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Oliver Wyman
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C O N F I D E N T I A L | www.oliverwyman.com
What is Management Consultancy?
4 November 2008
Ian Shipley
3
What is Management Consultancy?Overview
What’s in it for me?
What do you do for
your clients?
What is management consultancy?
Difficult, high stakes situations
Help senior executives with their toughest problems
These are problems which they cannot solve themselves– Lack of relevant
expertise– Shortage of
resources– Need for outside
objectivity
The type of projects cover a broad scope
Often characterised by– Driving revenue or
profit growth– Increasing market
share or competitive advantage
– Changing the way the company thinks and works
Outstanding opportunities for training and development to build a strong foundation in– How businesses and
markets really work– How to make
money(!)
Interaction with senior-level executives from day one
A truly global experience
Very good compensation…
4
What is Management Consultancy?Some differences between types of consulting firms
Clients
Length of project work/ team size Team size
Where you will work
What you will do and learn
Large International Strategy Firms
CEOs and Executive Board
2-6 months Generally small (3-20)
Mixture of local and global staffing opportunities
A balance of high-level strategy, process and analytics across a broad range of businesses
Smaller (Boutique) Firms
CEOs and Executive Board
Typically smaller companies
1-3 months Small (3-5)
At the margin, more local office staffing
As above, typically across a narrower range of businesses and partners
Process/ operations
Operational management
3-9 months Medium-large (5-50)
Mostly home staffing (UK)
Focus on detailed operational and process outcomes
IT Operational and IT management
6-18 months Large (20+)
Mostly home staffing (UK)
Focus on systems architecture, specification and coding
5
What is Management Consultancy?Top strategy consulting firms in 2006
Rank2
Firm(Ranked by growth)
Revenue 2006 ($BN)
Market share2006 (%)
CAGR 2003-2006
4 McKinsey $4.0 8% 7%
1 Oliver Wyman $1.21 3% 25%
2 BCG $1.8 4% 16%
3 Bain $1.3 3% 14%
Source: Kennedy 2007 Global Consulting Marketplace Report. 2005 market, defined as Strategy + 50% Operations, is $44.2 BNNotes: 1. Figures include all Oliver Wyman Group companies; 2. Ranked by 2006 revenue
Management and economic consulting market
7
Example case #1Leading US Consumer Lender – Bank banking strategy
The context: Considering expansion into branch banking– Strategic importance of retail deposits for funding asset growth– Access to new profit pools – desire to become multi-line retail FS provider
What we did: Soup to nuts strategy development– Educate key managers (up to and including CEO) on the economics and
operating practicalities of branch banking– Developed multiple entry strategies (organic, acquisition, combined)
Tangible changes– Client acquired SE and then NE regional bank– Currently discussing further increases in business footprint (e.g. first mortgage)
Visible impact– Framework for business value used in client presentation announcing acquisition– CEO personally thanked Oliver Wyman team for positive impact on strategy –
said our work was among the best pieces of consulting he had ever seen
8
Example case #2Leading US consumer/universal bank – New business launch
The context: Desires to launch a market leading product in home-equity release/“reverse mortgage”– Current leader in home equity lending and branch banking– Keen to get ahead of the market for RE lending solutions for retirees
What we did: Full support for the product launch– ~15 Oliver Wyman staff on multiple teams to support customer demand
analysis/marketing; pricing, risk and economics; and Ops and IT– Overall responsibility for coordinating multiple client teams with dozens of
participants
Tangible changes– Product pilot launched in November 2006– Full rollout during 2007
Visible impact– Oliver Wyman team front and centre to drive launch timelines– Retail CFO told us that “the highest NPV initiative we could undertake would be to
spend another $10 MM on Oliver Wyman”
9
Example case #3German Insurer – International strategy
The context: Global financial services institution with large domestic but small international primary insurance business. Client wanted to build off sub-scale international footprint from a follower-position in most relevant markets
What we did – Analysis including – aside of market and portfolio review – risk diversification
benefits and a thorough assessment of core competences within the Group– Base case scenario model without international business or with continuing
existing business as “burning platform” for internal commitment– Strategic portfolio design with granular entry strategies focused on leveraging
competitive advantages and market segments still open for entry– Internal readiness and change program as enabler
Client benefit (after 1 year of implementation)– 2 divestments of non-core and 2 new market entries done– Core competencies strengthened– Implementation of new organisational design and cultural change still ongoing
10
Example case #4US Fortune 500 chemicals company – Financial and commodity risk management The context: A leading US chemicals company wanted to stabilise earnings in an environment of
highly volatile raw material costs and currency rates
What we did – Developed a quantitative financial and commodity risk management tools
- A market model that projects correlated spot and forward prices for a variety of chemicals and FX rates
