4 November 2008

What is Management Consultancy?

Ian Shipley

C O N F I D E N T I A L | www.oliverwyman.com

Agenda

What is Management Consultancy? What do we really do?

Who does it and why?

Questions

What is Management Consultancy? Overview

What is management consultancy? What do you do for your clients?

Whats in it for me?

Difficult, high stakes situations Help senior executives with their toughest problems These are problems which they cannot solve themselves Lack of relevant expertise Shortage of resources Need for outside objectivity

The type of projects cover a broad scope Often characterised by Driving revenue or profit growth Increasing market share or competitive advantage Changing the way the company thinks and works

Outstanding opportunities for training and development to build a strong foundation in How businesses and markets really work How to make money(!) Interaction with senior-level executives from day one A truly global experience Very good compensation

What is Management Consultancy? Some differences between types of consulting firms

Length of project work/ team size
2-6 months

Clients Large International Strategy Firms

CEOs and Executive Board

Team size
Generally small (3-20)

Where you will work

What you will do and learn

Mixture of local A balance of and global high-level strategy, staffing process and opportunities analytics across a broad range of businesses At the margin, more local office staffing As above, typically across a narrower range of businesses and partners

Smaller (Boutique) Firms

CEOs and Executive Board Typically smaller companies

1-3 months

Small (3-5)

Process/ operations

Operational management

3-9 months

Medium-large (5-50)

Mostly home staffing (UK)

Focus on detailed operational and process outcomes Focus on systems architecture, specification and coding

IT

Operational and IT management

6-18 months

Large (20+)

Mostly home staffing (UK)

What is Management Consultancy? Top strategy consulting firms in 2006

Management and economic consulting market Firm (Ranked by growth) 1 2 3 4 Oliver Wyman BCG Bain McKinsey Revenue 2006 ($BN) $1.21 $1.8 $1.3 $4.0 Market share 2006 (%) 3% 4% 3% 8% CAGR 2003-2006 25% 16% 14% 7%

Rank2

Source: Kennedy 2007 Global Consulting Marketplace Report. 2005 market, defined as Strategy + 50% Operations, is $44.2 BN Notes: 1. Figures include all Oliver Wyman Group companies; 2. Ranked by 2006 revenue

Agenda

What is Management Consultancy? What do we really do?

Who does it and why?

Questions

Example case #1 Leading US Consumer Lender Bank banking strategy

The context: Considering expansion into branch banking Strategic importance of retail deposits for funding asset growth Access to new profit pools desire to become multi-line retail FS provider

What we did: Soup to nuts strategy development Educate key managers (up to and including CEO) on the economics and operating practicalities of branch banking Developed multiple entry strategies (organic, acquisition, combined)
Tangible changes Client acquired SE and then NE regional bank Currently discussing further increases in business footprint (e.g. first mortgage) Visible impact Framework for business value used in client presentation announcing acquisition CEO personally thanked Oliver Wyman team for positive impact on strategy said our work was among the best pieces of consulting he had ever seen

Example case #2 Leading US consumer/universal bank New business launch

The context: Desires to launch a market leading product in home-equity release/reverse mortgage Current leader in home equity lending and branch banking Keen to get ahead of the market for RE lending solutions for retirees What we did: Full support for the product launch ~15 Oliver Wyman staff on multiple teams to support customer demand analysis/marketing; pricing, risk and economics; and Ops and IT Overall responsibility for coordinating multiple client teams with dozens of participants Tangible changes Product pilot launched in November 2006 Full rollout during 2007 Visible impact Oliver Wyman team front and centre to drive launch timelines Retail CFO told us that the highest NPV initiative we could undertake would be to spend another $10 MM on Oliver Wyman

Example case #3 German Insurer International strategy

The context: Global financial services institution with large domestic but small international primary insurance business. Client wanted to build off sub-scale international footprint from a follower-position in most relevant markets

What we did Analysis including aside of market and portfolio review risk diversification benefits and a thorough assessment of core competences within the Group Base case scenario model without international business or with continuing existing business as burning platform for internal commitment Strategic portfolio design with granular entry strategies focused on leveraging competitive advantages and market segments still open for entry Internal readiness and change program as enabler
Client benefit (after 1 year of implementation) 2 divestments of non-core and 2 new market entries done Core competencies strengthened Implementation of new organisational design and cultural change still ongoing

Example case #4 US Fortune 500 chemicals company Financial and commodity risk management
The context: A leading US chemicals company wanted to stabilise earnings in an environment of highly volatile raw material costs and currency rates What we did Developed a quantitative financial and commodity risk management tools - A market model that projects correlated spot and forward prices for a variety of chemicals and FX rates - A company simulator that projects the earning-at-risk driven by - Product pricing managers responses to commodity markets levels - Purchasing managers responses to commodity market levels - Current book of hedge instruments - Future incremental hedge instrument purchases - An optimiser that searches for hedge structures that are efficient from a risk and return perspective Presented recommendations on the design and development of best practice commodity risk management governance processes and infrastructure support

Client benefit Risk management tool enables fact-based quantitative decision-making and the identification of optimal hedging strategies in accordance with risk appetite A clearer understanding of earnings at risk as a result of overall commodity and currency risk management strategy
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Agenda

What is Management Consultancy? What do we really do?

