Avenue Consulting Group is often called in when the development pattern of a company deviates substantially from normal. These tend to be difficult assignments, often carried out under severe time pressure, for example if the client organization is in serious financial difficulties, or feels that it would miss an exceptional opportunity if the consultant takes too much time over the analysis or in helping to identify candidates for a merger or an acquisition. These assignments usually involve radical and deep changes in most activity sectors of the firm and strongly affect its management. Examples are mergers and acquisitions, turnarounds, large-scale outsourcing, divestment, downsizing, changes in ownership structures, and privatization of state-owned companies, all pursuing the objective of making the company more competitive, profitable and effective.
Company transformation takes many forms and has many banners – turnarounds, revitalization, mergers and acquisitions, outsourcing, etc. – and covers a wide variety of changes. It could be the deliberate modification of formal relationships among organizational components, or redesign of work processes, or delayering and elimination of structural elements through outsourcing, spinning off, selling off, and divesting businesses.
Transformation could also include downsizing or re-engineering, but in itself it is a much broader and more inclusive concept. It can include the modification of financial structures (share repurchases, reducing debt/equity ratios, and issuing new shares), market structures (changing product/service portfolio), technological structures(automation), production structures, and organizational structure, and also delocalization (transferring production units to lower-cost locations). It could cover changing the portfolio of existing businesses (selling off unproductive divisions or activities and entering new businesses through acquisition or internal growth, rationalization or spin-offs). Restructuring even goes beyond the confines of the organization itself to embrace other elements of the value chain; it can dramatically affect the organizations of suppliers, customers and other business partners and corporate stakeholders. But in almost every case the basic goal remains the same: fundamentally to transform the ways of conducting business in order to cope with a new, more challenging and more complex environment.
Transformation may be viewed as a three-stage process following a sequence of
Restructuringis especially relevant to underperforming firms. The transformation process in these firms often starts with a major downsizing, pruning the product or service portfolio, and overhauling structures and management processes, which help to redefine the firm’s vision and redesign its strategic and core competencies. At the end of this stage, the firm reaches a minimum threshold of profitability that allows it to survive, but this is not enough to restore competitiveness. The focus in the second stage, revitalization, is on improving the firm’s growth and profitability. The effort may include identifying new business opportunities and competencies, as well as strategic alliances to access these opportunities and competencies with the help of others. The third and final stage comes to embody the aspects of both restructuring and revitalization at the same time.
Experience with organizational transformation during the past 15 years has taught us some important lessons. First of all, transformation is not just about reducing costs, improving profitability, or re-engineering. It is also about people and their concerns; it is reinventing strategies and management processes and must involve the whole organization as a social organism. It must be driven by new ideas, new concepts and a shared perception of opportunities.
Partner, Head of Strategic Management Advisory Services
Phone: 00374 99 75 10 00
Karen has more than 19 years of professional experience in different positions, but he is strategic management consultant by his nature. Karen’s academic background and professional experience enable him to provide consulting services from large to small businesses, governments and international development organizations on strategic development and planning, financial management and planning, corporate finance, start-up consulting, marketing and export promotion, comprehensive researches and market analysis and etc. He applies his knowledge and skills in different assignments for corporate and state clients in a number of sectors of economy. Know-how transfer and knowledge sharing is his most valued principles during his work.