European Executive Barometers
looking beyond the crisis CIO | CFO | Hr | SRM Barometers
EUROPEAN EXECUTIVE BAROMETERs
looking beyond the crisis CIO | CFO | Hr | SRM Barometers
© Copyright CSC 2010. All rights reserved.
We would like to thank all the executives and experts for taking the time to answer our questions, take part in our round-table debates and to be available for in-depth interviews. Without their valuable insights this book would not have been possible. This work is the fruit of the collaboration of various CSC teams, under the direction of Marc Bensoussan with the participation of Grégory Cann, Erik Oosthuizen, Frédéric Pichard, Maryse Leca, Jan Degraef, Coralie Bonnet and Megan Shaw. Art direction: Montserrat Martinez Zacarias
Sources: Michael Treacy & Fred Wiersema, The Discipline of Market Leaders, 1997, Addison-Wesley Pub. Co. Michael Hammer & James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (3rd Revised edition), 2001, Nicholas Brealey Publishing
CSC IN TOUCH WITH CURRENT TRENDS Within the framework of its I.D.E.A.S programme (Inspiration, Debate, Executive, Annual Surveys). CSC carries out a number of “barometers” every year to analyse trends and perspectives from key roles within the boardroom (human resources, finance, IT, procurement…) at the European level. Each of these studies, carried out with the assistance of independent survey institutions (IFOP and TNS Sofres), involve the participation of hundreds of managers from the largest businesses and public administrations in Europe. The results of these studies are revealed during high level events, organized in different European cities (Paris, Madrid, Barcelona, Milan, Brussels, Lisbon, etc.), and are also relayed by partners from the media (Les Echos, La Tribune, Expansion, Liaisons Sociales, Il Sole 24 ORE, etc.) and from academia (universities and elite schools).
CRISis or change
14. a time for transformation 16. CHOOSING A TRANSFORMATION STRATEGY 18. ADHERING TO A VALUE DISCIPLINE 22. IMPLEMENTING CHOICES: PERMANENT CHANGE
2 1 1 3
KNOWING WHEN TO EVOLVE
European leaders reinvent business 2009 - 2010 IN PICTURES
36. ANALYSIS 36. Franco Bassanini. Faster, simpler, more efficient: A time of disruption for the Public Sector
TRENDS AND PERSPECTIVES IN INFORMATION SYSTEMS
40. SUMMARY - CIO BAROMETER 45. TESTIMONIALS 46. etienne Bertin. IT Director - FNAC 48. Arnaud Lescroart. Director of product movements and IT systems - Printemps 50. Carlo Privitera. Group CIO - Luxottica Group 52. Alessandro Musumeci. CIO - Ferrovie dello Stato 54. Gianluigi Castelli. CIO - ENI Group 56. Rogério Campos Henriques. CIO - Fidelidade Mundial 58. Alfonso Álvarez. CIO - Aldesa Group 60. Edouard Odier et Jean-Christophe Lalanne. CIO and SVP of the CIO Office and Deputy CIO - Air France - KLM 63. ANALYSIS 64. Digital Revolution - Seven Trends for an Innovative New World revolution
TABLE OF CONTENTS 5 1
TRENDS AND perspectives FOR FINANCE DEPARTMENTS
72. SUMMARY - CFO BAROMETER 77. TESTIMONIALS 78. Thierry Moulonguet. Executive Vice President, CFO - Renault SAS 80. Bertrand Badré. Group CFO - Crédit Agricole SA Group 82. Jacques Stern. Deputy CEO in charge of Accor Services and Finance - Accor Group 84. Michel Baise. CFO- Millennium BCP Fortis 86. Michel Grandjean. Vice President, CFO - AGC Europe 88. Arnold De Brauwer. CFO - SNCB 90. Ennio La Monica. CFO - Banque Carige 92. Giuseppe Gullo. CFO - Groupe Mariella Burani
TRENDS AND PERSPECTIVES IN HUMAN RESOURCES
96. SUMMARY - HR BAROMETER 100. TESTIMONIALS 102. Ángel Luís Cabal. HR Director - Government of the Principality of Asturias 104. Alessandro Salustri. HR Director - British Telecom Italia 106. Véronique Rouzaud. Senior Vice President, Human Resources - Veolia 108. Laurence Frenkiel. HR Director - Grand Optical 110. Charles-Henri Besseyre des Horts. Associate Professor, Management and Human Resources Department - HEC Group 112. Jean-Paul Charlez. HR Director - Etam Group
tRENDS and perspectives WITHIN PROCUREMENT AND LOGISTICS DEPARTMENTS
116. SUMMARY - SRM BAROMETER 121. TESTIMONIALS 122. Alain Page Lécuyer. Group procurement Director - AXA 124. Pascal Ferte. Procurement Director - Sanofi - Aventis 126. Mauro Charrière. Production and logistics Director - Pininfarina Spa 128. Marco Facciano. Logistics Director - Calvin Klein Jeans 130. Stefano Zecchinato. Operations Director - Marelli Motori Spa 132. Aldo Previtali. Supply chain Director - Carrier Spa 135. ANALYSIS 136. The seventh annual global survey of supply chain progress 138. William Duncan. Supply Chain brain
SOLVING THE EQUATIONS OF A CHANGING WORLD 144. Taking action wherever change requires results 146. The story of CSC. 50 years strong 148. csc, WORLDWIDE PRESENCE, IN-DEPTH EXPERTISE 150. OUR OFFERINGS 152. TURNING BRIGHT IDEAS INTO BUSINESS SOLUTIONS
EUROPEAN EXECUTIVE BAROMETERs
"Boldness rewards those who know how to seize the opportunity." Marcel Proust, in Search of Lost Time
When businesses bask in the sunshine of fair weather, it is difficult to distinguish one from another. What really sets them apart is the course they are steering through a storm when it hits. First, the wind rises. Being overly cautious will drive some to neglect both their internal resources and their customers. The more daring will step up their efforts to reassure their disoriented customers and rally their teams against the swell, encouraging them to work in unison. Then the storm rages. When the environment is changing and the ship is pitching about in heavy seas, transformation is the best way to avoid sinking. To fail to overcome the fear of change is to risk drifting, rudderless, without the strength or momentum to prepare for the return of a more favourable economic climate. Being daring, turning to innovation and supporting the shipâ€™s crew make it possible to stay on course and arrive at safe harbour better adapted to the new environment.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
Crisis or change?
Crisis or change? The beginning of the year will be decisive for many businesses. They will have to withstand not only the crisis, but also look beyond it to prepare for the future. Because underneath the surface of the crisis, obscured by alarmist prophets of doom or, at the other extreme, overly optimistic oracles, profound shifts are underway: shifts in the relationships between businesses and their customers, shifts in how companies manage their performance and shifts in the management team itselfâ€Ś Those at the helm are well aware that a crisis is first and foremost a time in which to make tough choicesâ€Ś and stick to them. The time for change has come, and with it the time for radical reform.
Crisis or change?
A TIME FOR TRANSFORMATION Business activity has decreased, employment is stagnating and morale is at its lowest: never before has a stock market crisis turned into an economic crisis with such speed. However, the greatest mistake would undoubtedly be to focus only on the figures and viewpoints broadcast by the media in recent months, as their tone is often too alarmist or even too optimistic at times. Because underneath the breathtaking slowdown of the economy a more profound movement is becoming apparent: a shift that challenges the current business models and economic thinking. With this in mind, simply burying one’s head in the sand and waiting for the storm to pass seems a rather dangerous strategy.
Strategic changes and new models
The new meaning of performance
Careful examination shows that the current situation is the result of a series of disruptions. The first of these, in the fall of 2008, was a disruption in sources of financing: the markets, and later the banks, increased the cost of credit, precipitating the crisis we are experiencing today. This financial disruption was followed by strategic disruption, since in this same period 98% of company directors believed they would be forced to revise their business model in the next three years!
New models call for new indicators. Performance measurement has changed radically too. “In the space of just a few months, indicators went from being externally focused to being internally focused – and from being centred on longterm profitability to cash flow optimisation, productivity and human resources,” explains Marc Bensoussan, Senior Vice President and COO of CSC for South and West Europe.
Along with the strategic disruption came operational disruption. Faced with a severe downturn in business, companies had to rapidly adapt under pressure by reducing their costs and staffing levels, but also by rethinking their relationships with customers, suppliers and competitors. “In all of these areas, the crisis has accelerated the rate of change in an exceptional manner,” says Claude Czechowski, President and CEO of CSC for South and West Europe. Who could have imagined just a few months ago that Fiat in Italy would merge with Chrysler in United States? Or that two competing banks, the Société Générale and the Crédit Agricole, would merge their asset management divisions? Who would have thought that after years of growth and manufacturing to order, the automotive industry would revert to selling from stock in just a few months? In all sectors, new economic and business models are taking hold.
In this context more than ever before, companies need integrated information systems that are capable of quickly measuring performance and helping those at the helm steer a safe course through the storm. CFOs play an important role in this: they know how much leeway the company has and they have in-depth knowledge of the processes and methods for measuring its effectiveness. Some believe that because of this the CFO (who, like the CIO, tends to be closer to operations) is the most strategically placed executive in the company to create a new business model and to monitor its progress with appropriate performance indicators.
"the crisis has accelerated the rate of change in an exceptional manner" cLAUDE CZECHOWSKI, President and CEO South & West Europe President, Global Consulting / Technology / ERP Practices
A cultural – and technological – shift? A sign of just how profound the changes underway are is the fact that many companies are also experiencing a cultural shift. In their management practices, first of all. “During a storm, the companies that remain on the crest of the wave are often the ones that have understood that they need to think as a team rather than in terms of hierarchy," explains Marc Bensoussan. The other cultural shift has to do with technology and the new uses for it. The advent of the internet and mobile technologies has already drastically changed the way companies function. The impact of social networks on management is beginning to be felt… And other evolutions are on the way: video, for example, which will replace text for many purposes; or the development of artificial intelligence, which will have a significant impact on all areas of projecting and decision making. Of all the shifts, these are undoubtedly the most profound. They are unavoidable and affect all areas of business. Just as in any period of major transformation, companies that want to remain competitive are therefore faced with a vital choice: to adapt as best they can while being subjected to technological and cultural shifts… or to fully integrate both in order to invent a new model – their own model – and come out of the crisis on top.
Crisis? Not for everyone! Hard-discount distributors and McDonald's are experiencing recordbreaking years, and the Logan is a success: the “low cost” industry is alive and well in Europe. Luxury items have not suffered either: Fauchon’s sales figures increased by 33% during the holiday season in late 2008! And let’s not forget “comfort” products such as chocolate (+35% in 2008), gossip magazines, betting on horse races, electronic distribution, organically grown products, and certain innovations such as the iPhone and the Nintendo Wii game console – all were unaffected by the crisis. This confirms what we already knew: crises are first and foremost trend accelerators. And in the current tense situation, differentiation pays off.
CHOOSING A TRANSFORMATION STRATEGY All transformation necessarily entails a breakaway or a radical reform. For those at the helm, the biggest challenge in periods of transformation lies in clever handling of both the magnifying glass (to save money and immediately find room to manoeuvre) and the telescope (for strategic long-term vision). This is a difficult but crucial exercise. Provided, of course, that the telescope is properly focused on the client and that the differentiation strategy is found, since from this will stem all the major decisions that follow.
Betting on change: a must In the first few months of the crisis, there was one question on everyone's lips: How do we to react? Many companies were tempted to adopt the cost killing approach. Caution is in order, however: although cost management is more crucial than ever, blindly slashing costs can cripple the company later when business picks up again, or cause it irreparable damage. In other words: companies must reef the sails to survive the storm, but must also prepare the ship to move forward again when calmer seas return. They must make the necessary savings in the short term, but guard against sacrificing investments that are essential for the medium term. Preparing for the post-crisis period is without a doubt the greatest challenge companies are facing in 2010. “The companies that adapt today will be the first to bounce back and will be well ahead of their competitors in the new economic environment," says Claude Czechowski. The other major challenge lies in managing change in times of economic slowdown. Failing to act is not an option. It is therefore important to have created a process for instigating change – preferably before the crisis hit.
The new rules of competition Different customers seek different kinds of value. Because a company can't be the best at everything, it must choose its customers, properly identify the value offered to them, and constantly increase this value by choosing a business model that is uniquely linked to it. According to Michael Treacy & Fred Wiersema, in their the book The Discipline of Market Leaders*, by refusing to choose, companies adopt a hybrid business model that does a little of everything at once and is a source of confusion, stress and misspent energy. This equates to steering a ship without a rudder, with no clear way to resolve conflicts or set priorities. Looking out for the company first, instead of the customers, complicates management and wastes time. This is how a business can find itself adrift on the stormy seas of new competition.
*Michael Treacy & Fred Wiersema, The Discipline of Market Leaders, 1997, Addison-Wesley Pub. Co
Setting a new course and bringing new impetus during the crisis without any prior preparation is extremely dangerous and in all likelihood even impossible. If teams have already begun a process of change before the economic downturn, it will be easier to speed up or slow down the rate of change according to the company's situation. And it will be even easier to choose a transformation strategy, starting with a clear differentiation strategy.
Deciding on a differentiation strategy When faced with shifts in the environment, companies must prepare their own strategic change. This doesn’t mean changing everything, of course, but rather clearly defining the company’s products and services in order to stand out from competitors and maximise performance. To do this, a clear differentiation strategy must be developed along one of the three following lines: Operational excellence (cost): products positioned in line with the market average, at the best price, with a minimum of hassle. The operational excellence product range is above all simple. The hard-discount sector or IKEA, for example, have led the way in this area: it can be profitable to reduce service levels if the price/quality ratio of the products remains attractive, if purchasing is made easy and if the system is infallible. Product leadership (creativity): putting technology to new uses, inventing new services, focusing on userfriendliness or the environment – rational (but genuine) innovation makes all the difference as long as the company always stays one step ahead. For instance, Apple competes on performance, not on price. Intimacy (customer): it is vital for every company to know its customers and their needs. Some make this a true asset – with appropriate targeting, efficient management of customer relationships, tailored offers or new distribution networks. Companies that cultivate intimacy with their customers, such as the Accor hotel chain with its exclusive A-Club programme, are not interested in oneoff transactions. They build relationships.
Cost, customer or creativity: these three Cs determine the options available to businesses for withstanding the crisis, and beyond that for overhauling their business model. These choices must be made now. Later on they will determine who will be ahead of the game once the economic climate allows for improved visibility.
An essential choice Of course, while reading this, some are already thinking that their company would be better off betting on all fronts (on the basis that to choose means to also to exclude). The Leading Edge Forum, CSC’s strategic planning and research centre, has shown that companies that are unable to choose are unable to reach a level of excellence in any domain. Their efforts are dispersed and their position is threatened from all sides by competitors or newcomers with a clear differentiation strategy. Furthermore, customers know how to identify the three types of value and generally don’t expect to get them all at once from a single supplier. According to the researchers, “the choice is difficult, because it means concentrating all efforts on what is essential. But the lesson drawn from market leaders is clear: they create a genuine difference in one value discipline while remaining competitive in the two others.”
Building a new business model and adapting the processes Choosing a differentiation strategy (or value proposition) naturally leads to business models that are very different in terms of organisation, production processes, customer relationships, management, and of course information systems. Of course, different value propositions require different business processes. Take distribution policy, for example. The operational excellence scenario (differentiation through cost) requires a single procurement department and standardised retail outlets that are usually self-service. The customer intimacy scenario, on the other hand, requires a more flexible organisation in which the decision making power lies much closer to the end client and where orders are taken by salespeople who have some room to negotiate. These arguments are valid for all activities in the company – with one leitmotiv: once the model is chosen, it must be adhered to. That is the challenge of the value discipline.
for true market leaders Rule n°1: Offer the best product range on the market by excelling in one of the value disciplines Market leaders start by creating a value proposition that is appealing and unmatched. Only then do they seek to achieve efficiency in the other two areas. Rule n°2: Maintain a degree of competitiveness in the other value disciplines There is no need to strive to be the best in all areas – it is wiser instead to ensure that any drop in performance in a secondary value does not damage the primary customer value. Rule n°3: Dominate your market by improving your value from year to year Market leaders are threatened by both the companies that try to copy their models and those that increase expectations related to the other types of value. The solution? Constantly maintain efforts and raise customer expectations while raising the value standards. To remain a market leader, it is not enough for a company to offer the best product, the best price, or the best overall solution on the market today: it must be able to offer them today, tomorrow and the day after.
Rule n°4: Build a business model that is dedicated to creating unbeatable value
Continuous improvement of the business model can make the product range offered by competitors much less appealing – or even ruin it by making it obsolete. The business model is the ultimate weapon of the leading company that wants to dominate its market.
ADHERING TO A VALUE DISCIPLINE Choosing a value proposition is an act of renewal. It is not merely a new communication strategy, but a genuine movement that must drive the whole company. The value proposition gives meaning to the company’s strategic orientation and to all subsequent decisions, by imposing a road map or discipline on all areas of the business. This “value discipline” pervades the entire company, from its skills to its culture. It defines what the company does, and therefore what the company is.
DIVERSITY IS THE ENEMY OF EFFICIENCY. THE RIGHT STRATEGY IS THUS NOT TO OFFER THE BEST SERVICE, BUT RATHER TO STICK TO SIMPLE PRACTICES.
The operational excellence discipline Operational excellence has an historical model: Henry Ford. Shaking up the pre-existing standards of cost and performance, this famous manufacturer built his industrial empire on a simple idea that he instilled throughout his company: production must be efficient. Of course, nowadays Ford has been surpassed in many areas. But the core of his model remains the key to success: simplicity, collective discipline, and of course the ability to break away from established rules to accomplish what many (and sometimes even the customers) thought was impossible.
Customer value: price, reliability, speed Operational excellence is based on cost reduction. But it cannot be reduced to this aspect only. First, today’s (and tomorrow's) companies consider the total cost of their product: in addition to reducing production cost, they aim to reduce cost of usage by also fine tuning the reliability of the product or the speed of service. Their goal: eliminate the material and psychological (inconvenience, annoyance, etc.) costs linked to the purchase. The basis of the model: standardisation Companies aiming for operational excellence organise themselves around standardised means and highly efficient procedures. It is no coincidence that all Wal-Mart and IKEA stores look alike. But that is not enough. Companies also have to stay focused on the discipline chosen and resist the urge to diversify or upgrade their product range. Tempted to meet the requirements of other customers, undisciplined companies often allow their products and services to proliferate by creating variations for myriad customer segments, and gradually they lose the efficiency that made them unique. On the other hand, disciplined companies know that diversity comes at a cost. And controlling costs is a cardinal virtue of any operational excellence discipline. HR management: a focus on teamwork “It’s the team that counts.” These companies reward the teams that contribute to keeping the company’s promise. At McDonald’s, the employee of the year is named “best crew member” and, though wages are low, the company knows how to recognise those with potential for the future and helps them progress gradually through a clearly established hierarchy. Transaction effectiveness
to eliminate superfluous processes and improve the logistics flow from order through to delivery. Purchase approvals, orders and stock replenishing are replaced by new continuous resupply processes. Bills of lading and confirmations of receipt have already disappeared. Information technologies used to their full capability The new rules of competition make operational excellence necessary for many companies. It is made possible by information systems, which are both the nervous system and the backbone of the company. Decision making tools have become widespread within companies that have chosen this value discipline. Today they are integrating mobile technologies before their competitors, in order to both extend their control and improve their customer service. Customer service: the excellence of simplicity Because poor service can increase the total perceived cost for the customer, companies aiming for operational excellence have shifted their attention to this new area, focusing on three rules: the service must be accessible, flawless and immediate. If we think back on all the minor hassles that hiring a car once involved (a task that is now extremely simple), we can truly measure the progress made in just a few years. A word of caution, however: here again, diversity is the enemy of efficiency. The right strategy is thus not to offer the best service, but rather to uphold simple practices. And if necessary have customers adapt themselves to the company: after all, haven’t fast food restaurants managed to have their teenage customers clear their tables even though they refuse to do so at home? Similarly, low cost airline customers have gotten into the habit of eating before or after flights rather than during.
Solutions must constantly be found to improve the model. Today, vertical integration is being replaced by virtual integration, where companies and their suppliers pool their resources (and integrate their information systems)
The discipline of innovation At the end of the 19th century, Thomas Edison invented the first real product development process – a way to create one invention after another and then transform these into useful and marketable objects. His Menlo Park laboratory has been used as a model by the R&D departments of companies focused on product leadership such as Apple and BMW. They have revised and perfected the model, keeping in mind Edison’s great principle: “Genius is 1% inspiration and 99% perspiration.”
Customer value: (genuine) innovation! How many of the “new” products presented each day can really be considered innovations? From new formats to new look packaging and products, through to chocolateguava perfumes… customers quickly tire of superfluous variations and embellishments without value. To achieve product leadership, a company must be capable of creating a regular flow of genuine innovations, of the type that people wait for with bated breath and that forge lifestyles; innovations that offer a product experience combining pleasure, performance and identification. At the heart of the model: vision and talent Before starting to develop a new product, Edison would begin by providing an inspiring vision of it. He wasn’t the first to invent a light-emitting device, but he saw further ahead than his contemporaries: he wasn’t looking to invent the light bulb; he wanted to be able to light up an entire city. Furthermore, Edison had surrounded himself with associates who were naturally curious and motivated by the pursuit of virtually impossible goals. Nowadays, all product leadership companies know that it is crucial to have talented employees with ambitious and visionary ideas; employees who are often driven by a common goal expressed very simply. Being a step ahead – and preparing the market Product leadership companies must prepare markets so that they will accept radical innovations. And yet these companies know that history is littered with the debts of inventors whose only mistake was to be right too soon. Their challenge is to both invent and accelerate the rate at which an invention is taken up. They look beyond the market, but without ever losing sight of it. Flexible structures, robust processes By trying to box in creativity too much, eventually it runs dry. Innovative companies must therefore adopt flexible structures. Teams must be multidisciplinary in order to plan all aspects of the product as early on as the development phase (production, marketing, after-sales service, etc.).
The price of inequality “Companies that truly want to achieve intimacy with their customers must focus all their resources on one choice: rather than a superfluous service ‘with added value’, they must offer their clients performance that is the result of genuine expertise, a willingness to share in their risks, and true tailoring of products and services. They must be confident enough to sell these at a higher price, knowing that the bill is justified down to the very last cent.”
