“Strategic management consulting – the A.T. Kearney perspective” Warsaw, May 28, 2001 Wyższa...

“Strategic management consulting – the A.T. Kearney perspective”

Warsaw, May 28, 2001

Wyższa Szkoła Przedsiębiorczości i Zarządzania

im. Leona Koźmińskiegow Warszawie

Presentation

an EDS company

2A.T. Kearney / Szkoła Biznesu im. Kozminskiego / May 28, 2001 / shj

Agenda

Overview of management consulting

A.T. Kearney as a strategic management consulting firm

Consultant’s role in A.T. Kearney

The future of management consulting


Today, one is confronted with a variety of consultants . . . .

Tax “consultants”

Hair “consultants”

Image “consultants”

Color “consultants”

Catering “consultants”

What then, is “management consulting?



One definition . . . .

Management consulting = assisting management in facilitating change to gain and sustain competitive advantage



Companies engage management consultants for several reasons — some good, some not so good

Some reasons why companies hire consultants

The company does not have the necessary skills internally - Good reason

The company has never confronted this situation before - Good reason

Management needs fresh ideas and a new perspective - Good reason

Management wants the consultant to confirm its ideas - Not-so-good reason

Everyone in the company is too busy - Not-so-good reason

Management needs a “tie breaker” - Not-so-good reason



Why does management consulting seem to be growing in importance?

The nature of business is changing so rapidly that companies• Cannot provide for every eventuality in the organizational structure• Find it difficult to maintain permanent staff functions

Companies need “tailored” solutions to remain competitive in an increasingly global marketplace

The high cost of what management consulting provides can only be justified by companies on an outsourced, as needed basis



Why does there continue to be a demand for management consulting?

Most companies do not know how to • Analyze „themselves” in an objective way when business situations change significantly• Operate in a temporary, project mode

Unfortunately, most business schools do not • Prepare managers for “exceptions” in business situations• Teach real project management



Information technologyOperationsStrategy

• System strategy creation • Information systems market

analysis• Selecting appropriate IT

solutions • Inplementation of selected IT

solutions

• Process optimalization• Change management • Business process reengineering• Strategic sourcing• Supply chain management• Service level improvement• Benchmarking• Organization restructuring

• Corporate strategy• Strategic business units• e-business strategy• Production strategy• Distribution strategy• Market entry strategy• Restructuring

The major global management consulting firms concentrate in three areas of consulting; A.T. Kearney, together with EDS, cover the whole spectrum

McKinsey

Monitor, BCG, Bain

Booz Allen

Accenture

CSC Index

IBM Consulting

A.T. Kearney (EDS)

“Big Five” firms



$73$89

$100

$117132

$146$15921,9%

17,7%

9,0%10,7%

12,9%

16,8%

12,1%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1997 1998 1999 2000 2001 2002 2003

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

Consulting Industry Market Size and Growth Rates

Market Size($ B)

Per Annum Growth Rate

(%)

Source: The Global Consulting Marketplace: Key Data, Forecasts & Trends 2000 Edition, Kennedy Information Research Group. Chart pertains to the market for consulting firms independent of hardware/software organizations

IT projects to represent over 50 percent of the market

The world consulting market is estimated at $ 117 billion and is characterized by a double-digit annual growth.



The consulting services in Poland emerged after the transformation in 1989 with privatization; other segments of the market developed later

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Development of the consulting market in Poland

Privatization consulting

Audit and legal services

IT consulting

High value added consulting

Start of the economic transformation



The development stages in Poland were significantly different than in Western Europe

Source : A.T. Kearney

1998 - 20001994 - 19971990 - 1993

External

trends

• Start of economic transformation• Privatization of state own

enterprises

• Fast growth of the economy• Development of the free market

institutions (e.g. stock exchange)• Acquisitions by foreign investors

• Consolidation of the economy• Increased competitive preasure• Acquisitions and post merger

integrations• Big ticket privatizations

Consultants’

value

proposition

• Privatization• Financial valuation

• Privatization/Due Dilligence• IT consulting• Restructuring

• Efficiency improvement• Reorganization/Reengineering• Strategy• IT consulting

Key players • Small Polish companies• Smaller foreign companies

specialized in financial / privatization consulting

• Big five• Specialized Polish companies

• Big five• A.T. Kearney• McKinsey• BCG, ...

