While many companies have growth as a goal, most lack an effective strategy to achieve it. A successful growth strategy requires a different paradigm that establishes concrete growth targets and actively manages a program to meet them. There are five key elements to an effective growth strategy: developing prioritized growth options, executing those options through M&A or building new capabilities, optimizing acquired or built capabilities, ensuring sufficient growth capacity, and maintaining political will over time. However, growth strategies also carry risks at the strategic, execution, implementation, capability, and political levels that must be anticipated, planned for, and mitigated against to increase the likelihood of success.
Measure What Matters - New Perspectives on Portfolio SelectionUMT
The document discusses new frameworks for IT portfolio selection that consider both financial and strategic metrics. It summarizes that traditional portfolio selection focused solely on financial metrics, but recent research shows this led to underinvestment in strategic areas. The new framework evaluates investments from four perspectives: demand, supply, governance, and alternatives. This allows executives to consider financial returns, strategic alignment, risk exposure, architectural fit, options, costs, deadlines, and skills. Successful companies now use multiple financial and strategic metrics to optimize resource allocation and maximize investment value and benefits.
The document discusses strategic management concepts for a private dialysis service provider. It covers strategic planning, linking strategic and operational levels, performance management, growth options, and managing in a competitive environment. Key points discussed include having a strategic focus to guide long-term decisions, analyzing the external environment and internal resources, identifying strategic options, understanding who the different customers are for private clinics versus state-run services, and selecting strategies and making decisions to satisfy all stakeholders.
Business Strategy Review - A better way to merge companiesRichard Parry
Progressive companies are now using project teams to both originate mergers and acquisitions (M&A) deals and ensure their successful integration. These M&A project teams are nimble, flexing in size during different phases of the deal process. They leverage a single team from deal origination through post-merger integration. Using project teams allows companies, both large and small, to take a more proactive approach to M&A by uncovering new opportunities and conducting thorough due diligence. Developing an effective internal M&A capability, with clear governance, oversight and strategic measurement, is important for companies to maximize value from acquisitions.
The document summarizes key points from a presentation on competing for the future. It discusses how companies must shift their focus from short-term goals to long-term possibilities. Rather than just reducing costs, companies need to reinvent industries and regenerate strategies. The presentation also examines the difference between "numerator management" which grows net income through new opportunities, and "denominator management" which focuses only on cutting assets and costs. Companies that do not anticipate and shape future industry changes risk becoming "road kill" unable to adapt.
This document discusses the importance of developing an effective executive compensation strategy that considers the perspectives of key stakeholders. It begins by stating that while many companies articulate their compensation philosophies, they often fail to address the overall goals and how compensation will help achieve them. It then defines the differences between a compensation philosophy and strategy, with the strategy being the plan of action to execute the philosophy. The rest of the document outlines the different interests and concerns of the three main stakeholder groups - investors, the company, and executives - that an effective compensation strategy should seek to address. These include concerns around shareholder value, governance, leadership, driving value creation, and enterprise sustainability. The strategy must clearly articulate its goals and how compensation will incentivize
This document summarizes a seminar on applying financial realities to strategic planning. The seminar objectives are to help professional services firms use advanced financial models in parallel with strategic planning to assess how different strategies could impact revenues, returns, and risks over time. This enhances strategic decision making. The seminar will discuss building a robust strategic forecasting model, capabilities that enhance decision making, integrating strategic and operational forecasts, and approaches to strategic risks.
This document discusses building an "advantaged portfolio" at the corporate level. It defines an advantaged portfolio as having three key characteristics: being strategically sound, value-creating, and resilient.
To be strategically sound, a portfolio must be competitively positioned in attractive industries and markets where the company can win, support a balanced portfolio of innovation initiatives, and create synergies across businesses.
To be value-creating, a portfolio must maximize intrinsic value as measured by discounted cash flows, address capital market valuation to ensure market value aligns with intrinsic value over time, and maximize the portfolio's value to potential other owners.
Finally, a resilient portfolio can withstand various scenarios in its industry and builds flexibility through
While many companies have growth as a goal, most lack an effective strategy to achieve it. A successful growth strategy requires a different paradigm that establishes concrete growth targets and actively manages a program to meet them. There are five key elements to an effective growth strategy: developing prioritized growth options, executing those options through M&A or building new capabilities, optimizing acquired or built capabilities, ensuring sufficient growth capacity, and maintaining political will over time. However, growth strategies also carry risks at the strategic, execution, implementation, capability, and political levels that must be anticipated, planned for, and mitigated against to increase the likelihood of success.
Measure What Matters - New Perspectives on Portfolio SelectionUMT
The document discusses new frameworks for IT portfolio selection that consider both financial and strategic metrics. It summarizes that traditional portfolio selection focused solely on financial metrics, but recent research shows this led to underinvestment in strategic areas. The new framework evaluates investments from four perspectives: demand, supply, governance, and alternatives. This allows executives to consider financial returns, strategic alignment, risk exposure, architectural fit, options, costs, deadlines, and skills. Successful companies now use multiple financial and strategic metrics to optimize resource allocation and maximize investment value and benefits.
The document discusses strategic management concepts for a private dialysis service provider. It covers strategic planning, linking strategic and operational levels, performance management, growth options, and managing in a competitive environment. Key points discussed include having a strategic focus to guide long-term decisions, analyzing the external environment and internal resources, identifying strategic options, understanding who the different customers are for private clinics versus state-run services, and selecting strategies and making decisions to satisfy all stakeholders.
