Deloitte cb predictions seminar breakout future operating model v1 0 by Deloitte Netherlands

Consumer Business Predictions & Priorities Seminar 2013 Future Operating Model break out

28 May 2013

Introduction

Petra Tito

Willem Christiaan van Manen Petra Tito Partner Human Capital

Willem Christiaan van Manen Senior Manager Strategy & Operations

Daan de Groodt Daan de Groodt Partner Strategy & Operations

Consumer Business Predictions & Priorities Seminar 2013 â&#x20AC;&#x201C; Future Operating Model breakout session

ÂŠ 2013 Deloitte The Netherlands

An operating model is the sum of the strategic choices by which a company carries out its business model

The business model concept really boils down to one simple question: How does the business make money?

Business model

Aligned and linked

Operating model

A company’s operating model describes how the business model will be implemented. Where will the company operate? What kinds of products will it sell? Which customers and segments will it serve? Which processes will be outsourced, or handled in-house? Which alliances will be most critical? How will decisions be made, and performance measured?

Operating model design should not be confused with detailed design of tactical capabilities such as processes, systems and organization structures. Processes, technology, organizations

That said, it’s important for all three elements (business model, operating model and tactical capabilities) to be closely aligned.

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Companies will shift from “localized” operating models towards globally integrated operating models to meet both their cost as well as their growth objectives Drivers for Operating Model changes

External drivers • Increased market pressure (decline in organic growth) • Differentiated consumer demand • Increased consumer insight and external data

Key Challenge • Global companies are facing changing industry dynamics and scale challenges, driving a balancing act between global scale and local relevance

• Shifting channel dynamics • Competitor consolidation Key Question

Internal drivers • Growth into suboptimal large scale businesses

• How to remain fit for purpose through balancing global scale and local relevance?

• Numerous local autonomous organizations • Struggle to reap scale benefits... • ...and at same time being faced with scale challenges

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

• Companies will shift from “localized” operating models towards globally integrated operating models to meet both their cost as well as their growth objectives

CPG companies are moving from “localised” models towards globally integrated operating models to remain fit for purpose Globally integrated operating model

Business Strategy Brand strategy Standardized core value chain processes Global R&D Innovation

Supply Chain

End Markets Sales

Global Centers of expertise

Global Shared Services Organization Finance/HR/IT and standard technology platforms

Companies do not only integrate their operating models for cost purposes but also to unlock adjacent and new growth opportunities 4

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Every company can be categorized within four types of operating models

Holding Company

Strategic Guidance

Corporate

Corporate Operating model

Corporate

Business

Executive leadership strategic role Executive leadership decision role Operational model SG&A model

Corporate

Business

Business Core Function

Integrated Operating Company

Strategic Control

Staff Function

Core Function

Staff Function

Business Staff Function

Core Function



Sets and monitors financial targets; Defines fundamental objectives



Coordinates business strategies; Sets and monitors financial and business objectives



Participates in development of business strategies and their implementation



Develops plans, policies and guidelines; monitors operations



Delegates operating decisions



Provides inputs to some operating decisions



Participates in all major operating decisions



Makes major operating decisions



Stand-alone business units



General management team



General management team



Operating units



Rarely provides consolidated services



Sometimes provides consolidated services



Mostly provides consolidated services



Vast majority of services provided are consolidated

Every company can be categorized within four types of operating models Exercise – Please plot where your company is now and where it wants to be in the future

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

The choice of Operating Model in CPG companies is typically driven by five main questions Exercise â&#x20AC;&#x201C; what are the strategic themes your company is working on and please plot those on the grid on the whiteboard? Innovation

How can innovation best be shared, while remaining close to local consumer and shopper needs?

Marketing & Branding

Do marketing and brand management need to be driven primarily at global, regional or local level, or a combination thereof?

Services & Support

How to deliver a standardised service model and customer experience across the world considering local service requirements and expectations?

Supply Chain Global Business Services

What activities within the Supply Chain should be executed above market?

How far does the business want to go in the use of Global Business Services?

