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Increase Your Company's Value: Use the Value Multiplier

The document discusses how business models are disrupted by technological revolutions. It outlines four major revolutions: the Industrial Revolution, Services Revolution, Information Revolution, and current Digital Revolution. Each revolution shifts the focus of businesses and requires new financial and operating measures. The Digital Revolution in particular is built upon networks and relationships rather than assets. It favors models where many producers make and sell goods rather than centralized production models. However, the document notes most companies still lack readiness for digital transformation.

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Business Model Disrupted The Value Multiplier Four Steps to Creating More Value and Better Performance August 2014
Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Different  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
Acquired  by  Facebook   for  ~19x  revenue   Raised  funding  at   valua-on  of  ~40x   revenue   Raised  funding  at   valua-on  of  ~50x   revenue   Recent  IPOs  and  investments  highlight  value  of  Digital
Q. Which of the following technology enablers and/or disruptors do you believe may threaten your business model?   *Exploring  Strategic  Risk,  DeloiVe  Touche  Tohmatsu,  2013,  www.deloiVe.com/strategicrisksurvey     53%  believe  Digital  threatens  exis?ng  business  models
Making  it  the  number  2  strategic  risk Q:  Which  of  the  following  risk  areas  have  the  most  impact  on  your  business  strategy  (three   years  ago,  today,  and  three  years  from  now)?  (Respondents  could  choose  more  than  one  answer.   The  top  three  are  shown  below)   *Exploring  Strategic  Risk,  DeloiVe  Touche  Tohmatsu,  2013,  www.deloiVe.com/strategicrisksurvey    
21%   21%   19%   15%   14%   Our  CEO  sets  a  clear  vision  for  digital  in   our  business   We  have  the  right  people  to  define  our   digital  strategy   We  have  the  necessary  technology  to   execute  our  digital  strategy   We  have  the  necessary  people  and  skill   to  execute  our  digital  strategy   We  have  the  necessary  processes  to   execute  our  digital  strategy   “Assessing  your  organiza-on’s  digital  readiness,  how  much  do  you  agree  with   the  following  statements?”   (8,  9,  or  10  on  a  scale  of  1  [completely  disagree]  to  10  [  completely  agree])   Base: 1,254 executives in companies with 250 or more employees *Forrester/Russell  Reynolds  2014  Digital  Business  Survey   But,  Forrester  Research  says  few  companies  are  ready
1991 2011 Exxon Mobil Corp Exxon Mobil Corp Altria Group Inc. Apple Inc. Wal-Mart Stores Inc. Microsoft Corp General Electric Co Intl Business Machines Corp Merck & Co Chevron Corp Coca-Cola Co Wal-Mart Stores Inc. AT&T Corp Berkshire Hathaway Intl Business Machines Corp General Electric Co Bristol-Myers Squibb Co Procter & Gamble Co Johnson & Johnson AT&T Inc. Same position Higher positionLower positionNew entrant Lost position Source: Compustat data Business  Models  Effect  Even  Most  Valuable  Companies
So  how  did  we  get  here?
Industrial     revolu-on  —  1800   Services     revolu-on  —  1975   Informa-on   revolu-on  —  1990   Network   revolu-on  —  2010   Technology   Time   Each  Revolu?on  was  built  on  the  last
Industrial  Revolu5on     Began  a  new  era:          Away  from  Agriculture   •  Focused  inside  on   manufacturing  and  internal   processes…     •  New  financial  and  opera-ng   measures   •  Physical  output   •  Asset  u-liza-on   •  ROA   Digital  Revolu?on     Beginning  a  new  era:                Away  from  Info. •  Focused  outside  on  social   and  commercial  networks   and  the  big  data   produced… •  New  financial  and   opera?ng  measures •  Network  size   •   Crowdsourcing   •   Value  of  all  intangibles     Informa5on  Revolu5on       Began  a  new  era:                  Away  from  Services   •  Focused  inside  on   intellectual  property,   digi-zing  content  and   insights…   •  New  financial  and  opera-ng   measures   •  Crea-ve  output   •  R&D   •  ROI       Services  Revolu5on     Began  a  new  era:                  Away  from  Industrial   •  Focused  inside  on     hiring  and  training   employees  to  provide   services…   •  New  financial  and  opera-ng   measures   •  Revenue/employee   •  Customer  sa-sfac-on     Industrial Revolution ~1800 Services Revolution ~1975 Information Revolution ~1990 Digital Revolution ~2010 •  Key  Asset:    CapEx   •  Key  Asset:    Human   capital   •  Key  Asset:    IP   •  Key  Asset:    Network  /   rela-onships   New  Eras,  New  Models,  New  Assets
Industrial  Revolu5on      Make  one,  sell  one               •  Focus:    High  fixed  costs,   Field  (Ins-tu-onal)  sales;     big  accounts   •   Key  Industries   •  Manufacturing   •  Transporta-on   •  Energy   •   Key  Competencies   •  Finance   •  Manufacturing   •  Distribu-on   Digital  Revolu?on   Many  make,  many  sell         •  Focus:    Even  lower  fixed   costs,  higher  gross   margins;  Inbound   marke?ng  (consumers) •  Key  Industries •   Online  marketplaces   •   Social  sorware   •   Big  data   •  Key  Competencies •  Consumeriza-on   •  Mobility     •  Engagement   Informa5on    Revolu5on   Make  one,  sell  many               •  Focus:    Lower  fixed  costs   and  higher  gross  margins:     Blended  sales;  SMB   •  Key  Industries   •  Enterprise  sorware   •  Biotechnology   •  Publishing   •   Key  Competencies   •  Enterprise  Technology   •  IP  development   •  Content   New  models,  new  economics,  new  assets Services  Revolu5on     Hire  one,  sell  one               •  Focus:    Shir  of  capital  from   CapEx  to  salary;  customer   in-macy   •  Key  Industries   •  Finance   •  Enterprise  Sorware   •  Publishing   •   Key  Competencies   •  Recrui-ng  and  training   •  Customer  service   •  Lifecycle  support   Industrial Revolution ~1800 Services Revolution ~1975 Information Revolution ~1990 Digital Revolution ~2010
Network   Orchestrators   Technology   Creators   Service    Providers   Asset    Builders   Key assets Key competencies Key industries •  Relationships •  Network •  Knowledge •  Software •  IP •  Skilled employees •  PPE •  Consumerism •  Mobility •  Engagement •  Research & development •  Communication •  People services •  Manufacturing •  Distribution •  Social software •  Big data •  Software •  Biotech •  Energy •  Transport •  Retail •  Financial •  Healthcare •  Insurance Different  eras  create  different  industries  and  assets
Network   Orchestrators   Technology   Creators   Service    Providers   Asset    Builders   Different  eras,  have  different  business  models Many Make, many sell Make one, sell one Hire one, sell one Make one, sell many Build Platform
Technologies   Newer  Older   Low   High   Growth  and  Value   The  marginal  cost  for  scaling  goes  down  with  each  model! Result:  Different  models,  different  results Asset   Builders   Service   Providers   Technology     Creators   Network   Facilitators  
Exercise:    which  business  model  are  you? ?   How  do  you  make  and  spend  money?
