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One Company Group, LLC

William J. CantwellSeptember 14 - 18, 2009

Business Transformation Case

Study

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Air Products Overview

$11B revenues

A chemical industry safety leader

Operations in more than 30 countries

50% of sales revenue outside the U.S.

20,000 employees worldwide

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Our One Company Focus

Simplifying and standardizing global work processes

Corporate Vision

4

One Company Focus*

Manage work through global work processes

Provide value through one IT infrastructure

Emphasize enterprise value of initiatives

Consolidate / globalize organizations

Visibility of information targeted as strategic

* Non-negotiables.

5

Guiding Principles

In a few words…

Standardization, Simplification

and

SAP Centricity

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Elements of the One CompanyOperating Model

Growth– 3 categories of businesses (Growth, Core,

Restructure)– Direct R&D and capital into the Growth category

Effectiveness– Standardized global processes– KPI’s/cycle time reductions

Efficiency– Similar things done the same way– Reduce functional costs/IT enablement

Change Management– Active/passive alignment among senior executives– Resource to win/only one #1 priority per operating unit

Rewards/Recognition– Align rewards with new targets (KPI’s)– Targets should differ among categories/functions

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One Company is the New Model for Operational Excellence

Culture• Disciplined teamwork

• Standardization vs. empowerment

Processes• Streamlined work

procedures• Businesses converge to a global standard

Information Technology

• Highly automated

• Enables key processes

Organization, Skills• Centralized functions

• Global processes

Measures• Supply Chain KPI’s

• Productivity

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Change Management

Need an Enterprise Change Plan that addresses conflict resolution (Trio process)

Need defined change plans to be lead by business unit leaders

Need alignment before implementation

Need a Program Management Office to deal with prioritization and resources around initiatives

Need a governance process with metrics to sustain the business transformation

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Transition Curve

Denial“Inform”

Commitment “Reward”

Exploration“Encourage”

Resistance“Listen”

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Implementing Change in OrganizationsProject Management Change Management

Project scope and definition of project goals and objectives

Understanding of what people are to expect so they fulfill their roles

Milestones, timelines, work breakdown structure and schedule

Clarity of what will change and how it will affect each person on a day-to-day basis

Template for a project plan based on what is needed to be accomplished by what date

Change plan activities based on assessment so that the organization’s unique needs are addressed so that it can successfully accomplish the change

Accountability for specific project activities

Impact on stakeholders and recognition of what is needed to obtain their support

Status, update and progress of schedule

Communications, feedback and participation of those involved

Milestone accomplishment Rewarding the behaviors that are supporting the change

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Implementing Change in Organizations

Create a Shared Vision Provide Necessary Resources

Define Business Drivers Surface and Manage Resistance

Achieve Alignment Monitor and Adjust

Understand the Impact of the Organization

Apply Consequence Management

Move the Organization off the Status Quo

Gain Commitment

Leading Change Requires You To:

Maintain Persistence

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Stage 1: Global Processes were the Foundation

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What is the Enterprise Process Blueprint?

The Enterprise Process Blueprint maps out our Enterprise Design

It’s the way we choose to run the company– Common processes– Common tools

Includes the converged processes, both manual and IT-enabled

Enterprise Design includes the:– Complete set of decisions, work process

maps, related documents, configuration, and master data

– These work processes include both SAP and non-SAP functionality

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Process Principles

Business processes are simple,standardized, and global; enabledby a single instance of SAP

Customer responsiveness, operational efficiency, and cycle times are all important

Value creation is focused on the enterprise versus any individual business (“broad versus deep”)

Collaboration / teamwork will become the norm

Convergence is required by all business units

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Process GovernanceSurprises, Learnings, Advice

Simpler is better.

It takes longer and costs more.

People do what they believe is right.

Scorecards drive behavior.

It works better than you think.

If you can make it, it feels really good.

The process is never “complete.”

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Stage 2:SAP was the Tool

Single Instance of SAP

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What Did SAP Do?

