Making Turnarounds Work !


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The 6 critical keys that make Turnarounds work !

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Making Turnarounds Work !

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