Key factors for success

• Relationships• Prices

• Local knowledge• Quality standards

• Value added• Global network• Relationship

Major client

group

• State administration• Largest Polish state-owned

enterprises

• Foreign investors • Foreign investors• Largest Polish, privately owned

corporations



The consulting market in Poland is still significantly different than in other countries

DifferencesDrivers

Low sophistication of the market. Many potential clients do not recognize the need for consulting services

Brand names of global players not known Consulting fees relatively higher in relation to personal costs

Two groups of clients:• International companies entering Poland• Largest Polish companies of which many are state owned

Local shortage of consulting and industry knowledge and experience

Market dominated by financial and tax advisory

Local consultancies enjoy important market position in Poland

Different product offerings and selling strategies

for domestic and for international clients

Need to transfer knowledge and experience from developed markets



Consulting market in Poland is still dominated by financial and tax advisory services

20%

22%

3%

4%

11%

12%

34%

Percentage of companies using different consulting services

Source : BOSS-Gospodarka

Financial and tax advisory

Quality management

Business strategy

Human resources

Public relations

Other

Do not use consulting services



In parallel to world-wide brands, local consultancies enjoy important market position in Poland

Polish subsidiaries of global consultancies

Dominant strategies:• Focus on long-term relationship with client• Focus on several key products / industries

Key success factors• Global network• Combination of industry and local knowledge • Tangible results

Targeted client segment• International companies• Largest Polish corporations from strategic

industries

Products• Value added projects

Dominant strategies• Niche players• Specialization in one product / industry

Key success factors• Price• Personal relationships

Targeted client segment• Small and medium enterprises• State and local governments

Products• Off-the-shelf reports• Company valuations• Issuing prospectuses• Feasibility studies

Local companies



Clients can be split into two groups having different expectations regarding consulting services

International clients Local clients

Products• Market entry strategies• Distribution strategies• Post merger integration of acquired local

companies• Efficiency improvement in acquired companies

Projects sold mostly outside Poland (at the HQ level)

Co-operation characteristics• Used to work with consultants• Used to consulting fees• Expect involvement of own staff• Value added driven

Products• Strategy development• Marketing strategies• Restructuring• Cost reduction• IT systems

Projects sold in Poland

Co-operation characteristics• Used to work with consultants• Used to consulting fees• Expect consultants to do “everything”• Price driven



Global high-value-added consulting companies will have an advantage over local consulting companies because global companies

- Can leverage worldwide intellectual capital and experience- Still have necessary local capabilities

Global capabilities and support

On-line access to intellectual capital, data bases, benchmarks

Training and global project experience for

local consultants



Founded in 1926

International scope • 65 offices in 34 countries• Over 3000 consultants

Since 1996, A.T. Kearney is the second largest strategic management consulting firm in the world

• Over 3000 projects engagements per year

• 1,4 bln USD turnover in 2001

Since 1995, A.T. Kearney is part of EDS, the international leader in technology information

80% of work for repeat clients

Average consultant work experience: 17 years

Tokyo

Chicago

New York

Madrid

London

Düsseldorf

Milan

AmsterdamBrussels

Munich

Stuttgart

Beijing

SingaporeStockholm

Oslo

CopenhagenHong Kong

San Francisco

Los Angeles

Dallas

Phoenix

Atlanta

Mexico

Sao Paulo

MelbourneSydney

Berlin

Toronto

Boston

Cleveland

Washington

Paris

A.T. Kearney is one of the leading high-value-added strategic management consulting firms in the world

