Intelligence, Innovation & Best Practice
How organisations are driving growth and profitability




                    Ph...
Topics

1. A New Age Business
2. The Intelligent Organisation

3. Innovation & Productivity

4. Keys To Success

5. Snapsh...
1.
A New Age
Business
Expectations of a New Age business
1. Profitability and growth
      A return on shareholder funds after tax of 4 times th...
Australasian Profitability by Cohorts
    Return on Shareholder Funds (after tax), Top 1250 businesses                5 ye...
Profitability By Major Industries
     Return on Shareholder Funds (after tax), Top 1250 businesses                       ...
Intellectual Property

Intellectual property can best be described as a
“cocktail” of:

   • skills, special competencies,...
Unique Organisational Culture
A unique culture is about attracting and keeping
good people to your business, and helping d...
2.
The Intelligent
Organisation
The Total Environment For Business




                A
              Our
               Firm




                       ...
How much do we need to know about . . .
The Influential Environments (4)
  1. The world environment, growth, regions, nati...
In the Industrial Age businesses generally
planned and operated on an inside-out basis.

  The external business environme...
Business Intelligence
Expenditure on data and information, F2010(E)




        Internally
         Sourced
           64....
Nearly two thirds of all business
data, information and intelligence in
Australia in F2010 will be internally
generated.

...
Internally Generated Information?
       $126 billion in Australia in F2010




                    CEO
                IC...
Over one third of all spending on data,
information and intelligence by
enterprises in F2010 will be outsource.

This prop...
Type Of Outsourced Business Information
                                                    Australia F2010 (F)
          ...
Purpose Of Outsourced Information
                                    About What? F2010 (F)
                              ...
Of all the business spending on
data, information and intelligence -
$195 billion - only 10% is spent on
issues in the ext...
The Imperative of
  Going Up The
Information Chain
The Knowledge Pyramid
              By Volume                  By Value


                   Vision
                      ...
3.
The Innovation
& Productivity
  Imperative
Standard of Living 2008
                      20 Highest Nations GDP/capita, ppp basis

           QATAR                  ...
Business Research & Development
                                                                              (% of GDP)
 ...
Australian Productivity Growth
           GDP per hours worked (4-quarter moving average) to December   2009
     5.0
    ...
Australian Industries Productivity
            5 year growth to 2008, % p.a (IGP / employee @ 2006-07 prices)
            ...
4.
Keys To Success
What the Best Enterprises Are Doing
 1. They stick to one business at a time and do not diversify
 2. They aim to dominate...
Positioning

Secure a safe industry position in your
chosen industry to be master-of one’s-own-
                      mast...
Industry Share Strategy
                            (positioning for a winnable war)




                                 ...
Outsourcing And A Virtual Corporation

In the Industrial Age, corporations set out to be self-
                           ...
Business Outsourcing in the New Age
Trucking                          Accounting
    Road transport industry.          Pay...
The External IC&T Industry
                   Australia      Revenue based, F2009 (E)
                                    ...
The New Age Virtual Corporation

Traditional Structure                                 New Structure
 Multi-layered Corpor...
Leadership

Leadership sits above management. It demands
special attributes such as loneliness in ultimate
decision making...
What can happen with great
leadership, and following the
 Keys To Success (or most of
 them)

The Leighton Group was mid-s...
Leighton Holdings Revenue & Profitability1
                                 Revenue excludes JV & associates share 1962 to...
Successful Mid-sized Businesses
   5-year average ROSF (after tax) basis, % to F2009


           Allen & Unwin           ...
5.
Snapshots Of A
Changing World
World GDP Growth
                                                Real growth (PPP), 1950-2011(F)
       12
       11
     ...
World’s 30 Largest Economies
                                                  2010 (F)
Poland               1.0%
S. Arabi...
Economic Growth: 2009 (F)
                       20 Largest Economies (ppp ranking)

 China/HK                            ...
Economic Growth: 2010(F)
                          20 Largest Economies (ppp ranking)

   China/HK                        ...
Economic Growth: China
                                                Real growth 1950-2011 (F)
                         ...
Economic Growth: Australia
      Annual real GDP growth (%) progressed in quarters to    December 2009 (and forecast to Ju...
Australia’s Industry Mix
    Value added basis Shares of GDP in constant F2007 price terms C2009
                         ...
To download this presentation go to: www.ibisworld.com.au




       Enter details here to          ruthven
      download...
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Stream 1 - Keynote Presentation: Perth & Adelaide

