In phase one of our strategy (2012-2015), we focused on operational excellence and improvement in returns and cash flows. Having made progress in getting the basics right, we are driving the second phase of our strategy, which is focused more on organic growth, innovation and value generating acquisitions. Five strategic actions are in place and are briefly outlined below.
Hardwire new organization model
In 2016, significant effort went into hardwiring our behaviors to the multiple new structures we have implemented since 2012. These efforts are crucial for our future success. The new organizations we have put in place are close to being fully embedded, and the fact that we were able to achieve cost savings of more than €200 million with limited restructuring costs shows our continuous improvement drive is delivering.
Create a continuous improvement culture
We promote a culture of getting better every day, across all our operations. In 2016, continuous improvement training programs for all levels of the organization were incorporated into our AkzoNobel Academy learning platform. This culture of continuous improvement is embedded through the performance discussions with employees. Having started in manufacturing and supply chain, we are now expanding the AkzoNobel Leading Performance System (ALPS) into other functions, including Procurement, Finance, IM and HR. As such, it will become part of our DNA.
Build further operational excellence
In the past year, we have made progress in creating and using disciplined processes. This is now how we do business within AkzoNobel. Combined with the continuous improvement culture, these form a foundation from which we aim to accelerate operational excellence. Digital opportunities are targeted to benefit our manufacturing and supply chain operations, as well as selected functions. These new technologies are designed to positively affect our commercial teams – sales staff will be more connected to each other and to our customers. The Global Business Services organization is also starting to deliver benefits and build further operational excellence. At the end of 2016, we announced further changes to our IM and HR functions. Some of the targeted savings will be re-directed to develop new capabilities and support our innovation and growth agenda.
Drive organic growth and innovation
We have many leading market positions. To maintain these, our ambition is to grow in line with, or faster than, our relevant market segments. In 2016, we re-assessed our differentiated strategies by segments and geographies, taking into account changing market circumstances and new opportunities. These differentiated mandates allow us to prioritize our resources to follow value in a standardized way across our diverse portfolio. Growth and innovation have been included more extensively in our operational cycles. In 2016, we delivered volume growth in two out of our three Business Areas, in a challenging economic environment. Building on our digital success in the Decorative Paints business, we intend to expand our digital activities across all Business Areas. Market and business intelligence play a key role in supporting the identification of growth areas, driving these to success, and we will further professionalize this key capability.
Pursue value generating acquisitions
Over the last few years, we have built a stronger and more agile company. We aim to leverage our solid financial and operational foundation to grow through selected acquisitions, either expanding our existing business into new regions, or complementary markets. In 2016, we acquired BASF’s Industrial Coatings business (see Acquisition of BASF’s Industrial Coatings business). On a continuous basis, we consider and pursue a large number of possible targets in order to review attractive growth opportunities. In addition to looking at market opportunities, we also target value generating technology acquisitions with an intention to further strengthen our innovation portfolio. In a low growth macro-economic environment, we see an abundance of capital chasing a limited number of opportunities. Given this market context, we will continue to be disciplined in reviewing possible acquisitions and ensure we pursue those that deliver attractive value for AkzoNobel.
AkzoNobel Leading Performance System.
Global Business Services, which covers functional support activities such as Human Resources, Finance and Information Management, as well as non-product related Procurement.