HR as an essential resource Product leadership companies never forget that it is individuals who create innovation. They look for engineers who are creative and capable of easily moving from one project to another. They know how to increase the potential of their staff members by presenting them with ambitious challenges, while providing them with material comforts that stimulate imagination – as illustrated by the Google offices, for example. Life cycles to manage Brilliant engineers on the one hand and experts in launching products on the other: this is the winning combination for product leadership. It is the combination that allows a brand to sell a product that truly promises to bring value to customers. But innovation always ends up being matched. Gradually its value decreases, and its price with it. Market leaders don’t hesitate to prolong the life of an innovation by launching extensions and other variations. At the same time, however, they know how to keep one step ahead by quietly preparing the next product that will make the previous one obsolete as soon as it is copied by the competition.
The customer intimacy discipline We could trace customer intimacy back to the early days of trading or to the development of tailored services – or to the bellboy of a major hotel, who is willing to go to any lengths to anticipate the requirements of regular customers. But what exactly does this intimacy mean in a time of massive shifts?
The customer value: the solution to your needs
Balanced talent management
The lowest price or the best product is not a guarantee of value for customers if it only addresses part of their requirements: if the low cost flight takes them to an airport that is too far from their destination, if a software application doesn’t allow them to reorganise their management processes, or if they do not have the necessary skills to use the product. Companies focused on customer intimacy know how to remedy these deficiencies better than their competitors. Their main characteristic: an exclusive range of high quality services that allow their customers to use their products in the best possible conditions. This discipline involves optimising the customer experience and, in addition, offering each customer the solution that matches their current needs.
The key challenge for companies focused on customer intimacy is to gather, coordinate and keep talented staff members at their customers’ service. This challenge is particularly great in the consulting field, for example, where the most sought-after personalities are those who know how to materialise change within the client company. Customer intimate companies prefer to hire versatile candidates who are capable of adapting themselves to each customer and are not afraid (rather the opposite) to stray from their job description.
The basis of the model: knowing the customer Customer intimacy has acquired new meaning over the last few years with database development, behavioural segmentation, and all the possibilities for customising products. One-to-one marketing and product co-creation are the new standards of a customer intimacy that still only in an embryonic phase. A decentralised organisation It’s a tautology: decentralised businesses are closer to their customers. This proximity is also evident in the autonomy given to staff members who are in direct or virtual contact with the customer. It is also the model for any store that focuses primarily on service and where a skilled sales force is therefore essential. Furthermore, a store might welcome its customers royally, but be unable to deliver on time. Where is the value for the customer then? In B2B, just as in B2C, customer intimacy is not only a matter of contact; it is a relationship that involves the whole company.
Production systems that are often virtual Value discipline leaders rarely inherently possess the capabilities they put at their customers' disposal. Their strength lies first and foremost in their expertise and their ability to coordinate skills to offer solutions. In a way, their means of production are virtual and therefore potentially infinite. This formula enables these companies to turn to partners on behalf of their customers. Strong relationships with select customers Customer intimate companies calculate the value of a customer over the long term. They avoid occasional customers and concentrate their efforts (and therefore their value) on a regular and almost select customer base. When it comes to B2B services, naturally the aim is to strengthen relationships to develop existing accounts. In retail, the key is to foster customer loyalty. Without losing sight of the fact that a satisfied customer is not always loyal: a strong and long-lasting relationship must be built up and a company must sell the relationship as well as the goods.
IMPLEMENTING CHOICES: PERMANENT CHANGE Above all, choosing the differentiation value requires the ability to diagnose and the courage to decide. On the other hand, adhering to a value discipline requires changes that are often profound because they not only affect what the company does, but also what the company is. In some respects, an honest diagnosis will show that to truly be a market leader, it is not enough for the company to improve existing processes; it must fully reconsider them and reinvent them and, in the process, eliminate the activities that hinder efficiency. Isn’t that precisely the very essence of reengineering, of transforming a company?
Having made its first appearance in the 1980s and become widespread in the early 90s, reengineering is making a strong comeback. This is not surprising, given that it is not a way of managing, but rather a way of thinking that is particularly suited to periods of massive change. Today it is thus more relevant than ever before to thoroughly question all processes. It is by asking the real questions now that companies can prepare for a better future. In short, each company must invent its own way out of the crisis.
The thorough questioning of all processes Reengineering first appeared in the 1980s and owed its impressive success to the crisis of the early 90s, which forced companies to completely rethink their models by destroying the work structures that had resulted from the industrial revolution, in order to adopt processes that were better suited to the modern economy. Process reengineering led companies to reinvent themselves based on processes rather than individual tasks. Process-based management gradually became standard: ERP systems became widespread and business process management solutions (BPM) are now integrated into the core of information systems. “Thanks to BPM technologies, companies can now implement complex processes they only could have dreamed of during the first wave of
reengineering,” says Marc Bensoussan. “Based on a crossfunctional view and a thorough questioning of all processes, this method can make a difference now more than ever.”
A guide for the changes to come “Some corporations aren’t performing well today because they performed well yesterday,” wrote Michael Hammer and James Champy in Reengineering the Corporation… in 1993! Doesn't that which was true before the various massive shifts still apply today? Periods of massive shifts are an opportunity for companies to question not only what they do, but also what they are. They push companies to review their approach in a different way, and to abandon long-established procedures in order to take a fresh look at their business and rethink the processes necessary for providing their customers with products or services that have true value.
Information systems at the heart of company transformation Many companies make the mistake of planning their information technology infrastructure taking into account only their existing processes. They question themselves on how to use new technologies to reinforce what they already do. And yet, the real power of technology lies not in improving what already exists, but rather in allowing companies to explore new possibilities, to pursue more ambitious goals, to create other ways of working and thinking, or in other words: to reconfigure themselves. Companies must turn the use of technology into a key skill. Time is needed to analyse and understand the implications of such innovations, in order to imagine what can be done with them and in order to “sell” new uses to staff members and prepare their implementation. This is the time naturally required for a cycle of change.
"Thanks to BPM technologies, companies can now implement complex processes they only could have dreamed of during the first wave of reengineering" MARC BENSOUSSAN, Senior Vice-president and COO South & West Europe
A philosophy of change The reengineering vision was a philosophy of permanent change, a concept which has since become a leitmotiv for many companies. But in how many companies has change really become a culture? It all starts with a vision of the company and of its value proposition. A vision includes both measurable objectives and instruments of measure. It is qualified as “strong" when it contributes to transforming the fundamentals of competition in the sector. Then the processes must be remodelled and the changes implemented. Invention and pragmatism, technology and human organisations, creativity and synthesis: these are the elements of reengineering that will allow companies to come through the crisis in good shape, ready for future successes. With one focus: the customer. With one vision: the value proposition. And with one discipline: coherence in implementing a clear and established choice.
CSC and reengineering, 20 years of history Initiated by CSC in the 1980s, the process reengineering concept led to a pioneering article published in 1990 in the Harvard Business Review: “Reengineering work: don’t automate, obliterate.” In 1993, "Reengineering the Corporation" was published, co-authored by Michael Hammer and James Champy, the former president of CSC's consulting division.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
Knowing when to evolve
Knowing when to evolve When the environment changes, it is misguided – not to say risky – not to foresee the capability to evolve with it. The dinosaurs could vouch for that – if only they had been able to change in time. What was true for the diplodocus and tyrannosaurus rex in ages past is still true for companies today. In terms of already starting to lay the foundations for the post-crisis world, change is an obligation – and an excellent opportunity – to prepare for the economic recovery. Well executed change is a good indicator of future success. So, how best to set a change process in motion? What are the critical success factors for transforming processes and organisations? How to obtain buy-in and secure commitment from teams?
"Players in all sectors realise that well executed transformation is a good indicator of business success and an essential foundation on which to build the future." JAN DEGRAEF, partner at CSC in Belgium, in charge of the change management consulting practice.
to maintain a significant competitive advantage; the search for innovative methods to do so then becomes a real priority for management.” Change management methodologies are designed to provide a framework for and guide this transformation, by setting the pace, creating meaning and making the process comprehensible for everyone. In these troubled times, to be efficient companies must have the capability to rapidly simulate and demonstrate new ways of working, to measure the extent to which employees accept the new model and to re-think the way in which teams are mobilised.
he crisis has changed the context,” explains Maryse Leca, partner at CSC in France, in charge of the consulting practice linked to people management during business transformation. “Companies have to adapt their organisation and way of working even more quickly and fundamentally than before. In the last two years we have seen the number of mergers and reorganisations increase steadily, resulting in a thorough overhaul of business models. It rapidly becomes clear to organisations that they need to work differently in order
The first success factor: collaboration, which enables us to re-think business processes, without constraints in terms of time and space, on the basis of a new economic model. “When you’re forced to do more with less resources, the only way forward is to put into place different and innovative tools that encourage collaboration between teams,” continues Maryse Leca. “These techniques favour the exchange of best practice and knowledge sharing by transforming the working environment, which becomes more transparent and facilitates agility. They push back the borders of what is possible in an amazing way to enable the transformation of the business and its organisation.”
Recipe for change management
Obtain executive sponsorship Align management Involve employees Manage expectations Keep momentum and motivation Reassure the organisation
"To facilitate the comprehension of new operating models specific tools can be used, such as business games." MARYSE LECA, partner at CSC in France, in charge of the consulting practice linked to people management during business transformation.
Understanding, showing, measuring and comparing The second factor: adjusting operating models. “Of course change management has to be adapted to the specific issues facing every client: outsourcing, merging, ‘branding’ services, transforming operations and functions, plans designed to deliver increased profit or quality…,” comments Maryse Leca. But the objective remains the same: rapidly adjust operating models, action plans or behaviour depending on the context. With this in mind, we continuously measure the extent to which employees accept change, using internal surveys, indicators linked to change methods and benchmarking (comparing organisations and results in real time). The crisis has reinforced practices such as knowledge sharing and evaluation. Companies increasingly seek to understand the experiences of others, be it in the same sector, or at national or European level. They are evolving into learning enterprises. Currently the hottest topics are employee satisfaction and commitment, executive coaching, diversity and collaborative processes.
Laboratories for change The third critical factor: federate, mobilise and put into perspective the change thanks to innovative techniques. To facilitate the comprehension of new operating models specific tools can be used, such as business games. On the basis of simulation and role playing techniques, these exercises make it possible to discover, visualise and integrate new operating models by way of transformation scenarios. This enables the creation of laboratories for change as it were, which means things can be put into perspective in a rapid and measurable way – which is increasingly a necessity today, when action plans have to be developed, tested and launched in a very short time span. This time pressure has increased in the wake of the crisis and results must be concrete, demonstrable to all, both internally and externally, more and more quickly.
10 key concepts 1 2 3 4 5 6 7 8 9 10
Agility Anticipating risks Benchmarking Indicators Framework Collaboration Surveys Innovation Change laboratories Simulation
Introduce, clarify, shape, support The fourth key factor: introduce the change, explain it, train the employees and support them. Jan Degraef, partner at CSC in Belgium, in charge of the change management consulting practice confirms and emphasises this: “Being able to put change into perspective is crucial. Companies are going though a period of uncertainty. They know we are in a transition phase that will lead to the transformation of organisation models and processes. Change management consists first and foremost of reassuring all the employees and then guiding them throughout the process. All the steps need to be managed in a very concrete and pragmatic fashion.” CSC places a great deal of emphasis on transparency with its “employee self-reliance” concept. This approach enables the employees to prepare gradually for change – in their situation in particular – in order to understand and accept it. Tools have been developed to manage all these moments and provide essential support for everyone. “We are also involved in business transformation projects that are truly global in scale,” concludes Jan Degraef. “We ensure that operational and information system issues are closely managed in parallel so that the impact of the planned changed is realised to the fullest extent possible, at a fundamental level. Currently we assist both the private sector (for instance, the Belgian railway operator, the SNCB) and the public sector (for example, the Federal Public Service for Budget and Management Control). Players in all sectors realise that well executed transformation is a good indicator of business success and an essential foundation on which to build the future.”
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
European leaders reinvent business 2009 -2010 in pictures
leaders reinvent business 2009 -2010 in pictures
"We've strengthened social cohesion plans and training policy." Véronique Rouzaud Senior Vice President Human Resources | Veolia
"We're assessing our suppliers' approach towards 'sustainable development' – this has led to around a hundred improvement projects." José Matias Group Vice-President, Purchasing | Rhodia
"The crisis represents a healthy opportunity for consolidation and standardisation." Gianluigi Castelli CIO | ENI Group
"The major challenge for Public Administrations is to efficiently manage a limited budget in order to continue to offer the same quality of services to citizens." ﾃ］gel Luis Cabal HUMAN RESOURCES DIRECTOR | Government of the Principality of Asturias
leaders reinvent business 2009 -2010 in pictures
"CIOs have to be the innovation and transformation drivers of the businessâ€Ś" RogĂŠrio Campos Henriques CIO | Fidelidade Mundial
"In this time of crisis, it is essential that directors know how to manage change by serving as business partners within the company." Alessandro Salustri HR DIRECTOR | British Telecom Italia
"We have to go faster, with a business model that provides less instant cash flow." Nicolas Duhamel CFO, Member of the Management Board | BPCE
"The CFO is no longer just the numbers man. He has to have deep insight into the whole business chain." Arnold De Brauwer cfo | National Railway Company of Belgium
ANALYSIS FASTER, SIMPLER, MORE EFFICIENT:
A TIME OF DISRUPTIONS FOR THE PUBLIC SECTOR FRANCO BASSANINI CHAIRMAN
CASSA DEPOSITI E PRESTITI Franco Bassanini is one of the most renowned modernisation experts in Europe: former Italian cabinet minister for Public Administration and Government Reform (1996-2001), he has brought one of the most ambitious public sector reforms in recent years to a successful conclusion. Today he is chairman of the Cassa Depositi e Prestiti S.p.A., and European governments regularly seek his advice. He was member of the Executive Board of the ENA (École Nationale d'Administration) and member of the French Attali Commission. Currently he is the president of the Astrid Foundation, an Italian think tank dedicated to public sector modernisation in Europe.
How would you sum up the challenge of modernising the public sector?
Which drivers did you focus on to achieve that?
For European countries, it���s very simple: it’s a key challenge in terms of coping with globalisation. Allow me to explain: for years governments ran up debt to finance their public services. Today everything has changed. Our economies are competing with those of developing countries. Europe will only come out on top if it finds the correct balance between the cost and quality of the services provided to citizens and businesses.
All of them! We simplified legislation, privatised certain sectors and decentralised decision making. At the same time we reinvented the missions of public institutions and simplified the procedures for citizens and businesses – with the “single point of contact” concept and by putting numerous services online. The reform was an all-encompassing project. Ultimately we succeeded in reducing the cost of the public sector by more than two percent of GDP – while at the same time improving the quality of the services provided.
Are public services too expensive? I would put the question differently. Public spending can be defined as the amount of financial resources that the government removes from the private production of goods and services. If this translates into high quality services, the balance is right. However, if the services are mediocre, it becomes counterproductive and penalises businesses – and thus the country – versus emerging market economies.
How did public sector reform start in Italy? In the middle of the 90s the country found itself in an untenable situation. The public debt had reached 120% of GDP, with an annual deficit of 11%. The cost of the public sector thus needed to be drastically reduced.
In your opinion, do cost reduction and quality improvement necessarily go hand in hand? We should be careful not to generalise in this regard. It was possible in Italy because we had a great deal of catching up to do, starting with a public sector that was both too expensive and too inefficient. Now the focus should above all be on improving the quality of the services provided. In France, for example, efforts should be made to reduce costs while maintaining the good quality of many public services.
Which are the primary areas for improvement in the years ahead? The first area is institutional: responsibilities have to be clearly defined and divided among the various public
authorities in order to avoid duplication. This is a matter of particular importance throughout southern Europe. Automating public services is obviously another important area, including the integration of business intelligence tools. This requires genuine reengineering, with in-depth reform of the procedures and operational rules, but also cultural change on behalf of both civil servants and citizens when it comes to information technology…
The public sector has made considerable progress in the area of e-government, hasn’t it?
"THE MODERNISATION OF THE PUBLIC SECTOR BENEFITS EVERYONE"
Yes, but there’s still room for improvement! Look at how difficult it remains for the various public authorities to communicate among themselves because their information systems are incompatible. Another example: e-medicine – it could be used to make 70% of emergency room visits unnecessary. We still have a long way to go.
And what other challenges are on the horizon? There are two I’d like to mention. Firstly, outsourcing. It’s been a growing trend in the past few years, and can be a good solution – as long as it really reduces labour costs and is supported by an appropriate control structure to verify the quality of the services provided. A great deal of progress remains to be made as regards these two aspects, and Europe lacks a clear project and collective references in this domain. Secondly, the creation of a culture of performance, with genuine evaluation of individual and collective performance linked to remuneration. The idea is by no means new, but has not yet been applied in Europe – at least not on a large scale. It is, however, the key to improving the quality and efficiency of the services provided to citizens and businesses.
Indeed, let’s talk about businesses. What can they expect from public sector modernisation? Let’s remember that in general terms the government is a source of competitiveness for business. At a practical level, simplification and automation of procedures has made life much easier for businesses. A great deal of progress has been made here. Today there is still a major challenge: high speed internet access. In Italy, more than half the country is not connected by fibre optic connections – which is a major drawback for businesses. The issue is the same in every country: outside of the big cities, public sector investment is required. Broadband access today is the same sort of problem that electricity was at the beginning of the 20th century!
Caught between the requirements of increasingly demanding users and the budgetary rigour imposed by the chronic deficits of European governments, the public sector is seeking to reinvent itself. In the past decade government institutions have been carrying out – often in the shadows – the sweeping modernisation necessary to provide integrated, simplified and personalised services. Efficiency and results are now part of the set of values of public administrations that are more focused on the needs of citizens and businesses.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
cio barometer TRENDS AND PERSPECTIVES IN INFORMATION SYSTEMS
CIO barometer TRENDS AND PERSPECTIVES IN INFORMATION SYSTEMS
IN COLLABORATION WITH IFOP, CSC AND CAST HAVE DEVELOPED THE FIRST CIO BAROMETER, AN IN-DEPTH STUDY OF THE ROLE OF INFORMATION SYSTEMS DEPARTMENTS, BASED ON FEEDBACK FROM CIOs OF THE LARGEST EUROPEAN COMPANIES. UNTIL RECENTLY REGARDED AS COST CENTRE MANAGERS, CIOs TODAY CONSIDER THEMSELVES TO BE AT THE CUTTING EDGE OF INNOVATION AND DRIVERS OF BUSINESS GROWTH. TO WEATHER THE STORM IN TIMES OF CRISIS, IS MANAGERS MUST DEVELOP AND IMPLEMENT NEW MODELS BASED ON NEW TECHNOLOGIES.
THE IMPACT OF THE CRISIS AND TECHNOLOGY ON BUSINESSES
the impact of artificial intelligence on activities such as forecasting, risk prevention and business intelligence, etc.
Adversely affected by the current financial and economic crisis as well as by the ongoing digital revolution, businesses have to face several considerable challenges.
In carrying out their duties, CIOs need to question underlying assumptions and simultaneously seize any opportunities offered by new technologies to broaden and re-examine their role and positioning within the company.
DISRUPTION IN STRATEGIES AND OPERATIONAL MODELS
THE CHANGING ROLE OF CIOs The acceleration of the rate of change required to cope with the economic slowdown and extreme competition is forcing businesses to adapt their offering and prices, reinforce customer relationships, increase economies of scale and reduce costs. Surviving the storm means seeking out value and competitive advantage, and both are dependent on companies’ efforts to innovate. CULTURAL AND TECHNOLOGICAL DISRUPTION
The rise of the internet and mobile technologies has already dramatically changed the way businesses operate. Further technological changes are on the way : the impact of social networks on the way businesses operate and how teams are managed; images supplanting text for many purposes,
For a very long time, IS departments were considered by top management as cost centres whose added value was difficult to measure. In addition, failures and difficulties encountered with numerous IT projects served only to maintain this status quo, or even increase management’s wariness of information technology. The function of IS departments was considered to be to support cost reduction in the business units. After a period of conflict, the relationship between CIOs and the business units improved. CIOs built closer links with business units by gradually involving themselves in their development and in corporate strategy.
The financial and economic crisis and the ongoing digital revolution are a source of disruption for business.
CIOs developed approaches which ensured that IS was better aligned with the business units. They communicated with top management, the business units and users, providing information on their services, performance and the related costs. The most forward-looking have managed to implement service agreements, justifying their investments and demonstrating value creation.
scalability, and deliver its services at the lowest possible cost. The objective is to optimise or even reduce operating budgets, improve application profitability and increase resources allocated to innovation and business development opportunities.
IS thus became a fully-fledged contributor and a key factor of operational excellence for both management and the business units.
Every day, each and every member of staff must be able to access email, the internet, databases and transactional applications, in accordance with the needs defined and at the lowest possible cost. In addition, awareness is growing that the CIO has become responsible for all automated business processes and must therefore seek to continually improve their added value.
In the current situation of crisis and disruption, IS should be perceived both as a means to strengthen the companyâ€™s value proposal and reinforce its position in its market. CIOs have an opportunity to position IT as an activity capable of generating value for operational management. This means on the one hand continually developing the added value to the business of existing applications, and on the other hand using technology to identify and implement growth initiatives. For this change to be successful IS management needs to transform its operational model and further develop its information systems to increase their flexibility and
The crisis and technological disruption are forcing a re-examination and further development of the role of CIOs. The CIOâ€™s primary preoccupation is, and will continue to be, that of being in charge of the information generated by the company.
After a long period characterised by cost cutting and improving business processes, innovation has become a key subject of discussion for CIOs and CEOs. Information technology is a key force for driving value creation, financial performance and innovation
Furthermore, the current crisis and disruptions require that CIOs guide the implementation of new business models. This requires a partnership type relationship with business units based on consistent, large scale IT output, while simultaneously ensuring the IS remain agile and scalable. We can no longer disregard the digital revolution. In addition to technical advancement, technologies themselves represent new value proposals capable of redefining business models, and will thus have a key role to play in the changes ahead. Businesses that adapt, experiment, and roll out new technologies will be the first to bounce back and will have a head start in the new competitive environment. For the CIO new technologies are a means to become a leading driver of innovation in the company. His role is to help
management understand how technology can play a major role in changing the company’s strategy and the way in which it generates new or additional business.
