Operating Strategy & Cost

Operating Strategy & Cost

Helping clients to align their operating model to their financial targets and strategic objectives

Helping clients align their operating model to financial targets and strategic objectives

KPMG’s Operating Strategy & Cost services supports member firm clients to identify, quantify, prioritize and deliver the changes required to align their operating model to their financial targets and strategic objectives, delivering rapid improvement in performance and value.

With ever-increasing customer expectations, rapid market & technological change, disruptions from new entrants, increasing levels of regulation & reputational risk, along-side ever greater shareholder scrutiny on performance, business leaders are being forced to continually re-evaluate their operational strategy and ask themselves the key question as to whether they are organized in the optimal way to deliver their business strategy and maximize shareholder value.

The Operating Strategy & Cost proposition supports clients address this challenge through a structured approach to identify, prioritize and implement changes to their operating model and refinements of their strategy and targets.

There are a number of triggers which often cause businesses to re-assess their operating model including:

  • Significant changes in market, competitive dynamics, and / or business strategy, e.g.,
    • Changes in market prices squeezing margins and returns
    • Incumbent or new competitors changing market dynamics and economics
    • Changes to business targets and / or strategy which require operating model changes to successfully delivered the desired outcomes
  • Performance and funding gaps e.g.,
    • Margins / returns are underperforming versus competitors or shareholder expectations
    • Need to self-fund investment through driving structural efficiencies
    • Under delivery on acquisition synergies
  • Complex and inefficient operating model structures, e.g.,
    • Acquisitive growth has led to a fragmented / inefficient operating model
    • Inability to efficiently scale the operating model to support growth
    • Diversification of product offering has driven sales and supply chain complexity
    • Organizational complexities including inefficient structures and unclear responsibilities & decision rights
  • Technologically or regulatory driven change e.g.
    • Increasing shifts to digital channels
    • Potential to disrupt market  / need respond to disruption through use of new technology
    • Changes to regulatory environment or increased reputational risk demand significant changes to the operating model

KPMG firms support clients to increase value through successfully aligning their operating model to the business strategy and financial targets through:

  • Identifying the changes required to align the operating model to the business strategy and financial targets, including challenging strategic decisions that are potentially value diluting
  • Developing and testing a range of alternative operating model options to identify the optimal solution for their business, balancing opportunity and risk
  • Identifying, quantifying and prioritizing efficiency opportunities, to drive cost reduction and / or free up funds for investment
  • Streamlining and aligning processes, organizational structures, management information, decision rights and incentives
  • Designing and sequencing a change program to successfully deliver the required changes

Set against the backdrop of a European slowdown, low growth in market volumes, and a legacy of acquired country brand organizations the European region of a global beverage company was struggling to meet the Group’s margin growth targets.

KPMG firms were engaged to run a rapid value diagnostic, identifying significant margin improvement opportunities and operating model changes, providing the client with a 3 year transformation program delivering ~$200m per annum in improved margins.

A global precious metal mining company faced challenging macro-economic conditions, an oversupplied market, cost inflation and a deteriorating competitive position. KPMG firms were engaged to design an operating model to drive efficiency and alignment to market demand and strategic goals. The result was identification of ~$500m per annum in value improvement opportunities.

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