drowning in digital disruption · 2019-01-10 · goodman school of business presented to: snc...
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DROWNING IN DIGITAL DISRUPTION
Goodman School of Business
Presented to: SNC Lavalin
Presented by: Goodman Consulting Group
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KEY ISSUES
Problem Analysis Alternatives Financials Implementation Risks
Customers trust personnel, but digital
technology is disrupting manpower
Digital technology reduces costs and
increases productivity
Digital technology reduces client needs for
services and reduces billable hours (75%)
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PROBLEM STATEMENT
Problem Analysis Alternatives Financials Implementation Risks
How can SNC Lavalin achieve digital growth?
How will digital transformation affect the business?
How should the design engineering business change its business model?
How do we fund digital investments?
What should we tell investors?
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HOW WILL SNC LAVALIN ACHIEVE DIGITAL GROWTH?
Problem Analysis Alternatives Financials Implementation Risks
Recommendation: Change the business
model and the revenue model in a phased approach
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HOW WILL DIGITAL TRANSFORMATION AFFECT SNC LAVALIN?
If you don’t act now, you will
become obsolete
Problem Analysis Alternatives Financials Implementation Risks
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HOW SHOULD THE DESIGN ENGINEERING BUSINESS CHANGE ITS BUSINESS MODEL?
Phase out full-time employees and
move to a contract-based model
Problem Analysis Alternatives Financials Implementation Risks
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HOW DO WE FUND DIGITAL INVESTMENTS?
Combination of debt and equity, as well as cost savings
(redundancies)
Problem Analysis Alternatives Financials Implementation Risks
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WHAT SHOULD WE TELL INVESTORS?
We will increase the EPS to 7.21, or
possibly risk not hitting 5
Problem Analysis Alternatives Financials Implementation Risks
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DIGITAL DISRUPTION
Problem Analysis Alternatives Financials Implementation Risks
Computing Power
Data Being
Connected
Customers are Self-Sufficient
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SWOT ANALYSIS
Problem Analysis Alternatives Financials Implementation Risks
S
Leverage digital technology and AI to complete a
human’s tasks
Leads to increased efficiency
W
Business model: customers assume we have the best
people to do the job
Decrease need for services and
decrease billable hours
O
Small presence in Asia
Technical capability
Untapped market with the ability
to be a disruptive leader
T
Automation
Obsolete revenue model
Reducing manpower means
transaction costs = $0, losing
money
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CORE VALUES
Problem Analysis Alternatives Financials Implementation Risks
Safety Integrity
Collaboration Innovation
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ALTERNATIVES
Focus on new geographical markets
Change the business model
Change the revenue structure
Problem Analysis Alternatives Financials Implementation Risks
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FOCUS ON NEW GEOGRAPHICAL MARKETS
Problem Analysis Alternatives Financials Implementation Risks
Lack of knowledge
New partnership
Not addressing
current issues
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CHANGE THE BUSINESS MODEL
Problem Analysis Alternatives Financials Implementation Risks
Best reaction through the
change
Does not address
current issues
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CHANGE THE REVENUE STRUCTURE
Problem Analysis Alternatives Financials Implementation Risks
Regain 75% loss
Maintain current status
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PAAR ANALYSIS
Problem Analysis Alternatives Financials Implementation Risks
Alternatives Potential to GrowthAlignment with
ValuesAbility to Disrupt
Risks are
Manageable
Focus on emerging markets
Change the business model
Change revenue model
Combination in business and
revenue model
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COMBINATION
Problem Analysis Alternatives Financials Implementation Risks
Maintain current status
Create new revenue structure
Disrupt the market
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IMPLEMENTATION
Problem Analysis Alternatives Financials Implementation Risks
Phased Implementation
Approach
Change business model
Change revenue structure
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ASSUMPTIONS
Shift focus from Reimbursable contracts to Fixed Contracts
Be the disruptive leader in creating a platform that allows for direct collaboration
SNC Lavalin will be unable to maintain a current NP% increase of 50%
Change in business model will sustain NP% growth by increasing contribution margin of EDPM from 11-14.6%
Creation of platform will help alleviate backlog (2.4BN) as well as increase revenue gained
Commission of 15-25% gained on every contract signed via platform
Excess demand in market due to population growth
Based on Historical Numbers – 164M shares, Income – 820M for $5
Problem Analysis Alternatives Financials Implementation Risks
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FINANCIALS:
Problem Analysis Alternatives Financials Implementation Risks
Millions 2016 2017 2018 2019 2020
Total Net Income 255.5 382 573 859.5 1289.25
Total Net Income** 589 921 1354
By the year 2020 we would have an EPS of 7.21
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FINANCIALS:
Problem Analysis Alternatives Financials Implementation Risks
By the Year 2020, EDPM would have 3.6B
2018 2019 2020
EDPM Revenues 3200 3492 3656
2900
3000
3100
3200
3300
3400
3500
3600
3700
2018 2019 2020
EDPM Revenues
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IMPLEMENTATION: CHANGE BUSINESS MODEL
• Using in-house AI capabilities, develop AI contracting engine
• Map current talents in EDPM sector
• Phase out full-time employees and begin contract-based model
• Introduce parallel platform that will enable direct customer-engineer contracts
Problem Analysis Alternatives Financials Implementation Risks
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IMPLEMENTATION: CHANGE BUSINESS MODEL
Client
EDPM
Nominate Project
Manager
Problem Analysis Alternatives Financials Implementation Risks
AI to contract best talent for
job
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IMPLEMENTATION: CHANGE BUSINESS MODEL –ADDED PARALLEL PLATFORM
Client
EDPM
Nominate Project
Manager
Problem Analysis Alternatives Financials Implementation Risks
AI to contract best talent for
job
Client
15-25% Commission
from the contract
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IMPLEMENTATION: CHANGE REVENUE STRUCTURE
• Use the AI engine to estimate contract costs
• Gradually shift between reimbursable and engineering services contracts to EPC fixed-price contracts
• Charge 20% commission on contracts being closed in the new AI system
Problem Analysis Alternatives Financials Implementation Risks
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IMPLEMENTATION: TIMELINE
2018 2019 2020 2021
Build AI System
Map Employee
Talents
Introduce New
Parallel System
Gradually Shift FTEs
to Contracts
Shift to EPC fixed-
price contracts
Problem Analysis Alternatives Financials Implementation Risks
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RISKS AND CONTINGENCIES Risk Severity Contingency
Full-time employees will
not be willing to move to a
contract-basis
High Show employees advantages of
contracts
- More sources of income
- Choose what they work on
Going into fixed-price
contracts will decrease
revenue
High Using AI, we will know how to avoid a
miscalculation of the fixed price
Problem Analysis Alternatives Financials Implementation Risks
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KEY TAKEAWAYS
Problem Analysis Alternatives Financials Implementation Risks
How can SNC Lavalin achieve digital growth?
How will digital transformation affect the business?
How should the design engineering business change its business model?
How do we fund digital investments?
What should we tell investors?
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KEY TAKEAWAYS
Problem Analysis Alternatives Financials Implementation Risks
How can SNC Lavalin achieve digital growth? Change the business model and the revenue model
in a phased approach
How will digital transformation affect the business? If you don’t act now, you will become obsolete
How should the design engineering business change
its business model?
Phase out full-time employees and move to a
contract-based model
How do we fund digital investments? Combination of debt and equity, as well as cost
savings (redundancies)
What should we tell investors? We will increase the EPS to 7.21, or possibly risk
not hitting 5