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Design-to-Value Approach for Telcos - JP Romieu


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Design-to-Value Approach for Telcos - JP Romieu

  1. 1. DESIGN-TO-VALUE FOR TELCOS Jean-Philippe Romieu Jun 2013
  2. 2. Design-to-Value For Telcos – Executive summary • In a challenging environment, Design-to-Value (DtV) appears as a critical element of a telco strategy as it allows to optimize investments and costs while preserving the top-line • As most of the costs are embedded in the design phase, DtV is a powerful weapon to optimize costs and value at the same time • In comparison with a traditional way, DtV brings a holistic view on costs, leverages all possible sources of innovation and know-how and systematically uses a wide range of tools • DtV approach can be codified along 5 phases: starting with baselining the current economics and understanding the market situation, the DtV team set the targets before working in a cross-functional set-up to generate new ideas, that once prioritized and consolidated will be measured against the initial targets. • DtV requires a combination of several factors to make it successful - A cross-functional set up involving empowered internal teams and suppliers early in the process - The right skills and mindset of the people to build up capabilties and roll out DtV more systematically - An aggressive target setting to create a field of stress and recoup the effort required by applying DtV - The systematic use of optimization tools - Clear governance rules to integrate DtV into the corporate key processes and ensure top management attention - A rigorous execution with emphasis on the controlling loop to measure savings against target • DtV implementation in telcos should start with pilots that will help refine and adapt the concept to the organization before a roll-out on selected projects 2
  3. 3. Agenda • DtV principles • DtV building blocks • DtV implementation 3
  4. 4. DtV is an approach to optimize costs and customer value early in the design phase Most of the cost embedded in the design phase… … thus making DtV critical for optimization • Upfront time and effort required to offer greatest % cost defined payoff cascading from production to lifecycle costs while generating significant value 100% Lifecycle costs • Lifecycle cost optimization • Simplification, standardization, cost-effective 80% substitution to reduce production/ implementation costs without impacting quality/value 60% 40% • Optimization of post-production lifecycle cost including operating costs, maintenance, modernization and disposal costs Cost optimization opportunities 20% time 0% Planning Concept Detailed design design Design Production/ implementation Use Operations/ maintenance • Value generation • Increase of customer value through pricing optimization • Increase of customer stickiness • Lead time reduction due to design changes 4
  5. 5. DtV brings specific benefits vs. traditional approach Traditional approach DtV key benefits • Market considerations not part Restricted perspective • Understanding of customer and of cost optimization • Costs not known or acted upon competition requirements Holistic view late in the development cycle (product, service, operations, maintenance, disposal) • Each functional team making Functional silos decisions from their own perspective/targets • Suppliers involved after design • Leverage of all possible sources Extended know-how phase systematically consider cost implications of various designs • Established processes not robust (e.g. low ownership) of know-how and innovation, internally and with suppliers • Stimulation of creativity in empowered teams • Tools/information lacking to Lack of tools and robust processes • Holistic view on lifecycle costs • Systematic use of optimization Systematic use of tools & industrialization tools from an early stage (e.g. expert workshops, equipment teardowns, value analysis) • Industrialized processes 5
  6. 6. There are 5 main phases in a DtV approach 0 2 1 Baselining & cost/value model • Understand current economics with detailed base lining of costs, incl. major cost blocks and market (revenues, usage • Build driver-based cost/value model Market view & Value focus 3 Target costing • Understand customer • Establish top-level perceived value and sensitivity to costs • Analyze competition positioning (features, pricing) through detailed benchmarks target costing based on market view and allocate it to lower levels, subsystems or modules 4 Idea generation & crossfunctional view • Generate new ideas, • Evaluate total cost creative alternatives with cross-functional set-up (teardown workshops, supplier workshops) • Establish measurable • With end-to-end objectives Synthesis & implementation focus, prioritize applicable ideas (economic impact, ease of implementation) impact of final design and compare to initial target cost (reiterate and adjust target if necessary) • Prepare implementation plan and timeline for new design Business Case – End to End / Integrated Overview 6
  7. 7. Agenda • DtV principles • DtV building blocks • DtV implementation 7