As  noted,  there  are  four  business  models… Sorware  and   IP   (IQ)   Networks  and   big  data   (NQ)   Assets  and   products   (PQ)   People  and   services   (EQ)   The  digital  divide  
Exercise:  what  is  your  business  model? 1.  Consider  your  revenues   and  ask…   2.  Where  do  most  of  our   revenues  come  from…   3.  Then,  place  a  post-­‐it  note   on  one  of  4  quadrants…   4.  Understand  what  this   means  for  how  your  firm   makes  and  spends  money   Sorware   and  IP   Networks  &   big  data   Assets  &   products   People  &   services  
Exercise:  How  do  you  make  and  spend  money?
Asset  Builders:  Make,  market,  distribute,  and  operate  physical   assets  and  sell  products.  Invest  in  building/acquiring/managing   PP&E.  Examples:  auto,  real  estate,  advanced  materials,  u@li@es,   airlines,  and  telecom.       Service  Providers:  Hire  people  to  produce  services  for  which   they  charge.  Invest  in  hiring/training,  ren-ng  space.  Examples:   investment  banking,  healthcare,  customer  service,  accoun@ng,   and  management  consul@ng.     Technology  Creators:  Develop  and  sell  IP.  Invest  in  developing/ marke-ng  IP  to  more  users/subscribers  (not  making  more  of  the   same).  Examples:  soAware,  high  tech,  bio  tech,   pharmaceu@cals,  Fin  Tech,  and  data.     Network  Orchestrators:  Create  networks  of  businesses/ consumers  who  interact  to  sell  products,  build  rela-onships,   share  advice,  exchange  financial  instruments,  etc.  Invest  in   technology  plauorms  and  growing  networks.    Examples:  social   networks,  commercial  networks,  and  financial  exchanges.       Other,  please  specify  ________________   100%  100%   Earnings   contribu-on   propor-on   Capital   Investment   propor-on   %   %   %   %   %   %   %   %   %   %   Please  describe  your  earnings  and  investments    u5lizing  the  four  basic   business  models  below.     First  aVempt  to  simplify.    (1)  Cut  out  the  “count”  column,  (2)  re-­‐worded  ques-on,     (3)  eliminated  “scales  by”  sec-on  of  each  descrip-on,  (4)  shortened  remaining  wording.   Make,  market,  distribute  and  operate  physical  assets  and  sell   products:  Examples  include  auto,  real  estate,  advanced   materials,  u@li@es,  airlines  and  telecom.       Design,  market  and  provide  services:  Examples  include   investment  banking,  healthcare,  customer  service,  accoun@ng,   informa@on  services  and  consul@ng.     Develop,  market  and  sell  intellectual  property:    Examples   include  soAware,  high  tech,  bio  tech,  pharmaceu@cals,  Fin   Tech  and  big  data.     Create,  market  and  operate  networks  of  businesses,   consumers,  investors,  etc.:  Examples  include  social/ commercial  networks  and  financial  exchanges.       Other,  please  specify  ________________   100%   100%   Earnings   contribu-on   Capital    alloca-on   %   %   %   %   %   %   %   %   %   %   How  much  do  the  following  business  ac5vi5es  contribute  to  your   earnings  and  consume  of  your  investments?     Shirs  away  from  “business  model  terminology”  and  toward  “ac-vity  terminology.”  Removes  “Invests   in”  descrip-on  but  retains  examples  of  industries   Make,  market,  distribute  and  operate  physical  assets  and  sell   products       Design,  market  and  provide  services     Develop,  market  and  sell  intellectual  property     Create,  market  and  operate  networks  of  businesses,   consumers,  investors,  etc.       Other,  please  specify  ________________   100%   100%   Earnings   contribu-on   Capital    alloca-on   %   %   %   %   %   %   %   %   %   %   How  much  do  the  following  business  ac5vi5es  contribute  to  your   earnings  and  consume  of  your  investments?     Same  as  above  but  removes  examples  of  industries  –  assumes  these   descrip-ons  will  fit  CFOs  percep-ons  of  what  they  do.   Exercise:    How  Do  You  Classify  Yourself  (Placeholder)
Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Different  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
Industries  are  Ver?cals,  Business  Models  are  Horizontal Network  Orchestrator   Technology  Creators   Service  Provider   Asset  Builders  
Size of circle represents number of companies within industry Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013,; Revenue is LTM Average Multiplier The  Value  Mul?plier  is  Inversely  Correlated  with  Tangible  Assets
Assets 2x Services   3x   Size of circle represents number of companies within industry or multiplier group Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013,; Revenue is LTM Average Multiplier Industries  have  some  affilia?on  with  Business  Models Tech 5x NW 8x •  Intercon-nental Exchange  Group   •  Discover   Financial   •  TripAdvisor   •  Visa   •  MasterCard   •  CME  Group   •  Salesforce.com   •  Red  Hat   •  Google   •  eBay   •  American   Express   •  Apple   •  Nike   •  Nasdaq  OMX  
Intangible Assets are now 80% of Market Value, Up from 20% Source: Compustat data | Research from Ocean Tomo
0.62   0.40   0.31   0.00   Assets   Svcs   Tech   Network   Average  COGS/Revenue   0.15   0.27   0.28   0.41   Assets   Svcs   Tech   Network   Average  SG&A/Revenue   Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months Leaders  spend  money  based  on  their  business  model 0.01   0.00   0.15   0.06   Assets   Svcs   Tech   Network   Average  R&D/Revenue  
Result:  Network  business  models  grow  faster… 8.4   7.9   12.6   19.4   Assets   Svcs   Tech   Network   Avg.  Revenue  CAGR  ’10-­‐’12   The  digital   divide   Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months …  with  lowest  marginal  cost  of  expansion
…highest  profit  margins… 0.15   0.14   0.24   0.32   Assets   Svcs   Tech   Network   Average  Profit  Margin   0.23   0.21   0.30   0.38   Assets   Svcs   Tech   Network   Average  EBITDA/Revenue   Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013; Revenue is prior 12 months
2.0   2.1   4.6   8.1   Assets   Svcs   Tech   Network   Average  Mul5plier  (Price  to  Revenue  ra5o)   …as  well  as  enterprise  value  premiums! Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months The  digital   divide  
Network  business  models  are  fastest  growing 0%   20%   40%   60%   80%   100%   1972   1982   1992   2002   2012   Types  of  companies*  comprising  the  top  5%  of  the  S&P  500  by  P/R   Assets   Services   Technology   Network   *Each  company  manually  classified  based  on  examina-on  of  business  descrip-on,  spending,  and  MD&A  from   annual  report,  along  with  press  releases  and  other  news;  company  classifica-on  was  changed  if  company  strategy   changed  over  -me   The  network  era  
0.00   2.00   4.00   6.00   8.00   10.00   1975   1980   1985   1990   1995   2000   2005   2010   2013   Average  P/R  Ra5o  by  Business  Model  Historically   Network   Informa-on   Services   Industrial   *Digital CAGR is 1980 – 2013 Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013; Revenue is prior 12 months CAGR   1975  –  2013 8.7%* 2.7% 4.5% 3.4% This  trend  is  accelera?ng  and  premiums  are  widening Assets   Technology  
0   20   40   60   80   100   120   140   160   0   1   2   3   4   5   6   7   8   9   10   11   12   13   14   15   16   17   18+   Distribu5on  of  S&P  500   Investors  pay  more  than  $18  for   each  $1  of  revenue   Investors  pay  less  than  $1  for   each  $1  of  revenue   But:    80%  of  companies  are  s?ll  asset  and  services  firms Number of companies that fall within each range 80% of companies have P/R ratio less than 3
Exercise:    which  business  model  are  you? ?   How  do  you  make  and  spend  money?
Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
Our  research  indicates  that  Business  are  f(Mental  Models) Mental  model   Business  model   •  What  leadership…   •  Believes  is  important   •  Has  developed  their  own  skills   •  Gives  -me  and  aVen-on   •  Measures  and  reports   •  How  a  company…   •  Spends  and  makes  money   •  Hires  people  and  builds  skills   •  Engages  with  customers   •  Generates  long  term  growth  &  performance   Depends  on  leaders  ahtudes,  biases  and  beliefs
Exercise:    What’s  Your  Mental  Model ?   What  is  your  leadership  Style?
Take  the  Survey:    Find  Your  Mul?plier
There  are  Four  Different  Business  Models Technology   Creators   Network   Facilitators   Asset   Builders   Service   Providers   The  digital  divide   Social  networks   Stock  exchanges   Credit  card  companies   Financial  services     Insurance  companies   Consultants  Manufacturers   Retailers   Distributors   Drug  companies   Biotech  companies   SW  developers  
Each  Business  Model  Has  its  Own  Mul?plier  Effect The  digital  divide   4   8   1   2   Assets   Services   Technology   Network   Focus   Investment   Inside  Outside   Intangible  Tangible  
…as  well  as  business  model  risks IP  &   sorware   Risks   Reputa-on   &  network   Risks   Asset  &   Product   Quality  Risks   Employee  &   Training   Risks   The  digital  divide  
Exercise:    What  is  your  Mul?plier  Effect? ?   …Calculate  the  value  of  your  business  model
Take  the  Survey:    Find  Your  Mul?plier
Alterna?ve:    Es?mate  your  P/R  ra?o   1.  Write  your  company  name   on  post-­‐its   2.  Es-mate  your  P/R  ra-o   3.  Place  post-­‐its  on  the  scale   on  the  white  board   4.  We  will  provide  the  actual  P/ R  ra-o   5.  Discuss  the  difference   Client  4   Network   8   Client  1   Physical   2   Client  3   Info.   5   Client  2   Services   3   High   Low   The  digital  divide  
Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  your  capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
Add Create Eliminate Revise Use  CARE  to  Reallocate  your  capital
The  Value  Mul?plier:      4  Step  Process Orienta-on   What:    There  are  4  standard  business  models,  each  with  their  own  archetypes,   assets,  and  Value  Mul-plierssm.       How:    The  Value  Mul@plier  EBook  and  The  Value  Mul@plier  Research  EBook,   Infographic  ,  instruc@onal  videos  (3),  and  ar@cles.   Assessment   What:    Companies  can  ascertain  their  business  model  index,  leadership  style,   and  all  the  sources  of  value.     How:    www.Digitalgrader.com  which  includes  Business  Model  Indexsm  and   Leadership  Stylesm  (Forthcoming)  and  Digital  Inventory  Managersm  apps.   Ac-on   What:    Organiza-ons  can  outperform  their  compe--on  by  crea-ng  network   centric,  P:P  business  models.     How:    By  realloca@ng  capital  to  build  network  centric  business  models  using  our   CAREsm  app  (Forthcoming),  Workbook,  Curriculum,  and  Standard  Presenta@on.   Measurement   What:    Generally  Accepted  Accoun-ng  Procedures  (GAAP)  either  mis-­‐categorize   or  overlook  many  of  today’s  most  valuable  assets.     How:    Use  our  Digital  Inventory  Managersm  to  integrate  big  data  and  financial   data  to  track  all  the  sources  of  value  in  real  @me  (forthcoming).    
Remember:    there  are  four  ‘assets’  in  which  to  invest Asset   Examples   Tangible   Financial   Stocks,  Bonds,  Warrants,  Op-ons   Physical   Plant,  Property,  Equipment   Intangible   Human   Employees,  Partners,  Contractors   Intellectual   Data,  Knowledge,  Sorware   Network   Customers,  Partners,  Alumni,  Prospects  
Exercise:    Think  About  How  to  Reallocate  your  Capital ?   Use  CARE  to  rebalance  your  pornolio
Take  Care  Program:    4  Steps  to  Success
CARE:      Reallocate  your  capital Por_olio  of   Tangible  and   Intangible   assets   Create   Asset  will  operate   more  efficiently  if   decreased  in  scale  or   scope   Add   An  opportunity  has   been  iden@fied  to   create  an  en@rely  new   and  valuable  product/ asset   Revise   Asset  ahs  poten@al  to   increase  value  crea@on   by  adding  new   components  (features,   customers,  etc.)   Eliminate   Asset  is  no  longer   valued  or  is   underperforming  with   no  path  to   improvement   Asset  1   Asset  2   Asset  3  
Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
Reward Risk Biologic alassets Financialassets Inventories Property,plantandequipment Non-current assets Employee benefits Depreciation Payroll Interest expenses Terminationbenefits Interactions Consumer sentiment Patients Socialnetworks Customers Positive bias Negative bias Non categorized Positive bias Assets Negative bias Expenses Neutral Bias Not categorized Some  Assets  have  Nega?ve  Bias,  Some  Posi?ve
Outside Managed Outside unmanaged Inside managed Inside unmanaged To  Compensate,  Examine  All  the  Sources  Of  Value
Measurement Capital Sources Examples Inside  Managed   Financial   Return on Asset, Return on Investment, Assets under management Inside  Managed   Physical   Rent, SF under management, utilization/occupancy rate Inside  Unmanaged   Human   Intellectual capital, Employee engagement, networks, alumni Outside  Managed   Intellectual   Patents, Trademarks, Copyrights, business methods Outside  Managed   Customers   Loyalty, customer engagement, co- creation, word of mouth marketing, Outside  Unmanaged   Network   Size of network, number of participants, number of interactions, data size, vitality Examples  of  Different  Measurements  by  Quadrant
Exercise:    What  is  our  business  model  worth ?   And  what  is  the  marginal  cost  for  scaling?
