Friday, November 19, 2010

LOLC turnaround case study among global top 6

In 5 years, LOLC has moved from a niche leasing player (with a profitability of SLR 689 Million) to one of Sri Lanka’s leading conglomerates with 1st Half 2010/11 profits in excess of SLR $ 4.4 Billion. This case study (and the consulting role played by MTI) has made it to Top 6 of the CIMA Global Consultant of the Year.

The Challenge

* Flash back to 2006, LOLC with a profitability of 689 million, was recognized a niche financial player, mainly as a leasing company. The following indicators from market research and company financials demonstrate the high dependence on leasing:

* 85% of the company’s income came from their leasing portfolio.

* 89% of consumers associated LOLC with leasing, in fact the highest by consumers associating any financial product with a service provider.

* However, only 62% of consumers associated leasing with LOLC, due fierce competition.

* The Deputy Chairman (Ishara Nanayakkara) who also backed up as the Co-CEO was the driving force of the company and the ‘brains’ behind the success of the company to date. By the same token, the entire company was overly dependent on him, strategically and operationally, which was considered unhealthy for the growth of the company. His time was stretched, was unable to spend quality needed for growth of the company and more importantly prevented him from pursuing his passion to engage in M&A activities for the growth of the group.

* Traditionally LOLC was focused on Leasing, with the other services gradually gaining ground. Although still a niche player in 2006 by Sri Lankan standards, LOLC has made strides of progress since the Nanayakkara Family took over controlling interests in 2002. There was a widespread mind-set and belief that, being the market leader in leasing, that they are already successful and that leasing (mainly) was the route to success. Whilst they were expanding into other products and services, the structure of the company needed radical change to accommodate the entry into the next level.

The Change

* The Chairperson Ms. Rohini Nanayakkara (a respected baking professional and the mentor of Ishara Nanayakkara) and Ishara Nanayakkara had set their sights on a very ambitious target of being a mainstream financial services player as well as among the Top 10 business conglomerates in the Country.

* At this point, MTI Consulting was invited to work with LOLC over a 3 year Strategic Planning process that would transform LOLC from a niche player, perceived to be leasing focused, to a mainstream financial conglomerate.

The Approach

* Given LOLC’s ambitious vision and operating culture, MTI set about developing a customized approach for this consulting project.

* A project team of 15 cross-functional senior managers (including the Chairperson and Deputy Chairman) were hand-picked to form the LOLC Project Team.

* The project was to be based on MTI’s 8S – a proven, proprietary strategic planning process which was customized to LOLC’s specific needs. The entire project was divided into 10 modules, one each of the 8Ss, with 2 supplementary modules for Strategy.

* For each module, the MTI Team carried out extensive internal and external research, which was then the subject of debate and deliberations at a 2 day residential workshop. These 2 day workshops (10 such over a year) involved a minimum of 12 hours work a day at offsite resort hotels, characterized by team games and heated debates to deliberate the strategic choices and arrive at a consensus.

* Given below are the highlights of the Strategic Initiatives for each of the 8Ss, which was based on extensive research and analysis done by MTI Consulting and then deliberated and consensus, arrived at, with LOLC.

* Scope: As opposed to leasing, the scope of LOLC was defined as Financial Services, which includes offering consumers the opportunity to: Save, Invest, Borrow, Transact, Transfer, Insure or Advisory. This formed the new mission of the company and the basis of developing the corporate image campaign.

* Scan: In line with the defined scope, a comprehensive market map was developed, consisting of 27 segments, each of which was comprehensively evaluated for potential opportunities / strategic for LOLC.

* Sights: In addition to the Vision and related financials, of the 27 segments, the focus segments were selected and prioritization decided on specific business objectives.

* Strategy: This core module was segmented into Demand Generation and Demand Fulfillment. Under Demand Generation, the focus was on developing a multi-channel strategy that would provide deep penetration, while the Demand Fulfillment Strategy focused on Treasury & Fund Management. The concept of ‘LOLC Ventures’ was an integral part of the strategy, which identified specific M&As.

* Structure: Starting with Ground Zero, a new structure was developed, which mean taking a holistic view of retail financial services, as opposed to only leasing, as it was initially designed.

* Staff: Based on the Strategy, a competency framework was developed, which formed the basis of LOLC’s training and development plan, which was critical to the ambitious targets and organizational transformation. Importantly, competent individuals were identified (both internally and externally) for key senior management positions, which propelled the implementation of the strategic plan.

* Social Responsibility: While LOLC did undertake several micro projects, it lacked critical basis. Therefore, the new CSR initiative developed was based on Micro Finance, which would combine philanthropy with a business need.

* Systems: KPIs were developed for the new structure and based on the new segments LOLC plan to enter, which also formed the basis of a disciplined set of meetings and reports.

The entire strategic planning and transformation process, which took almost 18 months, was followed by periodic implementation audits.

The Impact

* Fast forward 2010, LOLC is today recognized as a major force in the financial services landscape in Sri Lanka and a major business conglomerate.

* From a Group Profit of SLR 689 million in 2006 , LOLC has declared their latest results, a staggering SLR 2,385 million a 36% YOY growth for the last 4 years (most of which was during a period Sri Lankan economy was adversely affected by the war). More importantly, the running of the business is firmly in hands of the CEO Kapila Jayawardena, a veteran banker, who shared the vision of the top management, joined LOLC in 2007 upon the completion of the strategic plan. He together with Ishara Nanayakkara continues to drive the growth of the Group to the next level.

* Beyond the numbers, the following achievements of LOLC is noteworthy:

* The LOLC product range now formalized to include Micro & Agro Finance, Insurance, Development Finance, Islamic Finance, Working Capital & Factoring, Leasing Hire Purchase & Loans, Saving & Deposits, Fleet Management thus reducing the perceived focus on leasing.

* LOLC has made strategic acquisitions (partly triggered by the strategic plan), which included Commercial Leasing Company (PLC) and investment in Touchwood Investment Ltd.

* LOLC has ventured into a successful international venture with a 17% stake of PRASAC in Cambodia.

* LOLC has been recognized in Sri Lanka, with the following awards . Signed up with LIOC to establish LOLC sub branches at LIOC filling stations, Set up the Islamic BU with an in-house Shair’ah Supervisory Board, Partnered with GTZ for capacity building of the micro finance staff, setting up low cost branch network and development of a micro banking system, Spin off of Micro Finance Business Unit as LOLC Micro Credit Ltd (LOMC) together with FMO, joined with Sri Lanka Post to open up Isuru Diriya centers at post offices and sub post offices.


* "When MTI started with us on this long journey, it was certainly a turning point for LOLC. Their highly interactive and highly effective workshop process made us think; they challenged us and worked with us in synergy to achieve the results. They have been with us through the entire transformation process over the years, rather than external consultants, they were like an extension of our team. Their CEO Hilmy Cader personally spearheaded this project and took a personal interest, bringing tremendous cross-industry and cross-border learning. The results speak for themselves," said Ishara Nanayakkara, Deputy Chairman, LOLC.

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