London: Ernst & Young found Xerox $100 million of savings — and provided its production business with a sustainable future.
2012 Strategy winner
For a global business like Xerox, recruiting a consultant to make cost-saving recommendations makes sense considering the breadth and depth of experience they bring to bear. So last year when Xerox needed to make $100m worth of savings across their European channels business, talking to Ernst & Young looked like a good idea. What they hadn't planned on however, was the level of ferret-like tenacity Ernst & Young would bring to the project — and in so doing — uncover something shocking.
As part of an operating model revision, Ernst & Young took a detailed look at Xerox's production business. They discovered that this business group — perceived as a top performer in terms of profitability — was in fact their bottom performer. A deep dive into the production business was required in addition to the cost saving work, but without additional budget or time allowances.
Ernst & Young's strategy was to look at the business in a fundamentally different way. The team had already identified some of the challenges around process and profitability which helped them prepare the case for tackling the production business.
Ernst & Young identified that the entire business strategy needed to change in order to secure sustainability of the future business. The current trajectory showed that the business would be losing money if it continued with its current strategy.
A new multi-faceted strategy was developed which included a new sales focus aligning resource proportionally to profitability, discontinuation of low margin offerings, a shift in focus to more profitable customer segments, changes in equipment sales structures, changes in order entry processes, and a shift to two-tier distribution.
Ernst & Young engaged the business to gain support for the change. They applied a level of rigour to their profitability analysis and process mapping that showed Xerox where profit was being wasted and which processes were driving higher costs. They worked across three European countries to create a balanced view of what changes were necessary to improve profitability across Europe. The team needed to collaborate with several data owners and so establishing positive relationships throughout the business became crucial. A steady build up of internal stakeholders took place allowing each to support the need for change then recommend the next person in the chain.
An experienced team with a good balance of analytical and modelling skill was critical to the success of the project. A strong management team with exceptional communication and stakeholder management expertise supported the teams and ensured data and insight was shared across both the production business and cost-saving project teams.
Ernst & Young achieved $100m worth of cost saving for the European Channels Group. Strategic initiatives for the production business project provided an uplift of 5% GM in the short term and an additional 7% in the long term. A 50% reduction in SAG costs was also achieved.
Ernst & Young delivered a highly valuable lead to future profitability and on this basis, was asked to return to work on another project for Xerox.