Implementation of a new CEO's vision for a traditional manufacturing company.
This case study illustrates how we helped a traditional manufacturing company open up a new world of growth and intra-company collaboration, generating over $650 million in annual revenues and over $275 million in improved annual productivity. It also outlines how we transferred the approaches and techniques used, enabling the company to add programs with similar impact every year.
When a new CEO takes the reins of a company, he or she normally has at least three major domains of concern:
This case study illustrates how we helped one new CEO address elements of all three and:
This client is a long-established company making heavy equipment for the mining and construction industries. For more than 100 years, the company had developed a stellar reputation in this area, and has recently diversified beyond its traditional base.
Through a series of acquisitions and divestments Industrial Co. had built a ‘diversified industrial company’ with a range of businesses. In the last 10 years well-known brands in personal transportation, trucking, security, and food processing were added to the portfolio.
In the late 90’s Industrial Co. executed a financial plan across these businesses to reduce working capital and thereby increase margins and earnings per share. The plan was successful, as over this period working capital was substantially reduced, and margins grew from 8% to over 14%. Meanwhile earnings per share grew at an impressive 22%, compounded annually. However, top-line growth over this period came primarily from acquisitions made from operating cash flows, and perhaps for this reason Industrial Co. was still perceived by the stock market as a low-growth, heavy manufacturer. The stock price underperformed its peers and trailed Industrial Co’s EPS improvements dramatically.
In 1999, a new CEO was appointed. The CEO believed that while Industrial Co. had made great strides in operating efficiencies, the next task was to add an emphasis on organic growth and change the market’s perception of the company. Recognizing the diversity of customers, markets, products, services, and capabilities within Industrial Co. the CEO knew that the whole was greater than the sum of the parts. He believed that by leveraging the whole enterprise new opportunities for growth could be found. He also knew that achieving synergy from the corporation’s businesses would change what jobs were performed, who performed them, how they were organized and rewarded, and even how employees thought about the company and their job. This disruption would be a major challenge for the organization, and require skillful implementation if it were not to create confusion, loss of direction, and disenchantment.
The CEO chose Alder Associates to partner with him because he believed that we could understand his vision and what it would take to accomplish it across multiple dimensions: from strategic to tactical, from cultural to organizational, and from the enterprise to personal levels. He would use our experience and capabilities to supplement those of his company where necessary to achieve this fundamental transformation.
The CEO knew that he could not pull off this major change if the vision remained his, alone. He must have his executive team take on the challenge with full ownership of the vision and aggressive growth targets. Alder supported the clarification and articulation of his vision and facilitated discussions of the vision and strategy. A level of honesty that had never before been possible in those discussions resulted in a stand on the part of the executive team to more than double the size of the company in five years.
As the executives grappled with the realities of the vision and how they would achieve it, they agreed to emphasize three strategic themes:
The leadership team embraced the model of Dual Responsibility, a dramatic departure from the past operating model, and agreed to help redesign the company to capitalize on that possibility. Four global growth sectors were identified and an enterprise reorganization of business units, products, and markets followed.
Work was soon underway to develop a new vision for the corporate center, creating clarity and alignment on a governance model that would truly serve the future direction of Industrial Co.
Alder Associates’ consultants provided support by;
The top 200 leaders across the enterprise were convened at a leadership conference to discuss and learn about the new vision. Alder resources helped to plan the meeting and prepare leaders to accomplish the intended results. This meeting represented a key milestone for bringing the concept of Dual Responsibility off of the drawing board and into a new set of behaviors centered on collaboration, enterprise leverage, and networking.
A “strategic initiative process” was designed and agreed to. Initiatives were chartered to explore and validate new opportunities that would capitalize on cross-business synergies. In 2001, Industrial Co. launched the first set of strategic initiatives designed to produce either dramatic growth or improved profitability, with minimal capital expenditure. Business cases were developed and a process for managing enterprise-wide initiatives was adopted. The initiatives were designed to accomplish all of the following objectives simultaneously:
Upon launch of the initiatives, behaviors and policies associated with the old, autonomous culture emerged, including:
Alder Associates coached both team leaders and sponsors, working with them to understand and address these challenges in a way that would produce one of the benefits required of the initiatives - real business change. While in many cases short-term work-arounds for these issues may have been feasible, it was the role of the initiatives to reveal the “rocks lurking beneath the surface” that could undermine enterprise synergies. By identifying the obstacles and working together to resolve them, the initiative teams cleared the way for lasting transformation.
When, by the beginning of 2002, the initiative process was seen to be a success, and the vision was being driven further into the organization, the leadership team decided that the ability to conceive and run strategic initiatives should be brought in-house. As the 2001 initiatives moved out of the planning phase and into implementation, Alder worked with the client to design and staff an Enterprise Program Office (EPO). Alder consultants worked with the new group to transfer to them all relevant learning, tools, techniques and documentation from the strategic initiative process. A broad range of approaches was used to maximize take-up and understanding, including:
Today, Industrial Co. has established new pathways for the dramatic growth and increased profitability of its existing businesses without requiring high levels of capital expenditure. The new CEO leveraged Alder resources to help move his vision into action crisply and quickly, while producing the following results:
The initiatives and their accomplishments are completely owned by the businesses, rather than being perceived as “the consultants’ program”, and it all has been achieved with a consulting budget well below 1% of one year’s profit improvements from the original strategic initiatives