Accelerating Growth through Principled Market Opportunity Accelerating Growth through Principled Market Opportunity

Evaluation and Entry Strategy DevelopmentEvaluation and Entry Strategy Development

GROWTH PROCESS OVERVIEWGROWTH PROCESS OVERVIEW

20132013

Vertical Market Vertical Market Expansion Expansion

Vertical Market Spotlight – Energy Markets

Why Vertical Market Expansion?

One path an organization

might take to growing the

top line is to take an existing

product or service into a

After cutting expenses to

the bone in the recent

recession, most companies

now recognize that they

CEOs are therefore

refocusing on growing the

top line.

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product or service into a

new market.

now recognize that they

can’t cut their way to

growth.

Three Critical & Gated Questions for Evaluating Vertical Markets:

1 – Is Vertical Market Expansion appropriate for your company and is the timing right?

2 – If the answer yes, which vertical markets are most appropriate/feasible to pursue?

3 – Finally, what is the optimal go-to-market strategy?

Vertical Market Expansion Risks

For every successful market entry, four fail.

95% of all vertical entries in the aerospace & defense industry

fail to take hold.

Winners and losers all look like winners at the outset – so why

do so many companies head down ill-advised paths?

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do so many companies head down ill-advised paths?

•Assuming vertical market expansion will deliver expected growth

•Entering multiple vertical markets simultaneously

•Moving into markets not adjacent to your core

Where Companies Go WrongNumerous pitfalls can derail even the most well-intentioned executive

Vertical Market Expansion Best Practices

Key Principles:

Pursue only one or two verticals at a time

Vet all opportunities for strategic fit before committing to market entry

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Understand that the better the assessment of market size, competitors,

market share, revenue, costs, and other factors, the better their odds of

making good vertical market entry decisions

Vet all opportunities for strategic fit before committing to market entry

The Opportunity in Vertical Market The Opportunity in Vertical Market Expansion into theExpansion into the

Energy IndustryEnergy IndustryEnergy IndustryEnergy Industry

Oil & Gas Generation Power and WaterTransmission

Renewables Distributed Power End Users and Back-up Waste Streams

Opportunism Abound Across the Energy Value Chain

Convergence ThemesConvergence Themes

Smart Cities Green Energy Shale Gas Phenomenon

Globalization Data Center Energy Trends

Grid Modernization Digital Oil Fields

Virtual Power Plants Energy Storage

Connected Homes Smart Buildings Water and Energy

Energy Recovery from Waste

Energy Efficiency and Smart Buildings

LED Lighting Revolution

Top 10 Markets

Energy & EnvironmentTop 10 Technologies and Markets to Watch for in 2020

Gas-Fired Power & Shale Gas Exploitation

Small Scale Distributed Generation

Top 10 Markets of the Future

Source: Frost & Sullivan

Advanced Batteries and Energy Storage

Solar PV

Smart Water Networks

Energy Harvesting Smart Grids

The Challenges and Opportunities in Energy are Too Great for Any One Company or Industry to Address

� Energy management is increasingly data

driven and customized

� Growing need for efficiency drives

information-based solutions across the

value chain:

– Upstream oil and gas

– Power generation

– The Grid

– Smart homes and buildings

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� Decentralized power systems increase complexity and opportunities globally through

challenges such as:

– Intermittent power from renewables

– Load profile uncertainty due to electric vehicles

– New business models with utilities and third party energy information providers

– Growth of on-site power and micro grids

Unique Qualities of the Energy Industry to Consider When Assessing a Potential Expansion

• High visibility industry

• Intrinsic to economic growth and development

• Key target for environmental legislation

• Strong public sector involvement, even ownership in certain countries

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certain countries

• Utilities and governments with long planning cycles

• Highly regulated

• Large end user of materials, equipment and services

Global Analysis

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Natural Gas Supply and Global Price Inequality Driving Opportunities

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Increasing Complexity of the Power Grid Requires New Solutions in Monitoring and Data Management

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Smart Grid a Major Area of Industry Convergence

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Renewable Energy, Driven by Wind Power, Brings Growth but also Challenges

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Competitive Analysis

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Energy Attracting New Competitors into the Market Through Industry Convergence

New materials providing

• Better electricity conductivity

• Better insulation

• “Self-healing” for everything from pipelines to buildings

Information and communications

• M2M in power plants and across grids

• AI, for example in predicting energy loads and demand based on weather

• Gathering and interpreting high volumes of data

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• Gathering and interpreting high volumes of data

Defense Companies

• Field services for remote oil and gas: information, security, communication, etc.

• Commercialization from military to private sector

• Leveraging advances in small scale, efficient and light weight technologies

Smart Industry Integration

• Energy, IT and Energy in the Smart Home

• Security, Transportation, Electricity and Water in the Smart City

• IT, Building Materials, and Efficiency for the Smart Building

New Companies Entering energy Will Force Existing Competitors to Respond

• Redefining “Energy” in light of changing

market dynamics such as:

• Shale oil & gas

• Renewable energy

• Efficiency and green standards

• Energy savings as revenue

• New business models in energy

generation, procurement, and

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generation, procurement, and

management

• Moving from equipment to solution sell

• Retiring workforce for operations at

utilities, oil & gas and heavy industry

open the door to more third party

outsourcing opportunities

• Increasing automation in homes,

buildings, factories, the grid, cities and

oil fields all center around better energy

usage

Market Penetration

Verizon is already an established player in power distribution communication, though

the market has limited growth due to saturation. Using it’s large communication network and expanding into related grid

markets would boost revenues and visibility

Product Development

By leveraging its know-how in areas of communication, monitoring, and technical

advances, Lockheed Martin is able to transition key core competencies from the

aerospace and defense industry into a value proposition for energy efficiency and security

to utilities and industrial customers

DEGREE OF INNOVATIONLow High

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Existing Market(s)

Different Strategies for Entering or Expanding Share in the Energy Market

Market Development

IBM, Cisco and others have embraced the Smart City, looking to connect disparate systems such as security, energy, water,

transportation, and others through a connected platform to reduce costs, improve

efficiency and communication across city services. Smart Cities are a new market and concept in the making, early entrants

will define what the market will be

Diversification

Google has had several forays into the energy space, from helping homes monitor power usage, to installing and promoting

electric vehicle charging stations. Google’s most recent major energy venture has been

its $400M investment into solar power. What might be next, the Google Smart

Energy Home?

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Directly in Energy

Increasing Risk

Incre

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Secrets to Success in Market Expansion into energy

Invest for the

Find

the Right

Partner(s)

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Invest for the

Long Term

Know Your

Business Model

Define Your Value Proposition