One Company Group, LLC
Business Transformation
Case Study
William J. Cantwell
September 14 - 18, 2009
1
Air Products Overview
 $11B revenues
 A chemical industry safety leader
 Operations in more than 30 countries
 50% of sales revenue outside the U.S.
 20,000 employees worldwide
2
Our One Company Focus
Corporate
Vision
Simplifying and standardizing
global work processes
3
One Company Focus*
 Manage work through global
work processes
 Provide value through one IT
infrastructure
 Emphasize enterprise value of
initiatives
 Consolidate / globalize
organizations
 Visibility of information targeted
as strategic
* Non-negotiables.
4
Guiding Principles
In a few words…
Standardization, Simplification
and
SAP Centricity
5
Elements of the One Company
Operating Model
 Growth
– 3 categories of businesses (Growth, Core,
Restructure)
– Direct R&D and capital into the Growth category
 Effectiveness
– Standardized global processes
– KPI’s/cycle time reductions
 Efficiency
– Similar things done the same way
– Reduce functional costs/IT enablement
 Change Management
– Active/passive alignment among senior executives
– Resource to win/only one #1 priority per operating unit
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 Rewards/Recognition
– Align rewards with new targets (KPI’s)
– Targets should differ among categories/functions
One Company is the New Model
for Operational Excellence
Culture
• Disciplined teamwork
• Standardization vs.
empowerment
Organization, Skills
• Centralized functions
• Global processes
Processes
• Streamlined work
procedures
• Businesses converge
to a global standard
Information Technology
• Highly automated
• Enables key processes
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Measures
• Supply Chain KPI’s
• Productivity
Change Management
 Need an Enterprise Change Plan that
addresses conflict resolution (Trio process)
 Need defined change plans to be lead by
business unit leaders
 Need alignment before implementation
 Need a Program Management Office to deal
with prioritization and resources around
initiatives
 Need a governance process with metrics to
sustain the business transformation
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Transition Curve
9
Denial
“Inform”
Commitment
“Reward”
Resistance
“Listen”
Exploration
“Encourage”
Implementing Change in Organizations
Project Management
Project scope and definition of
project goals and objectives
Understanding of what people are to
expect so they fulfill their roles
Milestones, timelines, work
breakdown structure and schedule
Clarity of what will change and how it
will affect each person on a day-today basis
Template for a project plan based on
what is needed to be accomplished
by what date
Change plan activities based on
assessment so that the organization’s
unique needs are addressed so that it
can successfully accomplish the
change
Impact on stakeholders and
recognition of what is needed to
obtain their support
Accountability for specific project
activities
10
Change Management
Status, update and progress of
schedule
Communications, feedback and
participation of those involved
Milestone accomplishment
Rewarding the behaviors that are
supporting the change
Implementing Change in Organizations
Leading Change Requires You To:
Create a Shared Vision
Provide Necessary Resources
Define Business Drivers
Surface and Manage Resistance
Achieve Alignment
Monitor and Adjust
Understand the Impact of the
Organization
Apply Consequence Management
Move the Organization off the
Status Quo
Gain Commitment
Maintain Persistence
11
Stage 1:
Global Processes were the Foundation
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What is the Enterprise Process Blueprint?
 The Enterprise Process Blueprint maps out
our Enterprise Design
 It’s the way we choose to run the company
– Common processes
– Common tools
 Includes the converged processes, both
manual and IT-enabled
 Enterprise Design includes the:
– Complete set of decisions, work process
maps, related documents, configuration,
and master data
– These work processes include both SAP
and non-SAP functionality
13
Process Principles
 Business processes are simple,
standardized, and global; enabled
by a single instance of SAP
 Customer responsiveness, operational
efficiency, and cycle times are all important
 Value creation is focused on the enterprise
versus any individual business (“broad versus
deep”)
 Collaboration / teamwork will become the norm
 Convergence is required by all business units
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Process Governance
Surprises, Learnings, Advice
 Simpler is better.
 It takes longer and costs more.
 People do what they believe is right.
 Scorecards drive behavior.
 It works better than you think.
 If you can make it, it feels really good.
 The process is never “complete.”
15
Stage 2:
SAP was the Tool
Single Instance
of SAP
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What Did SAP Do?