Inventory  all  your  sources  of  value
Human  capital   Intellectual  capital   Network  capital   Business   unit   Employees   Partners   Contractors   Data   Knowledge   Sorware   Customers   Partners   Alumni   Prospects   BU1   BU2   BU3     Intangible  Asset  Inventory  Tool
Alterna?ve:  Value  all  your  intangible  assets •  Use  finance.yahoo.com  to  find       •  Market  Value     •  It  is  found  under  Key  Sta-s-cs   •  Determine  your  Non  assets   •  In  addi-on,  write  down  your  key   sta-s-cs:   •  Revenues   •  Expenses   •  Profits  
Co. A FYxx Intangibles value $6B Revenue $40B Technology COS % GM% 22% SGA% 20% Operating Margin % (.5%) Market Value $9B Price To Revenue 0.2 Total Assets $20B Total Liabilities $15B Intangible Assets (Market) $4B Intangible Assets (Acquired) $1B Physical Assets $15B Co. B FYxx Intangibles value $106B Revenue $60B Technology COS 7% GM% 14% SGA% 12% Operating Margin % 1.0% Market Value $115B Price to Revenue 2.0 Total Assets $30B Total Liabilities $20B Intangible Assets (Market) $105B Intangible Assets (Acquired) $3B Physical Assets $28B Source:  Company  10-­‐K     Case  Study:    Company  A  versus  Company  B
•  Market  value  is  considered  to  be  the  present  value  of  future  discounted  cash   flows   •  Despite  being  rela-vely  same  sized  ($40B  and  $60B),  and  both  delivering   opera-ng  margins  (~1%),  the  market  views  company  B  as  13x  more  valuable   •  So  why  does  the  market  believe  Company  B’s  future  cash  flows  will  be  so   much  higher  than  Company  A’s?   •  The business model, clicks are more scalable than bricks •  The management team, and the employees (human capital) that understand the newer business model •  The customer, company B uses technology “as the business”, while Company A uses technology “to support the business” •  Recognizing  that  both  companies  have  strong  brand  and  reputa-on,  the   market  gives  Company  B  credit  for  over  $100B  in  addi-onal  intangible  assets   Note:    The  market  value  of  Intangibles
•  Split  into  four  working  groups,  which  will  each  tackle  one  of  the  following   topics:   1.  Who  at  the  client  do  you  target? 2.  What  does  the  client-­‐facing  lab  look  like? 3.  How  do  we  structure  a  strategy  engagement? 4.  How  does  this  align  with  exis?ng  Deloiqe  services •  You  will  have  30  minutes  to  discuss  and  develop  ideas  within  your   working  group •  Each  group  will  then  read  back  out  to  the  lab,  ~10  minutes  per  topic •  Last  topic:  which  clients  do  we  target  (20  min) Note:    For  Each  Working  Session
4  step  process  for  growth  and  performance Measuring   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day   Gather  senior   leadership  in   offsite  mee-ng  to   asses  current   mental  model   assump-ons    and   business  model   investments   Generate  detailed   business  model   ac-ons  by  process   and  product  to   include  digital   networks  star-ng   with  ‘edge  based   ini-a-ves’   Expand  edge   based  digital   networks  and  new   KPI’s  to  create   plauorm  for   business  model   transforma-on   over  -me   Con-nuous  Improvement   Conduct  high   level  analysis  of   capital   alloca-ons  by   SBU  and     inventory  all   intangible  assets   and  enabling  IT    
4  Step  Process:  Orienta?on Assess  Your  Risk  Propensity  and  Business  Model:  The  1-­‐Day  Offsite   •  Understand  business  models  and  their  rela-ve  economics   •  Assess  current  mental  models  of  leadership  team   •  Assess  current  business  model  indicated  by  current  assets  and  technologies   •  Exercises  to  understand  Value  Mul-plier  and  capital  alloca-on   •  Management  team  has  complete  understanding  of  business  model  and  economics,   plus  the  gap  between  current  business  model/performance  and  the  poten-al   Process   Tool   Outcome   Monitoring   On  Going   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
4  Step  Process:  Analysis Inventory  Tangible  and  Intangible  Assets:  The  90-­‐Day  Assessment   •  Cross-­‐func-onal  task  force  formed   •  Team  inventories  current  assets  and  technologies,  plus  capital  alloca-on  paVerns   •  Team  inventories  unmeasured  and  intangible  assets  not  yet  mone-zed  by  firm   •  Mental  Model  Assessment  and  Intangible  Asset  Inventory   •  Management  team  has  complete  understanding  of  the  firms  assets,  both  tangible   and  intangible,  plus  the  related  technologies  and  the  historical  trends  for  capital   alloca-on  among  these  assets   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
4  Step  Process:  Ac?on Create  a  New  Business  Model:  The  6-­‐Month  Implementa5on   •  Form  project  team  to  mone-ze  a  currently  under  u-lized  asset  (oren  a  network  of   customers,  employees,  shareholders,  suppliers,  etc.)   •  Develop  a  technological  plauorm  to  connect  this  popula-on   •  Populate  the  plauorm  with  content  and  product  offerings   •  Create  processes  and  incen-ves  that  encourage  the  network  to  par-cipate   •  Template  for  a  New  Business  Model   •  The  development  of  new  and  highly  scalable  assets  plus  a  repeatable  process  for   con-nuing  to  develop  underu-lized  assets   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
4  Step  Process:  Measurement Monitor  and  Rebalance:  An  Ongoing  Process  for  Delivering  Value   •  Establish  new  and  tailored  KPIs  for  the  developing  asset  (network)     •  Integrate  those  KPIs  with  exis-ng  financial  repor-ng  for  senior  management   •  Use  KPIs  to  manage  and  allocate  financial  capital  across  all  assets   •  Asset  Rebalancing  Tool   •  Management  team  is  informed  about  the  progress  of  network  development,  using   new  KPIs  tailored  to  the  asset  and  can  effec-vely  gauge  success  and  allocate  capital   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  

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Increase Your Company's Value: Use the Value Multiplier

  • 1.
    Business Model Disrupted TheValue Multiplier Four Steps to Creating More Value and Better Performance August 2014
  • 2.
    Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Different  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
  • 3.
    Acquired  by  Facebook   for  ~19x  revenue   Raised  funding  at   valua-on  of  ~40x   revenue   Raised  funding  at   valua-on  of  ~50x   revenue   Recent  IPOs  and  investments  highlight  value  of  Digital
  • 4.