Business Strategy Review - A better way to merge companiesRichard Parry
Progressive companies are now using project teams to both originate mergers and acquisitions (M&A) deals and ensure their successful integration. These M&A project teams are nimble, flexing in size during different phases of the deal process. They leverage a single team from deal origination through post-merger integration. Using project teams allows companies, both large and small, to take a more proactive approach to M&A by uncovering new opportunities and conducting thorough due diligence. Developing an effective internal M&A capability, with clear governance, oversight and strategic measurement, is important for companies to maximize value from acquisitions.
The document summarizes key points from a presentation on competing for the future. It discusses how companies must shift their focus from short-term goals to long-term possibilities. Rather than just reducing costs, companies need to reinvent industries and regenerate strategies. The presentation also examines the difference between "numerator management" which grows net income through new opportunities, and "denominator management" which focuses only on cutting assets and costs. Companies that do not anticipate and shape future industry changes risk becoming "road kill" unable to adapt.
This document discusses the importance of developing an effective executive compensation strategy that considers the perspectives of key stakeholders. It begins by stating that while many companies articulate their compensation philosophies, they often fail to address the overall goals and how compensation will help achieve them. It then defines the differences between a compensation philosophy and strategy, with the strategy being the plan of action to execute the philosophy. The rest of the document outlines the different interests and concerns of the three main stakeholder groups - investors, the company, and executives - that an effective compensation strategy should seek to address. These include concerns around shareholder value, governance, leadership, driving value creation, and enterprise sustainability. The strategy must clearly articulate its goals and how compensation will incentivize
This document summarizes a seminar on applying financial realities to strategic planning. The seminar objectives are to help professional services firms use advanced financial models in parallel with strategic planning to assess how different strategies could impact revenues, returns, and risks over time. This enhances strategic decision making. The seminar will discuss building a robust strategic forecasting model, capabilities that enhance decision making, integrating strategic and operational forecasts, and approaches to strategic risks.
This document discusses building an "advantaged portfolio" at the corporate level. It defines an advantaged portfolio as having three key characteristics: being strategically sound, value-creating, and resilient.
To be strategically sound, a portfolio must be competitively positioned in attractive industries and markets where the company can win, support a balanced portfolio of innovation initiatives, and create synergies across businesses.
To be value-creating, a portfolio must maximize intrinsic value as measured by discounted cash flows, address capital market valuation to ensure market value aligns with intrinsic value over time, and maximize the portfolio's value to potential other owners.
Finally, a resilient portfolio can withstand various scenarios in its industry and builds flexibility through
Specter is a marketing and business strategy consulting firm that focuses on strategy, marketing, and branding. They help clients with complex strategic challenges through tailored solutions to achieve growth. Their approach involves defining where clients should focus their resources to outperform competitors and generate higher returns.
Present.profitability analytics framework ima san antonio finalFernando Pico
The Profitability Analytics Center of Excellence (PACE) promotes a framework for profitability analytics that incorporates causal modeling. The framework includes revenue, cost, and investment models that quantify relationships between key elements based on causal factors rather than just correlations. By embedding causality into strategic planning, forecasting, and decision-making, management can better understand economic realities and manage the business toward strategic goals.
The document provides an overview of corporate mergers and acquisitions (M&A), including considerations in M&A transactions, the current state of the market, general concepts, and the transaction process timeline. It also discusses accretion/dilution analysis and adjustments that are made to the income statement for stock-for-stock and cash-for-stock acquisitions, such as accounting for new shares issued, debt financing, synergies, and other transaction-related impacts.
The document discusses market-based strategic planning for early stage life science companies. It notes that consumers are exposed to thousands of advertising messages daily and have too many choices. To cope, consumers create "ladders in the mind" to rank products and simplify decisions. The document advocates taking a systematic approach to strategic planning, including profiling products, positioning offerings, developing messages, and selecting a target "beachhead" market to focus on winning customers. It emphasizes the need to understand customers and build a whole solution for their problems.
The document discusses how revenue growth is the largest driver of shareholder return but many CEOs focus on cost cutting instead of growth initiatives. It outlines a 4-step process companies can follow to systematically accelerate revenue growth: 1) Define and focus resources on the core business, 2) Establish a common set of market facts and insights, 3) Select the most powerful growth initiatives to implement well, 4) Master the process of change management. The first step is using a "spider chart" to identify the core customers, products, channels and geographies that make up 80% of profits in order to focus on high-potential opportunities within the existing business.
It is now generally accepted in the M&A domain that most mergers fail. And yet despite the dangers and horror sagas associated with M&A transactions, these types of business combinations are here for good because they are now the principal route to rapid business growth for many firms.The burning question therefore is: how can firms that aspire to grow through mergers and acquisitions increase their chances of success?The point of departure for M&A should be development of an M&A strategy that is anchored on the firm‟s overall business strategy. The firm should adopt a structured approach that covers the whole M&A process; set metrics for evaluating M&A targets; and actively engage in searching for potential targets. The criteria used to spot the right target could include business strategy, potential synergies, market availability, scale of activities, geographical location, technology, market growth potential and, business and culture fit. The type of merger should be another consideration, in which case bottom-trawlers, bolt-ons, line extension equivalents and consolidation mature, all with over 50% success rate, should be prioritized.The firm should then carry out comprehensive due diligence and objectively/accurately evaluate synergies. With respect to synergies, the acquirer should establish beforehand what synergies exist, where those synergies exist and how they will be extracted. Once a deal is closed, it is necessary to establish its success or failure, post-merger.M&A success should be considered from the shareholders of the acquirer‟s perspective, and an M&A should be judged successful if Net RealisableSynergies exceed Acquisition Purchase Premium. M&A critical success factors include merger segmentation considerations, the type of acquisition, timing, APP, effective integration, economic certainty and accurate target valuation.
