RESTORING FAITH Annual Report 2008
Copenhagen Consulting Company
CONTENT
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MESSAGE FROM THE BOARD
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RESTORING FAITH
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DEVELOPMENTS AT COCOCO
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COCOCO AT A GLANCE
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COCOCO IN THE PRESS
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SERVICE LINES Strategy Development Commercial Excellence Strategy Execution Operational Excellence Transaction Services
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Corporate Finance
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COACHING
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ONWARDS
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Annual Report 2008
Copenhagen Consulting Company
MESSAGE FROM THE BOARD From our inception in 2002, Copenhagen Consulting Company (CoCoCo) has been a consultancy that continuously interacts with key stakeholders and particularly clients around the world. We believe that the challenging years ahead of us will reward companies with the ability and will to engage in ongoing dialogue with customers on how to best fulfil expectations and needs. This publication is our second consecutive public annual report and should be seen as one of many ways in which we interact with our stakeholders. We hope the report will prompt a desire to learn more about our unique business model, our professional services, our team of consultants, and the results delivered.
“The greatest and most inspiring mountain climbing achievements in history are not so much stories of individual achievement, but stories of the extraordinary power of a unified, talented and prepared team that stays loyally committed to one another and to their shared vision to the end.” Stephen R. Covey “The 8th Habit”
From the outset, CoCoCo was established with the aim of providing a real alternative to established consultancies. Not just a copy of them, but rather a management consulting company based on a different, and perhaps more Nordic, business model. A model with less dependence on standard methodologies and more emphasis on listening and giving advice based on the customer’s specific issues and our insight and experience. We wanted to change the game. To set a new agenda and build a new high-end brand in the industry. We wanted to work globally for the biggest, fastest and most profitable companies in the Nordic region. As you will see in this report, we are delivering on this aspiration. It is our hope that you will enjoy reading about our strategic, transactional, organisational, commercial, and operational competencies. If not for the theoretical substance, then for the stories from real-life projects that we have been allowed to share by our clients. Each project provides a different story. However, there is one similarity: The projects are delivered taking advantage of the highest standards of traditional management consulting, but with emphasis on experience, insight, client involvement, pragmatism, and simplicity. We would like to take this opportunity to thank our former CoCoCo board colleagues Asger Flygare and Gert Hansen, who left the board at the end of the fiscal year 2008, for a truly remarkable effort during their tenure. We would also like to thank the CoCoCo team as a whole for a record year with numerous professional and cultural highlights. A special thought goes to Sofia Arhall who, as the first partner ever, left CoCoCo to follow her husband to Singapore where he was offered a prestigious executive position. Finally and most importantly, a warm salute to our clients for the trust they have shown our company and our ability to deliver.
Christian Hvidt (chairman)
Jørgen Vig Knudstorp
Peter Lorange
General Rtd,
CEO, The LEGO Group
Dr., former President of IMD
Former Chief of Defence
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RESTORING FAITH After annual reports entitled “The Bow is Drawn” (2006) and “The Arrow Flies” (2007), we faced a bit of a creative struggle this year. Up until the end of August, that is. That was when one of our teams received a project appraisal from a major client, beginning with the now legendary words from a seasoned CEO: “Fantastic job. I used to believe that management consultants couldn’t contribute much new thinking. But I must say that you have restored my faith in consultants”.
”The fewer assumptions an explanation of a phenomenon depends on, the better the explanation”.
At the time, this was merely another positive review to fuel conviction in a different consulting model. But as the financial crisis unfolded and revealed a fundamental lack of confidence in the global economy, it was hard not to revisit that memorable day. Obviously, we have no illusions about our ability to affect global affairs, but we do think that consultants can and should play some small part in restoring faith in the value of focused strategies, effective organisations, and our collective ability to solve highly complex issues.
William of Occam
At CoCoCo we will remember the year gone by for the ongoing cooperation with a wide range of fantastic clients in the Nordic region. For a set of record results. For our growth and success in Oslo. For the lowest employee turnover among our peer group. For the extreme number of joyous maternity leaves. For the publication of three well-received books. For the equally successful “India – inevitable growth” seminar. For receiving the prestigious ACQ Award for “Commercial Due Diligence”. For becoming a carbon neutral company. For unprecedented media coverage. And for all the fun. Some of the most fun and memorable moments came during our trip to London in the spring, enjoying St. Martins Lane Hotel and the workshop facilities and spectacular view at Tate Modern. Our traditional stay in Båstad will also be remembered along with our two “Club CoCoCo” evenings at our offices, the latter with 600 guests. 600 people with red drinks, looking at “red art” created by renowned artist Marco Evaristti, may seem excessive. However, it was easily manageable compared to the 75 children that stampeded our offices during the Christmas celebrations with our families. We will also remember 2008 as the year when Professor Dr. Peter Lorange, former president of IMD, joined our board. Peter’s international track record is simply first rank, with an educational background from Yale and Harvard and a career at world class institutions such as Sloan, Wharton and IMD. We all look forward to working with Peter in the years to come. When looking forward, we feel confident. Not that we think CoCoCo will remain untouched by the global recession. But we are confident about our model, the strong relationship with our clients and our five distinct service lines, as you will see on the following pages. Torsten Hvidt Managing Partner
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DEVELOPMENTS AT COCOCO 2008 marked a truly exceptional year for CoCoCo. As proof of our business model and the faith shown to us by clients, we experienced 36% of organic growth, delivering combined revenue of 114 MDKK. Seen historically, 2008 marks a continuation of the positive growth trend witnessed since the company’s inception in 2002. The 2008 results indicate that our approach to management consulting resonates with the attitudes and needs of the business environment we are a part of. Though we will never regard size as a standalone parameter for our ability to provide value, reaching a certain mass of skilled and experienced consultants is critical for our ability to assist our clients and help them succeed with enterprise-wide transformation projects. REINFORCING OUR SERVICE LINES
We continue to believe in our methodology and our approach to problem solving. Rigorous analysis, reflection, and originality, yes. Formulaic processes, no. During the year, we have made great efforts to reinforce our service line teams, developing our methodologies, and investing in experienced hires to build deep skills in each service line.
and private equity driven transactions combined with CoCoCo’s increasingly strong Nordic position in a number of sectors. We remain focused on expanding our transaction services operation, aiming to develop the revenue in line with our other offerings.
