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Operations
Improvement for
Exit Planning
Agenda
The approach
The roadmap
Our case study
Table stakes
7
3
15
17
Hi, I’m Steve
Led transformation, software
selection, and implementation
projects at every level of business
– Fortune 50s...
About our case study company, HiTech
• Middle-market IT services and equipment company
• Wants to exit within 10 years, so...
What are “operations”?
Operations are the processes and resources that are used to
produce the goods or services a busines...
Reduce RiskAdd Value
Reduce costs
Enable top-line growth /
improve margin
Enable and drive innovation
Predictable revenue ...
First, let’s talk approach
Our process
• Define org and
management
capabilities
• Process and system
mapping
• Document
conceptual
architecture
• Pla...
Talent: Org Chart / Operating Model
Organizational Chart
• Shows all roles, reporting lines
• See number of direct reports...
Processes and Systems: Driven by Process
Process Framework
• Gets everyone talking the same language
• Think about busines...
Why do you need defined processes?
Scaling
Predictable operations, data, and behaviors across locations. Make it easy
to a...
What do you need to be careful about?
• Cannot be all about control  will make company slow-responding,
minimally reduce ...
Setting the stage for value, the role of “digital”
Digital is the most modern, efficient way to
unlock enterprise value an...
Pre-Roadmap: Operations investments compound
Value
Compounds over time
Risk
Controlled at strategic points
Year 1 Year 2 Y...
Building foundations for value
Some investments have little short term benefit, but are
required for significant downstrea...
Build the roadmap
FY2017 FY2018 FY2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Software
Organization
Infrastructure
Sales &
Ma...
That all sounds nice,
but what about HiTech?
Value judgements
Cost reduction cases can be challenging for reasonably well-run middle-
market companies. Focus on growth...
Why was there little interest from strategic buyers?
My hypothesis: risk
• Few international
resources
• Limited ability t...
Use operational improvement to decrease risk
Vendor risk
Management
structure
Cloud- based
infrastructure
Sourcing
process...
What we heard that we can act on now…
“Streamline our
management
structure to be a
bit more
professional”
Yes! But also ne...
What we heard that we need to set the stage for…
“Need more people…
particularly skilled
technicians”
Maybe, but be carefu...
What else it sounds like…
New Product
Introductions
• Create a structured NPI process for folding new products and
vendors...
Some other important projects for exiting companies
ERP
Customer Service Customer Satisfaction
Sub-ledger Automation
SOX
B...
Our Credentials
Led process transformation,
software selection, and
implementation projects at every
level of business – F...
Discover
More
(203) 539-1724
steve@ronanconsultinggroup.com
www.ronanconsultinggroup.com
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Operations in Exit Planning

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Creating Value Through Digital Enterprise Transformation

Originally presented to XPX, CT Chapter. We look at what it takes to create value and reduce risk using digital enterprise transformation to improve your business processes, technology, and talent foundations.

Topics covered include building a roadmap, process improvement, systems improvement including ERP, CRM, BI/Analytics, and eCommerce, how to build a global organization, and how to build a professional management team.

Published in: Leadership & Management
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Operations in Exit Planning