1) NGOs need to measure performance both financially and non-financially to align activities with objectives and meet donor accountability. Financial measures include analyzing income sources, expenditures, financial sustainability, efficiency, and effectiveness using ratio analysis and trend analysis.
2) Non-financial measures are also important to assess impact on communities served and progress toward goals. These include tracking changes in skills, relationships, jobs created, and goals achieved over time.
3) An integrated approach to performance measurement using both financial and non-financial metrics provides a balanced view of organizational performance and opportunities for continuous improvement.
Restructuring - and improving business performanceDavid Brown
This document discusses restructuring a business to improve performance. It covers topics such as integrating acquisitions, restoring profitability, and adapting to market changes. Restructuring does not need to be an overhaul, but can be coordinated initiatives to improve results. Careful planning and skilled execution of restructuring projects can profoundly impact business performance. The document provides an overview of issues to consider for various aspects of restructuring, including organizational structure, costs, performance measurement, operations, and employee relations. It emphasizes the importance of developing a conceptual framework and management team to successfully drive change.
The document summarizes the findings of a study conducted by Booz & Company that analyzed 197 companies based on their "Fit for Growth Index" across three elements: strategic clarity and coherence, resource alignment, and supportive organization. The study found that less than one-fifth of companies scored highly across all three elements and were truly "Ready for Growth". Most companies fell into categories like "Distracted", lacking a clear strategy, or "Capability Constrained", having a strategy but not executing it well. Only companies with high, coherent scores across all elements consistently achieved strong financial performance.
This document summarizes key information on mergers and acquisitions (M&A) from research conducted by VSC Growth. It outlines that global M&A transactions exceed $2 trillion annually, with deals increasing post-recession. However, on average only 1/3 of deals create value, while 1/3 destroy value. The document then presents a 7-step framework for M&A success, including committing to improve outcomes, understanding your approach, focusing on key success factors, and diligently executing each deal. Contact information is provided to learn more about applying the practical framework to create value from M&A transactions.
By merging, companies hope to benefit from staff reductions, economies of scale from larger purchasing power, acquiring new technologies, improved market reach, and overcoming barriers to entry. The key is achieving synergies like cost reductions, tax benefits, and unused debt capacity. Operating synergies can occur from exploiting economies of scale across generic and specific management functions as well as through vertical integration along the industry value chain.
Common Objectives Performance Management System for Not-for-profit and Public...Browne & Mohan
Designing Performance management system for government, public sector and not-for-profit organization is a daunting task. Many of these organizations pursue long-term programs and projects. Alignment of various groups, departments and individuals within each department is the need of the hour. However, many of these organizations suffer from functional silos and focus on financial measures only. Managing for results by directing right staff behaviour and initiative taking is not facilitated. In this paper Browne & Mohan consultants present a common objective approach that could be used to fix accountability, ownership and outcome based behaviour in public sector and non-profit organizations.
What can public companies learn from private equity? Look to cash flow over the long term not immediate EPS, deploying capital to business-units according to potential ROIC in relation to risk, and developing a competitive advantage in M&A.
The whitepaper discusses how procurement functions can transform into world-class strategic operations that enhance profits and mitigate risks. It outlines that procurement needs to expand its remit beyond purchasing goods and services to strategic areas like partnerships and restructuring. To achieve this, procurement requires the right skills, board support, and an end-to-end mandate. A transformed procurement function would provide commercial oversight, act as a trusted advisor, and develop collaborative supplier partnerships to maximize shareholder value through cost savings, risk management, and profitability gains. The whitepaper argues that world-class companies need world-class procurement to compete in today's challenging economic environment.
This document discusses factors that can predict business failure, including financial ratios. It states that financial ratios alone are not sufficient to predict failure and must be supplemented with qualitative analysis of a business's strategies, management, etc. The document then discusses several other specific factors that can potentially lead to business failure if not properly addressed, such as insufficient equity, lack of industry knowledge, poor planning and risk mitigation, and lack of strong leadership skills and appropriate staffing. It emphasizes the importance of considering both financial and non-financial qualitative aspects when evaluating a business's risk of potential failure.
A marketing strategy is a process that concentrates resources on opportunities to increase sales and achieve a competitive advantage. It should have customer satisfaction as its main goal and be integrated with corporate strategy. Tools like the BCG matrix, GE matrix, Ansoff matrix, and gap analysis can help analyze markets, products, competitive positioning, and identify areas for improvement.
C-level Innovation as Collaborative Business TransformationMalcolm Ryder
Executive adoption of innovations is an outcome of forming and pursuing a group ambition, but the group must be executives themselves, and it could also take a group of innovations to get any of them adopted.
The role of the CFO in the power utilities sector is changing due to two factors: 1) the overall transformation of the CFO role to be more strategic, value-focused, and future-focused, and 2) the transformation of the energy sector driven by new technologies, market changes, and customer needs. As a result, the CFO's role is becoming more outward-facing, strategic, and focused on optimizing value across new and existing business activities. Key areas the CFO must focus on to address challenges from energy transformation include anticipating new technologies, restructuring asset portfolios, designing new ventures, achieving returns on prior investments, influencing policy, replacing declining revenues, measuring performance of shifting business models, attract
This chapter discusses theories related to mergers and tender offers. It covers various reasons why mergers may create value such as economies of scale, synergies from combining operations, and acquiring human/organizational capital. However, mergers may also be driven by agency problems and hubris. The chapter then examines models of the takeover process and frameworks for analyzing sources of value from M&As as well as potential gains/losses to target and acquiring firms.
The document discusses the role of human resources in mergers and acquisitions. It begins by defining mergers and acquisitions as representing ultimate change for businesses that can be difficult and chaotic. It then provides statistics on M&A activity and discusses why understanding the process is important. The rest of the document outlines the M&A process and key roles for HR, including assessing cultural alignment, developing integration plans, managing communications, and ensuring retention of key employees.
