International companies working in emerging markets usually implement the same decision-making processes and operational schemes they use in their native (mature) markets. Such processes and schemes work well when sales annual growth count for 2 or 3% - the rates normal for most of mature markets; but what’s about 15% or 30% growth? Will these processes and schemes work same efficiently in such conditions? And the main question is "Will they support the growth or decelerate it?" In most cases it’s seemed the solutions fitting mature markets are not always effective for emerging economies; such situation may be met?too often – first, a fast growth in sales in emerging markets, but then operation management (including decision-making) begins to pull it down. To match the conditions in developing markets the international companies usually need performance and operational improvement that is optimization of business processes and activities so they maximize revenues and profits.
The local companies in emerging markets also need performance and operational improvement – by other reasons; working long in this or that kind of state-regulated economy the local companies too often orient "absolute|" figures, such as production volume, while losing the performance indicators (for instance, profit margin). These companies also need to optimize their activities, so the quick growth to be accompanied with high-efficient business operations.
ICG has strong experience in providing performance and operational improvement consultancy to both categories of customers, international and local.
What we do is:
- Identification of the business processes and decision-making patterns in the company
- Recommendations on improving decision-making processes and operation schemas
- Simulation and modeling of the improved decision-making processes and operation schemas to see their benefits and challenges
- Development of the metrics (KPI) that may efficiently describe the company’s business and its performance
- Application of the “best practice” improvement methods (Lean, Six Sigma, TPM, QRM, etc.)
During the performance and operational improvement process it may be required to align particular aspects of the company’s business – in such cases?ICG?provides the correspondent consulting services in:
- Improvement for Customer relationship management
- Improvement for Supply chain & Supplier relationship management
- Improvement for Cost management
In many cases the company’s restructuring and organizational changes are required.
Challenge:?Large construction company with interests in Western Asia negotiated international investors on the private placement. However the offer was postponed until the company "improves its performance" in terms of profit margin and decision-making flexibility. ICG was hired as a consultant for this project.
Approach:?As the investors recognized the target company as a valuable business with good perspectives ICG decided the problem was in particular "constraints" rather than in "general inefficiency".?Thus we used the Constraints Theory’s methodology – adapted to the specific conditions of the construction business in Western Asia.
First step was to identify the main constraints; few of them were found – in technology (a company recently bought some modern construction and engineering machinery that was used ineffectively), human resources (a limited number of qualified staff), and management (in "Western Asian style" – time costs nothing, "in one hour" really means "tomorrow", one man works while five men control him and give numerous "advises", etc.).
In the next stage it was decided how to better exploit the constraints in technology and human resources – to maximize the revenues and profits generated with them; for instance, it was defined that the providing "rental with crew" services for machinery could provide the better performance comparing to use of the machinery in the company’s own construction projects; as a part of the consulting project ICG made a market research for such kind of rental services in the Western Asian construction and infrastructure market – and recommended the niches for a client. The same approach was used towards other constraints – in human resources and management.
In the next phase the work on elimination of the constraints was done; the company was reorganized with launching of two new business units – one for providing qualified engineering services to construction operators (that in particular included machinery rental) and another for implementation of labor-intensive infrastructure projects in Western Asia and Africa.
ICG developed KPI for each business unit; after they started activities the performance was measured with these KPI – and the recommendations for operational improvement were developed; the hardest part was to improve the operations with the unskilled staff at construction and infrastructure works – but it was done, enhancing the total effectiveness. ??
Value:?The client could improve its performance (measured with a set of KPI) up to a level when the external investors agreed to renew the private placement negotiations. But even without reference to private placement the performance and operational improvement has led to growth in revenues and ROI, sharp increase of profit margin, etc.