Operating model transformation

Background

A leading drug retailer, already efficient, used operating model transformation and culture levers to achieve a $1 Bn+ opportunity.

A leading drug retailer faced SG&A costs that outpaced revenue growth, reducing their competitiveness in the marketplace. The engagement was focused on identifying organisation-wide opportunities to cut costs and grow stronger. Additional goals included identifying opportunities to increase critical process efficiency and effectiveness, strengthening the organisation by better defining roles and critical capabilities, and creating a high-performance culture. The work was framed in the need to be more competitive while also setting the vision to be more customer focused and capture a larger share of the market.

• Store growth was slowing.
• Customers were trading price for convenience.
• Difficult competitive environment, depressed retail economy and market saturation.
• Increasing costs, due to acquisitions and new offerings.
• Lack of execution ability and organisational agility.
• Organisation-related issues, including inadequate horizontal information flow and ineffective decision rights.
• Roles, responsibilities and performance metrics were not aligned to drive internal accountability or customer-facing behaviours.
• Previous customer service goals lacked insight into segmentation and a tailored and tiered customer experience.

• Worked with the client for 18+ months to identify high-impact opportunities and then detail and prioritise them.
• Conducted a cost diagnostic to surface significant efficiency opportunities.
• Identified key capabilities required to support the organisation’s strategy.
• Identified roles and responsibilities and prerequisites to motivate a high-performance, execution culture.
• Identified key decisions and aligned them to the new operating model, roles and responsibilities.
• Developed a leadership alignment strategy.
• Created detailed near and long-term rollout plans.
• Supported the detailed design, implementation planning and piloting of new customer behaviours.

• Cost savings of $1 Bn realised across all business areas, including 21% in field management, 13% in store labour and 10% in strategic sourcing.
• Stock price increase of 46%.
• Roles and responsibilities redesigned to provide attractive career paths, increasing engagement; new management model; pay-for-performance compensation; and incentives to motivate breakthrough actions.
• Stronger coaching and performance management at point of service, driving improved customer experience (top line growth), inventory control, and shrink versus target.