    Q. Which ofthe following technology enablers and/or disruptors do you believe may threaten your business model?   *Exploring  Strategic  Risk,  DeloiVe  Touche  Tohmatsu,  2013,  www.deloiVe.com/strategicrisksurvey     53%  believe  Digital  threatens  exis?ng  business  models
  • 5.
    Making  it  the number  2  strategic  risk Q:  Which  of  the  following  risk  areas  have  the  most  impact  on  your  business  strategy  (three   years  ago,  today,  and  three  years  from  now)?  (Respondents  could  choose  more  than  one  answer.   The  top  three  are  shown  below)   *Exploring  Strategic  Risk,  DeloiVe  Touche  Tohmatsu,  2013,  www.deloiVe.com/strategicrisksurvey    
  • 6.
    21%   21%   19%   15%   14%   Our  CEO  sets  a  clear  vision  for  digital  in   our  business   We  have  the  right  people  to  define  our   digital  strategy   We  have  the  necessary  technology  to   execute  our  digital  strategy   We  have  the  necessary  people  and  skill   to  execute  our  digital  strategy   We  have  the  necessary  processes  to   execute  our  digital  strategy   “Assessing  your  organiza-on’s  digital  readiness,  how  much  do  you  agree  with   the  following  statements?”   (8,  9,  or  10  on  a  scale  of  1  [completely  disagree]  to  10  [  completely  agree])   Base: 1,254 executives in companies with 250 or more employees *Forrester/Russell  Reynolds  2014  Digital  Business  Survey   But,  Forrester  Research  says  few  companies  are  ready
  • 7.
    1991 2011 Exxon MobilCorp Exxon Mobil Corp Altria Group Inc. Apple Inc. Wal-Mart Stores Inc. Microsoft Corp General Electric Co Intl Business Machines Corp Merck & Co Chevron Corp Coca-Cola Co Wal-Mart Stores Inc. AT&T Corp Berkshire Hathaway Intl Business Machines Corp General Electric Co Bristol-Myers Squibb Co Procter & Gamble Co Johnson & Johnson AT&T Inc. Same position Higher positionLower positionNew entrant Lost position Source: Compustat data Business  Models  Effect  Even  Most  Valuable  Companies
  • 8.
    So  how  did we  get  here?
  • 9.
    Industrial     revolu-on  —  1800   Services     revolu-on  —  1975   Informa-on   revolu-on  —  1990   Network   revolu-on  —  2010   Technology   Time   Each  Revolu?on  was  built  on  the  last
  • 10.
    Industrial  Revolu5on     Began  a  new  era:          Away  from  Agriculture   •  Focused  inside  on   manufacturing  and  internal   processes…     •  New  financial  and  opera-ng   measures   •  Physical  output   •  Asset  u-liza-on   •  ROA   Digital  Revolu?on     Beginning  a  new  era:                Away  from  Info. •  Focused  outside  on  social   and  commercial  networks   and  the  big  data   produced… •  New  financial  and   opera?ng  measures •  Network  size   •   Crowdsourcing   •   Value  of  all  intangibles     Informa5on  Revolu5on       Began  a  new  era:                  Away  from  Services   •  Focused  inside  on   intellectual  property,   digi-zing  content  and   insights…   •  New  financial  and  opera-ng   measures   •  Crea-ve  output   •  R&D   •  ROI       Services  Revolu5on     Began  a  new  era:                  Away  from  Industrial   •  Focused  inside  on     hiring  and  training   employees  to  provide   services…   •  New  financial  and  opera-ng   measures   •  Revenue/employee   •  Customer  sa-sfac-on     Industrial Revolution ~1800 Services Revolution ~1975 Information Revolution ~1990 Digital Revolution ~2010 •  Key  Asset:    CapEx   •  Key  Asset:    Human   capital   •  Key  Asset:    IP   •  Key  Asset:    Network  /   rela-onships   New  Eras,  New  Models,  New  Assets
  • 11.
    Industrial  Revolu5on      Make  one,  sell  one               •  Focus:    High  fixed  costs,   Field  (Ins-tu-onal)  sales;     big  accounts   •   Key  Industries   •  Manufacturing   •  Transporta-on   •  Energy   •   Key  Competencies   •  Finance   •  Manufacturing   •  Distribu-on   Digital  Revolu?on   Many  make,  many  sell         •  Focus:    Even  lower  fixed   costs,  higher  gross   margins;  Inbound   marke?ng  (consumers) •  Key  Industries •   Online  marketplaces   •   Social  sorware   •   Big  data   •  Key  Competencies •  Consumeriza-on   •  Mobility     •  Engagement   Informa5on    Revolu5on   Make  one,  sell  many               •  Focus:    Lower  fixed  costs   and  higher  gross  margins:     Blended  sales;  SMB   •  Key  Industries   •  Enterprise  sorware   •  Biotechnology   •  Publishing   •   Key  Competencies   •  Enterprise  Technology   •  IP  development   •  Content   New  models,  new  economics,  new  assets Services  Revolu5on     Hire  one,  sell  one               •  Focus:    Shir  of  capital  from   CapEx  to  salary;  customer   in-macy   •  Key  Industries   •  Finance   •  Enterprise  Sorware   •  Publishing   •   Key  Competencies   •  Recrui-ng  and  training   •  Customer  service   •  Lifecycle  support   Industrial Revolution ~1800 Services Revolution ~1975 Information Revolution ~1990 Digital Revolution ~2010
  • 12.
    Network   Orchestrators   Technology   Creators   Service    Providers   Asset    Builders   Key assets Key competencies Key industries •  Relationships •  Network •  Knowledge •  Software •  IP •  Skilled employees •  PPE •  Consumerism •  Mobility •  Engagement •  Research & development •  Communication •  People services •  Manufacturing •  Distribution •  Social software •  Big data •  Software •  Biotech •  Energy •  Transport •  Retail •  Financial •  Healthcare •  Insurance Different  eras  create  different  industries  and  assets
  • 13.
    Network   Orchestrators   Technology   Creators   Service    Providers   Asset    Builders   Different  eras,  have  different  business  models Many Make, many sell Make one, sell one Hire one, sell one Make one, sell many Build Platform
  • 14.
    Technologies   Newer  Older   Low   High   Growth  and  Value   The  marginal  cost  for  scaling  goes  down  with  each  model! Result:  Different  models,  different  results Asset   Builders   Service   Providers   Technology     Creators   Network   Facilitators  
  • 15.
    Exercise:    which business  model  are  you? ?   How  do  you  make  and  spend  money?
  • 16.
    As  noted,  there are  four  business  models… Sorware  and   IP   (IQ)   Networks  and   big  data   (NQ)   Assets  and   products   (PQ)   People  and   services   (EQ)   The  digital  divide  
  • 17.
