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FC Company Integrated Business Planning (IBP) journey – Part 4
18 June 2019
By Liam Harrington and Anne Marie Kilkenny, Associates at Oliver Wight
Liam and I were just reflecting on the Integrated Business Planning design workshops that we conducted for the FC Company over the last 6 weeks. It has been pretty intense and so many things have happened it’s quite hard to pick the highlights, but we’ll try!
We started, as we always do, with the Management Business Review (MBR). In many ways this session was relatively straightforward. The Exec team has done a lot of work on developing the strategy and has done a great job in articulating clearly what it means for people across the business. This process is not complete, and we found in the subsequent workshops that intellectually understanding the changes required by the strategy is one thing, actually doing things differently has not quite landed yet.
Sara and Alexandra (CEO and CFO) kicked off the MBR session with a reminder of the critical success factors for the business and how Integrated Business Planning fits into the delivery of those CSFs. The team were very engaged throughout the day. The small and larger groupwork sessions delivered really good output and these were extremely valuable in the subsequent design workshops.
The only real sticking point was persuading a couple of the Execs of the need and the value of spending time focusing on the mid to longer term horizon. Tim Miller (Industrial Division President) struggled with this more than the rest. As we dug into Tim’s issues it became apparent that the short term volatility in some key markets had driven everyone in the Industrial Division into a very short term focus. Once Tim could see that IBP is not intended to deal with the short term – as a monthly process it is simply too slow – and the options it could give him to grow the business, he became very engaged. It was agreed however that there are gaps in the current processes to manage the short term execution of the longer term IBP plans. We picked up an action to address this with Dirk (IBP lead). Meanwhile, Tim, Rachel and Frank (EVP Global Supply Chain) have nominated people from their organisations to be involved in this.
As expected, based on the outcome of the diagnostic, the Product & Portfolio design workshop brought out some key issues and plenty of opportunities for the business. There were a handful of real lightbulb moments for Taj Rahim (VP Marketing for Consumer) and Niels Pederson (EVP Global Development) who is leading the Product & Portfolio Design Team. A key one was the disconnect that has emerged over recent years between Product Development, Marketing and Sales. There is a high level of skill and capability in each function, but they have lost sight of the connection to strategy and been focused on different objectives.
Product Development project outcomes have been pretty disappointing lately and there was an acknowledgement that there has been more attention paid to development rather than successful introduction of new products. Digging into this further revealed that everyone has been mostly focused on generating more ‘new’ products, with less attention on margin growth. As is often the case, bias exists in many of the business cases and there is a lack of rigor in validating key assumptions, e.g. cannibalisation. This results in the expected incremental benefit of the investment in new products not being realised. Paula Virtanen (Sales Director for Nordics) pointed out more than once that Sales are often ‘told’ what the outcome will be, rather than being active participants in the process. Paula’s (strong!) view is that the voice of the customer is not heard – and that the numbers that end up in the Demand plan are typically over optimistic. In addition, there is a considerable tail in the portfolio but there is no ownership for phase out, so it doesn’t happen.
There was a lot of high energy discussion! We worked through the key issues and the action list includes some pretty significant changes in how things work. However, the team is now very excited about the possibilities an integrated approach will bring.
The Demand design workshop was also a high energy event. Rachel (Consumer Divisional President and leader of the Demand design team) encouraged the team to bring out real issues – and they did! The discussions flushed out some real pain points and there was quite a lot of frustration, even finger-pointing, between the functions (remember all the design teams are cross-functional). As was the case in the MBR design, it was hard at times to pull people up out of the short term – in parts of the business, this is where most of the attention is currently focused – and think about what information is really needed when planning over a 36-month horizon. Some of the team found it hard to accept that ‘roughly right’ is better than ‘precisely wrong’ and it’s clear to us that a lot of this is driven by the historical focus from the previous Execs on the current quarter. A big point we discussed was the level of detail. Since SKU detail is needed to manage the short term, many believed we would have 36 months by SKU and of course by customer would be even better! With 12,000 SKUs and 50 large customers, we were in danger of having 21 million wrong numbers.
We took 1.5 hours discussing the fact that the more detail the more likely you will be precisely wrong. So we ended up at Demand Planning by Family (all sales and marketing input would be at product family) and by Market, with one largest customer – the largest - being separate.
Sara (CEO) and Alex (CFO) have both been very clear that their focus is on delivering the strategic objectives and that they want to run the business based on best practice IBP principles. It was a salient reminder for everyone that it takes a lot of communication, education, and repetition to change how people think. Crucially the desired behaviours have to be reflected in what people see and feel day to day. More to add to the action list and some understandable concern about resource, but as was repeated several times ‘we simply have to do this’.
In the next instalment we will narrate through the Supply Review and Integrated Reconciliation designs.