Cardno-Emerging Markets

EMERGING MARKETS DIVISION Strategy Execution

Prepared by: Brian Doyle

Date: 23 June 2013

Student No: 40493251

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MGTS 7803 Integrated Strategy Analysis

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ............................................................................................... 3

2. EMERGING MARKETS DIVISION – Strategy Execution .................................................. 4

3. CUSTOMER VALUE PROPOSITIONS ............................................................................. 5

4. KEY CAPABILITIES ...................................................................................................... 6

5. KEY RESOURCES ........................................................................................................ 6

6. FIRM VALUE .............................................................................................................. 7

7. STRATEGY MAP IN BUSINESS MODEL TERMS ............................................................... 7

8. STRATEGY MAP ......................................................................................................... 9

9. DEVELOPMENT PROJECTS ........................................................................................ 10

10. PROJECTS .............................................................................................................. 11

11. PROJECT ONE ........................................................................................................ 12

12. PROJECT TWO ....................................................................................................... 15

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1. EXECUTIVE SUMMARY

Cardno Limited is a professional infrastructure and environmental services company, with specialist

expertise in the development and improvement of physical and social infrastructure for

communities around the world. Cardno conducts its business across key geographical areas with

290 offices and 8,000 employees globally. Cardno has demonstrated an impressive track record of

generating growth under a variety of market conditions with a net profit after tax of A$74.2 million,

representing a 26 per cent increase over the previous year.

However, Cardno faces a challenge to arrest the sluggish performance of the Emerging Markets

(EM) division. The purpose of this paper is to develop a strategy map for EM within the context of

its business model (Cardno model).

An analysis of the EM strategy map, within the framework of its parent Cardno, two issues have

been identified where opportunities exist to positively impact the future performance of both the ER

division and the organisation as a whole.

(a) Organisational restructure

(b) Rebranding

EM and Cardno, equipped with an organisational structure designed to support business growth and

a new brand designed to embody Cardno’s new structure and its aspiration to shape the future will

be positioned for ongoing business success.

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2. EMERGING MARKETS DIVISION – Strategy Execution

Cardno’s Emerging Markets (EM) is one of three group divisions, the other two being Australia and

New Zealand, and America and Software. While all divisions have contributed to Cardno’s

impressive track record of revenue and profit growth the EM division while generating positive

returns has not performed to management expectations, particularly in comparison to the other two

divisions. There is an evolving view within the organisation that action needs to be taken to realign

EM’s performance trend to match the other divisions, or alternatively do nothing, risking an

extended period of stagnation or sluggish growth.

To assist in this analysis this paper will construct an EM strategy map that considers its customer

and organisational value, in addition to EM’s capabilities and resources. Within this framework I

will consider what is fit for purpose and where the business needs to excel, as well establish clarity

around the cause and effect relationship between the elements.

From this analysis I will identify two key organisational development projects that will improve the

performance of the business. Each project will be discussed in isolation with a particular focus on

determining a success threshold in conjunction with appropriate performance metrics.

STRATEGY MAP

In developing a Cardno EM’s strategy map I will complete the following stages.

1. Establish EM’s Customer Value Propositions (CVP)

2. Identify EM’s capabilities and resources

3. Articulate the business model in strategy map terms

4. Develop an EM strategy map

5. Analyse the EM strategy map to identify opportunities for improvement within the

framework of a development project.

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3. CUSTOMER VALUE PROPOSITIONS

Cardno’s EM CVP’s are many and can be project specific. However, the following value

propositions have been identified as key drivers of future growth as the reasons why clients choose

Cardno EM to be their trusted partner. Also, a well thought out CVP requires a clear understanding

of the target customer segment, their problems and needs, to allow for a compelling reason to buy.

EM’s core clients are global aid agencies, and governments and non-government organisations

(NGO’s) that seek to improve the physical and social infrastructure of emerging nations.

1. EM supports their clients’ mission, and help them achieve their vision. EM acts as an

enabler in converting a concept to reality for the client.