    Exercise:  what  is your  business  model? 1.  Consider  your  revenues   and  ask…   2.  Where  do  most  of  our   revenues  come  from…   3.  Then,  place  a  post-­‐it  note   on  one  of  4  quadrants…   4.  Understand  what  this   means  for  how  your  firm   makes  and  spends  money   Sorware   and  IP   Networks  &   big  data   Assets  &   products   People  &   services  
  • 18.
    Exercise:  How  do you  make  and  spend  money?
  • 19.
    Asset  Builders:  Make,  market,  distribute,  and  operate  physical   assets  and  sell  products.  Invest  in  building/acquiring/managing   PP&E.  Examples:  auto,  real  estate,  advanced  materials,  u@li@es,   airlines,  and  telecom.       Service  Providers:  Hire  people  to  produce  services  for  which   they  charge.  Invest  in  hiring/training,  ren-ng  space.  Examples:   investment  banking,  healthcare,  customer  service,  accoun@ng,   and  management  consul@ng.     Technology  Creators:  Develop  and  sell  IP.  Invest  in  developing/ marke-ng  IP  to  more  users/subscribers  (not  making  more  of  the   same).  Examples:  soAware,  high  tech,  bio  tech,   pharmaceu@cals,  Fin  Tech,  and  data.     Network  Orchestrators:  Create  networks  of  businesses/ consumers  who  interact  to  sell  products,  build  rela-onships,   share  advice,  exchange  financial  instruments,  etc.  Invest  in   technology  plauorms  and  growing  networks.    Examples:  social   networks,  commercial  networks,  and  financial  exchanges.       Other,  please  specify  ________________   100%  100%   Earnings   contribu-on   propor-on   Capital   Investment   propor-on   %   %   %   %   %   %   %   %   %   %   Please  describe  your  earnings  and  investments    u5lizing  the  four  basic   business  models  below.     First  aVempt  to  simplify.    (1)  Cut  out  the  “count”  column,  (2)  re-­‐worded  ques-on,     (3)  eliminated  “scales  by”  sec-on  of  each  descrip-on,  (4)  shortened  remaining  wording.   Make,  market,  distribute  and  operate  physical  assets  and  sell   products:  Examples  include  auto,  real  estate,  advanced   materials,  u@li@es,  airlines  and  telecom.       Design,  market  and  provide  services:  Examples  include   investment  banking,  healthcare,  customer  service,  accoun@ng,   informa@on  services  and  consul@ng.     Develop,  market  and  sell  intellectual  property:    Examples   include  soAware,  high  tech,  bio  tech,  pharmaceu@cals,  Fin   Tech  and  big  data.     Create,  market  and  operate  networks  of  businesses,   consumers,  investors,  etc.:  Examples  include  social/ commercial  networks  and  financial  exchanges.       Other,  please  specify  ________________   100%   100%   Earnings   contribu-on   Capital    alloca-on   %   %   %   %   %   %   %   %   %   %   How  much  do  the  following  business  ac5vi5es  contribute  to  your   earnings  and  consume  of  your  investments?     Shirs  away  from  “business  model  terminology”  and  toward  “ac-vity  terminology.”  Removes  “Invests   in”  descrip-on  but  retains  examples  of  industries   Make,  market,  distribute  and  operate  physical  assets  and  sell   products       Design,  market  and  provide  services     Develop,  market  and  sell  intellectual  property     Create,  market  and  operate  networks  of  businesses,   consumers,  investors,  etc.       Other,  please  specify  ________________   100%   100%   Earnings   contribu-on   Capital    alloca-on   %   %   %   %   %   %   %   %   %   %   How  much  do  the  following  business  ac5vi5es  contribute  to  your   earnings  and  consume  of  your  investments?     Same  as  above  but  removes  examples  of  industries  –  assumes  these   descrip-ons  will  fit  CFOs  percep-ons  of  what  they  do.   Exercise:    How  Do  You  Classify  Yourself  (Placeholder)
  • 20.
    Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Different  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
  • 21.
    Industries  are  Ver?cals, Business  Models  are  Horizontal Network  Orchestrator   Technology  Creators   Service  Provider   Asset  Builders  
  • 22.
    Size of circle represents numberof companies within industry Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013,; Revenue is LTM Average Multiplier The  Value  Mul?plier  is  Inversely  Correlated  with  Tangible  Assets
  • 23.
    Assets 2x Services   3x   Sizeof circle represents number of companies within industry or multiplier group Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013,; Revenue is LTM Average Multiplier Industries  have  some  affilia?on  with  Business  Models Tech 5x NW 8x •  Intercon-nental Exchange  Group   •  Discover   Financial   •  TripAdvisor   •  Visa   •  MasterCard   •  CME  Group   •  Salesforce.com   •  Red  Hat   •  Google   •  eBay   •  American   Express   •  Apple   •  Nike   •  Nasdaq  OMX  
  • 24.
    Intangible Assets arenow 80% of Market Value, Up from 20% Source: Compustat data | Research from Ocean Tomo
  • 25.
    0.62   0.40   0.31   0.00   Assets   Svcs   Tech   Network   Average  COGS/Revenue   0.15   0.27   0.28   0.41   Assets   Svcs   Tech   Network   Average  SG&A/Revenue   Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months Leaders  spend  money  based  on  their  business  model 0.01   0.00   0.15   0.06   Assets   Svcs   Tech   Network   Average  R&D/Revenue  
  • 26.
    Result:  Network  business models  grow  faster… 8.4   7.9   12.6   19.4   Assets   Svcs   Tech   Network   Avg.  Revenue  CAGR  ’10-­‐’12   The  digital   divide   Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months …  with  lowest  marginal  cost  of  expansion
  • 27.
    …highest  profit  margins… 0.15   0.14   0.24   0.32   Assets   Svcs   Tech   Network   Average  Profit  Margin   0.23   0.21   0.30   0.38   Assets   Svcs   Tech   Network   Average  EBITDA/Revenue   Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013; Revenue is prior 12 months
  • 28.
    2.0   2.1   4.6   8.1   Assets   Svcs   Tech   Network   Average  Mul5plier  (Price  to  Revenue  ra5o)   …as  well  as  enterprise  value  premiums! Note: Based on analysis of the S&P 500 companies Source: Data pulled from Capital IQ database in October 2013; Revenue is prior 12 months The  digital   divide  
  • 29.
    Network  business  models are  fastest  growing 0%   20%   40%   60%   80%   100%   1972   1982   1992   2002   2012   Types  of  companies*  comprising  the  top  5%  of  the  S&P  500  by  P/R   Assets   Services   Technology   Network   *Each  company  manually  classified  based  on  examina-on  of  business  descrip-on,  spending,  and  MD&A  from   annual  report,  along  with  press  releases  and  other  news;  company  classifica-on  was  changed  if  company  strategy   changed  over  -me   The  network  era  
  • 30.
