looking beyond the crisis

Transcription

European Executive Barometers
CIO | CFO | Hr | SRM Barometers
2010
1
2
EUROPEAN EXECUTIVE BAROMETERs
CIO | CFO | Hr | SRM Barometers
2010
3
© Copyright CSC 2010. All rights reserved.
We would like to thank all the executives and experts for taking the
time to answer our questions, take part in our round-table debates
and to be available for in-depth interviews. Without their valuable
insights this book would not have been possible.
This work is the fruit of the collaboration of various CSC teams,
under the direction of Marc Bensoussan with the participation of
Grégory Cann, Erik Oosthuizen, Frédéric Pichard, Maryse Leca,
Jan Degraef, Coralie Bonnet and Megan Shaw.
Art direction: Montserrat Martinez Zacarias
Sources:
Michael Treacy & Fred Wiersema, The Discipline of Market Leaders,
1997, Addison-Wesley Pub. Co.
Michael Hammer & James Champy, Reengineering the Corporation:
A Manifesto for Business Revolution (3rd Revised edition), 2001,
Nicholas Brealey Publishing
4
CSC IN TOUCH WITH CURRENT TRENDS
Within the framework of its I.D.E.A.S programme (Inspiration, Debate,
Executive, Annual Surveys). CSC carries out a number of “barometers”
every year to analyse trends and perspectives from key roles within the
boardroom (human resources, finance, IT, procurement…) at the European
level. Each of these studies, carried out with the assistance of independent
survey institutions (IFOP and TNS Sofres), involve the participation
of hundreds of managers from the largest businesses and public
administrations in Europe. The results of these studies are revealed during
high level events, organized in different European cities (Paris, Madrid,
Barcelona, Milan, Brussels, Lisbon, etc.), and are also relayed by partners
from the media (Les Echos, La Tribune, Expansion, Liaisons Sociales,
Il Sole 24 ORE, etc.) and from academia (universities and elite schools).
5
1
CRISis or change
Page 11
14. a time for transformation
16. CHOOSING A TRANSFORMATION STRATEGY
18. ADHERING TO A VALUE DISCIPLINE
22. IMPLEMENTING CHOICES: PERMANENT CHANGE
2
1
1
3
KNOWING WHEN TO EVOLVE
Page 25
European leaders reinvent business
2009 - 2010 IN PICTURES
Page 31
36. ANALYSIS
36. Franco Bassanini. Faster, simpler, more efficient: A time of disruption for the Public Sector
4
1
CIO barometer
TRENDS AND PERSPECTIVES IN INFORMATION SYSTEMS
Page 39
40. SUMMARY - CIO BAROMETER
45. TESTIMONIALS
46. etienne Bertin. IT Director - FNAC
48. Arnaud Lescroart. Director of product movements and IT systems - Printemps
50. Carlo Privitera. Group CIO - Luxottica Group
52. Alessandro Musumeci. CIO - Ferrovie dello Stato
54. Gianluigi Castelli. CIO - ENI Group
56. Rogério Campos Henriques. CIO - Fidelidade Mundial
58. Alfonso Álvarez. CIO - Aldesa Group
60. Edouard Odier et Jean-Christophe Lalanne. CIO and SVP of the CIO Office and Deputy CIO - Air France - KLM
63. ANALYSIS
64. Digital Revolution - Seven Trends for an Innovative New World revolution
TABLE OF CONTENTS
5
1
CFO barometer
TRENDS AND perspectives FOR FINANCE DEPARTMENTS
Page 71
72. SUMMARY - CFO BAROMETER
77. TESTIMONIALS
78. Thierry Moulonguet. Executive Vice President, CFO - Renault SAS
80. Bertrand Badré. Group CFO - Crédit Agricole SA Group
82. Jacques Stern. Deputy CEO in charge of Accor Services and Finance - Accor Group
84. Michel Baise. CFO- Millennium BCP Fortis
86. Michel Grandjean. Vice President, CFO - AGC Europe
88. Arnold De Brauwer. CFO - SNCB
90. Ennio La Monica. CFO - Banque Carige
92. Giuseppe Gullo. CFO - Groupe Mariella Burani
6
1
Hr barometer
TRENDS AND PERSPECTIVES IN HUMAN RESOURCES
Page 95
96. SUMMARY - HR BAROMETER
100. TESTIMONIALS
102. Ángel Luís Cabal. HR Director - Government of the Principality of Asturias
104. Alessandro Salustri. HR Director - British Telecom Italia
106. Véronique Rouzaud. Senior Vice President, Human Resources - Veolia
108. Laurence Frenkiel. HR Director - Grand Optical
110. Charles-Henri Besseyre des Horts. Associate Professor, Management and
Human Resources Department - HEC Group
112. Jean-Paul Charlez. HR Director - Etam Group
7
1
SRM barometer
tRENDS and perspectives WITHIN PROCUREMENT AND LOGISTICS DEPARTMENTS
Page 115
116. SUMMARY - SRM BAROMETER
121. TESTIMONIALS
122. Alain Page Lécuyer. Group procurement Director - AXA
124. Pascal Ferte. Procurement Director - Sanofi - Aventis
126. Mauro Charrière. Production and logistics Director - Pininfarina Spa
128. Marco Facciano. Logistics Director - Calvin Klein Jeans
130. Stefano Zecchinato. Operations Director - Marelli Motori Spa
132. Aldo Previtali. Supply chain Director - Carrier Spa
135. ANALYSIS
136. The seventh annual global survey of supply chain progress
138. William Duncan. Supply Chain brain
8
1
SOLVING THE EQUATIONS OF A CHANGING WORLD
144. Taking action wherever change requires results
146. The story of CSC. 50 years strong
148. csc, WORLDWIDE PRESENCE, IN-DEPTH EXPERTISE
150. OUR OFFERINGS
152. TURNING BRIGHT IDEAS INTO BUSINESS SOLUTIONS
7
Page 141
8
EUROPEAN
EXECUTIVE
BAROMETERs
"Boldness rewards those
who know how to seize the
opportunity."
Marcel Proust, in Search of Lost Time
When businesses bask in the sunshine of fair weather, it is
difficult to distinguish one from another. What really sets
them apart is the course they are steering through a storm
when it hits.
First, the wind rises. Being overly cautious will drive some
to neglect both their internal resources and their customers.
The more daring will step up their efforts to reassure their
disoriented customers and rally their teams against the
swell, encouraging them to work in unison.
Then the storm rages. When the environment is changing
and the ship is pitching about in heavy seas, transformation
is the best way to avoid sinking. To fail to overcome the fear
of change is to risk drifting, rudderless, without the strength
or momentum to prepare for the return of a more favourable
economic climate.
Being daring, turning to innovation and supporting the ship’s
crew make it possible to stay on course and arrive at safe
harbour better adapted to the new environment.
9
10
1
EUROPEAN
EXECUTIVE
BAROMETERs
LOOKING BEYOND THE CRISIS
Crisis or
change?
11
Crisis or
change?
The beginning of the year will be decisive for many businesses.
They will have to withstand not only the crisis, but also look
beyond it to prepare for the future. Because underneath the
surface of the crisis, obscured by alarmist prophets of doom or,
at the other extreme, overly optimistic oracles, profound shifts
are underway: shifts in the relationships between businesses
and their customers, shifts in how companies manage their
performance and shifts in the management team itself… Those at
the helm are well aware that a crisis is first and foremost a time
in which to make tough choices… and stick to them. The time for
change has come, and with it the time for radical reform.
12
Crisis or
change?
13
1.
A TIME FOR
TRANSFORMATION
Business activity has decreased, employment is stagnating and morale is at its lowest: never before has a
stock market crisis turned into an economic crisis with such speed. However, the greatest mistake would
undoubtedly be to focus only on the figures and viewpoints broadcast by the media in recent months,
as their tone is often too alarmist or even too optimistic at times. Because underneath the breathtaking
slowdown of the economy a more profound movement is becoming apparent: a shift that challenges the
current business models and economic thinking. With this in mind, simply burying one’s head in the sand and
waiting for the storm to pass seems a rather dangerous strategy.
Strategic changes and new models
The new meaning of performance
Careful examination shows that the current situation is the
result of a series of disruptions. The first of these, in the
fall of 2008, was a disruption in sources of financing: the
markets, and later the banks, increased the cost of credit,
precipitating the crisis we are experiencing today.
This financial disruption was followed by strategic disruption,
since in this same period 98% of company directors believed
they would be forced to revise their business model in the
next three years!
New models call for new indicators. Performance
measurement has changed radically too. “In the space of just
a few months, indicators went from being externally focused
to being internally focused – and from being centred on longterm profitability to cash flow optimisation, productivity
and human resources,” explains Marc Bensoussan, Senior
Vice President and COO of CSC for South and West Europe.
Along with the strategic disruption came operational
disruption. Faced with a severe downturn in business,
companies had to rapidly adapt under pressure by reducing
their costs and staffing levels, but also by rethinking their
relationships with customers, suppliers and competitors.
“In all of these areas, the crisis has accelerated the rate of
change in an exceptional manner,” says Claude Czechowski,
President and CEO of CSC for South and West Europe.
Who could have imagined just a few months ago that Fiat
in Italy would merge with Chrysler in United States? Or that
two competing banks, the Société Générale and the Crédit
Agricole, would merge their asset management divisions?
Who would have thought that after years of growth and
manufacturing to order, the automotive industry would
revert to selling from stock in just a few months? In all
sectors, new economic and business models are taking hold.
14
In this context more than ever before, companies need
integrated information systems that are capable of quickly
measuring performance and helping those at the helm steer
a safe course through the storm.
CFOs play an important role in this: they know how
much leeway the company has and they have in-depth
knowledge of the processes and methods for measuring its
effectiveness.
Some believe that because of this the CFO (who, like
the CIO, tends to be closer to operations) is the most
strategically placed executive in the company to create
a new business model and to monitor its progress with
appropriate performance indicators.
"the crisis has
accelerated the
rate of change in an
exceptional manner"
cLAUDE CZECHOWSKI,
President and CEO South & West Europe
President, Global Consulting / Technology / ERP Practices
A cultural – and technological – shift?
A sign of just how profound the changes underway are is the
fact that many companies are also experiencing a cultural
shift. In their management practices, first of all. “During a
storm, the companies that remain on the crest of the wave
are often the ones that have understood that they need to
think as a team rather than in terms of hierarchy," explains
Marc Bensoussan.
The other cultural shift has to do with technology and
the new uses for it. The advent of the internet and mobile
technologies has already drastically changed the way
companies function. The impact of social networks on
management is beginning to be felt… And other evolutions
are on the way: video, for example, which will replace
text for many purposes; or the development of artificial
intelligence, which will have a significant impact on all areas
of projecting and decision making.
Of all the shifts, these are undoubtedly the most profound.
They are unavoidable and affect all areas of business. Just
as in any period of major transformation, companies that
want to remain competitive are therefore faced with a vital
choice: to adapt as best they can while being subjected to
technological and cultural shifts… or to fully integrate both
in order to invent a new model – their own model – and
come out of the crisis on top.
Crisis? Not for everyone!
Hard-discount distributors and
McDonald's are experiencing recordbreaking years, and the Logan is a success:
the “low cost” industry is alive and well
in Europe. Luxury items have not suffered
either: Fauchon’s sales figures increased
by 33% during the holiday season in late
2008! And let’s not forget “comfort”
products such as chocolate (+35% in 2008),
gossip magazines, betting on horse races,
electronic distribution, organically
grown products, and certain innovations
such as the iPhone and the Nintendo Wii
game console – all were unaffected by
the crisis. This confirms what we already
knew: crises are first and foremost trend
accelerators. And in the current tense
situation, differentiation pays off.
15
2.
CHOOSING A
TRANSFORMATION
STRATEGY
All transformation necessarily entails a breakaway or a radical reform. For those at the helm, the
biggest challenge in periods of transformation lies in clever handling of both the magnifying glass
(to save money and immediately find room to manoeuvre) and the telescope (for strategic long-term
vision). This is a difficult but crucial exercise. Provided, of course, that the telescope is properly
focused on the client and that the differentiation strategy is found, since from this will stem all the
major decisions that follow.
Betting on change: a must
In the first few months of the crisis, there was one question on
everyone's lips: How do we to react? Many companies were
tempted to adopt the cost killing approach. Caution is in order,
however: although cost management is more crucial than ever,
blindly slashing costs can cripple the company later when
business picks up again, or cause it irreparable damage. In
other words: companies must reef the sails to survive the storm,
but must also prepare the ship to move forward again when
calmer seas return. They must make the necessary savings in
the short term, but guard against sacrificing investments that
are essential for the medium term.
Preparing for the post-crisis period is without a doubt the
greatest challenge companies are facing in 2010. “The
companies that adapt today will be the first to bounce
back and will be well ahead of their competitors in the
new economic environment," says Claude Czechowski. The
other major challenge lies in managing change in times of
economic slowdown. Failing to act is not an option. It is
therefore important to have created a process for instigating
change – preferably before the crisis hit.
The new rules of competition
Different customers seek different kinds of value. Because a
company can't be the best at everything, it must choose its
customers, properly identify the value offered to them, and
constantly increase this value by choosing a business model
that is uniquely linked to it.
According to Michael Treacy & Fred Wiersema, in
their the book The Discipline of Market Leaders*, by
refusing to choose, companies adopt a hybrid business
model that does a little of everything at once and is a
source of confusion, stress and misspent energy. This
equates to steering a ship without a rudder, with no
clear way to resolve conflicts or set priorities. Looking
out for the company first, instead of the customers,
complicates management and wastes time. This is how
a business can find itself adrift on the stormy seas of
new competition.
*Michael Treacy & Fred Wiersema, The Discipline of Market Leaders,
1997, Addison-Wesley Pub. Co
16
Setting a new course and bringing new impetus during the
crisis without any prior preparation is extremely dangerous
and in all likelihood even impossible. If teams have already
begun a process of change before the economic downturn,
it will be easier to speed up or slow down the rate of change
according to the company's situation. And it will be even
easier to choose a transformation strategy, starting with a
clear differentiation strategy.
Deciding on a differentiation strategy
When faced with shifts in the environment, companies
must prepare their own strategic change. This doesn’t
mean changing everything, of course, but rather clearly
defining the company’s products and services in order to
stand out from competitors and maximise performance.
To do this, a clear differentiation strategy must be
developed along one of the three following lines:
Operational excellence (cost): products positioned in
line with the market average, at the best price, with a
minimum of hassle. The operational excellence product
range is above all simple. The hard-discount sector or
IKEA, for example, have led the way in this area: it can be
profitable to reduce service levels if the price/quality ratio
of the products remains attractive, if purchasing is made
easy and if the system is infallible.
Product leadership (creativity): putting technology
to new uses, inventing new services, focusing on userfriendliness or the environment – rational (but genuine)
innovation makes all the difference as long as the
company always stays one step ahead. For instance,
Apple competes on performance, not on price.
Intimacy (customer): it is vital for every company to know
its customers and their needs. Some make this a true asset
– with appropriate targeting, efficient management of
customer relationships, tailored offers or new distribution
networks. Companies that cultivate intimacy with
their customers, such as the Accor hotel chain with its
exclusive A-Club programme, are not interested in oneoff transactions. They build relationships.
Cost, customer or creativity:
these three Cs determine the
options available to businesses
for withstanding the crisis, and
beyond that for overhauling
their business model. These
choices must be made now. Later
on they will determine who will
be ahead of the game once the
economic climate allows for
improved visibility.
An essential choice
Of course, while reading this, some are already thinking
that their company would be better off betting on all fronts
(on the basis that to choose means to also to exclude). The
Leading Edge Forum, CSC’s strategic planning and research
centre, has shown that companies that are unable to choose
are unable to reach a level of excellence in any domain. Their
efforts are dispersed and their position is threatened from all
sides by competitors or newcomers with a clear differentiation
strategy.
Furthermore, customers know how to identify the three types
of value and generally don’t expect to get them all at once
from a single supplier. According to the researchers, “the
choice is difficult, because it means concentrating all efforts
on what is essential. But the lesson drawn from market leaders
is clear: they create a genuine difference in one value discipline
while remaining competitive in the two others.”
Building a new business model and
adapting the processes
Choosing a differentiation strategy (or value proposition)
naturally leads to business models that are very different
in terms of organisation, production processes, customer
relationships, management, and of course information
systems.
Of course, different value propositions require different
business processes. Take distribution policy, for example.
The operational excellence scenario (differentiation through
cost) requires a single procurement department and
standardised retail outlets that are usually self-service. The
customer intimacy scenario, on the other hand, requires a
more flexible organisation in which the decision making
power lies much closer to the end client and where orders
are taken by salespeople who have some room to negotiate.
These arguments are valid for all activities in the company
– with one leitmotiv: once the model is chosen, it must be
adhered to. That is the challenge of the value discipline.
4 rules
for true market leaders
Rule n°1: Offer the best product range
on the market by excelling in one of
the value disciplines
Market leaders start by creating a value
proposition that is appealing and unmatched.
Only then do they seek to achieve efficiency in
the other two areas.
Rule n°2: Maintain a degree of
competitiveness in the other value
disciplines
There is no need to strive to be the best in all
areas – it is wiser instead to ensure that any
drop in performance in a secondary value does
not damage the primary customer value.
Rule n°3: Dominate your market by
improving your value from year to
year
Market leaders are threatened by both the
companies that try to copy their models
and those that increase expectations related
to the other types of value. The solution?
Constantly maintain efforts and raise customer
expectations while raising the value standards.
To remain a market leader, it is not enough for
a company to offer the best product, the best
price, or the best overall solution on the market
today: it must be able to offer them today,
tomorrow and the day after.
Rule n°4: Build a business model that
is dedicated to creating unbeatable
value
Continuous improvement of the business
model can make the product range offered
by competitors much less appealing – or even
ruin it by making it obsolete. The business
model is the ultimate weapon of the leading
company that wants to dominate its market.
17
3.
ADHERING TO A
VALUE DISCIPLINE
Choosing a value proposition is an act of renewal. It is not merely a new communication strategy, but
a genuine movement that must drive the whole company. The value proposition gives meaning to the
company’s strategic orientation and to all subsequent decisions, by imposing a road map or discipline
on all areas of the business. This “value discipline” pervades the entire company, from its skills to its
culture. It defines what the company does, and therefore what the company is.
18
DIVERSITY IS THE ENEMY OF EFFICIENCY.
THE RIGHT STRATEGY IS THUS NOT TO OFFER
THE BEST SERVICE, BUT RATHER TO STICK TO
SIMPLE PRACTICES.
The operational excellence discipline
Operational excellence has an historical model: Henry Ford. Shaking up the pre-existing standards of cost and performance,
this famous manufacturer built his industrial empire on a simple idea that he instilled throughout his company: production
must be efficient. Of course, nowadays Ford has been surpassed in many areas. But the core of his model remains the key to
success: simplicity, collective discipline, and of course the ability to break away from established rules to accomplish what
many (and sometimes even the customers) thought was impossible.
Customer value: price, reliability, speed
Operational excellence is based on cost reduction. But it
cannot be reduced to this aspect only. First, today’s (and
tomorrow's) companies consider the total cost of their
product: in addition to reducing production cost, they aim
to reduce cost of usage by also fine tuning the reliability of
the product or the speed of service. Their goal: eliminate
the material and psychological (inconvenience, annoyance,
etc.) costs linked to the purchase.
The basis of the model: standardisation
Companies aiming for operational excellence organise
themselves around standardised means and highly efficient
procedures. It is no coincidence that all Wal-Mart and IKEA
stores look alike. But that is not enough. Companies also
have to stay focused on the discipline chosen and resist the
urge to diversify or upgrade their product range. Tempted
to meet the requirements of other customers, undisciplined
companies often allow their products and services to
proliferate by creating variations for myriad customer
segments, and gradually they lose the efficiency that made
them unique. On the other hand, disciplined companies
know that diversity comes at a cost. And controlling costs
is a cardinal virtue of any operational excellence discipline.
HR management: a focus on teamwork
“It’s the team that counts.” These companies reward the
teams that contribute to keeping the company’s promise.
At McDonald’s, the employee of the year is named “best
crew member” and, though wages are low, the company
knows how to recognise those with potential for the future
and helps them progress gradually through a clearly
established hierarchy.
Transaction effectiveness
to eliminate superfluous processes and improve the
logistics flow from order through to delivery. Purchase
approvals, orders and stock replenishing are replaced by
new continuous resupply processes. Bills of lading and
confirmations of receipt have already disappeared.
Information technologies used to their full
capability
The new rules of competition make operational excellence
necessary for many companies. It is made possible by
information systems, which are both the nervous system
and the backbone of the company. Decision making tools
have become widespread within companies that have
chosen this value discipline. Today they are integrating
mobile technologies before their competitors, in order
to both extend their control and improve their customer
service.
Customer service: the excellence of simplicity
Because poor service can increase the total perceived
cost for the customer, companies aiming for operational
excellence have shifted their attention to this new area,
focusing on three rules: the service must be accessible,
flawless and immediate. If we think back on all the minor
hassles that hiring a car once involved (a task that is now
extremely simple), we can truly measure the progress made
in just a few years.
A word of caution, however: here again, diversity is the
enemy of efficiency. The right strategy is thus not to offer
the best service, but rather to uphold simple practices.
And if necessary have customers adapt themselves to the
company: after all, haven’t fast food restaurants managed
to have their teenage customers clear their tables even
though they refuse to do so at home? Similarly, low cost
airline customers have gotten into the habit of eating
before or after flights rather than during.
Solutions must constantly be found to improve the model.
Today, vertical integration is being replaced by virtual
integration, where companies and their suppliers pool
their resources (and integrate their information systems)
19
The discipline of innovation
At the end of the 19th century, Thomas Edison invented the first real product development process – a way to create one
invention after another and then transform these into useful and marketable objects. His Menlo Park laboratory has been used
as a model by the R&D departments of companies focused on product leadership such as Apple and BMW. They have revised
and perfected the model, keeping in mind Edison’s great principle: “Genius is 1% inspiration and 99% perspiration.”
Customer value: (genuine) innovation!
How many of the “new” products presented each day can
really be considered innovations? From new formats to
new look packaging and products, through to chocolateguava perfumes… customers quickly tire of superfluous
variations and embellishments without value. To achieve
product leadership, a company must be capable of
creating a regular flow of genuine innovations, of the type
that people wait for with bated breath and that forge
lifestyles; innovations that offer a product experience
combining pleasure, performance and identification.
At the heart of the model: vision and talent
Before starting to develop a new product, Edison would
begin by providing an inspiring vision of it. He wasn’t the
first to invent a light-emitting device, but he saw further
ahead than his contemporaries: he wasn’t looking to
invent the light bulb; he wanted to be able to light up an
entire city.
Furthermore, Edison had surrounded himself with
associates who were naturally curious and motivated by
the pursuit of virtually impossible goals. Nowadays, all
product leadership companies know that it is crucial to
have talented employees with ambitious and visionary
ideas; employees who are often driven by a common goal
expressed very simply.
Being a step ahead – and preparing the market
Product leadership companies must prepare markets so
that they will accept radical innovations. And yet these
companies know that history is littered with the debts of
inventors whose only mistake was to be right too soon.
Their challenge is to both invent and accelerate the rate
at which an invention is taken up. They look beyond the
market, but without ever losing sight of it.
Flexible structures, robust processes
By trying to box in creativity too much, eventually it
runs dry. Innovative companies must therefore adopt
flexible structures. Teams must be multidisciplinary in
order to plan all aspects of the product as early on as the
development phase (production, marketing, after-sales
service, etc.).
20
The price of inequality
“Companies that truly want to achieve
intimacy with their customers must
focus all their resources on one
choice: rather than a superfluous
service ‘with added value’, they must
offer their clients performance that
is the result of genuine expertise, a
willingness to share in their risks,
and true tailoring of products and
services. They must be confident
enough to sell these at a higher price,
knowing that the bill is justified
down to the very last cent.”
HR as an essential resource
Product leadership companies never forget that it is
individuals who create innovation. They look for engineers
who are creative and capable of easily moving from
one project to another. They know how to increase the
potential of their staff members by presenting them with
ambitious challenges, while providing them with material
comforts that stimulate imagination – as illustrated by
the Google offices, for example.
Life cycles to manage
Brilliant engineers on the one hand and experts in
launching products on the other: this is the winning
combination for product leadership. It is the combination
that allows a brand to sell a product that truly promises
to bring value to customers. But innovation always ends
up being matched. Gradually its value decreases, and its
price with it. Market leaders don’t hesitate to prolong the
life of an innovation by launching extensions and other
variations. At the same time, however, they know how
to keep one step ahead by quietly preparing the next
product that will make the previous one obsolete as soon
