Message from Juan Pujadas, PwC Vice Chairman, Global Advisory
Recent years have seen rapid evolution in the needs and strategies of organisations across both the private and public sectors, as their CEOs strive to deal with profound shifts in the operating environment. This, in turn, has led to rapid and sweeping changes in the global market for advisory services.
Arguably the most fundamental of these changes is that clients are now looking for a number of advisory services to be provided together, united in a coherent and integrated suite of solutions. We’re also seeing less and less desire for narrow assignments. As a result, business advisors more than ever before need to combine agility with the ability to provide services that unite two distinct skill sets – strategic planning and delivery.
What are the changes in the operating environment that have driven these shifts? In many ways, it would be quicker and easier to describe what hasn’t changed for our clients rather than what has. At no other time in recent memory have so many macroeconomic forces converged to create rising complexity and uncertainty for organisations worldwide.
Everywhere you look, the ground is shifting. The rebalancing of global economic power from developed to developing countries is creating new opportunities for revenue growth, as businesses shift their growth strategies to emerging markets and the competitive environment continues to evolve. Meanwhile, governments across the globe are wrestling with the need to do more with less in public services. Add to this the ongoing advances in technology and innovation – and we have a perfect balance between exciting opportunities and widespread risks of disruption.
At the same time, public policymakers and regulators are intensifying their oversight of markets and participants in an effort to avoid a repeat of the financial crisis. Systemic risks continue to grow as global businesses become ever more interconnected. And, in a world that’s seemingly ever more reliant on technology, people talent is an increasingly key competitive differentiator; yet, business leaders around the globe express concern that a scarcity of skilled talent could limit future growth.
These forces are presenting challenges for all companies. Even mid-market companies are no longer shielded from global trends, since they now operate in the same complex environment as the global megacorporations. And with market instability and uncertainty expected to continue, nobody has any guarantees that today’s competitive advantage will be sustained into tomorrow.
This shifting landscape has seen the emergence of four business-critical areas – transformation, technology, transactions and crisis – where organisations have an especially pressing need for help. So, to stay relevant and keep delivering the value companies require, PwC needs to be ready and able to step in and provide them with immediate assistance in all of these key areas.
To do this, we need to remain agile. But, even more importantly, we must fully understand the changes businesses are facing. More than ever before, companies are looking for advisors who can get to grips with their issues and deliver a full end-to-end solution, consistently and at scale.
This means that the route to true client centricity for today’s advisory firms lies in offering an integrated, coherent and comprehensive range of services reaching from strategy formulation to execution – and in doing this responsively and consistently anywhere in the world.
To achieve all this, we’ve implemented a new approach we call ‘strategy through execution’ – a multi-specialist model where we bring together deep competency and sector expertise from across and beyond our Advisory practice to address companies’ needs along their full value chain. This approach reflects the fact that business value and deals are now less about the ‘big idea’ and more about superior implementation, with advisors being increasingly required to take accountability for whole outcomes.
As these shifts underline, companies now regard creating strategy and executing deals as two equally important sides of the same coin. Rather than merely looking to realise synergies by consolidating operations and reducing costs, more and more businesses now see a major M&A deal as a great opportunity to transform their front-office or back-office operations, and in many cases both.
Implementing this type of transformation at high pace and quality demands a blend of deep industry expertise, strategic foresight and relentless planning and execution. This is a combination that delivers benefits end-to-end: companies we work with tell us that when we offer Deals and Consulting capabilities simultaneously, they get more value and consistently better results.
Put simply, when we work together, the whole is indisputably greater than the sum of the parts.
HP Enterprise Services (HPES) is the global business and technology services division of HP, a renowned world leader in delivering technological products and innovations that benefit people, businesses, governments and society. After acquiring the outsourcing firm EDS (Electronic Data Systems) in 2008, HPES set out in 2009 to replace its own global ‘Opportunity-to-Cash’ (O2C) environment – based on SAP – and the underlying business processes against a tight deadline. For help in achieving this, it turned to the PwC network.
Four years on, this complex global business process transformation – led by PwC US and supported by PwC firms across the world, including Australia, Brazil, China, India, Italy and the UK – has been completed on time and on budget with zero business disruption. The figures speak for themselves: in less than 48 months the HPES transformation programme has completed more than 3,964 separate SAP migrations for teams operating in 70 countries and driving more than US$23 billion in HP revenues.
PwC US Management Consulting Director Matthew Duffey, PwC’s lead on the O2C transformation, comments: “Today’s high-value services market demands speed and agility – and the new anytime-anywhere style of IT must be built on a solid foundation. In the past 40 years, HPES had gathered together a fragmented set of processes and tools to manage the business. So standardisation of the business management environment was a fundamental pre-requisite.”
