Strategic Business Growth—day 1 2013.09

Proprietary and Confidential

UNI Strategic Strategic Business Growth

Kuala Lumpur, Malaysia September 23-24, 2013

2 Proprietary and Confidential UNI Strategic

Welcome to… Strategic Business Growth!


Agenda—Day 1

Agenda Item Time*

Registration 08:30—09:00

Introduction 09:00—09:15

Session #1—Overview of Business Growth Strategy 09:15—10:40

Refreshments & Networking Break 10:40—11:00

Session #2—Conducting a Current State Assessment 11:00—12:45

Luncheon 12:45—14:00

Session #3—Articulating a Business Growth Vision 14:00—15:30


Session #4—Driving Organic Growth 15:50—17:00 *Times are approximate—Sessions may cut across breaks


Agenda—Day 2

Agenda Item Time

Session #5—Pursuing Inorganic Growth 09:00—10:40


Session #6—Developing a Business Growth Strategy 11:00—12:45

Luncheon 12:45—14:00

Session #7—Organizational Readiness & Implement. 14:00—15:30


Session #8—Measuring and Tracking 15:50—17:00

*Times are approximate—Sessions may cut across breaks


Our Topic—Defined

! Business growth is something for which most companies, large or small, strive •  Small firms want to get big, big firms want to get bigger

! The most common measure of growth is financial-based: •  Top line—Increase revenue through greater product sales or service income •  Bottom line—Increase profitability through the operation by minimizing costs

!   Other businesses metrics may use additional criteria for assessing their growth: •  Number of employees •  Physical expansion •  Success of a product line •  Increased market share

! Ultimately, success and growth will be gauged by how well a firm does relative to the goals it has set for itself


›❯  The topic of business growth—and our agenda, more specifically—is extremely broad in nature. This workshop is designed to be “a mile wide and an inch deep.” Without exaggeration, each of our eight sessions could easily be a standalone, two-day workshop

›❯  The content in this workshop will contain a fair amount of real-world illustrative examples to bring the theories and concepts to life. Effort was made to choose examples that represent a range of different industries, business sizes and geographies

›❯  The agenda has several “practical exercises” which will provide participants the opportunity to apply learning. Rather than using hypothetical case studies, these exercises will ask participants to apply concepts to their actual real-world, business situations

Our Topic—Caveats & Disclaimers


Content

! Session #1—Overview of Business Growth Strategy

! Session #2—Conducting a Current State Assessment

! Session #3—Articulating a Business Growth Vision

! Session #4—Driving Organic Growth

! Session #5—Pursuing Inorganic Growth

! Session #6—Developing a Business Growth Strategy

! Session #7—Organizational Readiness & Implementation

! Session #8—Measuring and Tracking


Overview of Business Growth Strategy

#1—Overview of Business Growth Strategy

“You will either step forward into growth…or you will step back into safety.”

—Abraham Maslow


Business Growth—Not Just for the Sake of Growth


! Since the ultimate goal of most companies is profitability, most companies will measure their growth in terms of net profit, revenue, and other financial data

While temporary periods of unprofitable growth may be acceptable—and even

necessary—ultimately, growth without profitability

is a recipe for failure

•  Protecting market share •  Supporting a new product launch •  Entering a new market

Growth > Profitability

?


Types of Business Growth


Existing Products to Existing Customers

Growth Strategies

Organic Strategies

Entering New Industries

New Products & Services

Existing Products to New Customers

Takeover/Acquisition Mergers

Joint Venture

Strategic Alliance

Horizontal

Vertical

Conglomerates

New Business Models

Vertical Horizontal Unrelated

New to Company

New to World

New Geographies

New Channels

New Segments

Inorganic Strategies



Organic Growth

! Organic growth is the internal growth of a company due to more product/service sales and better saturation of a market

Organic Growth

•  When you grow your business through strong management and effective planning, you know your business inside and out

•  You can move quickly to take advantage of changes in the marketplace, and you can experience the satisfaction of seeing your vision come to fruition

•  You also have the choice of growing your business at a rate that is comfortable for you

•  Instead of merging with another company or buying one, you can sell your business when it is mature. This can create profit for you

•  You may have limited resources for growing your own business

•  You may find the marketplace will not allow you to grow beyond a certain point. In addition, your plans for your own growth can be thwarted by competition, causing you to cut back expectations and consider the possibility of having to close down due to limited opportunities

•  Growing a business from the start-up stage means constantly struggling to make sure you have positive cash flow in order to pay your bills and payroll, as well as finding ways to grow sales

Pros Cons



Inorganic Growth

! Inorganic growth is achieving growth through means other than internal efforts tied to the core of the business

Pros Cons •  Growing your business inorganically involves

joining with another business through a merger or an acquisition. This immediately expands your assets, your income and your market presence

•  You will have a stronger line of credit because of the combined value of the two businesses

•  You will also benefit from the added expertise from personnel at the new business.

