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CIPLA BY NUMBERSR20bn Revenues
SPEAKER PROFILE: Nishant Saxena
• Executive Director & CFAO, Cipla Medpro
– Finance & Accounting, M&A, IT, Procurement, Shared Services, India Supply Chain, Legal
– South Africa and neighbouring countries (SADC)
• Formerly
– CFO, Cipla India (R10bn revenues)
– 8 years in P&G in senior roles (Deputy CFO, P&G India and Asia M&A Manager)
– Worked (1-3 yrs) in Japan, Philippines, Singapore, India, South Africa, Australia, South Korea
• Consultant - with clients like Nestle, Cadbury, Kraft Foods, Conagra, KPMG etc.
• Taught Strategy, Finance & Leadership in leading Bschools in India, Singapore and Dubai
20 yrs after the advent of ‘business partnering’,
finance continues to be called ‘bean counters’!
10%
% of Finance employees
in business partnering
roles.
% of organizations
where Finance is
primarily playing a
reporting or number
crunching role.
66%
SURVEY: Stakeholders of finance lamented that Finance -
Often sees a Problem purely
from cost point of view
Needs more business
knowledge to ask right
questions
Is mainly involved in
accounting and reporting
Has limited impact on
real business decisions
Is largely internal
focused
Is generally Risk averse
THIS IS SUCH A WASTE…
• Correlation between high performance business and high performance finance
organization is 84%!
• The project owner may be too involved to take a distant look.
• Most business partners expect finance to help them make choices by providing
clear decision rules.
• Junior and middle finance managers tend to grow frustrated with the transactional
nature of their role.
WORKPLAN FOR A CFO- Jeff Emmelt, Chairman GE
Bottom-line stewardship
Top-line stewardship
WORKPLAN FOR A CFO- Jeff Emmelt, Chairman GE
What does Business Partnering mean?
Making the business look
outwards through
insightful competitive and
industry analysis.
Kotler found that
60% of all marketing
initiatives are
generally a failure!
Doing benchmarking externally with
competition and internally with the
best manufacturing locations, to find
the right cost structure.
Understanding
the key drivers of
success
Initiative/
Investment
Analysis
Cost structure
that can afford
that pricing
Cost Structure
Optimisation
Trajectory of
profitable growth
Strategy
Formulation
Strategy, fundamentally, is making a choice.
Financial Analysis should help the business in making a better choice.
FINANCE – INTERNAL VENTURE CAPATALISTHelping make “right choices”
How will we win
in chosen
markets?
What
management
systems are
required?
What are our
goals and
aspirations?
What
capabilities must
be in place to
win?
Where will we
play?
TRS Goals
Sales/Profit Targets
Portfolio Analysis
Initiatives Analysis
Profitability Analysis
Competitive Analysis
Budgeting
Forecasting
P&Ls…
Analysis
Strategic Planning
Forecasting
Business Planning
FINANCE RAISON D’ÊTRE
Insights vs. information
HOUSE OF FINANCE - INDIA
Domestic
busines
s to
grow at
~25%
year on
year
B C
Staffing - X% Attrition, Build Vs. Buy Y% World Class Functional Training Customer Satisfaction - X%
Performance Driven CIPLA Values Led
Top Line
Stewardship:
Portfolio Analysis.
