1. © The Delos Partnership 2007 page 1 Integrated Enterprise Leadership A workshop carried out for Trinity Biotech

2. © The Delos Partnership 2007 page 2 ABC Company “We want to be market leader through providing the best levels of customer service in the industry, which means delivering the highest quality products, competitively priced, delivered on time. We will provide a continuous stream of new products. We will achieve this through a genuine partnership with suppliers, who will be part of our team. Our employees are empowered to make the most of their skills, and will operate in a fun environment, satisfied with their work. We will take a responsible attitude to the environment, ensuring that we contribute positively to the sustainability of the planet. In this way we will achieve superior long-term returns for our stakeholders.” said the mission statement at the entrance. Marketing is in the middle of a special promotion, which has suddenly been arranged to meet year- end targets. The artwork – as usual - is having to be arranged at short notice for the packaging. Sales have just quoted for a big contract which will mean significant extra business above the business plan. It is two months until year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding her target. Customer Services will be working late tonight to catch up with the backlog of orders, shipping whatever can be shipped, having been chased by the Sales Director and the Operations director, keen to meet this month’s targets. The Operations Manager had heard the rumour about a 'big order‘ in the canteen at lunch. But they've heard about these before. So they are proceeding with their plans to cancel overtime. The Operations Director meets monthly, individually, with the marketing managers to get a feel for the market. Then he meets with his Production Planner, compares his ideas with past history and they finalise the forecast and production plan, largely based on history.

3. © The Delos Partnership 2007 page 3 ABC Company.. Cont’d Corporate are short on cash flow, and hence have told the division to implement a cost reduction programme, and to reduce inventory by 20%. The Finance Director is working on ways to do this, however is reluctant to make any write-offs of current obsolete inventory, so is wanting to restrict any further purchases. Suppliers’ payment terms are being lengthened. The Manufacturing Manager has just come back from a course with ideas on Total Productive Maintenance, and Operating Equipment Effectiveness. He wants a smaller product range and bigger batches. His basic manufacturing philosophy is that lower costs are achieved through maximising utilisation of machines, keeping direct labour at maximum levels of output. The Distribution manager believes that demand is increasing, so is going to open a large new Central Distribution centre. The Development department are working on a massive increase in the product portfolio, and are in the middle of developing a revolutionary new product, that will dramatically increase market share. However, a minor modification to the product will reduce costs, and enhance the quality. Customer response so far is excellent. Unfortunately it will delay the launch to Quarter 3 of the next year. The Chairman and the Chief Financial Officer just met with a key group of Stock-market analysts, and have said that cash-flow will improve this year through a radical cost reduction and inventory management programme. Sales and Profit will rise by 20 % next year, which should mean an increase of 25 % in Earnings per share, due to an exciting new product to be launched in Quarter 1 next year. What are your observations on this company ?

4. © The Delos Partnership 2007 page 4 Conflicting objectives Inventory Customer Service Manufacturing Costs Manufacturing Flexibility

5. © The Delos Partnership 2007 page 5 Conflicting objectives Finance Marketing Manufacturing Sales

6. © The Delos Partnership 2007 page 6 Vertical Functional Organisation MD Sales Marketing Technical Operations Finance HR R&DR&D R&DR&D MKTGMKTG MKTGMKTG SALESSALES SALESSALES OPSOPS OPSOPS ACCTSACCTS ACCTSACCTS HRHR HRHR Directors Managers Supervisors/Team Leaders

7. © The Delos Partnership 2007 page 7 Functional Measures Actual Volume vs Budget Actual Sales vs Budget Inventory Level Project Costs Leads to Silo Management Mentality Manufacturing Director Manufacturing Director Sales Director Sales Director Finance Director Finance Director Development Director Development Director Managing Director Managing Director

8. © The Delos Partnership 2007 page 8 Disintegrated Business Planning Long term plan Short term Plan Medium Term Plan

9. © The Delos Partnership 2007 page 9 Lack of Visibility Year to date is below budget and last year, and therefore there is an urgent need to cut costs, and reduce inventory, in order to improve cash flow…

10. © The Delos Partnership 2007 page 10 The informal company Multiple sets of numbers Multiple spreadsheets Multiple ways of working Confusion over real objectives Defensive functional behaviour Rumours around the corridor Ad hoc communication Short-term focus Heroes are favourites SiloManagementSiloManagement