•  You will have to expand your management capabilities dramatically when you join forces with another business

•  You will suddenly have many more employees and more assets to monitor, use and dispose of as your business needs change

•  You may enter areas of the marketplace where you have no expertise

•  You can also grow too fast. Most mergers and acquisitions require financing, and you will have to service your debt from the growth you experienced with the merger or acquisition

Inorganic Growth



Source: The Evolution of Strategic Management/Strategic Planning

! While in the past business strategy has focused on factors such as cost cutting, quality, and productivity, recent trends have suggested an increasing focus on innovation and growth

Trends in Business Strategy


CEOs’ Perspectives On Growth


! PwC’s Annual Global CEO Survey suggests a decrease in confidence when it comes to identifying and capturing growth opportunities

Source: PwC


CEOs Targeting Pockets of Opportunity

! CEOs are pursuing organic growth in existing markets


! Half of CEOs’ top ten countries are growth markets

! Additionally, PwC’s Annual Global CEO Survey suggests a tendency toward pursuing organic growth, and in global growth markets

Source: PwC


Business Growth—Industry Perspectives


! In particular, CEOs in Technology, Capital Markets and Oil & Gas view organic growth in existing markets as integral to their growth plans

Source: PwC


The Case for Business Growth


Why should you care? How will you benefit?

! As with any topic in business, the case needs to be made for why growth is important and how the company will benefit from it

&


Why Should You Care?—Universal & Timeless Need


! Growth is possible in any industry, any region, any phase of the business cycle


Why Should You Care?—Long-term Business Viability


! Simply put, growth is not an option—it’s an imperative. Businesses that do not grow consistently eventually risk market irrelevance and extinction

When companies stop growing, they reach a “stall point” in their revenue growth and almost never recover it

Only 7% ever recover from a stall. Most go on to be acquired or to go into bankruptcy or dwindle at market growth levels of growth for some period after that

They never really recover that next level of true business success and true business impact

Source: Strategic Planning Failure, The Evolution of Strategic Management/Strategic Planning


How Will You Benefit?—Improved Financial Condition


! Not surprisingly, achieving sustainable growth typically has a direct and profound impact on a company’s bottom line

Improves Business

Value

Generates Additional

Capital

Reduces Fin’l Market

Vulnerabilities

Can Reduce Bank Debt

More Quickly


How Will You Benefit?—Increased Shareholder Value


Source: A.T. Kearney 5-, 10-, and 15-year analyses of revenue growth and total shareholder returns for the entire Australian Securities Exchange, identifying top performers on the ASX200.

! Long-term growth is the decisive driver of stock prices, thus companies are in control of their own stock price destiny

CEOs stated…

•  Growth requires a clearly-articulated and relevant vision

•  Growth is a direct outcome of strategy

•  Growth requires a solid methodological approach

•  Growth success is attributed to to corporate culture and leadership


Strategic Business Growth—Best Practices


! Through our work helping companies grow, we have identified five best practices that tend to yield the best results

Follow a Process Be a Leader

Find the Next S-Curve Know Thy Customer Embrace Your Inner Innovator


1) Best Practices—Find the Next S-Curve


! If you wait until you need a new growth strategy, it already may be too late to identify and develop one


2) Best Practices—Know Thy Customer


! Best practice growth companies excel in the area of customer centricity. They make it a priority to understand their customers better than any of their closest competitors

•  Demographics

•  Attitudes

•  Perceptions

•  Beliefs

•  Needs

•  Wants

•  Behaviors


3) Best Practices—Embrace Your Inner Innovator


! There is an inextricable link between innovation and growth. While growth without innovation is technically possible, it is significantly limited in scope


4) Best Practices—Be a Leader


! It’s no coincidence that some of the most consistent growth-oriented companies have senior-level leaders who value and reinforce the importance of growth and innovation



! Growth is typically not accidental—it is the result of establishing and following a well-thought out process and approach

Current State

Assessment

Articulating a Business

Growth Vision

Driving Organic Growth

Pursuing Inorganic Growth

Developing a Business

Growth Strategy

Organizational Readiness & Implementation

Measurement &

Tracking

5) Best Practices—Follow a Process


Content










#2—Conducting a Current State Assessment

Conducting a Current State Assessment

“The long run is a misleading guide to current affairs. In the long run, we are all dead.”

—John Maynard Keynes



Win: Win:

Economic Technological S

ocie

tal

Impact of Globalization

Balance of Trade

Access to Capital

Tech. Infrastructure

Tech S

tandards IP

Reg.