Processes integrated all of our functions and businesses

Provided real-time, online consistent data and information that everyone – employees, customers, suppliers – had access to

Created a one company infrastructure / supply chain (i.e., all steps from production planning to delivery to the customer)

Reduced complexity, waste, defects

Increased speed, agility, efficiency and strategic customer focus

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Phases of SAP Implementation

Bus

ines

s Pe

rfor

man

ce

SAP Go - Live

STABILIZATION

BENEFITS

Time

IMPROVEMENT

RECOVERY

Handover

Identify business transformation opportunities;Perform to one company (convergence) decisions;Identify productivity benefits; implement organization changes

Analyze & correct data and configuration issues;Identify training and work process issues;Disengage SAP project team

Identify & implement inter and intra work process opportunities; Collect and report business and process KPI’s

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SAP Implementation

7 phases over 4 years by geographical region

Core implementation team reported to the Supply Chain organization versus IT

Common core team moved through all 7 phases

Core team worked with a dedicated regional implementation team

Regional VP drove the efforts of the implementation team

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Benefits Targeted

Identify potential leverage by process– Change the way we do business– External benchmarks

Categories– Productivity 3X– Balance sheet improvements 30%– Functional cost reductions 20%– Procurement $300MM– Revenue impact $500MM

Soft benefits Customer Loyalty

by 15%

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Stage 3:Supply Chain Was The Connection That Drove Productivity

Single Instance of SAP

Plan MakeSource FulfillVOC

SuppliersCustomers

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Supply Chain KPI’sDrive Process Performance

Returnon

Investment(increase)

13%ORONA

Revenue(increase)

Growth

Cost(decrease)

Productivity

Investment(decrease)

Net Assets

Reliability

Responsiveness&

Flexibility

Cost

AssetManagement

Efficiency

ProductivityImprovement

Cash to Cash Cycle Time

Perfect Order Fulfillment

Customer Data Quality

ForecastAccuracy

Complaints Closed by Target

Supply ChainAttribute

“Top 5”Focus Areas

$ Benefit Area

EnterpriseSupply Chain KPI’s

Perfect Order Fulfillment

Average Terms (customer)

Customer Master Data Quality

Demand Forecast Accuracy

% Orders Rec’d on-time (supplier)

Production Master Data Quality

% Faultless Invoices

Average Days Past Terms

Inventory Accuracy

Workbook Rejection Rate

Production Plan Adherence

% Complaints Closed by Target

P&L Impact

Net Hard Benefits

Cash to Cash Cycle Time

Days Sales Outstanding

Inventory Days of Supply

Days Payable Owed22

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Other Step Change Performance Opportunities Creates focus for driving results

Target $100MM opportunities

Resource to win/benefits begin within six months

Transfer of knowledge is critical

Initiative examples– Strategic sourcing– Shared Services (e.g., functional cost

reductions)– Price Management– Lean/Six Sigma

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Strategic Sourcing

Organizationally separate from tactical sourcing

Focus on fewer, longer term relationships for key materials

Look to source global requirements from low cost suppliers/countries

Need a limited number of experienced and motivated sourcing professionals to drive the program

Cost benefits can approximate 25%

Must quantify risk management process

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Global ProcurementStrategic Sourcing/Business

Alignment Process Process focuses on identifying and prioritizing strategic

sourcing initiatives that will enhance the competitiveness of businesses and functions.

Senior leaders of businesses and functions are engaged to gain endorsement and alignment.

Business leaders cannot overrule Procurement decisions.

Creates dialogue on sourcing support ….expectations and service level.

Provides structure to sourcing activities…strategies, objectives, and team accountabilities are defined.

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Global Procurement “Strategic Sourcing… Defining

Success”From To

Local/Regional Global

Limited Procurement Involvement Procurement Fully Engaged

Supplier Relationships….

Not Leveraged

Supplier Relationships

…Fully Leveraged

Variations in Work Process Standardized Work Processes

Formal Strategy Development Lacking

Formal Process Strategic Sourcing In-place

Minimal Contract Visibility Contracts Fully Visible

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3-Year Roadmap for Low Cost Country Sourcing

Year #1 Year #2

• Organizational change, Country

Integration (structure, scope, operating

model, and governance), and

communications

• Strategic sourcing leadership team

build-up by Key Market Area.