Consumer Business Predictions & Priorities Seminar 2013 â&#x20AC;&#x201C; Future Operating Model breakout session

ÂŠ 2013 Deloitte The Netherlands

Defining an effective Marketing operating model which is globally aligned, locally responsive and focused on winning through the consumer is an important first step • We classify operating models for Marketing into three types: Centralised, Globally Integrated, and Local Focus • Companies often have a vision to be globally aligned yet locally responsive. This points towards the Globally Integrated operating model • Key considerations: ‒ What is the desired shape of the future brand portfolio: International brands vs. Local brands; Innovation vs. Renovation? ‒ Where will the brand architecture, strategy and positioning be decided and hence where will marketing capabilities need to reside? ‒ How and where will the portfolio strategy be decided? Where will the consequent PLM and Supply Chain impacts need to be worked through? ‒ To what extent should there be local planning autonomy vs. a central prioritisation and resource allocation process? ‒ How should local market needs be incorporated into above market plans? ‒ How will best practice ways of working and centrally developed strategy be tracked and enforced? 8

Deloitte: Commercial Operating Model framework – Sales and Marketing

Centralised

Benefits  Easier investment allocation decisions  Improved sharing of best practices  Consistent brand execution and customer experience

Local Focus

Globally Integrated

A central brand team assumes responsibility and control for all brand resources, strategy, processes, standards and infrastructure

Drawbacks  Potential for lack of accountability at market level  Solutions can be homogenous rather than needs based  Can be bureaucratic and difficult to implement

Use to bring consistency when core activities are of utmost priority

Brand strategy set centrally with implementation delegated to local teams; countries operate autonomously, but with oversight and line of sight reporting to and from the centre

Benefits

Drawbacks

Local marketing teams assume responsibility and control for local marketing resources, strategy, processes, standards and infrastructure

Benefits

 Collaborative  Potential for internal approach slower decision  Combination of group making governance with local  May require additional autonomy headcount  Ensures alignment with corporate and marketing strategy and local needs and opportunities Use when corporate goals are still a high priority but countries/functional groups require autonomy to meet their needs

 Alignment to country needs  Addresses local nuances  Increased responsiveness

Drawbacks  Potential for duplication of effort  Lack of visibility of Marketing ROI  Lack of consistency in global brand execution  Variability in customer experience and visual merchandising

Use when market accountability and consumer closeness is the priority

Governance Implications • Central control of advertising, promotional activities, POS, web content, creative, campaigns, measurement and evaluation • Overall strategy, plans and budgets set centrally • Common measurement framework across territories 1• Global retail format Consumer Packaged Goods TOM

• Review and approval of specified marketing • Local marketing teams assume responsibility and activity control for strategy, planning, creative and execution (corporate and marketing strategy • Basic assortment and global brands managed provided) globally • Marketing results analysed locally and reported to • Local knowledge and insight is held with individuals and not across a organisation (no centre central visibility of all plans) • Centrally defined brand framework (look and feel) • Strategic direction provided centrally • Standard process and templates for planning

Centralised

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Local

A mixed brand portfolio drives a number of key considerations in the design of your brand management operating model CPG generally have a large and mixed brand portfolio comprising:

Global Brands

• Globally managed, locally executed according to globally defined brand positioning strategies and default mixes • Driving strong growth across a number of key brand health indicators

Regional Brands

• Generally multi-market, or major local brands with strategic value to the Group and significant share in market • Exhibiting (or capable of) sustained growth across a number of key brand health indicators

Local Brands

• Local brands that have strength in their native market(s) but are likely to have limited appeal in other markets • Could benefit from central support, or better ways of working Vision, Strategy & Positioning

Innovation Pipeline

Key considerations: 1. How can CPGs best develop their Global Brands, ensuring alignment in execution across markets and the right role as a key part of the portfolio in each market?

Pack & Product Specs

Comms

Marketing Investment

Promotion

GLOBAL

Region/ Hub

inc. Price position

International GLOBAL Premium

Flagship

GLOBAL

Region/ Hub

MARKET

Other

GLOBAL

MARKET

Global Marketing Capability Grouping

Non Brand Specific Marketing Strategy & Planning Mgmt

Functional Strategy Development & Review

Functional Planning and Performance Management

Global Portfolio Strategy Development & Review

Performance Monitoring and Analysis

International Brands

Brand Portfolio Development

2. How can CPGs best support their regional brands, locally? 3. How can CPGs optimise their performance of all of their brands at the point of purchase and consumption in the on-trade and off-trade across markets?