IT Product

Develop

R&D

Tax &

Regulatory Sustain-ability

Future Markets

Hum

an

Rig

hts

Dem

ogra

phic

Sh

ifts

Wor

kfor

ce

Tale

nt

Cor

p R

esp.

Mkt

. R

es

Sale

s/M

ktg

Hum

an

Rsc

s

Macro Environment

Industry/Sector

Organization

Current State Assessment—Framework



Economic Trends

Political impasse in the U.S. will leave the government without the borrowing capacity to fund normal operations

Significant risk stems from uncertainty about bold policy action and coordination within and among advanced countries

With weak financial institutions and its infrastructure-led growth model under attack, China may not have all the tools to achieve its goals

Worldwide, we may witness a widening gap between the preferences of savers and the needs of borrowers

The new trend to look for in the euro area will be in the financial markets rather than in the political realm

1 23 45

Source: Brookings Institution



Impact of Globalization Economic

Development

Balance of Trade Product

Markets

Financial

Assets

Access to Capital

Macro Environment

Industry/Sector

Organization

Economic Factors •  Which countries are gaining most in

terms of consumer wealth and disposable income?

•  Which countries are showing the greatest improvements in economic development and GDP?

•  How favorable (or unfavorable) are the current financial markets?

•  What is the optimal means for raising capital (e.g., debt, equity)?

•  Which regions of the world have the most favorable trade balances?

•  What are the implications of your company’s ownership structure (e.g., shareholder expectations)?

•  Does you company have adequate access to capital?

•  Is your current financial situation conducive to growth? If so, which means of investment are optimal?

1) Economic Factors & Considerations

Questions/Considerations



2) Technological Trends

Source: PwC



Technological Infrastructure Technological

Ingenuity

Tech Standards Patent

Norms

New Product

Development

R&D

Macro Environment

Industry/Sector

Organization

Technological Factors

2) Technological Factors & Considerations

•  Which regions/countries represent the current “hot bed” of innovation?

•  Do certain countries or geographies have a more favorable technology infrastructure? What is the basis for this advantage?

•  What are the current innovation trends in your industry (e.g. product, service, process, solution)?

•  What is your industry’s stance relative to patents (e.g., granting, enforcing)?

•  Does your industry aggressively protect proprietary IP, or is it more “open source?”

•  What is your company’s track record in new product/service development?

•  How strong is your company’s R&D capabilities relative to those of key competitors?




3) Political Trends

Risks to Conducting Business Internationally:

•  Confiscation, Expropriation and Domestication

•  Economic risks associated with the political environment (exchange controls, local-content laws, import restrictions, etc.)

•  Political Sanctions (e.g., boycotting trade)

•  Political and Social Activist and NGOs

•  Violence, Terrorism and War

•  Cyber-terrorism and Cybercrime

Global Political Trends/Factors:

•  Inherently unstable governments

•  Changes in ruling political parties

•  Extreme nationalism

•  Animosity toward specific countries

•  Trade disputes



Balance of Power Tax &

Regulatory

Regulatory Environment Incentives

& Support

Public

Affairs

Corp. Gov.

Macro Environment

Industry/Sector

Organization

Political Factors

3) Political Factors & Considerations

•  How is the political environment (domestic and international) affecting your business?

•  Which countries seem to be the most “business friendly” and receptive to foreign investment?

•  Do tax laws make certain countries more or less attractive from an investment/growth perspective?

•  Are there trade barriers in current or prospective countries that make partnership and/or investment less feasible?

•  Which countries seem to be offering the greatest incentives to encourage foreign investment?

•  What is your company’s risk tolerance relative to doing business in foreign countries?

•  How strong is your company’s corporate governance function?




4) Environmental Trends

1.  A deeper understanding of what sustainability means

2.  Your employees are your secret weapon

3.  Speaking with rather than to your customers

4.  Your impact goes well beyond what happens in your office

5.  Really get to know your suppliers

6.  The gap is getting bigger, which is both good and bad

7.  A more open environment to explore sustainability

8.  The ‘business case’ is wider than most realize

9.  Your new recruits will take you there

10.  Having fun with it

How Sustainability is Impacting Business:

Source: The Sustainable MBA



Natural Disasters Climate/

Weather

Raw Materials Supply

Stability

Public

Affairs

Environ. Affairs

Macro Environment

Industry/Sector

Organization

Environmental Factors

4) Environmental Factors & Considerations

•  To what extent (if any) is your industry affected by climate/weather?

•  Does your company have critical infrastructure in countries susceptible to natural disasters (e.g., hurricanes, earthquakes)?

•  Is sustainability a big issue in your industry, and if so, how is it impacting your company?

•  How stable is the supply of raw materials in your industry? Are supply levels sufficient to meet current and future projected demand?