  8. 8. A high-impact DtV program is based on key building blocks DtV Program 1 2 Cross-functional team 3 Right skills and mindset Radical target setting • Cross-functional working • Implementation of DtV mindset • Aggressive target setting teams (e.g. technology, marketing, procurement, finance, operations, DtV champions) • Early involvement of vendors and full leverage of external know-how through systematic training • Scale building through training of cross-functional teams by a pool of internal experts based on best possible boundary conditions • Creation of field of stress to prompt spaces for new solutions • Broad commitment of all relevant functions 6 4 5 Systematic use of optimization tools Clear governance rules Rigorous execution and and controlling • Systematic use of optimization • Integration of DtV processes • Implementation planning methodologies (e.g. benchmarks, expert workshops, equipment teardowns) • Application of robust analytical tools (e.g. cost analysis, revenue model) into technology roadmap, budget planning • Top-management involvement (steering committees) closely monitored • Controlling loop to track savings vs. target 8
  9. 9. DtV building blocks A cross-functional set-up to generate ideas and decide for implementation Preparation • Collect expert input (cost drivers, engineering, manufacturing, suppliers) and results of teardowns • Get results from market analysis and customer value • Select key suppliers and prepare supplier briefing Idea generation in expert workshops • Set-up cross-functional teams (marketing, engineering, service, quality, logistics, procurement, regulatory) • Conduct workshops with internal teams and key suppliers • Generate long list of potential cost reduction ideas for each area using technical and functional levers Trade-off and prioritization Decision for implementation • Analyze cost impact vs. perceived value impact for each idea • Analyze interdependencies between proposed measures • Prioritize ideas against impact and ease of implementation. Decide on Go/No-go for each initiative 9
  10. 10. DtV building blocks A DtV school to build up sustainable capability DtV School Curriculum • Focused training on DtV foundation and use case for a hands-on experience, provided by DtV experts • Combination of dedicated DtV modules with DtV-related trainings (e.g. project management, procurement engineering) • Main focus on on-the-job training and in cases where short real-life application is planned • DtV champions to follow the entire curriculum to be able to coach the cross-functional team (“train-the-trainer concept) 10
  11. 11. DtV building blocks Target costing as a foundation Customers Principle • Understanding of perceived Tools • • • • value, willingness-to-pay Price elasticity Survey tools Customer decision journey Feature prioritization Competition Internal users • Analysis of needs and value of • Awareness of competition specific features (e.g. technical service, maintenance) • Management interviews • Focus groups • Cost-driver analysis requirements • Feature and functionality • benchmarks Competitor pricing strategy Target costing • Determination of must-have features valued by all parties • Definition of top-level target costing and allocation to lower levels • Commitment of development teams on target objectives 11
  12. 12. DtV building blocks A whole range of tools to tackle costs from an end-to-end view • Disassembly and analysis down to EXAMPLES Equipment Teardown • Comparison of features, • technical specifications, actual performance of products Bridge to comparable configurations for local specifics Benchmarking • Analysis of essential product • • bill of material level (should cost) Calculation of fair sales price based on BoM and associated indirect costs Supplier cost structure • Transparency on cost • Optimisation toolbox functions Identification of functions with a high cost to function ratio for further cost reduction structure incl. R&D, SG&A costs Ground for fact-based negotiation Design for manufacturing Value analysis • Estimate of fabrication or • Analysis of the flow of materials and • information to bring a product or service to a consumer Reduction of lead time by identifying sources/causes of waste Tool categories Customers Value stream mapping • Total cost assembly labor time and machine cycle time Evaluation to reduce cycle time and resources Manufacturing/ supply chain 12
  13. 13. DtV building blocks A clearly defined governance to make DtV results sustainable • Anchor DtV principles into • Set-up cross-functional key governance processes (e.g. technology roadmap, product development, procurement process) teams with all relevant functions and when possible co-locate them (campus mode) • Establish regular performance management reviews to share info and tools, adapt systems to DtV and coordinate with key processes • Define clear roles and Governance responsibilities in the xfunctional team (e.g. with RACI method) and ensure decisions involve all relevant functions • Set-up steering committees made up of leaders of x-functional teams • Prescribe frequency for reviews and update of key elements of design decision and for steering next steps • Align incentives of x-functional team 13