A ROLE IN LEVERAGING THE COMPANY’S APPLICATION ASSETS Today IT underpins all processes within a company. From purchasing to logistics, from financial activities to HR, from sales through to communication and security, everything is automated. If the assets of a company are first and foremost the men and women that work there, their ideas, their expertise, their knowledge sharing and their networks, then the rules – industrial, technical, commercial, economical, financial, legal, etc. – that govern the way the company operates are also assets. All are primarily IT based. The CIO’s role is therefore to optimise and improve the added value of the company’s application assets, i.e. to facilitate or anticipate the fulfilment of business requirements, but also to globally improve the profitability of applications throughout their life cycle. He must optimise the performance of these application assets to the greatest extent possible while continuing to build links between IT, operational processes and the business itself. In addition, the CIO must provide operational management with greater insight into the quality of the most strategic applications.
iN BRiEF A STRATEGIC ROLE IS departments have a strategic role to play supporting one of the most important intangible assets: the way work is conducted in the company. IS is also a gateway to the future, in the sense that it must help the company conceptualise and implement new business models based on new technologies.
A NEW IDENTITY To reposition themselves within the company, CIOs must step back from their role of manager of a support function focused on cost, and take on a new identity, based on two new roles: manager of the application assets and innovation leader. As far as CIOs are concerned, they need to change their relationship with the business units from a customer-supplier model to a model based on partnership and proactiveness. They should be involved in strategy formulation and operational development while constantly maintaining a technological perspective.
A GUARANTOR OF THE COMPANY’S SUSTAINABILITY The CIO needs to be a creative driving force: optimising processes and innovation through IT to develop new working methods; proposing new services to customers based on NICT, among others. The CIO thus becomes a fundamental guarantor of the company’s sustainability.
A ROLE AS INNOVATION LEADER After a long period characterised by cost cutting and process improvement, innovation has become a key issue for CIOs and CEOs. Information technology is a key force for driving value creation, financial performance and innovation. Through innovation, CIOs can help the company change the way it works and does business, thus differentiating it from its competitors. CIOs need to contribute ideas, identify new opportunities and present new points of view to business units. Given this, they must be even more deeply involved in strategy and operational development.
A continuous monitoring system with a dedicated budget must be set up to identify future business models before competitors, to ensure the company is not left behind.
CIOs need to encourage awareness and curiosity about change within the company, as change takes place everywhere: at an organisational level, in design, in manufacturing new products, new business economic models, etc.
CIOs must integrate innovation in customer relationship management, as in future companies will work together with their customers to define the products and they need. Similarly, ever increasing social networking means that companies need to learn to harness the social power of their staff and thus integrate new dimensions into common work and projects. The arrival of the first generation of managers from the digital era must also be prepared for; they will not be keen to abandon the technologies they grew up with.
Finally, the company should no longer be thought of only in terms of what it produces or does. It must be considered in terms of what it owns and what it knows, in other words, its strategic assets.
To be as innovative as possible and successfully capitalise upon opportunities for new value proposals based on new technologies within the company, CIOs must adhere to several principles: •
Innovation comes from contradiction and from changing the rules of the game in the industry. It is thus necessary to understand and anticipate the impact of leading indicators linked for example to demographic, technological or regulatory change. CIOs must ensure that executives have adequate understanding of IT and are aware of the stakes at play. They must also initiate a relationship with business unit managers that goes beyond mere partnership and is based on a proactive approach.
"Innovation focused on client relationships."
etienne bertin it director
FNAC Interview published in the latest edition of CIO Barometer (2009)
Fnac has launched the "100% client revolution". What is this revolution? Itâ€™s part of the company's '100% client' project which was launched in 2008. Itâ€™s a genuine change in Fnac's business model - from a product focused company to a client and multi-channel focused company. We have already made quite a lot of progress in this direction with, for example, the implementation of common internet and store commercial policy and logistics which have been operational since 2008. Fnac is now going further with a clearly stated objective: to be the preferred brand and standard setter for each of our clients. During the next three to five years, we will launch numerous innovations centred on the client experience both in stores and on the internet, in France and at an international level.
How do the IT systems contribute to improving the client experience? We have already started on the internet with a personalised space called MyFnac where users can customise their preferences and interests in order to receive personalised content. Store management will also be strengthened with communication screens, a sort of Fnac TV, for which the content can be customised by the store and according to section (especially ticket sales and 'TV wallsâ€™). We are also launching pilot installations of contact-free payment systems in France, new mobile services or self-service tills in Spain and Portugal. New product offers will also be available such as stationery and related products or second-hand games, which require a specific management process. Eventually, we plan to reorganise the stores around the concept of a 'world' or a 'use' where books, CDs, DVDs and technical products for a given client type can all be found together. This revolution has a major impact on our IT systems as it requires great cross-functionality and a reorganisation of our data flows.
What relationships do you have with the operational departments for implementing these innovations? We are involved quite early on in strategy development and project planning in order for the impact of IT systems to be incorporated into the different roadmaps. In general, we have a regular dialogue with the operational departments where we not only listen but are also a source of ideas in order to ensure that we align the development of the processes and IT systems. This is a real 'internal client' approach with three priorities: proximity, operational excellence and controlled operating costs. This 'client' concept is now completely accepted and part of the IT department mindset, and the other departments recognise this too: internal surveys show that the perception of the quality of our services is steadily increasing. Now more than ever before, the quality of the relationship between IT and the other departments is crucial and must be based on absolute rigour and reciprocity combined with exemplary professionalism on a daily basis. In concrete terms, it means avoiding leaving things unsaid, structuring the relationship and communication, formalising and managing it in order to ensure the perception of our service is based on facts to the greatest extent possible.
Do you have other innovative projects in development? During the last three years we have been conducting a major rationalisation, simplification and consolidation of our infrastructure driven by one essential principle: virtualisation. We started with the servers, and this will soon be followed by virtualising workstations and network infrastructure. This helps manage costs while also allowing us to support the company's growth with much greater flexibility and agility. We are also working on our service gateway which will not only consolidate our relationship with the operational departments and provide them with targeted and personalised information, but will also structure our internal processes such as incident management, change requests or project management. This gateway is a major project for the IT department because it is the tangible result of several years of effort to standardise, professionalise and improve Fnac's IT system while safeguarding its processes and organisation. 47
"To play a determining role in creating value."
Director of product movements and IT systems
printemps Interview published in the latest edition of CIO Barometer (2009)
Is the current situation special for an IT Director?
You talked about 'internal clients'. Is this a new expression at Printemps?
Our company reacted quickly to the economic downturn. We decided to concentrate on the 'backbone' of our systems. We therefore maintained and strengthened two priority projects - one related to modernising the tills, the other to managing the back office (supplier relationships, logistics, supplies, etc.).
I arrived a year ago with the objective of demonstrating that IT systems play an important role in creating value. To do this, you have to change perceptions. In addition to creating tools, we have to view general management and the operational departments as internal clients that we are assisting with their strategies.
At the same time, we were very careful to ensure that costs were controlled.
The term is very important – assistance. Of course, it means on-time delivery of the expected products but also being an incubator of ideas for the other departments. For example, in the case of the tills, we didn’t simply satisfy a technical specification; we also made proposals to support the move upmarket by the stores. Consequently, we suggested automation in order to give Printemps a more modern image.
Are you already preparing for the economic recovery? Of course! It's essential to do so. I think it’s wise to use this crisis period as an opportunity by reviewing every one of our processes and optimising our investments. But you also have to look further ahead. The continuation of two leading projects is part of this approach. For instance, the 'tills' project is crucial for the future. Printemps' strategy is to create an extraordinary' in-store client experience. The tills are one of the key moments of that experience. This project is a keystone onto which we can place other stones as soon as we feel ripples of an upturn spreading in the market.
This message is starting to be well accepted internally within the IT department: communicate, announce a plan, report - all of this is becoming part of our routine. Our internal clients have noticed the change...Naturally, they’re waiting for the first results. This is why we are giving special attention to current projects, to ensure that our follow-up is irreproachable.
"Recession? An opportunity to consolidate and simplify." 50
carlo privitera group cio
Luxottica GROUP Interview published in the latest edition of CIO Barometer (2009)
What impact has the financial and economic crisis had on your business?
Is outsourcing an opportunity to help face the crisis?
The crisis has affected neither the solidity of Luxottica, nor its future. Of course, the market has changed for us too, but the crisis has given us a good opportunity to think about how to manage corporate priorities in the best possible way. Recently, Luxottica has made major acquisitions; now we need to integrate them and increase efficiency. It’s time to think about which areas can be better integrated, where we can work more efficiently and how we can provide different services. The crisis has accelerated the ongoing process of technological innovation. IT has shown itself to be one of the key drivers for overcoming this period more successfully: in 2009, our investments in IT were not cut.
It’s simply not in Luxottica’s DNA! We see it as a short-term opportunity, and certainly not one to be used just when we are reviewing our processes and need to understand how we can improve our working methods. In addition, fashion goods have very short lifecycles that require a particularly high level of responsiveness from companies in the sector – something that can’t always be guaranteed when working with subcontractors.
Considering the present situation, how has the relationship between the business and IT changed? The relationship between information systems and management is changing radically. It’s a long and challenging process however, and one which requires strong change management support because it’s closely bound to the mentality of individuals and their leadership qualities. Luxottica’s executive management is totally committed to creating full collaboration between IT and business. Our CEO’s decision to appoint a director as head of IT clearly shows our intention to orient IT completely towards the business. Nevertheless, we’re only halfway to reaching full cooperation: it’s not yet in the corporate DNA.
What are the priorities for IT at the moment? The main priority continues to be the redesign and integration processes – which absorb 70% of our investments – with a view to consolidation and simplification of both infrastructure and applications. There is also a need to contain costs associated with IT, much like in all other corporate areas: investments made to support business activities are priorities, but we also invest in projects aiming to reduce operational costs. To improve operational performance we are focusing on raising the level of in-house skills: today Luxottica is investing more in IT training than ever before. Developing skills remains one of the few levers for motivating people in a period of crisis. Another priority for 2009 has been the development of a new approach to the client, through new sales channels. With this in mind, we are investing in e-business and in web 2.0 technologies.
In this context, what do you think of trends such as social networking and green IT, which have received so much attention in the media? Social networks represent a channel that must be recognised; it would be unwise to ignore them. We currently manage communities on both Facebook and Twitter – one of the biggest communities on Facebook is for Rayban fans. These are tools that must be understood and governed, and certainly not fought against; however, their potential impact and the effort required to manage them should not be underestimated. As far as green IT is concerned, we don’t have a specific budget allocated to environmentally friendly IT investments or a specific strategy in this regard. Of course, if we make changes to our data centre we will introduce low energy consumption equipment, both to save money and preserve the environment.
How has the relationship between IT and its external technology partners changed since the crisis? It has led to further consolidation of our supplier group. The crisis often caused deterioration in their marketing approach, which had become too aggressive. So we have chosen to carry on working with companies we already trust; I favour those with whom I have a good relationship, the ones I believe in.
Last question: does IT drive innovation in the company? Yes, but we’re still on the starting blocks. Technology as a driver of innovation is still the dream of a few, although there are areas where technologies have created value for the business. Of course, in those areas the perception of IT as a driver of innovation has improved considerably.
â€œThe crisis represents an opportunity to standardise the IT structure while improving customer service.â€?
alessandro musumeci CIO
Ferrovie dello Stato Interview published in the latest edition of CIO Barometer (2009)
What impact has the crisis had on your company? The crisis is in fact an opportunity to improve our customer service. In recent years, our clientele has changed considerably: customers are increasingly mobile, more prepared to use new technologies, and willing to pay for additional services in exchange for higher quality (punctuality and speed). This translates into a thorough examination of the services provided by IT to the business, the review of systems adequacy, standardisation, etc.
Has the relationship between IT and the businesses changed due to the crisis? The crisis has had a positive effect by strengthening this relationship: it has forced us to review the way in which the business is supported by IT, and to place collaboration and integration at the heart of this relationship.
Have investments in IT been reduced? No, on the contrary, the crisis has acted as an accelerator in this respect. 2010-2011 will not only see the expected economic recovery, but also market liberalisation; Ferrovie dello Stato will be competing with other leading European rail operators and we want to be prepared for that. This year we are investing in key projects that will help us face the challenges of 2010.
What are the IT priorities for 2009-2010? The top priority is to support the business, notably by simplifying the ticketing process by eliminating paper tickets and seizing all opportunities offered by the internet and mobile systems to propose innovative services to our clients. We are very interested in collaborative tools such as social networks and viral marketing. As regards infrastructure, we will continue to extend and improve our network, which is one of the most extensive and critical in the country, and to invest in IT security in order to protect the increasing amount of information supplied online (currently over 50% of the passengers travelling in high speed trains purchase their tickets online). The guiding criteria will be the ROI, and the concrete contribution to improving the business, boosting efficiency and reducing costs.
Is outsourcing an opportunity to help face the crisis? Outsourcing is an excellent way to reduce cost, free up resources and dedicate them to the core business,
and improve our service levels. Ferrovie dello Stato uses outsourcing on a massive basis. Our business is to make trains travel with utmost punctuality, comfort and safety; many services can thus be placed in charge of subcontractors, thereby generating savings and allowing greater focus on the core businesses.
In the context of this crisis, how has the role of human resources role changed? Ferrovie dello Stato has undertaken a major restructuring project. In the past there was a major gap between resources dedicated to governance and operational support. The current objective is to increase and enhance management capabilities through training and skills building, and to scale down the support services, notably through outsourcing.
Has the relationship with suppliers changed as a result of the crisis? We tend to streamline our supplier base and target specific services. We have a more critical approach and avoid excessive dependence on the supplier. I have noticed a weakening of suppliersâ€™ competences in general, but also opportunities for small and medium sized enterprises to emerge, especially national companies which are recognised as having strong skills, high service levels and the ability to lead innovation within client firms.
What about green IT; have you defined a specific strategy? Green IT is essential in order to make tangible savings on overall costs. For example, the server consolidation project we initiated a few months ago is an opportunity to replace old equipment with machines that generate energy savings and are more environmentally friendly.
What is the main constraint on innovation? Certainly the internal organisation, which sometimes limits the ability to leverage the full potential of technological innovation.
Last question: do you consider yourself as an innovator? Yes, but we're just getting started: for our clients, the first results will be noticeable in 2010.
â€œThe crisis represents a healthy opportunity for consolidation and standardisation.â€?
Gianluigi Castelli CIO
ENI GROUP Interview published in the latest edition of CIO Barometer (2009)
What impact has the crisis had on your company?
How has the role of human resources changed in these times of crisis?
ENI operates in a sector that has always invested the necessary resources. However, this period of crisis has allowed us to get rid of unnecessary elements, and to standardise and consolidate areas where demand did not require large investments.
Within ENI we have always rewarded commitment and excellence, and have successfully developed our internal capabilities. Training has a major role to play in this. As a matter of fact, training is the only part of my budget that has not been downsized. We also promote knowledge exchanges within the company: we have identified 200 “knowledge owners” (of which six are in the IT area) who have strong process skills and dedicate part of their time to training colleagues, and not only in their own area.
Has the relationship between IT and the businesses changed? In a company like ENI, information technology is an important support for the business. In recent years, there has been considerable awareness of the ‘intelligent’ use of IT as a result of the interconnection between the business and technology. While the technology side created greater transparency surrounding its technical and specialised role, thereby facilitating comprehension of the underlying processes, the business analysed its own processes and realised how essential IT solutions were.
Have technology investments been reduced due to the crisis? Some projects have been postponed, others cancelled, but dedicated investments generating efficiency gains and guaranteeing a ROI in the short and medium term have been accelerated. For instance, systems consolidation projects and VoIP deployment projects have been maintained and major infrastructure and application transformation and consolidation projects have been initiated.
What are the priorities for your IT systems in 2009-2010? The top priority is the standardisation and simplification of our processes, from an infrastructure and application point of view, in order to reduce our operating costs and improve customer relationship management while reducing distribution costs.
In this context, what do you think of trends such as social networking, which has received so much attention in the media? Making efficient use of social networks depends on the sector in which the company operates. There is a huge risk of initiating actions that are extremely difficult to control and that could have a negative impact on the corporate image. ENI’s choice is to promote the creation of internal communities and social networks, and develop the ENI portal. IT goes in this direction, but is not projected outwards.
Green IT is in vogue; have you defined a specific strategy in this area? We have a well-defined green IT strategy for our new data centre, which is the most efficient in Europe: the objective is a PUE (Power Usage Effectiveness) of 1.18; today the maximum standard reached is 1.25. The data centre should be ready by 2012. It’s a huge and very expensive project, but the energy savings will enable a payback period of less than 7 years at current energy prices. In addition, it’s a major step in the reduction of greenhouse gas emissions, considering that when running at full power it will consume as much electricity as a city with a population of about 800,000 people.
Do you consider yourself to be an innovator within your company? Asked like that, it’s a too personal question. As for the company that I help manage, I feel that IT brings much innovation, through structured initiatives such as “Open Innovation” and “Proven Innovation”, and collaboration with suppliers having expertise in key fields and presenting them to our lines of business in order to stimulate debate on interesting technologies. Apart from innovation for its own sake, we feel it is important to develop a culture of widespread and shared innovation at a corporate level.
What are the principal constraints on innovation? There are two principal constraints and they are closely linked: the first is the additional risk and responsibility associated with every choice, particularly if it involves change; the second is the ongoing use of legacy systems, applications that have become intertwined and stratified over time and that make any change costly and complex.
"CIOs have to be the innovation and transformation drivers of the businessâ€Ś"
RogĂŠrio Campos Henriques CIO
Fidelidade Mundial Interview published in the latest edition of CIO Barometer (2009)
How did Fidelidade react to the crisis? Fidelidade Mundial is currently responding to the impact the crisis has had upon the business. Although there is greater pressure to reduce costs, the general course of the company has not changed; prior to the crisis there was already the notion that we needed to make some structural changes in the way in which we were organised. We have thus designed a three-year strategic project which includes initiatives in all the areas the company is active in, which aims to rethink the way the processes run throughout the business and improve efficiency. We are restructuring the commercial network and have launched several initiatives in the areas of process redesign, cost reduction and information systems. In reacting to the crisis the company is reducing discretionary expenditure over the short term; in terms of structural areas, the crisis has only reinforced the need to take action to consolidate our long-term position.
As CIO, how did you feel the impact of the crisis? We are of course highly aware of the crisis and the impact it has had on the business, and are focusing our efforts on trying to give the business the means to react in an appropriate manner. As CIO, I did not feel a significant impact on the budget; however we are tougher in negotiating purchases with our suppliers, and do our best to secure better prices and leverage our budget to the greatest extent possible. Our actions have been driven by the principle of doing more with less. In the context of this crisis, I believe that IT should not be seen as merely a cost centre, but rather an area for investment. We are investing in specific systems that enable operational cost savings in other areas and which allow us to respond better to the needs of the business. Information systems are an ideal tool for improving operational efficiency, optimising the response capability of the business and gaining market share.
What were the measures you used to fight the crisis? The first impulse in times of crisis is to significantly reduce costs in IT and make budget sacrifices. At Fidelidade Mundial we chose not to make many sacrifices for the simple reason that they could compromise our future competitiveness. We have a series of structural programmes to implement which are crucial, and our IT costs are in line with best practice in the sector. Clearly, all cost reduction initiatives make sense, but not if they inhibit innovation and transformation of business processes. From an operational point of view, we are trying to do things more efficiently â€“ but this strategy was of course in place before the crisis. Once again, the crisis served only to reinforce our efforts in this respect.
Are you ready for the economic recovery? Given our restraint in terms of the sacrifices made, Iâ€™m confident that when opportunities arise we will be able to respond rapidly. In this context, having the right infrastructure in place when the economic recovery comes means that we will be able to capitalise on business opportunities in the areas in which we are best prepared. And all the preparation has to be done during the most difficult stage of the economic cycle.
What are the challenges facing CIOs in the coming years? The greatest challenge for CIOs is to demonstrate the benefits delivered by IT in a very consistent way, and to prove that IT is an area for investment rather than just a cost centre. CIOs have to be the innovation and transformation drivers of the business, and it is up to them to demonstrate how technology contributes to successful business transformation. They have to present new solutions which will boost the competitiveness of the business and deploy tools that allow us to deliver equal or better performance with fewer costs. In the insurance sector this last point is even more important than in other sectors. Responding to that challenge is a major undertaking indeed.
â€œThe crisis has made return on investment the key factor when undertaking new projects.â€?
Aldesa is one of the leaders in the construction and civil engineering industry in Spain
alfonso álvarez CIO
aldesa group Interview published in the latest edition of CIO Barometer (2009)
WHICH IMPACT HAS THE CRISIS HAD ON YOUR ORGANISATION? WHAT MEASURES HAVE YOU TAKEN IN RESPONSE? Budgetary controls and cost reductions with regard to last year’s figures are among the most important measures taken by IT to help the organisation face the crisis. As a construction group, Aldesa’s line of business offers fewer opportunities for growth engendered by new technologies than other industries. As a result, our action is focused on the optimisation of our resource use and the implementation of applications that help the company have a global control over its businesses and therefore facilitate and anticipate strategic decisions.
HOW IS THE CRISIS AFFECTING THE INFORMATION SYSTEMS DEPARTMENT? WHAT STRATEGIES ARE BEING DEVELOPED TO PLACE THE IT DEPARTMENT IN A POSITION WHERE IT HAS THE OPPORTUNITY TO CREATE ADDITIONAL VALUE FOR THE COMPANY? There was a time recently when the economic rationale behind many IT projects did not play a fundamental role in the decision of whether or not to make the investment. The crisis has made return on investment the key factor when undertaking new projects and has also given priority to projects that go further, those that increase the company's business opportunities (e-commerce, customer portals, etc.). It may also be the time to communicate to our technology partners that current price points and cost models must be revised in order to adapt them to the current situation.
IN TIMES LIKE THESE, WHAT IS EXPECTED OF THE COMPANY’S CIO? It seems obvious, but the first thing expected of CIOs is that they do not waste money, that they invest carefully, and that they add value to projects that generate savings, and as I was saying before, that expand the company's business opportunities. It is also expected that they be a catalyst for technological innovation as applied to business models so that IT may be a source of ideas that serve to develop new opportunities within the company.
Finally, they must focus on projects that are able to turn a profit quickly, such as the virtualisation of data centres or the consolidation of corporate services, which are even more important in times like these.