2007/08: 114
2006/07: 86
FORTIFYING OUR NORDIC POSITION
2005/06: 80
Only about a fifth of our client engagements in 2008 were limited geographically to Denmark. A major share of our work was conducted in a global setting, working either with global implementation programmes, with international subsidiaries of Nordic companies, or with customers that have their corporate headquarters outside the Nordic region.
2004/05: 39 2003/04: 32
In total, 41% of our client work in 2008 took place outside the Nordic region, which is explained by the fact that almost half of our clients (44%) are international or global companies with operations on more than one continent. A third of all our projects (33%) were global in scope.
2002/03: 9
Our aim is to have a strong presence throughout the Nordic region, and a proven ability to deliver globally. As such, we consider the work load in 2008 to be well balanced; about 60% of our projects were Nordic, the rest were international. We believe our physical presence with offices in Norway and Denmark combined with our long experience with serving Nordic blue chip customers such as IKEA (Sweden), Telenor (Norway), Nokia (Finland), and A.P. Møller – Maersk (Denmark) will ensure that we further develop our strong Nordic position in the future.
Revenue in MDKK
As a leading Nordic management consultancy, we offer a broad spectrum of services to our clients. By organising ourselves in a network of expert teams, we ensure that our clients always work with experienced and profoundly engaged consultants that possess in-depth and cutting edge knowledge. CoCoCo serves clients through five service lines: Strategy development, strategy execution, commercial excellence, operational excellence, and transaction services. In 2008, about a third of our engagements (35%) were within strategy development, making this our primary service offering. Commercial excellence, strategy execution, and operational excellence each contributes by about 20% to our total revenue. Although most of our projects are categorised as strategy work, it is evident that there is a growing demand for our services within the hard and soft disciplines of strategy. The integration of a number of customer service experts during the year has further strengthened our capabilities within the commercial excellence arena, enabling our customers to make the most of their front office processes and reap the full potential from alignment of marketing, sales and service processes. Transaction services exhibited strong growth in 2008, stimulated by a positive environment for corporate
DEEPENING OUR SECTOR EXPERTISE
During 2008, we continued to implement our “Breaking Away” strategy set out in 2007 – building on our expertise in the consumer/retail, transportation, and media sectors. The year also brought interesting developments in other industries such as finance, technology, telecom, pharmaceuticals, construction, as well as in the public sector.
STRATEGY 35%
COMMERCIAL 17%
OPERATIONS 21%
TRANSACTIONS 7%
EXECUTION 21%
SERVICE LINE
Consumer/Retail CoCoCo is building a reputation as the Nordic retail industry’s preferred partner; the 2008 developments send a firm signal that the sector team is on track, contributing with 27% of total revenues. We believe the demand for our services in the retail sector will continue to be strong, not only despite but perhaps also because of the impact of the financial crisis. The industry is facing profound challenges that require deep industry and operational insights. Now more than ever, our clients appreciate the value of
NORDIC 37%
EUROPE 6%
GLOBAL 33%
MIDDLE EAST 1%
DENMARK 22%
PROJECT GEO SCOPE
working with the most experienced retail consultants in the Nordic region. Transportation The transportation sector accounted for 33% of our revenue in 2008, becoming our largest sector. We strengthened our deep partnerships with major international clients in airline, railroad, and shipping. During the year, we saw the results of our ongoing engagements, spanning several years and progressing from strategy to execution – once again affirming the mutual value of long-lasting relations. Our clients in this vast sector will continue to benefit from working with one of the Nordic region’s premier strategy and operational consultancies within air, rail, and sea transport. Media The Media team experienced continued demand for core strategy services across different media segments. During 2008, there was particularly a sustained Nordicwide interest for our services in broadcast, where we continue to build strong capabilities. We have engaged with both broadcasters and distributors and assisted them in dealing with the strategic issues arising from digitalisation, new revenue models in online distribution, and changes in the regulatory environment.
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The Media team has also been involved in significant engagements with non-media organisations on developing digital strategies – creating a structured approach to business operations in an ever-changing and transforming digital environment. Going forward, CoCoCo will continue to act as trusted advisors for executives in the media industry and help address the challenges that the industry is currently facing, i.e. structural and cyclical migration of advertising revenues, digitalisation, and the need for restructuring core operations in order to remain profitable. Expanding the sector profile 2008 was also a year in which we strengthened our capabilities in sectors outside our three traditional industry sectors. The private equity industry is an important client group for CoCoCo, representing approximately 14% of our client work. Our reputation and skills base in relation to private equity-led business activity was confirmed by ACQ Magazine, the leading international publication in the M&A industry, when CoCoCo in 2008 for the second consecutive year was recognised as Commercial Due Diligence Advisor of the Year in Europe.
LISTED 37%
PE 14%
PRIVATELY OWNED 31%
NGO 3%
PUBLIC SECTOR 16%
CLIENT TYPE
Within the financial sector, CoCoCo has been involved in engagements within retail banking, pensions, private banking, and insurance. The depth and breadth give us an industry “spike” within the financial sector, which we intend to develop with our clients in the coming years. The development in the pharmaceutical sector is much the same, with a range of strategic client engagements in 2008, and some very interesting relationships being forged, promising to equip CoCoCo with unique international insights into the dynamics, challenges, and best practices of the pharma/biotech sector. The public sector is also becoming an increasingly important foothold for CoCoCo. We have a strong capability base and a broad set of very experienced consultants with skills that match the needs and requirements of the public sector. We tend to believe that our experience from the commercial side of the private sector, combined with a deep understanding of public sector dynamics, is a good mixture for many of our clients in this area. Finally, we expect to see significant growth within the cleantech industry, which shows positive growth signals in early 2009.
TRANSPORT 33%
MEDIA 7%
RETAIL 27%
TECHNOLOGY 6%
OTHER 13%
Pharmaceuticals 6%
FINANCE 9%
SECTOR
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COCOCO AT A GLANCE A NORDIC ALTERNATIVE – TURNING MANAGEMENT CONSULTING UPSIDE DOWN At the heart of CoCoCo lies an ambition to succeed with a unique alternative to the standard model in management consulting – a Nordic model, representing what we call “next practice”. We believe in the charm of simplicity and call our model “the bucket”. This structure has the opposite qualities of the standard “pyramid” model, with much less dependence on standard methodologies and more emphasis on listening and giving advice based on the customer’s specific issues and our insight and experience. Put simply, “the bucket” means: More experts than project managers, and more senior consultants than junior consultants. It also means: More flexible ways of working and less fixed operating procedures, more listening and less talking. We believe that this structure supports consistent delivery of high-quality client service and the ability to sustain long-lasting relationships.
