Often, the companies most in need of change are the least capable of implementing it. This isn't a Zen paradox, but a dilemma many business leaders face after years of subpar growth. Low margins and declining profits hardly provide a firm foundation for radical business transformation. While it may seem like an impossible task, it's possible to execute a disciplined and effective change process that can boost your margin and foster sustained growth.
The change process requires extreme discipline and a focus on rapidly increasing margins. While the transformation needs to be immediate, it must also ensure no loose ends are left. Our approach in end-to-end margin transformation (E2EMT) is designed to facilitate such a disciplined transformation process.
A testing inspection and certification (TIC) group asked for support in the design and execution of its five-year strategy and company transformation. Like many others in similar situations, a history of low organic growth has resulted in its earnings before interest, taxes, depreciation and amortization (EBITDA) falling significantly behind market leaders.
Crafting a strategy looking onto market dynamics and investor narrative
In developing the strategy, we started with an overview of the industry’s market dynamics and opportunities, producing a clear picture of the group’s performance and challenges, and the assets it could leverage. This identified the major value plays that would unlock growth, detailed in a robust business plan that provided granular objectives for each lever. This vision was then used to develop a compelling investor narrative.
The end-to-end margin transformation focused on six key dimensions in the TIC
1. Extreme focus on value plays
We focused on five value plays in the first wave and the same number in the second. These included best in class commercial effectiveness, total workforce management, the operating model, and lean support functions.
2. Balance the value levers
To balance growth, commercial actions, and performance, we drove down to granular delivery impact. Interventions included targeted campaigns on loss-making accounts and the professionalization of pricing.
3. Double Investment impact
As well as scaling up best practices, we produced new decision tools, improved human resources, and sharpened incentives. The new tools and solutions included a pricing web tool and a margin management web tool.
4. Engineer the transformation path
When mapping the desired transformation path, we put in place maturity gates. The map included TIC’s transitional organization and identifying quick wins designed to improve margin.
5. Empower managers with tools for success
For each initiative, we equipped, tracked, and supported managers. We developed a pyramid management solution and accompanying tool, as well as new standard delivery models, and embedded these within the tools provided.
6. Implement the transformation for global growth
The new operating model is to designed to foster growth through alignment of the commercial organization globally around geographic sectors, business lines, and specialized business units.
Successful transformation attracted capital and doubled company’s growth
The TIC’s compelling investor story of its five-year transformation strategy led to a major private equity fund entering with capital. The group has since doubled its organic growth through a better-focused portfolio and investments and has increased its EBITDA by more than 5 percentage points.