•  Can the futures market help offset risk related to certain critical raw materials?

•  How strong is your company in terms of public and environmental affairs?




5) Societal Trends

1.  Value creation shifting from workers to outside the enterprise

2.  Business processes as opt-in community-powered activities

3.  Mobile experiences as the primary social channel

4.  Business engagement driven by social analytics

5.  Engagement strategies that scale across all important social channels

6.  Anticipating and designing for loss of control

Six Social Trends Impacting Business:

Source: Dachis Group



Demographic Shifts

Human Rights

Workforce Talent Social

Respons-

ibility

Sales &

Mktg.

Market Res.

Macro Environment

Industry/Sector

Organization

Societal Factors

5) Societal Factors & Considerations

•  How are recent shifts in global demographic trends affecting your industry and business?

•  Are certain countries more or less attractive to your company because of their stance on human rights?

•  Is your company able to understand and be sensitive to differences in social norms across the world?

•  Which countries and markets are most attractive from a workforce talent perspective (in terms of skill set, wages, etc.)?

•  How strong are your sales and marketing functions at identifying societal nuances and leveraging them for competitive advantage?

•  Is your company adept at conducting market research, and understanding how attitudes, perceptions and behaviors are changing?




Current State Audit—Template

Economic + -

Macro Environment

•  Economic Development

•  Impact of Globalization

•  Distribution of Wealth

Industry/Sector

•  Product Markets

•  Balance of Trade

•  Financial Markets

Organization

•  Financial Assets

•  Ownership Structure

•  Access to Capital

Environmental + -

Macro Environment

•  Climate/Weather

•  Natural Disasters

•  Sustainability

Industry/Sector

•  Supply Stability

•  Raw Materials

•  Futures Markets

Organization

•  Public Affairs

•  Investor Relations

•  Environmental Affairs

Technological + -

Macro Environment

•  Tech. Ingenuity

•  Tech. Infrastructure

•  Level of Innovation

Industry/Sector

•  Patent Norms

•  Tech. Standards

•  IP Regulations

Organization

•  New Product Dev.

•  Information Tech.

•  R&D

Societal + -

Macro Environment

•  Human Rights

•  Demographic Shifts

•  Social Norms

Industry/Sector

•  Social Responsibility

•  Workforce Talent

•  Training & Dev.

Organization

•  Sales & Marketing

•  Human Resources

•  Market Research

Political + -

Macro Environment

•  Tax & Regulatory

•  Balance of Power

•  Business Posture

Industry/Sector

•  Incentives & Support

•  Regulatory Environ.

•  Trade Barriers

Organization

•  Public Affairs

•  Legal Affairs

•  Corporate Governance



Practical Exercise #1—Current State Assessment

With YOUR organization/business unit in mind, think about the key factors impacting your potential for growth…both internal and external; favorable and unfavorable

! Which of the five factors on the previous page have the most significant impact on your potential for business growth?

! Within each of the five factors, what specific criteria warrant the most consideration as you plan for growth?

! What company resources do you have at your disposal to help you conduct a Current State Assessment?

! What new/additional information, resources, or activities could you leverage to supplement your Current State Assessment?

! How could you potentially modify the framework from this session to make it even more relevant for your organization?


Content










#3—Articulating a Business Growth Vision

Business Growth Vision

“A leader has the vision and conviction that a dream can be achieved. He inspires the power and energy to get it done.”

—Ralph Lauren



! Business Growth Vision is a bridge between the Current State Assessment and the Business Growth Strategy. It essentially articulates the objectives business expansion needs to deliver

Strategic Roles

Business Growth Vision

Growth Gap Decision Filters Growth Charter

Business Growth Vision—Key Components



! The Financial Growth Gap is a central part of the Growth Vision. It defines how much revenue is required—over and above base business—to achieve financial goals

Activities: ! Gain input through management interviews and analyses ! Collect and understand financial data and division financial/growth trend data ! Determine the growth gap based upon realistic, yet aggressive analysis and planning

Tools: ! Historical growth rate ! Management cited goals ! Financial summary for official growth plans ! Past product launches

Definition: Growth Gap—The difference between total expected business unit revenues from existing products and the revenue goal. This identifies revenues to be generated through growth modes such as new product development and acquisitions.