Brand Management

Define Brand Vision / Long Term Strategy NPI Launch Project Management

Creative Agency Strategy & Roster Mgmt

Information and Data Aggregation

Customer & Consumer Market Insights

Customer / Consumer Market Research Management

Global Insights Platform Management

Emerging Consumer Need and Opportunity Identification

Insights Agency Management

Marketing Research Tool and Methodology Design and Development

Brand Planning Brand Portfolio Management Creative Development

Consumer Relevant Brand Positioning Brand Architecture Development Brand Standard Definition

Industry / Competitor / Market Intelligence Analysis

Brand Program Development Brand Program Management Comms Mgmt

Brand Performance Evaluation

Marketing Planning

Financial Assessment

Business Case Development

Consumer Comms Development (POP/POC)

Brand Price Positioning

Informs which capabilities are required at a Global, Hub or Market level by brand type

Consumer Understanding (including segmentation)

Tech Driven Idea Generation

Product Testing

Consumer Driven Idea Generation

Consumer Concept Research / Testing

Commercial Feasibility Testing

Idea Prioritisation

Product Brief Development

Feasibility Testing

Technical Feasibility Assessment

Concept Development

Product Design and Specification

Sales & Distribution Best Practice Development

Sales Performance Aggregation

Retail classification methodology development

Customer Plan Development

Innovation & Product Innovation

Concept Evaluation

Product Development

Sales Planning

Sales Execution

Consumer Comms Planning (POP/POC)

Route to market methodology development

Customer Management & Business Development

Global Above market Market

Brand Governance Matrix ensures brand activities managed at right level and with the right level of MARKET MARKET oversight and governance

Price Distribution Management

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Informs shape of the brand teams. Hourglass: Small global team focused on strategy development and driving collaboration and coordination. Larger markets focused on local brand and execution © 2013 Deloitte The Netherlands

Multiple CPGs have migrated towards more integrated Supply Chain “hub” models with the principal differences centred around the degree of centralisation of the planning functions Innovate

Plan

Buy

Make

Move

R&D / Development expertise and new innovation insights centrally coordinated / led

Planning centred around regional SC hubs balancing regional and global demand and supply

Global Procurement, with local operational procurement on a small number of direct and indirect categories

Ideas generation

Demand forecasting

Strategic sourcing

Manufacturing network strategy

Logistics capacity strategy

Plan, develop and test

Sales & operations planning

Procurement business development

Master production planning

Warehouse and transport management

Launch and produce

Rough cut capacity planning

Supplier and contract management

Engineering execution

Primary distribution

End of life

Sourcing contingency planning

Operational procurement

Manufacturing execution

Order fulfilment / secondary distribution

Global team set strategy, Global Logistics manage 3rd “make / buy” decisions, party contracts to optimise and shape fixed asset international material transit. requirements. Local plants In market logistics executed execute the provided plan by local capability

Key Global

Regional supply chain ‘hub’ Local

Key considerations Pros for centralisation

Cons against centralisation

• Generation of scale around innovation • Objective view of product applicability across markets • Efficiency in development and testing

• Regional supply chain hubs offer process efficiency and objectivity • Integrated view of demand, capacity requirements and costs • Tax efficiency

• Efficiency in global management across categories of spend • Regionally specific category expertise as required • Tax efficiency

• Disconnect from end market / consumer • Reduced speed in responding to market changes and trends

• Perceived loss of local accountability • Maintaining skilled centralised planning hubs is easier to say than do

• Difficulties in managing • Requires diligence around • Reduction in flexibility to local specific situations, manufacturing master accommodate changes in particular in fast-changing data and integrated customer requirements markets planning systems • Business-wide decisions not always in individual sites best interests

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

• Global view of • Exposes and drives out manufacturing helps drive local logistics inefficiencies up asset utilisation • Prioritised stock allocation • Centralised production in constrained situations planning enables objectivity and efficiency

A globally consistent and multi-tiered services and support function meets local service requirements and customer expectations against low costs How to deliver a standardised service model and customer experience across the world, considering local service requirements and expectations? Key considerations •

•

• • •

• •

How to provide a consistent high quality customer experience across all channels? How to harmonise structures, roles, skills, processes and information so that the end-to-end customer experience is consistent? Yet, how can you provide a suitable differentiated service for specific customer groups? Which skills to keep in-house, versus out of house? How to tailor for languages and local regulations? How do you migrate customers towards lower cost service channels where possible How to enable end-to-end process ownership in the governance? Can integration increase efficiency in the field due to more accurate planning and reduced work time?