2. EM is efficient and dependable. Clients depend on EM to consistently deliver the right

results on schedule and within budget.

3. EM is flexible and accommodating. EM provide hassle-free delivery of each clients’

specific solution with the fewest possible changes to contract scope.

4. EM is agile and responsive. EM anticipates client needs; this flexibility allows EM to

deliver solutions quickly without contracting delays, and EM’s limited bureaucracy enables

swift decision-making.

5. EM provides the best value solution by offering the most capability and highest levels of

performance per dollar of client budget. Frequently, EM’s focus is on customised, long-term

solutions that saves client’s money in the long run.

6. EM actively listen to their clients to thoroughly understand their needs in the context of

their existing business practices. By viewing the clients challenges from their perspective,

while also recognising the needs of other stakeholders, EM develop an understanding of the

big-picture context. Such understanding enables EM to create cost-effective solutions that

consistently deliver the right results.

7. EM form long-term relationships and become a trusted partner to their clients by making

decisions that are guided by their clients’ big-picture, long-term interests. EM’s partnerships

are sustained by providing clients with a visible, accessible, and stable team to support their

mission. EM earns their clients’ trust through an unwavering commitment to high standards

of ethics and integrity.

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4. KEY CAPABILITIES

Cardno EM’s key capabilities are identified as a ‘system’ of interdependent organisational

processes and / or skill sets within the business that create value.

1. Acquisition - Merger and acquisition strategy that works. Cardno has developed a

methodology (strategic fit, price discipline and transitional integration) accompanied with

the necessary discipline that has allowed some 46 successful acquisitions over the last

decade.

2. Commercialisation - Successful track record of knowledge sharing and cross selling group

services to generate organic growth.

3. Production - Capability and flexibility to balance the management of both small short-term

projects with larger long-term projects to optimise utilisation of business resources.

4. Logistics - A global reach and breadth of professional expertise allow EM to deliver a full

range of services wherever their clients operate.

5. Design and development - Professional services design and planning software.

6. Zero Harm program – Cardno has developed a strong ‘zero harm’ culture across the

business to support organisational and stakeholder (clients) social responsibility needs.

7. Financial management – Track record of cost control and optimising overhead costs.

8. Integrated solutions – Resource diversity of professional disciplines across planning,

surveying, engineering, management services, and environmental sciences allow for the

formulation of innovative, value-add client solutions.

5. KEY RESOURCES

Cardno EM’s key resources are viewed as enablers of its capabilities.

1. Organisational structure - Business unit and operational configuration designed to support

the pursuit of strategic objectives in addition to being attractive to potential merger partners.

Also, a key element in EM’s pursuit of new business growth and the application of the its

CVP’s.

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2. Strong Balance Sheet - Financial position from which to fund new growth either through

acquisition or organic growth opportunities.

3. Human Resources – A quality team of professionals across a multidiscipline range of

services. This consists of the human capital elements of knowledge, skills and values, in

addition to the internal and external social capital elements.

4. Multidiscipline Services - Diversity of professional services across Australia, New Zealand

and the Americas to support EM initiatives.

5. Innovation - Strong in-house innovation and development of critical mass professional IP

world-wide.

6. FIRM VALUE

The interaction of key resources and key capabilities result in the application of value propositions

to customers resulting in firm value as follows.

1. Premium pricing – through the provision of project specific solutions that maximise client

value while providing EM with higher rates of return.

2. Revenue and earnings growth – as a factor of premium pricing and increased business.

3. Increase benefits and efficiencies – from ongoing business growth and integration.

4. Increase company profile – due to increased global coverage, increased repeat business and

new business.

5. Audacious growth targets – meet Cardno’s 2010-2015 strategic objectives for business

growth.

7. STRATEGY MAP IN BUSINESS MODEL TERMS

FIRM VALUE Premium pricing

Revenue and earnings growth

Increase benefits and efficiencies

Increase company profile

Audacious growth targets

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CUSTOMER

VALUE

PROPOSITION

Supports their clients’ mission

Efficient and dependable.

Flexible and accommodating.