  1. 1. Intelligence, Innovation & Best Practice How organisations are driving growth and profitability Phil Ruthven, Chairman WHERE KNOWLEDGE IS POWER
  2. 2. Topics 1. A New Age Business 2. The Intelligent Organisation 3. Innovation & Productivity 4. Keys To Success 5. Snapshots Of A Changing World
  3. 3. 1. A New Age Business
  4. 4. Expectations of a New Age business 1. Profitability and growth A return on shareholder funds after tax of 4 times the bond rate Growth better than the industry average ( + international?) 2. Uniqueness in: Product, IP and operations Organisational culture 3. World best practice in: Value for money for customers Respect for the society in which it operates Relations with other stakeholders Treatment of the natural environment
  5. 5. Australasian Profitability by Cohorts Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009 Best 50 158.0 2nd 50 48.9 3rd 50 35.2 4th 50 28.6 5th 50 23% > World Best Practice (ROSF 22.2%) 24.7 6th 50 21.8 7th 50 19.7 8th 50 17.7 9th 50 15.6 10th 50 13.8 Average 42% > Average (ROSF 12.6%) 12.6 11th 50 12.5 12th 50 11.1 13th 50 9.9 14th 50 9.0 15th 50 7.9 16th 50 6.7 17th 50 68% > Bond Rate (5.4%) 5.6 18th 50 4.2 19th 50 3.2 20th 50 2.1 21st 50 1.0 22nd 50 0.2 23rd 50 11% Losses -2.5 24th 50 -10.5 Worst 50 -128.0 Percent -50 -40 -30 -20 -10 0 10 20 30 40 50 60 Source: IBISWorld 19/11/09
  6. 6. Profitability By Major Industries Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009 Communications 33.7 Mining 19.6 Hospitality 19.1 Cult & Recn Serv 18.9 Wholesaling 17.3 Transport 15.3 Prop & Bus Services 15.2 Finance & Ins 13.7 Average 13.3 Retailing 13.1 Manufacturing 12.5 Construction 12.5 Personal & Other 12.0 Agriculture 8.9 Utilities 7.8 Education 4.3 Govt. Adm. & Defence 1.8 Health & Community 6.4 0.4 Percent 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 Source: IBISWorld 22/12/09
  7. 7. Intellectual Property Intellectual property can best be described as a “cocktail” of: • skills, special competencies, unique systems; • patents, trademarks & brands; • organisational culture, customer relation protocols; • vision, plans and documented achievable strategies. It is the "holy grail" of a enterprise, its core and its most valuable balance sheet asset, whether recorded as such in dollar terms or not.
  8. 8. Unique Organisational Culture A unique culture is about attracting and keeping good people to your business, and helping develop ordinary people into extraordinary people. This is built on a base of world best practice principles of human resources management. But a unique culture goes well beyond the basics: it needs to have special elements of both a tangible and intangible nature. No matter how often we say it, employees are not a firm’s most valuable asset, since slavery has been outlawed for some considerable time! But in the emerging “sellers market” we need them to stay.
  9. 9. 2. The Intelligent Organisation
  10. 10. The Total Environment For Business A Our Firm © IBISWorld
  11. 11. How much do we need to know about . . . The Influential Environments (4) 1. The world environment, growth, regions, nations, demography etc. ? 2. National resources,developed (infrastructure, IC&T), natural (resources, ecology) ? 3. Our community, its changing demography, lifestyles and spending ? 4. The economic environment, the “business weather” conditions ? The Operating Environments (6) 5. The government environment, laws, taxes, policies, incentives ? 6. The finance market, equity, debt, exchange/interest rates, treasury ? 7. The services market, to outsource none-core activities and functions ? 8. The labour market, for executives, employees and customers ? 9. The purchases market, raw materials, semi-/finished goods, prices ? 10. Its market, local and global ? The Immediate Environment Our own industry, WBP, size, growth & disposition, competitors? Our Own Business Its IP, financials, sales, operations, TQC, productivity, R&D, HR etc. ?