• Well-defined strategies by division.

Accelerate implementation, and

communications of the strategies

• Enhanced collaborations with business

units

• SAP support

Year #3

• Full scope of executing strategies

and communications of status and

results, with focus on sourcing from

LCC for the rest of world

• Effective supplier relationship and

development program implemented

• Effectively support regional project

executions and plant operations

• Broader influence in procurement

strategies and processes

• Well-defined strategies in the areas

of Corporate sourcing, Logistics /

Dist. and (Real Estate?)

• Integrating country team to

corporate.

• Successful SAP implementation

• Fully integrated into

organization, strategies, and

processes

• Greater and broader

confidence and willingness

from stakeholders in using

low-cost country suppliers.

• Global leadership or co-

leadership in certain

commodity category

management.

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• New FY Initiative Targets

• Best Practices Identified

• Review of Customer Success Stories

• Supply Chain KPI's

SBU Managers Meeting:

• SBU/Region New FY Work Plan

• New FY Supply Chain Capability Projects

• Best Practices to be Implemented

SBU/Region/FunctionMeetings

50 Business and Senior Corporate Leaders

• New FY CorporateScorecard Review

• New FY Initiative Priorities

• Shared Service

Centers Review

• Growth Board/CDO Overview

Senior Mgmt Meeting:

3000 Employees

• Measure Employee Engagement

• Progress on Development of Core

Capabilities?

Senior Management Meeting

50 Business and Senior Corporate Leaders

• Procurement Initiatives

• E-Connections Review

• Customer Testimonials

• Portfolio Mgmt. Review

All Business Units

• Kick-off SBU Strategy Reviews

E-Pulse Survey: Corporate ExecutiveCommittee (CEC)

• Customer Loyalty Review

• Supply Chain MilestoneReview

• Functional Performance Versus Benchmarks

FIRST QUARTER SECOND QUARTER

• Next FY OperatingPlan Approval

• Growth Initiative Spending

• HRP Review

• Next FY Training Plan Approval

• S,G&A Targets

All Business Leaders

• Next FY Initiative

Targets Set

• Individual Business Operating Plans

• Next FY Continuous Improvement Plan

3000 Employees:

• Measure Employee Engagement

• Progress on One Company Capabilities

Leadership Alignment

• 360° FeedbackAlignment Survey

• Review of SBU Strategic Plan

• Review of AnnualSupply Chain Plan

• Next FY EconomicOutlook

• SBU HRP Review

Corporate Executive Committee (CEC):

SBU/Region/Function Meetings:

E-Pulse Survey:

• Corp. Portfolio Management Review

• Growth Initiative Spending Target

• Hard Productivity Targets

• Corporate Planning &Commitment ProcessTargets

Corporate Development:SBU/Region/Function Meetings:

FOURTH QUARTER THIRD QUARTERRev. 11/08/06

Sr. Management Meeting

50 Business and Sr. Corporate Leads

• Next FY Challenges

• Next FY Initiatives Prioritized (Business/Process Alignment)

• Supply ChainPriorities

• One Company Accomplishments

Adapted from GE Model

CustomersEmployees

Shareholders

Corporate Executive Committee (CEC):

• Technology Review

• HRP Priorities

• Process Maturity Assessment

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Business Results

4 growth platform businesses increased from 30% to 60% of total corporate revenue

5 years of double-digit topline growth

4 years of double-digit earnings leverage

Increased ORONA by 3%

S, G, & A / Sales declined by 3%

Procurement Savings exceeded $300M

Share price doubled

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Results…A Change in Conduct

Simplification and standardization– Instituted global work processes– Shared service organizations– Underpinned by a single instance of SAP

Consolidated global business and functional organizations under single managers

Increased Customer Loyalty by at least 15% for each business in each region

Tripled rate of hard productivity savings over past 3 years

Resourcing to win

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Keys to Success

Business leaders responsible for “what;” process owners responsible for “how” through service level agreements

Converge and then document the process before you enable it through software packages

IT spending / prioritization is controlled by process owners versus business leaders

Lean / Six Sigma projects are focused on improving Process KPI's

An integrated process governance model sustains improvements

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Thank you