ITStrategy February24 2000 CaseStudyofaRecentClientExperience RobTrollinger Principal DallasChrisWisler Manager AlexandriaKimberlyBrown Associate Alexandria Today sdiscussion BackgroundofCompanyCompanyITOverviewCauseforActionITStrategyApproachApplicationArchitectureTechnicalArchitectureEstablishtheITProgramOfficeOrganizationalEffectivenessandITAlignmentSummary Backgroundofcompany Beganin1909asapartnershipbetweenaninnovativechemistandabusinessmanPioneeringworkinleathertanningBestknownforexpertiseinacrylicchemistryEssentialcomponenttodetergents diapers cellphones industrialcoatings andmore50manufacturing research andtechnicalfacilitiesworldwideSalesin100countries totaling 4billionannually CompanyA CompanyB CompanyAannouncedtheirintendedmergerwithCompanyBin1999 1848 foundingLargestandmostrecognizedbusinessforaparticularconsumerproductMajorsupplierofbasicinorganicchemicalsderivedfromsaltEssentialingredientsinCDs newspapers magnetictapes sportsequipment andmore36miningandprocessingfacilities 68chemicalmanufacturing research andtechnicalfacilitiesworldwideSalestotal 2 5billionannually Drivetheshort termvalueExceedthemarket sexpectations IntegratetheOrganizationsasSeamlesslyasPossible DevelopandcommunicateasharedstrategicagendaDefineorganizationstructures keybusinessprocessesandtechnologyplatform architectureSelectleadersandstaffpositionsDevelopmetricsandbudgetsIntegratethebusiness Integrateday to dayoperationsPositionforthefuturegrowth AchieveBusinessValueGoalsasQuicklyasPossible Achieve 200millionofsavingswithin12 18months runningrateby2001 EnsurecustomerretentionCorporateCenterrationalizationAdministrativeoverheadreductionSourcing ProcurementsavingsProductlineandoperationsrationalizationManufacturingproductivityandsupplychainimprovementsReductionintechnologycosts Thefocusoftheintegrationwastoquicklyachieveoperationalsynergieswhilecombiningtheorganizationstosupporttoplinerevenuegrowth A T Kearneywasaskedtostructure driveandmanagetheentireintegrationprocessforwhatwouldbecomeoneofthelargestspecialtychemicalcompanies LatinAmericaandAsia PacificRegionOperations 10 ofsales20manufacturingfacilities10distributionsites NorthAmericanRegionOperations60 ofsales60manufacturingfacilities230distributionsites 1 Whilethepotentialsourceofthesynergiesweresomewhatclear smoothandtimelyintegrationofthetwocompanieswaslessassured Challenges SomemanufacturingprocessesandtechnologieswereincompatiblebetweenthetwocompaniesCombiningtwocompanieswithbothdirectproductoverlapAcquiringcompanywasmoreofa intermediatesproducer andtheacquiredcompanywasmoreofa formulator SignificantfacilitiesconsolidationopportunitiesDistributionconsolidationandimprovementrequiredchangingthebusinessmodelandthemindsetStandardleadtimesStandardservicelevelsSignificantcustomeroverlapSignificantEH Sissuesneededtobeaddressed competingawayscarcecapitalresources EuropeanRegionOperations 30 ofsales40manufacturingfacilities60distributionsites Afteranacceleratedintegrationprogram themergerwasdeemedasuccessbytheCEOaswellastheanalystcommunity Bytheendof3Q thenewcompanyhadachievedcostreductionsof 100MMonanannualizedbasis threemonthsaheadofschedule MorganStanleyDeanWitter Already thecompanyhasachieveda 100MMannualrunrateincostsavingsaheadofschedule JanneyMontgomeryScott Theintegrationprocessisrunningsmoothlyandinfactbetterthanexpectedachievinga 100MMlowerrunrate J P MorganSecurities Theintegrationeffortscontinuetotrackaheadofplan DeutscheBancAlexBrown Consideringthesteepincreaseinrawmaterialcosts thenewcompanywasabletomeetexpectationswithitsrapidintegrationoftheacquiredcompany soperations BrownBrothersHarriman Perspective ExternalFocus InternalFocus Incremental Transforming ValueCreation P ERatio NewBusinessModelNewSegmentsNewTechnologiesAcquisitions ShareGainTechnologyImprovementGeographicExpansionPortfolioManagement WorkRedesignSupplyChainOperatingExcellence 2 3 SalesGrowth 4 5 SalesGrowth 6 8 SalesGrowth Followingtheintegration theCEO sAgendaistodoubletherateofgrowthwhilemaintaininghighlevelsofprofitability Costimprovement customerserviceandretentionande businesshavebeenidentifiedaskeyareasoffocus RapidassimilationofacquisitionswithlimitedadditionalfinancialstaffGlobalsharedservicesITprovidesastrategicadvantageinsupportofgrowthinitiatives TargetCapabilities GlobalprocessesandmetricsInteriminformationonsales profitabilityandcostofoperationAutomationofroutineprocessesandtransactionsFinancialstaffisalignedwiththebusiness ContinuouslaunchofserviceofferingsthatcannotbeeasilymatchedbycompetitorsQualitybuiltintoanautomatedprocessesHumansmanagetherelationshipnottransactions Integratedsupplychainnetwork S OPprocess acrossmultipleenterprisesInventorycommitmentusingproduction salesandbalancesAbilitytoreachcustomersgloballywithoutalocalpresence Growth Agility StrategicImperative CostImprovement CustomerService Retention e Business NewCo sbusinessstrategywillplaceadditionaldemandsontheentireorganization CompanyITOverview Finance BackOffice DemandPlanning SupplyChain CustomerService HumanRes