Transformation Programme of a

Leading FMCG Company in W.A

Background and Context

What was their Ambition?

What was their change framework?

How did they apply the change framework?

All’s Well that Ends Well

Table of Contents

2

The Case for Change

3

Costs

Analysis of peer competitors showed that there were

significant opportunities for ABC to:

• Reduce its marketing and overhead costs.

• Improve its operating margins.

Complexity and Scale

ABC operated as a federated business. Each

Market did things a little differently. Functions

were not fully integrated – they were not joined

up.

This meant it was difficult:

• To operate across geographic boundaries.

• Fully leverage our global scale.

• Be nimble, agile and cost-effective.

External Pressures

Their industry faced significant challenges which

threatened future growth:

• Sharp excise increases.

• Growing illicit trade in many Markets.

• Changing consumer behavior.

• Increasing regulation.

To build a truly Global business and create long-term sustainable growth, ABC Plc. needed to change the way it

operated.

Our competitors spend £536M less than we

do on Marketing and Overheads.

(Competitive Report 2008)

NTO mix will shift even more towards developing markets

An unbalanced consumer equation will constrain growth

Regulation erodes our value proposition ABC has performed well Slice by slice, the value proposition is being eroded – the end game is clear

Source: Government websites and Ministries of Health, TobaccoLabels.ca, BAT

Product

Tobacco control environment

Changing societal, consumer and industry environment

Standard sticks

Places

Packaging

Toxicant ceilings

De facto prohibition

of tobacco through

gradual de-

normalisation of the

category

The question is not

if, but when and

where. While there

may be delays or

challenges to some

regulations, there are

no obvious game

changers in sight

Display

and

Brand

Comms.

Ingredient bans

Full outdoor bans

Ban

on

one-to-one comms

Ban

on

Outdoor comms

Parks BeachesHoReCa

5.0

2.8

2006 2007 2008 2009 2010

Adjusted Operating Profit (£bn)

15% CAGR

195208

187

161146

2006 2007 2008 2009 2010

GDB volume

9% CAGR

30

41

70

59

2030

2010

Developed markets Developing Markets

CHANGING SMOKING PLEASURE

CHANGING BRAND IMAGE

HIGHER RETAIL PRICING

~£20?

PERCEIVED CUSTOMER VALUE

CHANGING SMOKING PLEASURE

CHANGING BRAND IMAGE

HIGHER RETAIL PRICING

~£20?~£20?~£20?

PERCEIVED CUSTOMER VALUE

PERCEIVED CUSTOMER VALUE

PERCEIVED CUSTOMER VALUE

Consumer value equation in the future

The changing commercial environment created a need to change

GLOBAL CASE FOR CHANGE

INTERNAL COST REVIEW

RESEARCH ANALYST REPORTS

COMPETITIVE COMPARISONS

Increase in total costs (Centre + Regions):

£500 million (2000 adj.)

£800 million (2011)

= £1200 million (54% in real terms)

...and growing

‘Back office’ is £500m more expensive than peers

DEF is £500m cheaper in Marketing and Overheads

ABC Operating Margin: 35.8% (2011)

DEF Operating Margin: 44.2% (2011)

GHI Operating Margin: 42.3% (2011)

Our cost base needs re-engineering. It is completely unacceptable that we can sit on a cost base that we know is

not the most efficient in the industry “ Company Leader, 2011

“ GLOBAL CASE FOR CHANGE

WEST AFRICA CASE FOR CHANGE: KEY CHALLENGES

INCREASING ILLICIT FIERCE COMPETITION

REGULATORY

RESTRICTIONS

EXCISE

SHOCKS INSTABILITY IN

ENVIRONMENT

This programme is a key enabler for West Africa. The programme will

deliver the standardised processes, systems and organisational capabilities

needed to simplify our business and to embed increased focus and discipline

in support our Regional growth ambitions. - Senior Executive

Background and Context

What was their Ambition?

What was their change framework?

How did they apply the change framework?

All’s Well that Ends Well

Table of Contents

7

New Operating Model It was not just about organisation structures…

Upgrading IT

systems and

building new IT

capability:

- APO, Nexus, Core

SAP, BPC, etc.

Clear governance

frameworks

- e.g. One Marketing

Transition plan to

New Org

structures Consistent master

data:

- e.g. Asset Class,

Brand, Product, Pricing

Globally and regionally

standardised KPI’s

End to End Business

process

KPIs

Key decisions & governance

Data & information

Risks & controls Organisation

design

IT architecture Fiscal &

corporate structures

Business process

8

Risks and controls

embedded in the

process

Opportunity to clean up

redundant entities

and structures

WHAT DID THE CHANGE MEAN

TO ABC?

