated story …. (up to you to imagine…)
    • A very strict “business” presentation made for a French Bank (without images) also exists and is available on request (see last page)
  • 3.
    • Why do so many turnarounds fail ?
    • Companies squander their energies on attractive-looking projects or major restructuring projects that fail to produce bottom-line results
    WHY ?
  • 4.
    • After months of turnaround activity and redesigning the company, we find dramatic improvements in major fields…. but with an overall performance decline.
    How is this Possible ? DEFINITION (Platt – 1993): The Turnaround Manager is responsible for getting control of cash, eliminating excesses (people, products and facilities), focusing upon the company’s core competencies and preserving assets .
  • 5.
    • NUMBERS…. not available for Turnarounds
    • For Major Change Management programs
      • European survey LOGICA/EIU (2008)
        • 36% are stopped before deployment
        • 30% do not give financial results
        • => 66% fail (and we are not yet at TURNAROUND LEVEL)
    Turnarounds Change Mgmt Programs Projects VALUE High impact – high value Low impact – no value
  • 6. Personal experiences - 1
    • one of my consulting missions : a furniture distribution company in distress
    • 2 turnaround plans in 18 months
      • GREAT  : operational costs reduced by 15 %, the creating of a real brand name, larger audience and sales increase of 14% during those 18 months (+ successful web launch).
      • BAD  : Financial results : unchanged (ebita worsened by 0.2%)
    Note: I was only a consultant on this mission so I could not handle some sensible issues like closing down the 10 most lost-generating outlets.
  • 7. Personal experience - 2
    • turnaround of a retail company in the event industry
      • GREAT  : operational costs reduced by 45 %, beating the historical leader, sales volume multiplied by 150 times in 18 months.
      • BAD  : the company was close to bankruptcy and had severe cash problems. Our exponential growth only created a success story hiding our continuous cash problem.
    A great business success but without any financial result (so negative shareholder value) ?
  • 8. Personal experience - 3
    • Solving cultural conflicts after a failed merging (2 Internet platforms)
      • GREAT  : Strong audit detecting the possibility of a perfect merging
      • BAD  : The merging did not work
        • No new products
        • No new sales neither new clients
        • No innovation during 2 years in a very competitive environment
    I came in to solve the cultural conflicts and to make the company running again. Result : growth of 70%, 2 successful new productlines…
  • 9. Now, it is time to present…
    • The six elements
    • that make
    • a turnaround work !
  • 10. Or do you think you can fight better than Cesar ?
  • 11. Critical element 1: you need a champion Who do you pick as a champion to execute ? The intellectuel The communicator The force of nature The beauty
  • 12. Critical element 1: A high engaged executive
    • You need the first 3 in one person : the intelligence, the communicator and the force
    • Turnarounds can only succeed when senior executives invest time and energy
      • In 80% of the cases, a new executive is brought in to execute a radical change
      • In 80% of my missions, I was preceded by at least 3 failing change management experts.
    • Only a boss can act to:
      • Dedicate the best people
      • Be generous on resources (people, IT…) to make things happen
      • Implement the right communication
      • Define the adequate pace to change
  • 13. Critical element 2: The right and ambitious scope
  • 14. Critical element 2: The right and ambitious scope
    • Most turnarounds fail as they are oriented towards one « field » or one « activity » or one « process » and not to the whole company (or even market transformation).
    • Don’t go too wide
      • You can not change everything overnight. You need a roadmap.
      • People need to follow the leader… take care they are behind you
    • The target must span the entire business to ensure sufficient breadth…
    • If you can impact the whole market ! Just go for it!
  • 15. Critical element 3: Know your value ? What do they want you to do ? Why are you important for your clients ? What do you do for them ?
  • 16. Critical element 3: Know your value
    • Everyone thinks knowing the value its company creates … but have an audit to see what clients would appreciate in your company.
      • A wider catalogue or faster delivery ?
      • A faster contact center of a web interface ?
      • … .
        • Personnal experience  : a cybercafé in distress
          • the first reaction was to replace the existing computers with faster and new ones and repaint the wall (nice and new !)
          • What people wanted was better service (an area to take a good cup of coffee, information leaflets…)
  • 17. Critical element 4: Succeed cross-influences ?
  • 18. Critical element 4: Succeed cross-influences
    • The corporate landscape is complicated… back-office and front-office are strongly linked with visible and HIDDEN links.
    • Take care of the hidden relationships between people, teams and organizations,
    • Assign full-time team members from a wide range of functions/services
  • 19. Critical element 5: Monitor your turnaround
    • manage your existing customers as they are the one that deliver you cash.
        • Try to increase the purchase ticket
        • Also focus on prospects that are unhappy being with your nearest competitor
    • Create a 2 way communication channel to know what happens
        • One from your employees to yourself
        • One from your clients to yourself
    • Know what you collect !
  • 20.
    • Define the critical element of your turnaround.
        • Is it scope, time or budget ? (remember, you can only pick one… the other two are less critical)
    • How do I monitor my turnaround
        • It is common to change the way to monitor during the turnaround process.
    • Is it working ? Are the results on target ?
        • If no, how to correct
        • If yes, are we sure we are on the right track ?
    Critical element 5: Monitor your turnaround
  • 21. Critical element 6: Thinking out of the box You could be the same Obelix doing different things ! - Doing the same thing… but serving 3 different markets
  • 22. Critical element 6: Thinking out of the box
    • What organizational drivers will determine the success of a redesign?
    • Does the front-office understand back-office and vice versa
    • Does everybody understands business ?
    • Do salespeople know what they are selling and what it takes to deliver ?
    • Does everyone has the attitude to improve daily operations ?
  • 23. Critical element 6: Thinking out of the box
    • Create several WHAT IF scenarios
    • What if a new competitor delivers my products at half price ?
    • What if I start selling my products in another country?
    • What if I change operations so I can reduce staff by 50%
    Personnel experience: 2005 A new market entrant delivering my products at TOP250 companies for FREE (while my average ticket was 40.000 euros). Solution: as we blocked the market early 2005 with a unique service offering, 90% of our existing client-base stayed with us.
  • 24. 5 most frequent pitfalls
    • the wrong team (or underpowered team members)
    • preview only the impact of the plan itself and not the impact to the whole company (or even customer relations)
    • settle for a status quo (we turn around not to loose our world… versus we turnaround to win the world)
    • overlook communication and buzz
    • burnout of the executive (out of magic potion)
  • 25. Don’t hesitate to contact me… Erik Van Rompay [email_address] Tel. 33+(0)6.79.91.06.87
  • 26. Turnarounds need to combine the 4E+4C+4P Product Price Place Promotion Consumer Cost Convenience Communication Experience Exchange Everyplace Evangilism 4P 4C 4E + +