WHAT SHOULD THE PRIORITIES BE FOR A COMPANY’S INFORMATION SYSTEMS DEPARTMent at the moment? Their first priority should be cost reduction: to continue providing the same service at a better price or at a lower cost. The crisis has once again highlighted the significance of cost constraints on the type of department, such as ours, that is sometimes so prone to speculative ventures. It is also important to review and optimise the portfolio of applications as part of effort to search out new opportunities and eliminate applications with little value and high maintenance costs. It’s also the occasion to review contracts with technology partners in order to adapt them to the current market situation without sacrificing quality but at the same time being realistic in terms of the cheapening of the labour market over the past year.
WHAT ARE THE LONG-TERM CHALLENGES FOR INFORMATION SYSTEMS DEPARTMENTS? It is increasingly difficult to stay on the cutting edge of the various emerging technologies and of the practical applications of these technologies for business purposes. One of the major challenges for our department will be to know how to separate the wheat from the chaff, that is to say, to separate technologies that will create longterm value from those that will be short-lived. Outsourcing will also continue to be a challenge. Striking a balance between reducing the number of permanent IT staff and maintaining the company’s knowledge base will continue to be vital in order for the department to perform as it should. Last but not least, the challenge is to underscore the importance of an organisation’s technological units, to make them a component that is more closely linked to a company’s decision-making and to stop considering them as mere service departments.
edouard odier CIO
jean-christophe lalanne SVP of the CIO Office and Deputy CIO
air france KLM Interview published in the latest edition of CIO Barometer (2009)
You are both in charge of IT systems for the worldâ€™s largest air carrierâ€Ś What specific challenges does the sector present for CIOs? Edouard Odier : Airline IT presents very specific challenges. First of all, the sector has been using IT systems since the 1960s, so even today many generations of very different systems coexist. Another particularity is the degree of openness of our systems. Internally, our activities are highly interlinked; as a result, applications must communicate extensively with each other. Externally, we must manage connections in real time with several sites and partner companies. Jean-Christophe Lalanne : Our size presents a particular challenge. With more than 2000 flights per day and more than 100,000 employees, our systems are so complex that existing software packages cannot handle the scope
our activities. We are often forced to develop our own applications.
What role do IT operations play within Air France? E. O. : We deem IT operations to be a strategic component. As such, we are represented on the Executive Committee. However we also play a support role, at the service of the various business units. Since the merger with KLM, we have further simplified and clarified our governance structure. Each business unit has an end users representative who reports to the CIO. This organization is now well established. J-C. L. : This decentralized approach to our relations with the various business units has helped both improve service levels and boost confidence in IT. There are key
"Improving the Quality of Service and Boosting Confidence." the two companies, and allow us to actively pursue growth when more favourable economic conditions return.
What are these projects? J-C. L. : In the near future, several applications are scheduled to migrate to the Amadeus common platform: in particular, inventories for reservations, check-ins and ticketing (with electronic tickets). A reform of inflows management is also underway, as well as an overhaul of the aircraft maintenance application, a new e-business tool and a new revenue management system. We are leading these seven major projects simultaneously!
You spoke of “rigorous measures”…
success factors in day-to-day operations, even more so during a time of crisis! Had we not taken this measure, we would no doubt not have been able to react as effectively as we did to the events of 2008…
Let’s talk about the crisis. How has the Group reacted to it? And how has it specifically impacted the IT division? E. O. : For us the crisis began last Spring, with the sharp rise in the price of petroleum. As of June 2008, we launched a project to combine the IT components of Air France and KLM and reap the benefits of increased synergies. By adopting rigorous measures, we stabilized IT expenses in 2008 (despite budget forecasts of an increase), and reduced them in 2009, without affecting the large-scale projects that will ensure a more effective working relationship between
E. O. : Certainly. In light of reduced budgetary provisions, we have had to be very selective when it comes to new projects. As a result we consulted with the various business units to determine which projects were most pressing and evaluated the return on investment for each project. On this basis, we proposed a new scenario, with the final decision resting with the group’s IT Committee, the CEO of Air France and the President of KLM, as well as both CFOs. Two major long-term projects have been retained: one for the management of industrial activities (whose ultimate objective is the establishment of a global supply chain) and another for the cargo sector, where we are now number 1 across the world.
What are the main challenges in the years ahead? E. O. & J-C. L. : In the medium term, our greatest challenge will be to develop a common IT structure for Air France and KLM. This is a fundamental project, with repercussions both at the organizational level (with various sites in France and in the Netherlands) and on ways of thinking. There is a lot at stake for the entire Group: if we succeed, we will help guide the other activities in the Group on a path towards a common Air France / KLM culture..
Seven Trends for an Innovative New WorlD revolution The advent of the Internet and mobile technologies has profoundly changed both our way of life and the way business is conducted. But this is only the beginning, according to a new report from the Leading Edge Forum, CSC’s technology think tank. This report explores the current and upcoming “digital revolution,” defining seven major digital disruptions that will shape the world of tomorrow.
YouTube, Facebook, the swift expansion of e-commerce. With the Internet, the social links, information access models and business models of yesteryear have begun to falter. Some economic sectors have already been on the receiving end: the record industry is undergoing an unprecedented crisis, while television’s economic model is threatened… And these are only a few of the “digital disruptions” that will continue to transform the world over the coming decades, according to the latest report from CSC’s Leading Edge Forum, Digital Disruptions: Technology Innovations Powering 21st Century Business (see text box). What exactly is meant by “digital disruptions”? The report uses this notion to identify technologies that not only bring about technical advancement but act as catalysts for very different value propositions that are likely to redefine our business models. As such, disruptive technologies constitute a dilemma for businesses: Do I invest immediately, with the risk of outpacing consumer expectations, or wait, with the risk of one day finding myself behind the competition? To settle this question, businesses must constantly be on the lookout, in order to be among the first to identify the models of tomorrow.
The Next Ten Years Will Be Crucial Digital Disruptions singles out seven major “disruptions.” They are all at various stages of maturation: some of them have already begun to transform our frames of reference; others remain under the radar – but are already having a
transformative effect behind the scenes. Despite current economic woes, these digital disruptions will help world gross domestic product flourish in the 21st century, much as industrial disruptions did in the 19th century. However, according to New York University pundit Clay Shirky, progress is often not made in a straight line. When disruptions arrive, they typically take us from current business model A to a somewhat chaotic state, before taking us to new and improved business model B. "We are at the stage where digital disruptions are leading us temporarily into expected chaos," says Alex Fuss, LEF associate and the reports’s lead researcher. "It will take a decade or two to sort out, but we will move through chaos to B. Ever the optimist, I think we will end up in a better place."
Leading Edge Forum: CSC Gets Ahead… and Shares Its Findings As part of CSC’s Office of Innovation, the Leading Edge Forum (LEF) is a global community whose programs help participants realise business benefits from the use of advanced IT more rapidly. Members enjoy access to a global network of thought leaders and leading practitioners, and to a powerful body of research and field practices. The content of this dossier is in large part drawn from the LEF’s latest report, “Digital Disruptions: Technology Innovations Powering 21st Century Business.” The complete report is available at www.csc.com/ddreport.
New Media: We have met the new media, and it is us
The boundary between physical reality and virtual reality is blurring. Virtual worlds augment our reality by enabling the impossible to be possible. For example, NASA’s Jet Propulsion Laboratory created a virtual world for the Phoenix Mars landing in May 2008, enabling people worldwide to witness the spacecraft landing in real time. Video games like “Guitar Hero” and games for the Nintendo Wii console also blend physical reality with virtual reality, allowing us to play music or tennis in our living rooms without lessons. Thanks to related technologies, it will soon be possible to try on clothes without being physically present: 10 seconds is now all it takes to complete a 360° body scan! Virtual technology is also giving us more virtual mobility. Today it is possible to organise a convention for 100,000 people without the need for anyone to travel, by having the participants interact with each other via avatars in a virtual world. Other promising applications in education and training are currently under study.
Internet technologies have shattered the traditional media model of one producer broadcasting to a mass audience. A phenomenon like YouTube gives individuals a direct line to the media as both producers and proactive viewers (dubbed “proviewers” in the report). The traditional media model has clearly been disrupted: we are all the new media. Whether we are bloggers, citizen journalists or basement musicians, going forward we will all participate in the creation of our own media. Although the phenomenon has already begun, it will inevitably spread. For example, in publishing, half of the top 10 best-selling novels in
Challenges Integrating the Real and Virtual Worlds: The two worlds are not mutually exclusive; rather, they complement each other to create a new “blended reality.” Group Co-Creation: Thanks to new virtualisation technology, it should become more feasible for companies and their customers to “co create” products.
Japan in 2007 were initially published as cell phone novels, created on and for cellular phones. On the technology front, major change will come from video: less costly to produce than before, easier to post online, it will likely replace text in many areas. In this spirit, several businesses have developed sites along the lines of YouTube, where employees offer testimonials of their experiences and exchange good practices. This democratisation of video should also ensure the Internet’s eventual dominance as the pre-eminent advertising platform, further hastening the decline of television as we know it.
Living in a New Reality
Qwaq Forums: The Workspace of Tomorrow? What if your digital workspace looked and felt like your physical office? CSC and other companies are experimenting with Qwaq Forums, a virtual environment designed specifically for secure business collaboration. Qwaq Forums takes the form of virtual rooms whose walls double as portals to view and edit documents as a group, for example, or access an application. Working together with others from around the world, in real time, is a core feature. Different rooms can be set up for different projects and activities; you can move your avatar from room to room to go from one project or meeting to another. Applications for these virtual workspaces include virtual office collaboration, program management, virtual operations centres, facilitated meetings and corporate training.
Challenges Video Indexing: When will users be able to search for images and sounds as easily as they do now for text? This important issue relates to the future of information organisations. Technical progress in this field is growing. Embracing Openness: In a world open to participation, businesses must pass some of their power to individuals; the report describes this as “losing to win.” According to the report: “The business models that will flourish are those that invite participation and give individuals more control. Ownership is not the way to win. Openness, customisation and personalisation are the way of the future.”
Thriving on Disruption. The 21st century will be laden with digital disruptions. These disruptions are forming the foundation for a new economy driven by the network and information. As such, these disruptions represent opportunities for innovation and growth. So put today’s digital disruptions on your radar, realising they are a work in progress as supporting technologies and new behaviours take hold. Today’s digital disruptions lay down important foundations and principles for the new economy to build and thrive on.
Social Power: The power inherent in connected people surges
Challenges Leveraging the power inherent in connected people is disrupting how we locate and retain expertise, collaborate, advertise, lend money and even listen to music. New business strategies harnessing social power put a premium on relationships and what others say and do, and tap the viral capability of social networks as distribution channels for advertising, software applications and more.
Enterprises need to “let people be people” and flex their social muscle at the office (with blog posts, social networks, etc.), but within corporate guidelines for acting responsibly. With social networks infiltrating the enterprise as well as becoming the hub of one’s Internet experience, major disruptions are afoot.
Virginmoneyus.com: Peer-to-Peer Lending Peer-to-peer (P2P) networking is being used to connect borrowers with lenders, sometimes with a social twist. In October 2007, Richard Branson launched “virginmoneyus.com”, a P2P lending site that manages loans between friends and family. Part of the Virgin empire, the site is essentially an expansion in social networking. Developed and hosted by CSC, virginmoneyus. com offers more affordable terms than classic credit solutions, takes care of all administrative management of the loan, and ensures greater repayment flexibility. P2P lending, in its infancy, includes other players like Zopa.com and Prosper.com and is expected to grow.
Create Links Between the Private and Professional Lives of Employees. Should employees be allowed to use social networking sites and manage blogs? Yes, concludes the report, although organisations need to decide what works best for them: consumer sites, internal corporate sites, or a combination of both. In addition, clear limits must be set to prevent abuse. (See next item.) Solutions for making social networking secure in the enterprise are emerging. Establish Guidelines. Enterprises need to create guidelines for appropriate use of social networking tools regarding transparency, proprietary and confidential information, regulatory compliance and legal discovery. Additionally, they need to create provisions to protect employee privacy. This is especially important for companies with employees in Europe, where privacy laws are stricter than in the United States.
Nowadays, many types of data that was once unavailable or carefully hidden are accessible to everyone, from price comparisons to organisation charts to real-time air traffic. For consumers, this transparency ensures greater efficiency in service delivery and reduces the risk of unpleasant surprises. For businesses, transparency means, among other things, that formerly opaque procedures are now out in the open, so it is becoming harder and harder to hide “small” mistakes. Transparency also means knowing where employees and assets are in real time, so enterprises can operate more safely and effectively. The trend towards transparency, will continue to grow. Advances in geolocation (made possible by GPS,
The sky is not the limit as spectrum goes digital Challenges Living in an “Open Format” World: Proprietary formats and incompatible standards are relics of a bygone era; open platforms will dominate the world of tomorrow. Inventing New Uses: History teaches us that networks and services develop in tandem; once wireless technologies become standard, there is no limit to the services that can be invented!
RFID and radio sensors) and visualisation tools are accompanied every year by a new crop of applications. CSC has developed OmniLocation, software that enables enterprises to create a real world visualisation of enterprise operations. It integrates location with relevant attributes about people, vehicles, assets and infrastructure, creating a four-dimensional visualisation of the enterprise on a Web platform. OmniLocation combines data about physical business operations into a real world visualisation that is physically correct, accurately mapped, and continuously updated. OmniLocation delivers an unprecedented level of insight into operations to improve safety, security and efficiency for the enterprise.
Challenges Completely Transform Encryption: With quantum computing, users will one day be able to decrypt the most elaborate codes in just a few seconds; encryption specialists, take heed! Thinking in Parallel: Multicore chips will become ever more powerful (Intel is expected to announce an 80-core chip around 2012) and will be able to process multiple problems simultaneously; will the minds of the programmers be able to take advantage?
The 21st century will be the wireless century. Traditional networks and complex frequency allocation systems to avoid interference will be things of the past. The electromagnetic spectrum will become an open resource, “as valuable a resource today as oil was in the Industrial Age,” according to the report. One example of this disruption is that mobile connectivity will be prolific as trains, planes and cars get online. With the help of CSC, Thalys International is setting the pace with the first Internet-accessible high-speed trains for travellers in Europe.
As spectrum opens up, the air waves become fertile ground – some say “beachfront property” – for a vast array of new services from new players, not just traditional operators. Eventually, we will see a complete breakdown of spectrum as software defined radio, and its child, cognitive radio, take hold and spectrum allocation is shattered. Use the entire spectrum and let software find the signals you need. The result: a dynamic and completely digital spectrum. Now is a great time for innovators in this space.
Challenges Balancing Transparency and Confidentiality: Each business must strike the appropriate balance, taking care that neither side of the equation damages its interests. Meeting New Requirements: Businesses and governments will soon find out that once the public starts to experience transparency, it will continue to demand more and more of it. Be prepared to make data accessible in new and flexible ways.
Transparency in the Healthcare Sector It is estimated that between 44,000 and 98,000 patients die in American hospitals every year due to medical error. Better information could help reverse these statistics. Thanks to technology advancements such as longitudinal electronic health records, intelligence systems, advanced data mining and improved connectivity, healthcare is poised to become more transparent, providing better information for better decisions. These technology enablers will help healthcare reach its ultimate goal: personalised medicine. Based on genetic information, family background, and DNA, care can be customised for the individual. For example, insulin dosage plans can be fine-tuned based on individual attributes rather than general criteria (e.g., gender and weight); this would avoid needing to prick yourself every 20 minutes to check your blood sugar level. Creating a transparent healthcare systems is a complex challenge, but if other industries like financial services and travel can become digitally transparent, so can healthcare. It’s a matter of life and death.
New platforms, new materials: two revolutions are underway in IT. In the first, which is related to cloud computing, data and computing resources will reside on the Internet (the “cloud”). Enterprises will no longer own their servers (thus eliminating purchase and maintenance costs), but will instead access their data and shared services via the network from any number of access points. The other revolution is longer-term and relates to physics. Because silicone will eventually reach its limits, we will have to use other materials to attain greater processing speed: nanotechnology, molecular computing, quantum computing and optical computing. All of these materials are being explored
Democratising Artificial Intelligence: By extrapolating from recent advances in IT and biology, the inventor Ray Kurzweil believes that by 2029 it will take only $1,000 USD to build a computer that is 10 times smarter than the human brain and passes for a human during normal conversation (i.e., it passes the Turing test).
A smart(er) technology landscape that understands language and can reason is in the works. With that comes innovations in knowledge gathering, decision making and predicting. Smart virtual assistants are the future of online customer service, disrupting labour-intensive call centres. Semantics can be put to work to find expertise in the
enterprise, solving problems faster and averting crises. Semantics at the IT infrastructure level make services more shareable and organisations more agile, since they can develop applications and manage change faster. A semantic revolution lies ahead (see the text box Towards an Intelligence Web).
3.0, 4.0: Towards an Intelligence Web In the wake of Web 2.0, which some call the Social Web, comes Web 3.0, the Semantic Web, which has been on the drawing board for several years. Users will no longer simply share information but instead knowledge, across open systems capable of learning. Such systems could, for example, use deduction to identify the solution that best fits a user’s search. With Web 3.0, the end result is being able to find relevant information, extract embedded and intrinsic knowledge, reason automatically, solve more complex problems, and manage computer systems autonomically. This Web 3.0, expected to emerge over the next decade, will pave the way for a new phase predicted to emerge by 2020: Web 4.0, which will connect intelligence in an environment where humans and machines will be able to reason and communicate together.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
CfO BAROMETER trends and persPECTIVES FOR FINANCE DEPARTMENTS
BAROMeTEr φ TRENDS AND PERSPECTIVES FOR FINANCE DEPARTMENTS
FOR THE SECOND YEAR, CSC AND THE CEGID GROUP, IN PARTNERSHIP WITH THE ECONOMIC DAILY LA TRIBUNE AND CHALLENGES MAGAZINE, ARE PUBLISHING THE PHI BAROMETER. IN A TURBULENT ECONOMIC CONTEXT, THE 2009 EDITION REVEALS THE PROFOUND CHALLENGES THAT EUROPEAN FINANCE MANAGERS ARE FACING: RISK MANAGEMENT, GROWING PRESSURE FOR RELIABLE ACCOUNTS AND IMPROVED PERFORMANCE IN ORDER TO FREE UP CASH.
THE IMPACT OF THE CRISIS ON COMPANIES THE CRISIS IS CAUSING AN ACCELERATION IN THE RATE OF STRATEGIC CHANGE REQUIRED TO DEAL WITH THE ECONOMIC SLOWDOWN AND EXTREME COMPETITION.
The financial and economic crisis is a source of disruption for companies, in particular in the following areas: • Disruption in sources of financing: access to markets is restricted and the loans granted by banks have become more expensive; the role of debt in the financing of companies has been revised. • Strategic disruption: companies urgently need to adapt to the drop in activity and go back to their core business; they have the opportunity to modify their product range and prices in view of new needs, to conclude long-term partnerships with their suppliers, to consolidate their customer relationships, to contain costs, to augment economies of scale, to take advantage of the crisis to acquire their competitors, or even to diversify. • Disruption in operating models: companies are having to reinvent their business models taking into account the scarcity of resources, the shift from mass markets towards more customisation and the increased cost of carrying inventory. The situation is forcing companies to find a new equilibrium between capital, labour and resources. • Managerial disruption: the collapse of the stock markets has intensified the pressure on management. To get through a major crisis it may be useful to bring in managers
The barometer illustrates the initial responses to the crisis: back to basic principles, controlling risk areas and optimising the organisation.
from other industry sectors or other companies; external people are indeed sometimes more adept at navigating disruptive phases.
THE IMPACT OF THE CRISIS ON FINANCIAL DIRECTORS Although their main tasks remain the same, financial directors must question the assumptions associated with the exercise of their function. Before the crisis, financial directors played an important role in the valuation of companies in the equity markets. They were involved in strategy development and were present in all the company’s processes. The crisis, the fall in stock markets and the growing shortage of capital changed all this. The first priority of financial directors is cash management and cost reduction. Financial directors are becoming the guardians of both overall company performance and a coherent approach to the profit and loss account.
THE ROLE OF THE CFO The crisis marks a return to reality. Financial directors have had the tendency to concentrate above all on the ways to increase corporate valuations on the equity
markets. The crisis has forced them once again to focus on manufacturing the “best tyre in the world” or delivering the “best service”, rather than the best stock price.
FINANCING Capital and cash are the resources most sought after by the companies. The probability of securing bank loans will be lower henceforth. The era of low cost credit has passed. Investors have become more risk averse. Companies must rely first of all on their own financing capability. Since access to external financial resources has become more difficult, the means necessary for their recovery and further development after the crisis must come from within.
STRATEGY The crisis is accelerating the rate of strategic change required to cope with the economic slowdown and extreme competition. The definition and the implementation of corporate strategy are tasks with high added value for financial directors.
The crisis is an opportune moment to shake up the organisation. It can be an agent of change, delivering a shock from outside that can prove to be healthy.
in BRIEF The financial and economic crisis represents disruption at four levels for companies: sources of financing, strategies, operating models and management methods. Financial directors must cope with a shift in the nature of their function, and become the guardians of the company's overall performance. Their first priority is cash management and cost reduction. With a focus on operations, they must ensure that the activities of all departments are coherent and contribute to the creation of value.
performance Another priority for financial directors is to update economic and financial forecasts regularly in order to give company leaders good visibility, in the short and medium term. The core business of financial directors has gone back to basics. They have to automate reporting, speed up closing, pool accounting operations, optimise management tools, improve risk management, limit commitments, and improve the handling of large volumes of information (accounting, taxes, etc.).
COMMUNICATION The crisis is giving a new orientation to financial communication. Firstly internal, given the need to reassure and provide explanations to employees and partners, and to convince people of the need for change and the efforts required. Secondly external, to build management credibility and give investors a clear view of the companyâ€™s direction.
governance The loss of confidence has intensified the requirements in terms of governance, transparency and risk management. The financial function contributes to all dimensions of corporate governance, in particular to ensuring compliance with standards and regulations. The accountability of financial directors can be called into question when, alongside chief operating officers and general managers, they are the guarantors of the honesty of the accounts and the information communicated to the markets.
The first priority of financial directors is cash management and cost reduction. Financial directors are becoming the guardians of both overall company performance and a coherent approach to the profit and loss account. 75
"THE CRISIS HAS FORCED THE RETURN OF THE BALANCE SHEET TO THE FRONT LINE."