Warsaw

Prague



A.T. Kearney is one of the few high-value-added management consulting firms which possesses the full range of consulting services

Complete set of consulting skills

Business and marketing strategyPost merger integration

Strategy sourcingTransforming the enterprise

Restructuring

Technology managementPhysical distribution & logistics

Operations redesign – Process & structureChange management

Multi-functional bemchmarking


Core competencies


Sample of Recent Clients

Representative Annual Results Achieved

• Ameritech• Anglian• BT• Carrefour• Casino• Euro Disney• Galeries Lafayette• General Motors• House of Fraser• Johnson & Johnson• Keebler• Kellogg• Metro• Monoprix• Nabisco• Nomura• PepsiCo• Promodes• Prudential• Quelle• Sears• Shell• Sprint• Unilever• Wal-mart

“A.T. Kearney has helped enormously to address our key issues… We have planned and implemented cost reduction programs that will return over half a billion dollars”

— Fred Smith, CEO, Federal Express

“…in sharpest contrast… A.T. Kearney consultants helped engineer one of the most stunning corporate turnarounds in recent memory”

— (Excerpt about Sears success working with A.T. Kearney, review of Dangerous Company in Fortune, August 18, 1997)

“The Kearney work has made us radically re-think our approach to the business. We wouldn’t have done that otherwise”

— Marks & Spencer Supplier

“A.T. Kearney is really the father of our global purchasing system.” “They are our achievement consultants”

— Jack Smith, CEO, GM

“We wanted consultants who wouldn’t just give us advice and walk away”

— John Rose, CEO, Rolls-Royce

Federal Federal ExpressExpress

>$500 Million>$500 Million

SearsSears>$750 Million>$750 Million

Rolls-RoyceRolls-Royce$750 million$750 million

Marks & Marks & SpencerSpencer

$250 million$250 million

General General MotorsMotors

>$3.5 Billion>$3.5 Billion

A.T. Kearney is committed to delivering tangible and measurable “bottom-line” results for our clients


22A.T. Kearney / Szkoła Biznesu im. Kozminskiego / May 28, 2001 / shjSource: Louis Harris Survey, 1998

A.T. Kearney is the global leader in client satisfaction

71%

74%

75%

77%

79%

79%

80%

82%

94%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

CSC Index

IBM

Boston Consulting

Booz-Allen & Hamilton

Andersen Consulting

McKinsey & Company

Price Waterhouse

KPMG Peat Marwick

A.T. Kearney



A.T. Kearney is a leader in the field of Integrated Supply Chain Management

• Delivered keynote address at the 1999 NRF annual conference on and leadership practices in driving success through consumer-focused supply chains

• Co-sponsored Asia LOGICON conference for senior logistics professionals (1999)— Addressed supply chain strategies and overcoming logistics obstacles for the Asia-Pacific region— Presented research findings on issues, bottlenecks and IT-related concerns of the Asian supply chain

• Featured presenter for the Council of Logistics Management: “Why Effective Partnerships Require a Clear Supply Chain Strategy”

• Delivered keynote address at 1999 Strategic Electronic Commerce Conference, an EDS-sponsored conference

• Featured speaker at AsiaPorts 1998 conference - “How Shifting Global Sourcing Patterns Are Impacting Port Operations”

• Hosted CEO Forum on “Challenges in the Digital Future in the 21st Century”, with topics including digital supply chain opportunities and digital demand management

• Sponsoring future supply chain industry seminars:— "Global Excellence in Operations" with Fortune (2000)— "2000 Supply Chain Management Conference” (2000)

• A.T.Kearney/European Logistics Association: "Insight to Impact. Results of the Fourth Quinquennial European Logistics Study 1999“

• White papers and research studies

• A.T. Kearney has been cited in several articles on supply chain management

• Leadership— Past President of Council of Logistics Management— Past President of Canadian Association of Logistics Management

Seminars, Research and Leadership

Selected Examples



A.T. Kearney facilitates new thinking on the future of the Retail/Consumer Products industry through several forums

Thought Leadership

• Lead the EDS/GMA Future Forces Roundtable, held annually— Bring together the CEO’s and Presidents of the leading grocery manufacturers and retailers— Facilitate discussions on future of technology and science— Help to bring together new ‘breakthrough’ thinking e.g. UCCNet was formed based on the actions set

out in the 1998 Future Forces meeting.

