When deep structural problems call for radical—and immediate—changes
A high-tech market leader with revenues in the tens of billions of dollars had enjoyed long years of double-digit growth. But more recently, multiple forces had combined to create a challenging environment for the company. Its revenues had contracted, operating income had dropped, and stock price had eroded. In addition, its market had become saturated, new competitors had emerged, and commoditization had depressed prices for the company’s legacy product lines.
Management launched an austerity program to stem the tide and support a strategic shift to more value-added services. But the program did little to restore the company’s profitability or lay a foundation for driving future growth. When the company’s private equity owners began playing a more proactive role in its performance, the need to make fast and sustainable improvements shot to the top of the agenda.
In particular, the PE owners wanted a portfolio of cross-functional productivity-improvement initiatives that would be applied across the entire company, in every region where it did business. What’s more, they wanted this large-scale transformation effort to be applied with enough rigor and strong governance to ensure that the value generated by the initiatives would be measurable in the company’s P&L. They brought in AlixPartners for help.
Productivity improvements deliver as promised
We knew that this transformation program called for more than just temporary austerity moves. To be sustainable, the company would have to make deep structural changes, such as radically reconfiguring its cost structure. With this in mind, we set up a program management office, with strong governance at the helm, to orchestrate the program.
We also examined a wide range of options for enhancing productivity across the business—including in areas like sales and go-to-market productivity, organizational efficiency, facilities utilization, and procurement effectiveness. We knew that anecdotal evidence and rough benchmarks aren’t compelling, so we developed bottom-up analyses across all areas and functions of the organization to make the business case for every potential initiative. For instance, drawing on proprietary analytics tools and methodologies, we extracted insights from the data and identified the most promising improvement ideas. Then we quantified the expected results for both short-term and mid-term periods and started full speed to go get results.
When it really matters
Our disciplined implementation approach to this large-scale transformation program soon yielded remarkable results. In addition to enabling the company to achieve impressively high run-rate savings, the program delivered significant in-year impact, and the management team gained confidence in its ability to deliver predictable value through the program that could be either reinvested or brought to the bottom line.