In "Parole d'expert", Morgan Philips Executive Search gives the floor to business specialists. In this new interview, Benoit Dauchin, Chief Operations & Transformation Officer at LVMH - Nestlé - P&G - Vodafone - Kingfisher answers questions from Charlotte Vitoux, Managing Director of Morgan Philips Switzerland.
The principle of transformation is an integral part of a company's development process. In Switzerland, as elsewhere, companies must constantly reinvent themselves to keep pace with the market. Today Benoit Dauchin is sharing with us some takeaways for you to consider to successfully drive all type of business transformations.
Let's discover without further delay the advice and insight of our specialist !
“Transformation is not about talking”
1.Let’s start with conclusions. What are 3 key insights you have gained over the years by managing various company transformations?
I like that ! I would summarize as simply and as visualy as “ x vs. +”
ONE, transformation is never incremental and linear. It is a fraud to believe things can improve gradually. Thinking step changes is the only way to actually progress significantly.
TWO, transformation requires transversality. The ability to federate across functional silos, on a simple yet holistic roadmap. Adding independent plans & objectives from various departments does not provide consistency in action. Adding various functional expertise to compensate is pointless. Overall business efficiency is the outcome of a multiplication, not an addition. You can have the best marketing, best finance, best manufacturing, … if your logistics sucks, it is worth nothing : 100 x 100 x 100 x 0 = 0 !
THREE, transformation is nothing magic. Best strategy on power point is worth little without disciplined and thorough execution. Leaders need to be hands-on, on the field with their teams, taking on challenges, fixing upcoming issues, demonstrating what it actually takes to outperform competitors: running the extra mile, giving up last.
2.What does that mean step-change actually? Can you give examples how to define transformation?
I would say anything structural and durable, which can be measured, with >10% shifts. Step-change is when your ambition/need cannot be fulfilled by simply doing more-of-the-same, and instead you have to change the way you do it. Here are some actual examples which come to mind :
• adding 30 points of gross margins in 2.5 years.
• Shortening development time-to-market in a year, from 4 years to 6 months, from product concept to market launch.
• Shifting distribution road-to-market from 75% wholesale to 80% own retail and ecommerce in less than 2 years, with online share peaking up to 50% on ad hoc product releases.
• Building a supply chain organization from scratch in 9 months.
• Setting a reverse logistics for packaging recycling in less than a year.
• Turning 90% of raw materials sourcing towards ESG standards in 2.5 years.
• Cutting the carbon emissions footprint by half in 3 years. Rationalizing in 18 months a scattered set of legacy IT systems into a single architecture, with integrated tools.
3.What is your take on current business context post pandemic?
Inflation is no more a rhetorical question, it is material. Pressure on costs is likely to settle durably, partly driven by raw materials but not only.
Climate and social challenges are converging with economical realities.
Industrial re-localization has shifted from a social wish to a business continuity need. Not only for semi-conductors … also for plastics, metals, chemicals, food ingredients, etc. Millions of tons of basic sub-components without which “western” production cannot durably function. Think of such basic raw materials as organic pigments which now mostly come from China and India. Imagine a consumer world short of colors ! For those businesses which have not matured procurement and worked out upstream supply agility earlier, I think they will soon have to radically catch up, or simply disappear.
Besides, consumers demands have massively shifted, and blew up most aggressive pre-covid ecommerce ambitions. This means for B2C businesses a need to radically re-visit their road-to-market models. Digitalization remains a fairly broad and vague concept in my opinion, though it is surely imposed on companies. No choice but adapting, and quickly.
4.Precisely, as you have specialized in leading company transformations, isn’t it a most favorable context for change leaders?
Gaining engagement on the need for change seems easier. I am still missing a sense of urgency though. Surely a lack of anticipation, eg. reducing fixed costs and cashflow tied to inventory should be the norm currently, as a pre-empting survival measure.
The shift from talking to doing remains the key challenge I believe. Many are now talking about transformation.
5.What are the key transformational agendas?
Although any transformation should be tailored for the specific company context and needs, there are some contextual common themes obviously.