as it is copied by the competition.
The customer intimacy discipline
We could trace customer intimacy back to the early days of trading or to the development of tailored services – or to the
bellboy of a major hotel, who is willing to go to any lengths to anticipate the requirements of regular customers. But what
exactly does this intimacy mean in a time of massive shifts?
The customer value: the solution to your needs
Balanced talent management
The lowest price or the best product is not a guarantee
of value for customers if it only addresses part of their
requirements: if the low cost flight takes them to an airport
that is too far from their destination, if a software application
doesn’t allow them to reorganise their management
processes, or if they do not have the necessary skills to
use the product. Companies focused on customer intimacy
know how to remedy these deficiencies better than their
competitors. Their main characteristic: an exclusive range
of high quality services that allow their customers to
use their products in the best possible conditions. This
discipline involves optimising the customer experience
and, in addition, offering each customer the solution that
matches their current needs.
The key challenge for companies focused on customer
intimacy is to gather, coordinate and keep talented staff
members at their customers’ service. This challenge is
particularly great in the consulting field, for example, where
the most sought-after personalities are those who know how
to materialise change within the client company. Customer
intimate companies prefer to hire versatile candidates who
are capable of adapting themselves to each customer and
are not afraid (rather the opposite) to stray from their job
description.
The basis of the model: knowing the customer
Customer intimacy has acquired new meaning over the
last few years with database development, behavioural
segmentation, and all the possibilities for customising
products. One-to-one marketing and product co-creation
are the new standards of a customer intimacy that still only
in an embryonic phase.
A decentralised organisation
It’s a tautology: decentralised businesses are closer to their
customers. This proximity is also evident in the autonomy
given to staff members who are in direct or virtual contact
with the customer. It is also the model for any store that
focuses primarily on service and where a skilled sales force
is therefore essential. Furthermore, a store might welcome
its customers royally, but be unable to deliver on time.
Where is the value for the customer then? In B2B, just as in
B2C, customer intimacy is not only a matter of contact; it is
a relationship that involves the whole company.
Production systems that are often virtual
Value discipline leaders rarely inherently possess the
capabilities they put at their customers' disposal. Their
strength lies first and foremost in their expertise and their
ability to coordinate skills to offer solutions. In a way, their
means of production are virtual and therefore potentially
infinite. This formula enables these companies to turn to
partners on behalf of their customers.
Strong relationships with select customers
Customer intimate companies calculate the value of
a customer over the long term. They avoid occasional
customers and concentrate their efforts (and therefore their
value) on a regular and almost select customer base. When
it comes to B2B services, naturally the aim is to strengthen
relationships to develop existing accounts. In retail, the key
is to foster customer loyalty. Without losing sight of the fact
that a satisfied customer is not always loyal: a strong and
long-lasting relationship must be built up and a company
must sell the relationship as well as the goods.
21
4.
IMPLEMENTING CHOICES:
PERMANENT CHANGE
Above all, choosing the differentiation value
requires the ability to diagnose and the courage
to decide. On the other hand, adhering to a
value discipline requires changes that are often
profound because they not only affect what
the company does, but also what the company is.
In some respects, an honest diagnosis will show
that to truly be a market leader, it is not enough
for the company to improve existing processes;
it must fully reconsider them and reinvent them
and, in the process, eliminate the activities that
hinder efficiency. Isn’t that precisely the very
essence of reengineering, of transforming a
company?
Having made its first appearance in the 1980s and become
widespread in the early 90s, reengineering is making a
strong comeback. This is not surprising, given that it is
not a way of managing, but rather a way of thinking that is
particularly suited to periods of massive change. Today it is
thus more relevant than ever before to thoroughly question
all processes. It is by asking the real questions now that
companies can prepare for a better future. In short, each
company must invent its own way out of the crisis.
The thorough questioning of all
processes
Reengineering first appeared in the 1980s and owed its
impressive success to the crisis of the early 90s, which
forced companies to completely rethink their models by
destroying the work structures that had resulted from the
industrial revolution, in order to adopt processes that were
better suited to the modern economy. Process reengineering
led companies to reinvent themselves based on processes
rather than individual tasks.
Process-based management gradually became standard:
ERP systems became widespread and business process
management solutions (BPM) are now integrated into the
core of information systems. “Thanks to BPM technologies,
companies can now implement complex processes they
only could have dreamed of during the first wave of
22
reengineering,” says Marc Bensoussan. “Based on a crossfunctional view and a thorough questioning of all processes,
this method can make a difference now more than ever.”
A guide for the changes to come
“Some corporations aren’t performing well today because
they performed well yesterday,” wrote Michael Hammer
and James Champy in Reengineering the Corporation…
in 1993! Doesn't that which was true before the various
massive shifts still apply today? Periods of massive shifts
are an opportunity for companies to question not only what
they do, but also what they are. They push companies to
review their approach in a different way, and to abandon
long-established procedures in order to take a fresh look
at their business and rethink the processes necessary for
providing their customers with products or services that
have true value.
Information systems at the heart of
company transformation
Many companies make the mistake of planning their
information technology infrastructure taking into account
only their existing processes. They question themselves
on how to use new technologies to reinforce what they
already do. And yet, the real power of technology lies not
in improving what already exists, but rather in allowing
companies to explore new possibilities, to pursue more
ambitious goals, to create other ways of working and
thinking, or in other words: to reconfigure themselves.
Companies must turn the use of technology into a key skill.
Time is needed to analyse and understand the implications
of such innovations, in order to imagine what can be done
with them and in order to “sell” new uses to staff members
and prepare their implementation. This is the time naturally
required for a cycle of change.
"Thanks to BPM
technologies,
companies can now
implement complex
processes they
only could have
dreamed of during
the first wave of
reengineering"
MARC BENSOUSSAN,
Senior Vice-president and COO South & West Europe
A philosophy of change
The reengineering vision was a philosophy of permanent
change, a concept which has since become a leitmotiv
for many companies. But in how many companies has
change really become a culture? It all starts with a vision
of the company and of its value proposition. A vision
includes both measurable objectives and instruments of
measure. It is qualified as “strong" when it contributes to
transforming the fundamentals of competition in the sector.
Then the processes must be remodelled and the changes
implemented.
Invention and pragmatism, technology and human
organisations, creativity and synthesis: these are the
elements of reengineering that will allow companies to
come through the crisis in good shape, ready for future
successes. With one focus: the customer. With one vision:
the value proposition. And with one discipline: coherence in
implementing a clear and established choice.
CSC and reengineering,
20 years of history
Initiated by CSC in the 1980s, the process
reengineering concept led to a
pioneering article published in 1990 in the
Harvard Business Review: “Reengineering
work: don’t automate, obliterate.” In
1993, "Reengineering the Corporation"
was published, co-authored by Michael
Hammer and James Champy, the former
president of CSC's consulting division.
23
24
2
EUROPEAN
EXECUTIVE
BAROMETERs
Knowing
when to
evolve
25
26
CHANGE
MANAGEMENT
Knowing
when to
evolve
When the environment changes, it is misguided – not to say risky – not to foresee the
capability to evolve with it. The dinosaurs could vouch for that – if only they had
been able to change in time. What was true for the diplodocus and tyrannosaurus
rex in ages past is still true for companies today. In terms of already starting to
lay the foundations for the post-crisis world, change is an obligation – and an
excellent opportunity – to prepare for the economic recovery. Well executed
change is a good indicator of future success. So, how best to set a change process
in motion? What are the critical success factors for transforming processes and
organisations? How to obtain buy-in and secure commitment from teams?
27
"Players in all
sectors realise
that well executed
transformation is
a good indicator
of business success
and an essential
foundation on which
to build the future."
JAN DEGRAEF, partner at CSC in Belgium, in charge
of the change management consulting practice.
to maintain a significant competitive advantage; the
search for innovative methods to do so then becomes a
real priority for management.”
Change management methodologies are designed to
provide a framework for and guide this transformation,
by setting the pace, creating meaning and making the
process comprehensible for everyone.
In these troubled times, to be efficient companies must
have the capability to rapidly simulate and demonstrate
new ways of working, to measure the extent to which
employees accept the new model and to re-think the
way in which teams are mobilised.
Working differently
“T
he crisis has changed the context,” explains
Maryse Leca, partner at CSC in France, in charge of
the consulting practice linked to people management
during business transformation. “Companies have to
adapt their organisation and way of working even
more quickly and fundamentally than before. In the last
two years we have seen the number of mergers and
reorganisations increase steadily, resulting in a thorough
overhaul of business models. It rapidly becomes clear to
organisations that they need to work differently in order
The first success factor: collaboration, which enables
us to re-think business processes, without constraints
in terms of time and space, on the basis of a new
economic model. “When you’re forced to do more
with less resources, the only way forward is to put into
place different and innovative tools that encourage
collaboration between teams,” continues Maryse Leca.
“These techniques favour the exchange of best practice
and knowledge sharing by transforming the working
environment, which becomes more transparent and
facilitates agility. They push back the borders of what is
possible in an amazing way to enable the transformation
of the business and its organisation.”
Recipe for change management
Obtain executive sponsorship
Align management
Involve employees
Manage expectations
Keep momentum and motivation
Reassure the organisation
28
"To facilitate the
comprehension of
new operating models
specific tools can be
used, such as business
games."
MARYSE LECA, partner at CSC in France, in charge of the
consulting practice linked to people management during
business transformation.
Understanding, showing, measuring
and comparing
The second factor: adjusting operating models. “Of
course change management has to be adapted to the
specific issues facing every client: outsourcing, merging,
‘branding’ services, transforming operations and functions,
plans designed to deliver increased profit or quality…,”
comments Maryse Leca. But the objective remains the
same: rapidly adjust operating models, action plans or
behaviour depending on the context. With this in mind,
we continuously measure the extent to which employees
accept change, using internal surveys, indicators linked
to change methods and benchmarking (comparing
organisations and results in real time). The crisis has
reinforced practices such as knowledge sharing and
evaluation. Companies increasingly seek to understand
the experiences of others, be it in the same sector, or at
national or European level. They are evolving into learning
enterprises. Currently the hottest topics are employee
satisfaction and commitment, executive coaching,
diversity and collaborative processes.
Laboratories for change
The third critical factor: federate, mobilise and put into
perspective the change thanks to innovative techniques.
To facilitate the comprehension of new operating models
specific tools can be used, such as business games.
On the basis of simulation and role playing techniques,
these exercises make it possible to discover, visualise and
integrate new operating models by way of transformation
scenarios. This enables the creation of laboratories for
change as it were, which means things can be put into
perspective in a rapid and measurable way – which is
increasingly a necessity today, when action plans have to
be developed, tested and launched in a very short time
span. This time pressure has increased in the wake of the
crisis and results must be concrete, demonstrable to all,
both internally and externally, more and more quickly.
Change today:
10 key concepts
1
2
3
4
5
6
7
8
9
10
Agility
Anticipating risks
Benchmarking
Indicators
Framework
Collaboration
Surveys
Innovation
Change laboratories
Simulation
Introduce, clarify, shape, support
The fourth key factor: introduce the change, explain it, train
the employees and support them. Jan Degraef, partner at
CSC in Belgium, in charge of the change management
consulting practice confirms and emphasises this: “Being
able to put change into perspective is crucial. Companies
are going though a period of uncertainty. They know we are
in a transition phase that will lead to the transformation of
organisation models and processes. Change management
consists first and foremost of reassuring all the employees
and then guiding them throughout the process. All
the steps need to be managed in a very concrete and
pragmatic fashion.” CSC places a great deal of emphasis
on transparency with its “employee self-reliance” concept.
This approach enables the employees to prepare gradually
for change – in their situation in particular – in order to
understand and accept it. Tools have been developed to
manage all these moments and provide essential support
for everyone.
“We are also involved in business transformation projects
that are truly global in scale,” concludes Jan Degraef.
“We ensure that operational and information system
issues are closely managed in parallel so that the impact
of the planned changed is realised to the fullest extent
possible, at a fundamental level. Currently we assist
both the private sector (for instance, the Belgian railway
operator, the SNCB) and the public sector (for example,
the Federal Public Service for Budget and Management
Control). Players in all sectors realise that well executed
transformation is a good indicator of business success
and an essential foundation on which to build the future.”
29
30
3
EUROPEAN
EXECUTIVE
BAROMETERs
European
leaders
reinvent
business
2009 -2010 in pictures
31
European
leaders
reinvent
business
"We've strengthened social
cohesion plans and training
policy."
Véronique Rouzaud
Senior Vice President
Human Resources | Veolia
"We're assessing our suppliers'
approach towards 'sustainable
development' – this has led to
around a hundred improvement
projects."
José Matias
Group Vice-President, Purchasing | Rhodia
"The crisis represents
a healthy opportunity
for consolidation and
standardisation."
Gianluigi Castelli
CIO | ENI Group
32
"The major challenge for Public
Administrations is to efficiently manage
a limited budget in order to continue
to offer the same quality of services to
citizens."
Ángel Luis Cabal
HUMAN RESOURCES DIRECTOR |
Government of the Principality of Asturias
33
European
leaders
reinvent
business
"CIOs have to be the
innovation and transformation
drivers of the business…"
Rogério Campos Henriques
CIO | Fidelidade Mundial
"In this time of crisis, it is
essential that directors know
how to manage change by
serving as business partners
within the company."
Alessandro Salustri
HR DIRECTOR | British Telecom Italia
34
"We have to go faster, with a
business model that provides
less instant cash flow."
Nicolas Duhamel
CFO, Member of the Management Board
| BPCE
"The CFO is no longer just the
numbers man. He has to have
deep insight into the whole
business chain."
Arnold De Brauwer
cfo | National Railway Company of Belgium
35
ANALYSIS
FASTER, SIMPLER, MORE EFFICIENT:
A TIME OF DISRUPTIONS
FOR THE PUBLIC SECTOR
FRANCO BASSANINI
CHAIRMAN
CASSA DEPOSITI E PRESTITI
Franco Bassanini is one of the most renowned modernisation experts
in Europe: former Italian cabinet minister for Public Administration and
Government Reform (1996-2001), he has brought one of the most ambitious
public sector reforms in recent years to a successful conclusion. Today he
is chairman of the Cassa Depositi e Prestiti S.p.A., and European governments
regularly seek his advice. He was member of the Executive Board of the ENA
(École Nationale d'Administration) and member of the French Attali Commission.
Currently he is the president of the Astrid Foundation, an Italian think tank
dedicated to public sector modernisation in Europe.
How would you sum up the challenge
of modernising the public sector?
Which drivers did you focus on to
achieve that?
For European countries, it’s very simple: it’s a key challenge
in terms of coping with globalisation. Allow me to explain:
for years governments ran up debt to finance their public
services. Today everything has changed. Our economies
are competing with those of developing countries. Europe
will only come out on top if it finds the correct balance
between the cost and quality of the services provided to
citizens and businesses.
All of them! We simplified legislation, privatised certain
sectors and decentralised decision making. At the same
time we reinvented the missions of public institutions
and simplified the procedures for citizens and businesses
– with the “single point of contact” concept and by
putting numerous services online. The reform was an
all-encompassing project. Ultimately we succeeded in
reducing the cost of the public sector by more than two
percent of GDP – while at the same time improving the
quality of the services provided.
Are public services too expensive?
I would put the question differently. Public spending
can be defined as the amount of financial resources that
the government removes from the private production
of goods and services. If this translates into high quality
services, the balance is right. However, if the services are
mediocre, it becomes counterproductive and penalises
businesses – and thus the country – versus emerging
market economies.
How did public sector reform start in
Italy?
In the middle of the 90s the country found itself in an
untenable situation. The public debt had reached 120% of
GDP, with an annual deficit of 11%. The cost of the public
sector thus needed to be drastically reduced.
36
In your opinion, do cost reduction and
quality improvement necessarily go
hand in hand?
We should be careful not to generalise in this regard. It was
possible in Italy because we had a great deal of catching
up to do, starting with a public sector that was both too
expensive and too inefficient. Now the focus should above
all be on improving the quality of the services provided. In
France, for example, efforts should be made to reduce costs
while maintaining the good quality of many public services.
Which are the primary areas for
improvement in the years ahead?
The first area is institutional: responsibilities have to be
clearly defined and divided among the various public
authorities in order to avoid duplication. This is a matter
of particular importance throughout southern Europe.
Automating public services is obviously another
important area, including the integration of business
intelligence tools. This requires genuine reengineering,
with in-depth reform of the procedures and operational
rules, but also cultural change on behalf of both civil
servants and citizens when it comes to information
technology…
The public sector has made
considerable progress in the area of
e-government, hasn’t it?
"THE
MODERNISATION
OF THE PUBLIC
SECTOR
BENEFITS
EVERYONE"
Yes, but there’s still room for improvement! Look at
how difficult it remains for the various public authorities
to communicate among themselves because their
information systems are incompatible. Another example:
e-medicine – it could be used to make 70% of emergency
room visits unnecessary. We still have a long way to go.
And what other challenges are on
the horizon?
There are two I’d like to mention. Firstly, outsourcing. It’s
been a growing trend in the past few years, and can be a
good solution – as long as it really reduces labour costs
and is supported by an appropriate control structure to
verify the quality of the services provided. A great deal
of progress remains to be made as regards these two
aspects, and Europe lacks a clear project and collective
references in this domain.
Secondly, the creation of a culture of performance,
with genuine evaluation of individual and collective
performance linked to remuneration. The idea is by no
means new, but has not yet been applied in Europe –
at least not on a large scale. It is, however, the key to
improving the quality and efficiency of the services
provided to citizens and businesses.
Indeed, let’s talk about businesses.
What can they expect from public
sector modernisation?
Let’s remember that in general terms the government is
a source of competitiveness for business. At a practical
level, simplification and automation of procedures has
made life much easier for businesses. A great deal of
progress has been made here. Today there is still a major
challenge: high speed internet access. In Italy, more
than half the country is not connected by fibre optic
connections – which is a major drawback for businesses.
The issue is the same in every country: outside of the big
cities, public sector investment is required. Broadband
access today is the same sort of problem that electricity
was at the beginning of the 20th century!
Caught between the requirements of
increasingly demanding users and the
budgetary rigour imposed by the chronic
deficits of European governments, the
public sector is seeking to reinvent
itself. In the past decade government
institutions have been carrying out –
often in the shadows – the sweeping
modernisation necessary to provide
integrated, simplified and personalised
services. Efficiency and results are
now part of the set of values of public
administrations that are more focused on
the needs of citizens and businesses.
37
38
4
EUROPEAN
EXECUTIVE
BAROMETERs
cio barometer
TRENDS AND PERSPECTIVES IN
INFORMATION SYSTEMS
39
Summary
CIO barometer
INFORMATION SYSTEMS
IN COLLABORATION WITH IFOP, CSC AND CAST HAVE DEVELOPED THE FIRST CIO BAROMETER, AN IN-DEPTH
STUDY OF THE ROLE OF INFORMATION SYSTEMS DEPARTMENTS, BASED ON FEEDBACK FROM CIOs OF THE
LARGEST EUROPEAN COMPANIES. UNTIL RECENTLY REGARDED AS COST CENTRE MANAGERS, CIOs TODAY
CONSIDER THEMSELVES TO BE AT THE CUTTING EDGE OF INNOVATION AND DRIVERS OF BUSINESS GROWTH. TO
WEATHER THE STORM IN TIMES OF CRISIS, IS MANAGERS MUST DEVELOP AND IMPLEMENT NEW MODELS BASED
ON NEW TECHNOLOGIES.
THE IMPACT OF THE CRISIS AND TECHNOLOGY
ON BUSINESSES
the impact of artificial intelligence on activities such as
forecasting, risk prevention and business intelligence, etc.
Adversely affected by the current financial and economic
crisis as well as by the ongoing digital revolution, businesses
have to face several considerable challenges.
In carrying out their duties, CIOs need to question underlying
assumptions and simultaneously seize any opportunities
offered by new technologies to broaden and re-examine their
role and positioning within the company.
DISRUPTION IN STRATEGIES AND OPERATIONAL MODELS
THE CHANGING ROLE OF CIOs
The acceleration of the rate of change required to cope
with the economic slowdown and extreme competition
is forcing businesses to adapt their offering and prices,
reinforce customer relationships, increase economies of
scale and reduce costs.
Surviving the storm means seeking out value and
competitive advantage, and both are dependent on
companies’ efforts to innovate.
CULTURAL AND TECHNOLOGICAL DISRUPTION
The rise of the internet and mobile technologies has already
dramatically changed the way businesses operate. Further
technological changes are on the way : the impact of social
networks on the way businesses operate and how teams
are managed; images supplanting text for many purposes,
40
For a very long time, IS departments were considered by
top management as cost centres whose added value was
difficult to measure.
In addition, failures and difficulties encountered with
numerous IT projects served only to maintain this
status quo, or even increase management’s wariness of
information technology.
The function of IS departments was considered to be to
support cost reduction in the business units. After a period
of conflict, the relationship between CIOs and the business
units improved. CIOs built closer links with business units
by gradually involving themselves in their development and
in corporate strategy.
The financial and economic crisis and the
ongoing digital revolution are a source of
disruption for business.
CIOs developed approaches which ensured that IS was
better aligned with the business units. They communicated
with top management, the business units and users,
providing information on their services, performance
and the related costs. The most forward-looking have
managed to implement service agreements, justifying their
investments and demonstrating value creation.
scalability, and deliver its services at the lowest possible
cost. The objective is to optimise or even reduce operating
budgets, improve application profitability and increase
resources allocated to innovation and business development
opportunities.
IS thus became a fully-fledged contributor and a key factor
of operational excellence for both management and the
business units.
Every day, each and every member of staff must be able
to access email, the internet, databases and transactional
applications, in accordance with the needs defined and at
the lowest possible cost. In addition, awareness is growing
that the CIO has become responsible for all automated
business processes and must therefore seek to continually
improve their added value.
In the current situation of crisis and disruption, IS should
be perceived both as a means to strengthen the company’s
value proposal and reinforce its position in its market.
CIOs have an opportunity to position IT as an activity
capable of generating value for operational management.
This means on the one hand continually developing the
added value to the business of existing applications, and on
the other hand using technology to identify and implement
growth initiatives.
For this change to be successful IS management needs
to transform its operational model and further develop
its information systems to increase their flexibility and
QUESTIONING ASSUMPTIONS
The crisis and technological disruption
are forcing a re-examination and
further development of the role of
CIOs. The CIO’s primary preoccupation is,
and will continue to be, that of being
in charge of the information generated
by the company.
41
After a long period
characterised by cost cutting
and improving business processes,
innovation has become a key
subject of discussion for CIOs
and CEOs. Information technology
is a key force for driving value
creation, financial performance
and innovation
Furthermore, the current crisis and disruptions require that
CIOs guide the implementation of new business models.
This requires a partnership type relationship with business
units based on consistent, large scale IT output, while
simultaneously ensuring the IS remain agile and scalable.
We can no longer disregard the digital revolution.
In addition to technical advancement, technologies
themselves represent new value proposals capable of
redefining business models, and will thus have a key role to
play in the changes ahead.
Businesses that adapt, experiment, and roll out new
technologies will be the first to bounce back and will have
a head start in the new competitive environment. For the
CIO new technologies are a means to become a leading
driver of innovation in the company. His role is to help
42
management understand how technology can play a major
role in changing the company’s strategy and the way in