 Processes integrated all of our functions and
businesses
 Provided real-time, online consistent data
and information that everyone – employees,
customers, suppliers – had access to
 Created a one company infrastructure /
supply chain (i.e., all steps from production
planning to delivery to the customer)
Reduced complexity, waste, defects
Increased speed, agility, efficiency and
strategic customer focus
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Phases of SAP
Implementation
Business Performance
BENEFITS
IMPROVEMENT
STABILIZATION
RECOVERY
SAP Go - Live
Handover
Analyze & correct data and
configuration issues;
Identify training and work
process issues;
Disengage SAP project team
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Identify & implement inter
and intra work process
opportunities; Collect and
report business and
process KPI’s
Identify business transformation
opportunities;
Perform to one company (convergence)
decisions;
Identify productivity benefits; implement
organization changes
Time
SAP Implementation
 7 phases over 4 years by geographical region
 Core implementation team reported to the
Supply Chain organization versus IT
 Common core team moved through all 7
phases
 Core team worked with a dedicated regional
implementation team
 Regional VP drove the efforts of the
implementation team
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Benefits Targeted
 Identify potential leverage by process
– Change the way we do business
– External benchmarks
 Categories
– Productivity
– Balance sheet improvements
– Functional cost reductions
– Procurement
– Revenue impact
3X
30%
20%
$300MM
$500MM
 Soft benefits
Customer Loyalty
by 15%
20
Stage 3:
Supply Chain Was The Connection
That Drove Productivity
Customers
Suppliers
VOC
Plan
Source
Make
Single Instance
of SAP
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Fulfill
Supply Chain KPI’s
Drive Process Performance
“Top 5”
Focus Areas
Supply Chain
Attribute
Customer Data
Quality
Reliability
Forecast
Accuracy
$ Benefit Area
Revenue
(increase)
Perfect Order
Fulfillment
Responsiveness
&
Flexibility
13%
ORONA
Workbook Rejection Rate
Demand Forecast Accuracy
Production Plan Adherence
% Orders Rec’d on-time (supplier)
Production Master Data Quality
Complaints
Closed by Target
Cost
(decrease)
Customer Master Data Quality
Perfect Order Fulfillment
Growth
Return
on
Investment
(increase)
Enterprise
Supply Chain KPI’s
% Complaints Closed by Target
P&L Impact
Cost
Productivity
Improvement
Net Hard Benefits
Productivity
Cash to Cash Cycle Time
Days Sales Outstanding
% Faultless Invoices
Investment
(decrease)
Net Assets
Asset
Management
Efficiency
Cash to Cash
Cycle Time
Average Days Past Terms
Average Terms (customer)
Inventory Days of Supply
Inventory Accuracy
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Days Payable Owed
Other Step Change
Performance Opportunities
 Creates focus for driving results
 Target $100MM opportunities
 Resource to win/benefits begin within six
months
 Transfer of knowledge is critical
 Initiative examples
– Strategic sourcing
– Shared Services (e.g., functional cost
reductions)
– Price Management
– Lean/Six Sigma
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Strategic Sourcing
 Organizationally separate from tactical sourcing
 Focus on fewer, longer term relationships for key
materials
 Look to source global requirements from low cost
suppliers/countries
 Need a limited number of experienced and motivated
sourcing professionals to drive the program
 Cost benefits can approximate 25%
 Must quantify risk management process
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Global Procurement
Strategic Sourcing/Business
Alignment Process
 Process focuses on identifying and prioritizing strategic
sourcing initiatives that will enhance the
competitiveness of businesses and functions.
 Senior leaders of businesses and functions are
engaged to gain endorsement and alignment.
 Business leaders cannot overrule Procurement
decisions.
 Creates dialogue on sourcing support ….expectations
and service level.
 Provides structure to sourcing activities…strategies,
objectives, and team accountabilities are defined.
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Global Procurement
“Strategic Sourcing… Defining
Success”
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From
To
Local/Regional
Global
Limited Procurement Involvement
Procurement Fully Engaged
Supplier Relationships….
Supplier Relationships
Not Leveraged
…Fully Leveraged
Variations in Work Process
Standardized Work
Processes
Formal Strategy Development
Lacking
Formal Process Strategic
Sourcing In-place
Minimal Contract Visibility
Contracts Fully Visible
3-Year Roadmap for Low Cost Country Sourcing
Year #1
Year #2
• Organizational change, Country
Integration (structure, scope, operating
model, and governance), and
communications
• Full scope of executing strategies
and communications of status and
results, with focus on sourcing from
LCC for the rest of world
• Strategic sourcing leadership team
build-up by Key Market Area.