Growth Gap—Defined



14.3% CAGR

4.5% CAGR

$200MM

$400MM

$600MM

$800MM

$1B

FY13

$604

$688

FY18

$1 B 18.4% CAGR

Base Business

Growth Gap Expectation

$900

Growth Gap—Disguised Example

! The example below shows how a company projected a growth for its base business (CAGR), and subtracted the resulting amount from its revenue goal to derive its Growth Gap


Growth Gap—Assumptions & Scenarios


! It is important to develop several assumption-based scenarios when planning for growth

Estimated NP Costs ($MM): Development Costs Acquisition Costs Marketing Launch Costs TOTAL

Assumptions

Annual Gross $ Sales (MM) Gross Retail

•  Existing Expertise $35 $50 •  NTC $65 $100 •  NTW $167 $250

In-House Development Costs ($MM) •  Existing Expertise = $1.0 •  NTC/NTW = $1.5 - 2.0

Acquisition Costs ($MM) •  Medium = $80 •  High = $150

Year 1 2.5

-- 25.0 27.5

Year 2 1.0

80.0 25.0

106.0

Year 3 2.5

-- 25.0 27.5

TOTALS 6.0

80.0 75.0

161.0

1 – EE 1 – NTC

$100

1 – EE 1 – NTC

Year 1 Intros

$200

Year 1 Intros

Year 2 Intros

1 – EE 1 – NTC

$300

Scenario 1

($200MM when potential failure rate is applied)


Growth Gap—Rollout/Timing


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

0 Introductions in FY ‘13 1 year of product development, testing and revisions

3 “events” in FY ‘14 3 “events” in FY ‘15 2 “events” in FY ‘16

B2

C2

A4

A3

C1

B1

A2

$260MM in FY ‘16 (after success rate)

A Low Risk ($25MM Yr 1)

Medium Risk ($60MM Yr 1)

High Risk ($90MM Yr 1)

A1



B C

! Additionally, to the extent possible, it is often useful to sequence and time how growth events will play out over the term of the plan


Strategic Objectives—Definition & Disguised Example


•  Increase share of stomach within existing consumer base

•  Create new occasions and/or categories for the brand

•  Improve current margins

•  Grow topline sales while being highly incremental to the parent brand

•  Identify consumer problems, opportunities and ideas beyond frozen

•  Enhance consumers’ perceptions of Company X

•  Leverage internal capabilities, competencies, and capacities

-  R&D -  Manufacturing

Individual new products/platforms will achieve at least one or more of the following strategic roles in order to build a portfolio of new products/platforms that achieve all the strategic roles:

! Strategic Objectives are very specific goals or expectations that potential growth opportunities should satisfy


Decision Filters—Categories/Types


! While the categories/types of filters can vary by company, there are several that seem to be commonly used by most organizations. As with Strategic Objectives, they can be either “categorical” or go/no-go

Filter Description

Strategic Fit The extent to which a growth opportunity is a fit with the overall corporate (or BU) business strategy and objectives

Customer/Consumer Fit The extent to which a growth opportunity satisfies a high-potential customer need (especially an unmet need)

Technical Feasibility The extent to which a company is able to achieve a growth opportunity with minimal incremental technological upgrades

Operational Feasibility The extent to which a company is able to achieve a growth opportunity with minimal disruption to ongoing operations

Financial Returns The extent to which a growth opportunity meets the required financial hurdles as determined by the Growth Gap


Strategic Fit Hurdle •  Does the concept fit with the New Product Vision? Yes / No •  Is the concept consistent with Brand Extendibility? Yes / No •  Does the concept satisfy one or more Strategic Roles? Yes / No ➔  If yes, which Strategic Role(s) are satisfied? A, B, C, D, E, F •  Is there an enthusiastic champion for this concept on the Core Team? Yes/No ➔ Which OC would implement this concept? FRZ ASE GPD OTHER

Consumer Fit •  Does the concept offer consumers a very attractive solution to an intense need? Yes / No •  Does the concept offer a unique nutritional point of difference? Yes / No •  Does the concept have a strong purchase intent? <19.7 19.7-21.6 >23.5 •  Does the concept have a strong purchase frequency? L M H

Attractiveness of the Market

•  What is the potential size of the market (in $MM)? <$500 $500-2,000 >$2,000 •  What is the market growth trend? 1 2 3 4 5

(1 = Declining; 3 = Static; 5 = Growing) •  How attractive is the competitive environment? 1 2 3 4 5

(1 = Not at all; 3 = Somewhat; 5 = Very) •  Relative to current competitive offerings, how unique is this idea? 1 2 3 4 5 (1 = Not at all; 3 = Somewhat; 5 = Very)

Decision Filters—Disguised Example


•  = Screen è  = Sort/Portfolio Management


Growth Charter—Disguised Example


Consumers actively looking to improve their overall health and well-being will turn to Company X as their trusted source on healthy foods. Company X will earn their trust by understanding consumer needs and wants and introducing new products that provide nutritionally superior, great tasting “real” foods that make healthier eating easy every day.

•  Nutritionally Superior: Every Company X innovation will have a distinctive, relevant and motivating nutritional benefit.

•  Great Tasting: Company X foods will be a positive taste experience that consumers enjoy eating.

