The largest business unit of a publicly traded industrial corporation was grappling with slow growth and margin compression. The company had been built through acquisition, leaving three distinct regions with disconnected operating strategies and incentive structures. A new VP position was created and a bright executive was selected to head the three regional units. Ibex was brought in to help develop a strategy to reignite growth and unite the regions.
Sales at the business unit had flatlined as they struggled to gain share in a mature industry, while rising input costs and price competition from larger lower cost rivals threatened their profit margins. The business was under pressure to act quickly to shore up margins and create a plan to reignite growth.
Client's Operating Margin before Project
Our Approach
Set clear goals and direction
We worked closely with senior leadership to align on the business model that would make the business successful in the long run. While the company didn't have the scale to compete on price, it was known as an innovation leader within a group of key additives. Clarifying the goal of growth through targeted innovation and differentiated, high-margin products set the stage for the broader strategic assessment that followed.
Identify pockets of growth
Within every mature industry there are smaller pockets of high growth often driven by innovation or changing customer preferences within a geographic region. Isolating those areas allowed the company to direct limited resources to areas where they could have the most impact.
Improve margins through pricing
Diving deep into the data, we were able to find price anomalies by customer size, sales person and product type. Targeted pricing actions were identified to reprice or shed unprofitable customers, capture more of the value created by truly differentiated products and highlight areas for price renegotiation all of which will lead to improved margins.
Shift from regionally optimized to globally optimized ops strategy
A clean sheet review of global operations identified areas of excess expenditure driven by regional differences, a legacy of the company's growth through acquisition. The Ibex team created a tool to identify the optimal production site for each global product group given changes in demand, tariffs and shipping costs identifying multiple savings opportunities. We worked closely with the client's operations team to vet cost savings and to plan a restructuring of the company's Asia unit to improve efficiency and align the region with the BU's global strategy.
Get everybody on the same page
For any strategy to be successful the entire organization from the board to the front line staff needs to understand the plan, believe it can be achieved and know their role in supporting it. Throughout the process we worked closely with the sales, marketing, operations and finance team to develop solutions that would be actionable and building collaborative relationships. We led a week long session with our client's global sales team, who were on the front lines of many of the changes, to lay out the growth strategy and refocus the team on margin over revenue and on identifying opportunities for customer collaboration that would result in differentiated products.
Results
The final comprehensive strategic plan comprised of 5 main growth initiatives to increase operating income from 12.4% to nearly 18% over 5 years was accepted by the board of directors.
With the plan in place, we worked with the leadership team to bridge the gap between strategy and execution by creating a tactical execution plan to map out the initiatives that would be required to achieve the planned results and a management operating system to keep the teams on the same page and ensure KPIs are being met.