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Business Results Road Map Planning and Implementing Transformative Change

The Unique Alternative to the Big Four®Audit | Tax | Advisory | Risk | Performance

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Businesses often spend considerable time and effort developing and refining their corporate strategies, only to discover that turning those strategies into effective operating plans is an even greater challenge.The Business Results Road Map, developed by

Crowe Horwath LLP, has proven successful in helping

companies meet this challenge. The highly focused,

fast-paced road map approach helps executives identify

and prioritize those initiatives that are most promising

for producing positive results that are directly related

to the corporate strategy, while at the same time

recognizing the need to operate realistically within the

boundaries of the organization’s business assets. Even

more important, it enables prompt follow-through,

successful execution, and measurement of financial and

performance outcomes, while maximizing the effective

use of business assets in human, organizational,

financial, and informational resources. The result is a truly

transformative change in the organization, which enables

it to make the leap to the next level of performance.

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Crowe® Business Results Road Map

www.crowehorwath.com

A High-priority Approach to Achieving ChangeTurning plans into actions is not a new challenge – in fact, it’s a challenge as old as business itself. Yet in today’s competitive environment, the ability to successfully execute strategy is more critical than ever. Studies show that most business strategies consistently fail to achieve all their stated goals – a shortcoming that just about every executive experiences firsthand, often several times, throughout his or her career.

To overcome such impediments, the Crowe Business Results Road Map helps companies step away from isolated or disconnected improvement projects, and instead take a broader view of the organization’s strategy and its implementation. An intensive approach that generally is achieved on a seven-week timetable, the road map process begins with a high-impact review of the existing environment, followed by clarification of improvement targets and performance benchmarks, and the identification of a series of potential initiatives that will provide maximum impact.

The road map then helps executives prioritize the various initiatives based on their individual and collective return on investment (ROI) and their overall strategic impact. The result is a clear action plan that leaders can use to begin implementing an appropriate mix of short- and long-term initiatives.

Even more significant is the transformative change that occurs in the way the company translates strategy into action, and the development of a strong, effective management system that ensures chosen initiatives are executed effectively, and that projected results are achieved.

“Various studies done in the past 25 years indicate that 60 percent to 80 percent of companies fall short of the success predicted from their new strategies.”— Robert S. Kaplan and David P. Norton Harvard Business Review1

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Crowe Horwath LLP

The inability to successfully execute strategy can threaten the very survival of a business. This challenge can manifest itself in a variety of ways:

� In some companies, the failure to execute strategy results in a growth plateau, where the company struggles to reach the next level as it wrestles with challenges that limit its size, scope, and sales revenues.

� In addition to an inability to achieve growth targets, some companies also encounter an operational wall, experiencing unexpected increases in claims, service complaints, bad debt, or other breakdowns.

� Some companies develop reasonable and promising strategies for revenue growth, lower costs, improved service, or other critical objectives, but key managers are uncertain where to begin or unable to overcome inertia to get started.

� Still others are able to accurately identify the best initiatives to enact their strategies, but find that execution and long-term adoption are lacking.

Overcoming these common challenges requires a management strategy that starts and ends with a business focus, beginning with clear identification of the desired business outcomes, and ending with the accurate tracking of the actual business results. The Crowe approach will provide management with a mechanism to choose the most appropriate alternatives with the highest potential ROI. In addition, strong monitoring is essential in order to track realization of the targeted results.

To be successful, companies must establish a “new normal” – that is, a new, accepted method of operation that truly transforms the organization into a high-performing entity.

Executing Strategy: Where Good Companies Often Struggle

“I sat in rooms for years, looking at promising strategies that never delivered results.”— Jack Welch “Jack: Straight From the Gut” 2

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The Underlying Causes of Failed StrategiesThere are many reasons why companies fail to accomplish transformative change. One common impediment arises when companies fail to take a broad enough view of the challenges.

Companies in this situation often launch a series of one-off projects, using various skills and disciplines with which they are already familiar such as business intelligence, quality control, lean manufacturing, vendor-managed inventory, or other, similar specialized tools.

Some of these initiatives can be valuable and helpful, but only to a limited extent because the chosen initiatives address only a fraction of the full set of issues required for success. Such well-intentioned but inadequately planned efforts can be counterproductive, with often disappointing outcomes including turnaround expectations that are never realized.

In addition to adopting an unnecessarily limited view of change, companies also encounter a number of other common obstacles including:

� Limited resources (both financial and human), which prevent the organization from bringing projects to a successful conclusion;

� Competing and conflicting priorities within the organization;

� Individual executives’ inability to recognize the strategic implications of their initiatives;

� Lack of executive support or a powerful champion within the organization;

� Lack of a proper management system to sustain performance gains and perpetuate the new manner of doing business;

� General resistance to change; and

� Complacency after partial or limited success that fails to lift the company from “good” to “great.”

