Optimizing the (R&D) business part of a chemical company after a merger.
Our client’s company was formed at the end of 2000, from spin-off parts of large (petro-) chemical companies who remained shareholders. The company is a major player in the polyolefin’s industry with over € 6BN in annual turnover. The company is top ranked in both poly-propylene and poly-ethylene worldwide.
The company targeted to have, at any given moment, some 15% of its total product portfolio in the introduction stage of their life-cycle. As a result of the merger, many R&D activities however were spread over different locations (of which many across Europe), a costly set-up in a low-margin business.
When our client was appointed President of the global R&D business, he immediately aimed at re-directing the R&D portfolio; investing in high-potential programmes on the one hand and reducing/eliminating lower potential and risky R&D programmes on the other.
Soon it became clear that this would lead to a significant reduction in research activity and a concentration of R&D activities in particular locations. The initiative would ultimately lead to recurring annual savings of € 40m.
Based on market and corporate strategy assessment, the R&D programme portfolio was redefined after which a detailed analysis was conducted (on market, technology, people and assets) and a business case developed to validate the thoughts. Then the new R&D organisation was designed across the (reduced number of) locations in Europe and US.
The detailed analysis was consequently translated into implementation scripts, comprehensive implementation plans per business area (R&D function, e.g. competence areas) and per location (site), before actual implementation was launched.
For the implementation, we adopted a comprehensive programme management approach, where all activities were planned out in time, with milestones and benefits associated to them. In regular management team meetings, project progress was being monitored.
Only 6 months down the line in implementation, the program delivered according to, and in some cases beyond expectation, to the satisfaction of our client and the Board (who labelled this engagement as ‘an example to the wider Group’). The first millions in benefits (€ 12m at that stage) had actually been realised with limited to no disruption in the day-to-day operations nor to customers. This success was largely based on ownership and commitment of the organisation for the proposed transformation through rigorous implementation planning and management of the joint consultant-client team.
After a year of implementation efforts, we conducted a quality review on the programme and found that total target benefits were supposed to be even higher than anticipated (new calculations suggest total recurring benefits in excess of € 50m per annum) whilst implementation cost remained significantly lower than planned (below € 30m one-off implementation cost instead of € 45m as initially calculated).