TSS Responsive Strategy Bristol 29 November Graham Burr,
Bristol Tech start-up Strategy event Graham Burr 29th November 2011GBSA Ltd.
Agenda for today 1. Introduction: Why have a strategy? 2. Frameworks and concepts 3. Building a strategic planGBSA Ltd. 2
Introduction: What is strategy?Definition of strategy:A method or plan chosen to bring about a desired future, such as achievementof a goal or solution to a problem www.businessdictionary.com“Strategy is about winning.”“Strategy is a unifying theme that gives coherence and direction tothe actions and decisions of an individual or an organization”Strategy is about how to allocate resources to build competitive advantageGBSA Ltd. 3
Introduction: What are the benefits an drawbacks? Benefits… ..and possible drawbacks • Sets direction ..not blinkered to danger • Focuses effort …lack of peripheral vision • Defines the organisation … but not stereotypes it • Provides consistency …but doesn’t crush creativity Strategy helps keep you focused on where you want to go ....but it has to be responsiveGBSA Ltd. 4
Agenda for today 1. Introduction: Why have a strategy? 2. Frameworks and concepts 3. Building a strategic planGBSA Ltd. 5
Frameworks and concepts:Competitive strategy framework INDUSTRY KEY SUCCESS FACTORS Competitive External assessment of: STRATEGY advantage • Threats • Opportunities DISTINCTIVE COMPETENCIES Internal assessment of Analyses: organisational capability: - SWOT • Strengths -Porter’s five forces • weaknesses -“right to win” • Goals and Values • Resources and CapabilitiesGBSA Ltd. (tangible, intangible, human) 6
Frameworks and concepts:Porter’s five forces of competition framework SUPPLIERS Bargaining power of suppliers INDUSTRY POTENTIAL Threat Threat of of new COMPETITORS SUBSTITUTES substitutes ENTRANTS entrants Rivalry amongst firms Bargaining power of buyers BUYERSGBSA Ltd. 7
Frameworks and concepts:SWOT Strengths Weaknesses What strengths does the Where is it weak: business have: -Depth of talent -Technology -- acces to cash -Reputation -Route to market -Contacts Opportunities Threats What opportunities are Where are the threats that there: could de-rail the strategy: -New customers -Look externally (e.g. new -- extensions to existing entrants or technology products -- internally Cash, resource? -New regionsGBSA Ltd. A structured evaluation as input to strategy 8
Frameworks and concepts:“Right to play”Do we have competitive advantage that will drive success andsustainable profitability?Brand permission– are we credible in this space?Differentiation- Is our technology/quality/service proposition different?- Could it command a higher price?Business system- Do we have a more effective “route to market”? Does it have lower costs (scale)? Greater negotiating strength ?- Does it have an advantaged supply chain (lower conversion? better buying?)?GBSA Ltd. 9
Agenda for today 1. Introduction: Why have a strategy? 2. Frameworks and concepts 3. Building a strategic planGBSA Ltd. 10
What Should We Expect To see In The 3 Year Plan?The •Business scorecard (key metrics)Situation •Macro factors (Market, Consumer, Trade, Competitors) Where are we? Get real and factual !Analysis: Develop The Growth Plan Fund It Sell it Develop market map Address opportunity: Marketing plan: How much investment/from •Strategic cuts based • “Right to play” •How do I reach where: on consumers/ (Brand technology, customers? What competitive set business system) does it cost? •Capex •Segment •What can we do? •What do I tell them •WC (stocks and attractiveness How? (viable volume (USP) creditors) (growth, profitability) scenarios) •Sources of funds (loans, investors) Big areas of opportunity Big things we want to Inform and “white space” do and CAN do convince customers Be realistic Wrap into Financial Algorithm •Pull together different initiatives (profitability, investments, growth) •Iterate / flex to meet timing, growth risk needs GBSA Ltd. THE BUSINESS 3 YEAR STRATEGIC PLAN 1
The Situation Analysis: What’s Needed The objective is to identify the issues that we need to address as a business: • By understanding what has driven our business performance • By quantifying the macro-environmental factors that affect us To ensure the strategic plan is firmly rooted in reality Business Scorecard Checklist Macro/Environmental Back drop Financial Performance Category trends and driver What are the trends that worry us? Are we aligned with these trends? Market performance Competitive and trade dynamics Are we increasing our market presence? What impact on our run rate? There is real benefit in quantifying and formalising what you know! Link to SWOT to get implicationsGBSA Ltd. 4
Section 2 Develop market map: where to play “large growing segments?”GBSA Ltd.