  1. 1. Operations Improvement for Exit Planning
  2. 2. Agenda The approach The roadmap Our case study Table stakes 7 3 15 17
  3. 3. Hi, I’m Steve Led transformation, software selection, and implementation projects at every level of business – Fortune 50s, 500s, mid-sized, and small businesses Advised Fortune 500 executives, family-run business owners, and founders on growth plans, operational improvement projects, and technology strategy Delivered $10M+ in operating and technology savings, with $100M+ of projects delivered on- time and within budget, to-date Clients Big-4 Consulting Boston, Stamford, The World [ ] Lives in Stamford with wife, Darcy, and two sonsBoston College Alum B.S. Management, Info Systems
  4. 4. About our case study company, HiTech • Middle-market IT services and equipment company • Wants to exit within 10 years, sooner if possible • Previous round of PE and strategic buyer discussions did not expose adequate value in the business • No interest from 30+ strategic buyers • Limited interest from 120+ PE firms and value wasn’t as high as expected • Small but successful product portfolio • Run out of one location, some limited global reach
  5. 5. What are “operations”? Operations are the processes and resources that are used to produce the goods or services a business offers • Meta-process • Business processes • Outsourced processes Business Processes • Platforms • Foundational systems • Value-added systems Systems • Organization structure • Talent development • Governance and controls Structure / Talent 5
  6. 6. Reduce RiskAdd Value Reduce costs Enable top-line growth / improve margin Enable and drive innovation Predictable revenue cycle Reduce key-man risk Compliance and security What is our goal? Add value to over a specified period of time and reduce risk for investors 6
  7. 7. First, let’s talk approach
  8. 8. Our process • Define org and management capabilities • Process and system mapping • Document conceptual architecture • Plan projects • Onboard project owners • Choose vendors • Perform detailed designs • Build solutions • Train staff • Deploy solutions • Monitor and stabilize • Plan and roll-out improvements • Document current- state • Document goals • Understand growth expectations • Identify target metrics • Define high-level operating structure • Document current ecosystem • Solicit employee feedback • Gather improvement opportunities • Document risks and challenges • List and prioritize benefits of each opportunity Define/ Understand Strategy Assess Develop Roadmap Implement 8
  9. 9. Talent: Org Chart / Operating Model Organizational Chart • Shows all roles, reporting lines • See number of direct reports, overlapping responsibilities • Visual of where personnel cost and complexity sit, where complexity can be taken out Operating Model • Documents the mission and responsibilities of every role in the organization • Maps responsibilities and capabilities to a role, not an individual 9
  10. 10. Processes and Systems: Driven by Process Process Framework • Gets everyone talking the same language • Think about business process, not “tasks” • Clearly divides processes used to deliver a product or service and those that support that delivery Process Assessment • Level of maturity, # of people collaborating on a single process • The systems involved with each process • Top 5 improvements for each process 10
  11. 11. Why do you need defined processes? Scaling Predictable operations, data, and behaviors across locations. Make it easy to add people and locations and to integrate acquisitions Efficiency Perform operations at lowest cost, pursue automation, increase margin Effectiveness Ensure business activities achieve reliable outcomes, meaningful data, and can be easily adopted and understood by users 11
  12. 12. What do you need to be careful about? • Cannot be all about control  will make company slow-responding, minimally reduce risk • The tools drive the process. Do not skimp on system selection • Once you implement a system, the process becomes more difficult to change (by design). Stabilize processes before building too much infrastructure around them • Adoption is paramount. Moving too fast endangers adoption, carries cost, and makes future improvements even more difficult 12
  13. 13. Setting the stage for value, the role of “digital” Digital is the most modern, efficient way to unlock enterprise value and is key to leanly creating massive growth • Union of process, tech, people • Focused on execution • Constantly iterating, evolving • Customer is at the center of most decisions. How does this investment benefit our customers and how well we know them? Mobile Big Data AnalyticscX Tools Process Automation 13
  14. 14. Pre-Roadmap: Operations investments compound Value Compounds over time Risk Controlled at strategic points Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 EBITDARiskProfile 14
  15. 15. Building foundations for value Some investments have little short term benefit, but are required for significant downstream value drivers Master Data Modeling Data Maintenance Processes CRM + Sales Operations Example: Sales and Marketing Marketing Automation Fragmented, outdated customer data Keep customer data current, SST User customer data for targeting; sales operations Automate and micro-target potential customers $ |  |  $ |  /  |  $$ | / |  $$-$$$ |  |  15 Cost | Difficulty | Value