which it generates new or additional business.
A ROLE IN LEVERAGING THE COMPANY’S
APPLICATION ASSETS
Today IT underpins all processes within a company. From
purchasing to logistics, from financial activities to HR, from
sales through to communication and security, everything is
automated. If the assets of a company are first and foremost
the men and women that work there, their ideas, their
expertise, their knowledge sharing and their networks, then
the rules – industrial, technical, commercial, economical,
financial, legal, etc. – that govern the way the company
operates are also assets. All are primarily IT based.
The CIO’s role is therefore to optimise and improve
the added value of the company’s application assets,
i.e. to facilitate or anticipate the fulfilment of business
requirements, but also to globally improve the profitability
of applications throughout their life cycle.
He must optimise the performance of these application
assets to the greatest extent possible while continuing
to build links between IT, operational processes and the
business itself. In addition, the CIO must provide operational
management with greater insight into the quality of the
most strategic applications.
iN BRiEF
A STRATEGIC ROLE
IS departments have a strategic role to play supporting one
of the most important intangible assets: the way work is
conducted in the company. IS is also a gateway to the future,
in the sense that it must help the company conceptualise and
implement new business models based on new technologies.
A NEW IDENTITY
To reposition themselves within the company, CIOs must step
back from their role of manager of a support function focused
on cost, and take on a new identity, based on two new roles:
manager of the application assets and innovation leader.
As far as CIOs are concerned, they need to change their
relationship with the business units from a customer-supplier
model to a model based on partnership and proactiveness.
They should be involved in strategy formulation and
operational development while constantly maintaining a
technological perspective.
A GUARANTOR OF THE COMPANY’S SUSTAINABILITY
The CIO needs to be a creative driving force: optimising
processes and innovation through IT to develop new working
methods; proposing new services to customers based on
NICT, among others. The CIO thus becomes a fundamental
guarantor of the company’s sustainability.
A ROLE AS INNOVATION LEADER
After a long period characterised by cost cutting and
process improvement, innovation has become a key issue
for CIOs and CEOs. Information technology is a key force for
driving value creation, financial performance and innovation.
Through innovation, CIOs can help the company change the
way it works and does business, thus differentiating it from
its competitors. CIOs need to contribute ideas, identify new
opportunities and present new points of view to business
units. Given this, they must be even more deeply involved in
strategy and operational development.
•
A continuous monitoring system with a dedicated
budget must be set up to identify future business
models before competitors, to ensure the company is
not left behind.
•
CIOs need to encourage awareness and curiosity about
change within the company, as change takes place
everywhere: at an organisational level, in design, in
manufacturing new products, new business economic
models, etc.
•
CIOs must integrate innovation in customer relationship
management, as in future companies will work together
with their customers to define the products and they
need. Similarly, ever increasing social networking means
that companies need to learn to harness the social
power of their staff and thus integrate new dimensions
into common work and projects. The arrival of the first
generation of managers from the digital era must also
be prepared for; they will not be keen to abandon the
technologies they grew up with.
•
Finally, the company should no longer be thought of
only in terms of what it produces or does. It must be
considered in terms of what it owns and what it knows,
in other words, its strategic assets.
To be as innovative as possible and successfully capitalise
upon opportunities for new value proposals based on new
technologies within the company, CIOs must adhere to
several principles:
•
•
Innovation comes from contradiction and from
changing the rules of the game in the industry. It is thus
necessary to understand and anticipate the impact of
leading indicators linked for example to demographic,
technological or regulatory change.
CIOs must ensure that executives have adequate
understanding of IT and are aware of the stakes at play.
They must also initiate a relationship with business unit
managers that goes beyond mere partnership and is
based on a proactive approach.
43
44
|
CIO BAROMETER
TEstimonials
45
"Innovation
focused on client
relationships."
46
testimonials
etienne bertin
it director
FNAC
Interview published in the latest edition of CIO Barometer (2009)
Fnac has launched the "100% client
revolution". What is this revolution?
It’s part of the company's '100% client' project which
was launched in 2008. It’s a genuine change in Fnac's
business model - from a product focused company to
a client and multi-channel focused company. We have
already made quite a lot of progress in this direction with,
for example, the implementation of common internet
and store commercial policy and logistics which have
been operational since 2008.
Fnac is now going further with a clearly stated objective:
to be the preferred brand and standard setter for each
of our clients. During the next three to five years, we
will launch numerous innovations centred on the client
experience both in stores and on the internet, in France
and at an international level.
How do the IT systems contribute to
improving the client experience?
We have already started on the internet with a
personalised space called MyFnac where users can
customise their preferences and interests in order to
receive personalised content.
Store management will also be strengthened with
communication screens, a sort of Fnac TV, for which the
content can be customised by the store and according
to section (especially ticket sales and 'TV walls’). We are
also launching pilot installations of contact-free payment
systems in France, new mobile services or self-service
tills in Spain and Portugal.
New product offers will also be available such as
stationery and related products or second-hand games,
which require a specific management process.
Eventually, we plan to reorganise the stores around the
concept of a 'world' or a 'use' where books, CDs, DVDs
and technical products for a given client type can all be
found together. This revolution has a major impact on
our IT systems as it requires great cross-functionality and
a reorganisation of our data flows.
What relationships do you have with
the operational departments for
implementing these innovations?
We are involved quite early on in strategy development
and project planning in order for the impact of IT systems
to be incorporated into the different roadmaps. In
general, we have a regular dialogue with the operational
departments where we not only listen but are also
a source of ideas in order to ensure that we align the
development of the processes and IT systems. This is a real
'internal client' approach with three priorities: proximity,
operational excellence and controlled operating costs.
This 'client' concept is now completely accepted
and part of the IT department mindset, and the other
departments recognise this too: internal surveys show
that the perception of the quality of our services is steadily
increasing. Now more than ever before, the quality of
the relationship between IT and the other departments
is crucial and must be based on absolute rigour and
reciprocity combined with exemplary professionalism
on a daily basis. In concrete terms, it means avoiding
leaving things unsaid, structuring the relationship and
communication, formalising and managing it in order to
ensure the perception of our service is based on facts to
the greatest extent possible.
Do you have other innovative
projects in development?
During the last three years we have been conducting a
major rationalisation, simplification and consolidation
of our infrastructure driven by one essential principle:
virtualisation. We started with the servers, and this
will soon be followed by virtualising workstations and
network infrastructure. This helps manage costs while
also allowing us to support the company's growth with
much greater flexibility and agility.
We are also working on our service gateway which
will not only consolidate our relationship with the
operational departments and provide them with targeted
and personalised information, but will also structure
our internal processes such as incident management,
change requests or project management. This gateway
is a major project for the IT department because it is the
tangible result of several years of effort to standardise,
professionalise and improve Fnac's IT system while
safeguarding its processes and organisation.
47
"To play a
determining
role in creating
value."
48
testimonials
arnaud lescroart
Director of product movements and IT systems
printemps
Is the current situation special for an
IT Director?
You talked about 'internal clients'. Is
this a new expression at Printemps?
Our company reacted quickly to the economic downturn.
We decided to concentrate on the 'backbone' of our
systems. We therefore maintained and strengthened two
priority projects - one related to modernising the tills, the
other to managing the back office (supplier relationships,
logistics, supplies, etc.).
I arrived a year ago with the objective of demonstrating
that IT systems play an important role in creating value.
To do this, you have to change perceptions. In addition to
creating tools, we have to view general management and
the operational departments as internal clients that we
are assisting with their strategies.
At the same time, we were very careful to ensure that
costs were controlled.
The term is very important – assistance. Of course, it
means on-time delivery of the expected products but also
being an incubator of ideas for the other departments. For
example, in the case of the tills, we didn’t simply satisfy
a technical specification; we also made proposals to
support the move upmarket by the stores. Consequently,
we suggested automation in order to give Printemps a
more modern image.
Are you already preparing for the
economic recovery?
Of course! It's essential to do so. I think it’s wise to use this
crisis period as an opportunity by reviewing every one of
our processes and optimising our investments. But you
also have to look further ahead. The continuation of two
leading projects is part of this approach. For instance, the
'tills' project is crucial for the future. Printemps' strategy
is to create an extraordinary' in-store client experience.
The tills are one of the key moments of that experience.
This project is a keystone onto which we can place other
stones as soon as we feel ripples of an upturn spreading
in the market.
This message is starting to be well accepted internally
within the IT department: communicate, announce a
plan, report - all of this is becoming part of our routine.
Our internal clients have noticed the change...Naturally,
they’re waiting for the first results. This is why we are
giving special attention to current projects, to ensure
that our follow-up is irreproachable.
49
"Recession? An
opportunity to
consolidate and
simplify."
50
testimonials
carlo privitera
group cio
Luxottica GROUP
What impact has the financial and
economic crisis had on your business?
Is outsourcing an opportunity to help
face the crisis?
The crisis has affected neither the solidity of Luxottica, nor
its future. Of course, the market has changed for us too, but
the crisis has given us a good opportunity to think about
how to manage corporate priorities in the best possible
way.
Recently, Luxottica has made major acquisitions; now we
need to integrate them and increase efficiency. It’s time to
think about which areas can be better integrated, where we
can work more efficiently and how we can provide different
services.
The crisis has accelerated the ongoing process of
technological innovation. IT has shown itself to be one of the
key drivers for overcoming this period more successfully: in
2009, our investments in IT were not cut.
It’s simply not in Luxottica’s DNA! We see it as a short-term
opportunity, and certainly not one to be used just when we
are reviewing our processes and need to understand how
we can improve our working methods. In addition, fashion
goods have very short lifecycles that require a particularly
high level of responsiveness from companies in the sector –
something that can’t always be guaranteed when working
with subcontractors.
Considering the present situation,
how has the relationship between the
business and IT changed?
The relationship between information systems and
management is changing radically. It’s a long and
challenging process however, and one which requires
strong change management support because it’s closely
bound to the mentality of individuals and their leadership
qualities. Luxottica’s executive management is totally
committed to creating full collaboration between IT and
business. Our CEO’s decision to appoint a director as head
of IT clearly shows our intention to orient IT completely
towards the business. Nevertheless, we’re only halfway to
reaching full cooperation: it’s not yet in the corporate DNA.
What are the priorities for IT at the
moment?
The main priority continues to be the redesign and
integration processes – which absorb 70% of our investments
– with a view to consolidation and simplification of both
infrastructure and applications.
There is also a need to contain costs associated with IT,
much like in all other corporate areas: investments made to
support business activities are priorities, but we also invest
in projects aiming to reduce operational costs. To improve
operational performance we are focusing on raising the
level of in-house skills: today Luxottica is investing more in
IT training than ever before. Developing skills remains one
of the few levers for motivating people in a period of crisis.
Another priority for 2009 has been the development of a
new approach to the client, through new sales channels.
With this in mind, we are investing in e-business and in web
2.0 technologies.
In this context, what do you think of
trends such as social networking and
green IT, which have received so much
attention in the media?
Social networks represent a channel that must be
recognised; it would be unwise to ignore them. We
currently manage communities on both Facebook and
Twitter – one of the biggest communities on Facebook is
for Rayban fans. These are tools that must be understood
and governed, and certainly not fought against; however,
their potential impact and the effort required to manage
them should not be underestimated.
As far as green IT is concerned, we don’t have a specific
budget allocated to environmentally friendly IT investments
or a specific strategy in this regard. Of course, if we make
changes to our data centre we will introduce low energy
consumption equipment, both to save money and preserve
the environment.
How has the relationship between IT
and its external technology partners
changed since the crisis?
It has led to further consolidation of our supplier group.
The crisis often caused deterioration in their marketing
approach, which had become too aggressive. So we have
chosen to carry on working with companies we already
trust; I favour those with whom I have a good relationship,
the ones I believe in.
Last question: does IT drive innovation
in the company?
Yes, but we’re still on the starting blocks. Technology as
a driver of innovation is still the dream of a few, although
there are areas where technologies have created value for
the business. Of course, in those areas the perception of IT
as a driver of innovation has improved considerably.
51
“The crisis represents
an opportunity to
standardise the IT
structure while
improving customer
service.”
52
testimonials
alessandro musumeci
CIO
Ferrovie dello Stato
What impact has the crisis had on
your company?
The crisis is in fact an opportunity to improve our
customer service. In recent years, our clientele has
changed considerably: customers are increasingly
mobile, more prepared to use new technologies, and
willing to pay for additional services in exchange for
higher quality (punctuality and speed). This translates
into a thorough examination of the services provided
by IT to the business, the review of systems adequacy,
standardisation, etc.
Has the relationship between IT and
the businesses changed due to the
crisis?
The crisis has had a positive effect by strengthening this
relationship: it has forced us to review the way in which
the business is supported by IT, and to place collaboration
and integration at the heart of this relationship.
Have investments in IT been reduced?
No, on the contrary, the crisis has acted as an accelerator
in this respect. 2010-2011 will not only see the expected
economic recovery, but also market liberalisation;
Ferrovie dello Stato will be competing with other leading
European rail operators and we want to be prepared for
that. This year we are investing in key projects that will
help us face the challenges of 2010.
What are the IT priorities for 2009-2010?
The top priority is to support the business, notably by
simplifying the ticketing process by eliminating paper tickets
and seizing all opportunities offered by the internet and
mobile systems to propose innovative services to our clients.
We are very interested in collaborative tools such as social
networks and viral marketing. As regards infrastructure, we
will continue to extend and improve our network, which is
one of the most extensive and critical in the country, and
to invest in IT security in order to protect the increasing
amount of information supplied online (currently over 50%
of the passengers travelling in high speed trains purchase
their tickets online). The guiding criteria will be the ROI,
and the concrete contribution to improving the business,
boosting efficiency and reducing costs.
Is outsourcing an opportunity to help
face the crisis?
Outsourcing is an excellent way to reduce cost, free
up resources and dedicate them to the core business,
and improve our service levels. Ferrovie dello Stato
uses outsourcing on a massive basis. Our business is to
make trains travel with utmost punctuality, comfort and
safety; many services can thus be placed in charge of
subcontractors, thereby generating savings and allowing
greater focus on the core businesses.
In the context of this crisis, how has
the role of human resources role
changed?
Ferrovie dello Stato has undertaken a major restructuring
project. In the past there was a major gap between
resources dedicated to governance and operational
support. The current objective is to increase and enhance
management capabilities through training and skills
building, and to scale down the support services, notably
through outsourcing.
Has the relationship with suppliers
changed as a result of the crisis?
We tend to streamline our supplier base and target
specific services. We have a more critical approach and
avoid excessive dependence on the supplier.
I have noticed a weakening of suppliers’ competences
in general, but also opportunities for small and medium
sized enterprises to emerge, especially national
companies which are recognised as having strong skills,
high service levels and the ability to lead innovation
within client firms.
What about green IT; have you defined
a specific strategy?
Green IT is essential in order to make tangible savings
on overall costs. For example, the server consolidation
project we initiated a few months ago is an opportunity
to replace old equipment with machines that generate
energy savings and are more environmentally friendly.
What is the main constraint on
innovation?
Certainly the internal organisation, which sometimes
limits the ability to leverage the full potential of
technological innovation.
Last question: do you consider
yourself as an innovator?
Yes, but we're just getting started: for our clients, the first
results will be noticeable in 2010.
53
“The crisis
represents a healthy
opportunity for
consolidation and
standardisation.”
54
testimonials
Gianluigi Castelli
CIO
ENI GROUP
What impact has the crisis had on your
company?
How has the role of human resources
changed in these times of crisis?
ENI operates in a sector that has always invested the
necessary resources. However, this period of crisis has
allowed us to get rid of unnecessary elements, and to
standardise and consolidate areas where demand did not
require large investments.
Within ENI we have always rewarded commitment and
excellence, and have successfully developed our internal
capabilities. Training has a major role to play in this. As a
matter of fact, training is the only part of my budget that
has not been downsized. We also promote knowledge
exchanges within the company: we have identified 200
“knowledge owners” (of which six are in the IT area) who
have strong process skills and dedicate part of their time
to training colleagues, and not only in their own area.
Has the relationship between IT and the
businesses changed?
In a company like ENI, information technology is an
important support for the business. In recent years, there
has been considerable awareness of the ‘intelligent’ use of
IT as a result of the interconnection between the business
and technology. While the technology side created greater
transparency surrounding its technical and specialised
role, thereby facilitating comprehension of the underlying
processes, the business analysed its own processes and
realised how essential IT solutions were.
Have technology investments been
reduced due to the crisis?
Some projects have been postponed, others cancelled,
but dedicated investments generating efficiency gains and
guaranteeing a ROI in the short and medium term have been
accelerated. For instance, systems consolidation projects
and VoIP deployment projects have been maintained and
major infrastructure and application transformation and
consolidation projects have been initiated.
What are the priorities for your IT
systems in 2009-2010?
The top priority is the standardisation and simplification
of our processes, from an infrastructure and application
point of view, in order to reduce our operating costs and
improve customer relationship management while reducing
distribution costs.
In this context, what do you think of
trends such as social networking,
which has received so much attention in
the media?
Making efficient use of social networks depends on the
sector in which the company operates. There is a huge risk
of initiating actions that are extremely difficult to control
and that could have a negative impact on the corporate
image. ENI’s choice is to promote the creation of internal
communities and social networks, and develop the ENI
portal. IT goes in this direction, but is not projected outwards.
Green IT is in vogue; have you defined a
specific strategy in this area?
We have a well-defined green IT strategy for our new data
centre, which is the most efficient in Europe: the objective
is a PUE (Power Usage Effectiveness) of 1.18; today the
maximum standard reached is 1.25. The data centre should
be ready by 2012. It’s a huge and very expensive project, but
the energy savings will enable a payback period of less than
7 years at current energy prices. In addition, it’s a major step
in the reduction of greenhouse gas emissions, considering
that when running at full power it will consume as much
electricity as a city with a population of about 800,000
people.
Do you consider yourself to be an
innovator within your company?
Asked like that, it’s a too personal question. As for the
company that I help manage, I feel that IT brings much
innovation, through structured initiatives such as “Open
Innovation” and “Proven Innovation”, and collaboration
with suppliers having expertise in key fields and presenting
them to our lines of business in order to stimulate debate
on interesting technologies. Apart from innovation for its
own sake, we feel it is important to develop a culture of
widespread and shared innovation at a corporate level.
What are the principal constraints on
innovation?
There are two principal constraints and they are closely
linked: the first is the additional risk and responsibility
associated with every choice, particularly if it involves
change; the second is the ongoing use of legacy systems,
applications that have become intertwined and stratified
over time and that make any change costly and complex.
55
"CIOs have to be
the innovation and
transformation
drivers of the
business…"
56
testimonials
Rogério Campos Henriques
CIO
Fidelidade Mundial
How did Fidelidade react to the crisis?
Fidelidade Mundial is currently responding to the impact
the crisis has had upon the business. Although there is
greater pressure to reduce costs, the general course of
the company has not changed; prior to the crisis there
was already the notion that we needed to make some
structural changes in the way in which we were organised.
We have thus designed a three-year strategic project
which includes initiatives in all the areas the company is
active in, which aims to rethink the way the processes run
throughout the business and improve efficiency. We are
restructuring the commercial network and have launched
several initiatives in the areas of process redesign, cost
reduction and information systems. In reacting to the
crisis the company is reducing discretionary expenditure
over the short term; in terms of structural areas, the crisis
has only reinforced the need to take action to consolidate
our long-term position.
As CIO, how did you feel the impact of
the crisis?
We are of course highly aware of the crisis and the impact
it has had on the business, and are focusing our efforts
on trying to give the business the means to react in an
appropriate manner. As CIO, I did not feel a significant
impact on the budget; however we are tougher in
negotiating purchases with our suppliers, and do our best
to secure better prices and leverage our budget to the
greatest extent possible. Our actions have been driven
by the principle of doing more with less. In the context of
this crisis, I believe that IT should not be seen as merely
a cost centre, but rather an area for investment. We are
investing in specific systems that enable operational cost
savings in other areas and which allow us to respond
better to the needs of the business. Information systems
are an ideal tool for improving operational efficiency,
optimising the response capability of the business and
gaining market share.
What were the measures you used to
fight the crisis?
The first impulse in times of crisis is to significantly
reduce costs in IT and make budget sacrifices. At
Fidelidade Mundial we chose not to make many sacrifices
for the simple reason that they could compromise our
future competitiveness. We have a series of structural
programmes to implement which are crucial, and our IT
costs are in line with best practice in the sector. Clearly,
all cost reduction initiatives make sense, but not if
they inhibit innovation and transformation of business
processes. From an operational point of view, we are
trying to do things more efficiently – but this strategy
was of course in place before the crisis. Once again, the
crisis served only to reinforce our efforts in this respect.
Are you ready for the economic
recovery?
Given our restraint in terms of the sacrifices made, I’m
confident that when opportunities arise we will be able
to respond rapidly. In this context, having the right
infrastructure in place when the economic recovery
comes means that we will be able to capitalise on
business opportunities in the areas in which we are best
prepared. And all the preparation has to be done during
the most difficult stage of the economic cycle.
What are the challenges facing CIOs
in the coming years?
The greatest challenge for CIOs is to demonstrate the
benefits delivered by IT in a very consistent way, and
to prove that IT is an area for investment rather than
just a cost centre. CIOs have to be the innovation and
transformation drivers of the business, and it is up to
them to demonstrate how technology contributes to
successful business transformation. They have to present
new solutions which will boost the competitiveness of
the business and deploy tools that allow us to deliver
equal or better performance with fewer costs. In the
insurance sector this last point is even more important
than in other sectors. Responding to that challenge is a
major undertaking indeed.
57
“The crisis has made
return on investment
the key factor when
undertaking new
projects.”
Aldesa is one of the leaders in the
construction and civil engineering
industry in Spain
58
testimonials
alfonso álvarez
CIO
aldesa group
WHICH IMPACT HAS THE CRISIS HAD ON
YOUR ORGANISATION? WHAT MEASURES
HAVE YOU TAKEN IN RESPONSE?
Budgetary controls and cost reductions with regard
to last year’s figures are among the most important
measures taken by IT to help the organisation face the
crisis. As a construction group, Aldesa’s line of business
offers fewer opportunities for growth engendered by
new technologies than other industries. As a result, our
action is focused on the optimisation of our resource use