- A company simulator that projects the earning-at-risk driven by- Product pricing managers responses to commodity markets levels- Purchasing managers responses to commodity market levels- Current book of hedge instruments- Future incremental hedge instrument purchases
- An optimiser that searches for hedge structures that are efficient from a risk and return perspective
– Presented recommendations on the design and development of best practice commodity risk management governance processes and infrastructure support
Client benefit– Risk management tool enables fact-based quantitative decision-making and the identification
of optimal hedging strategies in accordance with risk appetite– A clearer understanding of earnings at risk as a result of overall commodity and currency risk
management strategy
12
Who does it and why?We are looking for outstanding people, whatever their background
Andrew graduated from Imperial College in Electrical Engineering
He was heavily involved in the theatre at Imperial, which he continues to do in his spare time
He is heavily involved in charity work and recruiting in the office
Miriam graduated from the London School of Economics with a degree in European Political Economy
She enjoys running and participated in the JP Morgan Challenge, running with her colleagues and tens of thousands of others for a good cause
Kumaran graduated from Oxford in Economics & Management
Represented his college at rugby and cricket, continues to play cricket competitively
Edits the satirical office newsletter, plays for the office football team and is heavily involved in recruiting
13
Who does it and why?In different ways, each of the consulting firms offer great opportunities for learning and development
First class business training
Collaborative environments where everyone contributes to solving problems
Exposure to the most senior management in industry, private equity, non-profits
Results-oriented meritocracy
Flexible career paths
Commitment to mentorship and investment in you as an individual
14
Who does it and why?Opportunities for diverse careers and rapid progression
Kath
JoinedSept 2000
JoinedSept 2000
Chris
Government(London)
Steel Mfg.(UK, Paris)
Supermarket(US)
ISP(UK, FR, DE)
SABBATICAL!!
Motor Breakdown (UK)
to LippincottRoyal Opera House(London)
ISP(UK)
Supermarket(UK)
Financial Services(Turkey, Dubai)
Transfer
Petrochemical(London)
Paper(London)
Government(London)
Pharma(NYC)
Travel(N. England)
Leisure(Midlands)
Pub-Sector(Midlands)
2 mth leave(Ibiza)
Telco(London)
Insurance(London)
Paper(Finland/ London)
Telco equipment(Berlin/London)
Engineering(Phoenix, AZ)
2001 2002 2003 2004 2005 2006
Telco(Finland)
Climate Group(UK)
Insurance Broker(London)
Telco equipment(Hickory, NC)
2007
15
Who does it and why?Opportunities for diverse careers and rapid progression
Sean
JoinedOct 2002
6 month sabbatical(15 countries!)
Economic capital
(UK insurer)
2002 2003 2004 2005 2006 2007 2008
Portfolio management
(UK corp. bank)
Basel II(UK retail bank)
Bulk annuities(UK insurer)
Strategic assetallocation
(Euro insurer)
Model validation(US mortgage co.)
Mobile phone insurance(UK private equity)
EVRM(S. Africa insurer)
Sales force redesign
(UK insurer)
Chris
JoinedJan 2002
Sabbatical(Tibet, Nepal…)
Economic capital
(UK insurer)
Corporate bank strategy
(Netherlands)
Branch productivity
(Belgian bank)
Leasing strategy
(Netherlands)
Business redesign
(Thai bank)
Country strategies
(Global I-Bank)
Commodities business plan(Global I-Bank)
Equities reorganisation
(S. Africa broker)Post-merger integration
(French brokers)
18
Next steps
Enjoy getting to know different firms
Take the opportunity to ask as many questions as you need to – This is an important decision – We are here to help you make the right decision for you
Good luck
21
Historic UK pub industry: inside-out/ product-led
Pub Case Study: Context
Breweries Products Pubs
Vertically integrated business growing network to maximise sales
OW perspective: Outside-in/customer-ledLife-style segments
Occasions Pub segments
Hollyoaks
Friends
Sex in the City
Only Fools & Horses
Royale Family
One Foot in the Grave
Steptoe & Son
Young local
Great local
Classic local
City day
City night
Value food
Mid-market food
Upscale food
Continually evolve pub offers to maximise returns from each site
22
Sales growth levers
Offer Service
Food Manager
PricingDécor / Interior
Investment
Which levers to pull? What investments to make in each lever? Which segments and pubs to target?
23
Applying multiple leversThe trick was to find the right set of initiatives by pub, executed in the right sequence to generate substantial returns
Sales impact
Declining Base
Boost from Pricing and Decor
Boost from Food
Boost from ServiceIndexed sales
The best sequence of initiatives depended on the type of Pub
24
The impact in the pubs has been significant
Sales
Margin
Example Pub
Price mechanic introduced
~35% sales uplift
~40% margin uplift
Weekly sales and margin
Overall impact of ~£29m sales and ~£15m margin
25
What makes it all worthwhile…
"Disneyland Paris is about to experience their second best attendance year and a record revenue year. I truly believe that the focus your work provided played a big part in enabling this growth. Next year's plans...look even better.“
"Thanks so much, as none of what we have done to turn this company around would have been possible without your help… I strongly believe the decision to hire Oliver Wyman to help us on pricing and segmentation was one of the most profitable ever…Well done and hope to work with you another time..."
Example email from senior client