THIERRY MOULONGUET Executive Vice President, CFO
Interview published in the latest edition of CFO Barometer (2009)
COULD THE CURRENT CRISIS HAVE BEEN ANTICIPATED? HOW HAVE YOU REACTED TO IT? Let’s look reality in the face: no one could have anticipated the magnitude and the depth of the current crisis. That being said, we know that the economy is cyclical. Therefore the role of financial management is always to carefully manage adequate reserves of liquidity to cope with a downturn in the market. Before the crisis, we had thus already negotiated confirmed lines of credit with our partner banks; at the same time we accelerated our planned bond issues during the first half of the year. When the downturn occurred – and so fast! – we reacted quickly with a very severe inventory reduction programme (and thus also reduced our production) and a reduction in expenditure. We reviewed all our activities to examine opportunities for self-financing.
SO PRIORITY IS THUS BEING GIVEN TO FREE CASH FLOW? Absolutely. Renault has long been managed in function of the operating margin; a more financial approach – focused on free cash flow and balance sheet indicators - was necessary. We started this cultural change in 2007. For eighteen months a cross-functional team made up of high potential employees worked on a specific action plan, and also on a communication plan aimed at educating the operational departments
about free cash flow. For my part, I also participated in videoconferences with our main subsidiaries to ensure that the message had been understood and that the resources had been put in place. This prior work enabled us to save precious time in the implementation of the action plan decided in October. Awareness had been generated throughout the entire group, and we put everything in motion.
WHAT ARE THE QUALITIES NEEDED IN A FINANCIAL MANAGEMENT TEAM IN A PERIOD OF CRISIS? The financial management team must act simultaneously at two levels. On the one hand it is necessary to be very attentive to all the financing opportunities on the market. On the other hand, it is necessary to involve the operational departments in financial matters – to educate, generate awareness, spread analyses and the message, and share best practices. Of course, appropriate monitoring tools must also be put in place. To put the finishing touches on the changes underway, we enhanced our management control system. For example: we need to be able to get rapid input concerning working capital requirements in order take appropriate measures as quickly as possible. It is a whole, a single process to be built up with the operational departments of all the subsidiaries.
"HUMAN RESOURCES ARE ESSENTIAL… BUT THEY ARE FRAGILE."
BERTRAND BADRÉ GROUP CFO
Crédit Agricole SA Interview published in the latest edition of CFO Barometer (2009)
WHAT WERE THE MAJOR CHALLENGES FOR FINANCE DEPARTMENTS WHEN THE CRISIS OF AUTUMN 2008 HIT?
root among our customers, in particular by creating greater transparency and taking a more informative approach.
In reality, everything began in the summer of 2007, with the subprime crisis. Starting in December 2007, we tightened up our methods for running the business, with a weekly committee meeting focused on monitoring our liquidity and our capital. Led by the finance department, these meetings enabled us to exchange information quickly (including the weak signals) and to shorten the decision making process. After the fall of Lehman Brothers, we retained this method of running the business…we accelerated the pace, included the risk management and the liquidity and capital committees, and even made the meetings a daily event for a while.
WHAT WILL YOUR PRIORITIES BE IN 2009?
With hindsight, it can be said that 2008 really was a year of life or death for the banks. And we have not yet come out of the zone of turbulence.
WHAT IS YOUR OPINION CONCERNING THE FAILURE OF THE SAFEGUARDS OF THE FINANCIAL SYSTEM? Extremely critical. The rating agencies, but also institutions like the SEC, failed in their mission. The biggest capital loss that we have sustained in this crisis is that of confidence. Doubtless we will need several years to dispel the doubt that has taken
First of all, vigilance at all times. In times of crisis, finance is an advanced lookout post. It must be on permanent alert, listening for the breeze that could become a storm. Prudence will also mark our investment decisions, and we will be even more selective than previously as regards the partners we do business with. Internal controls will certainly be increased…But it isn’t just about rules and processes. The human factor is essential. A few decisions taken at the right moment by a few individuals have allowed us to get out of tough situations. In a crisis everyone’s intelligence is stimulated – but it is necessary to watch out for fatigue. Human resources are our most precious resources, but they are fragile. It’s important to know how to pace yourself to go the distance. In addition, more than ever before, I move around in the various departments and on the trading floors to keep a finger on the pulse, as it were. This contact is also important because the messages about confidence that circulate internally have to be embodied in someone. The teams need to feel that there is a captain at the helm who knows where he is going, that management has a course to steer.
"THE PRIMARY ROLE OF THE CFO IS TO ENSURE THAT THE COMPANY HAS THE MEANS TO REALISE ITS AMBITIONS." 82
JACQUES STERN Deputy CEO in charge of Accor Services and Finance ACCOR GROUP
Interview published in the latest edition of CFO Barometer (2009)
What is the role of the CFO in the current crisis? Our main job is to think ahead. That's what we have been doing since 2007, by negotiating lines of credit at favourable conditions while the situation was still positive. This allowed us to tackle the crisis with a high degree of manoeuvrability. We also pre-empted the economic downturn as of September by launching an initiative driven by the executive committee to save EUR 50 million in 2009 across all support functions – this has recently been increased to EUR 75 million. Our third initiative was to reduce the level of our investments in the hotel business related to renovation and development, without however having an impact on service levels or our reducing investments in the low budget accommodation sector and in emerging countries. Our job in 2009 will be to monitor the essentials of course (especially working capital in our pre-paid services sector), and to monitor the implementation of our cost reduction initiatives.
Do your three areas of activity (finance, strategy and development) make this monitoring activity any easier?
or targeted acquisitions) involve financial management as well as strategic management; the same individuals are often also involved in funding and development projects. The scarcity of counterparties at the current time (due to the near disappearance of private equity players from the hotel business, for example) makes it all the more relevant to be responsible for all these areas.
Will 2009 be the year for getting back to basics? You should never forget the basics. The primary role of the CFO is to ensure that the company has the means to realise its ambitions. In 2008 we saw that the major players that had made excessive use of leverage were the first ones to suffer from the crisis – look at pubs in England, for example. Conversely we cannot ignore the stock market or our shareholders. It's all about common sense: in times of crisis, CEOs and CFOs must continue on their mission to explain their results and strategy to investors. It is definitely not about accepting diktat by the markets, but we must take our shareholders’ interests into account in the same way we do those of our employees and customers. Having their trust over the long term is essential.
It’s true that being in charge of all these areas helps me pass on certain messages directly; having responsibility for all three does actually make sense in a highly capital intensive industry such as the hotel business. All investment decisions (whether related to organic growth
"there is no point in being afraid of the future; the key lies in managing effectively through the downturn. A positive, hands-on approach from the cFO can help create the spirit needed for success."
michel baise CFO
millennium bcp fortis Interview published in the latest edition of CFO Barometer (2009)
Could the current crisis have been anticipated? How did you react to it? The crisis is a natural economic and social phenomenon. As a CFO, the best thing to do is not to emphasise the crisis, but rather to focus on the measures needed to protect the company’s position, and to ensure it is able to move forward. The art is to remain calm, unperturbed by the external circumstances, draw staff attention away from an imagined unpleasant future in order to alleviate their fears, and help them focus on the tasks at hand now, which if carried out to the best of their ability, will surely lead to the best possible results. At Millenniumbcp Fortis in Portugal, when the economic cycle was at its highest we maintained a prudent position, particularly in terms of investments, which proved to be the wisest approach. Indeed, there will always be a lower point in the cycle, for which one needs to be prepared. Managing a company is about managing variations; at our company, we took into account the possibility of wide variations when defining cost sustainability in our operations and pricing and risk sustainability in our products. This enabled us to enter the crisis in a position of strength.
What are the qualities expected of a CFO in a period of crisis? The first is integrity. For instance, in terms of remuneration, the extent to which the compensation of a CFO is linked to the company's financial performance is key to sustaining integrity. Although this system creates a healthy incentive, it can be dangerous if it results in a situation which would erode the objectivity of the CFO. However, it is important to avoid the temptation to do away with such systems merely because of the crisis; it’s a question of checks and balances. The second quality is optimism, which is necessary to help management within the company maintain the conviction that the crisis can be dealt with. There is no point in being afraid of the future; the key lies in managing effectively through the downturn. A positive, hands-on approach from the CFO can help create the spirit needed for success.
The period in which we are now is an opportunity to change the world for the better. It is important for CFOs to lead people in that direction, to shape their expectations for improvement and provide them with the means (in terms of insight and managing the company’s resources) to make them a reality. The CFO should help management move beyond worrying about problems, to focusing on solutions.
What are the major challenges for corporate finance departments in times of crisis? Cost reduction is not the main issue. Ideally companies should do away with unnecessary costs during the high points in an economic cycle, because it is then that the resources are available to do so. Headcount reduction is always easier in an economic environment where jobs are available elsewhere. The CFO has to distance himself to a certain extent from the current fear. Cost cutting in the midst of the crisis simply aggravates the phenomenon. It's all a question of managing with long-term vision and of anticipating changes. Currently we continue to grow faster than the market, we are expanding our product range and, in a matter of months, we may need to increase our capacity in terms of human resources - an ideal situation. Consequently people feel happier and more secure which in turn means they work proactively and deliver results.
What is your company’s strategy for facing the current challenges? Our objective is to offer our customers products that are attractive and compelling. We do use the bank as a distribution channel, but we ensure that our products are competitive. Our success is based on positive differentiation: we sell more because our offering is more innovative. The result is increased sales, but that’s not the sole objective. The core objective remains, as it should always be, sustainable and profitable growth.
"Our dashboards should include more than just financial indicators." 86
Michel Grandjean CFO
AGC Europe Interview published in the latest edition of CFO Barometer (2009)
The crisis has had a significant impact on your group. How did you react?
Some people say CFOs are the company’s “performance watchdogs”. Do you agree?
We’re a leading player in the flat glass sector, and we essentially work with the construction and automotive sectors. The economic downturn in 2008 has thus hit us severely. We’ve been forced to take radical measures: in terms of overall workforce optimization, selective scaling back of our production capacity, cutting our fixed costs, downsizing staff in support functions (including in finance and IT), renegotiating our procurement contracts…
CFOs are indeed well positioned to compile information on value creation and present it from a financial perspective – ultimately all business activity is expressed in financial terms… However, to gather and summarise this data, they need to build close relationships with operational departments.
In parallel, we had to take a rigorous approach to managing our working capital (by reducing inventory levels), our liquidity (to maintain our financing capability) and our balance sheet. We’ve managed to drastically reduce our investments without cutting back on R&D - it’s essential to continue to innovate - and to prepare for future in this period of global economic uncertainty.
Which scenarios have you envisaged for the months ahead? It is currently impossible to make reliable forecasts on the length and scale of the crisis. We’ve developed several scenarios, but we have to be prepared to weather the crisis for a longer period. The budgets drawn up at the end of summer of 2008 are now obviously obsolete. They have their uses, but we need to use more responsive tools such as rolling forecasts, balanced scorecards and dashboards to manage this crisis and enable management to make good decisions quickly.
In fact, CFOs can be considered as the keepers of the company’s “management cockpit”. Today, our major challenge is to develop a more flexible management model, with new tools. Our dashboards should not be limited to financial indicators: they should include nonfinancial indicators (including for intangible assets), which take into account key factors for success and value creation. This challenge is all the more delicate as we have to deal with increasingly stringent accounting requirements. In addition to the complexity of IFRS, the fact that we’re a 100% subsidiary of a listed Japanese company has imposed new constraints on us in 2009, namely quarterly external audits and the application of new Japanese internal audit standards that draw heavily upon American SOX regulations. To succeed, we need discipline and efficient tools. We need to be able to work together and rely upon teams of competent people – these are minimum requirements if we want to make more with less!
"The CFO is no longer just the numbers man. He has to have deep insight into the whole business chain."
ARNOLD DE BRAUWER cfo
National Railway Company of Belgium Interview published in the latest edition of CFO Barometer (2009)
What is the greatest challenge you are facing today as CFO of the National Railway Company of Belgium? Without a doubt, the decline in our financial results, due to loss of revenues caused by the crisis. Moreover, the railway company’s means of production (locomotives, railway cars, etc.) must be continue to be used in the same manner, while at the same time its costs have to be reduced. A CFO must always ensure that his company is as profitable as possible, but that can only be done if he deals with all of the company’s processes. He isn’t just the numbers man any more. His management policy rests on three pillars. Firstly, the numbers of course. Secondly, financial reporting used to monitor whether all systems are well aligned with each other. And lastly, the IT systems. I would say that the scope of the CFO’s involvement encompasses finance, acquisitions, logistics, utilities and strategy. Today’s CFO is coresponsible for the strategy and management of the company. He has to learn lessons from the crisis, and help determine the strategy for preparing the company for the future.
Does the everyday reality of the NMBS make such an approach possible?
What priorities have you set for the future? The first is the continuity of management in the company. For a CFO, knowledge transfer is more important today than ever before, because he has to have a complete overview of the entire business chain, including commercial, technical and financial aspects. Continuity is often neglected. Things that have become matters of course over the years can be essential learning points for newcomers. A second priority is transparent communication. It has to be more than just transparent, it needs to be broad and well directed you can’t see everything through a window if the frame is narrow and the angle wrong! The CFO must keep the management committee, the board of directors, the shareholders and various other stakeholders properly informed in a timely manner. A wide variety of constraints make this a challenge, not least the ability of a CFO to speak the language of his audience, since not everyone is an experienced specialist in the business. He must always present a clear and honest overview of the situation. Failure to do so means that sooner or later the company will – literally – have to pay the bill. Examples of CFOs that have got it wrong are unfortunately myriad…
As far as the organisational structure and the means are concerned, I have the complete support of the CEO. It is certainly possible to find the right people on the labour market. They need to have the necessary technical expertise and at the same time be able to cope with the challenges of running a company that is being completely changed by the crisis. I always say that every problem can be solved with 20% technical skill and 80% change management, but to do that a CFO has to surround himself with people who can implement and support the process of change.
"THE DETERIORATION OF THE ECONOMIC AND FINANCIAL CLIMATE MAKES FORECASTING A MORE COMPLEX TASK, AND MAKES ECONOMIC AND ASSET AGGREGATION AT GROUP LEVEL MORE DIFFICULT TO EVALUATE."
Ennio La Monica CFo
carige bank Interview published in the latest edition of CFO Barometer (2009)
How are you reacting to the crisis? What measures has the company taken to overcome this difficult period? Up to now the Carige group has been able to withstand the crisis better than other Italian and European credit institutions, thanks to its retail banking business model which is regionally driven and focused on the traditional commercial practice of consolidating savings and loans for companies and private individuals. The solid relationships that we have built up with our customer base over time have meant that we have been only marginally affected by the collapse in the financial markets. As such we haven't been involved in the liquidity crunch in the credit system. Another of Carige's strong points is its high level of capitalisation, which allows us to position ourselves at the forefront of the national banking system. The positive aspects of liquid assets and strong capitalisation have allowed us to maintain constant financial offerings in the real economy, in spite of a difficult economic environment characterised by weaker demand for credit and higher levels of risk. Our long-term strategy has enabled timely planning of consolidation operations which have made us stronger in terms of holdings and liquid assets. A capital increase of roughly EUR 1 billion was carried out in early 2008, and between June and December issuing activity was strong: four subordinated loans for over EUR 500 million, covered bonds for EUR 500 million and roughly EUR 850 million in loans to solvent institutions were securitised. EUR 2.6 billion in bonds were also sold to our customers during 2008.
from Intesa Sanpaolo and Unicredit without damaging the strength of the group. On the contrary: this strategy has enabled us to significantly broaden the sector offering of our investment products, to diversify the level of risk in the loan portfolio risk and increase liquidity. Against a background of systemic predictions of worsening of loan quality, Carige is focused on carefully selecting its new loans and closely monitoring existing customers, thanks in particular to the tools implemented in the last few months and a proactive operational approach to managing outstanding loans and payment delays.
What has the impact of the crisis been on administrative and financial control functions? The deterioration of the economic and financial climate makes forecasting a more complex task, and makes economic and asset aggregation at group level more difficult to evaluate. In order to reconcile long-term objectives with short-term demands we need greater management flexibility that will enable us to limit erosion of revenue and asset margins.
How do you think we can get out of this crisis? While the situation in the financial markets is returning to normal â€“ even if some tension still remains â€“ the recession has entered its most acute phase. International action, and specific action in Italy, aimed at strengthening the banks, re-starting infrastructure projects and supporting employees and families should set in motion a virtuous cycle capable of restoring a climate of confidence and thus speeding the passing of the current crisis.
In the course of 2008, the strategy of growing our distribution network led us to acquire new subsidiaries
"THIS CRISIS WILL TRANSFORM THE WAY THAT COMPANIES ARE MANAGED. MANAGERS WILL HAVE TO ENHANCE THE VALUE OF EXISTING CAPITAL AND DEVELOP MORE COMPETITIVE HUMAN RESOURCES."
Mariella Burani is a specialist in the design, manufacturing and distribution of leather goods, clothes and accessories.
GIUSEPPE GULLO cfo
MARIELLA BURANI group Interview published in the latest edition of CFO Barometer (2009)
What impact has the crisis had on your company? Mariella Burani has been present in the clothing sector for more than 40 years. Over the years the Group has based its growth on the acquisition of companies specialising in products close to its core business (leather goods for example), thereby adopting a policy of diversification of offerings so as to expand its brand portfolio, and to enable cross selling in the numerous international markets in which it operates. This strategy has proved its worth, including at the start of the crisis. Our strength lies in the synergy between products and markets, from the viewpoint of leveraging the value of "Made in Italy". Given this, the Group focused its investments on more profitable sectors (such as leather goods, which today represent 60% of turnover) while sidelining other sectors. The cost and organisation structures also tend to be steered towards greater simplification, with a particular emphasis on the management of human resources: in a labour market as inflexible as that in Italy we face serious competition from so-called low cost countries on a daily basis. To come back to your question, the crisis has nevertheless had a considerable impact on the Group and we are currently going through a crucial transition and change period.
How do you see your role in the context of a crisis? Have there been any changes at the operational level? All those in management positions find themselves on the front line in difficult times. Today in particular the CFO is expected to drive the Group's projects for growth forward, both in terms of managing financial requirements and motivating and leading the entire organisation to
achieve common objectives and, as a result, the realise the company's commercial objectives. When the world economy is in recession or in a period of crisis, it is essential for value to be created at all levels within the company, and management is the main guarantor of this. This means focusing on resources on a daily basis, and human resources in particular to involve and motivate each employee in order to strengthen the team concept. It is only together as a team that we will be able to get through the difficult times and successfully face the competition, as well as whatever the future holds in store for us.
What are the potential outcomes of this crisis? We're living through the first truly global crisis. Its features are different from previous crises as it affects all countries and all sectors. It's a financial and economic crisis which I believe will continue for some years. If we rely on historical data, however, we can recognise that any period of recession is followed by a time of growth. We should thus look to the future with some degree of optimism. The first to recover should be the United States thanks to its flexibility at both production and labour market level. I think that this crisis will force us all to review our approach to trade in general: companies will have to adopt a business model which develops financial and human capital as much possible, as the resources available can only diminish. From my point of view, only those companies that are able to concentrate their investments quickly on the most profitable areas and to increase the loyalty of the most competitive employees will be able to effectively overcome this period of economic and financial crisis and emerge from it even stronger.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
HR BAROMETER TRENDS AND PERSPECTIVES IN HUMAN RESOURCES
HR BAROMeTer MAJOR TRENDS WITHIN THE HR FUNCTION
THE CRISIS HAS DISRUPTED HR DEPARTMENT PRIORITIES. IN THE SPACE OF ONE YEAR MEASURES TO REDUCE COSTS AND PRODUCTION CAPACITY HAVE GONE FROM 7th TO 1st PLACE AMONG THE PRIORITIES OF THE HR DEPARTMENT. MEANWHILE, THEIR 2nd PRIORITY HAS NOW BECOME EMPLOYEE MOTIVATION.
EUROPEAN COMPANIESâ€™ FIRST REFLEX WAS TO CONSERVE THEIR HUMAN RESOURCES. THEY SOUGHT TO AVOID REPEATING PAST ERRORS AND WORKED TO FIND NEW SOLUTIONS. THEY LOOKED FOR WAYS TO REDUCE PAYROLL WHILE PRESERVING THE SKILLS THAT THE COMPANY WILL NEED WHEN THE ECONOMY RECOVERS.
COMPANIES REACTED BY BOOSTING THEIR FLEXIBILITY
The adaptation of the production capacity to the current economic situation, i.e., by the elimination of jobs, is undoubtedly not at an end.
To compensate for their inability to accurately forecast business needs and to prepare themselves for the rebound, companies have become more flexible. They have deployed a wide array of adjustment measures: no more temporary workers, non-renewal of fixed-term employment contracts, hiring freezes, short-time employment, flexible and reduced working hours, reduced comp time, employee sharing with other organisations, compensation for one or two-year leaves of absence, training, etc. Certain companies also seek concessions from their employees in order to reduce costs: pay cuts, unpaid leave, forfeited comp time, etc. It is important to note that labour flexibility has greatly progressed the last few years. In France, for example, over 4 million employees are now working part-time, compared to roughly 1.5 million twenty-five years ago. Furthermore, several European countries (Germany, Italy, France, etc.) have utilised short-time employment to a large extent, which has allowed them to preserve the link between employees and companies. However, labour adjustment has been moderate and fractional in comparison to the decline in business activity.
ACTIONS AIMING TO STIMULATE EMPLOYEE COMMITMENT Many HR departments have learned from the excesses of the past. They no longer automatically take recourse to the methods they formerly used, which often proved ineffective and undermined employee commitment. Management of previous crises, particularly the crisis of 1993, profoundly altered the link between employees and their company. New lines of work, new technologies, and new labour organisations have served to further worsen employee alienation. Workplace stress has become a major concern, especially following the media coverage of suicides within companies. Lastly, the value of work has been diminished by official policy, which, for twenty years has exalted work sharing and reduced work hours, going so far as to encourage redundancies or early retirement. This has resulted in less confidence in the company and its future. Nevertheless, employee commitment is an absolute necessity. Indeed, company performance and employee commitment are closely related. Team motivation is
One challenge faced by the HR function is to successfully support the company’s transformation – by mobilising line management and all of the company's personnel – in a context in which change occurs ever faster, while the human element evolves much more slowly.
fundamental. Companies are increasingly unable to ignore the human factor if they want to boost their performance. HR departments have been mobilised to restore trust between the company and the workforce, through the reinforcement of the role of local managers, the reinforcement of internal communication and the reinforcement of non-financial methods to recognise employees. Recognition takes first and foremost the form of personalised exchanges and working relationships. For most HR departments it is still important to build employee loyalty as well as to improve the social climate, ethics, social responsibility and working conditions. One challenge faced by the HR function is to successfully support the company’s transformation – by mobilising line management and all of the company's personnel – in a context where change occurs ever faster, while human beings evolve much more slowly.
