IT Strategy,February 24, 2000,Case Study of a Recent Client Experience,Rob Trollinger, Principal, Dallas Chris Wisler, Manager, Alexandria Kimberly Brown, Associate, Alexandria,Todays discussion,Background of Company Company IT Overview Cause for Action IT Strategy Approach Application Architecture Technical Architecture Establish the IT Program Office Organizational Effectiveness and IT Alignment Summary,Background of company,Began in 1909 as a partnership between an innovative chemist and a businessman Pioneering work in leather tanning Best known for expertise in acrylic chemistry Essential component to detergents, diapers, cell phones, industrial coatings, and more 50 manufacturing, research, and technical facilities worldwide Sales in 100 countries, totaling $4 billion annually,Company A,Company B,Company A announced their intended merger with Company B in 1999,1848, founding Largest and most recognized business for a particular consumer product Major supplier of basic inorganic chemicals derived from salt Essential ingredients in CDs, newspapers, magnetic tapes, sports equipment, and more 36 mining and processing facilities, 68 chemical manufacturing, research, and technical facilities worldwide Sales total $2.5 billion annually,Drive the short-term value Exceed the markets expectations,Integrate the Organizations as Seamlessly as Possible,Develop and communicate a shared strategic agenda Define organization structures, key business processes and technology platform/architecture Select leaders and staff positions Develop metrics and budgets Integrate the business,Integrate day-to-day operations Position for the future growth,Achieve Business Value Goals as Quickly as Possible,Achieve $200 million of savings within 12-18 months (running rate by 2001) Ensure customer retention Corporate Center rationalization Administrative overhead reduction Sourcing/Procurement savings Product line and operations rationalization Manufacturing productivity and supply chain improvements Reduction in technology costs,The focus of the integration was to quickly achieve operational synergies while combining the organizations to support top line revenue growth,A.T. Kearney was asked to structure, drive and manage the entire integration process for what would become one of the largest specialty chemical companies,Latin America and Asia-Pacific Region Operations: 10% of sales 20 manufacturing facilities 10 distribution sites,North American Region Operations 60% of sales 60 manufacturing facilities 230 distribution sites(1),While the potential source of the synergies were somewhat clear, smooth and timely integration of the two companies was less assured,Challenges,Some manufacturing processes and technologies were incompatible between the two companies Combining two companies with both direct product overlap Acquiring company was more of a “intermediates producer” and the acquired company was more of a “formulator” Significant facilities consolidation opportunities Distribution consolidation and improvement required changing the business model and the mindset Standard lead times Standard service levels Significant customer overlap Significant EH&S issues needed to be addressed, competing away scarce capital resources,European Region Operations: 30% of sales 40 manufacturing facilities 60 distribution sites,After an accelerated integration program, the merger was deemed a success by the CEO as well as the analyst community,“By the end of 3Q, the new company had achieved cost reductions of $100MM on an annualized basis, three months ahead of schedule.” Morgan Stanley Dean Witter “Already, the company has achieved a $100MM annual run rate in cost savings ahead of schedule” Janney Montgomery Scott “The integration process is running smoothly and in fact better than expected achieving a $100 MM lower run rate” J.P. Morgan Securities “The integration efforts continue to track ahead of plan” Deutsche Banc Alex Brown “Considering the steep increase in raw material costs, the new company was able to meet expectations with its rapid integration of the acquired companys operations” Brown Brothers Harriman,Perspective,External Focus,Internal Focus,Incremental,Transforming,Value Creation (P/E Ratio),New Business Model New Segments New Technologies Acquisitions,Share Gain Technology Improvement Geographic Expansion Portfolio Management,Work Redesign Supply Chain Operating Excellence,2-3% Sales Growth,4-5% Sales Growth,6-8% Sales Growth,Following the integration, the CEOs Agenda is to double the rate of growth while maintaining high levels of profitability,Cost improvement, customer service and retention and e-business have been identified as key areas of focus,Rapid assimilation of acquisitions with limited additional financial staff Global shared services IT provides a strategic advantage in support of growth initiatives,Target Capabilities,Global processes and metrics Interim information on sales, profita