Transition Management: A Model for Success

Barnaby Fountain, Master Black BeltDirector, Merck Sigma – Shared Business ServicesSeptember 22, 2011

V 1.4

Forward-Looking Statement

This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, statements about the benefits of the merger between Merck and Schering-Plough, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the merger of Merck and Schering-Plough will not be realized, or will not be realized within the expected time period, the impact of pharmaceutical industry regulation and healthcare legislation; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; Merck’s ability to accurately predict future market conditions; dependence on the effectiveness of Merck’s patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions.

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2010 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

Today’s Merck

Merck is a global healthcare leader working to help the world be well.• We provide innovative medicines, vaccines, biologic therapies and

consumer and animal health products to help improve health and well-being.

• We work with customers in 140 countries to deliver broad-based healthcare solutions.

• We demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships to help people around the world lead healthier lives.

Key Company Facts

$10.9 billion2010 R&D EXPENSE

$45.6 billion2010 REVENUES

Pharmaceuticals, Vaccines, Biologics, Consumer Health Care and Animal HealthBUSINESSES

Whitehouse Station, New Jersey, U.S.A.HEADQUARTERS

Approximately 94,000 (as of 12/31/2010)EMPLOYEES

Merck & Co., Inc. remains the name of the publicly traded company. It also is the formal legal entity name of our holding company, which has operating companies under it, including Merck Sharp & Dohme Corp., Schering Corp. and N.V. Organon, for example.

LEGAL ENTITY NAME

The Company is known as Merck in the United States and Canada. Everywhere else, we are known as MSD.

TRADE NAME

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Merck’s Organizational Structure

Organized into strategic divisions and global support functions (GSFs)

Centralized GSFs in 2006 to improve accountability and reduce cost structure

Strategic division and GSF leaders are members of the Executive Committee

Standardizing business processes, data and information systems globally

Integrating Schering-Plough to enable OneMerck and deliver value capture

Research Laboratories

Supply & Manufacturing

Global Human Health

Consumer Care

Animal Health

Finance

Legal

Human Resources

Strategy

Global Services

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Global Services at Merck

Chris ScaletEVP

Global Services (GS) and CIO

IT

SharedBusinessServices

(SBS)

Facilities Merck Sigma Security

Divisional IT

Application Services Technical Services

Enterprise Portal

Contact Centers

Hire to Retire

Procure to Pay

Order to Cash

Record to Report

Travel, Meetings and Media

Master Data, Reporting and

Analytics

Aviation

Facilities

Energy

Fleet

Real Estate

Sigma

GS Supplier Management

GS Learning

GS Operational Communications

People

Products

Property

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Shared Business Services at Merck Generating Productivity

ENTERPRISE PORTAL & SUPPORT SERVICES

One.Merck.com Usability Help Desks

GLOBALHR SERVICES

Hire to Retire Payroll Benefits

MANAGED SERVICES

Travel Card Meetings Media Contingent Workforce

DATA EXCELLENCE & ANALYTICS

Master Data Operations Reporting Analytics

STRATEGY & SERVICE ARCHITECTURESigma Master Planning Change Management

Americas EMEA AP/J

REGIONALCOMMERCIAL SERVICES

Order to Cash Procure to Pay Record to Report

• Raising the Effectiveness of our Managers, Employees and Client Groups

• Creating Capacity • Optimizing our Value

Chain, Cash Flow and Business Agility

• Proactively Managing Indirect Spend

• Integrating Value Capture

• Shaping our Shared Services Culture

• Driving Integration • Sustaining

Transformation

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Shared Services SuccessEconomies of scaleFlawless transaction processingMeeting service level agreementsExcellent customer satisfactionLabor arbitrageEnabling self-serviceEfficient standard processes - automatedContinuous improvement – lean thinkingCompliance with laws, regulations, and policy

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Building Trust and Credibility

• Expanding to new markets• On-boarding new services• Building a regional service center• Implementing a global ERP system• Integrating mergers & acquisitions

Leading efficient and effective service transitions is a fundamental capability Leading efficient and effective service Leading efficient and effective service transitions is a fundamental capabilitytransitions is a fundamental capability

New Dublin Service Center

Project Results

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Installation vs. Realization

Installation: Putting something new in place• Installation occurs when projects are first introduced and deployed

into a work setting

Realization: Achieving the expected return on investment• Realization occurs when the fundamental purpose for the change is

achieved

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What is Transition Management?Service Engineering

Alignment with service blueprintsBook of Operations: Process Flows, Job Aids, Policies, etc.

Organization DevelopmentImpact on Current OrganizationNew Organizational StructureRoles & ResponsibilitiesStaffing Strategy & Hiring

Successful Successful TransitionTransition

Transition Planning & SupportAccountabilityIntegrationPlan ManagementResources

LogisticsSupporting Telecom & TechnologyFacilitiesSecurity

Risk ManagementAssessmentMitigationMonitoringBusiness Continuity

RealizationKey Performance MetricsService Level AgreementsContinuous Improvement

Marketing & CommunicationAudiencesDevelopment of messages/ marketing MaterialRollout

Sponsorship & Relationship ManagementAssessmentDevelopmentMaintenance

Vendor ManagementPartner EngagementService ModelRelationship Management

Training & EducationAssessmentDevelopmentDelivery

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End-to-End Transition Process

Legacy SBS-aligned

IdentifyOpportunities

AssessOperations

Evaluate Transition Stabilize

ImplementChange

BuildTransition

Plan

Handover &Sustain

cost &capability gap

people, process,tools development

people, process,tools transfer

Cost and capability transformation

Transition Management

Create, improve, or continue a service

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Critical Skills

Project Management

ChangeManagement

ServiceOptimization

Left

Right

• Schedule• Issues/actions• Risk management• Resource planning

• Compliance• Service Levels• Process Mapping• Critical to Quality• Process metrics• Failure mode & effects analysis

• Sponsor engagement• Intent alignment• People impacts• Communications• Training

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Framework

Initiate Discover Implement Optimize

Strategy TeamOps 

Team

Project Team

BusinessInitiation

OpportunityAnalysis

PortfolioMgmt

ProjectInitiation

KickoffMeeting

Discovery Design Implement DeliveryOptimize 

&Integrate

What isAgreed to?

Time Boxed?

High LevelScoping

Complexity/ResourcesRequired

PortfolioReview

Resource Impact

Budget Impact

ProjectCharter

Scope

Kickoff Plan

IdentifyTransitionTeam

ProjectEnrollment

Align on Scope

& Charter

DetailedDiscovery

Plan

Align Roles&

Responsibilities

Measure

Control

ContinuousImprovement

Production

Stabilize

HypercarePlan

Controls

Training

Provisioning

Legacy(Clean up)

Hiring

Notifications

Infrastructure

Communication

Future StateDoc

SOPs

Staffing Plan

Risk Mitigation

Plan

HypercarePlan

Org Design

CommunicationPlans

TrainingPlan

Current StateDocuments

StakeholderAnalysis

IT Implications

AuditImplications

DiscoveryReport

Project Plan

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Doing it well….

• Positioned for rapid growth• Merger and acquisition leaders• Benchmarked• Workforce career path progression• Great place to work• Retain top talent• Focus on end user productivity

Driving Transformation

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Any Questions…?

Thank You!

Barney Fountain, Master Black BeltDirector, Merck Sigma – Shared Business ServicesMerck & Co., Inc.