ABC needed…:

Broader missile launches through strategic portfolio

Faster deployment and rollout of innovations

Simplified and standardised ways of working

Business insight for better decision making

A truly global enterprise, global investment decisions and resource allocation “

My expectation is to have a leaner, fitter, more agile and transformed ABC, growing with the backbone of our people,

our brands and our products. “ Company President, 2011

“ “TRANSFORMATION”

CHANGE SUPPORTING

TRANSFORMATION

Four of the top 5 are people issues Top 7 relate to people

0%20%

40%60%

Changing mind-sets and attitudes

Corporate Culture

Complexity underestimated

Shortage of resources

Lack of senior leader commitment

Lack of change know-how

Technology issues

Lack of staff motivation

Change of process

58%

49%

35%

33%

32%

20%

18%

16%

15%

Major Challenges

0% 20% 40% 60% 80% 100%

Top management sponsorship

Employee Involvement

Honest and timely communication

Corporate culture

Change Agents

Change supported by culture

Efficient training

Adjustment of performance…

Efficient organisation structure

Incentives

92%

72%

70%

65%

55%

48%

38%

36%

33%

19%

Major Successes

Source: Summary of IBM ‘Making Change Work’ research, 2010.

If the key to transforming the way we run our business was purely in deploying a single instance of ERP – we would have done this a long time ago. Executive

When I look at the Programme …. This scale of change management is new territory . Executive

CRITICAL SUCCESS FACTORS

15000+

1000 5000

100 100 GMs and Top Teams who understand how their business is changing and reinforce the right behaviours and ways of working to embed the change and deliver benefit

People trained and enabled to do their jobs effectively

Managing the transition of ~5000 people into new roles effectively and minimising disruption

Bringing 1000 leaders on board at the right time to lead the programme in the Regions

Cri

tica

l S

ucce

ss F

acto

rs

Background and Context

What was their Ambition?

What was their change framework?

How did they apply the change framework?

All’s Well that Ends Well

Table of Contents

12

Global Change Framework

Change Outcomes

Case for Change & New Direction

Leadership & Sponsorship

Stakeholder Communication & Engagement

Learning & Capability Development

• Clear case for change for programme deployment is defined and is understood by, and resonates with, all key stakeholders.

• Vision of how the programme fits within overall Company Strategy is communicated.

• People at all levels and across all Regions are committed to the change.

• People understand the role they need to play to achieve the planned benefits.

• Leaders are aligned to the

case for change and

demonstrate their visible

commitment by incorporating

the messages at Leadership

Team meetings and functional

meetings, and in discussions

with staff.

• Leaders have engaged with

stakeholders to gain their

support for the change.

• Leaders role model the

desired behaviors and ways

of working, in particular:

collaborative interaction with

impacted functions.

• People empowered for

Change, are prepared for

their role and build energy for

the change.

• Buy-in and

commitment is

achieved with critical

stakeholders,

particularly within the

Leadership Team,

Finance, Operations,

Marketing.

• All impacted

personnel are

communicated to

and engaged with,

effectively.

• Employees understand the

new processes and ways of

working ahead of the

change, and are bought into

the need for above-market

consistency of all

processes.

• Employees are trained in

the ERP and can perform

their tasks effectively on day

1 of the change.

• The required behavior

changes, such as working

collaboratively cross-

functionally and adhering to

standard processes, are

embedded.

• Learning's are captured and

shared

Change Products

Start Up Preparation Blueprint Realisation Final Prep Go Live

OD As-is vs To-be

Change Plan

Change Approach

High Level CIA

Comms Roadmap

L’ship Engagement

Approach

CRA

Change Plan

L’ship Engagement

Approach

Organisation

Transition Plan

Comms Roadmap

Detailed CIA

Superuser Approach

CRA

Change Plan

Detailed TNA

Role to Position Maps

Training Content

Comms Roadmap

L’ship Engagement

Approach

Training Schedule

CRA

Change Plan

Training Evaluation

Report

CRA

Training Evaluation

CRA

Comms Roadmap

Region AND Local

Product

Local Product

Trainer Prep Plan

Stabilisation &

embedment plan

Stabilisation &

embedment plan

Stabilisation &

embedment plan

Change Plan Activities

Change Success Factors

Personal leadership, drive, behaviour of Leadership Teams

Accurate assessment of current reality in organisation - CIA

Change is a journey, not a quick fix – “ have patience”

Ensure you have adequate and the right resources

Change strategy tied to business strategy

Engagement leads to: More Energy, Commitment and Pride

HR team that can use their initiative, knowledge and skills to

support

Global guidance & tools

Do not reinvent the wheel

Background and Context

What was their Ambition?

What was their change framework?

How did they apply the change framework?