We believe that the primary need of our clients, when seeking external assistance, is experience – experience from specific industries, with specific issues, and/or from specific functional areas. At CoCoCo, we are content with making a small contribution to turning management consulting “upside down” – by providing clients with insight, delivered by experienced consultants who guide them safely through informed decision-making when faced with complex challenges. And in the process, reaffirm high integrity and passion about client service as our shared corporate values, and help our consultants see consulting as a true profession rather than an early stepping stone on the career path. In essence, this is what “the bucket” is all about.
NORDIC PRESENCE, GLOBAL REACH
need for standard methodology
cococo
level of experience
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CoCoCo set out to work for the biggest, fastest and most successful companies in the Nordic region. This required us to establish a setup with the ability to work in a virtually global structure from day one. To deal with this requirement, we have established partnerships providing access to expert resources in diverse global regions such as China, India, and the US. Most of the time, our global reach originates from our consultants accompanying our clients across the globe, in high streets, and industrial areas, wherever we are needed to work with clients in order to solve business issues. This has, yet again, brought our consultants to Nuuk in the North and Cape Town in the South and just about every significant commercial community in between on both the latitudinal and longitudinal dimensions.
It is our experience that the pragmatic Nordic model, based on flexibility, openness, and a collaborative approach to problem solving, has global appeal to global companies as well as emerging companies with global aspirations.
We strive to stretch our contribution from “Successful Delivery” to “Delivering Success”. This is a more profound obligation to create client value. It is such nuances that make the Nordic model stand out from its counterparts on the global scene.
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COCOCO IN THE PRESS The year 2008 was a breakthrough for CoCoCo as far as positive press coverage goes, and the trend continues into 2009. Our insight and expert knowledge have increased the demand for comments on important business issues. A number of highly visible stories were printed in the Danish and Norwegian business media based on the knowledge and experience from our subject matter experts.
A new board member
Transforming the sales organisation
“I see CoCoCo not only as a best practice, but rather as a next practice consultancy – the founders originate from the blue chip consultancies but have found a different, more modern and perhaps more Nordic business model. This approach appeals to me, as does the idea of Nordic presence combined with global reach.”
The Danish business paper Børsen printed the story “Maersk Line focuses on new sales culture”, which outlined our work with the One Bridge project. The project is considered as the largest change project in Danish history, leading to a transformation of Maersk Line’s global sales organisation.
“The most significant results of the project are related to the individual. We have seen employees blossom due to the new opportunities for individual growth. Suddenly, we have full transparency of which employees are able to deliver results and also which need help to develop.” Søren Stig, Senior Director, Maersk Line, Børsen, August 22, 2008
The first 100 days
Børsen also printed the article “Every third top executive fails on the runway” presenting the fact that many Danish top executives fail in their job within the first 100 days. The story was based on conclusions from the book “The first 100 days” written by CoCoCo Director Lars Bo Hansen.
“Almost every third of all the newly appointed top executives in Scandinavia fail and are gone within 18-24 months. It is a great loss for the top executive, the company, the employees, and the owners when the new top executive does not even start working before he is replaced.” Lars Bo Hansen, Director, CoCoCo, Børsen, October 3, 2008
Professor and former president of IMD, Dr. Peter Lorange, joined the CoCoCo board in November 2008. That same month, Børsen printed the story “Lorange, new strong card in Danish boardroom” presenting our newest board member. Lorange joins our chairman, Christian Hvidt, former general and Chief of Defense and Jørgen Vig Knudstorp, CEO of The LEGO Group.
Dr. Peter Lorange, Børsen, November 7, 2008
Leading in turbulent times
The daily paper Jyllands-Posten printed an interview with Dr. Peter Lorange which was conducted during a seminar at the CoCoCo office in Copenhagen. Titled “Pep talk from Switzerland” the story focused on how to lead in turbulent times, inspired by an article in Financial Times by Dr. Peter Lorange. According to Dr. Lorange, it takes an optimistic and pragmatic leader to lead companies successfully through the crisis.
Price gap slows transactions In an article focusing on available investment funds in the Norwegian market, business daily Finansavisen quoted Partner Nicolai Strate on his view on the market outlook. Nicolai Strate commented that ten Norwegian venture capital funds had raised close to 20 billion NOK in 2008, but that the wide gap between buyers’ price ceiling and sellers’ unrealistic price expectations led to a continued slowdown in corporate transactions. As a result, a large share of the available funds was expected to be directed to follow-up investments as opposed to new acquisitions. Nicolai Strate does not expect the market for corporate transactions to reach a tipping point until late 2009 at the earliest, when sellers are expected to be more willing to accept a low price as long as debt and other liabilities are transferred in the transaction.
“We are observing significant restructuring in many industries, and as a consequence, we expect many companies to decide to sell off activities that are either non-core or that operate at a deficit under the current conditions”. Nicolai Strate, Partner, Oslo Office, CoCoCo, Finansavisen, January 5, 2009
M&A is all about timing Financial crisis and economic turbulence complicate the process of buying and selling companies. In this context, Børsen printed the story “Bidders need to watch out” focusing on the timing of M&A in a time of economic crisis. The story presents recommendations from CoCoCo to wait selling the company until 2010 or 2011 but if there is a need to buy then companies should act quickly at the beginning of 2009.
“If you wish to buy a company now, be very careful. As a buyer, you need to ask yourself if the company’s financial performance/results are bad as a result of the business model or if it is just due to the hard times.” Jesper Skriver Frandsen, Director of Corporate Finance, CoCoCo, Børsen, January 2, 2009
CONTINUED STRONG PRESS COVERAGE In 2008, CoCoCo was the third most quoted consulting company in the Danish business media. We wish to maintain our strong position in the business media in 2009, and to ensure that our expertise is always available on relevant business topics. Our goal is to be perceived as the number one expert in our field; to share our knowledge and experience with others and help them become more successful. After all, this is what we do.