and the implementation of applications that help the
company have a global control over its businesses and
therefore facilitate and anticipate strategic decisions.
HOW IS THE CRISIS AFFECTING THE
INFORMATION SYSTEMS DEPARTMENT?
WHAT STRATEGIES ARE BEING DEVELOPED
TO PLACE THE IT DEPARTMENT IN A
POSITION WHERE IT HAS THE OPPORTUNITY
TO CREATE ADDITIONAL VALUE FOR THE
COMPANY?
There was a time recently when the economic rationale
behind many IT projects did not play a fundamental role
in the decision of whether or not to make the investment.
The crisis has made return on investment the key factor
when undertaking new projects and has also given
priority to projects that go further, those that increase
the company's business opportunities (e-commerce,
customer portals, etc.).
It may also be the time to communicate to our technology
partners that current price points and cost models must
be revised in order to adapt them to the current situation.
IN TIMES LIKE THESE, WHAT IS EXPECTED OF
THE COMPANY’S CIO?
It seems obvious, but the first thing expected of CIOs is
that they do not waste money, that they invest carefully,
and that they add value to projects that generate savings,
and as I was saying before, that expand the company's
business opportunities.
It is also expected that they be a catalyst for technological
innovation as applied to business models so that IT
may be a source of ideas that serve to develop new
opportunities within the company.
Finally, they must focus on projects that are able to turn a
profit quickly, such as the virtualisation of data centres or
the consolidation of corporate services, which are even
more important in times like these.
WHAT SHOULD THE PRIORITIES BE FOR
A COMPANY’S INFORMATION SYSTEMS
DEPARTMent at the moment?
Their first priority should be cost reduction: to continue
providing the same service at a better price or at a lower
cost. The crisis has once again highlighted the significance
of cost constraints on the type of department, such as
ours, that is sometimes so prone to speculative ventures.
It is also important to review and optimise the portfolio
of applications as part of effort to search out new
opportunities and eliminate applications with little value
and high maintenance costs. It’s also the occasion to
review contracts with technology partners in order
to adapt them to the current market situation without
sacrificing quality but at the same time being realistic in
terms of the cheapening of the labour market over the
past year.
WHAT ARE THE LONG-TERM CHALLENGES
FOR INFORMATION SYSTEMS DEPARTMENTS?
It is increasingly difficult to stay on the cutting edge of
the various emerging technologies and of the practical
applications of these technologies for business purposes.
One of the major challenges for our department will be
to know how to separate the wheat from the chaff, that
is to say, to separate technologies that will create longterm value from those that will be short-lived.
Outsourcing will also continue to be a challenge. Striking
a balance between reducing the number of permanent
IT staff and maintaining the company’s knowledge base
will continue to be vital in order for the department to
perform as it should.
Last but not least, the challenge is to underscore the
importance of an organisation’s technological units, to
make them a component that is more closely linked to
a company’s decision-making and to stop considering
them as mere service departments.
59
testimonials
edouard odier
CIO
jean-christophe lalanne
SVP of the CIO Office and Deputy CIO
air france KLM
You are both in charge of IT systems
for the world’s largest air carrier…
What specific challenges does the
sector present for CIOs?
Edouard Odier : Airline IT presents very specific
challenges. First of all, the sector has been using
IT systems since the 1960s, so even today many
generations of very different systems coexist. Another
particularity is the degree of openness of our systems.
Internally, our activities are highly interlinked; as a result,
applications must communicate extensively with each
other. Externally, we must manage connections in real
time with several sites and partner companies.
Jean-Christophe Lalanne : Our size presents a particular
challenge. With more than 2000 flights per day and more
than 100,000 employees, our systems are so complex
that existing software packages cannot handle the scope
60
our activities. We are often forced to develop our own
applications.
What role do IT operations play
within Air France?
E. O. : We deem IT operations to be a strategic component.
As such, we are represented on the Executive Committee.
However we also play a support role, at the service of
the various business units. Since the merger with KLM,
we have further simplified and clarified our governance
structure. Each business unit has an end users
representative who reports to the CIO. This organization
is now well established.
J-C. L. : This decentralized approach to our relations
with the various business units has helped both improve
service levels and boost confidence in IT. There are key
"Improving the
Quality of Service
and Boosting
Confidence."
the two companies, and allow us to actively pursue
growth when more favourable economic conditions return.
What are these projects?
J-C. L. : In the near future, several applications are scheduled
to migrate to the Amadeus common platform: in particular,
inventories for reservations, check-ins and ticketing (with
electronic tickets). A reform of inflows management is also
underway, as well as an overhaul of the aircraft maintenance
application, a new e-business tool and a new revenue
management system. We are leading these seven major
projects simultaneously!
You spoke of “rigorous measures”…
success factors in day-to-day operations, even more so
during a time of crisis! Had we not taken this measure, we
would no doubt not have been able to react as effectively
as we did to the events of 2008…
Let’s talk about the crisis. How has
the Group reacted to it? And how has
it specifically impacted the IT division?
E. O. : For us the crisis began last Spring, with the
sharp rise in the price of petroleum. As of June 2008,
we launched a project to combine the IT components
of Air France and KLM and reap the benefits of
increased synergies. By adopting rigorous measures,
we stabilized IT expenses in 2008 (despite budget
forecasts of an increase), and reduced them in 2009,
without affecting the large-scale projects that will
ensure a more effective working relationship between
E. O. : Certainly. In light of reduced budgetary provisions, we
have had to be very selective when it comes to new projects.
As a result we consulted with the various business units to
determine which projects were most pressing and evaluated
the return on investment for each project. On this basis, we
proposed a new scenario, with the final decision resting with the
group’s IT Committee, the CEO of Air France and the President
of KLM, as well as both CFOs. Two major long-term projects
have been retained: one for the management of industrial
activities (whose ultimate objective is the establishment of a
global supply chain) and another for the cargo sector, where
we are now number 1 across the world.
What are the main challenges in the years
ahead?
E. O. & J-C. L. : In the medium term, our greatest challenge
will be to develop a common IT structure for Air France and
KLM. This is a fundamental project, with repercussions both
at the organizational level (with various sites in France and
in the Netherlands) and on ways of thinking. There is a lot at
stake for the entire Group: if we succeed, we will help guide
the other activities in the Group on a path towards a common
Air France / KLM culture..
61
62
|
CIO BAROMETER
ANALYSIS
63
Digital Revolution
Seven Trends
for an Innovative
New WorlD
revolution
The advent of the Internet and mobile technologies has profoundly changed both our way
of life and the way business is conducted. But this is only the beginning, according to a new
report from the Leading Edge Forum, CSC’s technology think tank. This report explores the
current and upcoming “digital revolution,” defining seven major digital disruptions that
will shape the world of tomorrow.
YouTube, Facebook, the swift expansion of e-commerce.
With the Internet, the social links, information access
models and business models of yesteryear have begun
to falter. Some economic sectors have already been on
the receiving end: the record industry is undergoing an
unprecedented crisis, while television’s economic model
is threatened… And these are only a few of the “digital
disruptions” that will continue to transform the world over
the coming decades, according to the latest report from
CSC’s Leading Edge Forum, Digital Disruptions: Technology
Innovations Powering 21st Century Business (see text box).
What exactly is meant by “digital disruptions”? The report
uses this notion to identify technologies that not only bring
about technical advancement but act as catalysts for very
different value propositions that are likely to redefine our
business models. As such, disruptive technologies constitute
a dilemma for businesses: Do I invest immediately, with the
risk of outpacing consumer expectations, or wait, with the
risk of one day finding myself behind the competition?
To settle this question, businesses must constantly be on
the lookout, in order to be among the first to identify the
models of tomorrow.
The Next Ten Years Will Be Crucial
Digital Disruptions singles out seven major “disruptions.”
They are all at various stages of maturation: some of them
have already begun to transform our frames of reference;
others remain under the radar – but are already having a
64
transformative effect behind the scenes. Despite current
economic woes, these digital disruptions will help world gross
domestic product flourish in the 21st century, much as industrial
disruptions did in the 19th century. However, according to New
York University pundit Clay Shirky, progress is often not made
in a straight line. When disruptions arrive, they typically take us
from current business model A to a somewhat chaotic state,
before taking us to new and improved business model B.
"We are at the stage where digital disruptions are leading us
temporarily into expected chaos," says Alex Fuss, LEF associate
and the reports’s lead researcher. "It will take a decade or two
to sort out, but we will move through chaos to B. Ever the
optimist, I think we will end up in a better place."
Leading Edge Forum: CSC Gets Ahead…
and Shares Its Findings
As part of CSC’s Office of Innovation, the
Leading Edge Forum (LEF) is a global
community whose programs help participants
realise business benefits from the use of
advanced IT more rapidly. Members enjoy
access to a global network of thought
leaders and leading practitioners, and to a
powerful body of research and field practices.
The content of this dossier is in large part
drawn from the LEF’s latest report, “Digital
Disruptions: Technology Innovations Powering
21st Century Business.”
The complete report is available at
www.csc.com/ddreport.
65
1
New Media:
We have met
the new media,
and it is us
The
boundary
between
physical
reality and virtual reality is blurring.
Virtual worlds augment our reality by
enabling the impossible to be possible.
For example, NASA’s Jet Propulsion
Laboratory created a virtual world for
the Phoenix Mars landing in May 2008,
enabling people worldwide to witness
the spacecraft landing in real time.
Video games like “Guitar Hero” and
games for the Nintendo Wii console also
blend physical reality with virtual reality,
allowing us to play music or tennis in our
living rooms without lessons. Thanks
to related technologies, it will soon be
possible to try on clothes without being
physically present: 10 seconds is now all
it takes to complete a 360° body scan!
Virtual technology is also giving us
more virtual mobility. Today it is possible
to organise a convention for 100,000
people without the need for anyone to
travel, by having the participants interact
with each other via avatars in a virtual
world. Other promising applications
in education and training are currently
under study.
66
Internet technologies have shattered
the traditional media model of
one producer broadcasting to a
mass audience. A phenomenon like
YouTube gives individuals a direct
line to the media as both producers
and proactive viewers (dubbed
“proviewers” in the report). The
traditional media model has clearly
been disrupted: we are all the new
media. Whether we are bloggers,
citizen journalists or basement
musicians, going forward we will all
participate in the creation of our own
media. Although the phenomenon
has already begun, it will inevitably
spread. For example, in publishing,
half of the top 10 best-selling novels in
Challenges
Integrating the Real and Virtual
Worlds: The two worlds are not
mutually exclusive; rather, they
complement each other to create
a new “blended reality.”
Group Co-Creation: Thanks to
new virtualisation technology, it
should become more feasible for
companies and their customers
to “co create” products.
Japan in 2007 were initially published
as cell phone novels, created on and
for cellular phones.
On the technology front, major
change will come from video: less
costly to produce than before, easier
to post online, it will likely replace
text in many areas. In this spirit,
several businesses have developed
sites along the lines of YouTube,
where employees offer testimonials
of their experiences and exchange
good practices. This democratisation
of video should also ensure the
Internet’s eventual dominance as the
pre-eminent advertising platform,
further hastening the decline of
television as we know it.
2
Living in a
New Reality
Qwaq Forums: The Workspace of Tomorrow?
What if your digital workspace looked and felt like your physical office?
CSC and other companies are experimenting with Qwaq Forums, a virtual
environment designed specifically for secure business collaboration. Qwaq
Forums takes the form of virtual rooms whose walls double as portals to
view and edit documents as a group, for example, or access an application.
Working together with others from around the world, in real time, is a core
feature. Different rooms can be set up for different projects and activities; you
can move your avatar from room to room to go from one project or meeting
to another. Applications for these virtual workspaces include virtual office
collaboration, program management, virtual operations centres, facilitated
meetings and corporate training.
Challenges
Video Indexing: When will users be able to
search for images and sounds as easily as they
do now for text? This important issue relates
to the future of information organisations.
Technical progress in this field is growing.
Embracing Openness: In a world open to
participation, businesses must pass some of
their power to individuals; the report describes
this as “losing to win.” According to the
report: “The business models that will flourish
are those that invite participation and give
individuals more control. Ownership is not
the way to win. Openness, customisation and
personalisation are the way of the future.”
Thriving on Disruption. The 21st century
will be laden with digital disruptions.
These disruptions are forming the
foundation for a new economy driven
by the network and information. As
such, these disruptions represent
opportunities for innovation and growth.
So put today’s digital disruptions on
your radar, realising they are a work
in progress as supporting technologies
and new behaviours take hold. Today’s
digital disruptions lay down important
foundations and principles for the new
economy to build and thrive on.
3
Social Power: The power
inherent in connected
people surges
Challenges
Leveraging the power inherent in
connected people is disrupting
how we locate and retain expertise,
collaborate, advertise, lend money
and even listen to music. New
business
strategies
harnessing
social power put a premium on
relationships and what others say
and do, and tap the viral capability
of social networks as distribution
channels for advertising, software
applications and more.
Enterprises need to “let people be
people” and flex their social muscle
at the office (with blog posts, social
networks, etc.), but within corporate
guidelines for acting responsibly.
With social networks infiltrating the
enterprise as well as becoming the
hub of one’s Internet experience,
major disruptions are afoot.
Virginmoneyus.com: Peer-to-Peer Lending
Peer-to-peer (P2P) networking is being used to connect borrowers with
lenders, sometimes with a social twist. In October 2007, Richard Branson
launched “virginmoneyus.com”, a P2P lending site that manages loans
between friends and family. Part of the Virgin empire, the site is essentially an
expansion in social networking. Developed and hosted by CSC, virginmoneyus.
com offers more affordable terms than classic credit solutions, takes care of
all administrative management of the loan, and ensures greater repayment
flexibility. P2P lending, in its infancy, includes other players like Zopa.com and
Prosper.com and is expected to grow.
Create Links Between the Private
and Professional Lives of Employees.
Should employees be allowed to use
social networking sites and manage
blogs? Yes, concludes the report,
although organisations need to decide
what works best for them: consumer
sites, internal corporate sites, or a
combination of both. In addition,
clear limits must be set to prevent
abuse. (See next item.) Solutions for
making social networking secure in the
enterprise are emerging.
Establish Guidelines. Enterprises need
to create guidelines for appropriate
use of social networking tools
regarding transparency, proprietary
and confidential information, regulatory
compliance and legal discovery.
Additionally, they need to create
provisions to protect employee
privacy. This is especially important for
companies with employees in Europe,
where privacy laws are stricter than in
the United States.
67
4
Information
Transparency
5
Nowadays, many types of data that was
once unavailable or carefully hidden
are accessible to everyone, from price
comparisons to organisation charts
to real-time air traffic. For consumers,
this transparency ensures greater
efficiency in service delivery and reduces
the risk of unpleasant surprises. For
businesses, transparency means, among
other things, that formerly opaque
procedures are now out in the open,
so it is becoming harder and harder to
hide “small” mistakes. Transparency also
means knowing where employees and
assets are in real time, so enterprises
can operate more safely and effectively.
The trend towards transparency,
will continue to grow. Advances in
geolocation (made possible by GPS,
The sky is not the
limit as spectrum
goes digital
Challenges
Living in an “Open Format”
World: Proprietary formats and
incompatible standards are relics of
a bygone era; open platforms will
dominate the world of tomorrow.
Inventing New Uses: History
teaches us that networks and
services develop in tandem; once
wireless technologies become
standard, there is no limit to
the services that can be invented!
68
RFID and radio sensors) and visualisation
tools are accompanied every year by
a new crop of applications. CSC has
developed OmniLocation, software
that enables enterprises to create a
real world visualisation of enterprise
operations. It integrates location with
relevant attributes about people,
vehicles, assets and infrastructure,
creating a four-dimensional visualisation
of the enterprise on a Web platform.
OmniLocation combines data about
physical business operations into a real
world visualisation that is physically
correct, accurately mapped, and
continuously updated. OmniLocation
delivers an unprecedented level of
insight into operations to improve safety,
security and efficiency for the enterprise.
Challenges
Completely Transform Encryption:
With quantum computing, users will one day be
able to decrypt the most elaborate codes in just a
few seconds; encryption specialists,
take heed!
Thinking in Parallel: Multicore chips will become ever
more powerful (Intel is expected to announce an
80-core chip around 2012) and will be able to process
multiple problems simultaneously; will the minds of
the programmers be able to take advantage?
The 21st century will be the wireless
century. Traditional networks and
complex frequency allocation systems
to avoid interference will be things
of the past. The electromagnetic
spectrum will become an open
resource, “as valuable a resource
today as oil was in the Industrial Age,”
according to the report.
One example of this disruption is that
mobile connectivity will be prolific as
trains, planes and cars get online. With
the help of CSC, Thalys International
is setting the pace with the first
Internet-accessible high-speed trains
for travellers in Europe.
As spectrum opens up, the air waves
become fertile ground – some say
“beachfront property” – for a vast array
of new services from new players, not
just traditional operators. Eventually,
we will see a complete breakdown of
spectrum as software defined radio,
and its child, cognitive radio, take hold
and spectrum allocation is shattered.
Use the entire spectrum and let
software find the signals you need.
The result: a dynamic and completely
digital spectrum. Now is a great time
for innovators in this space.
Challenges
Balancing Transparency and
Confidentiality: Each business
must strike the appropriate
balance, taking care that neither
side of the equation damages its
interests.
Meeting New Requirements:
Businesses and governments will
soon find out that once the public
starts to experience transparency,
it will continue to demand more
and more of it. Be prepared to
make data accessible in new and
flexible ways.
Transparency in the Healthcare Sector
It is estimated that between 44,000 and 98,000 patients die in American
hospitals every year due to medical error. Better information could help
reverse these statistics. Thanks to technology advancements such as
longitudinal electronic health records, intelligence systems, advanced
data mining and improved connectivity, healthcare is poised to become
more transparent, providing better information for better decisions.
These technology enablers will help healthcare reach its ultimate goal:
personalised medicine. Based on genetic information, family background,
and DNA, care can be customised for the individual. For example, insulin
dosage plans can be fine-tuned based on individual attributes rather
than general criteria (e.g., gender and weight); this would avoid needing
to prick yourself every 20 minutes to check your blood sugar level.
Creating a transparent healthcare systems is a complex challenge, but
if other industries like financial services and travel can become digitally
transparent, so can healthcare. It’s a matter of life and death.
Challenge
6
Platform
Makeover
New platforms, new materials: two
revolutions are underway in IT. In the
first, which is related to cloud computing,
data and computing resources will reside
on the Internet (the “cloud”). Enterprises
will no longer own their servers (thus
eliminating purchase and maintenance
costs), but will instead access their data
and shared services via the network from
any number of access points.
The other revolution is longer-term
and relates to physics. Because silicone
will eventually reach its limits, we will
have to use other materials to attain
greater processing speed: nanotechnology,
molecular computing, quantum computing
and optical computing. All of these
materials are being explored
Democratising
Artificial Intelligence:
By extrapolating from
recent advances in
IT and biology, the
inventor Ray Kurzweil
believes that by
2029 it will take only
$1,000 USD to build
a computer that is 10
times smarter than
the human brain
and passes for a
human during normal
conversation (i.e., it
passes the Turing
test).
7
A smart(er) technology landscape
that understands language and can
reason is in the works. With that
comes innovations in knowledge
gathering, decision making and
predicting. Smart virtual assistants
are the future of online customer
service, disrupting labour-intensive
call centres. Semantics can be put
to work to find expertise in the
Smart(er) World
enterprise, solving problems faster
and averting crises. Semantics at
the IT infrastructure level make
services more shareable and
organisations more agile, since
they can develop applications and
manage change faster. A semantic
revolution lies ahead (see the text
box Towards an Intelligence Web).
3.0, 4.0: Towards an Intelligence Web
In the wake of Web 2.0, which some call the Social Web, comes Web 3.0,
the Semantic Web, which has been on the drawing board for several years.
Users will no longer simply share information but instead knowledge,
across open systems capable of learning. Such systems could, for example,
use deduction to identify the solution that best fits a user’s search. With
Web 3.0, the end result is being able to find relevant information, extract
embedded and intrinsic knowledge, reason automatically, solve more
complex problems, and manage computer systems autonomically.
This Web 3.0, expected to emerge over the next decade, will pave the way
for a new phase predicted to emerge by 2020: Web 4.0, which will connect
intelligence in an environment where humans and machines will be able to
reason and communicate together.
69
70
5
EUROPEAN
EXECUTIVE
BAROMETERs
CfO BAROMETER
trends and persPECTIVES FOR
FINANCE DEPARTMENTS
71
Summary
BAROMeTEr φ
TRENDS AND PERSPECTIVES
FOR FINANCE DEPARTMENTS
FOR THE SECOND YEAR, CSC AND THE CEGID GROUP, IN PARTNERSHIP WITH THE ECONOMIC DAILY
LA TRIBUNE AND CHALLENGES MAGAZINE, ARE PUBLISHING THE PHI BAROMETER. IN A TURBULENT
ECONOMIC CONTEXT, THE 2009 EDITION REVEALS THE PROFOUND CHALLENGES THAT EUROPEAN
FINANCE MANAGERS ARE FACING: RISK MANAGEMENT, GROWING PRESSURE FOR RELIABLE ACCOUNTS
AND IMPROVED PERFORMANCE IN ORDER TO FREE UP CASH.
THE IMPACT OF THE CRISIS ON COMPANIES
THE CRISIS IS CAUSING AN
ACCELERATION IN THE RATE OF
STRATEGIC CHANGE REQUIRED
TO DEAL WITH THE ECONOMIC
SLOWDOWN AND EXTREME
COMPETITION.
72
The financial and economic crisis is a source of disruption for
companies, in particular in the following areas:
• Disruption in sources of financing: access to markets is
restricted and the loans granted by banks have become
more expensive; the role of debt in the financing of
companies has been revised.
• Strategic disruption: companies urgently need to adapt to
the drop in activity and go back to their core business;
they have the opportunity to modify their product range
and prices in view of new needs, to conclude long-term
partnerships with their suppliers, to consolidate their
customer relationships, to contain costs, to augment
economies of scale, to take advantage of the crisis to
acquire their competitors, or even to diversify.
• Disruption in operating models: companies are having to
reinvent their business models taking into account the
scarcity of resources, the shift from mass markets towards
more customisation and the increased cost of carrying
inventory. The situation is forcing companies to find a new
equilibrium between capital, labour and resources.
• Managerial disruption: the collapse of the stock markets
has intensified the pressure on management. To get
through a major crisis it may be useful to bring in managers
The barometer illustrates the initial responses to the
crisis: back to basic principles, controlling risk areas
and optimising the organisation.
from other industry sectors or other companies;
external people are indeed sometimes more adept at
navigating disruptive phases.
THE IMPACT OF THE CRISIS ON FINANCIAL
DIRECTORS
Although their main tasks remain the same, financial
directors must question the assumptions associated with
the exercise of their function. Before the crisis, financial
directors played an important role in the valuation of
companies in the equity markets. They were involved
in strategy development and were present in all the
company’s processes. The crisis, the fall in stock markets
and the growing shortage of capital changed all this.
The first priority of financial directors is cash management
and cost reduction. Financial directors are becoming the
guardians of both overall company performance and a
coherent approach to the
profit and loss account.
THE ROLE OF THE CFO
The crisis marks a return to reality. Financial directors
have had the tendency to concentrate above all on the
ways to increase corporate valuations on the equity
markets. The crisis has forced them once again to focus
on manufacturing the “best tyre in the world” or delivering
the “best service”, rather than the best stock price.
FINANCING
Capital and cash are the resources most sought after by
the companies. The probability of securing bank loans
will be lower henceforth. The era of low cost credit has
passed. Investors have become more risk averse.
Companies must rely first of all on their own financing
capability. Since access to external financial resources
has become more difficult, the means necessary for their
recovery and further development after the crisis must
come from within.
STRATEGY
The crisis is accelerating the rate of strategic change
required to cope with the economic slowdown and extreme
competition. The definition and the implementation of
corporate strategy are tasks with high added value for
financial directors.
73
74
The crisis is an opportune moment
to shake up the organisation.
It can be an agent of change,
delivering a shock from outside
that can prove to be healthy.
in BRIEF