BETTER MANAGEMENT OF EMPLOYEES AND COMPETENCES
have a more forward-looking vision. The objective of HR departments is to anticipate HR needs and to prepare the company for the business activities of tomorrow. The strengthening of internal skills is a priority. HR departments must both attract new talent and retain old talent. They must help the company and its employees prepare for the end of the crisis. They must build loyalty among their people and provide professional development to anticipate competence needs. They must mobilise and perfect skills in areas where they are under-exploited in order to transfer them to areas where skills are lacking, thanks to internal mobility. Employee and competence management provides significant insight into the company’s resources and makes it possible to develop a vast internal labour market in which employees are able to move from one position to another. It makes it possible to anticipate future needs, to train the personnel who must fulfil these needs, and to provide job security, all while creating job prospects for older personnel.
Employee and competence management is a key area for improvement within the HR department, both because regulations require it and because HR departments
EFFECTIVE HR PROCESSES AND TOOLS The responsiveness and pragmatism of HR departments in the face of the crisis demonstrates that the investments made by the HR function in the HR organisation, processes, and information systems have been productive and efficient. In the space of a few years, the HR function has experienced a true transformation and has boosted its value added, built up new skills, and developed a closer relationship with line personnel. Processes must be optimised and the cost of management activities must be reduced in order to allow the HR function to continue to increase its value added. The effectiveness of the HR function may be optimised at several levels: the optimisation and simplification of administrative management processes, the outsourcing of administrative management, and better communication with line personnel. However, the streamlining of HR processes at an international level in order to develop common frames of reference remains a major challenge.
IN THIS CONTEXT, WHAT DOES IT MEAN TO “LOOK BEYOND THE CRISIS?” The crisis has been a rude awakening for the 21st century. It is also an opportunity to commit to changing our society in a way that will preserve our ecosystems and future. Nobody knows how long this period of change
will last or what turns it will take. However, we do know that in order to overcome the crisis we need to be innovative, responsive, and able to adapt to a world that has gone from abundance to scarcity, all while valuing the workforce, which is the main resource of a continent like Europe.
A DIFFERENT MODEL FOR GROWTH Any strategy to overcome the crisis involves the alteration of our business models. We must invent a new model for growth, no longer driven by credit or focused exclusively on high value added services. We must thus refocus industry as quickly as possible, beginning with the activity sectors with a promising future. Two major areas for innovation are the environment and healthcare. The leaders of tomorrow will be those companies that are able to integrate the new challenges – the environment, sustainable development, an aging population, and the increasing world population – with their business model. The companies that will be best prepared for the end of the crisis will be those that prioritise training, flexibility and innovation, and those in which trust is a driving force.
TECHNOLOGICAL BREAKTHROUGHS We are at the dawn of extraordinary technological breakthroughs in the areas of energy, IT, the management
of rare resources, such as water, the management of space and many more. The race to innovate will set off at a furious pace. The industries of the future will be fuelled by a “great convergence” of technologies, as nanotechnology, biotechnology, IT, and cognitive informatics come together. Europe, with its culture, quality of life, and over-educated workforce, is well positioned to play an important role in this growth cycle. The level of education, which is the decisive factor in the evolution of a society, is very high in Europe. The intelligence and inventiveness of the population are our raw materials.
TWO RESOURCES ARE INDISPENSABLE FOR CREATING A NEW ECONOMIC PARADIGM: PEOPLE AND CAPITAL. THE ONLY TRUE NATURAL RESOURCE IS PEOPLE AND THEIR ABILITY TO INNOVATE. THE ROLE OF THE HR DEPARTMENT HAS NEVER BEEN SO IMPORTANT. HR DEPARTMENTS MUST CONTINUE TO PRESERVE THE BALANCE BETWEEN THE SHORT TERM – DOWNSIZING PERSONNEL TO REDUCE COSTS – AND PREPARING FOR THE ECONOMIC RECOVERY BY BOOSTING THE COMPETENCES AND MOTIVATION OF THEIR TEAMS.
RE-INDUSTRIALISATION The growth model of tomorrow will most likely be based on industry and exports. Innovation, productivity gains and revenue increases always originate within or around factories. One industrial job generates three jobs in the service sector. Without industry, a lasting increase in the standard of living is not possible. Re-industrialisation is necessary so that exports can drive the economy. This is why we must open industry again to young people, through training, to women, by offering them true careers, to older personnel, by keeping them within the company, and to those who are less qualified, by making use of continuous development.
“THE MAJOR CHALLENGE FOR PUBLIC ADMINISTRATIONS IS TO EFFICIENTLY MANAGE A LIMITED BUDGET IN ORDER TO CONTINUE TO OFFER THE SAME QUALITY OF SERVICES TO CITIZENS.” 102
ĂĄngel LuĂs Cabal HUMAN RESOURCES DIRECTOR
Government of the Principality of Asturias Interview published in the latest edition of HR Barometer (2009)
WHAT IMPACT HAS THE CRISIS HAD ON YOUR ORGANISATION? WHAT MEASURES HAVE BEEN TAKEN IN RESPONSE TO THE CRISIS?
IN THESE DIFFICULT TIMES, WHAT SHOULD WE EXPECT FROM AN HR DEPARTMENT, IN BOTH THE PUBLIC AND PRIVATE SECTOR?
In general, all public administrations are affected by the economic recession because it leads to a drop in tax revenues as a result of decreased consumption and production activities. In this context, administrations must optimise public resources in order to support social investment policies and thus contribute to the upturn in economic activity.
At the present time, public administrations must know how to work with sufficient employees, while taking into account that these organisations have large human resource needs as they offer major services in the areas of health, education and social services. For our part, we are opposed to the reduction of these services, and have even requested an increase in our resources by way of efficient hiring and cost effective management. HR departments must be able to optimise human resource costs and the return on investment of public finances.
In terms of human resources, we must boost the efficiency of our organisation by analysing our services and their cost, and by implementing projects to improve the productivity of civil servants by evaluating their performance, and encouraging them to become more involved in the strategies adopted. In effect, it is the civil servants who have a direct relationship with citizens: they know the procedures and the improvements needed.
IN YOUR OPINION, HOW DOES THE ECONOMIC CRISIS AFFECT HIRING WITHIN COMPANIES AND PUBLIC INSTITUTIONS? WHAT STRATEGIES HAVE BEEN ADOPTED AND WHAT MEASURES ARE NEEDED TO RETAIN TALENT? In general, companies are able to adapt the number of employees to the level of activity in a given period. However, within public administrations employment is normally guaranteed. We are thus unable to reduce staff. The impact of the crisis on public administration has been felt rather in terms of limited hiring, with new employees being hired primarily for key positions, as well as limited replacement. The objective is to optimise human resource expenses in order to ensure that public finance is able to bear the cost of stimulating the economy and providing social services.
IN 2009, WHAT SHOULD COMPANIES AND PUBLIC INSTITUTIONS PRIORITISE? Both companies and public institutions must have forward-looking management. We cannot allow ourselves to focus on short-term results; we must develop strategies with a time span of at least three years. Of course we will continue to carry out short-term projects, but they will not enable us to achieve objectives over the long term.
WHAT ARE THE LONG-TERM CHALLENGES OF HR DEPARTMENTS? We do not know exactly how long this crisis will last or what the new economic context will be once the situation has stabilised. Therefore, the major challenge for administrations is to efficiently manage a limited budget in order to continue to offer the same quality of services to citizens. Streamlining operations, the implementation of structures with a human dimension, and the motivation of personnel through professional development programmes will prove to be indispensable tools.
“IN THIS TIME OF CRISIS, IT IS ESSENTIAL THAT DIRECTORS KNOW HOW TO MANAGE CHANGE BY SERVING AS BUSINESS PARTNERS WITHIN THE COMPANY.”
alessandro SALUSTRI HUMAN RESOURCES DIRECTOR
BRITISH TELECOM italia Interview published in the latest edition of HR Barometer (2009)
WHAT IMPACT HAS THE CRISIS HAD ON YOUR COMPANY? British Telecom is part of the telecommunications sector, an industry in which margins were already low before the crisis began. The crisis has served to put even greater pressure on profits. It has therefore been necessary to review internal processes to optimise performance in order to maintain our margins and cash flow: we have reduced costs considerably, especially those that do not generate value. In particular, we have focused on two areas: firstly, on overhauling our production processes; secondly, on ensuring that our organisation’s resources represent a proportionate response to this new state of affairs.
WHAT IMPACT HAS THE CRISIS HAD ON YOUR FUNCTION? Personally, I do not make a distinction between the crisis and globalisation, which is a phenomenon that is constantly evolving. Furthermore, the crisis has become a global event due to the very fact that the world’s economies are interconnected. In this context, managers must be able to improve their understanding of the markets and expand internationally. In order to implement the changes required, they must think globally but act locally. This principle is especially applicable to the human resources department, which is currently being called upon to manage not only personnel
but also the company’s resources in their entirety, while taking major commercial and organisational requirements into consideration. The HR function must manage corporate change and reorganisation, internal communication, and above all, costs. To ensure that such responsibilities are fulfilled, the manager must demonstrate leadership skills that allow him or her to implement the necessary processes and models. Finally, it is necessary that the HR department plays a central role in the company by working hand-inhand with other departments to create value.
WHAT ARE YOU PLANNING TO DO TO OVERCOME THIS CRISIS? I don’t think there is a miracle cure to remedy the current economic circumstances, even if there are some macroeconomic signs of recovery: reduced inflation, low interest rates, and limited spreads. I think above all that the effect on unemployment will be longer lasting than the crisis itself, and those who lose their jobs today must be able to reinvent themselves and overcome the irregularity of the job market that will characterise the coming years. Income levels will also remain low, which will lead to a fall in buying power and thus changes in lifestyle. I believe that when the economy recovers, it will be necessary to adopt tools that will promote opportunities and limit the negative effects on the job market.
"WE'VE STRENGTHENED SOCIAL COHESION PLANS AND TRAINING POLICY."
VĂŠronique Rouzaud Senior Vice President, Human Resources
Interview published in the latest edition of HR Barometer (2009)
Has the crisis affected your company? The world is experiencing a deep financial and economic crisis that is also a social crisis. Assumptions are being questioned at all levels of society, and business is no exception. By drawing on the basic values that underpin our company model, Veolia Environmental Services has implemented the changes required by the crisis.
What are your main strategic plans? First of all we've strengthened social cohesion plans in addition to any action taken by public authorities and trade unions. Along with our unions and management in France, the rest of Europe and all over the world, we've worked closely on those topics that directly affect the lives of our employees, such as health and safety, equal opportunities, solidarity, etc. In France for example, as of 2008 we implemented an anonymous support service for employees in difficulty, both in terms of their private and working lives. We've also strengthened local ties through recruitment and training policies that are more focused at local level, in order to find solutions that are in tune with reality and with the challenges in the field. Employee commitment is one of the key factors of Veolia Environmental Servicesâ€™ success. These initiatives concerning social cohesion and local involvement have allowed us to keep the degree of commitment very high.
What has your cost reduction strategy been? Our water, waste, energy and passenger transport management service operations have been relatively unaffected. We do, however, have to limit investments and reduce costs while still improving the quality of our services in an increasingly competitive environment. This involves making our organisation more flexible so that we can adapt to fluctuations in activity levels and operational developments in particular. Employee mobility, particularly horizontal mobility, is a strategic
priority in this regard. We've developed tools and channels to support professional mobility. In addition to technical versatility we have to encourage employees to strengthen their social competences and their ability to adapt, allowing them to be the agents of their own professional development.
Does that not imply investment in spite of the crisis? In the service industry more than in any other, competitiveness depends essentially on team competence. We have to have the best profiles in order to remain the reference provider of integrated environmental management services. We have again increased our training activities this year. We've created three new campuses in France, the United States and in Israel and will soon have one in Australia, which will increase our campus network to 18 training centres. These universities provide training for environmental management jobs and award degrees recognised by the government for qualifications ranging from technical to managerial. The aim is to train new employees, developing them throughout their working lives, anticipating the operational needs of the future and building up employee competence accordingly.
Is this a group-wide strategy? Our activities are firmly established at a regional level, with economic and social realities that differ greatly from one country to the next. Cohesion remains essential, particularly in the management of human resources. We're continuing to consolidate and align remuneration, training and development policies across the group. It's a guarantee of upward social mobility for everyone in a decentralised organisation. The contribution made by new technologies is vital in this regard, provided that the solutions are pragmatic and simple enough to be adopted by everyone across the board. The key issue is to reconcile process standardisation with the absolute requirement for socially responsible and individualised
"WE'VE PUT THE EMPHASIS ON TRAINING FOR SALES AND CUSTOMER SERVICE IN ORDER TO SUPPORT OUR EMPLOYEES IN THE FIELD." 108
Laurence Frenkiel human resources director
Grand Optical Interview published in the latest edition of HR Barometer (2009)
Has the crisis affected human resources management for you?
What is the main issue for human resources management?
Since the management change in September 2008 we've been committed to an optimisation plan that encompasses all our processes and is aimed at improving our results while bringing costs under control. This was originally a family business which is now owned by the HAL investment fund and which has a strong track record of growth. It's thus vital for us to further streamline and standardise our operating model for increased consistency and efficiency. For human resources this means establishing more systematic and stricter standards in our recruitment, skills management and payroll administration processes.
We have to be both responsive to and meet the demands of the current situation, without losing sight of our longterm strategy. We have to reconcile short and long-term objectives even if this is not always easy.
What is the greatest challenge of this period? To continue rallying our employees in a less favourable economic climate in which selling is more difficult. That requires more commitment from them. We've thus put the emphasis on training for sales and customer service in order to support our employees in the field and to increase motivation. We've reviewed the variable pay policy for managers and further developed our sales force incentives.
Although turnover tends to decrease in a period of crisis, we are still in a competitive sector where ensuring the loyalty of the best employees remains essential. Employees are in a give-give or win-win relationship with the company. Unquestioning support can no longer be taken for granted. Employees expect recognition for their contributions. The company â€“ particularly through its human resources policies â€“ must provide value added services to employees with real career prospects.
What is your strategy for next year? We're going to continue investing in training and career management, with a more refined approach that is increasingly forward-looking in terms of our needs. Our information systems allow us to refine our approach thanks to improved record keeping, long-term monitoring and more proactive management of each employee. We are the number two worldwide in the sector and can thus offer opportunities for career progression and horizontal moves to our employees; we're going to continue encouraging this type of mobility in future. Itâ€™s also up to each employee to make the most of existing opportunities and dynamically manage their career within the company.
"THIS CRISIS IS A UNIQUE OPPORTUNITY FOR HR."
Charles-Henri Besseyre des Horts Associate Professor, Management and Human Resources Department
Interview published in the latest edition of HR Barometer (2009)
What impact has the crisis had on human resources management? Companies have tried to make savings, which has resulted in salary freezes, lower bonuses and reduced training budgets. There has also been some restructuring, but employers have learnt lessons from previous crises and have sought to avoid the yoyo effect inherent in changes that are made too quickly. They haven't given into the short-term logic of financial diktats. Financial variables no longer seem to be the only deciding factors. I think that this crisis is the start of a new way of viewing the importance of human capital in business.
Is a change of direction occurring? Companies' sustainable development and social responsibility activities are constantly expanding. In my opinion these are sustainable trends that will encourage other factors to be taken into account in business strategy, rather than only purely financial ones. The younger generations are aware of companies' corporate social responsibility efforts; non-financial rating agencies like Vigeo have an increasingly large influence. By reminding us of the limits of the financial world's supremacy, this crisis is a unique opportunity for HR. It asks the common sense questions for which human resources management is the primary source of answers. Cosmetic policies have had their day; the gaps between empty talk and reality are going to become more and more untenable.
Will the role of the HR director have to become a more strategic one? Human capital is the central lever of companies' competitiveness and it should acquire a more strategic role. But this viewpoint still has trouble making itself felt. The reason: management that is not sufficiently aware
and which doesnâ€™t value human resources to the extent it should. On the other hand the HR role lacks openness towards the business. It has to acquire a more companywide view. In this regard we can be glad that a growing number of management students are going into HR, whereas in the past it has traditionally been a bastion of lawyers and psychologists.
What are the next challenges for the HR function? The function must improve its transversal insight into the company and it must also reinforce its credibility in the eyes of the business. From this perspective it must become more rigorous in measuring its contribution to overall company results more effectively, even if the value it adds is felt over the long term. It's by demonstrating the return on investment achieved that HR will play a greater role in decision making. The further development of information systems will make this improved measurement easier; the efficiency of the systems is however directly linked to the change management processes that support their use.
How do you see the post-crisis period? The war for talent will intensify as we emerge from the crisis. Even in the context of a gradual upturn with mixed results, there is a structural effect linked to the demographic pyramid, with many employees going into retirement. Employees will also be more demanding: they have accepted their companies' belt-tightening measures during the crisis and will want to reap the rewards of that commitment during the economic recovery. Failing that, the best people will put employers in competition with each other for their talent.
"HR MUST GET CLOSER TO THE BUSINESS."
Jean-Paul Charlez hr director
Etam group Interview published in the latest edition of HR Barometer (2009)
Has the crisis affected human resources management for you? Line managers' first reaction is to manage the crisis by managing cost. Companies have thus cut recruitment, training and internal communication costs. It seems to me that this crisis has been exaggerated by the media to quite a large extent compared to the one in 1929. This very alarmist viewpoint has definitely encouraged companies to think ahead and adopt some very progressive measures. The other side to this is that budgetary restrictions were possibly imposed too soon in some sectors. This deteriorated outlook has also led to unions and management monitoring day-to-day matters extremely carefully.
Is the role of human resources affected by the crisis? HR always plays a more central role during difficult times. Line managers increasingly turn to it because of its expertise. However, that's the result of slow and gradual progress. Human resources was for a long time perceived as an extension of accounting, with payroll as its central function: a rather basic service provider. As time passed, line managers began to recognise that human resources could contribute much more and that it had a whole range of solutions that could help them at a strategic level. The issue for HR is to continue moving closer to the business by positioning itself as a fully fledged business partner and safeguarding the balance between financial results and the quality of working life, which is above all based upon recognition and mutual respect. I spend a lot of time in person with brand managers designing solutions
tailored to their specific objectives to the greatest extent possible. That's the case for policies related to pay, for example, which is one of the primary challenges in a time of crisis.
How do you see us getting out of the crisis? I'm waiting to find out how this crisis will be seen with the benefit of hindsight. I'm not convinced that it will be as dramatic as the image promoted by the media. 2009 will have been a year of cost management. We anticipate consumption will resume and that 2010 will thus be a year of investment.
In the longer term, how do you see the relationship between the company and its employees developing? To me it seems essential to improve employees' prospects. For a long time employees have felt that they have no real freedom of choice. Nowadays linear careers are no longer the norm and employees are much more involved in managing their own dynamic career paths. Individuals who regularly change company or job are no longer seen as unstable. In fact, more questions are asked of people who stay in the same job for a long time. Employees no longer want to just have obligations imposed upon them: they yearn for personal and professional development and try to salvage the freedom that they have in all other areas of their lives from mechanisms within the company. Companies have to be attractive and offer career paths that allow individuals to fulfil their potential.
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
SRM BAROMETER TRENDS AND PERSPECTIVES WITHIN PROCUREMENT AND LOGISTICS DEPARTMENTS
SRM BAROMETER TRENDS AND PERSPECTIVES WITHIN
PROCUREMENT AND LOGISTICS DEPARTMENTS
THE TRANSFORMATION THAT WE ARE EXPERIENCING IS EXCEPTIONAL IN TERMS OF ITS FORCE AND ITS MAGNITUDE. THE CURRENT FINANCIAL CRISIS IS ALSO A CRISIS OF CONSUMPTION AND INNOVATION— THERE IS NO LONGER A BALANCE BETWEEN CONSUMERS, THEIR DESIRES, THEIR FINANCIAL MEANS AND THE PRODUCTS AVAILABLE TO THEM. A NEW FORM OF CONSUMPTION IS EMERGING, A TYPE OF CONSUMPTION THAT IS MORE CONCERNED WITH ISSUES SUCH AS ENERGY, THE ENVIRONMENT AND HEALTH.
THE CRISIS IS AN OPPORTUNITY FOR PROCUREMENT FUNCTIONS TO CONSIDER AN ECONOMIC MODEL BASED ON CLOSER COLLABORATION BETWEEN PARTNERS. IT IS NOT OVERLY IDEALIST TO THINK THAT THE BEST PERFORMERS OF TOMORROW, HUMAN AND ETHICAL CONSIDERATIONS ASIDE, WILL BE THOSE COMPANIES THAT ARE ABLE TO WIN OVER BOTH THEIR CLIENTS AS WELL AS THEIR SUPPLIERS. POWER STRUGGLES MUST GIVE WAY TO RELATIONSHIPS BASED ON COLLABORATION.
To maintain their comfortable lifestyles, hyper-consumers buy without pause and without limits. The upheaval in consumerism represents a massive challenge for producers. In industry, for example, economic models are being reviewed from top to bottom in an effort to seek out cost reduction opportunities. Companies unable to adopt flexible production methods or zero inventory suffer even more. In reality, it is much easier to be a hyper-consumer than to become a hyper-producer. The crisis has once again disrupted the status quo. These changes have been accompanied by drastic monetary shifts that have wreaked chaos in companies, both in terms of their strategy and their production processes. Within this context, four major trends were identified by our survey.
For fifteen years, the unfettered quest for profits has led to high pressure being placed on suppliers, with the development of better organised, more powerful procurement departments. Procurement is indeed a major driver of profitability. From an accounting standpoint, a reduction of approximately 1% in a company's procurement expense leads to an increase of approximately 10% in profit. Certain groups have thus become recognised leaders in procurement, showing unlimited creativity in this field, sometimes to the detriment of their ability to innovate and adapt to market changes.
COMPANIES’ IMMEDIATE REACTION TO THE IMPACT OF THE CRISIS
ACCELERATED “DISINTEGRATION” OF THE VALUE CHAIN
In times of crisis, the objective is to make less go farther. Procurement’s main role is thus to leverage its capability to free up cash in the short term, either by bringing in more money or by reducing costs.