An integrated services and support function will typically be a globally consistent multi-tiered model

Customers / Partners

Key element 1. Web self service Channels

Phone

Web

Face 2 face

Letter…

IRM

(Touch points)

Tier 0 Automation

Identification, verification and routing

Self -service portal

Tier 1 Initial contact

Contact centre 1st line support

Tier 2 Escalated

3 Escalated technical support

Escalated customer services

Contract, warranty administration

Invoicing, billing

contact Services

Tier 3 Offline channel

Non-services 4

Physical branch / store

Field Services & Repair

Finance / Supply chain

Customer analytics

Sales and Marketing

Key element 1. Web self service; Self help + registration & tracking of tickets

Key element 2. Centralised, outsourced, multilingual, CRM-enabled Contact Centre

Key element 3. In-house technical support, outsourced, multilingual customer services

Key element 4. Intelligent and automated real-time scheduling of field engineers. Centralised Repair Facilities

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Global companies increasingly opt for full integration through GBS

GBS evolution

GBS Lead Global Process Owners

Value

LATAM Fin

Proc Fin

EMEA

Proc

HR Service Management

Fin

IT HR Proc

Americas

Comms / Training IT & Facilities Support

Record to Report Source to Pay Hire to Retire IT / Master data management Other

Customer experience

Global Process Owners

Process Development

Quote to Cash

Multi-function Lead

End-to-end Processes Service Management Comms / Training IT facilities & support

Integration Independent Shared Services

Independent Shared Services – limited sharing

• Individual functions managed in discrete shared service centres

• Individual functions managed in growing shared service centres

• No sharing

• Limited sharing (tools)

Global Business Services

- Common Infrastructure

- Fully integrated

• Multi-Function

• Multi-Service

• Increased sharing (tools & people)

• Full integration (common processes, tools and people)

• Increased co-location

• Single Governance Structure

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Defining a global Business Services model improves services and benefits in a broader way across the company • The core of GBS is about driving both improved service and benefits using the established principles of functional shared services, more globally, across a broader scope and ultimately moving to an end-to-end business process model to drive continuous improvement with a service, quality and cost focus • Key considerations:

‒ What services should be provided by GBS? ‒ How will GBS be governed effectively and where will it report within your company? ‒ How will GBS manage its services to the business and improve year-on-year? ‒ What is the model for SSCs (Regional, Hub and spoke, Global Hub) and the outsourcing strategy? ‒ What technology enablers are required and to what extent will the GBS design impact or be supported by existing or planned projects? ‒ How should GBS evolve from functional alignment to global and regional end-to-end business services (e.g. Procure-to Pay, Hire-toRetire, etc.)?

GBS Strategy Service Management

The Business

Finance

Corporate Services

Accounts Payable

Personnel & Org Admin

Master Data Management

Procurement

Collections

Payroll

Service Desk & Support

Real Estate

Intercompany

Time & Attendance

Continuity & Service Mgt

Facilities Management

Reporting Analytics

Recruitment Admin

Testing

Evolves to ... End-to-end Business Processes

E.g. Order to Cash Custo mer Acqui sition

Order Mana gm’t

Credit Mana gm’t

Order Fulfill ment

Custo mer Billing

Collec tions Mana gmt

Claim s Mana gmt

Cash App

Repor ting Activit ies

Key: Global SSC Regional SSC

Process ownership Continuous Improvement

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Talent Management Enabling Technology

GBS Project Management

COE Outsource

In our experience there are a number of critical factors that underpin the delivery of a successful TOM transformation.

Integration & alignment

Organisation design

• For an Operating Model change programme to deliver its objectives, all the elements of the future operating model e.g. process, capabilities, organisation design and KPIs need to be fully aligned • In addition, to sustain the TOM there will need to be ongoing senior leadership sponsorship and a robust design authority in place to keep true to core principles and to approve and manage changes

• Ensuring the organisation design is fit for purpose to support how the future business will operate underpins our approach • A clearly defined ASIC/RACI defining roles, responsibilities and accountabilities, along with the individual competencies that are critical to establishing the capabilities needed to win in the market • Capabilities and resources need to be aligned at the local and above market structures

Change management

• Operating model change programmes, by their nature, result in organisation wide concern and resistance to the changes proposed • Supporting and guiding people through the change process will be critical to successfully implementing the changes that are required • Embedded change management at the heart of the programme will therefore be critical to delivering the desired business outcomes

Consumer Business Predictions & Priorities Seminar 2013 – Future Operating Model breakout session

Portfolio management

• TOM programmes impact and typically need to embrace a broad array of initiatives being implemented across a business • A robust approach to portfolio management and initiative prioritisation will therefore be important to ensure that precious resources are focused on establishing the capabilities required to deliver the strategic priorities of the business

Benefits case

• The importance of a clear benefits case should not be underestimated in terms of underpinning senior stakeholder engagement and ensuring focus on the right strategic outcomes • A dedicated, rigorous benefits case will serve to underpin the credibility of a Target Operating Model programme