The successful delivery of the project underlines the value of collaborative working. From the start of the programme, PwC and HP SAP specialists worked together in teams committed to common goals, sharing expertise and insights to achieve optimal results.
Following the transformation, HPES now has one global platform and one unified business process, giving it a single worldwide view all the way from the initial identification of a sales lead to the final invoice and payment. In creating this single platform, PwC and HPES have significantly reduced the 128 technology tools that enabled the prior environment.
HPES’s new SAP-based O2C ecosystem provides unprecedented control and visibility while supporting approximately 120,000 users in 81 countries. Jason Ferguson, HPES VP for Opportunity-to-Cash, comments:
“A major component of our ES turnaround strategy is implementing operational controls that provide visibility to our business to enable faster, more accurate decision-making. PwC has been instrumental in enabling us to achieve this at an extremely rapid pace.”
Now in its 42nd year of operation, Dallas-based Southwest Airlines carries more domestically-originated passengers than any other airline in the US. From its first flights in June 1971, the company has made air travel more affordable than ever before, driving fares downwards and passenger traffic upwards on every route it serves. In late 2010, Southwest announced its commitment to “spreading low fares farther”, and said it would start building its gateway to the future by acquiring and integrating AirTran Airways.
This deal was a huge undertaking for Southwest. At a stroke it would increase its reach from 72 to 97 destinations and its fleet size by 25%, while also seeing it officially enter international markets – an absolute game changer for a carrier that historically provided domestic-only services. Executing the deal would be complex, time consuming, and require unwavering focus from all areas of Southwest’s business. The effort would also face headwinds ranging from widely differing business processes to ageing technologies.
“PwC adds real value. They genuinely care about the success of your business and will see you through to success.”
- Kathleen Wayton, Vice President Technology, Business Transformation Solutions — Commercial, Southwest Airlines
Overall, the proposed merger highlighted the need for the help and support of a strategic partner Southwest had come to trust: someone that understood Southwest’s culture, a proven champion of Southwest’s strategic initiatives, and a seasoned advisor with deep understanding of the airline’s business. Southwest turned to PwC US.
The US firm hit the ground running, pulling together several high-performing teams committed to helping Southwest achieve its goals. First, the team built an IT integration planning team to draw up a technology roadmap spanning corporate, commercial, operations, and infrastructure. Next, it formed an integration programme management team to support technical integration across applications including reservation systems, agent applications, loyalty and web, supported by dedicated project management and solution development teams for high-risk applications. Finally, it established a technology deployment management function to ensure all the necessary technical changes were executed as planned.
On 28 January 2013, through the combined efforts of the Southwest and PwC teams, the integration efforts were completed with the successful sale of flights spanning the combined Southwest and AirTran flight network.
The Global Fund is a US$23 billion financing institution based in Geneva, which funds programmes to prevent, treat and care for people with HIV/AIDS, tuberculosis (TB) and malaria in the world’s poorest countries. PwC has been working with the Fund since its creation in 2002.
The Global Fund is the main multilateral funder in global health, with 750 programmes currently in 151 countries. The success of the Global Fund’s activity can be gauged not only by its funding levels but more importantly by the results it has achieved. Over the past 10 years, more than 300 million insecticide-treated bed nets were distributed to prevent malaria, 9.7 million cases of TB were detected and treated, and 4.2 million people received life-saving treatment for HIV/AIDS.
As a provider of finance, the Global Fund does not directly implement any programmes. Instead, it funds mostly national institutions, like ministries of health or NGOs to deliver programmes that will have the greatest impact on the three diseases. In order for the financing to be used as effectively as possible, the Global Fund uses a number of Local Fund Agents (LFA) on the ground. Their role is to help to assess the capacities of key implementers in-country and provide ongoing monitoring of the use of funds and the progress of programme implementation.
PwC firms currently act as LFAs in 72 countries, with more than 350 people working to assist the Global Fund in making effective programme funding decisions. According to Gill Sivyer, the PwC Switzerland partner who leads the work with the Global Fund, two of PwC’s major strengths in particular make us the ideal fit for this work: “The global strength and reach of our network means that we have the right people, with the right skills and capabilities on the ground. Thanks to this network, we’re truly local both to the programmes and to the Global Fund’s base in Geneva. In addition, one of PwC’s core strengths – our independence – enables us to offer the Global Fund completely impartial assessment and recommendations. This gives the Global Fund the transparency and confidence they need for effective decision-making.”