Pioneering companies in mature economies are learning from emerging market companies a new way to expand their businesses. For more insights from s+b, visit strategy-business.com.
The U.S. banking industry is overdue for consolidation as market structure is obsolete and profitability has been weak for a decade. Regulatory pressures and competition are making it hard for most banks to grow revenues and profits. Mid-tier banks with $10-250 billion in assets are expected to see significant consolidation through M&A to gain scale and lower costs. Consolidation can yield 30-35% cost savings by shedding excess capacity, spreading fixed costs over a larger base, and investing in digital capabilities. $600 billion in M&A among mid-tier banks is estimated to boost sector returns enough to reach banks' cost of capital.
Specter is a marketing and business strategy consulting firm that focuses on strategy, marketing, and branding. They help clients with complex strategic challenges through tailored solutions to achieve growth. Their approach involves defining where clients should focus their resources to outperform competitors and generate higher returns.
Present.profitability analytics framework ima san antonio finalFernando Pico
The Profitability Analytics Center of Excellence (PACE) promotes a framework for profitability analytics that incorporates causal modeling. The framework includes revenue, cost, and investment models that quantify relationships between key elements based on causal factors rather than just correlations. By embedding causality into strategic planning, forecasting, and decision-making, management can better understand economic realities and manage the business toward strategic goals.
The document provides an overview of corporate mergers and acquisitions (M&A), including considerations in M&A transactions, the current state of the market, general concepts, and the transaction process timeline. It also discusses accretion/dilution analysis and adjustments that are made to the income statement for stock-for-stock and cash-for-stock acquisitions, such as accounting for new shares issued, debt financing, synergies, and other transaction-related impacts.
The document discusses market-based strategic planning for early stage life science companies. It notes that consumers are exposed to thousands of advertising messages daily and have too many choices. To cope, consumers create "ladders in the mind" to rank products and simplify decisions. The document advocates taking a systematic approach to strategic planning, including profiling products, positioning offerings, developing messages, and selecting a target "beachhead" market to focus on winning customers. It emphasizes the need to understand customers and build a whole solution for their problems.
The document discusses how revenue growth is the largest driver of shareholder return but many CEOs focus on cost cutting instead of growth initiatives. It outlines a 4-step process companies can follow to systematically accelerate revenue growth: 1) Define and focus resources on the core business, 2) Establish a common set of market facts and insights, 3) Select the most powerful growth initiatives to implement well, 4) Master the process of change management. The first step is using a "spider chart" to identify the core customers, products, channels and geographies that make up 80% of profits in order to focus on high-potential opportunities within the existing business.
It is now generally accepted in the M&A domain that most mergers fail. And yet despite the dangers and horror sagas associated with M&A transactions, these types of business combinations are here for good because they are now the principal route to rapid business growth for many firms.The burning question therefore is: how can firms that aspire to grow through mergers and acquisitions increase their chances of success?The point of departure for M&A should be development of an M&A strategy that is anchored on the firm‟s overall business strategy. The firm should adopt a structured approach that covers the whole M&A process; set metrics for evaluating M&A targets; and actively engage in searching for potential targets. The criteria used to spot the right target could include business strategy, potential synergies, market availability, scale of activities, geographical location, technology, market growth potential and, business and culture fit. The type of merger should be another consideration, in which case bottom-trawlers, bolt-ons, line extension equivalents and consolidation mature, all with over 50% success rate, should be prioritized.The firm should then carry out comprehensive due diligence and objectively/accurately evaluate synergies. With respect to synergies, the acquirer should establish beforehand what synergies exist, where those synergies exist and how they will be extracted. Once a deal is closed, it is necessary to establish its success or failure, post-merger.M&A success should be considered from the shareholders of the acquirer‟s perspective, and an M&A should be judged successful if Net RealisableSynergies exceed Acquisition Purchase Premium. M&A critical success factors include merger segmentation considerations, the type of acquisition, timing, APP, effective integration, economic certainty and accurate target valuation.
1) NGOs need to measure performance both financially and non-financially to align activities with objectives and meet donor accountability. Financial measures include analyzing income sources, expenditures, financial sustainability, efficiency, and effectiveness using ratio analysis and trend analysis.
2) Non-financial measures are also important to assess impact on communities served and progress toward goals. These include tracking changes in skills, relationships, jobs created, and goals achieved over time.
3) An integrated approach to performance measurement using both financial and non-financial metrics provides a balanced view of organizational performance and opportunities for continuous improvement.
Restructuring - and improving business performanceDavid Brown
This document discusses restructuring a business to improve performance. It covers topics such as integrating acquisitions, restoring profitability, and adapting to market changes. Restructuring does not need to be an overhaul, but can be coordinated initiatives to improve results. Careful planning and skilled execution of restructuring projects can profoundly impact business performance. The document provides an overview of issues to consider for various aspects of restructuring, including organizational structure, costs, performance measurement, operations, and employee relations. It emphasizes the importance of developing a conceptual framework and management team to successfully drive change.
The document summarizes the findings of a study conducted by Booz & Company that analyzed 197 companies based on their "Fit for Growth Index" across three elements: strategic clarity and coherence, resource alignment, and supportive organization. The study found that less than one-fifth of companies scored highly across all three elements and were truly "Ready for Growth". Most companies fell into categories like "Distracted", lacking a clear strategy, or "Capability Constrained", having a strategy but not executing it well. Only companies with high, coherent scores across all elements consistently achieved strong financial performance.
