Case (A) describes the situation facing John Davison after joining the company in December 2014 as the new CEO. A failing ERP implementation had led to serious operational issues in Singapore (its home base) and the Philippines (its biggest and most profitable market). Affected hospitals and doctors had complained directly to the Zuellig family, who owns the company.
The board fired the two Co-CEOs who had been running the company and brought John in to turn it around. The company had lost ground with the ratio of operating profit to Gross Operating Revenue (GOR) dropping from 30% in 2009 to 14% in 2014. Increased competition leading to falling margins had contributed to this, as had a lack of focus on improving productivity.
The company’s most important clients, such as GSK, were threatening to take their business elsewhere if Zuellig Pharma did not fix its operational problems. The organization was fragmented, with a very small head office, disparate processes across the country operations, and no central leadership of key functions such as operations and quality assurance.
The board had lost confidence in the leadership team which, in turn, felt that the board was interfering too much and not giving them the freedom to address the problems at hand. The company had invested in a number of businesses it saw as complementing its main distribution core, but these were sub-scale and (with one exception) loss-making. The leadership team needed to urgently develop a turnaround plan.
- Turnaround management: Balancing short-term operational excellence with long-term strategic transformation; Balancing exploitation versus exploration.
- Moving relationships from transactional to strategic in order to create a value ecosystem.
- Transforming corporate culture.
- Digitalizing the business model