  14. 14. DtV building blocks A close monitoring during execution to reconcile against initial target costing Decision for implementation Implementation plan Tasks • Define implementation options based on prioritized measures • Develop detailed implementation plan of selected measures Measure implemented Measure implementation • Schedule change • Conduct manufacturing or process change trial • Implement change • Assess constraints (e.g. Savings validated Savings validation • Measure financial impact of each implemented measure • Compare with planned savings and validate impact • Consolidate savings and resource availability, knowhow) and additional cost related to implementation compare with initial overall target costing • Define accountabilities to conduct implementation Typical KPIs • Number of measures decided for implementation (vs. idea generated • Planned impact incl. • Lead time to implement measure • Actual cost of change/implementation • Actual impact (e.g. EBIT) • Gap with planned impact • Gap with target costing implementation cost 14
  15. 15. Based on project experience, a complete DtV approach usually yields a higher savings ratio DtV maturity grade Project portfolio DtV building blocks X-functional Mindset Target setting Toolbox Governance Execution DtV maturity grade of a project 0 6 = number of DtV building blocks realized during a given project Strong correlation between the DtV maturity level and the relative savings potential 15
  16. 16. Agenda • DtV principles • DtV building blocks • DtV implementation 16
  17. 17. DtV roll-out in a TelCo follows 3 steps Y1 Q1 1 Q2 Y2 Q3 Q4 Q1 High-impact pilots Test-and-learn approach 2 DtV blueprint & prioritization 3 • Select projects by focusing on a • • • small country or on a large country with tight cost control and significant spend Leverage past experience for quickwins (replicability) Establish the appropriate crossfunctional team involving key areas Use DtV best practices • Use results of pilots to define • • • working cooperation model, governance and top management involvement Refine tools/methodologies and develop missing elements Integrate DtV approach into technology roadmap, product development and budget planning Prioritize projects (effort, return on investment) Roll-out • Start implementation of prioritized • • • projects in lead countries Build up capabilities to scale (DtV school leveraging pool of experts – train-the-trainer) Roll-out support tools and systems Strictly monitor financial results and adjust accordingly 17
  18. 18. DtV project set-up based on focused cost areas and deep central/country cooperation Steering committee • HQ Board member or N-1 • Country Board member or N-1 • Technology/Marketing/Finance leader (HQ/Country) • Others (e.g. operations) (HQ/Country) • Value Engineering team Project sponsor • HQ Board member • Country Board member Project lead • Country Technology/Marketing leader Integration team end-to-end view, interdependencies & business case • Value engineering • Technology • Finance • Marketing Focus area 1 e.g. Technology platform • Country/HQ Technology team • Country Procurement/Finance • Central Procurement Focus area 2 e.g. Marketing • Country/HQ Marketing team • Country Procurement/Finance • Central Procurement Other focus areas …. • TBD 18
  19. 19. DtV project plan usually spans over 3 months Example High-level workplan 1 Month 1 09 10 11 12 Month 2 13 14 15 16 Month 3 17 18 19 20 21 22 Project set-up & baselining • Compile existing initiatives & quantification • Analyze in DtV context & identify opportunities • Develop holistic cost view • Define scope of project & working teams • Define market view and derive ambition level 2 3 Project development • Run expert workshop in focus areas • Evaluate and prioritize optimization ideas • Iterate processus and align with global target • Finalize business case Prepare implementation • Phase optimization initiatives • Prepare steering & tracking of measures Launch implementation 19
  20. 20. A few requirements prior to kicking off a DtV project • Align targets between DtV central team and Country • Name an executive sponsorship for the project in the Country • Involve DtV teams in the early stage of the process • Set up project team with min. one representative of each relevant function • Provide visibility on business needs and financials of the Country • Coordinate actions towards suppliers 20
  21. 21. Back-up 21
  22. 22. To implement DtV, a dedicated Value Engineering team provide a unique skillset • Independent center of competence in the group and from the suppliers Independent • Delivery of practical and sustainable solutions, resulting in quick and tangible changes Sustainable solutions Methods • Systematic application of proven tools and methodologies Value Engineering Team • Top-qualified cost engineers able • Relevant experiences from a range of related technology projects Experts and project leaders Experience Crossfunctional • to train Telco teams and build internal future competencies Extensive experience in international project management • Support the cross-functional team with internal and external stakeholders (vendors) 22