This document summarizes key information on mergers and acquisitions (M&A) from research conducted by VSC Growth. It outlines that global M&A transactions exceed $2 trillion annually, with deals increasing post-recession. However, on average only 1/3 of deals create value, while 1/3 destroy value. The document then presents a 7-step framework for M&A success, including committing to improve outcomes, understanding your approach, focusing on key success factors, and diligently executing each deal. Contact information is provided to learn more about applying the practical framework to create value from M&A transactions.
By merging, companies hope to benefit from staff reductions, economies of scale from larger purchasing power, acquiring new technologies, improved market reach, and overcoming barriers to entry. The key is achieving synergies like cost reductions, tax benefits, and unused debt capacity. Operating synergies can occur from exploiting economies of scale across generic and specific management functions as well as through vertical integration along the industry value chain.
Common Objectives Performance Management System for Not-for-profit and Public...Browne & Mohan
Designing Performance management system for government, public sector and not-for-profit organization is a daunting task. Many of these organizations pursue long-term programs and projects. Alignment of various groups, departments and individuals within each department is the need of the hour. However, many of these organizations suffer from functional silos and focus on financial measures only. Managing for results by directing right staff behaviour and initiative taking is not facilitated. In this paper Browne & Mohan consultants present a common objective approach that could be used to fix accountability, ownership and outcome based behaviour in public sector and non-profit organizations.
What can public companies learn from private equity? Look to cash flow over the long term not immediate EPS, deploying capital to business-units according to potential ROIC in relation to risk, and developing a competitive advantage in M&A.
The whitepaper discusses how procurement functions can transform into world-class strategic operations that enhance profits and mitigate risks. It outlines that procurement needs to expand its remit beyond purchasing goods and services to strategic areas like partnerships and restructuring. To achieve this, procurement requires the right skills, board support, and an end-to-end mandate. A transformed procurement function would provide commercial oversight, act as a trusted advisor, and develop collaborative supplier partnerships to maximize shareholder value through cost savings, risk management, and profitability gains. The whitepaper argues that world-class companies need world-class procurement to compete in today's challenging economic environment.
This document discusses factors that can predict business failure, including financial ratios. It states that financial ratios alone are not sufficient to predict failure and must be supplemented with qualitative analysis of a business's strategies, management, etc. The document then discusses several other specific factors that can potentially lead to business failure if not properly addressed, such as insufficient equity, lack of industry knowledge, poor planning and risk mitigation, and lack of strong leadership skills and appropriate staffing. It emphasizes the importance of considering both financial and non-financial qualitative aspects when evaluating a business's risk of potential failure.
A marketing strategy is a process that concentrates resources on opportunities to increase sales and achieve a competitive advantage. It should have customer satisfaction as its main goal and be integrated with corporate strategy. Tools like the BCG matrix, GE matrix, Ansoff matrix, and gap analysis can help analyze markets, products, competitive positioning, and identify areas for improvement.
C-level Innovation as Collaborative Business TransformationMalcolm Ryder
Executive adoption of innovations is an outcome of forming and pursuing a group ambition, but the group must be executives themselves, and it could also take a group of innovations to get any of them adopted.
The role of the CFO in the power utilities sector is changing due to two factors: 1) the overall transformation of the CFO role to be more strategic, value-focused, and future-focused, and 2) the transformation of the energy sector driven by new technologies, market changes, and customer needs. As a result, the CFO's role is becoming more outward-facing, strategic, and focused on optimizing value across new and existing business activities. Key areas the CFO must focus on to address challenges from energy transformation include anticipating new technologies, restructuring asset portfolios, designing new ventures, achieving returns on prior investments, influencing policy, replacing declining revenues, measuring performance of shifting business models, attract
This chapter discusses theories related to mergers and tender offers. It covers various reasons why mergers may create value such as economies of scale, synergies from combining operations, and acquiring human/organizational capital. However, mergers may also be driven by agency problems and hubris. The chapter then examines models of the takeover process and frameworks for analyzing sources of value from M&As as well as potential gains/losses to target and acquiring firms.
The document discusses the role of human resources in mergers and acquisitions. It begins by defining mergers and acquisitions as representing ultimate change for businesses that can be difficult and chaotic. It then provides statistics on M&A activity and discusses why understanding the process is important. The rest of the document outlines the M&A process and key roles for HR, including assessing cultural alignment, developing integration plans, managing communications, and ensuring retention of key employees.
Pioneering companies in mature economies are learning from emerging market companies a new way to expand their businesses. For more insights from s+b, visit strategy-business.com.
The U.S. banking industry is overdue for consolidation as market structure is obsolete and profitability has been weak for a decade. Regulatory pressures and competition are making it hard for most banks to grow revenues and profits. Mid-tier banks with $10-250 billion in assets are expected to see significant consolidation through M&A to gain scale and lower costs. Consolidation can yield 30-35% cost savings by shedding excess capacity, spreading fixed costs over a larger base, and investing in digital capabilities. $600 billion in M&A among mid-tier banks is estimated to boost sector returns enough to reach banks' cost of capital.
This article is based on Booz & Company's long-standing work on organizational DNA. It describes how to select the right mix of organizational design elements--both formal structures and informal aspects of organizational culture--to advance your company's strategy.
“Supercompetitors” are a new kind of market leader, gaining competitive advantage through the things they do better than anyone else—even amid the fierce competition and turbulence of many industries today. Learn more about how they do it: http://strat.bz/yhGHUWN
CEO turnover was high in 2012, with 15% of the world's largest public companies changing leadership. This was the highest rate since 2005 and the second highest since 2000. However, most of this turnover was planned succession rather than reactive changes, with nearly three-quarters of companies planning for the leadership transition. Companies appear to be making leadership changes more deliberately to gain competitive advantages rather than in response to crises. There were also regional differences, with emerging markets like Brazil, India and Russia seeing higher turnover than countries like China and mature economies. Performance also played a role, with lower performing companies more likely to force out CEOs and hire outsiders.