  12. 12. In the Industrial Age businesses generally planned and operated on an inside-out basis. The external business environments were largely opaque to an enterprise which tended to be fortress style; and enterprises were opaque to outsiders who saw enterprises as secretive. In the New Age businesses must now forecast, plan and operate on an outside-in basis. The business environments are becoming transparent to enterprises, and in turn the enterprises are becoming more transparent to outsiders.
  13. 13. Business Intelligence Expenditure on data and information, F2010(E) Internally Sourced 64.5% 35.5% Externally Sourced $195 billion in Australia (5.6% of all business revenue) IBISWorld 17/11/09
  14. 14. Nearly two thirds of all business data, information and intelligence in Australia in F2010 will be internally generated. How much value-adding do we do with this, to help with planning, efficiency, revenue growth, CRM and profitability?
  15. 15. Internally Generated Information? $126 billion in Australia in F2010 CEO ICT & Board CIO? © IBISWorld
  16. 16. Over one third of all spending on data, information and intelligence by enterprises in F2010 will be outsource. This proportion has been steadily increasing from less than 10% half a century ago to an estimated 35.5% this year. We are spending more on information and also outsourcing more of it.
  17. 17. Type Of Outsourced Business Information Australia F2010 (F) Exploratory News/ Books/ Mags. Online Info 2.0% Scientific 1 ISPs 1.7% Conferences/ Research 1.2% Other Data Process 1.5% Meetings2 Mkt. Research 1.3% 3.1% 2.2% 5.8% Cons. Eng. + 26.2% Architects 20.3% Accounting Legal Services Services 10.6% Note: 1 Public Relations Credit Agencies 0.9% Other 0.7% $68.8 billion Expenditure 2 Includes accommodation, (2.0% of national revenue) travel, registration fees, speakers etc IBISWorld 18/11/09
  18. 18. Purpose Of Outsourced Information About What? F2010 (F) Exploratory Government 1.0% World 0.8% Services 0.5% Resources 0.5% Own Industry 9.8% 71.6% About Our Own Company1 From Accounting firms, Legal firms, Management Consultants, Consulting Engineers etc Spending on information about $ 68.8 billion expenditure the external environment ($19.5 (Australia) billion) is 28% of all outsourced spending and 10% of all spending IBISWorld 17/11/09
  19. 19. Of all the business spending on data, information and intelligence - $195 billion - only 10% is spent on issues in the external environment. But this spending is growing nearly 2% pa faster than the economy in response to the need to plan on an outside-in basis, displacing the old inside-out approach of the secretive Industrial Age?
  20. 20. The Imperative of Going Up The Information Chain
  21. 21. The Knowledge Pyramid By Volume By Value Vision Vision & Strategy Vision Unique Unique IP Expert Opinion Decreasing IP Value Wisdom Wisdom Expert Opinion Expert Opinion Intelligence Intelligence Increasing Information Information Value Data Data Hearsay But interesting! Hearsay, Rumour, Scuttlebut Source: IBISWorld 18/11/09
  22. 22. 3. The Innovation & Productivity Imperative
  23. 23. Standard of Living 2008 20 Highest Nations GDP/capita, ppp basis QATAR 110.7 Luxembourg 81.0 Norway 59.3 Kuwait 57.4 Brunei 53.1 Singapore 51.5 USA 46.9 Ireland 45.3 Hong Kong 43.7 Iceland 41.8 Switzerland 41.8 Netherlands 40.4 Austria 40.2 UAE 39.9 Canada 39.1 Australia 39.9 Sweden 38.1 Belgium 37.4 Bahrein 37.3 Equatorial Guinea 37.2 0 10 20 30 40 50 60 70 80 90 100 110 120 $US ‘000 (ppp) CIA FactBook/IBISWorld 20/10/09
  24. 24. Business Research & Development (% of GDP) 2.6 2.4 World Best Practice: nations > 2.5% of GDP 2.2 (eg. Sweden, Japan, Finland, S. Korea, USA) Australia 14th in 2008 among 30 OECD member. 2 1.8 BERD % of GDP 1.6 OECD 1.4 1.2 Australia 1 0.8 0.6 NZ (0.5%) 0.4 0.2 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Year, ended June Source: DIISR
  25. 25. Australian Productivity Growth GDP per hours worked (4-quarter moving average) to December 2009 5.0 4.5 4.0 20th Century average 3.5 was 1.9% per annum 3.0 2.5 2.0 1.5 % 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: ABS Cat NO 5206.0 IBISWorld 05/03/10
