CASE STUDY
LOLC turnaround case study of MTI commended
In five years, LOLC has moved from a niche leasing player (with a
profitability of Rs 689 million) to one of Sri Lanka’s leading
conglomerates with first half 2010/11 profits in excess of Rs 4.4
billion. This case study (and the consulting role played by MTI) has
made it to top six of the CIMA Global Consultant of the Year.
The challenge
* Flash back to 2006, LOLC with a profitability of Rs 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 percent of the company’s income came from their leasing
portfolio.
* 89 percent of consumers associated LOLC with leasing, in fact the
highest by consumers associating any financial product with a service
provider.
* However, only 62 percent of consumers associated leasing with LOLC,
due to 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 mindset 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 Rohini Nanayakkara (a respected banking
professional) and Ishara Nanayakkara had set their sights on an
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 three 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 ten modules, one each of the
eight Ss, with two supplementary modules for strategy.
* For each module, the MTI Team (personally led by their CEO Hilmy
Cader) carried out extensive internal and external research, which was
then the subject of debate and deliberations at a two day residential
workshop. These two day workshops (ten 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 eight Ss, 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 and 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 Rs 689 million in 2006 , LOLC has declared
their latest results, a staggering Rs 2,385 million a 36 percent YOY
growth for the last four 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 and Agro
Finance, Insurance, Development Finance, Islamic Finance, Working
Capital and Factoring, Leasing Hire Purchase and Loans, Saving and
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 percent 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.
Testimonial
“When MTI started with us on this long journey, it was certainly a
turning point for LOLC. Their interactive and 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,” LOLC Deputy Chairman Ishara
Nanayakkara said.
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