3. Strategic Review
Strategic review of Group activities undertaken within
the SBP2 framework
Presentation to Board on 10/12/09
Global Group strategy confirmed for the major markets:
Aerospace
Space
Defence
Security
date / references
3
4. Aerospace
Major difficulties on several programmes
Corrective measures to redress the situation
First effects of the Civil Aerospace Crisis on sales
End of recession expected in 2012
Euro/dollar exchange rate
Threat to competitiveness to the horizon of 2012/2013
Pursue the preparation of future in ATM
SESAR, NEXTGEN
date / references
Strategic partnerships in regions of growth
Brazil, Russia, India, China
4
5. Space
Enhance the competitiveness in telecoms
(dollar market) and on ESA market
Optimisation of internal cost base
Strengthen business in Italy and in Germany
Italy : Sicral 2, Sigmabus
Germany : DLR partnership
Strengthen the Space Alliance
Complementarity of systems / services
Pursue strategic partnerships outside Europe
date / references
Sale of payloads in Russia, in USA
5
6. Defence
Major difficulties on several contracts
Corrective action to put situation right
Beneficial effects of French stimulus plan
Must be followed by export orders
Rapid technological evolution in tactical radio
and optronic markets
Opportunity / threat to worldwide market shares
Capture market share in the naval domain in USA
and in Germany
JVs or strategic partnerships
date / references
Promote renewal of radar family
From very short to very long range
6
7. Security
Turn around contracts in difficulty
Strong action needed
Develop position in rail signalling
Partnerships in growth regions (Brazil, Russia, India, China)
Propose innovative solutions for Civil Security
R&D investment in supervision and video analysis
Strong growth in securing IT systems
Expansion of the range of products and services
date / references
Strengthen local integration centres
Broadening of their business domains
7
8. Remember: our strategy is global
Key Key Key Customers
Technical Domains Know-How Domains Worldwide
Space
Hardware Avionics States
ATM
Radars
Software Public Operators
Radiocommunications
Defence networks
Defence systems
Processing Large Accounts
Security systems
Signalling systems
date / references
Optronics
Systems Aircraft Cies
Sonars
8
9. PROBASIS
Performance plan
2010-1014
* "momentum" in ancient Greek
10. Global target
A five-year action plan for a stronger Thales
Improve margin to fuel initial and external growth
worldwide
Anticipate market price decreases and US dollar
pressure
Enhance working methods within the Group by
systematically matching best practices
date / references
Target a € 1.3 bn impact in 2014
10
11. Major areas for performance improvement
Reduce the cost of non quality
focus operational units attention on strengthening
programme management and increasing engineering
capability
bring all units to Thales « best in class » levels
Adapt to market price decreases and US dollar
pressure through the supply chain
Stronger « make or buy », « design-to-cost » policies
Further reduction of number of suppliers, rationalisation of
production plants
Reduce internal costs
date / references
shared services, support functions, general expenses,
real estate
11
12. Methodology
PROBASIS team headed by the CEO, assisted by the
SVP Operational Transformation
Team work involving the Operational Managers to
define the action plans
Follow up of action plans through monthly reporting
The « principle of subsidiarity» will be systematically
taken into account in the day-to-day execution of the
action plans
date / references
12
14. Chorus II
Facts
Major gaps revealed on Programmes
Main root causes
Upstream technical choices
Contract management
Processes are neither simple nor precise enough; their
implementation is not rigorous enough
Diluted responsibilities
Consequences
Reinforce the Design Authority
Involve Purchasing, Legal and the Design Authority from the
upstream phase onwards
Develop process implementation measurement and
date / references
introduce a Right to Veto for the Quality Department at key
gates
Tailor the Chorus Reference System
to support Thales Transformation
14
15. Chorus II Orientation
Simplify and unify the Chorus Reference System
(structure, content)
Define the Chorus Reference System in two layers