Agile and responsive

Provides the best value solution

Actively listen to thoroughly understand and deliver

the right results.

Long-term relationships as a trusted partner

KEY

CAPABILITIES

Acquisition

Commercialisation – knowledge sharing and cross

selling

Production

Logistics

Design and development

Zero Harm progam

Financial management

Integrated solutions

KEY

RESOURCES

Organisational structure

Strong balance Sheet

Human resources

Multidiscipline services

Innovation

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8. STRATEGY MAP

The following strategy map Table 1 below is designed to replace a traditional graphical

representation. The interrelationship and associated gaps are identified by colour coding and

number matching. This methodology is also designed to better demonstrate the integration and

execution logic with the strategy map. For example, each firm value, CVP, capability and resource

element is numbered and colour coded. Attached to each element is a colour code number/s that

establishes its relationship with other individual elements initially and all other elements holistically

as the map can be viewed from key resources up to CVP’s or down CVP’s to key resources.

This model is designed to identify what is fit for purpose and where gaps exist and where the

business needs to excel to support its CVP and generate firm value. In addition this approach

provides clarity around the cause and effect relationship between each levels of the strategy map.

Table 1 – Strategy Map

FIRM VALUE

1. Premium pricing

(1 to 7)

2. Revenue & earnings growth

(1 to 7)

3. Increase benenfits & efficiencies

(1 to 7)

4. Audacious growth targets

(1 to 7)

CUSTOMER

1. Supports their clients mission

(1 to 8)

2. Efficient & dependable

(1 to 8)

3. Flexible & accommodating

(1 to 8)

4. Agile & responsive

(1 to 8)

VALUE PROPOSITION

5. Provides best value solutions

(5&8)

6. Listen, understand & deliver results

(3&4&8)

7. Long-term relationship & trusted partner

(1 to 8)

KEY

1. Acquistion

(2)

2. Commercialisation knowledge sharing &

cross selling (3&4)

3. Production

(3&4&5)

4. Logistics

(3&5)

CAPABILITIES

5. Design & development

(4&5)

6. Zero harm program (3&4)

7. Financial management

(2&3&4)

8. Integrated Solutions

(5&4)

KEY RESOURCES

1. Organisatoinal Structure

2. Strong Balance sheet

3. Human Resources

4. Multidiscipline Services

5. Innovation

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9. DEVELOPMENT PROJECTS

While this analysis is focused on the EM division, the parent (Cardno) cannot be ignored as

essentially its business model and strategic objectives have been dropped onto EM. Within that

context, I was not surprised to see a high level of fit for purpose interrelationships across the

strategy map. Apart from EM’s challenges it is logical to expect, given the overall performance of

Cardno that these effective interrelationships exist, and as such support the businesses pursuit of its

strategic objectives.

I was however initially surprised to identify that the one element that did not feed into the strategy

map in a quantifiable fashion was EM’s organisational structure (defacto Cardno structure). Based

on the resources available to me a more detailed investigation only added to my confusion.

Organisational confusion

1. Within Cardno’s organisational chart EM is classified as a separate division from an

operational perspective. However, in the financial reports there is no reference to EM, only

the International Development Assistance division.

2. The organisational chart nominates an executive general manager for International, but in

the annual report it states he has no responsibility for EM, but has responsibility for America

and Software. Within that context why is there an additional management layer between the

America and Software general manager when none exists for the other divisions. Also if he

has a responsibility for Cardno’s international business why is there no connection to the

EM division.

3. The organisational chart nominates that the executive general manager for International has

direct responsibility for the Middle East. However, in the annual report within the EM

portfolio a manager has been allocated responsibility for Europe, Middle East and Africa.

4. While responsible has been allocated for the African region in the annual report, there is no

reference to it on the organisational chart.

5. Why the disconnect with regard to the Middle East? The organisational chart indicates direct

responsibility to the executive general manager International. Yet in the annual report

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responsibility for the Middle East is claimed by the EM’s division through the manager

responsible for Europe and the Middle East.