• A.T. Kearney is active with the World Economic Forum on several levels— A.T. Kearney leads the Food and Beverage Governor's Meetings in Davos Switzerland as part of the

World Economic Forums annual meeting— Publishes annual white papers on advanced topics of interest to food and beverage executives as part

of the World Economic Forum proceedings

• A.T. Kearney participates with Grocery Manufacturers of America on several fronts— Facilitate Top-to-Top meetings at the annual Greenbrier CEO Conference (1999, 2001)— Master of Ceremonies at the annual Information Systems, Logistics and Distribution conference (1997,

2001)— Facilitate key issues forums with executive members (Presidents meeting (2000), Board of Directors

(1999,2000)

World Economic

Forum

Selected Examples



• Assessed Delphi Automotive in implementing a “value capture” program for all modules of SAP/R3, for 50 sites throughout Europe, identifying over $28MM in incremental savings

• Aligned business and IT strategies with core processes, and leveraged existing ERP investments to derive additional business value; Leveraged IT assets by establishing IT shared services capabilities

• Developed a comprehensive E-Business “landscape” and competitive strategy, then assessed and realigned ERP priorities to support global purchase order management and supply-chain strategies

• Assisted HP in conducting an SAP post-implementation audit, recapturing over $19MM in net savings

• Identified over $250MM in unrealized business benefits in operations optimization, fleet productivity, staff reduction and sourcing as a result of their SAP implementation

• Pre-merger assessment including the ERP integration of two global multi-billion dollar organizations and creation of financial and HR shared services organizations; identified $52MM in IT run-rate reductions

• Restructured and consolidated IT organization to improve efficiency and effectiveness

• Assisted with functional and operational requirements analysis, ERP program management, global ERP consolidation, and ERP global template design and integration

• Assisted with global restructuring and consolidation of IT organizations and systems, to improve operational efficiency and effectiveness

• Reinvented IT organization, processes, and infrastructure as part of post-merger integration with Bank of America

• Aligned and streamlined business and IT processes and systems; developed an IT architecture “blueprint” for all enterprise applications

• Restructured business and IT processes for better alignment, and assisted in outsourcing certain IT functions to modernize the IT infrastructure; developed the IT blueprint to leverage ERP systems

In addition to a market leading reputation in supply chain, A.T. Kearney has also delivered significant IT enabled transformation initiatives



A.T. Kearney is the recognized European leader in several industries

Major clients per practice

• Deutsche Bank• BNL• Barclays• Societe Generale• AXA

• Deutsche Bank• BNL• Barclays• Societe Generale• AXA

Financial inst.Financial inst.

• Rohm&Haas• Arjo Wiggins• BASF• Pechiney• BP/Amoco

• Rohm&Haas• Arjo Wiggins• BASF• Pechiney• BP/Amoco

Chemicals/O&GChemicals/O&G

• FIAT Group• VW• GM Europe• Daimler Chrysler• Renault

• FIAT Group• VW• GM Europe• Daimler Chrysler• Renault

AutomotiveAutomotive

• France Telecom• Siemens• Deutsche Telekom• Lucent• Philips

• France Telecom• Siemens• Deutsche Telekom• Lucent• Philips

Comm/hi-techComm/hi-tech

• VEBA/VIAG• Drewag• Mainova• ENEL• ENBW/Neckar

• VEBA/VIAG• Drewag• Mainova• ENEL• ENBW/Neckar

UtilitiesUtilities

• Carrefour• Marks &Spencer• Galerie Lafayette• Unilever• Auchan

• Carrefour• Marks &Spencer• Galerie Lafayette• Unilever• Auchan

Consumer/retailConsumer/retail

• Rolls Royce plc.• Rolls Royce plc.