The financial and economic crisis represents disruption
at four levels for companies: sources of financing,
strategies, operating models and management methods.
Financial directors must cope with a shift in the nature
of their function, and become the guardians of the
company's overall performance.
Their first priority is cash management and cost
reduction.
With a focus on operations, they must ensure that the
activities of all departments are coherent and contribute
to the creation of value.
performance
Another priority for financial directors is to update
economic and financial forecasts regularly in order to
give company leaders good visibility, in the short and
medium term.
The core business of financial directors has gone back
to basics. They have to automate reporting, speed
up closing, pool accounting operations, optimise
management tools, improve risk management, limit
commitments, and improve the handling of large
volumes of information (accounting, taxes, etc.).
COMMUNICATION
The crisis is giving a new orientation to financial
communication. Firstly internal, given the need to
reassure and provide explanations to employees and
partners, and to convince people of the need for change
and the efforts required. Secondly external, to build
management credibility and give investors a clear view
of the company’s direction.
governance
The loss of confidence has intensified the requirements
in terms of governance, transparency and risk
management.
The financial function contributes to all dimensions
of corporate governance, in particular to ensuring
compliance with standards and regulations. The
accountability of financial directors can be called into
question when, alongside chief operating officers
and general managers, they are the guarantors of
the honesty of the accounts and the information
communicated to the markets.
The first priority of
financial directors
is cash management
and cost reduction.
Financial directors
are becoming the
guardians of both
overall company
performance and a
coherent approach
to the profit and
loss account.
75
76
|
CFO BAROMETER
TESTIMONIALS
77
"THE CRISIS HAS
FORCED THE
RETURN OF THE
BALANCE SHEET TO
THE FRONT LINE."
78
TESTIMONIALS
THIERRY MOULONGUET
Executive Vice President, CFO
RENAULT SAS
Interview published in the latest edition of CFO Barometer (2009)
COULD THE CURRENT CRISIS HAVE BEEN
ANTICIPATED? HOW HAVE YOU REACTED
TO IT?
Let’s look reality in the face: no one could have
anticipated the magnitude and the depth of the current
crisis. That being said, we know that the economy is
cyclical. Therefore the role of financial management
is always to carefully manage adequate reserves of
liquidity to cope with a downturn in the market. Before
the crisis, we had thus already negotiated confirmed
lines of credit with our partner banks; at the same time
we accelerated our planned bond issues during the first
half of the year.
When the downturn occurred – and so fast! – we
reacted quickly with a very severe inventory reduction
programme (and thus also reduced our production)
and a reduction in expenditure. We reviewed all our
activities to examine opportunities for self-financing.
SO PRIORITY IS THUS BEING GIVEN TO
FREE CASH FLOW?
Absolutely. Renault has long been managed in function
of the operating margin; a more financial approach –
focused on free cash flow and balance sheet indicators
- was necessary. We started this cultural change in 2007.
For eighteen months a cross-functional team made
up of high potential employees worked on a specific
action plan, and also on a communication plan aimed
at educating the operational departments
about free cash flow. For my part, I also participated in
videoconferences with our main subsidiaries to ensure
that the message had been understood and that the
resources had been put in place.
This prior work enabled us to save precious time in the
implementation of the action plan decided in October.
Awareness had been generated throughout the entire
group, and we put everything in motion.
WHAT ARE THE QUALITIES NEEDED IN
A FINANCIAL MANAGEMENT TEAM IN A
PERIOD OF CRISIS?
The financial management team must act simultaneously
at two levels. On the one hand it is necessary to be
very attentive to all the financing opportunities on the
market. On the other hand, it is necessary to involve
the operational departments in financial matters – to
educate, generate awareness, spread analyses and the
message, and share best practices.
Of course, appropriate monitoring tools must also
be put in place. To put the finishing touches on the
changes underway, we enhanced our management
control system. For example: we need to be able to get
rapid input concerning working capital requirements in
order take appropriate measures as quickly as possible.
It is a whole, a single process to be built up with the
operational departments of all the subsidiaries.
79
"HUMAN
RESOURCES ARE
ESSENTIAL…
BUT THEY ARE
FRAGILE."
80
TESTIMONIALS
BERTRAND BADRÉ
GROUP CFO
Crédit Agricole SA
WHAT WERE THE MAJOR CHALLENGES FOR
FINANCE DEPARTMENTS WHEN THE CRISIS
OF AUTUMN 2008 HIT?
root among our customers, in particular by creating
greater transparency and taking a more informative
approach.
In reality, everything began in the summer of 2007, with
the subprime crisis. Starting in December 2007, we
tightened up our methods for running the business, with
a weekly committee meeting focused on monitoring
our liquidity and our capital. Led by the finance
department, these meetings enabled us to exchange
information quickly (including the weak signals) and to
shorten the decision making process. After the fall of
Lehman Brothers, we retained this method of running
the business…we accelerated the pace, included the risk
management and the liquidity and capital committees,
and even made the meetings a daily event for a while.
WHAT WILL YOUR PRIORITIES BE IN 2009?
With hindsight, it can be said that 2008 really was a
year of life or death for the banks. And we have not yet
come out of the zone of turbulence.
WHAT IS YOUR OPINION CONCERNING THE
FAILURE OF THE SAFEGUARDS OF THE
FINANCIAL SYSTEM?
Extremely critical. The rating agencies, but also
institutions like the SEC, failed in their mission. The
biggest capital loss that we have sustained in this crisis
is that of confidence. Doubtless we will need several
years to dispel the doubt that has taken
First of all, vigilance at all times. In times of crisis,
finance is an advanced lookout post. It must be on
permanent alert, listening for the breeze that could
become a storm. Prudence will also mark our investment
decisions, and we will be even more selective than
previously as regards the partners we do business with.
Internal controls will certainly be increased…But it isn’t
just about rules and processes. The human factor is
essential. A few decisions taken at the right moment
by a few individuals have allowed us to get out of
tough situations. In a crisis everyone’s intelligence is
stimulated – but it is necessary to watch out for fatigue.
Human resources are our most precious resources, but
they are fragile. It’s important to know how to pace
yourself to go the distance.
In addition, more than ever before, I move around in the
various departments and on the trading floors to keep
a finger on the pulse, as it were. This contact is also
important because the messages about confidence that
circulate internally have to be embodied in someone.
The teams need to feel that there is a captain at the
helm who knows where he is going, that management
has a course to steer.
81
"THE PRIMARY ROLE
OF THE CFO IS TO
ENSURE THAT THE
COMPANY HAS THE
MEANS TO REALISE ITS
AMBITIONS."
82
TESTIMONIALS
JACQUES
STERN
Deputy CEO in charge of Accor Services and Finance
ACCOR GROUP
What is the role of the CFO in the
current crisis?
Our main job is to think ahead. That's what we have
been doing since 2007, by negotiating lines of credit
at favourable conditions while the situation was still
positive. This allowed us to tackle the crisis with a high
degree of manoeuvrability. We also pre-empted the
economic downturn as of September by launching an
initiative driven by the executive committee to save EUR
50 million in 2009 across all support functions – this
has recently been increased to EUR 75 million. Our third
initiative was to reduce the level of our investments in the
hotel business related to renovation and development,
without however having an impact on service levels or our
reducing investments in the low budget accommodation
sector and in emerging countries.
Our job in 2009 will be to monitor the essentials of course
(especially working capital in our pre-paid services
sector), and to monitor the implementation of our cost
reduction initiatives.
Do your three areas of activity
(finance, strategy and development)
make this monitoring activity any
easier?
or targeted acquisitions) involve financial management as
well as strategic management; the same individuals are
often also involved in funding and development projects.
The scarcity of counterparties at the current time (due to
the near disappearance of private equity players from the
hotel business, for example) makes it all the more relevant
to be responsible for all these areas.
Will 2009 be the year for getting back
to basics?
You should never forget the basics. The primary role of
the CFO is to ensure that the company has the means
to realise its ambitions. In 2008 we saw that the major
players that had made excessive use of leverage were
the first ones to suffer from the crisis – look at pubs in
England, for example.
Conversely we cannot ignore the stock market or our
shareholders. It's all about common sense: in times of crisis,
CEOs and CFOs must continue on their mission to explain
their results and strategy to investors. It is definitely not
about accepting diktat by the markets, but we must take
our shareholders’ interests into account in the same way
we do those of our employees and customers. Having
their trust over the long term is essential.
It’s true that being in charge of all these areas helps me
pass on certain messages directly; having responsibility
for all three does actually make sense in a highly
capital intensive industry such as the hotel business. All
investment decisions (whether related to organic growth
83
"there is no point in being
afraid of the future; the key
lies in managing effectively
through the downturn. A
positive, hands-on approach
from the cFO can help
create the spirit needed for
success."
TESTIMONIALS
michel
baise
CFO
millennium bcp fortis
Could the current crisis have been
anticipated? How did you react to it?
The crisis is a natural economic and social phenomenon.
As a CFO, the best thing to do is not to emphasise the
crisis, but rather to focus on the measures needed to
protect the company’s position, and to ensure it is able
to move forward. The art is to remain calm, unperturbed
by the external circumstances, draw staff attention away
from an imagined unpleasant future in order to alleviate
their fears, and help them focus on the tasks at hand now,
which if carried out to the best of their ability, will surely
lead to the best possible results.
At Millenniumbcp Fortis in Portugal, when the economic
cycle was at its highest we maintained a prudent position,
particularly in terms of investments, which proved to be the
wisest approach. Indeed, there will always be a lower point
in the cycle, for which one needs to be prepared. Managing
a company is about managing variations; at our company,
we took into account the possibility of wide variations when
defining cost sustainability in our operations and pricing and
risk sustainability in our products. This enabled us to enter
the crisis in a position of strength.
What are the qualities expected of a
CFO in a period of crisis?
The first is integrity. For instance, in terms of remuneration,
the extent to which the compensation of a CFO is linked to
the company's financial performance is key to sustaining
integrity. Although this system creates a healthy incentive,
it can be dangerous if it results in a situation which would
erode the objectivity of the CFO. However, it is important
to avoid the temptation to do away with such systems
merely because of the crisis; it’s a question of checks and
balances.
The second quality is optimism, which is necessary to help
management within the company maintain the conviction
that the crisis can be dealt with. There is no point in being
afraid of the future; the key lies in managing effectively
through the downturn. A positive, hands-on approach
from the CFO can help create the spirit needed for success.
The period in which we are now is an opportunity to
change the world for the better. It is important for CFOs to
lead people in that direction, to shape their expectations
for improvement and provide them with the means (in
terms of insight and managing the company’s resources)
to make them a reality. The CFO should help management
move beyond worrying about problems, to focusing on
solutions.
What are the major challenges for
corporate finance departments in
times of crisis?
Cost reduction is not the main issue. Ideally companies
should do away with unnecessary costs during the high
points in an economic cycle, because it is then that the
resources are available to do so. Headcount reduction is
always easier in an economic environment where jobs are
available elsewhere. The CFO has to distance himself to
a certain extent from the current fear. Cost cutting in the
midst of the crisis simply aggravates the phenomenon.
It's all a question of managing with long-term vision and
of anticipating changes.
Currently we continue to grow faster than the market,
we are expanding our product range and, in a matter of
months, we may need to increase our capacity in terms of
human resources - an ideal situation. Consequently people
feel happier and more secure which in turn means they
work proactively and deliver results.
What is your company’s strategy for
facing the current challenges?
Our objective is to offer our customers products that
are attractive and compelling. We do use the bank as a
distribution channel, but we ensure that our products
are competitive. Our success is based on positive
differentiation: we sell more because our offering is more
innovative. The result is increased sales, but that’s not the
sole objective. The core objective remains, as it should
always be, sustainable and profitable growth.
85
"Our dashboards
should include
more than
just financial
indicators."
86
TESTIMONIALS
TÉMOIGNAGE
Michel Grandjean
CFO
AGC Europe
The crisis has had a significant
impact on your group. How did you
react?
Some people say CFOs are
the company’s “performance
watchdogs”. Do you agree?
We’re a leading player in the flat glass sector, and we
essentially work with the construction and automotive
sectors. The economic downturn in 2008 has thus
hit us severely. We’ve been forced to take radical
measures: in terms of overall workforce optimization,
selective scaling back of our production capacity,
cutting our fixed costs, downsizing staff in support
functions (including in finance and IT), renegotiating
our procurement contracts…
CFOs are indeed well positioned to compile information
on value creation and present it from a financial
perspective – ultimately all business activity is expressed
in financial terms… However, to gather and summarise
this data, they need to build close relationships with
operational departments.
In parallel, we had to take a rigorous approach to
managing our working capital (by reducing inventory
levels), our liquidity (to maintain our financing
capability) and our balance sheet. We’ve managed to
drastically reduce our investments without cutting back
on R&D - it’s essential to continue to innovate - and to
prepare for future in this period of global economic
uncertainty.
Which scenarios have you envisaged
for the months ahead?
It is currently impossible to make reliable forecasts on
the length and scale of the crisis. We’ve developed
several scenarios, but we have to be prepared to
weather the crisis for a longer period. The budgets
drawn up at the end of summer of 2008 are now
obviously obsolete. They have their uses, but we need
to use more responsive tools such as rolling forecasts,
balanced scorecards and dashboards to manage this
crisis and enable management to make good decisions
quickly.
In fact, CFOs can be considered as the keepers of the
company’s “management cockpit”. Today, our major
challenge is to develop a more flexible management
model, with new tools. Our dashboards should not be
limited to financial indicators: they should include nonfinancial indicators (including for intangible assets),
which take into account key factors for success and
value creation.
This challenge is all the more delicate as we have to deal
with increasingly stringent accounting requirements.
In addition to the complexity of IFRS, the fact that
we’re a 100% subsidiary of a listed Japanese company
has imposed new constraints on us in 2009, namely
quarterly external audits and the application of new
Japanese internal audit standards that draw heavily
upon American SOX regulations.
To succeed, we need discipline and efficient tools. We
need to be able to work together and rely upon teams of
competent people – these are minimum requirements if
we want to make more with less!
87
"The CFO is no
longer just the
numbers man. He
has to have deep
insight into the
whole business
chain."
88
TESTIMONIALS
TÉMOIGNAGE
ARNOLD DE BRAUWER
cfo
National Railway Company of Belgium
What is the greatest challenge
you are facing today as CFO of
the National Railway Company of
Belgium?
Without a doubt, the decline in our financial results, due
to loss of revenues caused by the crisis. Moreover, the
railway company’s means of production (locomotives,
railway cars, etc.) must be continue to be used in the
same manner, while at the same time its costs have to be
reduced. A CFO must always ensure that his company is
as profitable as possible, but that can only be done if he
deals with all of the company’s processes. He isn’t just
the numbers man any more. His management policy
rests on three pillars. Firstly, the numbers of course.
Secondly, financial reporting used to monitor whether
all systems are well aligned with each other. And
lastly, the IT systems. I would say that the scope of the
CFO’s involvement encompasses finance, acquisitions,
logistics, utilities and strategy. Today’s CFO is coresponsible for the strategy and management of the
company. He has to learn lessons from the crisis, and
help determine the strategy for preparing the company
for the future.
Does the everyday reality of the NMBS
make such an approach possible?
What priorities have you set for the
future?
The first is the continuity of management in the
company. For a CFO, knowledge transfer is more
important today than ever before, because he has to
have a complete overview of the entire business chain,
including commercial, technical and financial aspects.
Continuity is often neglected. Things that have become
matters of course over the years can be essential
learning points for newcomers. A second priority is
transparent communication. It has to be more than just
transparent, it needs to be broad and well directed you can’t see everything through a window if the frame
is narrow and the angle wrong! The CFO must keep
the management committee, the board of directors,
the shareholders and various other stakeholders
properly informed in a timely manner. A wide variety
of constraints make this a challenge, not least the
ability of a CFO to speak the language of his audience,
since not everyone is an experienced specialist in the
business. He must always present a clear and honest
overview of the situation. Failure to do so means that
sooner or later the company will – literally – have to pay
the bill. Examples of CFOs that have got it wrong are
unfortunately myriad…
As far as the organisational structure and the means
are concerned, I have the complete support of the
CEO. It is certainly possible to find the right people on
the labour market. They need to have the necessary
technical expertise and at the same time be able to
cope with the challenges of running a company that
is being completely changed by the crisis. I always say
that every problem can be solved with 20% technical
skill and 80% change management, but to do that a
CFO has to surround himself with people who can
implement and support the process of change.
89
"THE DETERIORATION OF THE
ECONOMIC AND FINANCIAL
CLIMATE MAKES FORECASTING
A MORE COMPLEX TASK, AND
MAKES ECONOMIC AND ASSET
AGGREGATION AT GROUP LEVEL
MORE DIFFICULT TO EVALUATE."
90
TESTIMONIALS
Ennio La Monica
CFo
carige bank
How are you reacting to the crisis?
What measures has the company taken
to overcome this difficult period?
Up to now the Carige group has been able to withstand
the crisis better than other Italian and European credit
institutions, thanks to its retail banking business model
which is regionally driven and focused on the traditional
commercial practice of consolidating savings and loans
for companies and private individuals.
The solid relationships that we have built up with our
customer base over time have meant that we have been
only marginally affected by the collapse in the financial
markets. As such we haven't been involved in the liquidity
crunch in the credit system.
Another of Carige's strong points is its high level of
capitalisation, which allows us to position ourselves at
the forefront of the national banking system. The positive
aspects of liquid assets and strong capitalisation have
allowed us to maintain constant financial offerings in the
real economy, in spite of a difficult economic environment
characterised by weaker demand for credit and higher
levels of risk.
Our long-term strategy has enabled timely planning of
consolidation operations which have made us stronger in
terms of holdings and liquid assets.
A capital increase of roughly EUR 1 billion was carried out
in early 2008, and between June and December issuing
activity was strong: four subordinated loans for over
EUR 500 million, covered bonds for EUR 500 million and
roughly EUR 850 million in loans to solvent institutions
were securitised. EUR 2.6 billion in bonds were also sold
to our customers during 2008.
from Intesa Sanpaolo and Unicredit without damaging the
strength of the group. On the contrary: this strategy has
enabled us to significantly broaden the sector offering of
our investment products, to diversify the level of risk in
the loan portfolio risk and increase liquidity.
Against a background of systemic predictions of
worsening of loan quality, Carige is focused on carefully
selecting its new loans and closely monitoring existing
customers, thanks in particular to the tools implemented
in the last few months and a proactive operational
approach to managing outstanding loans and payment
delays.
What has the impact of the crisis
been on administrative and financial
control functions?
The deterioration of the economic and financial climate
makes forecasting a more complex task, and makes
economic and asset aggregation at group level more
difficult to evaluate. In order to reconcile long-term
objectives with short-term demands we need greater
management flexibility that will enable us to limit erosion
of revenue and asset margins.
How do you think we can get out of
this crisis?
While the situation in the financial markets is returning to
normal – even if some tension still remains – the recession
has entered its most acute phase. International action,
and specific action in Italy, aimed at strengthening the
banks, re-starting infrastructure projects and supporting
employees and families should set in motion a virtuous
cycle capable of restoring a climate of confidence and
thus speeding the passing of the current crisis.
In the course of 2008, the strategy of growing our
distribution network led us to acquire new subsidiaries
91
"THIS CRISIS WILL
TRANSFORM THE WAY
THAT COMPANIES ARE
MANAGED. MANAGERS
WILL HAVE TO ENHANCE
THE VALUE OF EXISTING
CAPITAL AND DEVELOP
MORE COMPETITIVE HUMAN
RESOURCES."
92
Mariella Burani is a specialist in the
design, manufacturing and distribution of
leather goods, clothes and accessories.
TESTIMONIALS
GIUSEPPE GULLO
cfo
MARIELLA BURANI group
What impact has the crisis had on your
company?
Mariella Burani has been present in the clothing sector for
more than 40 years. Over the years the Group has based
its growth on the acquisition of companies specialising
in products close to its core business (leather goods for
example), thereby adopting a policy of diversification
of offerings so as to expand its brand portfolio, and
to enable cross selling in the numerous international
markets in which it operates. This strategy has proved
its worth, including at the start of the crisis. Our strength
lies in the synergy between products and markets, from
the viewpoint of leveraging the value of "Made in Italy".
Given this, the Group focused its investments on more
profitable sectors (such as leather goods, which today
represent 60% of turnover) while sidelining other sectors.
The cost and organisation structures also tend to be
steered towards greater simplification, with a particular
emphasis on the management of human resources: in a
labour market as inflexible as that in Italy we face serious
competition from so-called low cost countries on a daily
basis. To come back to your question, the crisis has
nevertheless had a considerable impact on the Group and
we are currently going through a crucial transition and
change period.
How do you see your role in the
context of a crisis? Have there been
any changes at the operational level?
All those in management positions find themselves on
the front line in difficult times. Today in particular the
CFO is expected to drive the Group's projects for growth
forward, both in terms of managing financial requirements
and motivating and leading the entire organisation to
achieve common objectives and, as a result, the realise
the company's commercial objectives. When the world
economy is in recession or in a period of crisis, it is
essential for value to be created at all levels within the
company, and management is the main guarantor of this.
This means focusing on resources on a daily basis, and
human resources in particular to involve and motivate
each employee in order to strengthen the team concept.
It is only together as a team that we will be able to get
through the difficult times and successfully face the
competition, as well as whatever the future holds in store
for us.
What are the potential outcomes of
this crisis?
We're living through the first truly global crisis. Its
features are different from previous crises as it affects
all countries and all sectors. It's a financial and economic
crisis which I believe will continue for some years. If we
rely on historical data, however, we can recognise that
any period of recession is followed by a time of growth.
We should thus look to the future with some degree of
optimism. The first to recover should be the United States
thanks to its flexibility at both production and labour
market level. I think that this crisis will force us all to
review our approach to trade in general: companies will
have to adopt a business model which develops financial
and human capital as much possible, as the resources
available can only diminish. From my point of view,
only those companies that are able to concentrate their
investments quickly on the most profitable areas and to
increase the loyalty of the most competitive employees
will be able to effectively overcome this period of
economic and financial crisis and emerge from it even
stronger.
93
94
6
EUROPEAN
EXECUTIVE
BAROMETERs
HR BAROMETER
HUMAN RESOURCES
95
SUMMARY
HR BAROMeTer
MAJOR TRENDS WITHIN THE HR FUNCTION
THE CRISIS HAS DISRUPTED HR DEPARTMENT PRIORITIES. IN THE SPACE OF ONE YEAR MEASURES TO REDUCE
COSTS AND PRODUCTION CAPACITY HAVE GONE FROM 7th TO 1st PLACE AMONG THE PRIORITIES OF THE HR
DEPARTMENT. MEANWHILE, THEIR 2nd PRIORITY HAS NOW BECOME EMPLOYEE MOTIVATION.
EUROPEAN COMPANIES’ FIRST REFLEX WAS TO CONSERVE THEIR HUMAN RESOURCES. THEY SOUGHT
TO AVOID REPEATING PAST ERRORS AND WORKED TO FIND NEW SOLUTIONS. THEY LOOKED FOR
WAYS TO REDUCE PAYROLL WHILE PRESERVING THE SKILLS THAT THE COMPANY WILL NEED WHEN
THE ECONOMY RECOVERS.
COMPANIES REACTED BY BOOSTING THEIR
FLEXIBILITY
The adaptation of the production capacity to the current
economic situation, i.e., by the elimination of jobs, is
undoubtedly not at an end.
To compensate for their inability to accurately forecast
business needs and to prepare themselves for the rebound,
companies have become more flexible. They have deployed
a wide array of adjustment measures: no more temporary
workers, non-renewal of fixed-term employment contracts,
hiring freezes, short-time employment, flexible and reduced
working hours, reduced comp time, employee sharing with
other organisations, compensation for one or two-year
leaves of absence, training, etc. Certain companies also
seek concessions from their employees in order to reduce
costs: pay cuts, unpaid leave, forfeited comp time, etc.
It is important to note that labour flexibility has greatly
progressed the last few years. In France, for example, over
4 million employees are now working part-time, compared
to roughly 1.5 million twenty-five years ago. Furthermore,
several European countries (Germany, Italy, France, etc.)
have utilised short-time employment to a large extent,
which has allowed them to preserve the link between
employees and companies.
However, labour adjustment has been moderate and