Develop The Market Map Not a huge exercise – you have all the data. Uncoated Kids Adult food Snacks Premium Etc. 1. Get the right dimensions - Practical vs. where the “rules of ROB the game” are similar (consumer occasion and competitive set) - Self contained (few substitutes) (include chilled and fresh?) Other 2. Growth: Comp. 1 Understand consumer drivers of growth for each? Is it attractive? Wil Comp growth continue? .2Competitive 3. Profitability: X Volume Repeat Understand competitive set and set X Value by the “rules of the road” (pricing, X Profit (indicative) segment brand, quality?), plus indications of profitability (best estimates) Where are the big areas of attractive opportunity GBSA Ltd. What is the competitive set we need to fight 5
Section 3 Address Opportunity: Competitive position and where do we have a “right to play”, what rules by segmentGBSA Ltd.
Address The Opportunities To drive profitable growth we need to move from “white space” to areas where we have a “right to play”. clientConsumer Competitor Do we have competitive If we do … what are the viable volumePrice advantage? Scenarios at acceptable profitability?Trade Margin Brand Credibility What will we do in each /technology/quality area? to drive a higher price Demand + building Establish our propositionSelling and More effective “route to market” Identify likely share stealDistribution - lower cost (scale?) /distribution - negotiating strength (trade margin) Develop PricingSupply Chain + /differentiation and Advantaged supply chain demand building approachRaw Materials - lower conversion - better buying Profit The “Right to Play” means The big things we want to do GBSA Ltd. Sustainable Profitability 6
Wrap Into Financial AlgorithmDefine the Algorithm that delivers our profit target Pull together the initiatives to give (% CAGR, 07-10) A "Strawman" an acceptable algorithm Category Growth • Overall category back into growth Volume – steal share from "chilled" and Fresh! Growth 0-5? • Aligned to growth – push on growth country/segment/channel "cells". 10-15? Share Steal Profit • Push back private label (pricing, Growth Target 10+ differentiation, trade story). • Attack weaker branded specialists. 20+ Manage the trade-off Pricing/Unit • Premiumize (innovation, segment/occasion Margin/Unit choice, overall brand building, trade Growth +5 support). • Optimised pricing architecture. +5? Cost/Unit • Close "profit holes" in existing business. • Innovation/quality/brand building investment. – • Efficiencies (especially leverage cross- segment and cross country scale). GBSA Ltd. Bigger, more sustainable growing business 66563-gb-ad- 7
Choosing your position on the growth/margin curve is a big decision- but pricing/ margin will be a big part 20.00 18.00 16.00 14.00Volume growth (%) 12.00 ((0.25), 11.0) 10.00 8.00 (0.50, 5.7) 6.00 4.00 2.00 0.00 (1.50) (1.00) (0.50) 0.00 0.50 1.00 1.50 Change in gross margin (ppt)GBSA Ltd.
..but there are lots of ways to do it: pricing/mix/trade terms and trade offs (investments vs. savings) 9% EBITDA growth per annum 3-4% annual volume 0.75 ppt of EBITDA margin 1% pricing growth (4% pa growth) • €200+ million of incremental sales in 3 years (€50 million of which is to offset decline in non –core categories) A&P Trade terms Mix Fixed costs Supply Chain • More and • Holding flat • Managing • Up to • 0.5ppt p.a. more vs. channel mix, but 0.25ppt p.a. needed or effective dynamics entering from volume (50% pass A&P needed and trade some lower leverage through) to to drive power margin above growth (no already a sectors saving) stretch.GBSA Ltd.
Building a strategic plan: Summary 1. Situation analysis – get real, get factual and link to SWOT to get implications 2. Develop market map: where to play “large growing segments?” 3. Address Opportunity: Competitive position and where do we have a “right to play”, what rules by segment 4. Fund it and sell it (enough financial and human resources to do both) 5. Wrap Into Financial Algorithm – manage the margin/volume trade-offsGBSA Ltd. 20