Entering new products
and product categories
via- in licensing , brand
buy out, in-house R&D,
Alliances
SKU Rationalisation
Unbundling the
potential of Corporate
Hospital and Low
market share
geographies
Initiative Analysis
Competition Analysis
Bottom Line
Stewardship:
Pricing
Product Cost – x%
of sales
ROI on marketing
spends
Sales force
effectiveness
Logistics and
Distribution Cost
FG Inventory
Management
Governance:Enterprise Risk
Management
IT Automated MIS –Timely, Accurate, Insightful
Forecasting – x% accuracy
Audit – 0 comment
Compliance – 100% On time and Accurate filings
Internal Controls –<$m value at risk
Internal Control over special rate supplies
Operations:
Lean, Six Sigma,
Shared Services
SAP implementation
Receivables -x DSO, Write-offs
Eliminate >Automate > Consolidate
Maximum Leverage of SAP
Cipla’s TRS in Top 25%
Sales Growth – 20%
New Product
Contribution – 3%
Stockist
Appointment
Marketing
ContributionMIS
Insights versus
Information
Build the Business via
Growth, Margin & Cash
Outstanding Business
PartneringNo Controls Risks Defect Free
Overall
corporate goals
Expectations
from Finance:
iBOND
Activities
People
Culture
7 STEPS TOWARDS BUSINESS PARTNERING
1. Mandate
from the
CEO
2. Time Out from
Transactional
work
3. Venture
Capitalist
Mindset
4. Developing
Business
Acumen
7 STEPS TOWARDS BUSINESS PARTNERINGContinues…
5. Learning
Analysis Tools
6. Mastering Soft
Skills
7. Redefining KRAs
Core
SupplierCurrent performance
Known drivers behind
performance
What is their
positioning with this
Channel?
Our hypotheses on why this supplier is
winning / losing with this Channel
(notable successes and failures)
Supplier A • Underperforming in this
channel
• Declining market share by
xxx
•Limited sales support (limited
POS presence, infrequent
promotions)
•Share of shelf is lower than
share of sales
•A big supplier with a strong
presence in beverages
•Historically has been strong
at convenience channel and
small retailers
(-)
•Has historically de-prioritised this channel
•Has a very small sales team for this channel
with limited budget and with no authority to
make any significant changes
•Margins are lower than key competitors
Supplier B • Category leader at x %
share
• Growing strongly in this
channel
•Strong sales support (frequent
promotions, strong POS
presence)
•Highest share of shelf in the
category
•Category leader - leading the
innovation in this category
•Large international presence
with funds
•Dedicated sales team
(+)
•Has the ability and funds to invest heavily
into this channel
•Provides above average margins
•Excellent POS support and awareness
campaign increases footfall to the category
Supplier C •Under performing in this
channel vs.. national
average
•Flat share for the past 12
months
•Limited sales support
•Limited shelf space & pos
presence
• Large supplier that
understands the category
shopper inside & out with
strong presence on TV &
other media
(-)
•Tight sales budget is limiting their ability to
win with key customers - this is believed to
be due to their heavy investment on
advertising & PR at the moment
Supplier D •Aggressively growing
•Significantly over
performing in this channel
vs.. national average
•Channel specific sizing,
packaging
•Heavy sales support
•Best in class joint promotions
with excellent execution
•Share of shelf is 2x share of
sales
•Tries to be a strategic
partner – understands and
fulfils channel needs better
than other suppliers
•Small but aggressive firm,
flexible to tailor its offering
based on customer needs
(+)
•Disproportionately investing in this channel
•Providing highest overall margin in this
category
•Providing customer specific packs and
promotions such as bundled packs or price-
marked packs
4) EXAMPLE OF BUSINESS ACUMEN:Who’s Winning & Why Template
5) EXAMPLE OF RISK ANALYSIS:- NPV as a probability distribution
Distribution for NPV
X <=1.05
5%
X <=28.81
95%
0%
20%
40%
60%
80%
100%
-10 0 10 20 30 40
NPV ($MM)
Pro
bab
ilit
y (
%)
NPV IN SCENARIOS OF INDICATIONS & MARKETS
Modelling here is extremely uncertain with dozens of critical variables and their associated probabilities.
Each probability may actually be a 0 or 1, leading to wide variations in actuals.
