To Merge or Not to Merge … Dilemma for Boards
With the same mission and goals for performance and impact, two well-established Boy Scout of America set out to study the viability of a merger of equals. As separate 501c3 corporations, each group operated independently, and in recent years, explored collaboration in specific areas of operation.
With long-term decline in community acceptance and operating deficits, both groups faced an unsustainable future. In broad terms, as organizations chartered to serve youth in local communities, the need for such organizations has never been greater. Population has grown, more youth are at risk and more families need community-based programs to support youth development and safety.
These organization asked a significant strategic question, ”Should we strengthen collaboration between the groups, and if so, what are our strategic options?”
DRC worked the executive board of each organization to explore collaboration and weigh options for merger. Each board consisted of about twenty community leaders. To engage the groups separately and together, a steering committee of six individuals – three from each 501c3 – was established to oversee the scope and direction of DRC’s work. To enable the respective boards to reach the best decision, DRC facilitated a process which included input from a broad sampling of stakeholders and community leaders and a series of boardroom meetings to identify the range of collaborations with material impact on the mission and determined the required next steps for deeper collaboration and/or merger. Joint workshops with both boards and the steering committee were conducted to define a mutual “Sweet Spot for Collaboration” based upon DRC’s collaboration model. Throughout the process DRC pushed the groups to reach consensus and commit to action.
Establishing a Trusted Institution for Mexican Housing Finance
Mexico has experienced an unprecedented need for housing. To meet market needs, Infonavit expanded its mortgage financing. DRC worked with Infonavit to develop a thorough analysis of best practices for capital market funding, financing, mortgage origination, administration and investor relations, to establish performance initiatives to expand lending capacity, streamline operations and improve access to capital.
DRC started by analyzing the risk factors throughout the business cycle. We interviewed market participants and developed a working model, the “The DRC Mortgage Market Model ™ ” that provides the framework to examine risk, market opportunities and new relationships among participants. This model serves as a point of reference for determining the strengths, weaknesses, opportunities and threats facing Infonavit. Once the base-line research was gathered, cross-functional strategy sessions were conducted resulting in 24 strategic initiatives.
To date, Infonavit is still the largest foremost issuers of Mexico mortgage-backed securities and has established itself as the largest mortgage lender in Mexico.
Demand Based Mortgage Funding
The “Office of Finance” (OF), the capital markets desk of the Federal Home Loan Bank System, set out to implement a system for issuing housing securities using the Internet to facilitate transactions. DRC attacked the challenge with an analysis of the business requirements in a collaborative way working with the funding managers and the systems area. Through this process, the team DRC / OF defined and analyzed a series of relevant activities, working generators of these activities and management practices through observation. In addition, decisions were made regarding the functions of the transaction, and identified common problems. The workflows associated with the function of the transaction were made to denote the process input, user interactions, and output information together with a description or narrative of the process. This project provided the basis for the continued development of applications. As a result of implementing this new technology application, the OF was able to improve operational performance, reduced reliance on paper transactions, and eliminate risks associated with trade processing.
Re-engineering Global Services and Operations
With operations in 17 jurisdictions, Bermuda Trust Company handled more than $ 100 billion in assets. Acquisitions, expansion into new jurisdictions and administrative costs created pressures on operating margins and risk management practices. The regulations varied by jurisdiction, technology did not meet the needs of operations, and maintaining a well-trained staff was a challenge.
DRC worked with management to develop a 5 year plan and proposed the information architecture to support the business. This initiative included a valuation all assets under management – cash, securities, real estate and physical assets. DRC developed an asset classification model and determined the revenue contribution to all areas of the bank. Once assets were classified, an updated pricing strategy was implemented to reflect the fiduciary risks incurred by the trust company. With a deep process analysis of business practices and operations, DRC developed recommendations to enhance management and services in trust administration. In addition, new workload management practices were established, staff competency models for business development and administration and new policies and procedures established for trust administration. The results were an increase in annual revenues of $5,000,000 from new fee collection and allocation practices and additional increased in administrative productivity.
Competitive Business Model: Telecommunications Market
Technology advancement and new competitive forces have challenged the fundamentals of the telecom industry. The realities of deregulation, new technologies and changing customer expectations require established businesses to reassess their business models. One national based telephone company was faced with such challenges. The company needed to establish a business model to effectively operate in the new competitive arena. The company had enjoyed regulated profits for years. With wireless and IP phone services advancing in the marketplace, the company was continuously challenged to develop the staff and expertise to survive in global communications markets.
DRC designed a two-part program to address the challenges. For a three month period DRC coordinated the Vision Team to produce a new comprehensive strategic plan for the company. It included market and economic analyses, technology assessments, assessments of the global telecommunications markets, interviews with customers, documentation of strengths and weaknesses, performance targets across the organization, proposed performance improvement initiatives, targeted financial goals and a new organizational structure. The initial targets called for annualized saving were in excess of 10% of the annual operating budget before any labor performance issues were addressed.
Once the strategic plan was approved by the board of directors, a fifteen month company-wide change program was implemented under the direction of DRC.
Corporate Development – New Venture Investment Strategies
Investing with a strategic purpose is fundamental to a successful corporate development initiative. As such Dartmouth Research & Consulting along with a team of senior managers at Toshiba outlined strategic opportunities to capitalize upon the emerging technologies that would enable growth for Toshiba within new media markets and the IT service sector. We began by identifying the best operating parameters to support Toshiba’s interest in emerging technologies. The challenge for Toshiba was to identify how best to leverage corporate activities that will result in positive corporate development.
DRC facilitated a series of interactive sessions with team members to outlined operating models for emerging market opportunities. Models developed during the engagement with DRC promoted a theme of Value-Based Investing. As a framework for strategic planning, value-based investing provides value beyond short-term financial return. It focused Toshiba’s efforts to extend its technology trajectories within its current product offerings to new technologies and capabilities anticipated in the marketplace. In conjunction with the management at Toshiba Venture Capital Corporation, DRC defined investment strategies for a seed level investment fund of $100 million.
Policy Research: Banking Technology & Risk
The Office of the Comptroller of the Currency (OCC) required the services of a consultant knowledgeable of the new media, Internet and banking technologies. DRC provided extensive research into the operating trends and technology framework to develop regulations and guidance for emerging technology use by Banks. The project examined the current status and risks associated with account aggregation services, authentication, and transaction processing.
Regulators faced needed to understand the implications of the technology and its impact on business practices. With more banking services moving to third parties, new risks continue to emerge – strategic, transaction, compliance and reputation risks have changed significantly.
DRC provided an analysis of Internet services, studied the technology implications and extrapolated how technology was expanding the reach and exposure for banks. The formed the foundation for new banking policies and served a framework for the OCC’s efforts with the Basle Committee on Banking Supervision. OCC Bulletins for Bank Examiners and Bank Managers were developed.