10. PROJECTS

Through my analysis I have formed the view that Cardno’s organisational structure is impeding EM

ability to grow existing business, but more importantly break into and generate new business. As a

result I nominate the following projects. Both projects go hand in hand. The first is the primary

project, which is the key driver of value for both EM and Cardno as a whole. The second supports

the first, but is critical in establishing the first and optimising its potential.

Project one – Establish a new organisational structure for EM/Cardno.

Project two – Establish a re-branding and stakeholder engagement program to support project

one. MBA relationship:

Project one – International Management

Project two - Marketing

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11. PROJECT ONE

For this project I’ve taken the position that regarding organisational structure EM and Cardno’s

other divisions businesses are interdependent. Cardno’s business model is mirrored across divisions

with each business element a series of duplicates (mini me’s). While Cardno’s existing

organisational structure has supported business performance to date, I suggest that this structure is

impeding EM’s opportunities. Should growth through acquisition continue at its historical pace it

will reach a tipping point. In economic terms it will reach its point of diminishing return, when new

additions will further complicate and erode its ability to optimise performance and outcomes.

I would also note that while I’m suggesting a restructure, I do so in the full understanding of the

discussion in class with regard to ‘good strategy execution: more than structure’. Neilson (et al,

2008) makes the point that when company’s fail to execute its strategy, the first thing they often

think to do is restructure (quote was accompanied with a graphic depicting the deckchairs on the

Titanic and the rearranging thereof). In this instant, my recommendation is not based on that I see

Cardno failing to execute its strategy, but rather the result of growing pains.

These growing pains relate to the evolution of the business, in particular the coordination and

control through cross-border management. In my initial analysis of this problem I was uncertain as

to whether I would classify Cardno as a ‘global’ or ‘international’ organisation as elements of both

classifications were evident. However, further analysis has established Cardno as an ‘international’

firm. The restructure that I propose is to provide Cardno with an organisational structure that will

transition it from an ‘international’ to ‘transnational’ firm. This will position Cardno to maximise

existing and future opportunities and act as a foundation on which to pursue its CEO’s goal as

Number 1 in its field.

Existing organisational structure

Cardno’s and EM’s existing structure is based on a ‘Worldwide area structure’. This structure is

favoured by firms with low diversification and domestic structures based on function. Each area

tends to be autonomous with its own set of value activities. Strategic management and financial

control remains with head office. Its strength lies with its local responsiveness in its multi-domestic

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structure. However, a significant drawback which I would suggest is a risk for Cardno is that

fragmentation of the organisation can occur.

New organisational structure

My recommendation is that Cardno/EM transition from a ‘Worldwide area structure’ to a

‘Worldwide product division structure’. This structure is adopted by firms that are diversified and

have domestic structures based on product divisions. Each division has its own complete value

chain, but these are coordinated by that division worldwide. Strength lies with its ability to achieve

location and experience curve effects, and its ownership-specific attributes that can be transferred

with simultaneous introduction of knowledge sharing and innovation worldwide.

In the introduction of this model, significant work is required in its design to embed the key

advantage of the area structure model being local responsiveness. There have been examples where

the ineffective interaction between area and divisional managers has resulted in a drop in local

responsiveness.

An examination of the organisational structures of Cardno’s competitors and peers, particularly

those which Cardno aspires to emulate (Bechtel and Fluor), confirmed that a ‘worldwide product

division structure’ is being used successfully. In fact, the organisational structures of these two

competitors were decidedly focused and concise, as opposed to Cardno’s proliferation of business

names that do not immediately communicate what they do.

Methodology

1. Project analysis and management presentation (concept review team – Cardno and UQ).

2. Board approval for project – Initial project team budget established.

3. Establish a project team to evaluate the proposal. Membership to be multidisciplinary with

representatives from Cardno. I would suggest the team include external financial, strategic

and International Management, marketing, SHRM (academic) representation to support

Cardno. Project team full budget established and approved.

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4. Develop/establish a range of structure options, what ifs, strategic objectives and financial

targets etc.

