Actions

In the next phase of strategy development, our action focus will shift towards continuous improvement and organic growth

So far, we have built a foundation for achieving our leading performance vision by beginning a cultural transformation based on our core principles and values, our Planet Possible sustainability agenda and our Human Cities initiative. We have implemented new organizational models in all three Business Areas and in all functions, and have defined and are deploying company-wide processes as described. Further momentum will also be provided by our new company purpose, which will help to fully align the organization, drive employee engagement and create a more unified and cohesive business. Our first three next steps in terms of actions are to:

Hardwire new organization model

We have made some significant changes to our organization model, including reorganizing and restructuring in all three Business Areas and all functions. As already indicated, in early 2016 we went live with our full organizational model for the support functions. We need to ensure that all the change we have undergone is embedded and that the new models work, become the new norm and deliver against expectations.

Deliver continuous improvement culture

Our financial expectations for 2016-2018 don’t just rely on maintaining current performance levels. They are based on continued performance improvement as a cultural norm. We now have a robust continuous improvement process, which we call the AkzoNobel Leading Performance System (). We have started to implement this process in our Integrated Supply Chain and will begin to introduce it into our Global Business Services (GBS) organization in 2016. Furthermore, we have developed continuous improvement training programs for all levels of the organization, which have been incorporated into our AkzoNobel Academy learning platform. Our focus now is on developing a culture where we do things a little bit better every day.

Build further operational excellence

By creating a continuous improvement culture, we will be able to progress towards operational excellence in all aspects of the company. This includes the Integrated Supply Chain and the support functions through GBS, as outlined above. It also includes continuous improvement to achieve operational excellence in our Marketing and Sales functions. We will address these functions through our commercial excellence programs, which are focused on improving commercial processes, systems, tools, remuneration and behavior.

In the next phase of strategy implementation, we will put greater emphasis on growth and innovation, resulting in our final two action steps:

Drive organic growth and innovation

We have leading market positions in many of the sectors and/or regions in which we compete. To maintain these market positions, our ambition is to grow in line with, or faster than, our relevant market segments. To achieve this, as well as developing more robust operational excellence models in commercial functions, we will continue to build on our track record of successfully commercializing innovation, with a significant emphasis on sustainability.

Pursue value generating bolt-on acquisitions

Over the last few years, we have pruned our portfolio to focus on our market leading positions. Going forward, we have a strong financial and operational foundation on which to build via bolt-on acquisitions. We will consider any acquisition that generates value in terms of market, geography or technology synergies. We will be very disciplined in evaluating these acquisitions, with a strong focus on acquisitions that offer a good in the medium term.

GBS

Global Business Services, which covers functional support activities such as Human Resources, Finance and Information Management, as well as non-product related Procurement.

ALPS

AkzoNobel Leading Performance System.

ROI (return on investment)

This is a key profitability measure and is calculated as operating income as a percentage of average invested capital.