1) The document discusses how geopolitical uncertainty requires business leaders to prioritize stability, resilience, and relationship management over rapid growth.
2) It argues the old model of global stability is breaking down and being replaced by sustained crisis. The US is less willing to provide global leadership while emerging powers like China rise.
3) It recommends companies focus on stability through disciplined, purposeful growth rather than rapid growth for its own sake. Strong, decentralized organizations built around stability will be best equipped to thrive in today's ambiguous geopolitical environment.
This document summarizes key practices of highly successful companies that allow them to close the gap between strategy and execution. It identifies five unconventional practices these companies employ: 1) Committing to a clear identity aligned around capabilities and value proposition. 2) Translating strategic goals into everyday operations by developing distinctive capabilities. 3) Leveraging culture as a strength rather than a hindrance. 4) Pruning non-essential costs to invest in critical capabilities. 5) Proactively shaping the future through capabilities rather than reacting to changes. Case studies of companies like IKEA, Natura, and Danaher illustrate how they employ these practices to consistently outperform competitors.
Neuroscience shows why the practice of pride builders can help you build a high-performance culture. These practices are: (1) giving more autonomy to frontline workers; (2) clearly explaining to staff members the significance and value (the "why") of everyday work; and (3) providing better recognition and rewards for employee contributions.
The dangers of adjacencies strategy are explored. While entering adjacencies seems logical for growth, it can distract companies from opportunities in their core business and dilute their capabilities. Many retailers, airlines, and other companies have pursued adjacency strategies only to later reverse course as the promises of growth proved illusory. For big-box retailers specifically, expanding into small formats risks averaging down their capabilities and undermining advantages of large store operations. However, not all adjacency moves fail; some companies like Apple, Berkshire Hathaway, and Roche have succeeded through adjacencies, and lessons from them will be discussed in the next post.
This document discusses 10 principles for linking strategy and execution in companies. It begins by describing how most companies struggle to be effective at both strategy creation and execution. The 10 principles discussed are: 1) Aim high with both strategic ambitions and execution excellence. 2) Build on your company's distinctive strengths. 3) Be "ambidextrous" in understanding both strategy and execution. 4) Clarify everyone's role in strategic success. 5) Align organizational structures to support the strategy. 6) Continuously learn through experimentation. 7) Communicate relentlessly. 8) Make strategy a continuous process. 9) Develop strategic talent throughout the organization. 10) Treat strategy as a way of life. Effective strategy execution requires seamless
When deciding how to respond to a threatening new entrant, companies often assume that they are facing a disruption, that is, an innovation that allows upstarts to build a new market from the bottom up. But new products and services can enter your market from other directions, each distinct in terms of how, where, and when it affects your business. They are all market dislocations -- radical breakaways that create new markets and make old markets obsolete. Instead of acting rashly, incumbents should take a step back, diagnose the type of dislocation they are facing, and respond with the appropriate tools and strategies.
The most important technology industry trend right now is also the greatest source of new business opportunity. As 50 billion devices connect to the Internet globally, three different types of businesses are jockeying for position: Enablers of underlying technology, Engagers that deliver to customers, and Enhancers that devise value-added services unique to the Internet of Things. For more insights, visit www.strategy-business.com
The document discusses the balance between fixed and variable strategy. It argues that strategy must be adaptable to changing conditions but also needs a stable foundation. Nordstrom is used as an example of a company that continually challenges its strategy through executive meetings while maintaining its core foundations. The conclusion is that for strategy to be effective, it must change daily in response to new challenges but much of it also needs to stay constant to provide direction. The key is for strategists to balance variability with a strong underlying strategic framework.
The document discusses how a major consumer products firm in Europe reorganized into a matrix structure to increase collaboration between divisions but struggled with cultural issues. It then discusses how PepsiCo Mexico Foods successfully merged two of its subsidiaries, Gamesa and Sabritas, through extensive cultural alignment efforts in addition to structural changes. These efforts included adopting a new unified image and culture symbolized by the merging of two rivers, aligning employee behaviors and identities behind the new combined company through initiatives like shared uniforms, and focusing leaders on collaboration rather than their legacy company interests. This cultural alignment was needed to fully realize the benefits of the new matrix structure.
The specialist leaders of HR, IT, finance, and other functions have had their time, attention, and (in some cases) money freed up by more efficient practices. They now have the ability--and the mandate--to play a more influential role, especially when building capabilities. Instead of balancing services among all business units equally, or striving to be best in class in everything, they can become increasingly "fit for purpose," thinking and acting in line with the enterprise strategy.
When Darren Entwistle became CEO of Telus in 2000, the Canadian telecommunications firm was a solid but unspectacular amalgamation of two former regulated telephone utilities. Since then, the company has experienced a notable transformation. During the last 15 years, few companies have delivered as consistently on almost all metrics that matter. Telus’s revenue has doubled from US$4.5 billion in 1999 (CAD$5.9 billion, using 2015 dollars) to $9.2 billion (CAD$12.0 billion) today. The company has become the global leader in total shareholder value creation among incumbent telecommunications companies worldwide, returning 351 percent to shareholders between 2000 and the present. It has the lowest customer churn rate of any major wireless carrier in North America, and receives customer satisfaction ratings among the top tier on J.D. Power. And Telus’s employee engagement score stands at 85 percent, a world-best for a company of its size and workforce mix, according to Aon Hewitt.