  26. 26. Australian Industries Productivity 5 year growth to 2008, % p.a (IGP / employee @ 2006-07 prices) 2006- Communications 4.9 Finance & Ins 2.8 W'Sale Trade 2.5 Agriculture 2.4 Retail Trade 2.2 Personal & Other 1.5 Transport 1.3 Cult & Recn Serv 1.1 Govt Admin/Def 0.8 All Industries 0.7 Average Construction 0.7 Manufacturing 0.5 Hospitality 0.8 Health 0.4 Prop & Bus Serv 0.1 Education -1.6 Utilities -5.8 Mining -7.6 Percent -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 Source: ABS & IBISWorld 05/03/09
  27. 27. 4. Keys To Success
  28. 28. What the Best Enterprises Are Doing 1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative, valuing the business’ IP. 4. They outsource non-core activities to enable growth. 5. They don’t own “hard” assets. 6. They have good and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business. 10. They develop strategic alliances. 11. They develop unique organisational cultures. 12. They value leadership first and management second.
  29. 29. Positioning Secure a safe industry position in your chosen industry to be master-of one’s-own- master- one’s-own- destiny by dominating something. Domination can be of: the whole industry class (being a major); or major); one category in the industry (a niche player); player); or one product group1 (an ultra-niche player); or ultra- one product ( a boutique operator). operator). Note: 1 Or a customer segment; and occasionally a geographic area
  30. 30. Industry Share Strategy (positioning for a winnable war) 5% 1-5 % No-man’s-land Major Player 25-75% No-man’s-land (un-winnable position) Caught between majors (“sledgehammers”) and niche players (“knee-cappers”) Source: IBISWorld
  31. 31. Outsourcing And A Virtual Corporation In the Industrial Age, corporations set out to be self- self- sufficient - apart from obvious sub-contracting - sub- creating complex and multi-layered/multi-functional multi-layered/multi- structures. In the New Age, all non-core/non-strategic activities non-core/non- are outsourced1 to specialists in the interest of reduced complexity and to develop focus, lightness, flexibility and faster growth of the business: a virtual corporation. In 2005, over $450 billion of non- non-core activities are now outsourced by businesses (20% of revenue) 1 Outsourcing is not to be confused with subcontracting
  32. 32. Business Outsourcing in the New Age Trucking Accounting Road transport industry. Payroll, Share Registers Cleaning Full contract accounting. Office, factory, hotel etc. Superannuation administration. Laundry, work clothes. Computing Canteens, Dining Rooms Software development. Caterers. Computer services (IT outsourcing) Maintenance Property Painting . Property trusts, Engineering. Property management Carpentry. Marketing Security Advertising, media buying Security systems. Call Centres Surveillance services. Distribution Personnel Warehousing & Delivery Recruitment. Information & Planning Out placement. Training. Database services Strategic and Other Consulting Reception Franchising Serviced offices. Operations.
  33. 33. The External IC&T Industry Australia Revenue based, F2009 (E) Telecommunications Computer 34.5% Retailing Mobile 17.2% (incl. resellers 2.9%) Telecom Eqpt Wholesaling 11.1% Wired Computer 14.3% Wholesaling 14.3% 4.1% IT Consult. 0.6% IT Relay, Manufacturing Satellite IT Databases & Maintenance Data Process $116.1 billion IBISWorld: 30/07/09
  34. 34. The New Age Virtual Corporation Traditional Structure New Structure Multi-layered Corporation Virtual Corporation Board, CEO and Leader, Senate and Top Management Top Management Head Office functions Mostly outsourced Implementers Middle No Longer Management Mostly Required outsourced Coordinators & Operatives Supervisors No Longer & Employees Required Mostly outsourced and /or franchised Functions provided back to company by firms in new (specialised) industries (e.g IT, personnel, legal, accounting, information, transport, cleaning etc.)