PwC’s work with the Global Fund has grown considerably over the past decade. Our team in Geneva works closely with the Global Fund to deliver high-quality LFA services that meet the Global Fund’s information and risk management requirements. We also host an annual training conference for PwC staff to make sure they’re up to speed on the latest developments.
PwC Brazil has been awarded a five-year contract to establish and run a new organisation (the EAQ – Entidade Aferidora de Qualidade) that will monitor the quality of broadband services in Brazil. PwC Brazil was the only major consulting firm that was asked to compete for the contract by the Brazilian telecoms regulator Anatel.
Ensuring the quality of both fixed and mobile broadband across the whole of Brazil is a priority for Anatel. Accordingly, it has created a unique regulatory framework that includes the power to fine service providers who fail to meet required standards and quality benchmarks. The importance of high-quality monitoring, assessment and reporting of that performance is therefore critical.
PwC Brazil and PwC UK worked together with a UK-based broadband technology provider to win this five-year project, awarded in 2012. The combination of PwC’s telecommunications’ expertise and its partner´s credentials on similar projects in Europe, the US, the UK and Singapore, created a powerful proposition.
Additionally, PwC’s leading reputation in the telecoms industry in Brazil was a key success factor as the body awarding the contract included representatives from more than 20 Brazilian broadband service operators as well as Anatel’s management. “PwC’s track-record for independence and integrity helped us win the contract and run this very challenging and exciting project”, says Luiz Viotti, PwC Brazil TICE Advisory and Engagement Leader.
From winning the contract, PwC Brazil has built a new organisation from scratch, and now has 30 full-time people working in the EAQ office in Brasilia. Ensuring that testing is as rigorous and representative as possible has required recruiting more than 200,000 broadband customers as volunteers across Brazil to agree to have a monitoring device connected to their computer. In addition, 5,000 public schools across the country were selected to receive and install equipment that will measure the quality of the mobile broadband connections. At any one time, up to 10,000 of those households and schools, on a rolling basis every 24 months, are subject to constant field-testing and their data is already being used to create reports for both the regulator and the Brazilian public.
Building and running the new organisation required PwC Brazil to enter into contracts with a wide variety of suppliers, including logistics, manufacturing and network infrastructure so that the EAQ fulfils its brief to help all Brazil’s broadband customers to get the best possible service from their service providers.
José Alexandre Bicalho, Anatel´s Planning and Regulation Superintendent, describes the introduction of the new quality indicators for internet broadband as “a milestone in the evolution of telecommunications in Brazil.” He adds: “Continued growth in the availability and quality of broadband services is essential to meet the needs and expectations of Brazilian society. Creating the EAQ with PwC is a major innovation – one that both enhances transparency for users and also reinforces Anatel’s regulatory model."
Photo by Ross Becker, photographer
In February 2011, a devastating earthquake struck New Zealand’s second-largest city of Christchurch, located in the country’s Canterbury region. Tragically, the earthquake killed 181 people, while also causing severe damage to buildings and infrastructure already weakened by a previous quake in 2010. The cost of the damage from the earthquake and aftershocks has been estimated at around NZ$40 billion, making it New Zealand’s costliest natural disaster ever.
In the immediate aftermath, PwC New Zealand was engaged by the newly-formed Canterbury Earthquake Recovery Authority (CERA) to lead and coordinate the recovery efforts. This role has seen us undertake a wide variety of work for many organisations across Canterbury, with our Christchurch office receiving active and enthusiastic support from most of our other offices throughout New Zealand.
We began by seconding two directors to CERA itself to help set the organisation up – a move that helped us gain insights into the challenges ahead. This work included advising on a financial blueprint, investor engagement and the business cases for anchor projects, one of which is a new Convention Centre in Christchurch.
We also acted as financial advisors on land acquisitions, developed joint risk management frameworks, and helped with a proposal to the Commerce Commission for an increase in electricity line charges to cover repairs to the power network.
Restoring public transport was a key priority after the earthquake, and this was another area in which we were involved, providing a due diligence report on the landscape of Christchurch including public transport planning. We developed a dedicated Christchurch Rebuild page on the PwC website, focusing on the risks for companies associated with the reconstruction efforts. We also engaged with construction firms involved in the work, as well as providing ongoing support to businesses dealing with business interruption claims. Insurance assessments were a further focus, and we developed proposals to reduce the risks of fraud.
“The rebuild is clearly an emotional and sensitive time for the people of Christchurch – and we’ve done our best to make the project run as smoothly as possible, by providing resources from across our offices and sharing our expertise with a wide array of businesses”, says Wayne Munn, PwC New Zealand partner responsible for the Christchurch office.