FALSE 034 34
FALSE west with Str. 4 in '04?0 51
TRUE 051 51
TRUE Change after 3 years to Stream 4?0 60
TRUE 060 60
TRUE west as well in '04?0 60
FALSE 037 37
FALSE Brand b, Country 1 with 2C?0 60
FALSE 048 48
FALSE Str. 4 conversion in Prestige?0 57
TRUE 057 57
FALSE Brand b with other technologies?0 60
FALSE 034 34
FALSE 037 37
TRUE Which regions?0 60
FALSE 056 56
TRUE 060 60
FALSE 020 20
TRUE Flankers intro?0 62
FALSE 053 53
TRUE Convert Prestige to Str. 4 in '06?0 62
TRUE 162 62
TRUE Invest in Str. 4 for west in '04?0 62
FALSE 036 36
TRUE Flankers in '04?0 62
FALSE 023 23
TRUE Brand b with 2C in '03?0 62
FALSE 013 13
TRUE Brand a in Country 2 with 2C?0 62
FALSE 06 6
Brand a in Country 1 with 2C?0 62
FALSE 0-9 -9
Tech X
Yes
No
Yes
No
Yes
Not now
Yes
No
Stream 3
Stream 4
No Bb at all
Continue Str 2C in C1
Switch to Str 4 in '07
Yes
No
Bb only in JFM 2004
Bb+Ba conv '06+West
Bb '04+Ba conv '06
Bb+West 2005
yes
only C1
no west
west w/4, 2C in C1
Yes
No
No Stream 4
No: West/4, prestige/2C
Yes: Prestige 2C to 4
West w/4
west w/4+2C/3 in C1
west w/4+C1 conv. '07
5) EXAMPLE OF ADVANCED FINANCIAL ANALYSIS: Decision Tree
• Helps you model the future as a
series of decision points
• You have the option, but not the
obligation, to invest further
6) EXAMPLE OF SOFT SKILLS:- Advocacy vs Inquiry
� What I see is a perspective
on how it is
� Those who differ may see
something I’ve missed
� Assume others strive to
act with integrity
� Use our differences to
improve our viewsPro
ducti
ve
convers
ati
ons� State thinking behind own
view
� Seek and offer illustrations
� Inquire into others’ views
� Make dilemmas
discussable
� Design ways to test
differences
� Increased
understanding
� Higher
commitment to
action
� Increased
recognition of own
contribution
� What I see is how it is
� Those who differ are
wrong
� They have bad motives
(or, are wrong for being
wrong)
� Get others to do what I
know is right
Unpro
ducti
ve
convers
ati
ons
� Assert own view
� Take own reasoning
for granted
� Minimize inquiry into
others' views
� Ask leading questions
� Keep thoughts and
reactions private
� Limited understanding
� Low commitment
� Each sees other as
problem
ResultsResultsActionsActionsFramesFrames
7) EXAMPLE OF KRA:Gold Standards
One of the Gold standards for a Business Finance role:
� Shows a tremendous sense of ownership for his/her brands, acting as the brand(s) CFO.
� Understands the brand strategy, pricing, technical performance, selling strategy, cost, profitability,
etc. better than anyone else.
� Integrates that knowledge well and proactively recommends solutions or alternatives which impact
the business.
� Looks at the big picture and doesn’t accept “givens”.
� Has a major impact on projects before they reach major investment points.
� Reverse engineers the economics, as needed, so the team knows what they need to deliver and the
pricing/cost structure to make sense financially.
