Restructuring & rebuilding program for high tech equipment manufacturer
A venerable, high tech, equipment manufacturer was engulfed by multiple problems, which were heightened by a market collapse and resulting cash-flow shortage. Moreover, the company was losing revenue and faced substantial cost structure and operating model challenges, as well as issues related to their product portfolio and technology choice.
Challenge
The high tech company faced the steep challenges of a major turn-around program. It required a fundamental realignment of the business strategy, coupled with the operating model and value chain transformation. At the same time, the company was pressured by an immediate, short-term, cash drain.
Approach
A.T. Kearney worked closely with the manufacturer on three major restructuring and rebuilding planks. A center-led, company-wide approach was driven by leadership from the top, including the CEO and COO, plus senior business and functional leaders, who were accountable for key workstreams.
This large-scale transformation was support by a program management office, which developed and drove the project structure, cross-initiative integration, and a strong measurement scheme. The change management program included integrated employee communication strategy and delivery, and leadership alignment workshops.
While the program implemented rapid and deep restructuring, it emphasized strategic choices and resizing, and operational improvement. The three primary restructuring-rebuilding planks comprised:
- Drive for cash and short-term results (coupled with re-financing actions) – immediate reductions in discretionary spend through demand-management policies and approvals; directed reductions in IT-managed services, non-employee workers, software/hardware, travel, property services; cutbacks in employee-related costs; focused reductions in inventory and accounts receivable; and sell-off of non-core assets
- Alignment of business strategy and operating model – customer/market strategy assessment to reduce complexity and define base for profitable business, rationalized product/R&D portfolio, and reconfigured operating model for focus on go-to-market and customer initiatives with clear accountabilities and metrics
- Re-sized value chain functions for the new business model – outside-in market/customer focus to determine functional cost targets by quarter, specific spend-area mapping for consistency in strategy and customer/product portfolio to drive country/product exits and transitions, cost-down functional workstreams, rebuilding initiatives focused on running the business differently for operational efficiency and effectiveness, transformation to virtual supply chain of extended enterprise model, and complete rationalization of IT
The detailed implementation was worked over a 12-month period on a shoulder-to-shoulder, collaborative basis with significant use of client/consultant teams on a regional basis: North America, Europe, and Asia.
Results
The restructuring and rebuilding program has had a significant transformational impact. With a new business model, an aligned operating structure and value chain, plus across-the-board cost savings, the company is benefiting from the improved confidence of its employees, customers, and investors around the world.
Specifically, in the first six months, the company regained financial viability – with improved cash-flow, dramatic reductions in operating cost, and major reductions in capital expenditures – plus a refocused product and business unit portfolio, new focus on core customers and countries, and new supply chain and corporate center models.
After eighteen months, the company was executing on the new business model to drive revenue and compete effectively through a transformed cost-operating model. The cost structure continued to improve with lowered asset intensity and a shift to targeted fixed and variable costs. And, importantly, customer satisfaction was improving because of more focused customer-facing operations, improved on-time delivery and product/solution quality performance, and joint process ownership with customers.
Contact
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David Asper is a partner in A.T. Kearney's Chicago office.
Bruce Marshall is a principal in A.T. Kearney's New York office.