Such as sustainability, which requires each and every business to re-think their models, scrutinize their impacts, mitigate the negatives and leverage the positives. And surely we need to expand sustainability into broader ESG and CSR concerns.
Another key theme is omnichannel delivery, which has become the norm for B2C. That requires thorough organization and processes transformation, a massive change within operations, and a fully synchronized agenda between supply, IT and sales/marketing. Much more than just setting up a website, recruiting CRM skills, working out digital acquisition and UX…
Another theme comes along with mergers and acquisitions, which usually require significant adaptations on the three pillars, people/processes/systems. Economic downturn is likely to accelerate market consolidation in various industry segments. That also relates to change of shareholders and/or the emergence of PE funds. A more silent transformation, though instrumental to maintain competitiveness, is the ability to significantly reduce costs on core business, while innovating marginally so to fight price erosion. Managing cost/price cycles is crucial and usually poorly monitored/managed. And obviously, coming next is also the web 3 economy which will likely require transforming towards brand new paradigms. Irrelevant on how much one believes into cryptos, NFTs, EFTs, metaverse or else.
6.What are the road-blocks you have experienced the most when orchestrating business transformations?
Interestingly, challenges are quite common across companies, business segments, geographies, B2B as well as B2C. It is always down to people, mindset, culture, experience … and poor diversity.
Here are a few usual road-blocks : lack of managerial courage, weak operations understanding, dogmatic thinking, functional silos, absence of an holistic plan across business, lack of external focus, too much of internal politics, too many managerial layers, inability to decide, poor execution culture, lack of internal communication, more data than actual insights … as well as, too many meetings and power points !
Leadership is often the starting issue. A few values which are often missing and key to transformation: 1) walk the talk 2) managerial courage 3) hands-on management. It is pointless to talk if we don’t act. Communicate with results not with intentions. As per being operationally savvy, it seems to me essential. I am often shocked by how few decision makers are actually knowledgeable of factories, warehouses, boutiques, clients … and even often of products ! Remote working is likely accentuate this syndrome, and besides further widen the gap between on-the-field employees (workers, logistics operators, sales associates, after-sales, etc) and “office people”. In consumer goods and retail, that’s a risk to closely monitor I believe.
7.What is your take on startups and venture capital, as transformation is not only for old existing business models?
Spot on! Interestingly, when looking at startups and other new business ventures, what differentiates them from well established companies is they are lean, their overheads are low, there are less people around the table, hence less meetings and more decisions. They have nothing to lose, so they take risks. They have little money, so these would better be educated risks.
“They” is actually shareholders, so their money is at stake, and they spend it as such. There is much less personal agenda, politics and self-interest driven behaviors. Decisions are made out of convictions; hence they are authentic, and there is no better marketing to engage clients.
There are few people to work, so no place to hide, no time for power point and excuses. The absolute need to be hands on. There are no functional silos, each and every one has to contribute. Collaboration is a given, otherwise nothing happens. There is no dogma, as the purpose is to come up with novelty anyway. No recipe, hard work, resilience, commitment, … these are very much the codes of transformation in fact !
8.Are you implying expertise and strategic thinking is irrelevant?
No. Surely you need to be thoughtful to craft the right vision and plan. But I am equally certain that a sophisticated strategy, nurtured by decades of expertise, will get you nowhere but spending money on power points and getting great perspectives on the past.
Strategy is about making choices anyway, and transformation is not about talking, it is about doing. Hence the simpler the strategy, the more executable.
Besides, expertise is always dated, usually anchored on functional dogmas, and sometimes toxic to innovative thinking. I prefer experience which in my opinions induces an element of continuous learning. When staffing for transformation, I favor passion, experience, and commitment over expertise.
9.What are leadership traits or values which are most important to transform businesses and achieve step changes ?
Without doubt, I will say humility and courage.
The humility to be curious of new possibilities, to be open to alternative view points, to get to know people at all level of the organization and across various functions.
The courage to get away from comfort zone, to free up from past experiences and avoid recipes, to take risks, to lead with authenticity, to walk the talk, to do what you feel right versus what the norm might expect you to talk.