STRATEGY EXECUTION
“In times of economic upturn, people believe that trees grow into the sky; during a downturn they believe that things will go to hell. It is important to learn that business cycles are normal. Things go up and down. I believe that a realistic optimism is important these days.” Dr. Peter Lorange, Jyllands-Posten, February 18, 2009
WITH HUMAN IMPACT
During 2008, a CoCoCo team was engaged by BØRNEfonden to craft a new 5-year strategy. A strategy process unlike many others, taking the team to faraway places in e.g. Africa to review and analyse the BØRNEfonden operations and assistance to third country societies and their children. The process made use of commercial and business oriented approaches making the strategy realistic, simple and understandable. The process involved the whole organisation which has secured a common understanding of where BØRNEfonden is and where it is heading. “This is an ambitious strategy, which will benefit Africa’s children and I look forward to seeing the results”, says Annette Lüdeking, CEO at BØRNEfonden. The newsletter “Økonomichefen” published an article after having visited Benin, one of BØRNEfonden’s programme countries:
“From the very simple level, the individual child, to the more general level, the controller function, BØRNEfonden works on making itself superfluous to create a sustainable community at all levels. It is an ambitious project, but you can feel very confident when making a contribution, since the controlling is well developed and the economy transparent. The funds end up in the ‘pockets’ of the children – which is what this is all about.” As part of our CSR strategy, CoCoCo donated half of our internal Christmas present budget to a school project in Togo which will take place in 2009. www.bornefonden.dk
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TIGHTENING THE SHOELACES Following an organisational audit in August, it was decided to increase our focus on the services delivered by CoCoCo to clients. A vast majority of our work is concentrated around our service lines, and we aspire to be a recognised thought and solution leader within each of them. The service line effort was coined “tightening the shoelaces” signalling a change in our go-to-market approach – as we know neither marathons nor sprints are won with loose shoelaces. The CoCoCo service lines can be seen as offerings with relevance across sectors and industries, even though a strategy development process for a global brand retailer obviously differs significantly from a similar process delivered to a regional energy provider. It comes as no surprise when we claim to have unique sector insight within consumer/retail, media/telco, transportation, private equity, government and finance. Now, with our meticulously tight shoelaces, we feel comfortable stating that we are among the top thought and solution leaders within the functional areas of: • • • • •
Strategy Development Commercial Excellence Strategy Execution Operational Excellence Transaction Services
During our seven years in operation, delivering in excess of 300 client engagements has created a significant pool of unique intellectual property. The tightening of our shoelaces has resulted in a commercialisation of this knowledge and know-how, which means that CoCoCo is now able to combine profound industry insight with documented service line capabilities, including high-profile cases, best practices, and world class results. We will present our approach and offering within each of the five service lines on the following pages. It is our ambition to illustrate the level of competence, our methods, and a few cases on how CoCoCo delivers results in cooperation with our clients. Enjoy.
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STRATEGY DEVELOPMENT: STRATEGISING IN STRONG HEADWIND
STRATEGY IS MORE THAN OCCASIONAL THERAPY
Strategy work is crowded with obsolete facts and contaminated by useless buzzwords – especially when the core business is slipping and the cash flow is under severe pressure. But it is too easy to simply view strategy work as occasional therapy and ignore a revisit of the business strategy when the tides are turning, the core business comes under pressure, and all well-known market dynamics become increasingly unpredictable. Strategy work, when orchestrated as an engaging process involving key people in the organisation in joint problem solving, can serve as an important energizer likely to spur renewed optimism and bring about innovative solutions to complex and important business issues. Even though many business leaders put strategy reviews at the low end of the corporate agenda these days, in favour of high-impact operational activities to adapt to new supply and demand conditions, strategy work remains an important backbone for effective crisis management and leadership. THE NEW MIND OF THE STRATEGIST
Strategy work is often more valuable under pressure than during good times. Our experience from working with strategy tells us that without the pressure to understand the unpredictability of markets and likely competitive moves, and without the pressure to radically change and transform, strategy work often results in business-as-usual scenarios with little financial or organisational impact.
But under pressure the strategists are forced to change their mindsets. They need to master the difficult discipline of creative market understanding, simulating scenarios based on asymmetric information and quickly getting into the numbers that dictate whether or not the strategy should be executed in the short and long term. Further, strategy in strong headwind requires the strategists to be both insightful and experienced. They need deep insight into the industry dynamics and experience in managing strategy work in an engaging and involving process that allows implementation to start from day one. Insight, experience, and speed make up the core of the value proposition of CoCoCo’s Strategy Development practice. COCOCO’S STRATEGY MIND
During 2008, CoCoCo assisted a wide range of companies outlining game changing strategies for navigating successfully through the crisis – both from a cost reduction and from a growth perspective. We strongly believe that valuable strategising exercises require deeply rooted industry insight to deliver value. Beyond insight and experience, we also believe in speed and involvement. These elements are high in demand among business leaders currently undertaking the most needed strategy work that will serve as a managerial guide and organisational backbone going forward in strong headwind. UNLOCKING THE COMMERCIAL POTENTIAL
StrategIPLANEN For years Dako has developed high-end antibodies and diagnostics kits and assays for the use in diagnostics labs across the world. The antibodies are sold both in retail and OEM and demanded by research labs, IVD (In-Vitro Diagnostics) players and hospital labs seeking precise, effective, and reliable test results.
It is often stated that strategy development is easy. It is the implementation that is difficult. Consequently, the challenges of implementation have been seen as a shortage of understanding among middle managers and a lack of willingness among these to change. In our view, the difficulties are caused by the split between strategy development and strategy implementation. At CoCoCo, we always see these two subjects in the light of one another. Strategy is about change. In order to change you must understand the strategy and the reason for the change. The key to this is not communication of the strategy but true and meaningful involvement in the development of the strategy. Therefore, the strategy must be kept simple and straightforward. We propose that the good strategy should answer four questions. First, what are the ambitions of the company? Second, what is the business model of the company (the customers, products, markets and competences)? Third, what are the company’s differentiation parameters? And finally, what is the logic behind this strategy? We have described this in the book Strategiplanen, published in 2007 at Børsens Forlag.
The new head of the antibody business unit approached CoCoCo to seek assistance to outline a new long-term market strategy that would enable Dako to reap the full commercial potential of many years of excellent research, production, and distribution of high-end antibodies.
Lars Bo Hansen, Børsens Forlag, ISBN 978-87-7664-248-8
The study of the full commercial potential soon showed to be highly complex, cutting across different user segments, lab types, disease types, different applied technologies, and even more different antibody qualities.
