Profitability Improvement Challenge

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An enterprise without an effective profitability measurement solution suffer a whale shaped cumulative profit curve, i.e. only around 20% of its customers and products are profitable and they create 150% or more of the enterprise\'s reported profit. Initiatives powered by Acorn solutions help enterprises to improve the shape of their cumulative profit curve and consequently increase profit by 50% or more in a reasonable period of time.

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Profitability Improvement Challenge

  1. 1. UNDERSTAND YOUR ENTERPRISE’S PROFITABILITY CUSTOMER BY CUSTOMER, PRODUCT BY PRODUCT, CHANNEL BY CHANNEL TO DRIVE PROFITABLE GROWTH PROFITABILITY IMPROVEMENT CHALLENGE UNLEASH THE PROFITABILITY IMPROVEMENT POTENTIAL OF YOUR ENTERPRISE AND INCREASE OPERATING PROFIT BY 50% OR MORE Powered by Go to Acorn homepage http://www.acornsys.com/
  2. 2. Does your enterprise suffer from a whale shaped cumulative profit curve? CUMULATIVE OPERATING PROFIT CURVE Cumulative operating profit (product / SKU or customer / point of sale) A Profit improvement potential B Profitable (A) P 1,5 x Reported (B) Most profitable customers/ products Most loss making customers / products A – sum of net operating profit generated by profitable products / SKUs or customers / points of sale B – agreggate net operating profit (EBIT) as reported on a consolidated Profit & Loss Account 2
  3. 3. UNDERSTAND YOUR ENTERPRISE’S PROFITABILITY CUSTOMER BY CUSTOMER, PRODUCT BY PRODUCT, MARKET BY MARKET TO DRIVE PROFITABLE GROWTH CHOOSE BETWEEN TWO INITIATIVES ONE-OFF DUE DILIGENCE EXERCISE OR FULL INTEGRATION OF THE ACORN SOLUTION INTO AN ENTERPRISE’S MANAGEMENT SYSTEM We commit to helping you improve your operating profits by as much as 50% or more in a reasonable period of time by delivering full cost transparency and a uniquely detailed and cross-dimensional insight into profitability of your transactions - customer by customer, product by product, SKU by SKU, market by market… The choice between (i) a 5-10 week consulting project requiring minimal engagement of your resources or (ii) a full integration of Acorn’s solutions into your business system requiring 5-10 months to implement Anything but a black-box solution – fully auditable and verifiable results of the analysis, including reconciliation with the financial accounting reporting structures Fully compatible to your ERP, BI or warehousing systems (home-grown, Oracle, Microsoft, Infor, SAP, Navision, Business Objects, Cognos, Hyperion, MicroStrategy, Excel, Access, etc.) In case of the one-off due diligence project, no installation of software or any other changes required in existing data collection and storage information systems and technology
  4. 4. The Imperative to Understand Customer and Product Profitability “ARE OUR CUSTOMERS AND PRODUCTS PROFITABLE OR NOT – AND WHY?!” [SO EASY TO ASK – SO DIFFICULT TO ANSWER!] CROSS- AND MULTI-DIMENSIONAL ANALYTICS REQUIRED TO UNDERSTAND PROFITABILITY CANNOT BE PRODUCED AD HOC BY HAND USING EXCEL SPREADSHEETS AND TRADITIONAL ACCOUNTING RECORDS – TIME AND AGAIN, ATTEMPTS TO DO SO RESULT ONLY IN FRUSTRATED ANALYSTS AND DISAPPOINTED EXECUTIVES UNDERSTANDING PROFITABILITY REQUIRES A COMPLEX, FORWARD LOOKING AND SYSTEMATIC EFFORT WITH REGARD TO ALLOCATION, INTEGRATION AND STORAGE OF DATA REQUIRED TO PRODUCE CROSS- DIMENSIONAL PROFITABILITY ANALYSIS 4
  5. 5. So easy to ask – so difficult to answer! KNOWING SIMPLY WHAT IS (UN)PROFITABLE IS NOT ENOUGH TO MAKE DECISIONS TO IMPROVE PROFITABILITY Business dimension PRODUCT YOU HAVE TO KNOW WHY?! SOMETHING Business dimension CUSTOMER Profitability by product, mio € S IS PROFITABLE OR NOT TO ACT ON AN Prod1 Prod1 Prod3 Prod4 Prod5 ANALYTICAL FINDING Cust1 x x x x x 5,7 TO KNOW WHY? YOU NEED MULTI- DIMENSIONAL AND CROSS-DIMENSIONAL Profitability by customer, mio € Cust2 x x x x x 9,1 ANALYTICS PRODUCT BY PRODUCT, ? CUSTOMER BY CUSTOMER, PROCESS BY Cust3 x x x x x -4,9 PROCESS – TRANSACTION BY TRANSACTION Cust4 x x x x x 7,3 FOR EXAMPLE, NEGOTIATING WITH A CUSTOMER TO IMPROVE PROFITABILITY Cust5 x x x x x -3,9 REQUIRES KNOWING WHICH PRODUCTS Cust6 x x x x x 5,1 THAT YOU ARE SELLING TO THAT PARTICULAR CUSTOMER ARE PROFITABLE Cust7 x x x x x 1,3 AND WHICH ARE NOT, AND MOREOVER WHY ARE THEY (UN)PROFITABLE S 12,3 21,9 -12,7 7,5 -9,3 19,7 5
  6. 6. Profitability is no single number – it varies with dimensions analyzed! 16 DIFFERENT PROFITABILITIES OF THE SAME PRODUCT OR CUSTOMER!? YES!! A PRODUCT MAY BE PROFITABLE IN AGGREGATE, BUT ITS PROFITABILITY VARIES WITH BUSINESS DIMENSIONS, E.G. GEOGRAPHIC MARKET AND CUSTOMER SEGMENT: THE PRODUCT IS ACTUALLY LOSING MONEY IN TWO OF THE FOUR MARKETS, I.E. IN BULGARIA AND CROATIA. DISTRIBUTORS ARE THE MOST PROFITABLE CUSTOMERS, WHILE HORECA SEGMENT BARELY COVERS ITS COSTS PROFITABILITY VARIES THE MOST WITHIN CROATIA AND WITHIN DISTRIBUTORS CUSTOMER SEGMENTA 6