•  Healthier Eating Easy (Convenient): Consumers will find Company X new product introductions as easy, if not easier, to buy and use as the food choices presently in their lives.

•  Real Foods/Everyday: Consumers will consider Company X innovations mainstream – not just for special diets, not medicinal, not faddish and not strange. They can relate to and understand the nutrition provided and eat these foods every day with confidence.



Practical Exercise #2—Articulating a Growth Vision

For YOUR organization/business unit, think about the following components of a Business Growth Vision…

! Growth Gap •  What is the assumed growth rate for your base business (CAGR)? •  What is the size of your Growth Gap? •  Approximately what percentage of future growth needs to be organic?

! Strategic Objectives •  What are some specific objectives that come to mind as you think about identifying

growth opportunities for your organization? –  Financial? Strategic? Organizational? Operational? Competitive? Other?

! Decision Filters •  What are some examples of “Go/No-go” filters that might make sense for your

organization?

•  What are some examples of “Categorical” filters that can sure business growth is evenly distributed across different considerations?


Content










Driving Organic Growth

#4—Driving Organic Growth

“There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.”

—Ronald Reagan


A.T. Kearney—Strategy for Organic Growth


! An A.T. Kearney study prescribes a three-pronged strategy for Organic growth that any company can deploy to achieve aggressive growth rates

Source: A.T. Kearney, The Inside Story on Organic Growth


1) Capture Short-term Growth Opportunities


! Nothing ensures success faster than a few quick wins. Once in growth mode you can build momentum across the organization

Low-hanging Fruit Business Growth Momentum


2) Eliminate Barriers to Growth


! Eliminating growth barriers can open up internal and external avenues to growth that many companies do not even realize are blocked

•  Large size of company leading to lack of communication

•  Lack of salespeople’s knowledge about the product/service/market

•  Unproductive work environment

•  Too much focus on cost cutting or on improving EBIT creative a disincentive for investment in growth


3) Continually Manage for Sales & Marketing Excellence


! Companies that substantially improved several marketing and sales capabilities at once increased total sales by more than 25% per year


Organic Growth—Starbucks


! Organic growth is the single-minded focus for Starbucks and CEO, Howard Schultz

! Starbucks believes the franchising business presents a clear opportunity, as it allows the chain to open up stores in small towns where a franchisee can contribute their local knowledge and share the cost and risk

! The strategy is about sustaining a revenue growth rate, so the firm is looking to squeeze even more locations into available space

! In January 2013 Starbucks opened its first franchise store in the UK, in Liphook, Hampshire and the franchise has since opened three additional sites

! Starbucks is actively expanding the new U.K. franchise program with a number of experienced and well capitalized regional and national franchise operators as well as growing captive licensed store footprint into important customer segments such as rail stations, airports, universities and hospitals


Organic Growth—Lego


! Lego has never made an acquisition. It focuses on using new product development and innovation as the driver of revenues and profits - to great success

! Since 2007, Lego has tripled its revenues globally and achieves an operating profit margin of almost 25%!

! Its share of the total U.S. toy market has quadrupled in five years. As of the end of 2012 it was 7.9%, up 1.6 percentage points from the previous year

! The strategy of Lego is best summed up by the quote: "We want to be the best, not the biggest”

! On Dec. 26 in the U.K. and Jan. 1 in the U.S., Lego rolled out Lego Friends, aimed at girls 5 and up. It sold better than expected - to the extent that production units were unable to keep pace with demand

! In the U.S., Lego Friends surpassed early projections, with its sales eventually increasing three times more than expected


Organic Growth—Framework


Existing Products to Existing Customers

Growth Strategies

Organic Strategies

Entering New Industries

New Products & Services

Existing Products to New Customers

Takeover/Acquisition Mergers

Joint Venture

Strategic Alliance

Horizontal

Vertical

Conglomerates

New Business Models

Vertical Horizontal Unrelated

New to Company

New to World

New Geographies

New Channels

New Segments

Inorganic Strategies



1) New Geographies

! There are three distinct phases of globalization. Companies and industries do not move smoothly through these phases. Progression is disruptive, and, when one company changes the game, an entire industry can be forced to respond

Export Regionalize Originate

Source: Guiding Global Growth, PwC


1) New Geographies—Applied


! The three phases of globalization can be applied to a number of important dimensions for most global businesses

Source: Guiding Global Growth, PwC


1) New Geographies—IKEA


! Ikea Group, the world’s biggest home-furnishings retailer, plans to increase the number of outlets fourfold in China as the world’s most populous nation is set to become the company’s second-largest market

! China will be Ikea’s number two market relatively soon, and number one maybe in the long run - the furniture retailer plans to add five stores to the 11 it currently has in the country and boost the total to 40 by about 2020