    0.00   2.00   4.00   6.00   8.00   10.00   1975   1980   1985   1990   1995   2000   2005   2010   2013   Average  P/R  Ra5o  by  Business  Model  Historically   Network   Informa-on   Services   Industrial   *Digital CAGR is 1980 – 2013 Note: Based on analysis of the S&P 500 Source: Capital IQ data pulled October 2013; Revenue is prior 12 months CAGR   1975  –  2013 8.7%* 2.7% 4.5% 3.4% This  trend  is  accelera?ng  and  premiums  are  widening Assets   Technology  
  • 31.
    0   20   40   60   80   100   120   140   160   0   1   2   3   4   5   6   7   8   9   10   11   12   13   14   15   16   17   18+   Distribu5on  of  S&P  500   Investors  pay  more  than  $18  for   each  $1  of  revenue   Investors  pay  less  than  $1  for   each  $1  of  revenue   But:    80%  of  companies  are  s?ll  asset  and  services  firms Number of companies that fall within each range 80% of companies have P/R ratio less than 3
  • 32.
    Exercise:    which business  model  are  you? ?   How  do  you  make  and  spend  money?
  • 33.
    Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
  • 34.
    Our  research  indicates that  Business  are  f(Mental  Models) Mental  model   Business  model   •  What  leadership…   •  Believes  is  important   •  Has  developed  their  own  skills   •  Gives  -me  and  aVen-on   •  Measures  and  reports   •  How  a  company…   •  Spends  and  makes  money   •  Hires  people  and  builds  skills   •  Engages  with  customers   •  Generates  long  term  growth  &  performance   Depends  on  leaders  ahtudes,  biases  and  beliefs
  • 35.
    Exercise:    What’s Your  Mental  Model ?   What  is  your  leadership  Style?
  • 36.
    Take  the  Survey:   Find  Your  Mul?plier
  • 37.
    There  are  Four Different  Business  Models Technology   Creators   Network   Facilitators   Asset   Builders   Service   Providers   The  digital  divide   Social  networks   Stock  exchanges   Credit  card  companies   Financial  services     Insurance  companies   Consultants  Manufacturers   Retailers   Distributors   Drug  companies   Biotech  companies   SW  developers  
  • 38.
    Each  Business  Model Has  its  Own  Mul?plier  Effect The  digital  divide   4   8   1   2   Assets   Services   Technology   Network   Focus   Investment   Inside  Outside   Intangible  Tangible  
  • 39.
    …as  well  as business  model  risks IP  &   sorware   Risks   Reputa-on   &  network   Risks   Asset  &   Product   Quality  Risks   Employee  &   Training   Risks   The  digital  divide  
  • 40.
    Exercise:    What is  your  Mul?plier  Effect? ?   …Calculate  the  value  of  your  business  model
  • 41.
    Take  the  Survey:   Find  Your  Mul?plier
  • 42.
    Alterna?ve:    Es?mate your  P/R  ra?o   1.  Write  your  company  name   on  post-­‐its   2.  Es-mate  your  P/R  ra-o   3.  Place  post-­‐its  on  the  scale   on  the  white  board   4.  We  will  provide  the  actual  P/ R  ra-o   5.  Discuss  the  difference   Client  4   Network   8   Client  1   Physical   2   Client  3   Info.   5   Client  2   Services   3   High   Low   The  digital  divide  
  • 43.
    Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  your  capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
  • 44.
    Add Create Eliminate Revise Use CARE  to  Reallocate  your  capital
  • 45.
    The  Value  Mul?plier:     4  Step  Process Orienta-on   What:    There  are  4  standard  business  models,  each  with  their  own  archetypes,   assets,  and  Value  Mul-plierssm.       How:    The  Value  Mul@plier  EBook  and  The  Value  Mul@plier  Research  EBook,   Infographic  ,  instruc@onal  videos  (3),  and  ar@cles.   Assessment   What:    Companies  can  ascertain  their  business  model  index,  leadership  style,   and  all  the  sources  of  value.     How:    www.Digitalgrader.com  which  includes  Business  Model  Indexsm  and   Leadership  Stylesm  (Forthcoming)  and  Digital  Inventory  Managersm  apps.   Ac-on   What:    Organiza-ons  can  outperform  their  compe--on  by  crea-ng  network   centric,  P:P  business  models.     How:    By  realloca@ng  capital  to  build  network  centric  business  models  using  our   CAREsm  app  (Forthcoming),  Workbook,  Curriculum,  and  Standard  Presenta@on.   Measurement   What:    Generally  Accepted  Accoun-ng  Procedures  (GAAP)  either  mis-­‐categorize   or  overlook  many  of  today’s  most  valuable  assets.     How:    Use  our  Digital  Inventory  Managersm  to  integrate  big  data  and  financial   data  to  track  all  the  sources  of  value  in  real  @me  (forthcoming).    
  • 46.
    Remember:    there are  four  ‘assets’  in  which  to  invest Asset   Examples   Tangible   Financial   Stocks,  Bonds,  Warrants,  Op-ons   Physical   Plant,  Property,  Equipment   Intangible   Human   Employees,  Partners,  Contractors   Intellectual   Data,  Knowledge,  Sorware   Network   Customers,  Partners,  Alumni,  Prospects  
  • 47.
    Exercise:    Think About  How  to  Reallocate  your  Capital ?   Use  CARE  to  rebalance  your  pornolio
  • 48.
    Take  Care  Program:   4  Steps  to  Success
  • 49.
    CARE:     Reallocate  your  capital Por_olio  of   Tangible  and   Intangible   assets   Create   Asset  will  operate   more  efficiently  if   decreased  in  scale  or   scope   Add   An  opportunity  has   been  iden@fied  to   create  an  en@rely  new   and  valuable  product/ asset   Revise   Asset  ahs  poten@al  to   increase  value  crea@on   by  adding  new   components  (features,   customers,  etc.)   Eliminate   Asset  is  no  longer   valued  or  is   underperforming  with   no  path  to   improvement   Asset  1   Asset  2   Asset  3  
  • 50.
    Agenda Research   Assessment   Ac-on   Measurement   2   3   4   5   Orienta-on   1   Mental  Models,  ‘Asset’  Classes,  Value  Mul-pliersm   Business  Model  Index  and  Leadership  Style   Reallocate  Your  Capital  with  CAREsm   GAAP  Versus  Measuring  All  the  Sources  of  Value   Digital,  4  Business  Models,  Leadership  Preferences  
  • 51.
  • 52.
  • 53.