All’s Well that Ends Well

Table of Contents

18

WAY OF WORKING: 3 TIER MODEL

3 TIERS CHANGE MANAGEMENT

Global

Regional

Local

Change Management Approach

Organisation Design Communication Approach

& Tools

Training Approach &

Tools

Change Management Planning

Organisation Design

Planning Communication Planning

Training Planning &

Execution

Change Management Execution

Organisation Design

Execution Communication Execution Training Execution

Resource Planning & Execution

WAY OF WORKING: 3 TIER MODEL

Global, Regional, Local team responsibilities

Global

Regional

• Develops global change and OD guidelines, tools and plans • Sets strategic direction, standards • Monitors and signs off global change plan • Supports the development of change capability in the regions and end markets • Supports and coordinates localisation of change plan, products and supports stage planning

in the regions • Provides day to day support to Regional Change Managers and facilitates knowledge transfer

between regions • Quality assures Regional Change Plans

• Leads the localisation of change management and OD products and supports stage planning

within the region • Responsible for all change outcomes in the region • Co-ordinates change management with non programme initiatives • Develops and implements Regional Change Plan through localisation of global change plan • Manages and coordinates Regional and Local /End Market change resources • Provides guidance and support to Local/End Market change leads • Quality assures Local/End Market team change plans • Coordinates training delivery across the region

• Responsible for all change outcomes in the End Market • Localises the Regional change plan for End Market • Delivers and implements the change plan for End Market • Co-ordinates change management with non programme initiatives • Deliver end user training • Co-ordinates Local super users

End Market

The Team was structured with Global, Regional and Local change

resources who had delineated roles

and services, however structures

were in place to ensure 2 way

communication between and

within the 3 tiers

ENGAGEMENT COMMITMENT CURVE

Change Readiness Assessment

Awareness Understands

the background

and case for

change

Understanding

of functional

changes

Blueprint

Realisation

Go-Live

Post Go-Live

Engagement/

Involvement Understands

how the

changes

impact me

Commitment Prepared and

up skilled to

do new role

Adoption Adopts new ways

of working

BELIEVE in & LEAD the Change

Share EXPERTISE

EMBRACE the New Way of Working

Early

Engagement –

Readiness

Assessment

Preparation

Awareness

“What are we doing

& Why?

• CIA, Business

Readiness

• Top Team

Engagement

• BAU Channels

• GM Speech / Message

to employees

• F2F Briefings

• Playback sessions with

Leadership Teams /

Top Teams

• Stakeholder

Engagement

• Leadership Team

Engagement for

Business Readiness

Plan Activities, Mobilise

People, Identify Changes

Preparation

STAKEHOLDER & EMPLOYEE

ENGAGEMENT

Understanding

“This is the glue for

our ambition to be an

integrated

enterprise”

• Fit Gap Workshop

• Detailed CIA

• Direct Discussions

• BAU Channels Comms

• Animation

Blueprint

Discuss Issues,

Decide & Design Solutions

Engagement /

Involvement

“We’re all now part of the

programme in one way or

another!”

• Follow-up of Detailed CIA

• Role to Position Mapping (SAP &

TOM positions)

• HRBP & Line Mgr.

Communications

• User Acceptance Testing

• Training Trainers, Super users

• Functional Engagements &

Roadshows

• Business Briefings

• F2F Engagement / Stakeholder

Management

• Factsheets

• Process Videos

• 100 Day Countdown

Realisation

Build the Solutions

(ERP, Legacy Applications) Testing

Commitment

“We’ve reached

the summit - we

know we can do

this!”

• Training (Users)

• Go Live Campaign

(Internal/External)

Final Prep

Training

Adoption

“Support growth!”

“Deliver better

integrated

processes, system,

WoW and above-

market

Collaboration”

“ We are more

efficient, effective,

nimble & we

reached our target”

• Lessons Learned

HyperCare

KEY MILESTONES – PART 1

Step 2:

Direct design

Discussions

Step 3:

Detail CIA

Step 5: Transition

Management

Step 4:

Detailed CIA 2

OD

Step 6:

Organisation

Transition Plan

Step 7:

Role to Position

Mapping

Realisation

Step 1:

Base Change

and Comms plan

Start Up & Prep

Coaching, support and QA: 1. Help to provide business context 2. QA Stakeholder review 3. Agree on cadence of Leadership Team engagement

Coaching, support and QA: 1. Leadership sponsorship 2. Understand objectives 3. Satisfy yourselves orgn is prepared

Preparation, participation and QA: 1. Understand approach 2. Understand impacts to be explored 3. Agree treatment of OD 4. Provide input on HR policy & practice and activities to address impacts 5. Review outputs

Preparation and participation: 1. As per steps 1 – 5 for Detailed CIA part 1 2. Understand design principles 3. Collate As Is & To Be Organisation 4. HR Lead discussion on core differences / impacts 5. Agree on integration methodology to provide full picture