Telus demonstrates many of the usual characteristics of “good management,” such as a focus on execution, people, and talent, as well as clearly articulated goals. But there’s more to the story of the company’s ascent. A closer look reveals an organization that has demonstrated an unusual consistency of focus, in terms of both its business strategy and its culture.
The immense uncertainty that today’s business leaders face is something truly unique. In its scale, ferocity of impact, and ubiquity, it is different — by orders of magnitude — from anything I’ve seen before. We’ve been living with uncertainties forever, of course. What’s new is structural uncertainty. It is structural because the long-term, irresistible forces now at work can explode the existing structure of your market space or your industry, putting it at risk of being drastically diminished or completely eliminated. If you are unprepared, the massive changes these forces bring are like sudden bends in the road. They appear, seemingly without warning, to convey you away from the future you envisioned for your business. But in a world that is projected to add a minimum of US$30 trillion of GDP in the next decade, where human needs and wants are both multiplying and changing, structural uncertainty also creates myriad new needs, new industries, new businesses, new business models, and new market segments.
Taking control of uncertainty and successfully steering your organization through frequent bends in the road is the fundamental leadership challenge of our time. And it will call for a distinctly different type of leadership than the one you were trained for and are likely currently exercising. The advantage now goes to those who don’t just learn to live with change, but who create change. I call these people catalysts.
The document discusses how many companies struggle to keep their commitments over time due to "commitment drift." Despite best intentions, businesses often forget or break promises under pressure to meet quotas or during periods of constant change. This can undermine trust with customers, employees and other stakeholders. The article provides seven strategies to help companies avoid commitment drift and reliably keep their promises: 1) Make fewer, better commitments; 2) Track key commitments; 3) Ask for commitment from others; 4) Connect groups to avoid contradictions; 5) Focus on processes, not heroics; 6) Understand prior commitments when taking new roles; 7) Continually check for internal contradictions. Reliable promises create value by building confidence, but many companies
This document summarizes key findings from a study on CEO turnover in 2015 among the world's 2,500 largest public companies. Some key points:
- CEO turnover reached a record high of 16.6% in 2015, up from 14.3% in 2014, driven by increased M&A activity and forced turnovers. However, the rate of planned successions remained stable.
- Industries facing the most disruption like telecom and energy saw higher rates of outsider CEO appointments. Outsider appointments allow companies to bring in new skills and perspectives during times of change.
- Only 10 of the 359 new CEOs appointed in 2015 were women, the lowest percentage since 2011. However, forces are expected
What impact does Customer Management have on Business PerformanceDoug Leather
We know intuitively that managing the customer portfolio well leads to improved business performance. This slide deck shares important insights into what makes customer management work and how to measure it. This is based on research done by QCi (the main players now with The Customer Framework Ltd) and although I put this deck together 6 years ago I was astounded as to how relevant the thinking still is. The sad reality is that Customer Management capability hasn't improved very much over the years (in the majority of cases, hence we are still subject to inconsistent and poor customer experience) yet it remains a topic that is spoken about and focussed upon by many organisations. The difference that I find today versus 7 or 8 years ago is that MORE people talk about customer management than previously, however I don't se much improvement in the understanding of what it involves or much improved capability in operationalizing customer centric business.(this is a generalised statement)
Creating a Culture of Cost Optimization discusses developing an organization-wide culture of cost optimization through strategic planning, clear communication, and understanding suppliers' industries. It recommends articulating how expense savings impact revenue, making cost reduction a shared initiative, committing to sustainable change, and leveraging supplier knowledge to gain value. Maintaining momentum requires incentives and continuous efforts to find long-term savings that can be reinvested.
Keith turner quick silver funding solutions the role of finance in the stra...keithturnerquicksilverfun
Keith Turner discusses the role of finance in strategic planning and decision making. He outlines the strategic planning process and emphasizes that financial goals and metrics are critical to translating vision into action. Specifically, he discusses 8 key financial metrics that should be established based on benchmarks and industry standards to monitor strategy implementation: free cash flow, economic value-added, asset management, financing decisions, profitability ratios, growth indices, risk assessment, and tax optimization. Establishing measurable financial goals in these areas helps firms execute strategies effectively and create long-term value for stakeholders.
Etude PwC sur le reporting intégré (sept. 2014)PwC France
http://bit.ly/Reporting-PwC
Selon une étude du cabinet d’audit et de conseil PwC, 80 % des investisseurs s’accordent à dire qu’un reporting de qualité influence leur perception de l’entreprise. Pour près de deux tiers d’entre eux (63 %), la qualité du reporting d’une entreprise pourrait avoir un impact financier direct sur le coût de son capital.
Where is your corporate focus; cost cutting or value proposition? Sustainable future growth must come not only from a cost-obsession, but a value-obsession. Check out this white paper from Northpoint Advisors.
The document provides an overview of several strategic planning models and frameworks that can be used in strategic planning, including:
- Strategy map - A diagram that visually communicates an organization's strategy and how objectives align across different levels.
- Balanced scorecard - A framework that translates an organization's strategy into objectives and measures across financial, customer, internal process, and learning/growth perspectives.
- SWOT analysis - An analysis of an organization's strengths, weaknesses, opportunities, and threats to inform strategic planning.
The document discusses the key components and benefits of these models to effectively communicate and implement organizational strategies.
This will go into the minute details of growth and scaling, examining its unique features, advantages, and considerations.
Successful start-ups that grow and scale quickly are known as “unicorns” or “billion-dollar companies” .
The document discusses the evolving role of Chief Financial Officers (CFOs) toward becoming Chief Growth Officers. It notes that since the financial crisis, CFOs have taken on more strategic roles within their organizations. Specifically, CFOs are now expected to spend more time driving growth and profitability initiatives rather than just managing finances. The document outlines how CFOs can position themselves as strategic partners that leverage data insights to support revenue growth, market expansion, and shareholder value. It provides examples of key areas where CFOs can partner with the business, such as using real-time data analysis to inform strategic decision making and managing risks as opportunities for growth.
