Delivering Transformation

– getting the best out of consultants

“Some lessons from the front-line….. “

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Contents

Business Context

How we ensured maximum value for money

3 main lessons

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UK’s largest Water and

Sewerage provider

Largest Customer Base

13.5 Million customers

1 in 4 UK adults

£1.5 Billion revenues

Capital city with 300 yr old

infrastructure

Biggest Asset base

70,000 KMs sewers

31,000 KMs water mains

349 STWs and 265 WTWs

2530 pumping stations

58 Reservoirs

Highest daily activity levels

2.8 Bn litres of water daily

2.6 Bn litres of sewerage treated

daily

200,000 highway excavations pa

1300 miles of new mains laid in

London pa

Highest quality standards

99.98% of EU Water Standard

100% STW compliance

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Strategic Context

• Fixed 5 year income set by Regulator (Ofwat)

• £5 Billion Capital programme with big in-built efficiency

challenge

• TW acquired by PE in late 2006 (McQuarie Bank)

• New Executive - challenge the norm – no sacred cows

• Ruthless business focus on cost & performance

– OPA from 23rd (of 24) to 2nd in 3 years

• All key stakeholder targets met 4 years in row

• “Tired” procurement function – dis-engaged from business

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AMP 4

No programme – project by project

“chasing the game”

Dis-empowered under-weight procurement team

Contractors in commercial control

No cost transparency

Business in control

High-calibre procurement team

Well defined asset programme

Fully aligned contractors

Client in commercial control

Full cost transparency

AMP 5

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Contents

Business Context

How we ensured maximum value for money

3 main lessons

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Excellent

Strategic Sourcing

Process

High

Performance

Staff & Teams

Delighting

Customers

Active

Supplier

Management

Smart

Processes

& Systems

Savings Baked into

Business Plans

Clear Procurement

Strategies

Specialist

Consultancy

Support

Drive Culture

change

Strong

Policies &

Procedures

High-quality Data

We placed consultants at the heart of the transformation – their staff need to role-model the “new brand” and execute with real “pace and passion”

AAA

WEIT NBDB

PMA

DWYS TEC

“Aspire, Excel, Enjoy”

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Consultancy is now core to our procurement service delivery – we have

outsourced our team to the professionals – a revolution not an

evolution, to “turbo-boost” capability and service to internal customers

LAY FOUNDATIONS – TRANSFORM – EXCELLENCE ON-TAP

Functional up-grade and

OPEX Sourcing

“Accelerate”

Capital Procurement

Transformation

“Game-changing”

Managed Procurement

Service

“Bigger, Better, Faster”

Deep opportunity analysis

& functional competence

assessment

Clear deliverables agreed

98% OPEX addressed in 3

sourcing waves

Integrated teams with TW

staff

Coaching and up-skilling

in best practice strategic

sourcing tool kit

Category expertise

Create factual Baseline

from 840,000 original

documents

Control of T2 - 72

categories tendered with

over 1000 suppliers

New delivery & procure

strategy main T1 contract

Detail bid analysis on

1000s of bid variables

Embed HUB concept

Embed / train new skills

and processes

Innovative “in-sourced”

market model

Procurement as a service

function - with flexible

resources on demand

Control over £500 M pa of

direct and indirect spend

Total integration of

resources with TUPE of

TW staff to Efficio

Co-location with key

stakeholders at TW HQ

2007 2011 2009

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We have focussed hard on being an “organised client”

ensuring active formal sponsorship to clear road blocks &

make quick decisions

Cross-functional Teams

COO Sourcing Steering

Group BU Mgt Teams

Using project disciplines to drive pace

¼ ly Monthly

Weekly

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Both parties have benefited from the success of the

transformation – a real strategic fit is important so you are

not just “another client”

2010 Utility Week Supply Chain

Excellence award FINALIST

2010 CIPS Senior Management

Professional of the year

Finalist 2010 CIPS “Step change” Award FINALIST

WINNER

5 Categories – Best procurement

Team; Best X-functional project;

Overall Excellence; Innovation &

Partnership.

FINALIST

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• Business critical savings over £1 Billion delivered to helping stretch

limited funding and offset unavoidable and unplanned adverse costs

• 320 sourcing projects over 98% spend re-tendered

• OPEX - 23% average cost reduction worth over £100 Million

• CAPEX - 20%+ cost reduction vs AMP4 supply cost-base

• TW Control of the extended supply chain increased from 15% to 53%, and on

target for 85%

• Full transparency of actual cost

• Co-ordinated continuous improvement of Service levels, Quality and Innovation

Excellent Results at each stage gave the business

confidence to repeatedly invest and eventually partner

long-term

ROI of 5:1 on OPEX and over 30:1 on CAPEX demonstrated the real

value for money delivered by engaging top professionals

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Contents

Business Context

How we ensured maximum value for money

3 main lessons

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3 main lessons learned

1. Pick best of breed consultants – “horses for courses” – be suspicious of “jack of all trades”

– Focus on “end to end” excellence – the strategy and the delivery - only pay for results not abstract ideas and reports

– Try an identify the best strategic fit – don’t be just another account

– Focus on long-term value creation not just short-term rates & costs (NPV, ROI)

– They must have “Skin in the game” – fees at risk linked to the what (deliverables) & the how (style)

– Crystal clear scope, objectives and deliverables

2. Real teamwork – “success has many parents, failure is an orphan”

– Be a good “Client” – consultants aren’t magicians & time really is money so get the whole client organised

– One-team – assign your best people & work as co-located & fully integrated teams

– cultural fit is crucial – they are representing your “brand” in the business and in the market

– Don’t be a spectator – this is a contact sport – management must “own it” & be actively involved

– Leave a lasting legacy - long-term process change, tools, techniques and up-skilling of staff

3. Company-wide transformation is like a battle – having trusted partners allows you to really lead from the

front without worrying about the delivery.

– baseline is critical to drive fact – based influencing & decision making

– Get finance to sign-off baseline and deliverables – only the P+L counts, procurement savings are a distraction

– Business unit sponsorship & wide x-functional engagement & governance

– Don’t delegate the Stakeholder engagement…. especially the difficult ones

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Contact details:

ian.bolger@thameswater.co.uk

07747641063