Delivering cultural change to fuel our growth
Our CFO, Kathy Mikells talks productivity and the great progress we've made.
Feature 25 OCT 2017
“When I think about productivity and what it means to me, I think about efficiency and effectiveness in everything we do. At Diageo we want to be one of the best performing consumer products companies in the world, so to achieve this we all need to be striving to be the best. Over the past four years, we’ve made great progress and have made changes to create a highly productive, more effective, agile business. ”Kathy Mikells
Chief Financial Officer
Our goal is to deliver £700 million in savings and support 175 basis points of margin expansion (increased from £500 million and 100bps in July 2017) by the end of June 2019. Two thirds of this will be reinvested back into the business behind the biggest opportunities to fuel our growth. But, the benefits of becoming a more productive company go way beyond financials.
We are more innovative and imaginative at streamlining processes and simplifying our business so that we are more effective in everything we do. We are developing and introducing tools from zero based budgeting to our new marketing system, Catalyst, which allows for more focused analysis and enables us to seize opportunities, prioritise spend and improve returns.
We have also seen a shift in our culture as we have put the consumer at the heart of our business and combined this with an efficiency mindset through our productivity programme. Our people are feeling more empowered and connected and are using our internal social media platform Yammer to share successes and collaborate across markets.
I wanted to share some of the great progress we’ve made here.
We are working smarter and more effectively by making better use of technology. Technology is helping us gather information more accurately and cost-effectively: from the use of facial coding that tests responses to our advertising, to favouring technology to help us streamline working processes. For example, we’ve scrutinised the number and cost of business trips and significantly reduced these by favouring video conferencing and WhatsApp to connect with our colleagues around the world. We are also looking at where we can make further gains from the use of artificial intelligence and robotics in the back office, where there is potential to replace manual tasks, such as the processing of invoices, with automated programmes.
We implemented zero-based budgeting in the business a year ago. Using this methodology means that every budget owner starts with a blank spreadsheet and we are all responsible for scrutinising and justifying our costs. It has already helped us raise our game and helped encourage greater personal accountability and prioritising the most important goals.
We are also getting more value from every pound we spend on marketing. Effective investment behind our brands is a key growth driver for Diageo, so we need to ensure that we are not only putting the right amount of money behind our brands but that we drive consistent and increasing returns from our investment. To do this, marketers at Diageo are getting access to Catalyst. This bespoke tool gives them instant visibility on campaign returns, which allows them to better focus marketing spend on high performing and more strategic campaigns.
We are reducing cost and waste in our supply chain. The Johnnie Walker Platinum bottle and packaging were among the first to go through our new ‘tramlining’ process in 2016. The aim of tramlining is to breakdown and analyse the cost of every aspect of our products and packaging to ensure they are competitive. In the case of Johnnie Walker Platinum, the introduction of this new process enabled us to identify multi-million pound savings without compromising the premium design of the bottle and packaging. The result has been a successful relaunch, in March this year, of Johnnie Walker Platinum with a new name – Johnnie Walker Aged 18 Years – and sophisticated new packaging. We have also standardised how we operate our supply plants and are sharing best practice in manufacturing more effectively to increase plant utilisation and reduce waste across our global production sites.
I am really pleased with the progress we are making. Our hard work is really coming through in our performance, but we need to stay restless and continue to push ourselves. These are not ‘one off’ changes, but part of the cultural change. We are continually benchmarking against ourselves, our peers and others who are best in class to find more opportunities and go after them. Ultimately I believe that we are well on our way to achieving our ambition to be one of the best performing most trusted and respected consumer products companies in the world.