Background and challenge
A leading asset-rental company was underperforming and was unable to implement a turnaround due to poor visibility into its underlying revenue and profit drivers. L.E.K. Consulting was engaged to help the client develop a new strategic model aimed at unlocking hidden profitability within the company.
Approach and recommendations
L.E.K. leveraged its expertise in the field to obtain an accurate view of the business’s financial position, employing advanced data analytics and visualization solutions to analyze an array of disparate inputs from external and internal company datasets, including branch financials, labor time estimates and local market characteristics. We used the analysis to establish a profitability metric covering branches, products and clients. The results challenged management’s existing understanding of the business and highlighted a number of systemic challenges that were hampering performance.
Using this new understanding of the drivers of financial performance, we developed a transformation program to enhance the business’s sales and channel strategies, pricing model, and account management approach, as well as key operational enablers such as fulfillment, procurement and back-office functions. Emphasis was placed on creating new digitally driven strategies, including the use of data and analysis to inform pricing, branch formats and network configuration (such as mapping all U.K. branches according to their level of performance). In addition, we worked with the client to improve performance diagnostics and enable strategic decision-making by leveraging internal and external datasets. The resulting dashboard-driven approach to identifying and prioritizing opportunities remains embedded as a central part of the company’s business model.
By utilizing advanced analytical tools and skills, L.E.K. helped the client gain unprecedented insight into pockets of untapped profitability. Furthermore, we ensured that the capabilities developed as part of the business transformation — including synthesizing internal and market data, and sharing analysis throughout the enterprise — would continue to foster new approaches to understanding and managing the business.
Following the road map established by the L.E.K. team, the client instituted a number of initiatives including reconfiguring the distribution network, optimizing prices, reducing overheads and incentivizing the sales force. After one year, the business has returned profitability to target levels and is equipped to maintain higher performance in the future.