Companies have made widespread use of information technology throughout the last two decades. Thanks to these innovations, these companies have been able to scatter their production chains all over the world and across a vast network of subcontractors. The various phases of a single workflow may take place in different locations around the globe. This is known as the “disintegration” of the value chain.
One of the first priorities of procurement departments was to renegotiate contracts with suppliers. As a result one of the initial effects of the financial crisis was a fall in quantities purchased and a massive reduction in inventory throughout the supply chain. Two indicators were monitored especially closely by supplier relationship managers during the crisis: inventory levels and accounts payable. Over the past year many companies have attempted to maintain their profitability by demanding greater efforts on the part of their suppliers. However, the financial well-being of a company’s subcontractors is a concern of many procurement departments, which worry about the risk of bankruptcy among their strategic suppliers and the corresponding risk of production stoppages. To anticipate potential business failures, certain groups take preventive action, engage in dialogue and provide financial or non-financial support.
Today, international competition is of vital concern to companies. They must constantly optimise the location of their purchasing and production activities, taking into account various parameters: wage costs, inventory costs, shipping costs, lead times, quality, expertise, etc. As a result, the various business models of the companies within a single industry may lead to very different operational configurations.
In all likelihood, the crisis will accentuate the disintegration of the value chain, for two main reasons: â€˘ In developed countries the difficulties related to buying power will intensify price pressure â€˘ Shrinking profit margins in companies will necessitate the implementation of specific actions to restore these margins, specifically through outsourcing or offshoring.
THE RISE OF SUPPLIER COLLABORATION Logistics is increasingly costly. New sources of productivity must therefore be identified. The true sources of productivity are to be found in inter-company collaboration. For example, companies may improve the organisation of their order-to-delivery processes or optimise and merge their product shipment routes. In this way, both shipping and storage offer potential productivity gains and opportunities for sustainable development. Several pilot projects have been launched by industrial groups such as Danone, Kronenbourg, Coca-Cola, Carrefour and others.
These companies use shared trucks based out of a single logistics hub and deliver directly to their clients, eliminating the need for intermediary storage platforms. Information systems form the backbone of this collaboration. The rise of collaborative tools represents a new development in procurement. These tools allow companies to share their forecasts with their clients and suppliers, to simulate configurations, to select the best modes of transport, and to optimise order consolidation.
RECONCILING THE ECONOMY AND THE ENVIRONMENT Companies have come to understand that environmental protection and growth are not incompatible. In fact, sustainable development has become a differentiating factor and a major area of concern for supply chain departments. Sustainable development represents an opportunity, in terms of both branding and risk management, to innovate, open up markets and add value to a companyâ€™s brand. The crisis provides an opportunity to reconfigure logistics organisations while complying with environmental
INNOVATION AND VALUE CREATION ARE NOT INCOMPATIBLE WITH COST CONTROL. THE MANAGEMENT STYLE WITHIN CERTAIN PROCUREMENT DEPARTMENTS IS WITHOUT A DOUBT ONE REASON FOR VALUE-DESTROYING SUPPLIER RELATIONSHIP POLICIES. GOING FORWARD, THE CRISIS WILL CONTINUE TO FORCE COMPANIES TO REDUCE COSTS, BUT TO DO SO BY WORKING TOGETHER. THE OBJECTIVE IS TO MOVE BEYOND CONFRONTATION BETWEEN BUYERS AND SELLERS AND POOL KNOWLEDGE TO ELIMINATE ALL COSTS THAT DO NOT LEAD TO BENEFITS.
regulations and generating cost savings. Economic and regulatory pressures are the first factors to impact a company. Companies understand that the fight against climate change and the politicisation of environmental issues will mean new demands, such as the requirement for all companies employing over 500 people to issue an environmental report and publish an assessment of their carbon emissions. Many similarities exist between a sustainable development approach and a supply chain approach. Both approaches serve to create value, to enable companies to differentiate themselves from the competition, and to better meet consumers’ needs. The only point of contention between the two is inventory: too much absorbs cash, which is crucial at this moment; too little increases transportation needs and CO2 emissions. Companies must thus strike a balance and aim to achieve the “right” inventory level.
“GREATER RECOGNITION BUT ALSO GREATER EXPOSURE.”
alain page lécuyer GROUP PROCUREMENT DIRECTOR
Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED THE PROCUREMENT DEPARTMENT? Procurement is increasingly at the forefront of the company’s operations, as general management expects substantial savings from us. Internal decision makers, who have had to deal with significant budget cuts, are increasingly inclined to seek our assistance. We have expanded our procurement coverage from 68% two years ago to 80% at present. We are now involved in a portion of insurance purchases and marketing purchases, two new areas for us.
HAS THE SCOPE OF YOUR MISSION CHANGED? Our clients have become more receptive, giving us the opportunity to create more value for them. Without interfering with their business activities, we ask them to reflect on the nature of their needs. In the area of marketing, we evaluated the opportunity to reduce the number of media buying suppliers we use. Rates for contracts that cover all marketing channels are infinitely more competitive, and such contracts decrease the risk of diluting our message. These arguments were all the more convincing as the marketing department has less internal resources available for supplier management.
IS A REDUCED NUMBER OF SUPPLIERS AN IMPORTANT PART OF YOUR STRATEGY?
IS RENEGOTIATION STILL CRITICAL TO YOUR PERFORMANCE? We have relaunched major contract renegotiation campaigns at both a local and global level. In absolute terms we have generated substantial savings. The fact remains that it is crucial to maintain a contractual balance. It would be a mistake to ruin in a matter of months that which has taken years to build up. Procurement must sometimes temper demands for higher performance when they could be detrimental to supplier relationships over the medium or long term. It’s a difficult role to play.
IS THE PROCUREMENT FUNCTION IN THE PROCESS OF TAKING ON A NEW DIMENSION? Yes, we get greater recognition but also greater exposure as a result. The company expects a lot from us. I think that there are two types of buyers: those who will be able to bring the added value expected in this time of crisis, and the rest. Those who make the grade will take on new roles. They are true project managers that combine in-depth knowledge of their clients' operations with demonstrated talent in the area of negotiation. High level qualifications are required and candidates who meet all the criteria are much sought after.
No, it’s impossible to generalise; each case is different. The reduction in the number of suppliers is not an end in and of itself; the measures we have taken are not systematic, but rather case by case in nature. It’s sometimes preferable to maintain healthy competition between multiple suppliers. However, supplier reduction is a path that we are seriously exploring. The fewer the suppliers, the greater our ability to monitor them and the greater the productivity gains. It is impossible to talk about supplier relationship management (SRM) if a company is working with thousands of suppliers.
“PROCUREMENT CAN ALSO BE A TRUE SOURCE OF INNOVATIVE IDEAS.”
PASCAL FERTE PROCUREMENT DIRECTOR
SANOFI AVENTIS Interview published in the latest edition of SRM Barometer (2009)
HOW IS THE CRISIS IMPACTING THE PROCUREMENT DEPARTMENT?
ARE YOU IN THE PROCESS OF REVIEWING YOUR RELATIONSHIPS WITH SUPPLIERS?
The crisis represents an opportunity; it’s our chance to expand our procurement coverage within the company, into areas where we were not yet involved or not far enough upstream. It is primarily procurement’s role that is evolving; the company expects greater profitability gains from the function, and we are increasingly asked to exert an influence on corporate culture. We have begun a project to raise awareness among decision makers, our objective being to challenge buying habits and to revisit specifications. This has added a consulting role to our cost control function. Going beyond mere price negotiation, procurement staff have come to understand that our department can also be a true source of innovative ideas.
We have been meeting with the general management of all of our major suppliers for the past 18 months in order to discuss developments in the pharmaceuticals sector and to reflect, together, on ways to innovate and reduce costs. We have much to gain by taking advantage of their expertise; they have a broad overview of many different industries.
IT IS ALSO THE OPPORTUNITY TO RENEGOTIATE YOUR CONTRACTS WITH SUPPLIERS… All of our procurement operations are renegotiating contracts to align them with the new economic context, as this is one of their core functions for which they are responsible. The pressure to generate savings at any cost is great during such times of crisis, but this is a pitfall that must be avoided. Certain suppliers that find themselves in a precarious situation may be tempted to sell their products below production cost. During negotiations we must be mindful not to undermine the financial stability of our suppliers, which could prove to be a completely counterproductive strategy. Procurement functions are mature; the greatest profitability gains to realised will not result from negotiation with suppliers but rather from the ways in which we collaborate with them.
The strengthening of the three-way collaboration between procurement, decision makers and suppliers is one area in which we are trying to make improvements; the development of less restrictive specifications to allow our partners more room for creativity is one example of such efforts.
ARE YOU TEMPTED TO SHIFT YOUR SOURCING TO LOW COST COUNTRIES? We practice little offshoring in regard to common expenses, with the exception of promotional items. We quickly realised that these items were all manufactured in low cost countries. They passed through an entire chain of middlemen who each took their margin and offered no traceability and thus no guarantee as regards their manufacturing conditions. So we established a small sourcing team directly in China. It’s a question not only of reducing costs of course, but above all of monitoring safety and manufacturing practices. It would be unthinkable for us to offer products manufactured under deplorable social and environmental conditions. We audit suppliers and require them to comply with our specifications in exchange for reasonably negotiated prices. In this way we encourage our suppliers to gradually orient themselves towards sustainable development.
“THIS CRISIS CAN BE DESCRIBED AS ‘DEMOCRATIC’ : IT AFFECTS EVERYBODY AT EVERY LEVEL.”
MAURO CHARRIÈRE PRODUCTION AND LOGISTICS DIRECTOR
PININFARINA SPA Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED YOUR COMPANY? The economic crisis has had a great impact on the entire automotive industry. Those of us who work in a niche sector of the automotive industry have profoundly felt the effects: our production has decreased by approximately 30% compared to our forecasts. The challenge for us is to keep this decline from having a similar impact on the company’s results. We have thus adapted a business model that offers greater flexibility for all expense items, depending on actual production volumes. This was possible because, after listing all production activities in order to determine the characteristics of each specific cost, we went back to square one and evaluated the minimum resources required for the development of each activity and suspended what appeared to be excessive. This translated, for example, into a reduction of employee working hours to attain the correct number of full-time equivalents (FTEs) needed for specific production volumes. We organised the shifts in order to involve all employees at all levels by attempting to distribute the burden of sacrifice required by the company. It is in this sense that the crisis can be described as “democratic.”
REGARDING YOUR FUNCTION WITHIN THE COMPANY, HOW HAS IT BEEN IMPACTED BY THIS CRISIS? To resist the negative market trends, we decided to take action on the pockets of inefficiency within our systems using a series of instruments and processes that could guarantee both savings and gains in terms of time and use of resources. This was made possible by increasing the flexibility of the flows of goods in transit and by modifying production processes. For example, to transport goods within our facilities, we now use a “logistics train”: i.e., we went from using a single cart per crate of goods to be transported to using a train composed of several carts. Meanwhile, for production, we implemented what
is known as “sequential chain delivery,” a process that makes it possible to simultaneously manage the arrival of materials into inventory and the delivery of these materials to the production chain, without waiting time. It’s important to point out that thanks to these improvements we have reduced the amount of energy used, thereby benefiting the environment. Actions targeting inventory activities have been vital, as well as inventory spot checks; currently the margin of error within our inventory is very low. The traceability of all goods and products in transit allows us to organise work with precision and to limit urgencies as much as possible; this positively affects not only our internal costs, but also our reliability in the eyes of our customers. All of this, however, would not be possible without the IT department. Concerning the activities that I manage - the supply chain and production - the IT infrastructure ensures coordination between the different sectors, via a continuous feedback loop for production and logistics. Purchases are determined based on this loop, thereby avoiding waste and inefficiency.
WHAT CAN BE DONE TO OVERCOME THIS CRISIS, IN YOUR OPINION? The economic indicators are clear: the crisis is not going to end anytime soon, and it will have profound implications. We will find ourselves facing an economic and social situation that is different from the current situation, and the production world must be able to understand and, above all, anticipate this new state of affairs. In order to survive, companies must transform themselves starting now, by implementing changes in their culture, approach, and operations while aiming for maximum product diversity. Our company is already taking such steps: we presented an electric car at the Paris Motor Show; when designing it we integrated state-of-the-art technological and logistics innovations. These changes translate into production and management cost savings, and in the end into better prices for the consumer.
“THE MOST CRITICAL FACTOR FOR A COMPANY IS ITS UNDERSTANDING OF ITSELF AS WELL AS OF ITS PROCESSES, ESPECIALLY IN A TIME OF CRISIS.”
MARCO FACCIANO LOGISTICS DIRECTOR
CALVIN KLEIN JEANS Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED YOUR COMPANY? Within our industry and especially within our company, the crisis has impacted two particular areas: the client and the shareholder. On one hand we have clients who are ever more demanding and who require increasingly personalised services and products, and on the other hand, we have shareholders, owners, or an area of reference that constantly demands greater performance in terms of the cost-benefit ratio. To overcome the crisis and to meet demands that are not easily reconcilable, it is necessary to react to new market pressures with speed and flexibility. Given this, our attention has been focused on reviewing our business processes in order to identify the core activities of our company, then reviewing all auxiliary processes for potential redundancies or inefficiencies that the company cannot allow.
IN WHAT WAY HAS YOUR FUNCTION BEEN IMPACTED BY THIS CRISIS? In my opinion, the supply chain function represents ever greater management and coordination value compared to a more operational role, as this crisis has forced us to consider business models as a whole in order to identify areas in which efficiency may be optimised or recovered. Today it is no longer possible to envision improvised procedures that run within only a single stage of the production process in operational terms. It is necessary to develop strong, transverse controls in an attempt to optimise processes and to enhance the company’s ability to immediately respond to new market pressures and demands. A cross-functional approach is the decisive success factor, as it represents the know-how - an understanding of how the various functions interact - that makes it possible to increase the company's production capacity.
WHAT CAN BE DONE TO OVERCOME THIS CRISIS, IN YOUR OPINION? The fashion market is especially difficult as it serves to fulfil desires but not primary needs. One of the measures we are currently taking is the redefinition of our distribution structure, which currently operates according to a cycle of just under four months. Normally, after production, clients would receive all models at one time at their point of sale. To facilitate distribution, we are trying to redefine production into four “subcollections” - based, for example, on colour - in order to subdivide the collection and to deliver new products every month. By enabling our clients to continuously put new merchandise on offer, we encourage end consumers to enter the points of sale. We also foresee strong growth in the retail sector. Over the course of the next five years, we plan to increase our current share from 23% to 45% thanks to our single brand stores, points of sale and franchises, by focusing on the type of store that encourages brand loyalty. Lastly, we are prioritising internal information exchange in order to gain a broader understanding of business processes at all levels with a view to improving our risk management capability, which has been largely overlooked in the past. I believe that this approach represents an innovative element important for implementing processes that will enable us to overcome these difficult times and avoid, to the greatest extent possible, any future recurrence.
“ONLY THE STRONGEST, MOST COMPETITIVE COMPANIES, THOSE THAT HAVE THE COURAGE TO INNOVATE, WILL SURVIVE THE CRISIS.”
STEFANO ZECCHINATO OPERATIONS DIRECTOR
MARELLI MOTORI SPA Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED YOUR COMPANY? From our point of view, the crisis has had a profound impact on what we refer to as non-specialised standard products. In our case, for example, the demand for basic electric motors has decreased by nearly 30%. However, high value-added products which require specific knowhow have not been particularly affected by the crisis, as they are associated with projects that are still being carried out despite there being less demand. For example, motors designed for the oil and gas sectors - which require special certification - or custom-built machines for power generation, such as combined heat and power generators or uninterruptible power supplies. Whatever the product offered, clients are now demanding more services, especially during the proposal phase, and companies must demonstrate technical expertise in order to meet their requirements.
IN WHAT WAY HAS YOUR FUNCTION BEEN IMPACTED BY THIS CRISIS? My duty is to supervise a number of processes, and because of this I have a global view â€“ from an operational perspective â€“ of the corrective actions currently being implemented by the company, as opposed to areas for continuous improvement. In general, we have defined two types of investment: short-term investments that can be recovered in 12 months, and investments that are dependent on the introduction of new products which will allow us to occupy a favourable position in the market in this time of crisis, and which have a payback period of three to five years. Despite this approach, which should enable us to recover more quickly once the economy picks up, there are certain persistent weak points within the company that prevent us from taking advantage of all possible synergies. One specific example relates to the infrastructure of the IT department, which currently is
not being utilised to its full potential and which does not allow certain important integrations that would enable us to improve production and organisation processes. Regarding other functions such as the supply chain, however, we have implemented a number of small-scale corrective measures. For example, we have cancelled purchase orders related to certain product categories. These actions, which are mainly tactical in nature, result in immediate, tangible benefits thanks to the interaction with the IT department that has been put in place for the materials management process. Nevertheless, I am convinced that the main problem preventing us from being true innovators is that IT depends on the finance function, which only envisages our services in terms of producing management reporting, rather than seeing the potential for the development of innovative solutions that create value.
WHAT CAN BE DONE TO OVERCOME THIS CRISIS, IN YOUR OPINION? Our company, which is part of an English group, sells products throughout the entire world, with 75 % of our sales coming from abroad. As we see it, the crisis is affecting everybody, even though the naval sector, with its shipyards at a standstill, is feeling the effects most strongly. However, there are promising signs; we see significant areas of opportunity for new products designed for niche sectors. There are markets that are demonstrating strong growth, such as power generation, which in addition to traditional plants also includes alternative energy production. Furthermore, in my opinion, only the strongest companies, those able to implement the safeguards necessary to lessen the effects of the crisis, will be able to survive the crisis. Obviously there will be a shakeout, but the companies that remain on the market will have numerous opportunities for growth if they have the courage to innovate and launch new products.
“IN THIS CRISIS, THE SUPPLY CHAIN MUST ALSO TAKE INTO ACCOUNT THE VALUE CHAIN AS A MODEL FOR REORGANISATION.”
Carrier est le premier fabricant d’équipements de conditionnement d’air, de ventilation et de chauffage.
ALDO PREVITALI SUPPLY CHAIN DIRECTOR
Interview published in the latest edition of SRM Barometer (2009)
HOW HAS THE CRISIS IMPACTED YOUR COMPANY? The crisis has only served to intensify a radical revision of our business model that was already in progress and that hinges on multiple factors. First of all, very strong competition, due to offshoring and to the difference in labour costs between countries, tends to drive production to lower cost areas instead of countries where the cost of labour is higher. This is what is occurring, for example, to the Milan production site, located in a zone that has one of the highest labour costs in Europe. Added to this is a horizontal mass production model that is poorly equipped in terms of technology and services, and is thus not easily adaptable. In terms of proactivity, it can be said that the crisis has led to a massive shift of all current paradigms within the company and has forced us to seek out new ones to reduce costs and offer new ways to serve our clients. In reaction to the current situation and in order to pursue the restructuring that was already in progress, we decided to radically overhaul both our market positioning and our entire product portfolio. The objective was to transform our offering from basic products to a concept that was much more service and order oriented.
HOW HAS THE CRISIS IMPACTED YOUR FUNCTION WITHIN THE COMPANY AND YOUR RESPONSIBILITIES? The supply chain at Carrier is currently under pressure for two reasons: it must guarantee that production functions as it should - in order to survive the crisis - and it must also begin to develop new processes that correspond to the evolution of the business model.
chain, whereas currently the supply chain is related to a different function that is unable to understand the needs and demands of clients. Such integration would enable us to develop processes that are in line with the new business model and the predetermined market share objectives. However, this highlights a critical aspect related to the infrastructure of our IT department, which I consider to be the nervous system of the entire supply chain. Our IT system guarantees the coordination and synergy between logistics and the other functions; however, Carrier currently outsources the entire IT department as an apparent cost-saving measure. This means that there is no IT director within the company. In essence, there is no director familiar with the infrastructure capable of acting as both an advisor and a promoter of innovative, efficient, effective solutions that would enable the various units or functions to complement one another and, above all, be aligned with the new business model.
WHAT CAN BE DONE TO OVERCOME THIS CRISIS, IN YOUR OPINION? The crisis has not resulted in reduced demand or a slowdown, but rather a veritable interruption or complete absence of demand. This is evidenced by the fact that this year, in contrast to past years, promotional activities have had a marginal effect and have not contributed to what we consider a seasonal effect, with purchases following the rise in temperatures during the summer. Furthermore, at present we do not see any significant signs of improvement, although given the rapid onset of the crisis, recovery could be just as sudden. In this uncertain situation it is crucial, in my opinion, to increase the level of communication within the network in an attempt to understand all factors at work as well as to develop closer relationships with clients in order to understand their needs.
In my point of view, this is an opportunity for change and a critical aspect. The opportunity consists of the possibility to integrate the supply chain with the value
ANALYSIS THE SEVENTH ANNUAL GLOBAL SURVEY OF
SUPPLY CHAIN PROGRESS
Key Findings: The data clearly reflect a fall back based on current economic conditions and a need to use supply chain to cut costs; combined with moderate improvements in most areas of importance. Among the key findings, these characteristics could be cited:
Continued improvement in the reported range of cost savings and more firms showing revenue increases as a result of SCM efforts in 2009 validate there is still room for making significant gains, even in a down economy.
Europe continues to surpass NA in the overall cost reduction and revenue growth results, indicating that you cannot rest on past laurels or previous gains; someone is always moving ahead.
Given the current economic conditions, the emphasis has shifted back to cost reduction, with 81 percent of NA firms and 73 percent of those in Europe indicating they will be rethinking sourcing points. Fifty-seven percent have “near-term” plans to change sourcing points or buying habits. Eighty-eight percent have set objectives for the purchasing function to generate new cost savings. Suppliers should get ready for or are already being faced with pressure for help in cutting costs before a key customer goes into the market for lower prices.
Target percentage improvements to costs show Europe with 80 percent and NA with 73 percent having goals greater than 6 percent, a harbinger that the pressure is already being applied to achieve annual requirements for improvements.
North American firms are more likely to have a SCM organization, but European firms have more mature supply chain organizations, with CEOs more likely to be involved in running of the organizations (plus 50 percent for Europe compared to 30 percent in NA.). It’s an old story, but most firms are simply too slow to recognize the values that can be added from a consistent focus on supply chain under the direction of professional and involved management. That’s a lesson the leaders wrapped up years ago.