fractional in comparison to the decline in business activity.
96
ACTIONS AIMING TO STIMULATE EMPLOYEE
COMMITMENT
Many HR departments have learned from the excesses of
the past. They no longer automatically take recourse to the
methods they formerly used, which often proved ineffective
and undermined employee commitment. Management of
previous crises, particularly the crisis of 1993, profoundly
altered the link between employees and their company.
New lines of work, new technologies, and new labour
organisations have served to further worsen employee
alienation. Workplace stress has become a major concern,
especially following the media coverage of suicides within
companies. Lastly, the value of work has been diminished
by official policy, which, for twenty years has exalted
work sharing and reduced work hours, going so far as to
encourage redundancies or early retirement. This has
resulted in less confidence in the company and its future.
Nevertheless, employee commitment is an absolute
necessity. Indeed, company performance and employee
commitment are closely related. Team motivation is
One challenge faced by the HR function is to successfully support the company’s transformation –
by mobilising line management and all of the company's personnel – in a context in which change
occurs ever faster, while the human element evolves much more slowly.
fundamental. Companies are increasingly unable to ignore
the human factor if they want to boost their performance. HR
departments have been mobilised to restore trust between
the company and the workforce, through the reinforcement
of the role of local managers, the reinforcement of internal
communication and the reinforcement of non-financial
methods to recognise employees. Recognition takes first
and foremost the form of personalised exchanges and
working relationships.
For most HR departments it is still important to build
employee loyalty as well as to improve the social climate,
ethics, social responsibility and working conditions.
One challenge faced by the HR function is to successfully
support the company’s transformation – by mobilising
line management and all of the company's personnel – in
a context where change occurs ever faster, while human
beings evolve much more slowly.
BETTER MANAGEMENT OF EMPLOYEES AND
COMPETENCES
have a more forward-looking vision. The objective of HR
departments is to anticipate HR needs and to prepare
the company for the business activities of tomorrow. The
strengthening of internal skills is a priority.
HR departments must both attract new talent and retain
old talent. They must help the company and its employees
prepare for the end of the crisis. They must build loyalty
among their people and provide professional development
to anticipate competence needs. They must mobilise and
perfect skills in areas where they are under-exploited in
order to transfer them to areas where skills are lacking,
thanks to internal mobility.
Employee and competence management provides
significant insight into the company’s resources and makes
it possible to develop a vast internal labour market in which
employees are able to move from one position to another.
It makes it possible to anticipate future needs, to train the
personnel who must fulfil these needs, and to provide job
security, all while creating job prospects for older personnel.
Employee and competence management is a key area for
improvement within the HR department, both because
regulations require it and because HR departments
97
EFFECTIVE HR PROCESSES AND TOOLS
The responsiveness and pragmatism of HR departments in
the face of the crisis demonstrates that the investments made
by the HR function in the HR organisation, processes, and
information systems have been productive and efficient. In the
space of a few years, the HR function has experienced a true
transformation and has boosted its value added, built up new
skills, and developed a closer relationship with line personnel.
Processes must be optimised and the cost of management
activities must be reduced in order to allow the HR function
to continue to increase its value added. The effectiveness
of the HR function may be optimised at several levels:
the optimisation and simplification of administrative
management processes, the outsourcing of administrative
management, and better communication with line
personnel. However, the streamlining of HR processes at
an international level in order to develop common frames
of reference remains a major challenge.
IN THIS CONTEXT, WHAT DOES IT MEAN TO
“LOOK BEYOND THE CRISIS?”
The crisis has been a rude awakening for the 21st century.
It is also an opportunity to commit to changing our
society in a way that will preserve our ecosystems and
future. Nobody knows how long this period of change
98
will last or what turns it will take. However, we do know
that in order to overcome the crisis we need to be
innovative, responsive, and able to adapt to a world that
has gone from abundance to scarcity, all while valuing
the workforce, which is the main resource of a continent
like Europe.
A DIFFERENT MODEL FOR GROWTH
Any strategy to overcome the crisis involves the
alteration of our business models. We must invent a new
model for growth, no longer driven by credit or focused
exclusively on high value added services. We must thus
refocus industry as quickly as possible, beginning with
the activity sectors with a promising future.
Two major areas for innovation are the environment
and healthcare. The leaders of tomorrow will be those
companies that are able to integrate the new challenges
– the environment, sustainable development, an aging
population, and the increasing world population – with
their business model. The companies that will be best
prepared for the end of the crisis will be those that
prioritise training, flexibility and innovation, and those in
which trust is a driving force.
TECHNOLOGICAL BREAKTHROUGHS
We are at the dawn of extraordinary technological
breakthroughs in the areas of energy, IT, the management
of rare resources, such as water, the management of
space and many more. The race to innovate will set
off at a furious pace. The industries of the future will
be fuelled by a “great convergence” of technologies,
as nanotechnology, biotechnology, IT, and cognitive
informatics come together.
Europe, with its culture, quality of life, and over-educated
workforce, is well positioned to play an important role
in this growth cycle. The level of education, which is
the decisive factor in the evolution of a society, is very
high in Europe. The intelligence and inventiveness of the
population are our raw materials.
TWO RESOURCES ARE INDISPENSABLE FOR
CREATING A NEW ECONOMIC PARADIGM:
PEOPLE AND CAPITAL. THE ONLY TRUE
NATURAL RESOURCE IS PEOPLE AND THEIR
ABILITY TO INNOVATE.
THE ROLE OF THE HR DEPARTMENT HAS NEVER
BEEN SO IMPORTANT. HR DEPARTMENTS
MUST CONTINUE TO PRESERVE THE BALANCE
BETWEEN THE SHORT TERM – DOWNSIZING
PERSONNEL TO REDUCE COSTS – AND
PREPARING FOR THE ECONOMIC RECOVERY
BY BOOSTING THE COMPETENCES AND
MOTIVATION OF THEIR TEAMS.
RE-INDUSTRIALISATION
The growth model of tomorrow will most likely be based
on industry and exports. Innovation, productivity gains
and revenue increases always originate within or around
factories. One industrial job generates three jobs in the
service sector. Without industry, a lasting increase in the
standard of living is not possible. Re-industrialisation is
necessary so that exports can drive the economy.
This is why we must open industry again to young people,
through training, to women, by offering them true careers,
to older personnel, by keeping them within the company,
and to those who are less qualified, by making use of
continuous development.
99
100
|
HR BAROMETER
TEstimonials
101
“THE MAJOR
CHALLENGE FOR PUBLIC
ADMINISTRATIONS IS TO
EFFICIENTLY MANAGE A
LIMITED BUDGET IN ORDER
TO CONTINUE TO OFFER THE
SAME QUALITY OF SERVICES
TO CITIZENS.”
102
TESTIMONIALS
ángel Luís Cabal
HUMAN RESOURCES DIRECTOR
Government of the
Principality of Asturias
Interview published in the latest edition of HR Barometer (2009)
WHAT IMPACT HAS THE CRISIS HAD ON YOUR
ORGANISATION? WHAT MEASURES HAVE
BEEN TAKEN IN RESPONSE TO THE CRISIS?
IN THESE DIFFICULT TIMES, WHAT SHOULD
WE EXPECT FROM AN HR DEPARTMENT, IN
BOTH THE PUBLIC AND PRIVATE SECTOR?
In general, all public administrations are affected by
the economic recession because it leads to a drop in
tax revenues as a result of decreased consumption and
production activities. In this context, administrations
must optimise public resources in order to support social
investment policies and thus contribute to the upturn in
economic activity.
At the present time, public administrations must know
how to work with sufficient employees, while taking
into account that these organisations have large human
resource needs as they offer major services in the areas
of health, education and social services. For our part,
we are opposed to the reduction of these services, and
have even requested an increase in our resources by way
of efficient hiring and cost effective management. HR
departments must be able to optimise human resource
costs and the return on investment of public finances.
In terms of human resources, we must boost the
efficiency of our organisation by analysing our services
and their cost, and by implementing projects to improve
the productivity of civil servants by evaluating their
performance, and encouraging them to become more
involved in the strategies adopted. In effect, it is the civil
servants who have a direct relationship with citizens: they
know the procedures and the improvements needed.
IN YOUR OPINION, HOW DOES THE
ECONOMIC CRISIS AFFECT HIRING WITHIN
COMPANIES AND PUBLIC INSTITUTIONS?
WHAT STRATEGIES HAVE BEEN ADOPTED
AND WHAT MEASURES ARE NEEDED TO
RETAIN TALENT?
In general, companies are able to adapt the number
of employees to the level of activity in a given period.
However, within public administrations employment is
normally guaranteed. We are thus unable to reduce staff.
The impact of the crisis on public administration has been
felt rather in terms of limited hiring, with new employees
being hired primarily for key positions, as well as limited
replacement. The objective is to optimise human resource
expenses in order to ensure that public finance is able to
bear the cost of stimulating the economy and providing
social services.
IN 2009, WHAT SHOULD COMPANIES AND
PUBLIC INSTITUTIONS PRIORITISE?
Both companies and public institutions must have
forward-looking management. We cannot allow ourselves
to focus on short-term results; we must develop strategies
with a time span of at least three years. Of course we will
continue to carry out short-term projects, but they will
not enable us to achieve objectives over the long term.
WHAT ARE THE LONG-TERM CHALLENGES OF
HR DEPARTMENTS?
We do not know exactly how long this crisis will last
or what the new economic context will be once the
situation has stabilised. Therefore, the major challenge for
administrations is to efficiently manage a limited budget
in order to continue to offer the same quality of services
to citizens. Streamlining operations, the implementation of
structures with a human dimension, and the motivation of
personnel through professional development programmes
will prove to be indispensable tools.
103
“IN THIS TIME OF CRISIS, IT IS
ESSENTIAL THAT DIRECTORS
KNOW HOW TO MANAGE
CHANGE BY SERVING AS
BUSINESS PARTNERS WITHIN
THE COMPANY.”
104
TESTIMONIALS
alessandro SALUSTRI
HUMAN RESOURCES DIRECTOR
BRITISH TELECOM italia
COMPANY?
British Telecom is part of the telecommunications sector,
an industry in which margins were already low before the
crisis began. The crisis has served to put even greater
pressure on profits. It has therefore been necessary to
review internal processes to optimise performance in
order to maintain our margins and cash flow: we have
reduced costs considerably, especially those that do not
generate value.
In particular, we have focused on two areas: firstly, on
overhauling our production processes; secondly, on
ensuring that our organisation’s resources represent a
proportionate response to this new state of affairs.
FUNCTION?
Personally, I do not make a distinction between the
crisis and globalisation, which is a phenomenon that is
constantly evolving. Furthermore, the crisis has become
a global event due to the very fact that the world’s
economies are interconnected.
In this context, managers must be able to improve their
understanding of the markets and expand internationally.
In order to implement the changes required, they must
think globally but act locally. This principle is especially
applicable to the human resources department, which is
currently being called upon to manage not only personnel
but also the company’s resources in their entirety, while
taking major commercial and organisational requirements
into consideration.
The HR function must manage corporate change and
reorganisation, internal communication, and above all,
costs. To ensure that such responsibilities are fulfilled, the
manager must demonstrate leadership skills that allow
him or her to implement the necessary processes and
models. Finally, it is necessary that the HR department
plays a central role in the company by working hand-inhand with other departments to create value.
WHAT ARE YOU PLANNING TO DO TO
OVERCOME THIS CRISIS?
I don’t think there is a miracle cure to remedy the
current economic circumstances, even if there are some
macroeconomic signs of recovery: reduced inflation,
low interest rates, and limited spreads. I think above all
that the effect on unemployment will be longer lasting
than the crisis itself, and those who lose their jobs today
must be able to reinvent themselves and overcome the
irregularity of the job market that will characterise the
coming years.
Income levels will also remain low, which will lead to a fall
in buying power and thus changes in lifestyle. I believe
that when the economy recovers, it will be necessary to
adopt tools that will promote opportunities and limit the
negative effects on the job market.
105
"WE'VE STRENGTHENED
SOCIAL COHESION PLANS
AND TRAINING POLICY."
106
TESTIMONIALS
Véronique Rouzaud
Senior Vice President, Human Resources
veolia
Has the crisis affected your company?
The world is experiencing a deep financial and economic
crisis that is also a social crisis. Assumptions are being
questioned at all levels of society, and business is no
exception.
By drawing on the basic values that underpin our
company model, Veolia Environmental Services has
implemented the changes required by the crisis.
What are your main strategic plans?
First of all we've strengthened social cohesion plans in
addition to any action taken by public authorities and
trade unions. Along with our unions and management in
France, the rest of Europe and all over the world, we've
worked closely on those topics that directly affect the
lives of our employees, such as health and safety, equal
opportunities, solidarity, etc. In France for example, as of
2008 we implemented an anonymous support service
for employees in difficulty, both in terms of their private
and working lives. We've also strengthened local ties
through recruitment and training policies that are more
focused at local level, in order to find solutions that are
in tune with reality and with the challenges in the field.
Employee commitment is one of the key factors of
Veolia Environmental Services’ success. These initiatives
concerning social cohesion and local involvement have
allowed us to keep the degree of commitment very high.
What has your cost reduction
strategy been?
Our water, waste, energy and passenger transport
management service operations have been relatively
unaffected. We do, however, have to limit investments
and reduce costs while still improving the quality of our
services in an increasingly competitive environment.
This involves making our organisation more flexible
so that we can adapt to fluctuations in activity levels
and operational developments in particular. Employee
mobility, particularly horizontal mobility, is a strategic
priority in this regard. We've developed tools and
channels to support professional mobility. In addition to
technical versatility we have to encourage employees
to strengthen their social competences and their ability
to adapt, allowing them to be the agents of their own
professional development.
Does that not imply investment in spite
of the crisis?
In the service industry more than in any other,
competitiveness
depends
essentially
on
team
competence. We have to have the best profiles in
order to remain the reference provider of integrated
environmental management services. We have again
increased our training activities this year. We've created
three new campuses in France, the United States and
in Israel and will soon have one in Australia, which will
increase our campus network to 18 training centres.
These universities provide training for environmental
management jobs and award degrees recognised by the
government for qualifications ranging from technical to
managerial. The aim is to train new employees, developing
them throughout their working lives, anticipating the
operational needs of the future and building up employee
competence accordingly.
Is this a group-wide strategy?
Our activities are firmly established at a regional level,
with economic and social realities that differ greatly from
one country to the next. Cohesion remains essential,
particularly in the management of human resources.
We're continuing to consolidate and align remuneration,
training and development policies across the group.
It's a guarantee of upward social mobility for everyone
in a decentralised organisation. The contribution made
by new technologies is vital in this regard, provided that
the solutions are pragmatic and simple enough to be
adopted by everyone across the board. The key issue is
to reconcile process standardisation with the absolute
requirement for socially responsible and individualised
107
"WE'VE PUT THE EMPHASIS
ON TRAINING FOR SALES AND
CUSTOMER SERVICE IN ORDER
TO SUPPORT OUR EMPLOYEES
IN THE FIELD."
108
TESTIMONIALS
Laurence Frenkiel
human resources director
Grand Optical
Has the crisis affected human
resources management for you?
What is the main issue for human
resources management?
Since the management change in September 2008
we've been committed to an optimisation plan that
encompasses all our processes and is aimed at improving
our results while bringing costs under control. This was
originally a family business which is now owned by the
HAL investment fund and which has a strong track record
of growth. It's thus vital for us to further streamline
and standardise our operating model for increased
consistency and efficiency. For human resources
this means establishing more systematic and stricter
standards in our recruitment, skills management and
payroll administration processes.
We have to be both responsive to and meet the demands
of the current situation, without losing sight of our longterm strategy. We have to reconcile short and long-term
objectives even if this is not always easy.
What is the greatest challenge of this
period?
To continue rallying our employees in a less favourable
economic climate in which selling is more difficult. That
requires more commitment from them. We've thus put
the emphasis on training for sales and customer service
in order to support our employees in the field and to
increase motivation. We've reviewed the variable pay
policy for managers and further developed our sales
force incentives.
Although turnover tends to decrease in a period of
crisis, we are still in a competitive sector where ensuring
the loyalty of the best employees remains essential.
Employees are in a give-give or win-win relationship with
the company. Unquestioning support can no longer be
taken for granted. Employees expect recognition for
their contributions. The company – particularly through
its human resources policies – must provide value added
services to employees with real career prospects.
What is your strategy for next year?
We're going to continue investing in training and career
management, with a more refined approach that is
increasingly forward-looking in terms of our needs. Our
information systems allow us to refine our approach
thanks to improved record keeping, long-term monitoring
and more proactive management of each employee.
We are the number two worldwide in the sector and
can thus offer opportunities for career progression
and horizontal moves to our employees; we're going to
continue encouraging this type of mobility in future. It’s
also up to each employee to make the most of existing
opportunities and dynamically manage their career
within the company.
109
"THIS CRISIS
IS A UNIQUE
OPPORTUNITY
FOR HR."
110
TESTIMONIALS
Charles-Henri
Besseyre
des
Horts
Associate Professor, Management and Human
Resources Department
HEC GROUP
What impact has the crisis had on
human resources management?
Companies have tried to make savings, which has resulted
in salary freezes, lower bonuses and reduced training
budgets. There has also been some restructuring, but
employers have learnt lessons from previous crises and
have sought to avoid the yoyo effect inherent in changes
that are made too quickly. They haven't given into the
short-term logic of financial diktats. Financial variables
no longer seem to be the only deciding factors. I think
that this crisis is the start of a new way of viewing the
importance of human capital in business.
Is a change of direction occurring?
Companies' sustainable development and social
responsibility activities are constantly expanding. In my
opinion these are sustainable trends that will encourage
other factors to be taken into account in business strategy,
rather than only purely financial ones. The younger
generations are aware of companies' corporate social
responsibility efforts; non-financial rating agencies like
Vigeo have an increasingly large influence. By reminding
us of the limits of the financial world's supremacy, this
crisis is a unique opportunity for HR. It asks the common
sense questions for which human resources management
is the primary source of answers. Cosmetic policies have
had their day; the gaps between empty talk and reality
are going to become more and more untenable.
Will the role of the HR director have
to become a more strategic one?
Human capital is the central lever of companies'
competitiveness and it should acquire a more strategic
role. But this viewpoint still has trouble making itself felt.
The reason: management that is not sufficiently aware
and which doesn’t value human resources to the extent
it should. On the other hand the HR role lacks openness
towards the business. It has to acquire a more companywide view. In this regard we can be glad that a growing
number of management students are going into HR,
whereas in the past it has traditionally been a bastion of
lawyers and psychologists.
What are the next challenges for the
HR function?
The function must improve its transversal insight into the
company and it must also reinforce its credibility in the
eyes of the business. From this perspective it must become
more rigorous in measuring its contribution to overall
company results more effectively, even if the value it adds
is felt over the long term. It's by demonstrating the return
on investment achieved that HR will play a greater role in
decision making. The further development of information
systems will make this improved measurement easier; the
efficiency of the systems is however directly linked to the
change management processes that support their use.
How do you see the post-crisis period?
The war for talent will intensify as we emerge from
the crisis. Even in the context of a gradual upturn with
mixed results, there is a structural effect linked to the
demographic pyramid, with many employees going into
retirement. Employees will also be more demanding: they
have accepted their companies' belt-tightening measures
during the crisis and will want to reap the rewards of that
commitment during the economic recovery. Failing that,
the best people will put employers in competition with
each other for their talent.
111
"HR MUST GET
CLOSER TO THE
BUSINESS."
TESTIMONIALS
Jean-Paul Charlez
hr director
Etam group
Has the crisis affected human
resources management for you?
Line managers' first reaction is to manage the crisis by
managing cost. Companies have thus cut recruitment,
training and internal communication costs. It seems to
me that this crisis has been exaggerated by the media
to quite a large extent compared to the one in 1929.
This very alarmist viewpoint has definitely encouraged
companies to think ahead and adopt some very
progressive measures. The other side to this is that
budgetary restrictions were possibly imposed too soon
in some sectors. This deteriorated outlook has also led to
unions and management monitoring day-to-day matters
extremely carefully.
Is the role of human resources
affected by the crisis?
HR always plays a more central role during difficult times.
Line managers increasingly turn to it because of its
expertise. However, that's the result of slow and gradual
progress. Human resources was for a long time perceived
as an extension of accounting, with payroll as its central
function: a rather basic service provider. As time passed,
line managers began to recognise that human resources
could contribute much more and that it had a whole range
of solutions that could help them at a strategic level. The
issue for HR is to continue moving closer to the business
by positioning itself as a fully fledged business partner
and safeguarding the balance between financial results
and the quality of working life, which is above all based
upon recognition and mutual respect. I spend a lot of
time in person with brand managers designing solutions
tailored to their specific objectives to the greatest extent
possible. That's the case for policies related to pay, for
example, which is one of the primary challenges in a time
of crisis.
How do you see us getting out of the
crisis?
I'm waiting to find out how this crisis will be seen with
the benefit of hindsight. I'm not convinced that it will be
as dramatic as the image promoted by the media. 2009
will have been a year of cost management. We anticipate
consumption will resume and that 2010 will thus be a
year of investment.
In the longer term, how do you see
the relationship between the company
and its employees developing?
To me it seems essential to improve employees' prospects.
For a long time employees have felt that they have no
real freedom of choice. Nowadays linear careers are no
longer the norm and employees are much more involved
in managing their own dynamic career paths. Individuals
who regularly change company or job are no longer seen
as unstable. In fact, more questions are asked of people
who stay in the same job for a long time. Employees no
longer want to just have obligations imposed upon them:
they yearn for personal and professional development
and try to salvage the freedom that they have in all other
areas of their lives from mechanisms within the company.
Companies have to be attractive and offer career paths
that allow individuals to fulfil their potential.
113
114
7
EUROPEAN
EXECUTIVE
BAROMETERs
SRM BAROMETER
TRENDS AND PERSPECTIVES WITHIN
PROCUREMENT AND LOGISTICS DEPARTMENTS
115
SUMMARY
SRM
BAROMETER
TRENDS AND PERSPECTIVES WITHIN
PROCUREMENT AND LOGISTICS
DEPARTMENTS
THE TRANSFORMATION THAT WE ARE EXPERIENCING IS EXCEPTIONAL IN TERMS OF ITS FORCE
AND ITS MAGNITUDE. THE CURRENT FINANCIAL CRISIS IS ALSO A CRISIS OF CONSUMPTION AND
INNOVATION— THERE IS NO LONGER A BALANCE BETWEEN CONSUMERS, THEIR DESIRES, THEIR
FINANCIAL MEANS AND THE PRODUCTS AVAILABLE TO THEM. A NEW FORM OF CONSUMPTION IS
EMERGING, A TYPE OF CONSUMPTION THAT IS MORE CONCERNED WITH ISSUES SUCH AS ENERGY,
THE ENVIRONMENT AND HEALTH.
THE CRISIS IS AN OPPORTUNITY FOR
PROCUREMENT FUNCTIONS TO CONSIDER
AN ECONOMIC MODEL BASED ON CLOSER
COLLABORATION BETWEEN PARTNERS. IT IS
NOT OVERLY IDEALIST TO THINK THAT THE
BEST PERFORMERS OF TOMORROW, HUMAN
AND ETHICAL CONSIDERATIONS ASIDE, WILL
BE THOSE COMPANIES THAT ARE ABLE TO
WIN OVER BOTH THEIR CLIENTS AS WELL AS
THEIR SUPPLIERS. POWER STRUGGLES MUST
GIVE WAY TO RELATIONSHIPS BASED ON
COLLABORATION.
To maintain their comfortable lifestyles, hyper-consumers
buy without pause and without limits. The upheaval in
consumerism represents a massive challenge for producers.
In industry, for example, economic models are being
reviewed from top to bottom in an effort to seek out
cost reduction opportunities. Companies unable to adopt
flexible production methods or zero inventory suffer even
more. In reality, it is much easier to be a hyper-consumer
than to become a hyper-producer. The crisis has once again
disrupted the status quo.
These changes have been accompanied by drastic monetary
shifts that have wreaked chaos in companies, both in terms
of their strategy and their production processes.
Within this context, four major trends were identified by
our survey.
116
For fifteen years, the unfettered quest for profits has led to high pressure being placed on suppliers, with
the development of better organised, more powerful procurement departments. Procurement is indeed a
major driver of profitability. From an accounting standpoint, a reduction of approximately 1% in a company's
procurement expense leads to an increase of approximately 10% in profit. Certain groups have thus become
recognised leaders in procurement, showing unlimited creativity in this field, sometimes to the detriment of