“We’ve also helped with the governance of the anchor projects. Most of these are currently underway, but we’ve recently been awarded roles as advisors to the Transport Interchange design-build contract (DBC) and Stage 2 of the Convention Centre DBC.”
The Japan International Cooperation Agency (JICA) is a government agency that executes Japan’s Official Development Assistance programmes in developing/emerging markets. With more than 90 overseas offices, JICA’s role includes helping Japanese companies establish businesses that serve the ‘base of the pyramid’ (BoP) – commonly defined as the four billion people in developing countries who live on less than US$2.50 a day – thus fostering local social and economic development.
To support these goals, PwC Japan has helped JICA to promote BoP businesses to Japanese companies, including operating the Feasibility Study (F/S) programme. This enables Japanese companies to apply for and gain financial support to conduct feasibility studies, structure financing mechanisms such as the IMPACT fund, establish monitoring and evaluation schemes, and raise awareness of BoP businesses.
The project, recently won by a PwC team from the Japanese and the UK firms with support from PwC firms in Norway and the US, involved a benchmarking study to prepare the way for JICA to form new financial mechanisms to improve access to finance of BoP businesses. The PwC team reviewed the success factors for BoP businesses in emerging markets and existing impact fund mechanisms, and prepare a road map that JICA could take to establish its financial support for them. The PwC team then created a framework for measuring and monitoring the social returns of BoP businesses together with Japan’s leading social investment company.
In parallel to the benchmarking study, PwC Japan then won a three-year contract to help administer the BoP F/S programme of JICA. With private BoP companies setting up in developing countries able to apply for the programme, PwC Japan won the mandate to advise JICA on the selection process, and to help monitor and evaluate the programme – including reviewing lessons learned and recommending improvements to the company’s business propositions.
As part of this engagement, PwC Japan is also providing a ground-breaking one-stop shop for the BoP businesses supported by the programme, including supplying them with technical assistance in-market.
In evaluating the bids for this work, JICA was very impressed with PwC's global credentials, especially the UK-led ‘Business Innovation Facility’, which is aimed at pioneering new ways of working that will improve the lives of the poor. And the Sweden-led ‘Innovations Against Poverty’, which works to stimulate and support sustainable business ventures that might not otherwise be pursued because of perceived commercial risks and market uncertainties.
Masataka Mitsuhashi, engagement partner and International Development Leader for PwC Japan, comments: “In our work for JICA we’ve been able to draw on PwC’s unique blend of capabilities across the world, including our deep knowledge of BoP business, our presence in emerging markets, and our expertise in both business consulting and international development.”
Oerlikon is a highly innovative industrial group specialising in machine and plant engineering. With over 12,700 people in more than 34 countries, the Group is active in five businesses: textile machines for manufacturing manmade fibers, drive and transmission systems and components, vacuum systems, thin-film coatings and nanotechnology.
In its drive to double revenue growth in India in the next five years, Oerlikon Group needed to identify opportunities for leveraging its business in the country. Operating in a diverse set of industries and product categories, the Swiss group recognised that a holistic and cohesive approach would be essential. To drive a successful long-term outcome, and combat increased competition from mid-market players, it set out to promote India, at group-level, as a vital growth engine in a growing market.
To help achieve its ambitious targets, Oerlikon turned to PwC’s Emerging Markets Centre of Excellence, which partners with clients to help navigate challenges and deliver on their business ambitions in India, a key emerging market. The centre is a strategic investment made by PwC India and is closely connected with other PwC firms in emerging and developed economies.
Leveraging the Centre’s integrated and comprehensive suite of solutions, PwC India’s Mumbai-based team set about helping Oerlikon to extend its understanding of the Indian business environment, develop new value propositions and put in place a tailored operating model that would deliver on its objectives. The team helped Oerlikon define which products and services would be best suited to the Indian market as well as focus on deepening existing customer relationships. A business case was developed promoting India as a growth market which set an accelerated target for growth till 2020 and a national operating model was created that would facilitate common functions related to brand and national policies.
Oerlikon’s India Country head Khurshed Thanawalla said: “Our work with PwC resulted in a strategy that recognised the nuances and complexities of the Indian market for each of our four key segments. The process facilitated growth ideas from each team member. This has led to clarity for our long term goals and has created ownership for this profitable growth agenda.”
Along with enabling and accelerating strategy development, the team proposed on making the new strategy work ‘on the ground’. For Oerlikon, the results of this engagement enabled it to rapidly prioritise opportunities from a large and complex range of options. With an initial capability assessment backed by a financial plan, Oerlikon’s management was able to build internal consensus for the strategy and drive the transformation that is now underway in the India business.