  35. 35. Leadership Leadership sits above management. It demands special attributes such as loneliness in ultimate decision making (after full consultation), often with no (after consultation), voting. And, sometimes, no consensus. It is non-gender specific. non- Leadership involves more external focus than internal: the opposite of management. Apart from listening to experts and confidantes, it involves communicating directly with major customers at least once a year.
  36. 36. What can happen with great leadership, and following the Keys To Success (or most of them) The Leighton Group was mid-sized not that long ago
  37. 37. Leighton Holdings Revenue & Profitability1 Revenue excludes JV & associates share 1962 to F2009 50 45% 45 Notes: 1 Net profit after tax on S/F 40% 2 Zero data are actually 40 ROSF losses for those 3 years 35% Revenue (A$ billion) 35 30% 30 25% ROSF % ROSF % 25 20% 20 15% 15 10% 10 Revenue 5 5% 0 0% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 IBISWorld 30/03/10
  38. 38. Successful Mid-sized Businesses 5-year average ROSF (after tax) basis, % to F2009 Allen & Unwin 115.5% Wotif.com 80.1% Readers Digest 77.9% Mini- Mini-tankers Aust. 67.4% Nielsen Company 66.4% Ted’s Camera Stores 50.4% Nick Scali 48.8% Bakers Delight 42.3% Wridgways 38.3% Aust Steel Mills 35.1%
  39. 39. 5. Snapshots Of A Changing World
  40. 40. World GDP Growth Real growth (PPP), 1950-2011(F) 12 11 10 Purchasing Power Parity (PPP) terms 2008 3.2% 9 2009 -2.5% 8 2010 2.5% (F) 7 6 2011 2.9% (F) 5 4 Past 25 years 3.5% p.a 3 2 1950-1969 growth in US$ market terms 1 Per cent 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 IMF/Economist//IBISWorld: 30/03/10
  41. 41. World’s 30 Largest Economies 2010 (F) Poland 1.0% S. Arabia 0.8% Argentina 0.8% Purchasing Power Parity (PPP) terms Thailand 0.8% S. Africa 0.7% Egypt 0.6% Pakistan 0.6% Colombia 0.6% Malaysia 0.6% Belgium 0.5% Rest of World (198 nations) 15.5% 20.5% USA 11th – 20th Nations 14.8% 2.5% India 3.0% 4.0% 5.3% Mexico 2.1% Spain 1.9% Korea S 1.9% Canada 1.9% Indonesia 1.4% Turkey 1.3% World’s 228 nations Australia 1.2% 17th Iran Taiwan 1.2% 1.0% US$ 72.1 trillion Netherlands 0.9% CIA/IBISWorld 08/02/10
  42. 42. Economic Growth: 2009 (F) 20 Largest Economies (ppp ranking) China/HK 8.0 India 6.5 Indonesia 4.6 Iran 2.6 Australia 1.3 S Korea 0.5 Brazil -0.3 France -2.2 Canada -2.5 USA -2.5 World World Growth -2.5 Taiw an 2008, -2.5% -3.6 Spain -3.6 Netherlan -4.0 UK -4.7 Italy -4.8 Germany -4.9 Japan -5.3 Turkey -6.0 Mexico -6.9 Russia -8.0 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 The Economist/IBISWorld 11/04/10
  43. 43. Economic Growth: 2010(F) 20 Largest Economies (ppp ranking) China/HK 9.5 India 7.7 Indonesia 5.6 S Korea 5.3 Brazil 5.0 Taiwan 4.9 Mexico 4.3 Turkey 3.6 Russia 3.5 Australia 3.1 USA 3.1 Canada 3.0 World World Growth 2.5 2010 (f), 2.5% Iran 2.3 Japan 1.9 Germ any 1.6 France 1.5 UK 1.3 Netherlands 1.1 Italy 0.7 Spain -0.3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 The Economist/IBISWorld 11/04/10
  44. 44. Economic Growth: China Real growth 1950-2011 (F) 1950- 24 20 16 12 8.2% average 8 4 0 Per cent -4 -8 -12 -16 -20 -24 -28 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 SSBC/IBISWorld: 24/03/10
  45. 45. Economic Growth: Australia Annual real GDP growth (%) progressed in quarters to December 2009 (and forecast to June 2013) 9 Average long business cycle is 34 quarters (81/2 years) 8 7 Forecast 6 5 4 3 2 1 0 -1 -2 36 qtrs. 34 qtrs 34 qtrs 33 qtrs 38 qtrs 33 qtrs? 36 qtrs ? -3 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Years, ended June Source: IBISWorld: 04/03/10
  46. 46. Australia’s Industry Mix Value added basis Shares of GDP in constant F2007 price terms C2009 Pers. & Other Serv. Hospitality Cult & Rec. Serv. Agriculture (2.2%) Mining Utilities 2.6% 6.8% 2.4% Govt. Adm. 5.0% 11.3% Prop. & Business Services Finance & Ins. 2.8% Sectors Communications Primary Secondary Tertiary Quaternary GDP $1260 billion (current prices) Quinary $1208 billion (constant F2008) ABS 5206-26 /IBISWorld
  47. 47. To download this presentation go to: www.ibisworld.com.au Enter details here to ruthven download presentation i bm
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