11. © The Delos Partnership 2007 page 11 Objectives of Integrated Enterprise Leadership Vision and Strategy supported by : One set of numbers at all times Integrated Plans Realistic Plans Visibility and transparency Teamwork Decisions made in timely fashion More planning, less fire-fighting Consistent performance measures Delivery of the strategy Top Down and bottom up

12. © The Delos Partnership 2007 page 12 Prerequisites for effective IEL Integration of systems Accurate data Adherence to formal processes Process not function Long-termism and not short-termism Realism Honesty and trust Commitment  If you say you will do it, you will  If you can’t do it say so. Genuine focus on adding value to the customer

13. © The Delos Partnership 2007 page 13 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

14. © The Delos Partnership 2007 page 14 An Alice in Wonderland World? “Cheshire Puss” – said Alice – “ Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to” said the cat. “I don’t much care where, so long as I get somewhere” said Alice “Then it doesn’t matter which way you go” said the Cat.

15. © The Delos Partnership 2007 page 15 Vision and Strategy Vision  Clear statement of direction  Understood by all Strategy  Means of getting there focus  Requires clear focus

16. © The Delos Partnership 2007 page 16 Setting the Vision Simple Owned by the Chief Executive Understood by everyone Visible Relevant

17. © The Delos Partnership 2007 page 17 A Vision or… “We don’t so much have a vision, more a hallucination, really.” Anonymous senior manager, anonymous multinational “We don’t so much have a vision, more a hallucination, really.” Anonymous senior manager, anonymous multinational

18. © The Delos Partnership 2007 page 18 Suppliers’BargainingPower Threat of Newsuppliers Customers’Bargaining power power Industrycompetitivesituation The forces of competition Product and Service substitutio n FreedomOfEmployeemovement GovernmentLegislation

19. © The Delos Partnership 2007 page 19 Leverage our Product P and Product L assets Protect and expand our Product Family F franchise Grow our Product Family B business Develop / acquire innovative products and technologies Achieve a profitable leadership position in key countries  Derive 70% of company sales from top 10 markets by 2006  Maintain our leading position in S. America & France, Canada, UK, and Italy  Optimize public policy, regulatory, and communications to drive growth  Finalize Corea market strategy by 2003  Articulate a new Branding strategy  Meet timelines on bulk mfg. facility and packaging outsourcing for Bd  Acquire market knowledge in key countries  Develop/acquire Product Bk  Ensure launch of Bd Child by 2008  Develop ATO strategy  Develop Product P end- game strategy that maximizes Industrial utilisation  Accelerate the conversion from extP to intP  Consolidate and optimize ATO strategy to support Product P end-game and extP conversion  Slow competitor XX uptake in US  Develop comprehensive product delivery strategy  Institutionalize the Technology Visioning process  Ensure appropriate upstream / downstream balance  Ensure full alignment of Sales, Development, Legal Affairs and Marketing activities  Implement Goodwill optimization organization  Maximize existing assets for Product Fa and Fc  Ensure leadership in Family F delivery systems Ensure optimal capacity, quality and customer satisfaction  Develop/ Upgrade Quality systems to ensure 50% yearly reduction in rejects and rebuild  Maximize utilization of existing capacity  Achieve Delos Platinum level at all sites  Implement Delos Global Integrated Enterprise Leadership  Explore continuous improvement approaches Defend, and then expand, our leadership position through sustainable profitable growth. Launch Product N and Product M in 2005; >50% of sales from new products by 2012  Achieve all critical path milestones to ensure 2005 launches  Complete Product N and product M pre- launch activities  Upgrade sales and marketing competencies for adult markets  Develop trust and transparency between IO and R&D groups  implement programs to accelerate the product development process. Maximize our key assets  Continue to develop and implement e-strategies to enhance the effectiveness of Company corporate strategy.  Align our capacity and capital investment with our strategy. Rapidly upgrade our technical and leadership competencies  Aggressively fill the competency and values gap  Become a truly global organization  Empower through broad spans of control in a flat organization  Differentiate rewards and career opportunities based on performance Regain our leadership position in product development and approval Reliably supply quality XXX Foster a culture that demands excellence Continue to lead in marketing and sales

20. © The Delos Partnership 2007 page 20 Strategy vs. Execution “It is not so much the strategy that causes the failure. 80 % of companies fail to execute their strategy” - Kaplan and Norton: “Strategy Focussed Organisation ” “It is not so much the strategy that causes the failure. 80 % of companies fail to execute their strategy” - Kaplan and Norton: “Strategy Focussed Organisation ”

21. © The Delos Partnership 2007 page 21 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