The solution to the issue was to craft a new market taxonomy for the global IVD market through expert interviews with customers and researchers and assess the potential and addressable market for Dako’s new business unit. The resulting market strategy was based on a two-legged “speciality boutique” positioning in a highly fragmented market place focused on the lab and disease types with the largest growth and margin potential for Dako. As a consequence, the antibody product portfolio was drastically rationalised, prices raised, and the go-to-market model narrowed down to two channels: OEM and Retail. OEM through Direct Sales Force and Retail through a network of qualified distributors. The strategy has proved successful, and the newborn business unit, today labelled Reagent Partnerships, now exceeds its budgets for the second consecutive year.
Copenhagen Consulting Company
COMMERCIAL EXCELLENCE: RETURNING THE CUSTOMER TO CENTRE STAGE
The financial crisis has transformed into an economic recession with a speed and ferocity that has surprised everyone but the most pessimistic commentators. While economists are still outbidding each other in their estimates of how long the recession will last, business leaders are confronted with a new reality: The reality that they can no longer expect the same inflow of new customers and orders among existing customers combined with the fact that their competitors – in their own fight for survival – will be going to new lengths to capture their customers. After years in which shareholders have been in the driver’s seat and shareholder value has overshadowed most other priorities on the strategic agenda, the number one priority in the years to come will be customer closeness. For companies that escape the imminent stranglehold of the credit crunch, the customer will be their newfound best friend in the fight for survival – and eventually for the return to sustainable growth.
LEADER IN CROSS CHANNEL MANAGEMENT
In the spring of 2008, Telenor in Denmark challenged themselves to become a leader in cross channel management. Cross channel management is about delivering the customer experience that will return maximum customer lifetime value while simultaneously minimising subscriber acquisition cost and cost-to-serve. Deciding on the optimal channel mix and distribution network structure is a tricky trade-off for any Telco and in particular in Telenor Denmark, which is the result of several mergers – Sonofon, Cybercity, Tele2, and CBB Mobil. The joint Telenor & CoCoCo team delivered a full-scale assessment of channel economics, channel preferences, and channel competition to form a fact-based baseline for ways to configure the channel network structure. Through scenario-based simulation of different channel alternatives, Telenor decided on a branded, retail centric distribution setup that would take full advantage of its existing retail network as well as a significant step up on cost-effective channels such as web and telemarketing. This strategy increased the likelihood of delivering the targeted customer experience and simultaneously reducing cost-of-distribution by 10-15 percent. The resulting channel and organisation structures have created an effective launch pad for the planned rebranding of Telenor in Denmark by mid 2009.
This is not to say that customer centricity has not previously been on the strategic agenda. Companies have installed CRM systems to forge links with customers. And most companies conduct regular customer satisfaction surveys as a manifestation of their dedication to customers. But few companies have really done more than pay lip service to customer closeness. There are many reasons for this: • Top management handling customer closeness at an arm’s distance by delegating responsibility to the customer experience manager somewhere far down in the organisation while the head of strategy and investor relations sits next door to the CEO. • An obsession with statistics and reliability has resulted in companies spending too much time observing customers and symptoms and too little time and effort truly understanding (individual) customers and acting upon their feedback. • Failure to bring the voice of the customer into standard operating procedures and anchoring it in strategy, product, customer, and performance management, which has resulted in customer centricity ending up in a parallel corporate universe with separate customer visions and action plans.
In the years ahead, companies will have to focus on what it takes to be close to customers and assign some weight to making customers more satisfied and tying them closer to the company. Perhaps companies should transform all lean initiatives into lean consumption initiatives to the benefit of customers. A good start could be to call this strategic priority customer closeness (and not customer centricity) to signal that it is best achieved out there, in dialogue with individual customers, rather than from behind a desk based on statistically significant market research. Commercial excellence is all about strengthening the way we market, sell and serve in order to deliver excellent customer experiences and forge closer relationships with customers – and ultimately drive customer loyalty and sustainable revenue growth. Now more than ever, companies will need to be commercially excellent whether they simply want to survive the financial crisis or emerge stronger on the other side.
SPENDING MORE TIME WITH THE CUSTOMER
Jyske Bank took another significant step in spending more time with the customer and less time on administration and noncustomer tasks. With the 70/30 ambition, bank advisors in the retail branches strive to reduce administrative non-customer tasks to only 30 percent. Jyske Bank has mapped all business activities and the time they actually take up through detailed time studies. By observing how time is spent in the retail branches, Jyske Bank now has unique insights into the tasks and activities that are most time-consuming. Furthermore, the time and activity study was combined with in-depth analysis of several core business processes. Through a series of workshops, Jyske Bank has involved more than 50 people across the retail branches and headquarters. Now, Jyske Bank has identified a range of levers to come closer to the ambition: Spending more time with the customer.
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STRATEGY EXECUTION: FROM BOARDROOM DECISION TO ORGANISATIONAL BEHAVIOUR
FROM BOARDROOM TO BEHAVIOUR
The new economic landscape will put immense pressure on the ability to move quickly from boardroom decisions to new ways of working and changed organisational behaviour. On average, great strategies only materialise 60 percent of their potential due to poor execution. And in times of pressure to change and transform, a 60 percent level of implementation can show to be far from enough. Reaping the full effects of important boardroom decisions and defined strategic initiatives will challenge executives and middle managers in every company to master the difficult discipline of strategy execution. The question remains: How do you most efficiently bring boardroom decisions into effect in the organisation without losing trust and momentum among your key people?
to drive action, and our collection of best execution practices tells us that effective execution can be achieved by: • Preparing leadership teams to effectively lead the corporate change efforts • Managing change to ensure successful roll-out of and adaptation to the new rules • Simplifying structures, processes, and roles to cut cost and improve performance • Building leadership skills for people to better perform in their new roles • Prioritising resources and terminating projects that do not support the new strategic direction Culture, strategy, leadership, communication, project portfolio, training, and technology are important dimensions that need to be addressed in an execution context – if these are not considered in concert, they will inevitably clash.