“The vast majority of companies never become great, precisely because the vast majority become quite good – and that is their main problem.”— Jim Collins “Good to Great” 3

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Crowe Horwath LLP

Developed in response to businesses’ struggle to achieve transformative change, the Crowe Business Results Road Map is a rapid, intensive approach that helps companies step away from isolated or disconnected improvement projects, and instead take a broader view of the organization’s strategy and its implementation.

During the seven-week road map initiative, management is led through a process that helps the company assess the entire suite of potential initiatives that could be undertaken, producing an accurate evaluation of the business impact each of those initiatives would bring to the organization.

This initial assessment produces a portfolio of high-impact prospective improvement projects that address five fundamental business domains:

� Products – including new product development, product profitability, item rationalization, stocking and customer service levels, quality, and portfolio mix projects;

� Organization – including programs designed to update personnel roles, organizational structure, responsibilities, business policies, intergroup dynamics, outsourcing, shared services, risk management, and internal best practices;

� Process/Systems – including projects focused on business processes improvement and system integration, as well as specific technology projects such as enterprise resource planning, business intelligence, forecasting, warehouse management, data collection, and document management;

� Customers – including initiatives that involve relationship management, forecasting, channel partners, service level agreements, customer collaboration, early access to customer ordering patterns, special terms/royalties/rebates, and customer inventory visibility; and

� Supply Chain – including projects that affect suppliers, supplier-owned inventory, transportation, production, distribution centers, service level agreements, and contract management.

Opportunities in these five categories are assessed to identify their impact on the company’s organizational, financial, operational, and strategic goals. For each potential initiative, Crowe and the client organization also collaborate on a comprehensive list of key dependencies and risks, rating the maturity of current processes, projected business benefits, client resources required to implement, and critical success factors.

In this way, the road map helps to effectively coordinate the delivery of these initiatives and deliver positive results, while also providing management with additional and valuable perspectives they would otherwise not receive. Above all, the process enables the organization to move quickly in actually executing chosen initiatives successfully over a 12- to 18-month period.

Comprehensive, Transformative Change

Pillars for Road Map Initiatives

Customers Organization

Products

Supply Chain Process/Systems

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By developing the Business Results Road Map in a collaborative manner, Crowe and the client can identify, define, and prioritize specific initiatives that will yield the maximum impact in critical performance areas. The development and execution processes are generally organized into a series of phases:

� Defining Objectives The recognized need for change is expressed as a series of clearly identified and measurable business objectives, with quantifiable and tangible measures of success.

� Identifying Improvement Initiatives Crowe and the client identify potential initiatives that could be undertaken by the organization to realize these results.

� Assessing Impact and ROI The anticipated impact of each potential initiative is compared against the objectives. To identify ROI, Crowe’s assessment includes a detailed business case analysis and payback analysis.

� Prioritizing Projects The objective assessment of the projects’ impact is combined with other critical decision factors – such as timing, potential barriers, resource constraints, risks, and strategic importance – to produce a prioritized list of initiatives.

� Resource Planning and Road Map An agreed-upon action plan creates clarity, aligns people with the mission, and shows how actions will drive toward the broad transformative

change that is the overall objective. The final road map identifies budgets, projected benefits, timing, and a plan for implementation, beginning with some initial “quick wins” that create momentum and help engage the organization. These are followed by longer-term initiatives that, over the course of the execution, move the organization toward the enhanced performance level called for by the strategy.

� Execution Building on the high-level resource map, management can now quickly and confidently assign responsibility for each project and establish the project’s priority in the overall improvement effort. Some projects are assigned to internal teams, others may be led by Crowe consultants, and still others may be executed by niche specialists.

A Practical, Phased Approach to Strategic Success

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Crowe Horwath LLP

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Road Map Initiatives and Projects

ProductsNew Product Development H H M H H M H M M

Existing Product Management H H M L L L M M M

OrganizationRoles and Organization Alignment H H M H M M M M M

Performance Management M H M M H M L M L

SystemsERP System Replacement H L L M M H H M M

Forecasting/Demand Management System H M M M M H H M M

Document Management/Work�ow Enabler M M L H M M H L M

Reporting/Business Intelligence Framework M M M M L M M H M

Systems Architecture, Integration, & Optimization M M L M L H H M H

Supply Chain Process ImprovementS&OP Process Improvement H M L L L H H M M

Inventory Management H H M L M H M M L

Sourcing M H L M L H L M M

Service Quality L M M L M L M M H

Returns L H H L M L M L L

Additional Projects (identi�ed post-review)New Distribution Center Assessment M H L M H H M M L

Transition to 3PL H H L M H H M M L

New Brand Introduction M M L M M L L L L

Business Performance

Although an actual heat map would typically display many more potential projects, this example

illustrates the clear visibility and prioritization this useful tool provides.