their ability to innovate and adapt to market changes.
COMPANIES’ IMMEDIATE REACTION TO THE
IMPACT OF THE CRISIS
ACCELERATED “DISINTEGRATION” OF THE
VALUE CHAIN
In times of crisis, the objective is to make less go farther.
Procurement’s main role is thus to leverage its capability
to free up cash in the short term, either by bringing in
more money or by reducing costs.
Companies have made widespread use of information
technology throughout the last two decades. Thanks
to these innovations, these companies have been able
to scatter their production chains all over the world
and across a vast network of subcontractors. The
various phases of a single workflow may take place in
different locations around the globe. This is known as
the “disintegration” of the value chain.
One of the first priorities of procurement departments
was to renegotiate contracts with suppliers. As a result
one of the initial effects of the financial crisis was a
fall in quantities purchased and a massive reduction in
inventory throughout the supply chain. Two indicators
were monitored especially closely by supplier
relationship managers during the crisis: inventory levels
and accounts payable.
Over the past year many companies have attempted to
maintain their profitability by demanding greater efforts
on the part of their suppliers. However, the financial
well-being of a company’s subcontractors is a concern
of many procurement departments, which worry about
the risk of bankruptcy among their strategic suppliers
and the corresponding risk of production stoppages.
To anticipate potential business failures, certain groups
take preventive action, engage in dialogue and provide
financial or non-financial support.
Today, international competition is of vital concern to
companies. They must constantly optimise the location
of their purchasing and production activities, taking
into account various parameters: wage costs, inventory
costs, shipping costs, lead times, quality, expertise,
etc. As a result, the various business models of the
companies within a single industry may lead to very
different operational configurations.
117
In all likelihood, the crisis will accentuate the
disintegration of the value chain, for two main reasons:
• In developed countries the difficulties related to
buying power will intensify price pressure
• Shrinking profit margins in companies will necessitate
the implementation of specific actions to restore
these margins, specifically through outsourcing or
offshoring.
THE RISE OF SUPPLIER COLLABORATION
Logistics is increasingly costly. New sources of
productivity must therefore be identified. The true
sources of productivity are to be found in inter-company
collaboration. For example, companies may improve
the organisation of their order-to-delivery processes or
optimise and merge their product shipment routes.
In this way, both shipping and storage offer potential
productivity gains and opportunities for sustainable
development. Several pilot projects have been launched
by industrial groups such as Danone, Kronenbourg,
Coca-Cola, Carrefour and others.
118
These companies use shared trucks based out of a
single logistics hub and deliver directly to their clients,
eliminating the need for intermediary storage platforms.
Information systems form the backbone of this
collaboration. The rise of collaborative tools represents
a new development in procurement. These tools allow
companies to share their forecasts with their clients and
suppliers, to simulate configurations, to select the best
modes of transport, and to optimise order consolidation.
RECONCILING THE ECONOMY AND THE
ENVIRONMENT
Companies have come to understand that environmental
protection and growth are not incompatible. In fact,
sustainable development has become a differentiating
factor and a major area of concern for supply chain
departments. Sustainable development represents
an opportunity, in terms of both branding and risk
management, to innovate, open up markets and add
value to a company’s brand.
The crisis provides an opportunity to reconfigure logistics
organisations while complying with environmental
INNOVATION AND VALUE CREATION
ARE NOT INCOMPATIBLE WITH COST
CONTROL. THE MANAGEMENT STYLE
WITHIN CERTAIN PROCUREMENT
DEPARTMENTS IS WITHOUT A DOUBT
ONE REASON FOR VALUE-DESTROYING
SUPPLIER RELATIONSHIP POLICIES.
GOING FORWARD, THE CRISIS WILL
CONTINUE TO FORCE COMPANIES TO
REDUCE COSTS, BUT TO DO SO BY
WORKING TOGETHER. THE OBJECTIVE
IS TO MOVE BEYOND CONFRONTATION
BETWEEN BUYERS AND SELLERS AND
POOL KNOWLEDGE TO ELIMINATE ALL
COSTS THAT DO NOT LEAD TO BENEFITS.
regulations and generating cost savings. Economic and
regulatory pressures are the first factors to impact a
company. Companies understand that the fight against
climate change and the politicisation of environmental
issues will mean new demands, such as the requirement
for all companies employing over 500 people to issue
an environmental report and publish an assessment of
their carbon emissions.
Many similarities exist between a sustainable
development approach and a supply chain approach.
Both approaches serve to create value, to enable
companies to differentiate themselves from the
competition, and to better meet consumers’ needs. The
only point of contention between the two is inventory:
too much absorbs cash, which is crucial at this moment;
too little increases transportation needs and CO2
emissions. Companies must thus strike a balance and
aim to achieve the “right” inventory level.
119
120
|
SRM BAROMETER
TEstimonials
121
“GREATER
RECOGNITION
BUT ALSO
GREATER
EXPOSURE.”
TESTIMONIALS
alain page lécuyer
GROUP PROCUREMENT DIRECTOR
AXA
Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED THE
PROCUREMENT DEPARTMENT?
Procurement is increasingly at the forefront of the
company’s operations, as general management expects
substantial savings from us. Internal decision makers,
who have had to deal with significant budget cuts, are
increasingly inclined to seek our assistance. We have
expanded our procurement coverage from 68% two
years ago to 80% at present. We are now involved in a
portion of insurance purchases and marketing purchases,
two new areas for us.
HAS THE SCOPE OF YOUR MISSION CHANGED?
Our clients have become more receptive, giving us the
opportunity to create more value for them. Without
interfering with their business activities, we ask them
to reflect on the nature of their needs. In the area of
marketing, we evaluated the opportunity to reduce the
number of media buying suppliers we use. Rates for
contracts that cover all marketing channels are infinitely
more competitive, and such contracts decrease the risk
of diluting our message. These arguments were all the
more convincing as the marketing department has less
internal resources available for supplier management.
IS A REDUCED NUMBER OF SUPPLIERS AN
IMPORTANT PART OF YOUR STRATEGY?
IS RENEGOTIATION STILL CRITICAL TO YOUR
PERFORMANCE?
We have relaunched major contract renegotiation
campaigns at both a local and global level. In absolute
terms we have generated substantial savings. The fact
remains that it is crucial to maintain a contractual balance.
It would be a mistake to ruin in a matter of months that
which has taken years to build up. Procurement must
sometimes temper demands for higher performance
when they could be detrimental to supplier relationships
over the medium or long term. It’s a difficult role to play.
IS THE PROCUREMENT FUNCTION IN
THE PROCESS OF TAKING ON A NEW
DIMENSION?
Yes, we get greater recognition but also greater exposure
as a result. The company expects a lot from us. I think
that there are two types of buyers: those who will be able
to bring the added value expected in this time of crisis,
and the rest. Those who make the grade will take on
new roles. They are true project managers that combine
in-depth knowledge of their clients' operations with
demonstrated talent in the area of negotiation. High level
qualifications are required and candidates who meet all
the criteria are much sought after.
No, it’s impossible to generalise; each case is different.
The reduction in the number of suppliers is not an
end in and of itself; the measures we have taken are
not systematic, but rather case by case in nature. It’s
sometimes preferable to maintain healthy competition
between multiple suppliers. However, supplier reduction
is a path that we are seriously exploring. The fewer the
suppliers, the greater our ability to monitor them and
the greater the productivity gains. It is impossible to
talk about supplier relationship management (SRM) if a
company is working with thousands of suppliers.
123
“PROCUREMENT
CAN ALSO BE A
TRUE SOURCE OF
INNOVATIVE IDEAS.”
TESTIMONIALS
PASCAL FERTE
PROCUREMENT DIRECTOR
SANOFI AVENTIS
HOW IS THE CRISIS IMPACTING THE
PROCUREMENT DEPARTMENT?
ARE YOU IN THE PROCESS OF REVIEWING
YOUR RELATIONSHIPS WITH SUPPLIERS?
The crisis represents an opportunity; it’s our chance to
expand our procurement coverage within the company,
into areas where we were not yet involved or not far
enough upstream. It is primarily procurement’s role that
is evolving; the company expects greater profitability
gains from the function, and we are increasingly asked to
exert an influence on corporate culture. We have begun
a project to raise awareness among decision makers, our
objective being to challenge buying habits and to revisit
specifications. This has added a consulting role to our cost
control function. Going beyond mere price negotiation,
procurement staff have come to understand that our
department can also be a true source of innovative ideas.
We have been meeting with the general management of
all of our major suppliers for the past 18 months in order
to discuss developments in the pharmaceuticals sector
and to reflect, together, on ways to innovate and reduce
costs. We have much to gain by taking advantage of their
expertise; they have a broad overview of many different
industries.
IT IS ALSO THE OPPORTUNITY TO
RENEGOTIATE YOUR CONTRACTS WITH
SUPPLIERS…
All of our procurement operations are renegotiating
contracts to align them with the new economic context,
as this is one of their core functions for which they are
responsible. The pressure to generate savings at any cost
is great during such times of crisis, but this is a pitfall that
must be avoided. Certain suppliers that find themselves
in a precarious situation may be tempted to sell their
products below production cost. During negotiations we
must be mindful not to undermine the financial stability
of our suppliers, which could prove to be a completely
counterproductive strategy. Procurement functions are
mature; the greatest profitability gains to realised will not
result from negotiation with suppliers but rather from the
ways in which we collaborate with them.
The strengthening of the three-way collaboration between
procurement, decision makers and suppliers is one
area in which we are trying to make improvements; the
development of less restrictive specifications to allow our
partners more room for creativity is one example of such
efforts.
ARE YOU TEMPTED TO SHIFT YOUR SOURCING
TO LOW COST COUNTRIES?
We practice little offshoring in regard to common
expenses, with the exception of promotional items. We
quickly realised that these items were all manufactured in
low cost countries. They passed through an entire chain
of middlemen who each took their margin and offered
no traceability and thus no guarantee as regards their
manufacturing conditions. So we established a small
sourcing team directly in China. It’s a question not only of
reducing costs of course, but above all of monitoring safety
and manufacturing practices. It would be unthinkable
for us to offer products manufactured under deplorable
social and environmental conditions. We audit suppliers
and require them to comply with our specifications in
exchange for reasonably negotiated prices. In this way we
encourage our suppliers to gradually orient themselves
towards sustainable development.
125
“THIS CRISIS CAN
BE DESCRIBED AS
‘DEMOCRATIC’ : IT
AFFECTS EVERYBODY
AT EVERY LEVEL.”
TESTIMONIALS
MAURO CHARRIÈRE
PRODUCTION AND LOGISTICS DIRECTOR
PININFARINA SPA
HOW HAS THE CRISIS IMPACTED YOUR
COMPANY?
The economic crisis has had a great impact on the entire
automotive industry. Those of us who work in a niche
sector of the automotive industry have profoundly felt the
effects: our production has decreased by approximately
30% compared to our forecasts. The challenge for us
is to keep this decline from having a similar impact on
the company’s results. We have thus adapted a business
model that offers greater flexibility for all expense items,
depending on actual production volumes. This was
possible because, after listing all production activities in
order to determine the characteristics of each specific
cost, we went back to square one and evaluated the
minimum resources required for the development of each
activity and suspended what appeared to be excessive.
This translated, for example, into a reduction of employee
working hours to attain the correct number of full-time
equivalents (FTEs) needed for specific production
volumes. We organised the shifts in order to involve all
employees at all levels by attempting to distribute the
burden of sacrifice required by the company. It is in this
sense that the crisis can be described as “democratic.”
REGARDING YOUR FUNCTION WITHIN THE
COMPANY, HOW HAS IT BEEN IMPACTED BY
THIS CRISIS?
To resist the negative market trends, we decided to take
action on the pockets of inefficiency within our systems
using a series of instruments and processes that could
guarantee both savings and gains in terms of time and use
of resources. This was made possible by increasing the
flexibility of the flows of goods in transit and by modifying
production processes. For example, to transport goods
within our facilities, we now use a “logistics train”: i.e.,
we went from using a single cart per crate of goods to
be transported to using a train composed of several
carts. Meanwhile, for production, we implemented what
is known as “sequential chain delivery,” a process that
makes it possible to simultaneously manage the arrival
of materials into inventory and the delivery of these
materials to the production chain, without waiting
time. It’s important to point out that thanks to these
improvements we have reduced the amount of energy
used, thereby benefiting the environment. Actions
targeting inventory activities have been vital, as well
as inventory spot checks; currently the margin of error
within our inventory is very low. The traceability of all
goods and products in transit allows us to organise
work with precision and to limit urgencies as much as
possible; this positively affects not only our internal
costs, but also our reliability in the eyes of our customers.
All of this, however, would not be possible without the
IT department. Concerning the activities that I manage
- the supply chain and production - the IT infrastructure
ensures coordination between the different sectors, via
a continuous feedback loop for production and logistics.
Purchases are determined based on this loop, thereby
avoiding waste and inefficiency.
WHAT CAN BE DONE TO OVERCOME THIS
CRISIS, IN YOUR OPINION?
The economic indicators are clear: the crisis is not going to
end anytime soon, and it will have profound implications.
We will find ourselves facing an economic and social
situation that is different from the current situation, and
the production world must be able to understand and,
above all, anticipate this new state of affairs. In order to
survive, companies must transform themselves starting
now, by implementing changes in their culture, approach,
and operations while aiming for maximum product
diversity. Our company is already taking such steps: we
presented an electric car at the Paris Motor Show; when
designing it we integrated state-of-the-art technological
and logistics innovations. These changes translate into
production and management cost savings, and in the
end into better prices for the consumer.
127
“THE MOST CRITICAL
FACTOR FOR A COMPANY
IS ITS UNDERSTANDING
OF ITSELF AS WELL
AS OF ITS PROCESSES,
ESPECIALLY IN A TIME OF
CRISIS.”
TESTIMONIALS
MARCO FACCIANO
LOGISTICS DIRECTOR
CALVIN KLEIN JEANS
COMPANY?
Within our industry and especially within our company,
the crisis has impacted two particular areas: the client
and the shareholder. On one hand we have clients who
are ever more demanding and who require increasingly
personalised services and products, and on the other
hand, we have shareholders, owners, or an area of
reference that constantly demands greater performance
in terms of the cost-benefit ratio. To overcome the crisis
and to meet demands that are not easily reconcilable, it
is necessary to react to new market pressures with speed
and flexibility. Given this, our attention has been focused
on reviewing our business processes in order to identify
the core activities of our company, then reviewing
all auxiliary processes for potential redundancies or
inefficiencies that the company cannot allow.
IN WHAT WAY HAS YOUR FUNCTION BEEN
IMPACTED BY THIS CRISIS?
In my opinion, the supply chain function represents ever
greater management and coordination value compared
to a more operational role, as this crisis has forced us to
consider business models as a whole in order to identify
areas in which efficiency may be optimised or recovered.
Today it is no longer possible to envision improvised
procedures that run within only a single stage of the
production process in operational terms. It is necessary
to develop strong, transverse controls in an attempt to
optimise processes and to enhance the company’s ability
to immediately respond to new market pressures and
demands. A cross-functional approach is the decisive
success factor, as it represents the know-how - an
understanding of how the various functions interact - that
makes it possible to increase the company's production
capacity.
The fashion market is especially difficult as it serves
to fulfil desires but not primary needs. One of the
measures we are currently taking is the redefinition of
our distribution structure, which currently operates
according to a cycle of just under four months. Normally,
after production, clients would receive all models at
one time at their point of sale. To facilitate distribution,
we are trying to redefine production into four “subcollections” - based, for example, on colour - in order
to subdivide the collection and to deliver new products
every month. By enabling our clients to continuously put
new merchandise on offer, we encourage end consumers
to enter the points of sale.
We also foresee strong growth in the retail sector. Over
the course of the next five years, we plan to increase
our current share from 23% to 45% thanks to our single
brand stores, points of sale and franchises, by focusing
on the type of store that encourages brand loyalty.
Lastly, we are prioritising internal information exchange
in order to gain a broader understanding of business
processes at all levels with a view to improving our
risk management capability, which has been largely
overlooked in the past. I believe that this approach
represents an innovative element important for
implementing processes that will enable us to overcome
these difficult times and avoid, to the greatest extent
possible, any future recurrence.
129
“ONLY THE STRONGEST,
MOST COMPETITIVE
COMPANIES, THOSE
THAT HAVE THE
COURAGE TO
INNOVATE, WILL
SURVIVE THE CRISIS.”
TESTIMONIALS
STEFANO ZECCHINATO
OPERATIONS DIRECTOR
MARELLI MOTORI SPA
COMPANY?
From our point of view, the crisis has had a profound
impact on what we refer to as non-specialised standard
products. In our case, for example, the demand for basic
electric motors has decreased by nearly 30%. However,
high value-added products which require specific knowhow have not been particularly affected by the crisis,
as they are associated with projects that are still being
carried out despite there being less demand. For example,
motors designed for the oil and gas sectors - which
require special certification - or custom-built machines
for power generation, such as combined heat and power
generators or uninterruptible power supplies. Whatever
the product offered, clients are now demanding more
services, especially during the proposal phase, and
companies must demonstrate technical expertise in order
to meet their requirements.
IN WHAT WAY HAS YOUR FUNCTION BEEN
IMPACTED BY THIS CRISIS?
My duty is to supervise a number of processes, and
because of this I have a global view – from an operational
perspective – of the corrective actions currently being
implemented by the company, as opposed to areas for
continuous improvement. In general, we have defined
two types of investment: short-term investments that
can be recovered in 12 months, and investments that are
dependent on the introduction of new products which
will allow us to occupy a favourable position in the market
in this time of crisis, and which have a payback period of
three to five years. Despite this approach, which should
enable us to recover more quickly once the economy
picks up, there are certain persistent weak points within
the company that prevent us from taking advantage of
all possible synergies. One specific example relates to the
infrastructure of the IT department, which currently is
not being utilised to its full potential and which does not
allow certain important integrations that would enable
us to improve production and organisation processes.
Regarding other functions such as the supply chain,
however, we have implemented a number of small-scale
corrective measures. For example, we have cancelled
purchase orders related to certain product categories.
These actions, which are mainly tactical in nature, result
in immediate, tangible benefits thanks to the interaction
with the IT department that has been put in place for
the materials management process. Nevertheless, I am
convinced that the main problem preventing us from
being true innovators is that IT depends on the finance
function, which only envisages our services in terms of
producing management reporting, rather than seeing
the potential for the development of innovative solutions
that create value.
Our company, which is part of an English group, sells
products throughout the entire world, with 75 % of
our sales coming from abroad. As we see it, the crisis
is affecting everybody, even though the naval sector,
with its shipyards at a standstill, is feeling the effects
most strongly. However, there are promising signs; we
see significant areas of opportunity for new products
designed for niche sectors. There are markets that are
demonstrating strong growth, such as power generation,
which in addition to traditional plants also includes
alternative energy production. Furthermore, in my
opinion, only the strongest companies, those able to
implement the safeguards necessary to lessen the effects
of the crisis, will be able to survive the crisis. Obviously
there will be a shakeout, but the companies that remain
on the market will have numerous opportunities for
growth if they have the courage to innovate and launch
new products.
131
“IN THIS CRISIS, THE
SUPPLY CHAIN MUST
ALSO TAKE INTO
ACCOUNT THE VALUE
CHAIN AS A MODEL FOR
REORGANISATION.”
Carrier est le premier fabricant
d’équipements de conditionnement d’air,
de ventilation et de chauffage.
TESTIMONIALS
ALDO PREVITALI
SUPPLY CHAIN DIRECTOR
CARRIER SPA
COMPANY?
The crisis has only served to intensify a radical revision
of our business model that was already in progress and
that hinges on multiple factors. First of all, very strong
competition, due to offshoring and to the difference in
labour costs between countries, tends to drive production
to lower cost areas instead of countries where the cost of
labour is higher. This is what is occurring, for example, to
the Milan production site, located in a zone that has one
of the highest labour costs in Europe.
Added to this is a horizontal mass production model that
is poorly equipped in terms of technology and services,
and is thus not easily adaptable.
In terms of proactivity, it can be said that the crisis has
led to a massive shift of all current paradigms within the
company and has forced us to seek out new ones to
reduce costs and offer new ways to serve our clients.
In reaction to the current situation and in order to pursue
the restructuring that was already in progress, we decided
to radically overhaul both our market positioning and our
entire product portfolio. The objective was to transform
our offering from basic products to a concept that was
much more service and order oriented.
FUNCTION WITHIN THE COMPANY AND YOUR
RESPONSIBILITIES?
The supply chain at Carrier is currently under pressure for
two reasons: it must guarantee that production functions
as it should - in order to survive the crisis - and it must
also begin to develop new processes that correspond to
the evolution of the business model.
chain, whereas currently the supply chain is related to a
different function that is unable to understand the needs
and demands of clients. Such integration would enable us
to develop processes that are in line with the new business
model and the predetermined market share objectives.
However, this highlights a critical aspect related to the
infrastructure of our IT department, which I consider to
be the nervous system of the entire supply chain.
Our IT system guarantees the coordination and synergy
between logistics and the other functions; however,
Carrier currently outsources the entire IT department as
an apparent cost-saving measure. This means that there
is no IT director within the company. In essence, there
is no director familiar with the infrastructure capable of
acting as both an advisor and a promoter of innovative,
efficient, effective solutions that would enable the various
units or functions to complement one another and, above
all, be aligned with the new business model.
The crisis has not resulted in reduced demand or a
slowdown, but rather a veritable interruption or complete
absence of demand. This is evidenced by the fact that
this year, in contrast to past years, promotional activities
have had a marginal effect and have not contributed
to what we consider a seasonal effect, with purchases
following the rise in temperatures during the summer.
Furthermore, at present we do not see any significant
signs of improvement, although given the rapid onset of
the crisis, recovery could be just as sudden.
In this uncertain situation it is crucial, in my opinion, to
increase the level of communication within the network
in an attempt to understand all factors at work as well
as to develop closer relationships with clients in order to
understand their needs.
In my point of view, this is an opportunity for change
and a critical aspect. The opportunity consists of the
possibility to integrate the supply chain with the value
133
134
|
SRM BAROMETER
ANALYSIS
135
ANALYSIS
THE SEVENTH ANNUAL GLOBAL SURVEY OF
SUPPLY CHAIN
PROGRESS
136
Key Findings:
The data clearly reflect a fall back based on current
economic conditions and a need to use supply chain
to cut costs; combined with moderate improvements
in most areas of importance. Among the key findings,
these characteristics could be cited:
1.
Continued improvement in the reported range of
cost savings and more firms showing revenue increases
as a result of SCM efforts in 2009 validate there is
still room for making significant gains, even in a down
economy.
2.
Europe continues to surpass NA in the overall
cost reduction and revenue growth results, indicating
that you cannot rest on past laurels or previous gains;
someone is always moving ahead.
3.
Given the current economic conditions, the
emphasis has shifted back to cost reduction, with 81
percent of NA firms and 73 percent of those in Europe
indicating they will be rethinking sourcing points.
Fifty-seven percent have “near-term” plans to change
sourcing points or buying habits. Eighty-eight percent
have set objectives for the purchasing function to
generate new cost savings. Suppliers should get ready
for or are already being faced with pressure for help
in cutting costs before a key customer goes into the
market for lower prices.
4.
Target percentage improvements to costs
show Europe with 80 percent and NA with 73 percent
having goals greater than 6 percent, a harbinger that
the pressure is already being applied to achieve annual
requirements for improvements.
5.
North American firms are more likely to have
a SCM organization, but European firms have more
mature supply chain organizations, with CEOs more
likely to be involved in running of the organizations
(plus 50 percent for Europe compared to 30 percent
in NA.). It’s an old story, but most firms are simply too
slow to recognize the values that can be added from a
consistent focus on supply chain under the direction of
professional and involved management. That’s a lesson
the leaders wrapped up years ago.
Findings from a survey jointly
conducted by CSC, Supply Chain
Management Review (SCMR) magazine,
Michigan State University, Council
of Supply Chain Management
Professionals (CSCMP) and Supply
Chain Europe magazine
6.
Sixty-seven percent of responses indicate
strategy
and
change
management,
including
formulating and implementing initiatives, will be a part
of SCM to meet business objectives. There is supporting
evidence that
SCM is becoming a strategy for the future, a means to
reach overall business objectives.
7.
SCM organizations control the traditional aspects
of supply chain, but European efforts are more likely to