Findings from a survey jointly conducted by CSC, Supply Chain Management Review (SCMR) magazine, Michigan State University, Council of Supply Chain Management Professionals (CSCMP) and Supply Chain Europe magazine
Sixty-seven percent of responses indicate strategy and change management, including formulating and implementing initiatives, will be a part of SCM to meet business objectives. There is supporting evidence that SCM is becoming a strategy for the future, a means to reach overall business objectives.
SCM organizations control the traditional aspects of supply chain, but European efforts are more likely to consider strategy and after-sales service as elements of SCM, indicating an opportunity for future NA SCM efforts. Most firms stop the supply chain effort with delivery. The Europeans are showing that much can be added in the way of customer intimacy through staying with the customer all the way through handling returns and making necessary changes so the need for returns goes away.
About half of firms have completed some form of Green analysis or evaluations, with 54 percent identifying quantifiable savings, but the forward intentions vary all over the map, and evidence of a consistent approach and documentation of valid savings is nebulous.
Execution of Green initiatives is slow to develop and many firms indicated they have taken a back seat in the current economy. Seventy-seven percent report Green initiatives have led to no increase in revenues.
Europe is ahead of North America in adopting Green initiatives, with increases over last year. NA respondents think conserving natural resources is the main issue, while Europeans think it is related to a sustainable business reputation.
Supply Chain Brain william duncan CSC
August 31, 2009 A lot of companies have spent millions of dollars over recent decades on commercial software applications in order to strengthen their supply chain management performance. Many of them, looking back on the results, are becoming alarmed. Whether the investment was related to product lifecycle management (PLM), enterprise resource planning (ERP), manufacturing execution systems (MES), customer requirements management (CRM) or another software application, the unrealized benefits of these investments has serious consequences for the companies' financial performance. Increasingly, the companies involved are finding that the underlying causes of these shortfalls are factors within their control. Many have undertaken initiatives to recover that lost performance, and realize the benefits in purchased component cost, logistics costs, and cycle time reduction they were – quite literally – banking on.
The cost of goods sold (COGS) in most manufacturing companies is heavily weighted toward material, with 65 percent to 75 percent of COGS a common situation. The balance is typically comprised of 25 percent to 30 percent derived of overhead costs (administrative and other types of indirect labor, equipment, facilities and supplies). The smallest slice of the COGS "pie" is usually direct labor, representing less than 10 percent. It is only natural, then, that much of the justification for software applications such as ERP and MES is made up of reductions in the cost of material, inventory and the overhead (indirect labor and facilities) associated with managing it. When companies invest heavily in these systems to more effectively manage their material and inventory related assets, they are expecting to experience higher inventory turns, lower ongoing investment levels in raw materials and supplies, and greater efficiencies in the staff that manages those assets. They expect those improvements to result from better visibility of the assets themselves, better tools for balancing supply and demand, and greater levels of automation that require less human intervention in repetitive decision making around tedious tasks such as generating and managing purchase orders and manufacturing work orders. One of the most common underlying sources of trouble in these situations is that management takes shortcuts during the implementation of the systems. Perhaps the single greatest error managers make is failing to adequately cleanse the data they are loading into these new systems. Often, in the press of completing the implementation of
these systems on time and within budget, the fundamental work of cleansing data, filling in the missing elements of data, and managing the correct conversion of data into the new systems is set aside. Increasingly, it seems, executives in these companies are finding that they are compelled to go back again – after the implementation has failed to yield expected results – and unearth these problems to deal with them. A second common issue underlying many of these situations is training. People who are expected to operate these systems after they have been implemented need to understand not only how to perform the specific function to which they are assigned, but also what the overall process is within which they are working, and the outcome that the process is expected to produce. Under the pressure of managing the budget and schedule associated with a major systems implementation, the scope element is frequently sacrificed. Increasingly, as senior management "peels back the onion" in these cases, they find that deficient areas include not only data cleansing and testing, but training as well. The third fundamental problem is less commonly exposed, less understood, and more rarely remediated. It is simply stated: Senior management executives very often expect that software applications such as ERP, MES, etc., will achieve substantive improvements without significant changes in the underlying business processes that software is designed to enable. In more than three decades of doing
these implementations, the author has observed that nothing is more often shortchanged than strengthening and validating the business processes that our new software applications manage. The result is that even the very best software manages a wasteful, sub-par business process, and the expected efficiencies never materialize. In terms of the company's earnings performance, those three fundamental problems typically appear with the greatest impact in the following ways: 1. On the Inventory line of the balance sheet, where reductions are expected that far exceed the reductions experienced. Similarly, but to a smaller degree, on the Accounts Payable line and the Accrued Liability line where materials procurement are involved. 2. On the Material line of the COGS element of the Income Statement, where reductions are expected to result from efficiencies in procurement, grouping of purchases, and improved visibility and balance of demand against supply. Reductions in COGS have a dramatic impact on earnings compared to changes in revenue in most cases. Poor realization of these expected benefits can be devastating to the business case for investments in major software applications. 3. On the Indirect Labor line of the COGS element of the Income Statement, where efficiencies in processing work orders, purchase orders, exception messages, and other administrative processes such as accounting and billing are reflected. This is the most sensitive area of business case savings projections, of course, because these savings are usually expressed in the form of projected headcount reductions. Like the manufacturer mentioned above, many companies that are experiencing disappointing results from the implementation of major software applications are initiating corrective actions. In most cases, they are finding that remediation requires the completion of unfinished tasks from the preparation and implementation activities included in the original project. The most common are: 1. Data cleanup activities and data strengthening activities. Critical data elements such as bills of material, manufacturing routings, labor and time standards, machine capacities and capabilities, and material lead times are all critical to the fidelity of enterprise resource planning and manufacturing execution systems. Similarly, accurate material quantities, material master records, and part master records as well as design version data and effectivity data are critical to the fidelity of product lifecycle management and product data management systems. Customer records and pricing records are critical to CRM systems, and the list goes on. The bottom line is that every data element whose quality is substandard reduces the software application's fidelity, and ultimately weakens the company's earnings because expected efficiencies are lost.
2. Training. Especially in the areas where decisions are made each day around balancing supply against demand and executing purchase orders, training is hard to overemphasize. The companies most rapidly correcting this situation have come to recognize that employees need to understand not only how to operate the software, but why they are doing what they are doing â€“ how it fits into the end-to-end business process. Training sessions in these companies are most effectively being deployed when they begin with a description of the business process, and train the employees how to behave in the context of their overall process. 3. Business Process Re-engineering. Companies who find that they have simply "paved the cow path" by putting an attractive software wrapper around fundamentally flawed business processes have to rethink those processes, and remove the non-value-adding steps and associated times. Leading ERP systems all have business process templates incorporated within them, and most of the successful implementers have adapted -- for the most part -- to those generic business processes through a mechanism called "package based re-engineering" as a part of their implementation. (Other software applications such as PLM and manufacturing execution systems are typically less process-prescriptive, which leaves companies a bit more reliant on systems integrators and other consultants to assure that best industry practices are incorporated.) The least successful do things like perform the basic work in spreadsheets or personal databases outside the formal systems, importing only the results into the formal system. The rigidity, lack of responsiveness and sheer error volume introduced by that approach has cost companies millions. There are other challenges, of course, with corresponding remediation techniques. But as we all learned early on in our professional careers, the Pareto Principle dictates that the "significant few" are the elements to be managed for the greatest success. When it comes to recovering from lowerthan-expected results from major software investments, companies undertaking that work are discovering that the elements we have described here are the significant few that are making the difference.
"even the very best software manages a wasteful, sub-par business process, and the expected efficiencies never materialise." 139
EUROPEAN EXECUTIVE BAROMETERs
LOOKING BEYOND THE CRISIS
SOLVING THE EQUATIONS OF A CHANGING WORLD
SOLVING THE EQUATIONS OF A CHANGING
WORLD Anticipating change, reacting to fluctuations in the economic and social climate, seizing opportunities in order to progress: these are the challenges that all business leaders must face today. Since it was founded in 1959, CSC has gained solid experience working with market leaders in every sector. This experience is the result of our highly adaptable offering, based on commitment to results, an exclusive combination of experts, processes and technology specifically designed to meet our customers' needs, and the ambitious investments we have made in recent years. This experience is the capital on which CSC draws each day to provide customised solutions and to help its customers achieve a real competitive advantage.
TAKING ACTION WHEREVER
CHANGE REQUIRES RESULTS
CSC is a worldwide leader in consulting and information technology services. For 50 years CSC has worked side by side with its customers, helping them use information technology and to achieve their goals and continuously improve their results.
GLOBAL COVERAGE, A LOCAL APPROACH CSC is present in over 80 countries. Our success is founded on one of the strongest company cultures in its sector, combining the responsiveness and acute sense of customer intimacy of a local company with the best practices of a global company. Our local experts know the precise requirements and customs of each country in which we operate, while our ability to mobilise resources worldwide enables us to identify and share best practices across borders.
OUR PARTNERS In order to best meet its customers' requirements, CSC is committed to global and local partnerships with the best service and solution providers. Among our partners we count Citrix, Dell, EMC, HP, IBM, Microsoft, Oracle, PTC, SAP, SAS, Sun Microsystems, Xerox and many others. While preserving our independence, we ally ourselves with market leaders and with the most
innovative companies, ensuring that CSC and its partners can benefit from synergies for growth, and that the clients we share can also benefit from the most advanced service offerings.
OUR PEOPLE Different cultures, combined skills, shared experiences and professional opportunities: CSC is a special place that brings together highly creative and experienced professionals. As experience is the basis of efficiency, we offer our employees high quality, long-term career paths, team work and appropriate training, along with the opportunity to learn and integrate best practices by working in the field. We make a point of honour to put in place top quality skills management systems that respect individual career aspirations and ensure each employee has the best development plan possible.
served • AEROSPACE AND DEFENCE • AUTOMOTIVE • BANKING • ENERGY AND UTILITIES • HEALTH AND LIFE SCIENCES • HIGH-TECH • INSURANCE • MEDIA AND COMMUNICATIONS • PROCESS INDUSTRIES • PUBLIC SECTOR • RETAIL AND CONSUMER GOODS • TELECOMMUNICATIONS • TRANSPORTATION AND TOURISM
Listening to customers, knowing their industries and integrating feedback are at the heart of CSC's approach to value creation. CSC develops a special relationship with each client based on respect of their culture and identity in order to better understand the specific challenges each one faces, and to improve responsiveness, agility and flexibility.
CSC commits to global citizenship by ensuring a sustainable environment for future generations. Our Office of Corporate Responsibility (CR) manages our efforts globally around a defined framework, built on fair and ethical business practices.
In order to improve its offering and quality of service, CSC has engaged the leading market research company TNS for over ten years to carry out a quarterly survey to measure the quality of service CSC delivers on its assignments. Results from the last survey show a continuous improvement in customer satisfaction with 98% of customers satisfied.
Our commitment embraces all aspects of our business — delivering superior services to our customers, increasing shareholder value, providing an unsurpassed working environment, optimizing finite resources, lowering operating costs and minimizing our environmental impact through Green initiatives. And, since our employees make us who we are, we strongly support their continued learning and development.
The story of CSC...
50 years strong 1961 A contract to support NASA Jet Propulsion Laboratory’s Flight Operations Facility launches CSC into the space business.
1967 Based in Brussels, Computer Sciences International is formed to manage international growth. This is now known as CSC Europe.
1969 Infonet is created to operate CSC’s timesharing business.
1976 Infonet is extended to the Asia Pacific region, giving the network worldwide coverage.
1959 Roy Nutt and Fletcher Jones found Computer Sciences Corporation.
CSC enters credit reporting market with Associated Credit Services acquisition.
1965 Two divisions of ITT are acquired, making CSC the largest IT services company in the United States.
CSC becomes the first independent information services company to be listed on the New York Stock Exchange.
CSC creates the first computerized air cargo system at London’s Heathrow Airport.
CSC develops the information system for the Saudi Arabian Interior Ministry, still regarded today as one of the biggest in the world.
Future growth? We will continue to invest in our future and use our 50 years of strength and experience to help our clients emerge stronger than ever.
Computer Partners acquisition expands CSC’s presence in IT consulting and professional services market.
CSC employee/ astronaut Ron Parise flies on Space Shuttle Columbia Astro-1 mission.
Annual revenues exceed $10 billion.
CSC’s Covansys acquisition adds 8,400 employees in India, while First Consulting Group purchase bolsters presence in India and Vietnam
1987 Annual revenues hit $1 billion.
1993 CSC executive James Champy co-authors the groundbreaking bestseller, Reengineering the Corporation, with Michael Hammer.
2005 CSC signs very largescale outsourcing contracts in Europe.
2009 CSC celebrates 50-year anniversary… with a new logo..
Team CSC's Carlos Sastre wins Tour de France, capping a successful seven-year pro cycling sponsorship
WORLDWIDE PRESENCE, IN-DEPTH EXPERTISE
Consulting Improving our clientsâ€™ operational and financial results with information technology while efficiently managing the human, financial and technical risks related to their transformation projects; that is the task CSC sets itself.
Implementing new commercial strategies, improving client relationships, reorganising businesses, pooling resources, mergers and acquisitions, adapting performance management and measurement systems, redefining purchasing policies, optimising the value and supply chains, managing knowledge, adapting information systems, overseeing transformation projects: these are just some of the domains in which CSC has put processes and systems in place to improve corporate operational and financial performance. CSC has developed a service offering based on in-depth knowledge of sectors and industries and close cooperation with its clients. More than half of CSCâ€™s employees have acquired highly specialised experience before joining the company. CSC can thus call upon experts in every area of business to meet its clientsâ€™ needs and provide them with customised solutions in an environment that fosters the sharing of expertise and best practice.
B USINESS SOLUTIONS
Designing specific solutions for each sector, getting the most from off-the-shelf solutions available on the market, simplifying the integration of these applications, and enhancing these assets with portals and collaborative or decision support systems: CSC is positioned as the reference for tapping into the full potential that technology can offer to business. The market has matured and demands greater expertise and efficiency than ever before to cope with challenges related to the transformation of information systems. CSC helps its clients anchor their projects firmly in reality and realise a rapid return on investment by providing each of them with an optimal solution: the combination of specialised sector-specific skills, proven business processes and advanced and innovative solutions. With its unique experience in the management of ambitious and complex programmes, CSC is known for its exceptional reliability, which enables it to tackle each client's specific challenges, be it in terms of competitiveness, deadlines or skills development.
Operational performance requirements, financial pressure, shareholder value creation, increasing complexity of management: companies are obliged to have an organisation that guarantees a high level of service at the lowest cost. To respond to these challenges, CSC offers outsourcing solutions that allow its clients to focus on their core business by adopting new ways of working, in order to become faster, more flexible, more efficient and more competitive. CSC assists its clients by managing and maintaining their technology infrastructure, software applications and business processes. Based on a shared vision of the transformation project, CSC provides its clients with an efficient and flexible IT architecture that can adapt to rapid changes in a constantly shifting environment. CSC adapts its business model to each companyâ€™s key issues. By transforming their operations to become faster, more flexible and more efficient, CSCâ€™s clients preserve their competitive advantage.
We are results oriented, with a highly pragmatic approach that combines business and technological skills for each of our core activities: consulting in management and information technology, integration of systems and business solutions, and the outsourcing of IT services and business processes.
OUR OFFERINGS We know that our customers have complex businesses that require sophisticated services. Our solutions are carefully tailored, combining industry expertise, intellectual property and technology in a way that achieves real business results. Our three lines of business help our clients succeed by fully leveraging the value of IT in support of their mission.
For more than 50 years, we at CSC have developed smart, technology-enabled solutions to solve our clients' toughest challenges, demonstrating a commitment to excellence and a passion for exceeding expectations. Over the past five decades, technology has radically changed the world we live in. We have remained at the forefront of our business because we have understood how to use technology change and innovation to deliver value to our clients.
Strategy • Redefinition of business models • Restructuring, mergers and acquisitions • Launch of new activities • Industry monitoring, benchmarking and surveys • Resource strategy
Strategic alignment of information systems • BPM • Project management • Selection of software packages • Data migration and conversion
Technology infrastructure management • Management of PC platforms and help desk operations • Network management • Operating management (mainframe, midrange platforms, hosting) • High-performance computing and utility computing • Information security
Company performance • Purchasing performance • Product development • Financial management and performance • Supply chain optimisation • Marketing, customer service and sales efficiency • Human resources support • IT management Transformation projects • Process reengineering • Project and programme management • Optimisation of the organisation Operational support • Transition management • Restructuring of accounts
Transformation projects supported by ERP packages • SAP, Oracle Transformation projects supported by specific solutions • Sector-specific solutions: banking, insurance, aerospace, telecommunications, automotive, etc. • Production and development of the GraphTalk A.I.A solution Architecture and integration of corporate application processes • Architecture and deployment of EAI (Enterprise Application Integration) and SOA (Service Oriented Architecture) Service platforms, portals and company sites • Mobility and Wi-Fi solutions • Web services
Management of software applications • Application portfolio analysis and valuation • Corrective maintenance and upgrades in multiple application environments • Application consolidation and migration • Design and development of new applications Management of business processes • Human resources management • Finance and accounting • Procurement • Logistics • Marketing and customer service • Work environment • Forecasting, cost containment, business continuity
Product lifecycle management Business Intelligence Change Management • Project and programme management for business transformation 151
THE CSC OFFICE OF INNOVATION: SYSTEMATIC, RESULTS-DRIVEN INNOVATION
50 years of experience in the marketplace have taught CSC one lesson: Innovative ideas by themselves are not hard to come by. If anything, there are too many of them crowding today’s world — confusing, chaotic, tantalizing in their promise.
This is the single-minded focus of CSC’s Office of Innovation: • To bring a disciplined, market-led approach to innovation • To identify, coordinate and harness the power of innovation and thought leadership across CSC globally, in a way that delivers measurable results and strategic advantage to our clients • Above all, to transform innovation from a random, diffuse, often fortuitous activity to a rigorous, systematic business practice — a science rather than an art In harvesting innovative ideas from CSC divisions worldwide, the most important question we will ask ourselves is, ‘What business problem will this idea solve?’ At CSC, innovation will be driven by demand, not supply.
TURNING BRIGHT IDEAS INTO BUSINESS SOLUTIONS As change accelerates and becomes harder to predict, only one competitive differentiator can help companies stay ahead — leadership in ideas; relentless creativity in finding new ways of solving old problems.
SPANNING THE ARC: FROM IDEA GENERATION TO SOLUTION DEVELOPMENT Such a deliberate approach to innovation demands focus, coherence and integration. The CSC Office of Innovation enables this more strategic, open approach to innovation by integrating CSC groups in an architecture that spans the complete arc of innovation — from idea generation to solution development. The Leading Edge Forum, at the forefront of idea generation and thought leadership, which offers a powerful, multiclient community to explore management and technology issues. • ResearchNetwork: Market-sensing research for context • Collective intelligence: Building upon ideas for ultimate marketplace value • CSC Catalyst: Methodology to deliver consistent, quality solutions • Global Solutions Organization: Translating the idea into a business solution • Knowledge Management and Enablement: Fostering the culture of innovation that supports everything else
A NETWORK OF NETWORKS The Office of Innovation acts a little like the Internet, functioning as a “network of networks” whose cumulative power is far more potent than the individuals/discrete groups of which it is composed. By unifying CSC’s diverse groups across geographies and industries, the Office of Innovation focuses the creativity of our workforce on critical problems, synthesizing and bridging ideas to further the strategic business goals of our clients. We’ve always had a strong culture of client-focused innovation at CSC. But because of our highly federated approach, the innovation was very diffuse and difficult to harness. The task of the Office of Innovation is to set the agenda against which we can execute as one CSC. It is to bring clarity to the whole effort so that each individual CSC group understands what is crucial to the market and to our clients. They can then bring their own unique approach to delivering economic value — the ultimate goal of all innovation at CSC. The winners? CSC’s clients, who can stay at the forefront of technology and thought leadership and “predict the future by inventing it — thanks to the power of CSC’s Office of Innovation.
about csc The mission of CSC is to be a global leader in providing technology enabled business solutions and services. With the broadest range of capabilities, CSC offers clients the solutions they need to manage complexity, focus on core businesses, collaborate with partners and clients, and improve operations. CSC makes a special point of understanding its clients and provides experts with real-world experience to work with them. CSC is vendor-independent, delivering solutions that best meet each clientâ€™s unique requirements. For more than 50 years, clients in industries and governments worldwide have trusted CSC with their business process and information systems outsourcing, systems integration and consulting needs. The company trades on the New York Stock Exchange under the symbol â€œCSCâ€?.
LOOKING BEYOND THE CRISIS A VIEW FROM EUROPEAN EXECUTIVES
A fall in economic activity, an employment market in distress, low employee morale: perhaps never before has a stock market crisis transformed itself so quickly into an economic crisis. But the biggest mistake would no doubt be to focus only on the numbers droned out each day by the media. The slowdown is only part of the story. Behind it, there is a more profound transformation at work, one that calls into question the very economic models that underlie businesses.
The latest “CSC Barometers” have identified signs of strategic and operational disruptions. European executives provide an overview of life at the helm in today’s climate.
Alfonso Álvarez | Aldesa group Bertrand Badré | Crédit Agricole SA Michel Baise | Millenium BCP Fortis Etienne Bertin | Fnac Charles-Henri Besseyre des Horts | HEC group Ángel Luís Cabal | Government of the Principality of Asturias Gianluigi Castelli | ENI group Rogério Campos Henriques | Fidelidade Mundial Jean-Paul Charlez | Etam Mauro Charrière | Pininfarina SpA Arnold De Brauwer | National Railway Company of Belgium Nicolas Duhamel | BPCE Marco Facciano | Calvin Klein Jeans Pascal Ferte | Sanofi-Aventis Laurence Frenkiel | Grand Optical Michel Grandjean | AGC Europe Giuseppe Gullo | Mariella Burani group José Matias | Rhodia Ennio La Monica | Banque Carige Jean-Christophe Lalanne | Air France-KLM Arnaud Lescroart | Printemps Thierry Moulonguet | Renault SAS Alessandro Musumeci | Ferrovie dello Stato Edouard Odier | Air France-KLM Alain Page Lécuyer | Axa Aldo Previtali | Carrier SpA Carlo Privitera | Luxottica group Véronique Rouzaud | Veolia Alessandro Salustri | British Telecom Italia Jacques Stern | Accor group Stefano Zecchinato | Marelli Motori SpA