Who does it and why?

Questions

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Who does it and why? We are looking for outstanding people, whatever their background
Andrew graduated from Imperial College in Electrical Engineering He was heavily involved in the theatre at Imperial, which he continues to do in his spare time He is heavily involved in charity work and recruiting in the office

Miriam graduated from the London School of Economics with a degree in European Political Economy She enjoys running and participated in the JP Morgan Challenge, running with her colleagues and tens of thousands of others for a good cause

Kumaran graduated from Oxford in Economics & Management Represented his college at rugby and cricket, continues to play cricket competitively Edits the satirical office newsletter, plays for the office football team and is heavily involved in recruiting

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Who does it and why? In different ways, each of the consulting firms offer great opportunities for learning and development

First class business training Collaborative environments where everyone contributes to solving problems

Exposure to the most senior management in industry, private equity, non-profits

Results-oriented meritocracy Flexible career paths Commitment to mentorship and investment in you as an individual

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Who does it and why? Opportunities for diverse careers and rapid progression
2001 2002 2003 2004 2005 Transfer
Kath
Supermarket Government Supermarket ISP SABBATICAL!! (UK) (London) (US) (UK, FR, DE) Royal Opera House (London) Steel Mfg. (UK, Paris) ISP (UK) Motor Breakdown (UK) Financial Services (Turkey, Dubai) Climate Group (UK)

2006

2007

to Lippincott

Telco (Finland)

Joined Sept 2000 Chris

Telco Paper Pharma Travel Leisure (London) (London) (NYC) (N. England) (Midlands) Petrochemical Government Insurance Pub-Sector (London) (London) (London) (Midlands) Paper (Finland/ London) Engineering (Phoenix, AZ) Telco equipment (Berlin/London) Telco equipment (Hickory, NC) Insurance Broker (London)

2 mth leave (Ibiza)

Joined Sept 2000

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Who does it and why? Opportunities for diverse careers and rapid progression
2002 2003 2004 2005 2006 2007 2008

Sean
Economic Portfolio Sales force Model validation capital management redesign (US mortgage co.) (UK insurer) (UK corp. bank) (UK insurer) Basel II Bulk annuities (UK retail bank) (UK insurer) Strategic asset allocation (Euro insurer) EVRM (S. Africa insurer)

Mobile phone insurance 6 month sabbatical (UK private equity) (15 countries!)

Joined Oct 2002 Chris

Economic capital (UK insurer) Leasing strategy (Netherlands) Business redesign (Thai bank) Sabbatical (Tibet, Nepal) Equities reorganisation (S. Africa broker) Post-merger Commodities integration business plan (Global I-Bank) (French brokers)

Corporate bank strategy (Netherlands)

Branch productivity (Belgian bank)

Country strategies (Global I-Bank)

Joined Jan 2002

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Agenda

What is Management Consultancy? What do we really do?

Who does it and why?

Questions

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Questions?

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Next steps

Enjoy getting to know different firms Take the opportunity to ask as many questions as you need to This is an important decision We are here to help you make the right decision for you Good luck

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Back-up slides

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Pub Case Study: Context

Historic UK pub industry: inside-out/ product-led

Breweries Products Pubs

OW perspective: Outside-in/customer-led
Life-style segments
Hollyoaks

Occasions

Pub segments
Young local Great local Classic local

Only Fools & Horses

Steptoe & Son

City day Friends City night Sex in the City Value food Royale Family Mid-market food Upscale food

One Foot in the Grave

Vertically integrated business growing network to maximise sales

Continually evolve pub offers to maximise returns from each site

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Sales growth levers

Investment

Pricing

Dcor / Interior

Food

Manager

Offer

Service

Which levers to pull? What investments to make in each lever? Which segments and pubs to target?
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Applying multiple levers The trick was to find the right set of initiatives by pub, executed in the right sequence to generate substantial returns
Sales impact

Indexed sales

Boost from Service Boost from Food

Boost from Pricing and Decor

Declining Base

The best sequence of initiatives depended on the type of Pub

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The impact in the pubs has been significant

Example Pub

Weekly sales and margin

~35% sales uplift

~40% margin uplift

Sales Margin

Price mechanic introduced

Overall impact of ~29m sales and ~15m margin

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What makes it all worthwhile

Example email from senior client

"Disneyland Paris is about to experience their second best attendance year and a record revenue year. I truly believe that the focus your work provided played a big part in enabling this growth. Next year's plans...look even better. "Thanks so much, as none of what we have done to turn this company around would have been possible without your help I strongly believe the decision to hire Oliver Wyman to help us on pricing and segmentation was one of the most profitable everWell done and hope to work with you another time..."

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