  7. 7. Do not use a fork to eat soup … traditional book-keeping and financial accounting performance measurment systems are far from effective Source: Michael Maher University of California, Davis Cost accounting – Creating Value for Management 5th edition, Irwin McGraw-Hill 7
  8. 8. ACORN’S EXPERIENCE AND ACADEMIC RESEARCH TESTIFY THAT IF YOU DO NOT HAVE ACORN’S ANALYTICAL AND TECHNOLOGICAL CAPACITY … 8
  9. 9. … only around 20% of your products and customers is profitabile 2000 Arranging customers or products by profitability MOST (measured by net operating profit) PROFITABLE CUSTOMER / PRODUCT / SKU 1500 ~ 20% ~ 60% ~ 20% Net operating profit 1000 500 MOST MONEY 0 LOSING CUSTOMER / PRODUCT / SKU 1 2 3 4 5 6 7 8 910 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 -500 Making money Breaking even Losing money -1000 Experience of 250+ Acorn implementation projects 9
  10. 10. Academic research supports Acorn’s experience 10
  11. 11. ACORN’S HOLISTIC AND ONE-STOP SOLUTION IS USED BY THE WORLD’S RENOWNED ENTERPRISES AND IS COMPLEMENTARY TO ANY INFORMATION SYSTEM ENVIRONMENT… 11
  12. 12. Holistic and one-stop solution – transforming raw data into an efficient cost control and profitability analysis reporting capacity BI platforms [and Product Brand Customer Point-of-sale Supplier Acorn’s own profitability profitability profitability profitability profitability functionality] QUERYING Acorn’s PROFITABILITY ANALYSIS DATABASE (DATA MART) solution DATA INTEGRATION (ETL) FINANCIAL ALLOCATIONS METHODOLOGY and MODELING TOOL LDSS LDSS LDSS LDSS LDSS LDSS LDSS Existing legacy BIS/IT/ WH Legacy Data Storage Systems environments (e.g. SAP, TPS TPS TPS TPS TPS TPS TPS Navision, Excel, Oracle, etc.) Legacy Transaction Processing Systems 12
  13. 13. Time driven ABC – advanced financial allocations methodology 13
  14. 14. Acorn Works in Any Environment – Easily and Cost Effectively 14
  15. 15. Acorn Clients Financial Services Retail & Consumer Products Wholesale, Distribution & Logistics Manufacturing & Other Industries 15
  16. 16. Acorn Systems Inc. – At-a-Glance The Profit Improvement Company Delivering profit improvements to help clients grow profitably, i.e. increase revenues, decrease cost and minimize capital employed / improve operating efficiency The only firm focused solely on providing actionable decision making orientated analytics to improve profitability that does not exist today Proven Client Success 250+ clients around the world $1 billion of profit improvements resulting in $9 billion of additional shareholder value Global Operations Houston, Texas, USA (headquarters), Radnor, Pennsylvania, USA and Amsterdam, The Nederland's Founded in 1996 by Steven R. Anderson, a Harvard Business School and McKinsey alumnus who today serves as a Chairman of the company Association with professor Robert Kaplan from Harvard Business School who co-authored Acorn’s financial allocations methodology and sits on the Board of Acorn Systems Supported by two VC houses: Insight Ventures Partners (www.insightpartners.com) and Austin Ventures (www.austinventures.com) Partnerships with premier technology companies, consulting firms and associations around the globe, including STRATEKS and BATUMAN CONSULTING 16
  17. 17. Senior consultants – Authorized partners of Acorn Systems Branko Greganovič Deniz Batuman STRATEKS – Change Leadership BATUMAN CONSULTING Project role Project role Design of analytical approach and Project management, cost allocation methodology, scoping and structuring of the modeling, system integration, validation, allocation model, Action Plan development and Action Plan development and presentation presentation, quality assurance, Professional background Professional background Deniz has almost 10 years of extensive Branko has more than 20 years of experience experience with Acorn Systems and as an in advisory and executive positions in various independent consultant industries Successfully led numerous Acorn Solutions All-around experience in strategy making, driven consulting engagements based on business analysis and corporate finance, Time Driven Activity-Based Costing & ranging from monetary policy to public debt Management (TDABC/M). management and fiscal policy to banking to Clients come from various industries - M&A advisory to restructuring focused private Financial Services, Consumer Goods, equity role to a CFO position in a leading Manufacturing, Retail, and Distribution with regional food and beverage group. turnovers ranging from $100 million to over $50 billion Sloan Fellow (MSc in Strategy and Leadership), London Business School, MBA/MSc in Information Systems, dual University of London (2001) degree from Boston University (2001) 17
  18. 18. Unleash the profitability improvement potential of your enterprise Profit improvement initiatives Mergers and acquisitions Business process driven management structures Business strategy design and implementation Business and financial restructuring Go to Acorn homepage Branko Greganovic, Managing Partner http://www.acornsys.com/ E-mail: branko.greganovic@strateks.biz Mobile: +386 31 378 687

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