IN THOU WE TRUST
Execution is about building trust, mobilising the energy of the organisation and promoting the mindset and behaviour among people to quickly move the organisation in the right direction. One paradox is that people’s trust and energy is hard to get when you need it the most. And many organisations find that they need it now. In the fierce environment of crisis with a corporate agenda of downsizing, restructuring, and cost cutting, it can be even more difficult for managers to retain momentum and trust through the transformation process. What companies can do to increase the speed of execution is to give people an opportunity to work closely together on co-creating, crafting, and implementing the future, meeting both individual and company goals. FROM EXECUTIVE PLANS TO EXECUTION POWER
In 2008, the Strategy Execution team in CoCoCo assisted a number of our global clients such as Carlsberg, Novozymes, LEGO, and Maersk in executing vital strategic programs. Even though each of these programs were unique in both their point of departure and planned destinations, they all shared a strong focus on converting wellthought strategies and plans into new ways of working and measurable changes in performance. Over the years, CoCoCo has gained valuable experience on how to translate, cascade, and anchor strategies
At CoCoCo, we bring in highly experienced senior people to solve these issues, since a strong mix of consulting skills, pragmatism, and real-life experience is required.
CHEAPER KÖTTBULLAR
In 2008, CoCoCo worked with IKEA Food Services for the second time. IKEA Food Services operates the food outlets in all IKEA stores around the world. The project followed up on a previous study for the Swedish head office which identified how to strengthen operational efficiency in order to increase sales and reduce costs. The 2008 project focused on rolling out the pilot findings in Italy. The key levers of the project were: Boosting up-selling and cross-selling, increasing gross margins and productivity as well as improving operational performance during peak periods to increase conversion rates, sales, and customer satisfaction. The specific initiatives were developed jointly and on-site with IKEA Food Services staff in two of the Italian IKEA stores. Furthermore, all initiatives were tested during a 4-week period of the project in order to assess the actual rate of success. This allowed IKEA Food Services Italy to immediately execute the successful initiatives in other IKEA stores and devote additional attention to implementing other initiatives of a more structural character.
RETAIL CONCEPT IN A WORLD WHERE CONCEPT EXECUTION IS PARAMOUNT
Place Vendôme in Paris. This is where it all started in 1899. The first boutique still exists, and you clearly feel the heritage of one of the world’s greatest jewellery and luxury brands when visiting 151 Rue de la Paix. Today, the boutique is located only a 5-minute walk from the Paris headquarters of Cartier. CoCoCo was asked to develop and document a coherent retail concept for Cartier’s boutiques worldwide. A concept that should be easy to execute, use and access for the retail and boutique managers in more than 275 Cartier boutiques. Naturally, we did not start from scratch. A lot of materials, best practices, guidelines, media, and tools already existed. Thus, one of the main challenges was to gather and assess best practices across the world. In parallel with developing the content, we developed a web-based portal – Cartier Net – that hosts the retail concept along with news, seasonal campaign guidelines, etc. With the development of all the content and the Cartier Net portal, 20% of the work has been completed. Ahead lies the remaining 80%: Getting the retail concept consistently implemented from Place Vendôme to 5th Avenue.
Copenhagen Consulting Company
OPERATIONAL EXCELLENCE: MAKING THE MOST OF YOUR SCARCE RESOURCES
ACHIEVING results
Improving business operations has been a core activity in management consulting for a long time. Many companies have undertaken large-scale lean process improvement programmes and internalised operational excellence resources into their permanent staff. Why? Because constant improvement in business operations is the only way to stay competitive and stay at the forefront of customer responsiveness. However, both structural and process driven improvements aimed at reducing costs or improving customer responsiveness remain tricky tasks for many companies without inspiration, best practices and learnings from peer groups, comparable companies, or experienced consultants. Furthermore, identifying the real hidden improvement potential within companies is often not done or overcomplicated by long arduous projects. Improvement projects become too complex to manage and too time-consuming for key resources. In our experience, significant and immediate potential can be unleashed by combining rigorous analytics with experience, client involvement, and pragmatism. The CoCoCo Operational Excellence team has one success criteria – a return on investment of less than one year. How we do it
Restructuring Sales, Marketing and Customer Support & Planning
Our work and approach are closely connected to our “bucket” structure of delivering client impact through experience and insight delivered by senior consultants with a proven track record and the ability to interact and engage.
Having implemented a new global organisational structure, Aalborg Portland – Nordic Cement used this opportunity to challenge its existing customer and market approach. The market position and unique value proposition should be maintained and strengthened but executed through a simple and lean organisational setup.
In our view, the key challenge in operational improvement lies in getting things done – less so in the insight of what needs to be done. Rarely, new operational strategy or improvement initiatives come as a major surprise for management.
Top management decided to conduct a detailed analysis which pinpointed a specific list of recommendations for cost savings and outlined a new organisational structure. Focus was assessment of core business processes, roles and responsibilities, and how to create the best possible allocation of the time spent by all employees.
Our perspectives on operational excellence are embedded in all the work we do:
Today, Aalborg Portland has succeeded in restructuring its customer interface. Complexity has been reduced, employees have been moved into new teams, management is closer to critical decisions, and the operational cost has been lowered significantly.
• Focus and experience: Bring focus and experience into the process – prioritise the analysis, and dig deep only when needed. • Structure first: Look at structure before processes – do not start optimising in an area that may be completely restructured or outsourced.
• Multiple solutions: Work with multiple solutions and prioritise – silver bullet solutions are rare. • Speed: Go for speed in implementation – focus on solutions that can be implemented immediately. • Involvement: Involve employees – get ideas and solution acceptance in the process. Often 80-90 percent of the ideas can be found with the employees. What we do
Two projects, let alone clients, are rarely the same. Still, our operational excellence work has been centred around five themes across many different sectors including retail, transportation, banking and pharma. • Operations strategy – Designing a functional strategy, hands-on with the functional management team. The majority of the strategy work is completed within a 2-day strategy workshop. • Rapid business improvement – Identifying 360-degree company improvement parameters in six weeks. The methodology enables top management to pursue the most effective profit improvement options. • Smart category savings – Bringing purchasing improvement to a new level in six weeks. Managing internal demand, and working closer with key suppliers to reduce costs. • Process and activity improvement – Improving process efficiency and simplicity. Mapping out which tasks to stop, move or improve is an effective way of freeing up time. Many companies focus on sanitising tasks that are “nice to have” but not core. • Profitability optimisation – Developing economic insight into the sources of profit. Profitability optimisation focuses on segment, channel, or product insight. For example, CoCoCo has assisted a wide range of retail clients in optimising their assortment and inventories.