AerospaceAerospace

• Gambro• Quintiles• Merck• Henkel

• Gambro• Quintiles• Merck• Henkel

Pharma/healthPharma/health

• SAir Group• Air France• Lufthansa• KLM• Deutsche Bahn

• SAir Group• Air France• Lufthansa• KLM• Deutsche Bahn

TransportationTransportation



A.T. Kearney has wide experience in many industry sectors in Poland


Automotive

Energy

Chemical

Banking

Insurance

Telecommunications

Logistics and distribution

Publishing

Steel

Fast-moving consumer goods

Retirement funds

Food

Mining

Shipbuilding

Capital markets

Media

Real estate

Government institutions


Examples of projects realized by A.T. Kearney in Poland

Number one Polish publisher

Leading shipping company

Major Scandinavian bank

Leading automotive components manufacturer

Strategy MIS Organisational structure

Governmental assistance programme development

Market entry strategy

SAP implementation

Publishing

Transportation

Financial Institutions

Automotive

Industry Client Project

Selection

Mobile telephony provider

Operations improvement Business market diagnostics Loyalty program

Telecom

Alternative fixed line telephony provider

Business planning for regional markets Project management

Telecom



Becoming a good management consultant requires time, experience and certain key skills

Business education

Business experience

Management background

Technical background

Consulting experience

Written and oral skills

Analytical skills

Creative thinking

Management Consulting Capability



Six key rules* must be followed by every good management consultant

Know what you’re doing!

Don’t act beyond your capabilities

Continually add value commensurate with your skill and client expectations

Keep to the agreed-upon project scope

Hold client information strictly confidential

Be ethical at all times

*Source: Andrew Thomas Kearney, founder of A.T. Kearney



In addition to “time”, experience and basic skills, the good consultant requires three disciplined core consulting capabilities

Proposal writing = selling the assignment

Project management = conducting the assignment

Report writing = the product



“Feel that I belong and am part of something good”•Reliable network of people•Appreciation of unique talents•Communicate ATK’s direction and strategy to all

employees•Explaining how to get problems resolved

•Respect employees by providing timely and intelligent information

“Constantly grow, learn and develop”•Interesting mix of work•Good project experiences•Constructive feedback•Understanding the measurement process•Opportunities to develop •Upward feedback initiatives

“Be able to balance work and life”•Provide a more balanced quality of life•Tailor work requirements to individual needs•Services to help balance workand personal life

- 434U - Vacation buy-back program - Part-time program - Concierge services

“Work hard; be rewarded well”•Provide appropriate compensationsacknowledges the demands of thebusiness•Being recognized for outstanding performance•Provide input into compensation initiatives•Salary increases for mid-year promotions•Service incentive programs•Principal LTI options

A.T. Kearney adheres to four key points to hire and retain the best consulting talent

Wealth

Growth Pride

Teaming

Source: GPTW



$50,0

$30,0

$5,0 $2,0 $2,0

$91,8

$50,9

$11,1$2,7 $2,5

11,6%12,4%

14,0%

9,7%

15,1%

$0,0

$20,0

$40,0

$60,0

$80,0

$100,0

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

The Global Consulting Market by Major Region

North America Western Europe Asia-Pacific Latin America Rest of World

Region

19982003CAGR

Market Size($ B)

CAGR(%)

North America and Western Europe are projected to be the leading growth markets

Source: The Global Consulting Marketplace: Key Data, Forecasts & Trends 2000 Edition, Kennedy Information Research Group. Chart pertains to the market for consulting firms independent of hardware/software organizations



Global Consulting Market Size and Growth Rates by Vertical Industry($ Billions)

1998 Industry Size

20

1998 – 2003 CAGR

15

10

5

$5 $10 $15 $20

Manufacturing$33.2

FinancialServices

$33.8

Government$15.3

Communications$19.8

Wholesale/Retail$11.9

Healthcare$7.9

Energy/Oil and Gas

$9.9

High Technology

$8.0

Utilities$7.3

Business Services

$3.6Transportation

$2.5

Med./Ent./Pub.$2.9

Miscellaneous $2.4

Traditional industries will continue to grow . . . .