5. Run financial modelling against each option. In essence treat this project as any other capital

investment analysis to establish its viability.

6. Initiate a stakeholder engagement program to seek feedback. Feed the result back into the

deliberations of the project team.

7. Determine structure, implementation plans, time lines, budget, resources (assuming all

previous hurdles have been cleared).

8. Board approval.

9. Establish a marketing and communication, engagement and an internal communication

strategy to underpin roll out.

10. Control and management – ongoing review to plans, remedial action as required.

11. Completion

12. Audit outcome – initial audit to ascertain project performance to targets (financial and

operational). Periodic audit (three monthly) – Formal audit (end of a full financial year).

Project success – Achieves the strategic and financial targets establish in point number two.

Project metrics – Revenue growth, profit growth, EM percentage of new business by customer and

country, Cardno percentage of new business by segment, optimisation level of overheads, reduced

cost to serve and revenue per employee.

The full benefits of the changes to the organisational structure change may not be realised in the

first year as with any capital investment gains these accumulate over time. However, the periodic

and formal audit schedule will determine whether there is a notable improvement trend. In addition

the audit schedule will act as an early identifier of negative trends. A project time-line has not been

nominated as it is dependent on the allocation of appropriate resources.

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12. PROJECT TWO

As discussed earlier project two is complimentary to project one. To change an organisational

structure for an organisation the size of Cardno - 8,500 employees and 250 offices globally - is a

large and complex project. It would only occur if such a charge were of a real financial benefit, as

well as positioning Cardno for continued growth. In this regard there is enormous scope for growth

within the framework of the proposed organisational structure, given that Bechtel operates this

model with 53,000 employees.

However, with a change of this magnitude it will change the face of Cardno. Accordingly, this is an

opportunity to re-establish Cardno’s brand to define it for where it wants to be in the future.

Cardno’s brand strategy, customer experience and culture must be part of one integrated program to

build a strong corporate reputation (externally and internally).

The project is designed to align the external brand, organisational values and behaviours with the

internal brand and organisational culture. For the client the brand must provide a clear external

articulation of what the brand stands for (brand promise). The brand promise will be the statement

Cardno makes to customers that articulates what they should expect for all interactions with its

people, products, services and businesses.

I’m sure that Cardno have the view that they have a brand. However, I would suggest that Cardno

has a name and a logo, but not a brand. The historical practice of tagging Cardno’s name to

acquired business is not representative of developing brand equity, but rather an example of brand

fragmentation.

Methodology

1. Project analysis and management presentation (concept review team – Cardno and UQ).

2. Board approval for project – Initial project team budget established.

3. Establish a project team to evaluate the proposal. Membership to be multidisciplinary with

representatives from Cardno. I would suggest the team include external financial, strategic

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and marketing (academic) representation to support Cardno. Project team full budget

established and approved.

4. Establish strategic framework for Cardno’s brand;

• Align the external brand, and organisational values and behaviours.

• Provide a clear external communication of what the brand stands for.

• Ensure a deep internal understanding of the brand promise and how it should be

delivered.

• Define the values and behaviours required to deliver on the brand promise

5. Develop/establish a range of brand options within its strategic framework, financial budgets

to reflect the essence of ‘Cardno’.

6. Initiate a stakeholder engagement program to seek feedback. Feed the result back into the

deliberations of the project team.

7. Determine structure, implementation plans, time lines, budget, resources (assuming all

previous hurdles have been cleared).

8. Board approval.

9. Establish a marketing and communication, engagement and organisation change

management strategy to underpin roll out.

10. Control and management – ongoing review to plans, remedial action as required.

11. Completion

12. Audit outcome – initial audit to ascertain project performance to targets (financial and

operational). Periodic audit (three monthly) – Formal audit (end of a full financial year)

Project success – Achieves the strategic and financial targets established at Board approval.

Project metrics – Customer experience (external) and cultural evaluation (internal).

A project time-line has not been nominated as it is dependent on the allocation of appropriate

resources.

Documents

Cardno-Emerging Markets