Steering: those elements that are strictly for managing processes
Operational: those operational elements associated with daily
business operations, including IS solutions
Define convergence route at Group level while taking into
account local business needs
Clarify Thales operating processes and individual roles and
date / references
responsibilities within these processes
15
16. Planning
2009 2010 2011
T0 = 19/10/2009
2 months 2 months 6 months 12 months
Initialisation
Deployment
architecture
Realisation
principles
Target
Target
vision
and Deployment
Implementation
Kick-
Chorus II Kick-off Review
date / references
Project team and Group
Process Owners
26th January 2010
16
18. Objectives of change
Bring organisation closer to the customer
De-centralise to be more efficient
Simplify procedures to be more competitive
Favour international Growth
date / references
18
19. Previous matrix
Division 1
GBL 2 (Global Business Line)
CENTRES OF
GBL 1 (Global Business GTU 2 EXCELLENCE, SHARED
GBS 1
Line) (Global Technical Unit) SERVICES, AND
(Global Business GBS 2 GTU 1
FUNCTIONS
Segment)
CBL 4
CBS 1
CBL 1 CTU 1
(Country
Country 1 LE 1 (Legal Entity) (Country Business CBS 2 (Country CTU 4
Business
Line) Technical Unit)
Segment)
CBL 5
LE 2 CBL 2 CBS 3 CBS 4 CTU 2 CTU 5
Country 2
CBL 6
LE 3 CBL 3 CBS 5 CBS 6 CTU 3 CTU 6
Countries act as simple « host » structures for the Divisions
date / references
No global approach nor P&L responsibility at Country level,
therefore local resources not optimised
No real « business » motivation for the Country Directors,
therefore insufficient regional growth
19
20. Disadvantages of current organisation
Concept inherited from the Thomson-CSF era, when France dominated
largely, with a business model based on direct exports to the rest of the
world out of step with current size of Group’s presence abroad
(>50% of employees)
Overcentralisation of powers by the Divisions, so that :
Responsibility removed from local teams
Impossibility of Division’s staff to keep pace with everything
Great difficulty in establishing local inter Divisional synergies (« silo » effect)
Inadequate response to contracts difficulties, loss of commercial
opportunities, failure to optimise local costs
Matrix too complex, each Division having its own reference system and
imposing it in each country (proliferation of reporting lines and systems,
regional JVs uncoordinated)
Significant waste of internal effort, lack of coherence within the Group
date / references
Too many interfaces with client
Thales’ image misunderstood by client, scale of Group insufficiently
20
exploited
21. Example of current complexity of reporting lines
1 Finance Reporting
2 HR Reporting
Thales Germany Thales Group
3 Operation Reporting
4 Technical Reporting CEO Thalesgroup
5 Sales&Marketing Reporting
CCD
Thales Germany
HQ
Area A Thalesgroup Area B&C
HQ
VP 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
Thales Germany
M&S
1 2 3 4 5
KAM DIV DIV DIV DIV
Defence
L&J NAV AERO SPACE
KAM
BA Security
BA BA
AS Trans C&S KAM
DIV DIV
Transport
D3S Air Systems
KAM
Industry 1 2 3 4 5 1 2 3 4 5
TDD-GmbH
SBL SBL SBL
T&S Security CS
1 2 3 4 5
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
Thales Koblenz BA
date / references
Defence
1 2 3 1 2 3 4 5
BU BU BU
T&S Security AS/CS
4 5 5 5
21
22. Envisaged way forward
Evolution of the matrix:
Domestic Countries become responsible for bids, contracts,
customer satisfaction and for P&L (= short term)
Divisions to focus on R&D strategy, products & services,
industrial policies (= long term)
Evolution of Divisions: transition from six to seven,
with the improvement of real coherence within each
Division
Reduction in the number of Business Lines:
move from 44 to 33
Removal of management of Business Segments
Removal of Country Division Director, Global
date / references
Technical Unit, Country Technical Unit concepts
Unification and simplification of economic and
financial reporting, via the Domestic Countries
22
23. Project for new matrix
Management Domestic Country
« Shared services »
Business R&D Industry
BL 1
Division 11
Division
BL 2
BL 1
Division 22
Division
BL 2
Country Directors are motivated by the global objectives of the Group in
the Country, including successful implementation of contracts, customer
date / references
satisfaction, profitability and working capital requirement.
