Businesses that come under accute pressure from shareholders are frequently forced to develop and implement turnaround strategies - doing so in short timescales and under intense pressure. PA's clients have been faced by challenges such as:
- destroying value for the business and not meeting target returns
- not meeting the cost of capital so that capital could be more effectively deployed elsewhere
- company underperforming against key competitors.
In response to such challenges, PA's experience suggests that CEOs should implement a structured, focused turn-around approach.
Step 1: Develop the turnaround strategy objectives, define success and identify the key problems to fix. CEOs must quickly develop a strategy based on a sound analytical understanding of which parts of the business can create value now, or can create value in the future. This has to be based on a good understanding of value creation potential which is a function of both inherent market attractiveness and of competitive strength.
Step 2: Focus on execution activities that eradicate value destruction. It is often said that there is no such thing as a bad strategy, it is just the execution that is flawed. Whilst this statement is debateable, we observe many situations where implementation is poorly managed. The success of this step relies on the ruthless execution of a portfolio of projects, all aimed at the eradication of value destroying activities. The nature of the projects could include divesting underperforming businesses, implementing a new pricing strategy, selling underutilised assets, pruning unprofitable product lines and overhead cost reduction.
Step 3: Stabilise and nurture the value creating businesses. This phase usually requires a style of management that is different to the earlier phases, involving nurturing of management talent to guide value creating businesses to the next stages of their development. In parallel, turnaround must be embedded by consistent, visible management against value driving KPIs.
PA helps companies take each of these steps by bringing a combination of analytical rigour, broad industry experience, hands-on senior management support, project management and strategic insight.
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