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TRANSACTION SERVICES: IDENTIFYING THE TRUE VALUE POTENTIAL
M&A ACTIVITY LOOKING GRIM FOR 2009
Compared to the peak activity level in 2007 and 2008, the financial crisis will undoubtably dampen the 2009 M&A activity. Even though it still remains to be seen how long the credit crunch is going to last, and how long it is going to take the economy to recover, we expect to see things stabilise as people begin to regain comfort with the financial markets, and the global market for that matter. Companies and private equity groups will return to the market to make acquisitions and they are likely to be even more opportunistic than before. They are likely to strive for the next good deal and try to spot new value creating opportunities offering solid returns. The question is when, and our crystal ball is as good as anybody’s. It is probably going to be in the latter part of 2010, assuming that the financial aid packages deliver on their promises. FOCUS ON VALUE CREATION
Nevertheless, in today’s challenging environment, private equity and corporate buyers must understand how to create real strategic and operating value within and across portfolios. At CoCoCo, we advise private equity funds and corporate buyers across the entire value creation spectrum, from commercial due diligence to strategy and operations in order to deliver maximum value creation in portfolio companies following acquisition. LEARN FROM PRIVATE EQUITY
Private equity funds are faced with expectations by their investors that only few in the industry can meet. To separate oneself from the industry average, private equity companies are often excellent in using all available levers for value creation in the postacquisition phase.
TRANSACTION
From our experience we have learned that a disciplined approach in the post-acquisition process is vital to ensure value creation, and planting the seeds for the future. CoCoCo assists in several ways, and most often through: • Fact-based, rigourous analysis, and deep industry insight – we assess a business’ full commercial and financial potential. • Powerful workshop facilitation – we seek to unleash the energy of the client organisation in joint problem solving. • Development of defined must-win-battles – we secure board and management buy-in. • Consistent communication – we help increase the speed and precision of strategic and operational decision-making.
NORTHERN EUROPE’S LEADING HELICOPTER COMPANY
During the summer of 2008, the Norwegian helicopter company Blueway acquired the Danish offshore helicopter shuttle service company DanCopter and thus became Northern Europe’s leading helicopter company. Blueway is owned by the Norwegian private equity fund Reiten & Co and Helicopter Transportation Group. CoCoCo provided the commercial due diligence in the transaction. Prior to the transaction, Blueway had 130 employees and operated 19 helicopters, focusing on infrastructure, environment, and search & rescue, as well as specialty offshore services through its subsidiary, Vertech. The acquisition of DanCopter, with 60 employees and a fleet of 6 helicopters, strengthened Blueway’s oil and offshore business, expanded the company’s service offering into passenger transport, and broadened the geographic footprint into Denmark, the Netherlands, and Ireland. “For Blueway this implies a considerable strengthening of the group through a broader scope and increased turnover”, says managing director of Blueway, Bjarne Slapgaard.
THE FIRST 100 DAYS The manager’s first 100 days in a new executive position are characterised by a large amount of conflicting demands and expectations. Handling this situation in an optimal manner is of key importance – for the manager, the company, the owners, etc. Moreover, risks are high – more than 30% of newly appointed executives actually do not succeed. In order to identify what the best managers actually do in their first 100 days – what works and what does not work – we interviewed 20 highly profiled managers, board members, a cabinet minister, and other very experienced and respected Scandinavian business people in order to collect and consolidate their experiences. This resulted in the very well received book “De første 100 dage” published by Gyldendal Business in November 2008.
Lars Bo Hansen, Gyldendal Business, ISBN 978-87-02-07145-0
A NEW HIGH QUALITY BAKERY CHAIN HAS SEEN THE LIGHT
Back in 1991 and 1992, when the two bakers Steen Skallebæk and Ole Kristoffersen decided to establish their own bakeries in Haderslev and Copenhagen, no one would have believed the tremendous success they were to achieve. The bakers’ determined will to focus on quality bread and cakes that are truly fresh, as well as their desire to provide the customers with a superb shopping experience through all senses, proved very successful. In 2008, the two famous regional bakeries decided to merge and establish Lagkagehuset, a chain of high-quality bakeries. Lagkagehuset is backed by the private equity player, FSN Capital. CoCoCo has advised FSN Capital from the very beginning and has performed commercial due diligence, customer analysis, and has furthermore been instrumental in developing operations manuals and tools, as well as providing training for employees in new ways of working, to get the backbone of the new chain right from the start. “Based on proud Danish bakery traditions, Lagkagehuset wants to create an international chain of high-quality bakeries”, says responsible Partner Thomas Broe Andersen.
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CORPORATE FINANCE: ADDING EXTRA VALUE TO STRATEGY & EXECUTION
COMPANIES OFTEN FAIL IN M&A
WE AIM AT SEEMLESS AND QUICK PROCESSES
The way to Wall Street is paved with studies showing that the vast majority of transactions hardly add any value – and many even destroy it. Technically, the issues relate to identifying the right targets to acquire or spinoff, trading the activity at the right price, or to the posttransaction integration/de-integration of the business.
When CoCoCo carries through transactions, the corporate finance skills are typically added to the team during the strategy work process. That enables us to review M&A options at an early stage and thus allows us to effectively assess and map the real strategic options. We build the transformation risks into valuations as well as the business case. Later, when the transaction track is launched as part of the execution, an early-stage business integration/ restructuring process is prepared. We will always argue that covering the entire process makes it faster and reduces risk.
Think about it! When a company buys or sells activities, known as an M&A transaction, it is in the middle of a long, delicate, and highly complex process. It starts with an idea that becomes a strategy that defines a new business setting. As a consequence, the company may have to change focus and priorities, and this in turn may prompt a decision to acquire or divest. We recommend that the choice of M&A strategy should be sensitive to what can actually be traded subject to transformation risk and the price to be achieved. NOT THE MIDDLE-THING AGAIN, PLEASE
If we could remake the consulting industry around M&A transactions, would we decide to separate business consulting from corporate finance? From a client perspective, corporate finance is a critical and integrated part of the strategising and execution process, and often with conflicting interests. When we engage in transactions, it is typically in the tail end of long-lasting relations with the client organisation. Clients who trust us to engage in both strategy, execution, and transactions. Clients who believe that industry insight paves the way for quicker and more elaborate returns on their transaction investments.