Preparation, participation and QA : 1. Understand approach 2. Ramp up planning 3. External partners management 4. Cutover planning 5. Contingency planning (BCP) 6. Go / No Go decision control

Lead: 1. Determine key capability, skills and knowledge requirements 2. Determine implementation approach 3. Plan consultation requirements 4. Gain agreement of senior stakeholders 5. Update organisation transition plan

Coaching, participation and QA : 1. Provision of relevant employee data 2. Provision of To Be org structures 3. Contribute to discussions through AS IS and To Be role knowledge 4. QA of users to role mapping 5. Assist with positioning of potential changes to access for users

Blueprint

Step 9:

Oversight on execution

Change & Comms Org transition

Step 10:

Training Roll out

Promised Land

Step 8:

Training plan

Realisation

Step 11:

Cutover &

Preparation

Step 12:

Embedding the

Change

Step 8:

Training Needs

Analysis

Coaching, support and QA: 1. QA of ongoing change and comms 2. Execution of organisation journey 3. Apprise Change Lead of competing business priorities (course correction)

KEY MILESTONES – PART 2

Coaching, support and QA: 1. Guidance on local context 2. Determine non-ERP requirements 3. Coach on capability framework and assessment 4. Assist with Super User Approach

Coaching, support and QA: 1. QA of Plan 2. Determine HR resource implications 3. Assist with buy in of Leadership Teams

Coaching, support and QA: 1.Understand rollout plan 2. Attend / encourage session attendance 3. Sponsor Leadership Team kick off sessions 4. Review training effectiveness 5. Provide advice and feedback

Coach & support: 1.Participate in cutover preparation planning meetings 2. QA change activities and comms 3. Review and update HR BCP 4. Sponsor LT involvement and visibility

Coaching, support and QA: 1. Training effectiveness review 2. Ensure HR policies / principles lock in desired behaviours 3. Ongoing review with FLTs 4. Update plans to address impacts

Go Live

Final Prep

Background and Context

What was their Ambition?

What was their change framework?

How did they apply the change framework?

All’s Well that Ends Well

Table of Contents

25

Our future business became faster & more effective

What did a Post-deployment world look like?

Global process standardisation Disciplined, streamlined and consistent processes for better global collaboration

More focused, higher value Centres of Expertise Consolidated strategic capability in global centres of expertise more effectively servicing market needs. Increased capability and specialisation of roles

More efficient and value-adding shared services Concentration of increasing amounts of transactional effort into efficient & productive shared service centres

Reliable, integrated data and information Reduction in reporting cycles meant End Markets could make decisions more quickly and in a more informed way

Simplified, end market-focused organisation Improved and focused support above market for End Markets

A truly global enterprise able to leverage its

global scale Greater scale in the Supply Chain

Innovations deployed faster

and wider creating organic

growth

Better and more focused brand portfolio in key

markets

Global brand standards and

product specifications

Accurate consolidated

data facilitating better decision

making Greater visibility of total costs

Optimised organisation

structures

Extended use of Shared Services

Automation of manual

processes and transactions

End Markets focused on

customers and delivery

An agile organisation able to adapt fast to change

Business benefits

The project delivered

a number of business

benefits for ABC

Effective

Nimble

Lean

Key Success Factors

During project execution:

– Visible leadership ownership & support

– Organisation continuously kept well informed and engaged

– Employee involvement in shaping the change in order to build buy-in &

ownership for business change

– Successfully deliver the key project milestones and ultimately land the

programme with minimal business disruption

Post Go-Live:

– Ensure programme benefits are fully delivered

– Full clarity in terms of roles, responsibilities & new ways of working

– Changes & new ways of working are fully embedded and owned by the

business

– Employees are well equipped in terms of skills & capabilities to perform

optimally at their jobs

Key change & communication

principles

Change management approach aligned to global change framework &

consistent with the regional change approach

Programme to be maintained as a critical component of the business &

NOT separate from the rest of the business

Leverage on existing employee engagement platforms/channels within

the End Market

Leverage on available communication & engagement collateral from

Global & Regional OC&C platforms

Messaging to be targeted & specific to relevant stakeholder groups

Messaging to be centrally coordinated but delivered across various

levels:

– Area-wide

– Function-specific

– Process-relevant

Delivering changes across the business

Rapid deployment

Enabling seamless transition to BAU

On time, quality, cost and scope

Maximising and accelerating of benefits

No surprises!

A Global Transformation Programme “Adopt not Adapt”

Global direction

Regionally planned

End Market execution

Efficiently managed and controlled

Consistent and repeatable

Growing capability and skills

Managing change holistically

… And the Dream Came True