    Measurement Capital SourcesExamples Inside  Managed   Financial   Return on Asset, Return on Investment, Assets under management Inside  Managed   Physical   Rent, SF under management, utilization/occupancy rate Inside  Unmanaged   Human   Intellectual capital, Employee engagement, networks, alumni Outside  Managed   Intellectual   Patents, Trademarks, Copyrights, business methods Outside  Managed   Customers   Loyalty, customer engagement, co- creation, word of mouth marketing, Outside  Unmanaged   Network   Size of network, number of participants, number of interactions, data size, vitality Examples  of  Different  Measurements  by  Quadrant
  • 54.
    Exercise:    What is  our  business  model  worth ?   And  what  is  the  marginal  cost  for  scaling?
  • 55.
    Inventory  all  your sources  of  value
  • 56.
    Human  capital  Intellectual  capital   Network  capital   Business   unit   Employees   Partners   Contractors   Data   Knowledge   Sorware   Customers   Partners   Alumni   Prospects   BU1   BU2   BU3     Intangible  Asset  Inventory  Tool
  • 57.
    Alterna?ve:  Value  all your  intangible  assets •  Use  finance.yahoo.com  to  find       •  Market  Value     •  It  is  found  under  Key  Sta-s-cs   •  Determine  your  Non  assets   •  In  addi-on,  write  down  your  key   sta-s-cs:   •  Revenues   •  Expenses   •  Profits  
  • 58.
    Co. A FYxxIntangibles value $6B Revenue $40B Technology COS % GM% 22% SGA% 20% Operating Margin % (.5%) Market Value $9B Price To Revenue 0.2 Total Assets $20B Total Liabilities $15B Intangible Assets (Market) $4B Intangible Assets (Acquired) $1B Physical Assets $15B Co. B FYxx Intangibles value $106B Revenue $60B Technology COS 7% GM% 14% SGA% 12% Operating Margin % 1.0% Market Value $115B Price to Revenue 2.0 Total Assets $30B Total Liabilities $20B Intangible Assets (Market) $105B Intangible Assets (Acquired) $3B Physical Assets $28B Source:  Company  10-­‐K     Case  Study:    Company  A  versus  Company  B
  • 59.
    •  Market  value  is  considered  to  be  the  present  value  of  future  discounted  cash   flows   •  Despite  being  rela-vely  same  sized  ($40B  and  $60B),  and  both  delivering   opera-ng  margins  (~1%),  the  market  views  company  B  as  13x  more  valuable   •  So  why  does  the  market  believe  Company  B’s  future  cash  flows  will  be  so   much  higher  than  Company  A’s?   •  The business model, clicks are more scalable than bricks •  The management team, and the employees (human capital) that understand the newer business model •  The customer, company B uses technology “as the business”, while Company A uses technology “to support the business” •  Recognizing  that  both  companies  have  strong  brand  and  reputa-on,  the   market  gives  Company  B  credit  for  over  $100B  in  addi-onal  intangible  assets   Note:    The  market  value  of  Intangibles
  • 60.
    •  Split  into four  working  groups,  which  will  each  tackle  one  of  the  following   topics:   1.  Who  at  the  client  do  you  target? 2.  What  does  the  client-­‐facing  lab  look  like? 3.  How  do  we  structure  a  strategy  engagement? 4.  How  does  this  align  with  exis?ng  Deloiqe  services •  You  will  have  30  minutes  to  discuss  and  develop  ideas  within  your   working  group •  Each  group  will  then  read  back  out  to  the  lab,  ~10  minutes  per  topic •  Last  topic:  which  clients  do  we  target  (20  min) Note:    For  Each  Working  Session
  • 62.
    4  step  process for  growth  and  performance Measuring   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day   Gather  senior   leadership  in   offsite  mee-ng  to   asses  current   mental  model   assump-ons    and   business  model   investments   Generate  detailed   business  model   ac-ons  by  process   and  product  to   include  digital   networks  star-ng   with  ‘edge  based   ini-a-ves’   Expand  edge   based  digital   networks  and  new   KPI’s  to  create   plauorm  for   business  model   transforma-on   over  -me   Con-nuous  Improvement   Conduct  high   level  analysis  of   capital   alloca-ons  by   SBU  and     inventory  all   intangible  assets   and  enabling  IT    
  • 63.
    4  Step  Process: Orienta?on Assess  Your  Risk  Propensity  and  Business  Model:  The  1-­‐Day  Offsite   •  Understand  business  models  and  their  rela-ve  economics   •  Assess  current  mental  models  of  leadership  team   •  Assess  current  business  model  indicated  by  current  assets  and  technologies   •  Exercises  to  understand  Value  Mul-plier  and  capital  alloca-on   •  Management  team  has  complete  understanding  of  business  model  and  economics,   plus  the  gap  between  current  business  model/performance  and  the  poten-al   Process   Tool   Outcome   Monitoring   On  Going   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
  • 64.
    4  Step  Process: Analysis Inventory  Tangible  and  Intangible  Assets:  The  90-­‐Day  Assessment   •  Cross-­‐func-onal  task  force  formed   •  Team  inventories  current  assets  and  technologies,  plus  capital  alloca-on  paVerns   •  Team  inventories  unmeasured  and  intangible  assets  not  yet  mone-zed  by  firm   •  Mental  Model  Assessment  and  Intangible  Asset  Inventory   •  Management  team  has  complete  understanding  of  the  firms  assets,  both  tangible   and  intangible,  plus  the  related  technologies  and  the  historical  trends  for  capital   alloca-on  among  these  assets   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
  • 65.
    4  Step  Process: Ac?on Create  a  New  Business  Model:  The  6-­‐Month  Implementa5on   •  Form  project  team  to  mone-ze  a  currently  under  u-lized  asset  (oren  a  network  of   customers,  employees,  shareholders,  suppliers,  etc.)   •  Develop  a  technological  plauorm  to  connect  this  popula-on   •  Populate  the  plauorm  with  content  and  product  offerings   •  Create  processes  and  incen-ves  that  encourage  the  network  to  par-cipate   •  Template  for  a  New  Business  Model   •  The  development  of  new  and  highly  scalable  assets  plus  a  repeatable  process  for   con-nuing  to  develop  underu-lized  assets   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day  
  • 66.
    4  Step  Process: Measurement Monitor  and  Rebalance:  An  Ongoing  Process  for  Delivering  Value   •  Establish  new  and  tailored  KPIs  for  the  developing  asset  (network)     •  Integrate  those  KPIs  with  exis-ng  financial  repor-ng  for  senior  management   •  Use  KPIs  to  manage  and  allocate  financial  capital  across  all  assets   •  Asset  Rebalancing  Tool   •  Management  team  is  informed  about  the  progress  of  network  development,  using   new  KPIs  tailored  to  the  asset  and  can  effec-vely  gauge  success  and  allocate  capital   Process   Tool   Outcome   Measure   On  Going  KPIS   Ac-on   6  Months   Analysis   3  Months   Orienta-on   1  Day