  16. 16. Build the roadmap FY2017 FY2018 FY2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Software Organization Infrastructure Sales & Marketing ERP Selection CRM UpgradeERP Re-implementation ERP Infrastructure Marketing Analytics Payroll and Benefits Mobile project management Org design Management training Sales org and new hires Pricing tools and approvals Security Project New Wireless Supply Chain Analytics Sourcing & Purchasing Performance management rollout Full company communication Tech-stack upgrade Holding Pen (projects yet to be scheduled): • Custom promotions upgrade • Warehouse management • Move Field Service to the cloud • IT risk assessment • Recruiting platform replacement • Financial reconciliation tool implementation Sample New hiring process Global rollout 1 Global rollout 2 16
  17. 17. That all sounds nice, but what about HiTech?
  18. 18. Value judgements Cost reduction cases can be challenging for reasonably well-run middle- market companies. Focus on growth benefits + low-hanging fruit. Days Sales Outstanding Often lacks scale Total Sales Reduction Total Savings $34,795,000 2 days $17,349.84 $34,795,000 3 days $26,024.75 $34,795,000 5 days $43,374.59 FTE Savings Can’t cut partial FTE B/O Cost Automation Total Savings $275,000 1.5% $4,125.00 $275,000 3.5% $9,625.00 $275,000 7.5% $20,625.00 Value primarily comes from growth + improved margin Sales Transformation Sales and Marketing Automation Operational Scalability Structure and Talent Pricing Cost of Quality Worth the effort, can be met through other means COGS Reduction Total Savings $25.23M 5% $1.26M $25.23M 10% $2.52M $25.23M 20% $5.05M 18
  19. 19. Why was there little interest from strategic buyers? My hypothesis: risk • Few international resources • Limited ability to support across time zones • Need to be closer to growing markets Geographic risk • How will business run without partners? • Are all sales relationship based? • How will they price, buy, sell, collect without owners? Key-man risk • Concentration in a single vendor • Means expertise in sales, purchasing, consulting limited • 1 tech stack = little complexity. Can they handle more? Vendor risk 19
  20. 20. Use operational improvement to decrease risk Vendor risk Management structure Cloud- based infrastructure Sourcing processes, approvals Geographic riskKey-man risk Vendor risk Metrics and goals Operational systems (ERP, CRM, Knowledge Management) Tracking tools / BI Approval workflows and thresholds Management frameworks and tools SLAs, SOPs, FAQs, KX, centralized support Demand management 20
  21. 21. What we heard that we can act on now… “Streamline our management structure to be a bit more professional” Yes! But also need to consider management disciplines and tools • What metrics will they be responsible for? How will they be generated? • Where will process handoffs occur? • What staff will be they responsible for and do they have the right skills? “Improve our…operations to be more scalable” Scalability will come from: • Defined roles • Defined processes (balance discipline and flexibility) • Systems – well selected, designed for the business, owned by someone in the business. CapEx required 21
  22. 22. What we heard that we need to set the stage for… “Need more people… particularly skilled technicians” Maybe, but be careful: • Many smaller companies overspecialize specialties and industry experience. Be strategic • You definitely need good managers and great salespeople – often the best are generalists • Add strong managers before adding great technicians Prepare for M&A First time buyers need to minimize risk, maximize potential for value creation in the acquisition process: • Platform for integration – create scale you can use to become more efficient, don’t just add revenue • Established, empowered executive team • Systems, data structures, metrics that existing managers know how to understand and use 22
  23. 23. What else it sounds like… New Product Introductions • Create a structured NPI process for folding new products and vendors into the portfolio. • Assign a manager responsibility for each step of the process • Meet monthly to actively manage the process • More new products • Fewer issues at launch • Better prepared for support Vendor Rationalization • Evaluate current vendors, especially on outsourced services and IT • Contract re-negotiation and consolidation • Market survey and re-bidding for major services • Easy cost reduction • Re-cast vendors as strategic partners • Tighter selection process Pricing and Approval Tools • Develop process on paper including approval thresholds (distributed authority), digital workflow tools • Make pricing more consistent, eliminate unneeded discounts, collect for all service delivered • Easy cost reduction • Re-cast vendors as strategic partners • Tighter selection process HR Processes • Hiring process: job descriptions, recruitment strategy, interview strategy, compensation, and benefits evaluation • Retention and staff development – manager training, mobility, soft benefit policies, and performance management • Attract better candidates • Vet candidates consistently • People as core competency 23
  24. 24. Some other important projects for exiting companies ERP Customer Service Customer Satisfaction Sub-ledger Automation SOX Business Intelligence CybersecurityKnowledge Management Backoffice outsourcing eCommerce Fulfillment Automation Procurement Tools 24
  25. 25. Our Credentials Led process transformation, software selection, and implementation projects at every level of business – Fortune 500s, mid-sized, and small businesses Advised Fortune 500 executives, family-run business owners, and founders on growth plans, operational improvement projects, and technology strategy & implementation Delivered millions of dollars in operating savings and technology savings, with over $100M of projects delivered on-time and within budget Construction Life Sciences Broadcast Manufacturing Franchising HospitalityReal Estate Publishing ClientsIndustries High-tech
  26. 26. Discover More (203) 539-1724 steve@ronanconsultinggroup.com www.ronanconsultinggroup.com

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