A LOGIC OF SKILLS
We believe that the above points-of-view are what awarded us the title of “Best European Commercial Due Diligence Advisor of 2008”. What makes us excellent at strategy and business understanding is our key skill within corporate finance, improving our ability to select the right targets, sharpen the business case, and pose critical questions when we are at the negotiation table. As such, the corporate finance skills are certainly a valuable add-on to the strategy offering of CoCoCo. We staff teams with a combination of traditional corporate finance skills and business consultants and carefully adjust the team to meet the challenges as the project proceeds.
successful and quick divestment of a non-core business unit
SAS Group’s new strategy, Core SAS, provides the key elements necessary to support a new competitive and streamlined SAS. CoCoCo’s Corporate Finance team was engaged to manage the divestment process of the defined non-core business, Cubic Air Cargo – a leading air cargo provider in the Nordic region. An auction selling process with several bidders focused on an acquirer with strategic synergies and enabled a price well above initial expectations – also taking the financial conditions into consideration. “CoCoCo added a lot of value to the process through their professional and yet straightforward way of working”, says Vice President, SAS Cargo, Jimmy Kjaersvold. The successful and quick divestment of a non-core business unit is good news for all those who need to refocus their business during the current crisis.
ACQ’s Finance Award 2008 CoCoCo won ACQ’s Finance Award 2008 in the category “Commercial Due Diligence”. The magazine, which is one of the most respected Corporate Finance magazines in Europe, asks the market every year, who they consider the best M&A players within a number of disciplines. CoCoCo has advised companies on commercial due diligence for the last four years. Especially the big private equity funds such as CVC, 3i, EQT, and Axcel have used CoCoCo’s expertise several times. Partner at CoCoCo, Niels Miles Frandsen, comments: ”CoCoCo is delighted to have won this award. Our continued success in the field of due diligence is a reflection of our profound insight into certain industries, the rigour and depth of our analysis, and the quality of our people”.
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COACHING: BROADENING THE HORIZON, DELIVERING THE EXPERIENCE
Sometimes 1:1. Sometimes an integrated part of our value proposition. From famous actors to renowned executives. But always delivering great client experiences by offering second to none leadership and personal development. This year, our team of business coaches have once again manifested their position as one of the most sought after coaching firms in Denmark. The work with leadership teams increasingly focuses on building self-esteem, insight, trust, and openness as the basic foundation of great and sustainable relations and results. Equally, coaching the individual leader is centred on authentic personal leadership and the ability to lead through others by building close relations to team members and beyond. Aiming to create synergy between the relational and organisational reality, many of our clients combine team coaching with individual coaching. The coaching services are not a pre-packaged “one size fits all” solution. To meet the real needs and challenges from an organisational, team, and individual perspective, the focus of our coaching services is to uncover all the various perceptions of those needs together with the client participants. Throughout 2008, CoCoCo delivered remarkable results in mobilising and aligning leadership teams to perform according to new strategic directions and changed business models. We foresee that the integration between traditional consulting engagements and unique, individual and team coaching will become an even stronger value proposition for enabling change leadership.
UNDISCLOSED CASE FROM CRISIS MODE TO WORLD CLASS MARKET LEADERSHIP A global company was dealing with the conversion from crisis management to focus on growth – and at the same time keeping alert. Cooperation, execution, and drive in the top management teams were the main challenges of the company. This was e.g. reflected in very different approaches on how to implement the company’s short- and long-term strategies in the organisation at the same time. An unwanted degree of silo-thinking between the different business areas was also registered. The project demonstrated how to create progress by focusing on the preparation of a strategy and at the same time on the anchoring of the strategy in the company. The specific efforts initiated in order to respond to the challenges were: • Team coaching of the top three levels of management teams • Individual coaching of executives and key persons The effect was a development of the company culture which can now be felt by both executives and management teams as well as the many formal and informal contacts and relations in the company’s daily activities. As an organism, the whole organisation not only demonstrates stronger execution of the strategy, the increased motivation and engagement also seem to have provided an extra gear, which the strengthened interpersonal relations have made self-reinforcing. After a team process with the executive team, an executive leader said: “Before this process I thought that my own leader team functioned much better than the executive team – now I can see how much better my own leader team can become.”
The gateway to a new Leadership Self-esteem based leadership is about finding meaning and commitment, deeper and more creative than what leaders are used to. Self-esteem based leadership is about activating emotions and the feeling of being valued. This form of leadership ensures that both the manager and the employee feel a genuine kind of appreciation and start to grow, develop, engage, and take responsibility, personally. “The gateway to a new Leadership” investigates and describes the motivation of the performance-oriented human being – the manager and the people he is managing. The book is primarily for managers but can be read by anyone with an interest in modern leadership. “The employees of today are less motivated by authority and more attracted to authenticity. It is the opposite to what we have considered good leadership for decades”, says Martin Mourier.
Martin Mourier, René Bach, Peter Mortensen, Jørgen Lauge Sørensen, Børsens Forlag, ISBN 978-87-7664-306-5
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ONWARDS
This was the 2008 Annual Report from CoCoCo. Thank you for reading – we hope it was worth your while. When we finalised the 2007 report, we stated that we hoped to be able to present a voyage through 2008 that could match the fantastic journey described in the 2007 report. Looking back, we are happy to conclude that 2008 was actually more than we dared hope for. For CoCoCo, the year 2009, and the crisis it will most likely be remembered for, is not like looking at Picasso’s “Guernica”. Rather, it is like visiting the Reina Sofia museum where “Guernica” hangs. You will see terrifying images, yes, but also immensely beautiful and motivating visions. We will move closer together with our key clients, making sure that pitfalls are avoided if avoidable, that threats are met as effectively and forcefully as possible, but also that opportunities are sought methodically and faith in a better tomorrow is restored. Besides our traditional work, CoCoCo will do a small part to ensure a better tomorrow. In 2009 we will, as a company, be carbon neutral. Furthermore, we will publish a book on “Carbon Management Best Practices” describing how some of the most respected Danish companies integrate “carbon strategy” with corporate strategy and drive down carbon emissions and cost at the same time. The book will be followed by a CoCoCo conference on carbon management, with cabinet ministers and executives as confirmed speakers. The book and the conference should lead to increased awareness of not only why carbon management should be on the strategic agenda, but also of how to actually do something concrete and meaningful to participate in the solution of this enormous challenge to mankind. We hope to see you out there and we hope to continue to inspire you – if not with the services we described in this report, perhaps with carbon management best practices. Best regards Team CoCoCo
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Copenhagen Consulting Company Copenhagen office
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www.cococo.no
Annual Report 2008
www.cococo.dk
www.cococo.no