Making Turnarounds WORK by Erik Van Rompay FIRST DRAFT – © 2008

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)

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)

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 ?

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

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 .

After months of turnaround activity and redesigning the company, we find dramatic improvements in major fields…. but with an overall performance decline.

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

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)

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.

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%)

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) ?

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.

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…

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

Now, it is time to present… The six elements that make a turnaround work !

The six elements

that make

a turnaround work !

Or do you think you can fight better than Cesar ?

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

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

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

Critical element 2: The right and ambitious scope

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!

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!

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 ?

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…)

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…)

Critical element 4: Succeed cross-influences ?

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

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

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 !

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 !

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

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 6: Thinking out of the box You could be the same Obelix doing different things ! - Doing the same thing… but serving 3 different markets

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 ?

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 ?

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.

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%

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)

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)

Don’t hesitate to contact me… Erik Van Rompay [email_address] Tel. 33+(0)6.79.91.06.87

Turnarounds need to combine the 4E+4C+4P Product Price Place Promotion Consumer Cost Convenience Communication Experience Exchange Everyplace Evangilism 4P 4C 4E + +