A global industrial manufacturer across multiple industries was experiencing worsening margins from its project business in the utility sector. The previous success story had turned into a loss-making division when the customers requested more customised and complex solutions.
The division’s value chain strategy and internal operations no longer met the customers’ new requirements cost efficiently. The aged ‘one size fits all’ strategy had led to misalignments in the leadership team and no common view on the way forward.
Different incentives in different parts of the organisation were increasing the misalignment; for example, the regional sales organisation celebrated sales of projects that the project organisation could not execute in a cost efficient way. Poor understanding of the requirements during sales and lack of standardised ways of working across the entire value chain led to late changes in the projects, driving additional costs.
The year-old transformation program also failed to deliver results and the division was heading towards even bigger losses.
The division’s President wanted a second opinion on the transformation program and recommendations on actions to turn the business around. Analysis of the business and deep-dive interviews with the management team and additional key stakeholders revealed multiple gaps in the narrowly shaped transformation program.
Instead, the recommendation was to develop a new end-to-end value chain strategy linked to the newly developed business strategy before shaping the transformation program.
In-depth analysis of the business, historical sales and customer segmentation was the foundation for different scenarios for the value chain strategy. Through a series of workshops and interactions, the management team arrived at an aligned view on separating the business into two value chains; one for more complex turn-key projects and one for simpler equipment deliveries.
The entire organisation and ways of working needed to be adapted to the new value chain strategy. CHORD and the management team worked closely to define the new organisation and directions for the main processes, governance model and performance metrics before launching the changes. The objective was to focus on flow efficiency with clear responsibilities across the entire organisation.
The launch of the new organisation was planned and executed in close collaboration with the management team under strict confidentiality.
After the launch, the work continued in the broader organisation through the transformation program, adding supplementary work streams to further define the details in the processes, governance model, and performance metrics.
- Improved profitability and long-term competitiveness in the project division.
- The division left the ‘one size fits all’ strategy and adopted a differentiated value chain strategy based on the uniqueness of the different segments to better adapt the operations to fulfill the new customer demands.
- The new organisation, processes, governance model, and performance metrics were all designed to support the differentiated end-to-end value chain strategy and secure profitable sales and delivery of projects across the entire division.