Countries are responsible for optimising local resources (Integration
centres, support functions)
Divisions are to focus on worldwide strategies (R&D, products &
23 services, industrial policies)
24. New responsibilites
Two types of role coexist in the project
for the new matrix:
Country axis: operational role, to include P&L, with a wide
range of managerial responsibility (bids, programmes,
customer relationship management, Human Resources and
asset management, cost and WCR optimisation)
example: Area Director
Domestic Country Director
Company Chairman & Chief Executive
Divisional axis: functional role, to include responsibility for
strategy, with specific powers on operational managers
(definition of R&D policy, product policy & services, and
industrial policy) and associated methods of control
(approval of R&D budget, of industrial and technical
date / references
investment, and of technical content of bids)
example: Division Director
BL Director
…
24
25. Project for New Country Organisation
Area A Area B
UK NATO Germany
Southern Europe
North and Region (inc. EEC)
Central UN Spain
Australia
Europe Region
Italy South Asia Region
USA
North and Austria
Middle East Region
Canada Central Asia Region
Switzerland
Central America
Netherlands Region
Singapore
Norway Africa Region
India
South Korea Saudi Arabia
date / references
Domestic Commercial Domestic Commercial
Countries Network Countries Network
France, specific Domestic Country
25
26. Project for new organisation of Divisions (1)
Four dual Divisions (Defence and Civil)
Defence & Security C4I Systems (3.1 B€): Network & Infrastructure
DSC Systems, Radio Communication Products, Information Technology
Security, Protection Systems, Critical Information Systems
DAO Air Operations (1.2 B€): Defence Air Operations, ATM & Navaids
Systems, Surface Radars
Avionics (2.4 B€) : Commercial Aircraft Solutions,
DAV In Flight Entertainment, Military Avionics, Helicopter Avionics,
Electrical Systems, Training & Simulation, TWT & Imaging Subsystems
date / references
DSP Space (1.5 B€): Thales Alenia Space organisation unchanged
(JV with Finmeccanica)
26
27. Project for new organisation of Divisions (2)
Two Divisions 100% Defence:
Defence Mission Systems (2.2 B€): Electronic Combat Systems,
DMS Mission Airborne Solutions, Above Water Systems,
Under Water Systems
Land Defence (1.5 B€) : Missile Systems, Optronics,
DLD
Protected Vehicles, Armament & Ammunition
One Division 100% Civil:
Transportation Systems (1.3 B€) : Main Line Signalling,
DTS Urban Rail Signalling, Integrated Supervision Systems,
date / references
Revenue Collection Systems
27
28. New commercial organisation of Domestic Countries
Large Clients ("Key Accounts")
Large Clients ("Key Accounts")
Country
Key Account Executive
Key Account Executive Corporate
Local
KAM KAM KAM KAM KAM KAM Companies
date / references
The Key Account Executive is the Country Director or a close collaborator
KAM = Key Account Manager
28
29. Timetable
New organisation project explained to Unions:
10 December: Thales SA CCE
15 December: Thales European Committee
21 December: Major French Thales companies
Consultation of Unions about the project:
January 2010
Implementation after consultation of Unions
date / references
29
31. Project of New Executive Committee
Luc Vigneron
Chairman & CEO
Alex Dorrian Patrice Durand
Executive Vice President, Area A, Senior Vice President,
CEO of Thales UK Finance & Administration
Marko Erman
Yves Barou Senior Vice President,
Senior Vice President, Research &Technology
Human Resources
Blaise Jaeger
Senior Vice President, Area B
Patrick Fournié Jean-Loup Picard
Senior Vice President,
Senior Vice President,
Operational Transformation
Strategy
date / references
Pascale Sourisse Pierre-Eric Pommellet Alex Cresswell Jean-Loïc Galle Michel Mathieu Jean-Pierre Forestier Reynald Seznec
Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President,
Defence & Security Defence Mission Systems Land Defence Air Operations Avionics Transportation Systems Space
C4I Systems
31
33. Project of New Area Organisation
Area A HR
Area B
Int’ l
Co-ord A LEGAL
FINANCE
Sales & Marketing
Domestic Operations B
Business Development
Northern &
UK Nato/UN Central Europe inc EU Germany
Europe South & South
US Italy
East Asia
Northern & Spain
Canada Central Asia Middle East
Saoudi Arabia
Netherlands Latin America Austria
date / references
Australia & NZ Africa Switzerland
Norway Singapore
South Korea India
33
34. Project of New Area Teams
Alex Dorrian TBD (1)
Blaise Jaeger
S. Lucot TBD (1)
TBD (1)
R Eskinazi
G Delevacque
O Conrozier
A Dorrian E Buckley I Azemard P Mathieu M Hellenthal
A Cameron P Salvato
M.L. Bourgeois
O Guibert A Parrondo
TBD O Badard
JY Tolot
A Blokhuis C Kuberek M Veider
date / references
C Jenkins C Costes B Giger
G Pedersen L Mayer
I Kim F Dupont
34
36. Project of French Key Accounts Management
R. Seznec P. Sourisse P.E. Pommellet M. Mathieu J.L. Galle M. Erman J.P. Forestier B. Jaeger
DCMAT
DGA/DA
DGA/DO
DGA/UM ESIO
DGA/UM HORUS DASSAULT
DGA/UM NBC DCNS
DGA/UM TER DGA/UM AERO
DIRISI DGA/UM COEL COFACE
DGAC CEA
EADS SDE DGA/UM HELI DGA/DDI
EADS/ASTRIUM EADS/AIRBUS DGA/DS RATP
EMAT DGA/UM MID MIN AEE
CNES EADS/ MBDA DGA/DT SE Transport
EMA DGA/UM NAV SE AFF EURO
ESA EUROCOPTER MIN E&R SNCF
GENDARMERIE DGA/UM RAF SE COM EXT
SE Pro/Eco Num
LA POSTE EMAA
MEDDAT EMM
MINIMM SIMMAD
MINDEF SSF
MINEFI
MININT
NEXTER
OTAN (France)
SGDN
date / references
TOTAL
36