Background and Challenge

New and disruptive streaming music services have unsettled the music business. A major music company was evaluating the future of its digital music offering as physical sales and downloads plummeted.

As a result, the major record label enlisted L.E.K. Consulting to further understand the consumer audio listening behaviors and trends of current and potential customers. One challenge was assessing the landscape for existing and emerging digital models in order to prioritize future action.

Approach and Recommendations

L.E.K. organized a consumer survey across various demographics and U.S. locations to gain insight. The survey focused on key behaviors and psychographics to understand the broader U.S. population. Key inputs of the survey involved:

• Historic and current music consumption
• Key purchase drivers and inhibitors
• Marketing access or action channels for distribution
• Segmentation characteristics

The survey indicated that digital purchases were growing significantly, with digital streamers forming the core targeted market. To better understand the population, L.E.K. segmented customers into seven groups across all demographics: ethical downloaders, obsessed music customers, sharers, peer-to-peer copiers (pirated music), free-only streamers and traditionalists (still favor CDs).

We then analyzed these core customer groups to evaluate their spending habits and how spending was changing. The results indicated that there were new opportunities to increase conversion from digital service to paid acquisition, convert the traditionalists, monetize the free-only streamers and deal with the pirates.

Results

Equipped with specific and actionable strategic recommendations, the major media giant refreshed its global music strategy. L.E.K. also recommended it build a robust period-to-period or continuous response tracking system. The company is now able to better track trends over time, achieve economies of scale, and create the ability to evaluate customers and noncustomers at the segment level.

Background and Challenge

A global leader in specialty chemicals struggled to grow revenues for five years following its IPO. A new CEO was appointed who sought L.E.K.’s support to define a transformative strategy to reinvigorate growth.

Approach and Recommendations

We knew from the outset that the success of this work would hinge on ensuring all stakeholders contributing to the solution. Working closely with senior management, and creating joint teams that included over 70 people from all levels of the business, we led a highly collaborative engagement that:

• Identified a large number of significant growth opportunities, despite our client’s recent performance
• Provided robust triaging in order to help management select those opportunities that had the highest potential, and where the firm had the strongest ability to compete
• Helped our client articulate what steps were needed to win in each marketplace
• Identified the core capabilities the company needed to develop
• Demonstrated the limited opportunity for cost reduction in manufacturing because of the asset-light nature of the business, and identified significant upside in R&D efficiency and effectiveness

Results

• We supported management in developing an ambitious plan with over 10% per annum topline growth that would deliver an incremental $120 million within five years
• This was supported by a comprehensive set of implementation plans and KPIs in order to provide a robust process to track execution and allow senior management to intervene rapidly when required, while minimizing burden on the organization

Background and Challenge

Our client, a leading manufacturer of building products for residential and commercial construction, had recently acquired a single-plant metal roofing manufacturer, bringing its total number of metal roofing manufacturing plants to three.

The company sought to reduce its operating costs by consolidating these three roofing manufacturing plants into one.

Approach and Recommendations

We partnered with the client to define the right plan to consolidate its operations, maximize benefit, and minimize operational risk and cost by:

• Analyzing and comparing financial and operational impacts of consolidation into each of the three locations
• Summarizing the economic impact of the consolidation
• Creating a detailed floor plan for the consolidated plant layout that minimized reconfiguration of existing operations
• Developing an implementation plan to support the physical move while mitigating potential risk that defined timelines and ownership for each activity
• Baselining the current performance of the three plants to understand products, production processes, current and projected volumes/mix, cost performance, capacity/utilization, labor, infrastructure, supporting capabilities, etc.
• Assessing risks and developing a proactive risk mitigation plan

Results

• We determined that a plan for consolidation into a single facility was feasible operationally and attractive financially
• We calculated the expected run-rate operational cost reductions at  approximately 10%, with additional upside potential from increased operational efficiencies that could be achieved throughout the forecast period

We provided a floor layout and consolidation timeline to ensure the client could successfully consolidate manufacturing without impacting required production