! Its low-price strategy created confusion among aspirational Chinese consumers while local competitors copied its designs. IKEA adapted its strategies and became profitable in China

! The company plans to open its first store in India by 2014 and 25 stores in 10 to 15 years

! The retailer, which is also looking to open more stores in Russia this year, is testing an Internet- based e-commerce business in 10 countries to complement its physical stores


2) New Channels


! To grow profitably, it is critical to understand in which channels to play and to prioritize investments accordingly. The challenge for many companies is to identify through which channels to address which market segments

•  Successful players develop channel strategies that provide clear direction on which channels to exploit to target specific segments in specific markets, how to win in new and existing markets and how to be competitive at a local level

•  The ability to identify, enact, manage and support local or regional resources with quality channel strategies and execution can mean the difference between profitable growth and floundering business performance

•  Simply duplicating channel strategies from core markets can lead to disappointing results

•  A well developed and executed channel strategy focuses on understanding the opportunities, drivers and structures of different markets to ensure local firm resources are focused on ensuring goods are in the right place, at the right price, when consumers make a decision to buy


2) New Channels—Gap

•  Gap Inc. is strategically gaining market share in North America and around the world through its portfolio of six brands -- Gap, Banana Republic, Old Navy, Athleta, Piperlime and newly-acquired Intermix - while investing further in its leading digital and online capabilities

•  Company executives have confidence about the long-term growth potential of the brands and reaffirm intentions to expand through geographies and channels including specialty, online, outlet and franchise

•  "Over the next five years, key to our continued success will be pushing the envelope further to make shopping seamless to customers through our digital strategy, while seizing the opportunity for Old Navy in many untapped international markets”

•  In addition to Gap Inc.'s competitive advantage with its multiple brands, channel and geography model, the company plans to build upon its online success by delivering an omni-channel platform for consumers as the retail landscape continues to merge online and brick-and-mortar shopping experiences



3) New Segments


! While customers may look alike, their needs, attitudes and purchase drivers may differ significantly

! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

Customers are all the same Customers have unique needs

• Looking for lowest price

• Want maximum fuel efficiency

Example (Automobiles):

• Safety

• Fuel efficiency

! ! ! ! ! ! ! ! !

• Luxury

•  Image conscious

• Performance

• Style


3) New Segments—Segmentation Types


! In general, segmentations based on needs and/or attitudes tend to be more insightful and informative than ones based on channel or firmographics

Key Question:

Variables:

Type: Channel Firmographics Behavior Needs Attitudes

How are they doing it?

Who are they?

What are customers

doing?

What do customers

desire?

Why are they doing it?

§ Purchase

§ Key influencers

§ Sector

§ Geography

§ Spend Level

§ Company size

§ Product usage

§ Brand awareness, usage & loyalty

§ Price paid, share of wallet, and purchase frequency

§ Required/ Have to have

§ Preferred/ Like to have

§ Not needed

§ Category attitudes, desires and beliefs


3) New Segments—Characteristics of a Good Segmentation


! Although may different evaluation systems exist, the following criteria are widely accepted as guiding principles for a good segmentation

•  Identifiable—Individual segments should be able to be identified through measurable attributes

•  Prioritized—The value of each segment to the business is known and the relative importance to the business can be determined

•  Differentiated Needs—Segments need to explain underlying motivations (the “whys”) and the conditions under which they exist (e.g., different usage/purchase occasions)

•  Predictive—Segments are predictive of or align with consistent patterns of behavior

•  Durable—Segments are relatively stable over time, relieving the need to refresh frequently

•  Accessible—Marketing programs can be delivered profitably to the segments through channels they desire


3) New Segments—Porsche

•  Porsche has extended its product line beyond the flagship 911, and they’ve usually done well with product line extensions

•  The key in Porsche’s approach is using the brand to add value in the new category, in this case SUV (sports utility vehicles)

•  With the Cayenne Porsche brought luxury and sports car performance into the SUV category. The engine and body shape of the Cayenne was authentically Porsche, creating a distinctive and premium priced value proposition

•  It was a conscious decision to attract new buyers who couldn’t ordinarily buy a sports car either because of the price or because they needed greater space for their family

•  The Cayenne, launched in 2003, fueled growth of 60% over 3 years. Globally, the Cayenne made up 50% of Porsche’s volume

•  The Cayenne is the lowest price point for a Porsche at $122,000 and is now the company’s biggest selling vehicle in Australia