22. © The Delos Partnership 2007 page 22 CUSTOMERSCUSTOMERS Processes link customers to suppliers SUPPLIERSSUPPLIERS CoreCore Vision And Strategy Vision SupportingSupporting FinanceFinance Human Resources Information Technology Product Development Business Winning Customer Order Fulfillment After Sales Service

23. © The Delos Partnership 2007 page 23 Management of Innovation Integrated Project Management – Programme Management

24. © The Delos Partnership 2007 page 24 Forecasting Needs a Simple Process FilterDemand Computeforecast CaptureActual C O N S E N S U S F O R E C A S T C O N S E N S U S F O R E C A S T Hold Demand Review Agree commercial plans plans Agree Exceptional demand Assumptions written down and agreed ReviewAccuracy

25. © The Delos Partnership 2007 page 25 Supply Planning process Strategy Master Scheduler Sales Forecasts Customer Orders Manufacturing Plan Purchasing Plan ERP System Balanced Plan

26. © The Delos Partnership 2007 page 26 Financial support Value Stream AValue Stream BTotal Product 123Product 456Product 123Product 456Product 123 Product 456 Revenue10050 2515075 Advertising etc10553158 Manufacturing Costs3015 84523 Purchasing Costs3520 75532 Accounts and Admin411051 HR and IT111122 Research and Devel.6220102 Value Stream Contribution 146662012 Non Value Stream costs333265 EBITDA11334147

27. © The Delos Partnership 2007 page 27 Today’s Value ? Time is money... Time is waste...

28. © The Delos Partnership 2007 page 28 Traditional Measures Sales versus budget Machine Utilisation Purchase Price Variance Overhead Recovery Headcount Direct Labour Productivity Inventory Level

29. © The Delos Partnership 2007 page 29 The Delos Core Measures 1.Customer Order Delivery – the “Perfect Order” 2.Demand Forecast Accuracy 3.Lead Time Reduction - Demand, Supply and Change 4.Quality, Right First Time – Demand, Supply and Change 5.Schedule Achievement – In-house and outsourced 6.New Product Introduction 7.Velocity – all processes

30. © The Delos Partnership 2007 page 30 Teamwork With a common vision and a strategy there is a chance to develop common  Objectives  Commitment  Team direction

31. © The Delos Partnership 2007 page 31 People Values TraditionalNowFuture Process problems Not my jobOwnershipAccountability Management Style SuperviseFacilitator/ Team Leader Coach Working Style IndividualTeamEmpowered Teams Training and Education Non-existentLuxuryNecessity KnowledgeIgnorantUnderstandsExpert Attitude to People LiabilityCostAsset

32. © The Delos Partnership 2007 page 32 Suppliers’BargainingPower Threat of Newsuppliers Customers’Bargaining power power Industrycompetitivesituation Do these forces change ? Product and Service substitutio n FreedomOfEmployeemovement GovernmentLegislation

33. © The Delos Partnership 2007 page 33 How do we react to change ? Panic Crisis Management Fire-fighting Routine management of crisis Change identified, agreed and signed-off Formal and timely decision-making OR

34. © The Delos Partnership 2007 page 34 Integration of Processes Strategic Review IEL Review Demand Plan Master Schedule Project Plan MRP/CRP/ Activities WTL/ Orders/ Tasks How OftenYearlyMonthlyWeeklyDailyHourly WhoBoard ManagersComputer Units£’sFamiliesFamilies/ Products Parts/ Activities Parts/ Tasks Horizon5 years3 years2 years Focus3-5 years0-3 years0 to Cum Lead Time Part Lead Time Time buckets YearsMonthsWeeksDaysHours Detail

35. © The Delos Partnership 2007 page 35 Leadership – some quotes "If you do not know where you are going, every road will get you nowhere." - Henry Kissinger "Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." - Stephen R. Covey “A leader takes people where they want to go. A great leader takes people where they don't necessarily want to go, but ought to be.”-Rosalynn Carter "As we look ahead into the next century, leaders will be those who empower others." - Bill Gates "You manage things; you lead people." - Grace Murray Hopper “Inventories can be managed, but people must be led.” – H. Ross Perot

36. © The Delos Partnership 2007 page 36 Integrated Enterprise Leadership A vision and strategy – communicated to everyone and supported by facts not hopes Clear focus on strategic competency All-embracing performance measures Process not functional “orientation” Integration of all of the business processes Teamwork in pursuit of common objectives Focus on delivery of customer and shareholder value A process for managing change Getting people to follow the changed direction without appearing to launch too many “initiatives”.