Heat Map

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A Closer Look at Key Road Map DeliverablesThe Crowe Business Results Road Map is designed to help companies overcome significant challenges in translating strategy into meaningful operational improvements. Several key deliverables are essential to achieving this goal:

Heat Map This objective, intuitive matrix demonstrates the anticipated impact of each possible initiative and compares it against the defined objectives. The heat map helps prioritize projects, based on their assessed impact. For example, those in which the impact is assessed as “high” in three or more categories are classified as “critical,” while others are “recommended” for execution. This prioritization is essential to counteract the tendency to try to implement too many projects at once, resulting in none of them finishing satisfactorily.

Business Justification/ROICrowe applies its industry, financial modeling, and operational experience to help clients develop a detailed documentation and payback analysis that can be used to justify key investments with top executives and the board of directors. In certain situations this analysis may also serve as a key input into incentive-oriented projects based on actual business results.

Charter DevelopmentThe objective assessment of the initiatives’ impact, as spelled out in the heat map, is combined with other critical decision factors to produce a prioritized list of initiatives. These decision factors usually include:

� Timing (ideally a mix of quick wins and longer-term projects);

� Potential barriers to implementation;

� Resource constraints (including financial and personnel limitations);

� ROI;

� Risks;

� Strategic importance;

� Interdependencies among various departments and divisions;

� Possible overlaps with other initiatives; and

� Key executive sponsorship.

Resource PlanA high-level resource plan identifies the available resources from the client, Crowe, and potential third-party participants. This resource plan will drive the next phase of the process, which is the production of the actual road map document.

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Crowe Horwath LLP

New Product Development

Returns

Sourcing

Reporting/BI

Projects Led by Independent/Third Party

Company-led Projects

Optimization

Go Live

Recommended(10 projects)

Critical(8 projects)

S&OP Process Improvement

Service Quality

Existing Product Management

Inventory Management

Performance Management

Phase II

Roles and Organizational Alignment

Systems Architecture and Integration

Program Management

ERP, Forecasting

Distribution Strategy

EU Distribution Introduction

Outsource to Third-party Logistics Provider

Document ManagementSystems and Work�ow

0 – 6 months 6 – 12 months 12 – 18 months

ACME Supply Chain Improvements – All Projects Road Map

Road MapThis is an agreed-upon action plan that creates clarity, aligns people with the mission, and shows how actions will drive toward the broad, transformative change that is the overall objective. The road map will also incorporate many of the company’s existing portfolio of projects, and will rationalize any change to existing project priorities. The final road map identifies:

� Initial budgets and expenses for various projects’ execution;

� Projected savings, revenue enhancement, or other benefits;

� Timing expectations in view of resources, risks, and dependencies;

� Expected business impact;

� Expected costs;

� Action plans and next steps for implementation; and

� Executive and management responsibility for each initiative.

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Execution That Helps Ensure ResultsThe ultimate measure of the Crowe Business Results Road Map’s effectiveness is the successful implementation of projects that advance corporate strategy and deliver real business benefit. Those initiatives assigned to Crowe for execution are managed using a rigorous program management methodology, based on established best practices in program management. For initiatives assigned to internal teams or other providers, the road map process helps identify milestones, define realistic metrics, and establish clear lines of responsibility for achieving results.

Finally, it should be noted that the Crowe Business Results Road Map differs substantially from traditional assessments, which often serve primarily to confirm issues that management already suspects are impeding success. Thought leadership from Crowe helps clients identify threats and opportunities that often are “off their radar.”

The road map helps companies translate broad strategies into a portfolio of realistic, practical, and achievable projects – complete with the processes to execute them and the tools that are needed to track results – while relating each initiative back to the company’s defined strategy and objectives. And it does this in a fast-moving, seven-week process that establishes a momentum for change.

By identifying the investment required, defining the projected payback, projecting an achievable timeline, and outlining a specific execution strategy, the Crowe Business Results Road Map can help businesses achieve the transformative change they are seeking in order to turn sound strategy into measurable and lasting performance improvement.

1 Robert S. Kaplan and David P. Norton, “Mastering the Management System,” Harvard Business Review, January 2008, http://hbr.harvardbusiness.org/2008/01/ mastering-the-management-system/ar/1

2 Jack Welch, “Jack: Straight From the Gut,” Warner Business Books, 2001, p. 383

3 Jim Collins, “Good to Great,” HarperBusiness, 2001, p. 1

Crowe Horwath LLP is an independent member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP

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Contact Us For more information about the Crowe Business Results Road Map or any of our other practical, results-oriented business services, contact:

Vicky Ludema 800.599.2304 [email protected]

About Crowe Horwath LLPCrowe Horwath LLP is one of the largest public accounting and consulting firms in the United States. Under its core purpose of Building Value with Values®, Crowe assists public and private company clients in reaching their goals through audit, tax, advisory, risk, and performance services. With 26 offices and 2,400 personnel, Crowe is recognized by many organizations as one of the country’s best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest networks in the world, consisting of more than 140 independent accounting and management consulting firms with offices in more than 400 cities around the world.