HOLISTIC INITIATIVE ANALYSIS FRAMEWORK
CONCEPT
CATEGORY
CONSUMER
CHANNEL
COMPETITION
CAPABILITY
COMMUNICATION
CASHFLOW
COMPETITOR BUSINESS MODELS
Kraft Confectionery: The business derives its strength from RTM, masterbranding, manufacturing scale and an ability constantly to drive out cost
New Product Development
• Little breakthrough innovation
• Focus on format and flavour extensions, e.g. Milka
M-Joy
Advertising And Promotion
• ‘Alpine goodness’ positioning on Milka
• Masterbranding allows scale leverage on media
investment
• Levels of media expenditure low relative to
leaders in key markets
Manufacturing / Supply Chain • Constant drive to cut costs by reducing complexity
and leveraging Group scale
• Tight controls on number of product and formats
• Strong on process and ability to eliminate
complexity
• Highly efficient, scale plants
Chocolate confectionery business
built through acquisition, with a
strong focus on cutting costs to
achieve synergies in
manufacturing, back office and
route to market, supported in
commercial operations by
masterbranding
• Low price point for Milka in Germany and its other
heartland markets
• Dual pricing strategy in Eastern Europe, with a
local value brand and Milka as a premium brand
• Sales force well schooled in managing price
PriceRoute To Market (In Key Markets)• Focused on grocery, where its RTM is a key source
of advantage
• Emphasis on scale through combination of coffee,
confectionery and other where possible
• Focus on beating competitors to gain market share,
rather than on growing the category
• Sales technique emphasising market leadership
positions
• Arrogant sales force
• Attractive compensation and high investment in
training for salespeople
Product Range
• Focused on chocolate confectionery, weighted
towards moulded products
• Products rarely unique; more often extensions
leveraging historical brand equity
BrandsTarget Consumer
• Mass market
• Mostly legacy chocolate brands, appealing to the
whole family
• Masterbranding strategy, allowing sales force to sell
multiple categories
EXAMPLE: wholesale sell-in vs sell-out
Sell In Rxxxm vs Sell Out Ryyym
Destocking of Rzzzm (- x.x weeks)
Sell In Rxxxm vs Sell Out Ryyym
Build up of Rzzm (x.x weeks)
Build up of Rxxm
in Month Year
-
5
10
15
20
25
30
35
40
45
50
Originator 1st to market 2nd to market 3rd to market 5th to market
Mar
ket s
hare
(IM
S -J
une
2014
, MA
T)
Sequence to market
Units MS (%)
Rands MS (%)
* Growing slower than market
* Pricing not aligned with average reference
prices : 5mg - R 78.71
10mg - R100.84
20mg - R185.44
* Listed on Company A and Company B formularies
* Average SA Margin: 63%
Price of 5mg
Price of 10mg
R451.15
R128.00
* Cheapest of top 5
* Fastest growing in market
* Listed on Company B formulary
Price of 20mg
R240.23
R223.36
R128.00
R191.11
R101.10
R140.01
R108.48
R88.05
R78.66
Consider price drops (in-
line with expected
reference prices)
Medical aid X already on
R88.06 for 10mg, average
across all houses expected to
be dropped in near future
Growth (MAT) - Units
Total market 12.5%
5th to market 88.2%
2nd to market 41.8%
1st to market 7.8%
Originator 4.8%
3rd to market -42.7%
EV (MAT) - Rands
5th to market 145.7
2nd to market 119.4
Originator 102.9
1st to market 94.7
3rd to market 57.7
O
38%
1
43%
2
5%
3
3%5
8%
Other
3%
TPM - R172m
EXAMPLE: detailed pricing analysis
EXAMPLE: QlikView
Enabling sales rep to have focused discussion with customer
Pharmacy 1
Pharmacy 2
Pharmacy 3
Pharmacy 4
Pharmacy 5
Pharmacy 6
Pharmacy 7
Pharmacy 8
Product 1
Product 2
Product 3
Product 4
Product 5
Product 6
• Allows molecule, brand and trend analysis
Time/Priority Management Example (Real): CA in Fortune 50 Company
� Consistent Overtime
� Low Work-life Balance
� Frustration:
•System/reports taking too long
•People do not listen, respond on time
•Work processes broken… causing rework
•Too much stress in role (meeting +/-2% accuracy of forecast)
� Detailed Analysis of issues:
•Low capability on Systems, work processes, Who’s Who
•Lack of relationship with current workgroup
•Process broken behind workplace changes. Needed owner to step up and fix
•Lack of understanding of Standard Operating Procedures in multifunctional team. Needed enabling
•Above resulting in “surprise” entries, miss-communications, overspends… causing stress
“Put it before them briefly so they will read it, clearly so they will
appreciate it, picturesquely so they will remember it, and above
all, accurately, so they will be guided by its light..”
- Joseph Pulitzer
Founder
Pulitzer Prize
“If you want to run the show someday and run it well, you had
better learn to think, write and speak, in the that order – clearly,
forcefully, concisely and to the point…”
- Ed Artz
Former CEO
P&G (World’s Top 10 Most Admired Company)