• Effective supplier relationship and
development program implemented
• Well-defined strategies by division.
Accelerate implementation, and
communications of the strategies
• Effectively support regional project
executions and plant operations
• Enhanced collaborations with business
units
• SAP support
• Broader influence in procurement
strategies and processes
• Well-defined strategies in the areas
of Corporate sourcing, Logistics /
Dist. and (Real Estate?)
• Integrating country team to
corporate.
• Successful SAP implementation
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Year #3
• Fully integrated into
organization, strategies, and
processes
• Greater and broader
confidence and willingness
from stakeholders in using
low-cost country suppliers.
• Global leadership or coleadership in certain
commodity category
management.
FIRST QUARTER
SECOND QUARTER
SBU Managers
Meeting:
SBU/Region/Function
Meetings
Senior Mgmt
Meeting:
E-Pulse Survey:
Corporate Executive
Committee (CEC)
Senior Management
Meeting
• New FY Initiative Targets
• SBU/Region New FY
Work Plan
50 Business and Senior
Corporate Leaders
3000 Employees
• Customer Loyalty Review
• New FY Supply Chain
Capability Projects
• New FY Corporate
Scorecard Review
• Measure Employee
Engagement
• Supply Chain Milestone
Review
50 Business and Senior
Corporate Leaders
• Best Practices to be
Implemented
• New FY Initiative
Priorities
• Shared Service
Centers Review
• Growth Board/CDO
Overview
• Progress on
Development of Core
Capabilities?
• Functional Performance
Versus Benchmarks
• Best Practices Identified
• Review of Customer
Success Stories
• Supply Chain KPI's
Corporate Executive
Committee (CEC):
• Technology Review
• Procurement Initiatives
• E-Connections Review
• Customer Testimonials
• Portfolio Mgmt. Review
All Business Units
• Kick-off SBU Strategy
Reviews
• HRP Priorities
• Process Maturity
Assessment
Customers
Employees
Shareholders
Corporate Executive
Committee (CEC):
SBU/Region/Function
Meetings:
E-Pulse Survey:
Sr. Management
Meeting
• Next FY Operating
Plan Approval
All Business Leaders
3000 Employees:
• Next FY Initiative
• Measure Employee
Engagement
50 Business and Sr.
Corporate Leads
• Review of SBU
Strategic Plan
• Corp. Portfolio
Management Review
• Next FY Challenges
• Review of Annual
Supply Chain Plan
• Growth Initiative
Spending Target
• Next FY Economic
Outlook
• Hard Productivity
Targets
• SBU HRP Review
• Corporate Planning &
Commitment Process
Targets
• Growth Initiative Spending
• HRP Review
• Next FY Training Plan
Approval
• S,G&A Targets
FOURTH
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QUARTER
Targets Set
• Individual Business
Operating Plans
• Next FY Continuous
Improvement Plan
• Progress on One
Company Capabilities
Leadership Alignment
• 360° Feedback
Alignment Survey
• Next FY Initiatives
Prioritized (Business/
Process Alignment)
• Supply Chain
Priorities
• One Company
Accomplishments
THIRD QUARTER
SBU/Region/Function
Meetings:
Corporate Development:
Adapted from GE Model
Rev. 11/08/06
Business Results
 4 growth platform businesses increased from
30% to 60% of total corporate revenue
 5 years of double-digit topline growth
 4 years of double-digit earnings leverage
 Increased ORONA by 3%
 S, G, & A / Sales declined by 3%
 Procurement Savings exceeded $300M
 Share price doubled
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Results…
A Change in Conduct
 Simplification and standardization
– Instituted global work processes
– Shared service organizations
– Underpinned by a single instance of SAP
 Consolidated global business and functional
organizations under single managers
 Increased Customer Loyalty by at least 15%
for each business in each region
 Tripled rate of hard productivity savings over
past 3 years
 Resourcing to win
30
Keys to Success
 Business leaders responsible for “what;”
process owners responsible for “how”
through service level agreements
 Converge and then document the process
before you enable it through software
packages
 IT spending / prioritization is controlled by
process owners versus business leaders
 Lean / Six Sigma projects are focused on
improving Process KPI's
 An integrated process governance model
sustains improvements
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Thank you
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