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Portfolio Analysis
 

Portfolio Analysis

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Pitney Bowes is a 90+ year old company that has been undergoing a transformation by shifting focus from Mail Stream Management to Customer Communications Management. We have been leveragining ...

Pitney Bowes is a 90+ year old company that has been undergoing a transformation by shifting focus from Mail Stream Management to Customer Communications Management. We have been leveragining Portfolio Analysis as a key tool to help us allocate resources in our strategic planning process. The session will cover the approach we’ve taken, how to analyze core vs. growth offerings across a diverse portfolio of Hardware, Software and Services and what has and has not worked so far.


Portfolio analysis as a foundation to long term strategy.
Combining market, competitive and performance data to allocate resources across a diverse set of offerings.

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    Portfolio Analysis Portfolio Analysis Presentation Transcript

    • Portfolio Analysis at Pitney BowesBen YeminiDirector, Corporate StrategySeptember 29th, 2012This document is for academic discussion purposes only. It is an incomplete record of the conversation. Data containedherein has been disguised. This material does not contain any Pitney Bowes official statements of fact or intent.
    • Pitney Bowes History1902: Arthur Pitney patents his postage-stamping machine1920: Pitneys American Postage Meter Co. and Walter Bowess Universal Stamping Machine Co. merge to form Pitney Bowes1957: Faces government anti-trust suit, forced to license technology to others1979: Acquires Dictaphone Corp.1982: Enters fax machine market1995: Sells Dictaphone and Monarch subsidiaries2001: Spins off fax and copier division as Imagistics International2001-’08: Completes 92 acquisitions including mainly in Software and Services2008-’10: USPS First Class Mail decline rate increases from -2%/yr. (2001-’08) to -7%yr. (2009-’10) PB Revenue declines by $800M EBIT margin declines from 24% to 16%2009 -‘11: Strategic Transformation initiative Portrait Software acquired in 2010 2
    • Company VisionWe help SMB and Enterprise businesses optimize their communications, transactions & interactions with their customers, prospects and partners to enable business growth. Customers Prospects Partners Communications Solutions for preparing, delivering and responding to business communications Process Optimizing internal business processes related to Optimization connections Transactions Solutions for executing and processing transactions Customer Insight Customer and prospect profiling and response analysis Every Connection is a New Opportunity TM 3
    • Objectives of Portfolio Management• Actively manage our portfolio to leverage our resources most effectively and maximize value creation for our shareholders• Key Considerations: – How is our current portfolio positioned today? – Given the market outlook, how do we expect our businesses to perform in the future? – How should resources (e.g. R&D, Sales & Marketing) be allocated? 44
    • Portfolio Management Framework ENHANCE PROFITABILITY INVEST TO GROW 1 • Maximize cash flow • Prioritize over businesses in other • Invest in technology to improve quadrants for investments productivity • Exit sub-segments with poor prospects 2Profitability 3 REDUCE COST & SCRUTINIZE GROW & IMPROVE PROFITABILITY • Prioritize achieving acceptable • Allow growth investments only when profitability scale drives profitability 4 • Divest/Exit, if underperformance persists • Move businesses up into “Invest to Grow” or left to “Reduce Cost” quadrants based on performance to plan. 5 1 2 3 4 5 Strategic alignment and market attractiveness 55
    • Approach to Portfolio Analysis• Define the portfolio “bubbles” – Identify Business Unit segments for our core business – Identify growth segments• Assess each core and growth bubble based on consistent relative criteria – Profitability – Strategic Fit – Market Attractiveness• Determine likely trajectory of bubble• Provide assessment to GMs as input to their 3 year strategic plan and 1 year budget submission 66
    • Portfolio Assessment Core CriteriaProfitability Criteria• EBIT Margin• Relative Performance EBIT Margin vs. Peers % Strategic Alignment Criteria Market Attractiveness Criteria • Leverage Core Assets • Industry Growth • Trans. & Innovation • Industry Profitability • Growth Beyond Core • Addressable Market • LOB Growth • Relative Market Share • Sustain Profitability • Position vs. Market Forces 77
    • Portfolio Assessment Growth CriteriaProfitability Criteria• NPV (5 YR)• EBIT Margin (YR 3)• Cannibalization Strategic Alignment Criteria Market Attractiveness Criteria • Alignment with CCM • Industry Growth • Alignment with BU Strategy • Industry Profitability • Leverage of core assets • Addressable Market • Executability • Market Establishment Risk • Ability to be a disruptor • Susceptibility to Secular Change 88
    • What I’ve Learned• Connecting strategy and budget requires persistence• Not ending up in the top right is okay• Invest in fewer, bigger strategic bubbles• Customer needs should govern bubble definition• Overinvest in risk assessment for growth bubbles 99