2003 Industry Consulting Market SizeEarly E-Business Adopters



Pure E-Business• Start-up e-business• Web strategy, design and

implementation• E-strategy, marketing,

operations

Type of Service Brick and Mortar Dot.com

1998 2003

$63.0 $68.0

1998 2003

$0$20.0

1998 2003

$63.0$48.0

1998 2003

$24.0

$75.0

1998 2003

$4.5$19.0

1998 2003

$19.5

$56.0

1998 2003

$1.5$16.0

1998 2003

$1.0$11.0

1998 2003

$0.5 $5.0

All Clients

E-Business Related• Traditional consulting services

with e-focus

Traditional Consulting• Strategy• Operations• IT• Change management

Sources: E-commerce Consulting Kennedy; A.T. Kearney analysis

Breakdown of Global Consulting Market Segments (U.S.$ Billions)

Total Global Consulting Market (U.S.$ Billions)

Share of Consulting

Market:

10%

47%

43%

. . . . but, e-Business will be the main driver of future growth



Expected Growth in E-Business B2B Services 1999 – 2002 Annual Growth Rate (%)

60%51%

25% 23%

Internet Strategy/ Advice

Digital Value Chain (2)

Internet Software and

Services

Internet Outsourcing(1)

B2C (Business to Consumer)B2B (Business to Business)

Notes: (1) Internet outsourcing includes Internet project management and web-hosting services(2) Digital value chain includes supply chain, ERP, integration, CRM, business intelligence and ASP services

Sources: Forrester Research, IDC, A.T. Kearney analysis

B2B Is Eclipsing B2C: Expected Growth in E-Business

$0

$600

$1.200

$1.800

$2.400

$3.000

1999 2000 2001 2002 2003

Revenue($ Billions)

• Higher barriers to entry than B2C• More sustainable business models

The B2B market appears most attractive



Client-Market Positioning Matrix

Pure E-Business

E-Business Related

Traditional

Serv

ices

Brick & Mortar(incl. Dot Corp’s)

Dot.com’s

Clients

Therefore, the new Economy requires a new positioning and new innovative client-service relationships

Traditional Client Base

Management Consultants

New Client Base

Venture Capitalist /Incubators

„New Economy Consultants“



End-to-end e-services will have a competitive advantage over functional specialists

Paradigm shift in IT -services provision

Plan

Traditional IT-servicesdelivery chain

e-businessdelivery chain

ImplementBuildVision



So, A.T.Kearney and e-solutions are implementing the e-business solutions for start-ups and established clients to provide truly end-to-end capabilities

A.T. Kearney together with e.solutions is enabling the enterprise to offer end-to-end e-business solutions - from strategy to implementation

EDS e.solutions/Kearney Interactive need to have a broad range of design and implementation services - including branding/marketing, web design and e-solution implementation

Stategy OperationsImplemen-

tationWeb-Design

E-Business Solution

End-to-End Solution Process

EDS e.solutions/Kearney Interactive

A.T. Kearney•e-Space (incubator)• E-Business Practice

Marketing



A.T.Kearney offers comprehensive support to start-ups and new ventures.

Comprehensive strategic and

operational support

Dedicated team

Long-term commitment and flexible compensation

BusinessPlan Launch Growth

IPO/ Sale

…

A.T. Kearney Start-up Service Practice

Shares Others$

A.T. Kearney Start-up Network

+

Source: A.T. Kearney Start-up

A.T. Kearney New Ventures

Support through all business phases



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