4) New Products/Services—An Holistic Framework


Innova&on Strategy

Innova&on Process

Por1olio Management

Process Management

Project Metrics

Templates

Tools

Document Organiza&on

Execu&ve Sponsorship

Resource Alloca&on

Team Composi&on

Resources & Organiza&on

Metrics

Process

Strategy Defini&on of innova&on and its role in an organiza&on

Process that is followed to create and develop new products and services

Approach to managing mul&ple innova&on efforts across the por1olio

Oversight of NPD ac&vi&es and how the process is followed

Measurements and hurdles for individual projects and the holis&c por1olio

Set of documents which define and enable NPD ac&vi&es

Mechanisms and resources that aid comple&on of NPD tasks

A space where NPD knowledge is accessed and stored

Degree to which leadership visibly supports and endorses NPD

Decision-‐making process for resources to support NPD

Appropriate human resources that drive and support the NPD process

Lens Dimension Descrip&on

Materials and programs required to educate all NPD stakeholders Training

Templates & Tools

Metrics


4) New Products/Services—Six Sources of Inspiration


! The following Six Sources of Inspiration enable the gathering and developing of a unique set of insights related to the customer, their experiences, the brand, the organization and the industry

Customer Insights

Customer attitudes, behaviors and unmet needs

Experiential Analogs

Customer behavior outside the category

Brand DNA Core Competencies

Brand perceptions and key associations

Strengths of the organization (e.g., partners, assets, resources)

Market & Trend Analysis Expansive set of trends that are not bounded by the business issue or immediate relevance

Archives & Hidden Strengths

Looking into the past, beyond conventional wisdom and/or well below the surface


4) New Products/Services—Best Practices


1)  Encourage a culture that fosters risk taking

2)  Develop a new products strategy

3)  Use multi-functional teams with dedicated members

4)  Follow a systematic and flexible stage gate approach

5)  Apply compensation and incentives that stimulate an entrepreneurial environment

6)  Foster and demonstrate top management commitment to innovation

7)  Establish measurement criteria and track the results of innovation efforts

8)  Develop new product types to fulfill the strategy and a balanced portfolio

9)  Identify customer problems and needs before generating new product ideas

10)  Appoint dedicated leaders and develop new product champions

! Below are a handful of “tried and true” guiding principles to maximize the likelihood of successful new product/service launches


4) New Products/Services—Johnson & Johnson


•  Johnson & Johnson Pharmaceuticals segment is poised to continue driving growth with more than 10 potential new product filings by 2017

•  The Pharmaceuticals segment of J&J has built an industry-leading pipeline that has yielded 11 new product launches since 2009, more than doubling its productivity over the past four years

•  The Company's approach to innovation has resulted in a revitalized product portfolio for the Janssen Pharmaceutical Companies in the areas of Immunology, Neuroscience, Infectious Diseases and Vaccines, Cardiovascular and Metabolism, and Oncology

•  These new products, coupled with core growth brands, have fueled 12 consecutive quarters of operational sales growth in the segment and contributed significantly to the Company's recent earnings growth

•  The Pharmaceuticals business of Johnson & Johnson was the fastest growing in the U.S., Europe and Japan in 2012, with sales of $25.4 billion, an operational increase of nearly 7% versus 2011

•  “The innovative new therapies in our pipeline will drive our next wave of growth” --Paul Stoffels, M.D., Chief Scientific Officer, Johnson & Johnson, and Worldwide Chairman, Pharmaceuticals Group

Source: www.marketwatch.com


5) New Business Models


! The emergence of new technologies in recent years has vastly expanded the ability for companies to grow through developing new business models

Value Proposition

Resources

Processes

Profit Formula

A product/service that provides a meaningful end benefit to customers

People, technology, facilities, equipment and cash required to deliver the VP

Assets and fixed cost structure, and the margin and velocity required to deliver them

Ways of working together to address recurrent tasks in a consistent manner


5) New Business Models—Types


! Although there seems to be new business models emerging every day, there are three basic types that many subscribe to

Solution Shops

Value-Adding Process Businesses

Facilitated Networks


5) New Business Models—Zara


•  Fashions change at breakneck speed, which means retailers have to keep pace with changing needs yet affordable production of large volumes of clothing has traditionally involved long delivery times

•  Zara makes it possible for everyone (in the world) to buy the latest fashions at a price they can afford

•  Zara delivers on its brand promise by outperforming everyone else when it comes to precision, speed and small production volumes

•  Zara’s success is achieved by one of the most ingenious design, development, production and supply chains in the world. All Zara stores are supplied with a new batch of clothing twice a week

•  Delivery time is 24 hours within Europe and 36 hours to all other countries

•  A design idea has to be translated into a garment displayed in the store in a matter of just three weeks. This process takes other clothing manufacturers an average of six months

•  Whereas three months ago competitors were trying to work out what customers will want three months from now, Zara listens to what the customer wants now and supplies it in three weeks

Source: www.wikibusinessmodels.com

Strategic Business Growth—day 1 2013.09

Business

Transcript of Strategic Business Growth—day 1 2013.09