consider strategy and after-sales service as elements
of SCM, indicating an opportunity for future NA SCM
efforts. Most firms stop the supply chain effort with
delivery. The Europeans are showing that much can be
added in the way of customer intimacy through staying
with the customer all the way through handling returns
and making necessary changes so the need for returns
goes away.
8.
About half of firms have completed some
form of Green analysis or evaluations, with 54 percent
identifying quantifiable savings, but the forward
intentions vary all over the map, and evidence of
a consistent approach and documentation of valid
savings is nebulous.
9.
Execution of Green initiatives is slow to develop
and many firms indicated they have taken a back seat
in the current economy. Seventy-seven percent report
Green initiatives have led to no increase in revenues.
10.
Europe is ahead of North America in
adopting Green initiatives, with increases over last year.
NA respondents think conserving natural resources is
the main issue, while Europeans think it is related to a
sustainable business reputation.
137
ANALYSIS
Supply Chain Brain
william duncan
CSC
August 31, 2009
A lot of companies have spent millions of dollars over recent decades on commercial software
applications in order to strengthen their supply chain management performance. Many of them,
looking back on the results, are becoming alarmed. Whether the investment was related to product
lifecycle management (PLM), enterprise resource planning (ERP), manufacturing execution systems
(MES), customer requirements management (CRM) or another software application, the unrealized
benefits of these investments has serious consequences for the companies' financial performance.
Increasingly, the companies involved are finding that the underlying causes of these shortfalls are
factors within their control. Many have undertaken initiatives to recover that lost performance,
and realize the benefits in purchased component cost, logistics costs, and cycle time reduction they
were – quite literally – banking on.
The cost of goods sold (COGS) in most manufacturing
companies is heavily weighted toward material, with 65
percent to 75 percent of COGS a common situation. The
balance is typically comprised of 25 percent to 30 percent
derived of overhead costs (administrative and other types of
indirect labor, equipment, facilities and supplies). The smallest
slice of the COGS "pie" is usually direct labor, representing
less than 10 percent. It is only natural, then, that much of the
justification for software applications such as ERP and MES
is made up of reductions in the cost of material, inventory
and the overhead (indirect labor and facilities) associated
with managing it. When companies invest heavily in these
systems to more effectively manage their material and
inventory related assets, they are expecting to experience
higher inventory turns, lower ongoing investment levels
in raw materials and supplies, and greater efficiencies in
the staff that manages those assets. They expect those
improvements to result from better visibility of the assets
themselves, better tools for balancing supply and demand,
and greater levels of automation that require less human
intervention in repetitive decision making around tedious
tasks such as generating and managing purchase orders
and manufacturing work orders.
One of the most common underlying sources of trouble
in these situations is that management takes shortcuts
during the implementation of the systems. Perhaps the
single greatest error managers make is failing to adequately
cleanse the data they are loading into these new systems.
Often, in the press of completing the implementation of
138
these systems on time and within budget, the fundamental
work of cleansing data, filling in the missing elements of
data, and managing the correct conversion of data into the
new systems is set aside. Increasingly, it seems, executives
in these companies are finding that they are compelled to
go back again – after the implementation has failed to yield
expected results – and unearth these problems to deal with
them.
A second common issue underlying many of these
situations is training. People who are expected to operate
these systems after they have been implemented need to
understand not only how to perform the specific function
to which they are assigned, but also what the overall
process is within which they are working, and the outcome
that the process is expected to produce. Under the
pressure of managing the budget and schedule associated
with a major systems implementation, the scope element is
frequently sacrificed. Increasingly, as senior management
"peels back the onion" in these cases, they find that
deficient areas include not only data cleansing and testing,
but training as well.
The third fundamental problem is less commonly exposed,
less understood, and more rarely remediated. It is simply
stated: Senior management executives very often expect
that software applications such as ERP, MES, etc., will
achieve substantive improvements without significant
changes in the underlying business processes that software
is designed to enable. In more than three decades of doing
these implementations, the author has observed that
nothing is more often shortchanged than strengthening
and validating the business processes that our new
software applications manage. The result is that even the
very best software manages a wasteful, sub-par business
process, and the expected efficiencies never materialize.
In terms of the company's earnings performance, those
three fundamental problems typically appear with the
greatest impact in the following ways:
1. On the Inventory line of the balance sheet, where
reductions are expected that far exceed the reductions
experienced. Similarly, but to a smaller degree, on the
Accounts Payable line and the Accrued Liability line where
materials procurement are involved.
2. On the Material line of the COGS element of the Income
Statement, where reductions are expected to result from
efficiencies in procurement, grouping of purchases, and
improved visibility and balance of demand against supply.
Reductions in COGS have a dramatic impact on earnings
compared to changes in revenue in most cases. Poor
realization of these expected benefits can be devastating
to the business case for investments in major software
applications.
3. On the Indirect Labor line of the COGS element of the
Income Statement, where efficiencies in processing work
orders, purchase orders, exception messages, and other
administrative processes such as accounting and billing
are reflected. This is the most sensitive area of business
case savings projections, of course, because these savings
are usually expressed in the form of projected headcount
reductions.
Like the manufacturer mentioned above, many companies
that are experiencing disappointing results from the
implementation of major software applications are
initiating corrective actions. In most cases, they are finding
that remediation requires the completion of unfinished
tasks from the preparation and implementation activities
included in the original project. The most common are:
1. Data cleanup activities and data strengthening activities.
Critical data elements such as bills of material, manufacturing
routings, labor and time standards, machine capacities and
capabilities, and material lead times are all critical to the
fidelity of enterprise resource planning and manufacturing
execution systems. Similarly, accurate material quantities,
material master records, and part master records as well
as design version data and effectivity data are critical to
the fidelity of product lifecycle management and product
data management systems. Customer records and pricing
records are critical to CRM systems, and the list goes on.
The bottom line is that every data element whose quality
is substandard reduces the software application's fidelity,
and ultimately weakens the company's earnings because
expected efficiencies are lost.
2. Training. Especially in the areas where decisions are
made each day around balancing supply against demand
and executing purchase orders, training is hard to overemphasize. The companies most rapidly correcting this
situation have come to recognize that employees need to
understand not only how to operate the software, but why
they are doing what they are doing – how it fits into the
end-to-end business process. Training sessions in these
companies are most effectively being deployed when they
begin with a description of the business process, and train
the employees how to behave in the context of their overall
process.
3. Business Process Re-engineering. Companies who find
that they have simply "paved the cow path" by putting an
attractive software wrapper around fundamentally flawed
business processes have to rethink those processes, and
remove the non-value-adding steps and associated times.
Leading ERP systems all have business process templates
incorporated within them, and most of the successful
implementers have adapted -- for the most part -- to
those generic business processes through a mechanism
called "package based re-engineering" as a part of their
implementation. (Other software applications such as PLM
and manufacturing execution systems are typically less
process-prescriptive, which leaves companies a bit more
reliant on systems integrators and other consultants to
assure that best industry practices are incorporated.) The
least successful do things like perform the basic work in
spreadsheets or personal databases outside the formal
systems, importing only the results into the formal system.
The rigidity, lack of responsiveness and sheer error volume
introduced by that approach has cost companies millions.
There are other challenges, of course, with corresponding
remediation techniques. But as we all learned early on in our
professional careers, the Pareto Principle dictates that the
"significant few" are the elements to be managed for the
greatest success. When it comes to recovering from lowerthan-expected results from major software investments,
companies undertaking that work are discovering that the
elements we have described here are the significant few
that are making the difference.
"even the very best
software manages
a wasteful, sub-par
business process,
and the expected
efficiencies never
materialise."
139
140
8
EUROPEAN
EXECUTIVE
BAROMETERs
SOLVING THE
EQUATIONS OF
A CHANGING
WORLD
141
SOLVING
THE EQUATIONS
OF A CHANGING
WORLD
Anticipating change, reacting to fluctuations in the
economic and social climate, seizing opportunities
in order to progress: these are the challenges that all
business leaders must face today.
Since it was founded in 1959, CSC has gained solid
experience working with market leaders in every
sector. This experience is the result of our highly
adaptable offering, based on commitment to results,
an exclusive combination of experts, processes
and technology specifically designed to meet our
customers' needs, and the ambitious investments we
have made in recent years.
This experience is the capital on which CSC draws
each day to provide customised solutions and
to help its customers achieve a real competitive
advantage.
142
143
TAKING ACTION WHEREVER
CHANGE
REQUIRES RESULTS
CSC is a worldwide leader in consulting and information
technology services. For 50 years CSC has worked side
by side with its customers, helping them use information
technology and to achieve their goals and continuously
improve their results.
GLOBAL COVERAGE, A LOCAL APPROACH
CSC is present in over 80 countries. Our success is
founded on one of the strongest company cultures in its
sector, combining the responsiveness and acute sense
of customer intimacy of a local company with the best
practices of a global company.
Our local experts know the precise requirements and
customs of each country in which we operate, while our
ability to mobilise resources worldwide enables us to
identify and share best practices across borders.
OUR PARTNERS
In order to best meet its customers' requirements, CSC is
committed to global and local partnerships with the best
service and solution providers.
Among our partners we count Citrix, Dell, EMC, HP, IBM,
Microsoft, Oracle, PTC, SAP, SAS, Sun Microsystems, Xerox
and many others. While preserving our independence,
we ally ourselves with market leaders and with the most
144
innovative companies, ensuring that CSC and its partners
can benefit from synergies for growth, and that the clients
we share can also benefit from the most advanced service
offerings.
OUR PEOPLE
Different cultures, combined skills, shared experiences
and professional opportunities: CSC is a special place
that brings together highly creative and experienced
professionals.
As experience is the basis of efficiency, we offer our
employees high quality, long-term career paths, team
work and appropriate training, along with the opportunity
to learn and integrate best practices by working in the
field.
We make a point of honour to put in place top quality
skills management systems that respect individual career
aspirations and ensure each employee has the best
development plan possible.
industries
served
• AEROSPACE AND DEFENCE
• AUTOMOTIVE
• BANKING
• ENERGY AND UTILITIES
• HEALTH AND LIFE SCIENCES
• HIGH-TECH
• INSURANCE
• MEDIA AND COMMUNICATIONS
• PROCESS INDUSTRIES
• PUBLIC SECTOR
• RETAIL AND CONSUMER GOODS
• TELECOMMUNICATIONS
• TRANSPORTATION AND TOURISM
CUSTOMER INTIMACY
CORPORATE RESPONSIBILITY
Listening to customers, knowing their industries and
integrating feedback are at the heart of CSC's approach to
value creation. CSC develops a special relationship with
each client based on respect of their culture and identity
in order to better understand the specific challenges each
one faces, and to improve responsiveness, agility and
flexibility.
CSC commits to global citizenship by ensuring a
sustainable environment for future generations. Our
Office of Corporate Responsibility (CR) manages our
efforts globally around a defined framework, built on fair
and ethical business practices.
In order to improve its offering and quality of service,
CSC has engaged the leading market research company
TNS for over ten years to carry out a quarterly survey
to measure the quality of service CSC delivers on
its assignments. Results from the last survey show a
continuous improvement in customer satisfaction with
98% of customers satisfied.
Our commitment embraces all aspects of our business —
delivering superior services to our customers, increasing
shareholder value, providing an unsurpassed working
environment, optimizing finite resources, lowering
operating costs and minimizing our environmental impact
through Green initiatives. And, since our employees make
us who we are, we strongly support their continued
learning and development.
145
The story of CSC...
50 years strong
1961
A contract to
support NASA
Jet Propulsion
Laboratory’s Flight
Operations Facility
launches CSC into
the space business.
1967
Based in Brussels,
Computer Sciences
International is
formed to manage
international
growth. This is
now known as CSC
Europe.
1969
Infonet is created to operate
CSC’s timesharing
business.
1960
1976
Infonet is extended
to the Asia Pacific
region, giving the
network worldwide
coverage.
1970
1959
Roy Nutt and
Fletcher Jones
found Computer
Sciences
Corporation.
146
CSC enters credit
reporting market
with Associated
Credit Services
acquisition.
1980
1979
1965
Two divisions of ITT
are acquired, making
CSC the largest IT
services company in
the United States.
1982
1968
1972
CSC becomes the
first independent
information services
company to be listed
on the New York Stock
Exchange.
CSC creates the first
computerized air cargo
system at London’s
Heathrow Airport.
CSC develops the
information system for
the Saudi Arabian Interior
Ministry, still regarded
today as one of the
biggest in the world.
Future
growth?
We will continue to invest in our future
and use our 50 years of strength and
experience to help our clients emerge
stronger than ever.
1986
1990
2001
2007
Computer Partners
acquisition expands CSC’s
presence in IT consulting
and professional services
market.
CSC employee/
astronaut Ron Parise
flies on Space Shuttle
Columbia Astro-1
mission.
Annual revenues
exceed $10 billion.
CSC’s Covansys acquisition
adds 8,400 employees in India,
while First Consulting Group
purchase bolsters presence in
India and Vietnam
1990
1987
Annual revenues
hit $1 billion.
1993
CSC executive James
Champy co-authors
the groundbreaking
bestseller,
Reengineering the
Corporation, with
Michael Hammer.
2000
2005
CSC signs very largescale outsourcing
contracts in Europe.
2009
CSC celebrates 50-year
anniversary… with a new logo..
2008
Team CSC's Carlos Sastre
wins Tour de France, capping
a successful seven-year pro
cycling sponsorship
147
csc,
WORLDWIDE PRESENCE,
IN-DEPTH EXPERTISE
Consulting
Improving our clients’ operational
and financial results with
information technology while
efficiently managing the human,
financial and technical risks related
to their transformation projects;
that is the task CSC sets itself.
148
Implementing new commercial strategies, improving client
relationships, reorganising businesses, pooling resources,
mergers and acquisitions, adapting performance
management and measurement systems, redefining
purchasing policies, optimising the value and supply
chains, managing knowledge, adapting information
systems, overseeing transformation projects: these are
just some of the domains in which CSC has put processes
and systems in place to improve corporate operational
and financial performance. CSC has developed a service
offering based on in-depth knowledge of sectors and
industries and close cooperation with its clients. More
than half of CSC’s employees have acquired highly
specialised experience before joining the company. CSC
can thus call upon experts in every area of business to
meet its clients’ needs and provide them with customised
solutions in an environment that fosters the sharing of
expertise and best practice.
B
USINESS
SOLUTIONS
outsourcing
Designing specific solutions for each sector, getting the
most from off-the-shelf solutions available on the market,
simplifying the integration of these applications, and
enhancing these assets with portals and collaborative
or decision support systems: CSC is positioned as the
reference for tapping into the full potential that technology
can offer to business. The market has matured and
demands greater expertise and efficiency than ever before
to cope with challenges related to the transformation of
information systems. CSC helps its clients anchor their
projects firmly in reality and realise a rapid return on
investment by providing each of them with an optimal
solution: the combination of specialised sector-specific
skills, proven business processes and advanced and
innovative solutions. With its unique experience in the
management of ambitious and complex programmes, CSC
is known for its exceptional reliability, which enables it to
tackle each client's specific challenges, be it in terms of
competitiveness, deadlines or skills development.
Operational performance requirements, financial pressure,
shareholder value creation, increasing complexity
of management: companies are obliged to have an
organisation that guarantees a high level of service at the
lowest cost. To respond to these challenges, CSC offers
outsourcing solutions that allow its clients to focus on
their core business by adopting new ways of working, in
order to become faster, more flexible, more efficient and
more competitive. CSC assists its clients by managing
and maintaining their technology infrastructure, software
applications and business processes. Based on a shared
vision of the transformation project, CSC provides its clients
with an efficient and flexible IT architecture that can adapt
to rapid changes in a constantly shifting environment. CSC
adapts its business model to each company’s key issues.
By transforming their operations to become faster, more
flexible and more efficient, CSC’s clients preserve their
competitive advantage.
We are results oriented, with a highly
pragmatic approach that combines
business and technological skills for
each of our core activities: consulting
in management and information
technology, integration of systems
and business solutions, and the
outsourcing of IT services and business
processes.
149
OUR OFFERINGS
We know that our customers have complex businesses that require
sophisticated services. Our solutions are carefully tailored, combining
industry expertise, intellectual property and technology in a way that
achieves real business results. Our three lines of business help our clients
succeed by fully leveraging the value of IT in support of their mission.
For more than 50 years, we at CSC have
developed smart, technology-enabled solutions
to solve our clients' toughest challenges,
demonstrating a commitment to excellence and
a passion for exceeding expectations. Over the
past five decades, technology has radically
changed the world we live in. We have remained
at the forefront of our business because we
have understood how to use technology change
and innovation to deliver value to our clients.
Consulting
BUSINESS
SOLUTIONS
outsourcing
Strategy
• Redefinition of business models
• Restructuring, mergers and
acquisitions
• Launch of new activities
• Industry monitoring,
benchmarking and surveys
• Resource strategy
Strategic alignment of information
systems
• BPM
• Project management
• Selection of software packages
• Data migration and conversion
Technology infrastructure
management
• Management of PC platforms and
help desk operations
• Network management
• Operating management
(mainframe, midrange platforms,
hosting)
• High-performance computing and
utility computing
• Information security
Company performance
• Purchasing performance
• Product development
• Financial management and
performance
• Supply chain optimisation
• Marketing, customer service and
sales efficiency
• Human resources support
• IT management
Transformation projects
• Process reengineering
• Project and programme
management
• Optimisation of the organisation
Operational support
• Transition management
• Restructuring of accounts
Transformation projects supported
by ERP packages
• SAP, Oracle
Transformation projects supported
by specific solutions
• Sector-specific solutions:
banking, insurance, aerospace,
telecommunications, automotive, etc.
• Production and development of
the GraphTalk A.I.A solution
Architecture and integration of
corporate application processes
• Architecture and deployment
of EAI (Enterprise Application
Integration) and SOA (Service
Oriented Architecture)
Service platforms, portals and
company sites
• Mobility and Wi-Fi solutions
• Web services
Management of software applications
• Application portfolio analysis and
valuation
• Corrective maintenance and
upgrades in multiple application
environments
• Application consolidation and
migration
• Design and development of new
applications
Management of business processes
• Human resources management
• Finance and accounting
• Procurement
• Logistics
• Marketing and customer service
• Work environment
• Forecasting, cost containment,
business continuity
Product lifecycle management
Business Intelligence
Change Management
• Project and programme
management for business
transformation
151
THE CSC OFFICE OF INNOVATION: SYSTEMATIC,
RESULTS-DRIVEN INNOVATION
50 years of experience in the
marketplace have taught CSC
one lesson: Innovative ideas by
themselves are not hard to come by. If
anything, there are too many of them
crowding today’s world — confusing,
chaotic, tantalizing in their promise.
This is the single-minded focus of CSC’s Office of Innovation:
• To bring a disciplined, market-led approach to
innovation
• To identify, coordinate and harness the power of
innovation and thought leadership across CSC globally,
in a way that delivers measurable results and strategic
advantage to our clients
• Above all, to transform innovation from a random,
diffuse, often fortuitous activity to a rigorous, systematic
business practice — a science rather than an art
In harvesting innovative ideas from CSC divisions worldwide,
the most important question we will ask ourselves is, ‘What
business problem will this idea solve?’ At CSC, innovation will
be driven by demand, not
supply.
152
TURNING
BRIGHT IDEAS
INTO BUSINESS
SOLUTIONS
As change accelerates and becomes harder
to predict, only one competitive differentiator
can help companies stay ahead — leadership
in ideas; relentless creativity in finding new
ways of solving old problems.
SPANNING THE ARC: FROM IDEA GENERATION
TO SOLUTION DEVELOPMENT
Such a deliberate approach to innovation demands focus,
coherence and integration. The CSC Office of Innovation
enables this more strategic, open approach to innovation
by integrating CSC groups in an architecture that spans
the complete arc of innovation — from idea generation to
solution development.
The Leading Edge Forum, at the forefront of idea
generation and thought leadership, which offers a
powerful, multiclient community to explore management
and technology issues.
• ResearchNetwork: Market-sensing research for context
• Collective intelligence: Building upon ideas for ultimate
marketplace value
• CSC Catalyst: Methodology to deliver consistent,
quality solutions
• Global Solutions Organization: Translating the idea into
a business solution
• Knowledge Management and Enablement: Fostering
the culture of innovation that supports everything else
A NETWORK OF NETWORKS
The Office of Innovation acts a little like the Internet,
functioning as a “network of networks” whose cumulative
power is far more potent than the individuals/discrete
groups of which it is composed. By unifying CSC’s diverse
groups across geographies and industries, the Office
of Innovation focuses the creativity of our workforce on
critical problems, synthesizing and bridging ideas to
further the strategic business goals of our clients.
We’ve always had a strong culture of client-focused
innovation at CSC. But because of our highly federated
approach, the innovation was very diffuse and difficult to
harness. The task of the Office of Innovation is to set the
agenda against which we can execute as one CSC. It is to
bring clarity to the whole effort so that each individual
CSC group understands what is crucial to the market
and to our clients. They can then bring their own unique
approach to delivering economic value — the ultimate
goal of all innovation at CSC. The winners? CSC’s clients,
who can stay at the forefront of technology and thought
leadership and “predict the future by inventing it — thanks
to the power of CSC’s Office of Innovation.
153
about csc
The mission of CSC is to be a global leader in providing technology enabled business
solutions and services.
With the broadest range of capabilities, CSC offers clients the solutions they need to
manage complexity, focus on core businesses, collaborate with partners and clients, and
improve operations.
CSC makes a special point of understanding its clients and provides experts with real-world
experience to work with them. CSC is vendor-independent, delivering solutions that best
meet each client’s unique requirements.
For more than 50 years, clients in industries and governments worldwide have trusted CSC
with their business process and information systems outsourcing, systems integration and
consulting needs.
The company trades on the New York Stock Exchange under the symbol “CSC”.
155
A VIEW FROM EUROPEAN EXECUTIVES
A fall in economic activity, an employment market in distress, low employee
morale: perhaps never before has a stock market crisis transformed itself
so quickly into an economic crisis. But the biggest mistake would no doubt
be to focus only on the numbers droned out each day by the media. The
slowdown is only part of the story. Behind it, there is a more profound
transformation at work, one that calls into question the very economic
models that underlie businesses.
The latest “CSC Barometers” have identified signs of strategic and operational disruptions.
European executives provide an overview of life at the helm in today’s climate.
Alfonso Álvarez | Aldesa group
Bertrand Badré | Crédit Agricole SA
Michel Baise | Millenium BCP Fortis
Etienne Bertin | Fnac
Charles-Henri Besseyre des Horts | HEC group
Ángel Luís Cabal | Government of the Principality of Asturias
Gianluigi Castelli | ENI group
Rogério Campos Henriques | Fidelidade Mundial
Jean-Paul Charlez | Etam
Mauro Charrière | Pininfarina SpA
Arnold De Brauwer | National Railway Company of Belgium
Nicolas Duhamel | BPCE
Marco Facciano | Calvin Klein Jeans
Pascal Ferte | Sanofi-Aventis
Laurence Frenkiel | Grand Optical
Michel Grandjean | AGC Europe
Giuseppe Gullo | Mariella Burani group
José Matias | Rhodia
Ennio La Monica | Banque Carige
Jean-Christophe Lalanne | Air France-KLM
Arnaud Lescroart | Printemps
Thierry Moulonguet | Renault SAS
Alessandro Musumeci | Ferrovie dello Stato
Edouard Odier | Air France-KLM
Alain Page Lécuyer | Axa
Aldo Previtali | Carrier SpA
Carlo Privitera | Luxottica group
Véronique Rouzaud | Veolia
Alessandro Salustri | British Telecom Italia
Jacques Stern | Accor group
Stefano Zecchinato | Marelli Motori SpA
156

looking beyond the crisis

Transcription

Similar documents

Carl R. Darnall Army Medical Center (CRDAMC) COL Mark

CSC1att2 - Marlow Casino Chips

success story — cortal consors

NOTIFICATION www.esevaonline.telangana.gov.in

Mee Seva

LotusWorks - Declan Walsh (pdf format)

CIO Update

Convention for Safe Containers

pdf

June 2016 Newsletter