Managing Finance (MNGFIN)
Week 5: Strategic management accounting
The nature and role of strategic management accounting
Textbook reading (Atrill & McLaney: Ch. 9)
Last week’s objectives helped you develop an understanding of the role of budgets
in the strategic planning process. Budgets are useful tools for setting financial
standards of performance and act as motivators for effective management. However,
budget preparation, management, monitoring, and analysis represent only a small
portion of the role that management accounting can take within the strategic
planning process. Of course, strategic planning requires an organisation to fully
examine and analyse itself both internally and externally.
Management accounting is a unique field that is excellently positioned to assist with
both the internal evaluation as well as external analysis that organisations must
conduct to remain competitive. It may seem that management accounting is strongly
focused on the measuring of internal performance of the organisation. This was the
common belief for many years; however, in the contemporary business landscape,
companies are finding that they can also practice such analysis on their competitors
as well as their customers. Consequently, this forces them to be more outward
looking, to develop competitive strategies, and to monitor these strategies using the
appropriate range of performance measurements. The role of management
accounting is expanding from supportive to participative as new methods are being
used to help meet corporate strategic objectives.
Competitor and customer profitability analysis
Textbook reading (Atrill & McLaney: Ch. 9)
To better understand the expanding strategic role that management accounting is
acquiring within the organisation, it is important to examine two key areas from this
field: competitor analysis and customer profitability analysis. The methods and
techniques that you have examined and explored to this point have all been focused
on measuring and analysing the performance of the organisation itself. This
information is of great importance, as it provides detail with regards to profitability,
sustainability, etc. However, if the concentration remains solely on the individual
organisation, true analysis has fallen short, as companies do not operate in vacuums.
Managers must do their best to understand the competitive stance of other
organisations with regards to costs, strategies, resources, capabilities, and
objectives. In other words, an organisation must do its best to understand what its
competition might do if it were to reduce prices, launch a new product, or attempt to
enter a new market. While obtaining such precious information proves to be difficult
at times, there are numerous sources that can be utilised, such as public financial
reports, industry reports, government statistics, and simple observations of
behaviours and a ...
While many companies have shifted their focus to growth, most lack an effective growth strategy. To successfully grow, companies need a new paradigm of setting credible, quantifiable growth targets. A growth strategy requires actively managing a program to achieve desired growth. The document outlines a framework for growth with five key elements: strategy, execution, optimization, growth capacity, and managing political risk. It also discusses risks at each stage and how to mitigate risks to improve the chances of a successful growth program.
The document outlines a three-step process for companies to identify and prioritize new market opportunities adjacent to their core business in order to accelerate growth. Step 1 involves gaining alignment on objectives, unique capabilities, and criteria. Step 2 uses secondary research to develop fact bases to screen and rank adjacencies. Step 3 performs in-depth assessments to determine the best adjacency to pursue. The process is designed to efficiently identify opportunities and allocate resources to the most promising ones.
A hedge fund just bought 5 percent of your company. The fund partners clearly see value in what you’re doing, and, as a member of the management team, you take heart in that assessment. But you also know life is about to get more difficult. The fund partners are well-known activists. They have already asked for board seats. Now they’re proposing some dramatic strategic and financial changes, confidently assuring you and your shareholders that these moves will drive the company’s stock price higher. If you don’t comply and boost margins in a timely fashion, they will quickly bring in a management team that will.
For many company leaders, this is not a scary hypothetical — it is reality. It may also be an opportunity. In any case, activist shareholder campaigns are proliferating. According to the journal Activist Insight, 300 companies around the world were publicly targeted by activist investors between January and June 2015, about 25 percent more than in the same months the previous year. Since 2013, hedge fund managers have demanded change at hundreds of companies. The most widely publicized have included Apple, DuPont, General Motors, Microsoft, PepsiCo, Sony, Sotheby’s, and Yahoo.
One reason activism is growing is the rich rewards it earns for investors. On average, hedge funds with an activist approach have outperformed most other types of investment funds since 2010. The data analysis firm Hedge Fund Research reported recently that activist funds returned 12.5 percent a year between August 2012 and August 2015, while other funds, on average, earned returns in the single digits. No wonder investors increasingly demand activist funds in their portfolios, while the managers of those funds search diligently for new targets. No one can assume his or her company is immune.
We've distilled 10 principles for cost transformation that can help companies play the role of gadfly investor for themselves.
The role of finance in the strategic planning and decision-making processyashikagupta48
The document discusses the role of finance in strategic planning and decision making. It outlines the strategic planning process, which includes creating a vision and mission statement, analyzing strengths/weaknesses/opportunities/threats, formulating a strategy, and implementing and monitoring the strategy. The balanced scorecard approach aligns strategy with financial goals in key areas like free cash flow, economic value added, asset management, profitability, growth, risk management, and tax optimization. Setting measurable financial goals in these areas helps ensure strategies are effectively implemented and monitored.
Training employees and managers in business acumen, which means understanding how a company makes money and their role in impacting financial results, is important for business alignment and success. Companies like Southwest Airlines have developed a culture of business acumen where employees understand financial statements and how their decisions impact profitability. Developing business acumen through simulations and learning programs helps employees ask better questions to improve processes and strategies. It gives managers a company-wide perspective beyond their department and helps employees think like owners in contributing to financial goals.
Growth Stage Technology Business Evaluation and Strengthening - Nov 2010 - Da...Dave Litwiller
Performance indicators to monitor and operational disciplines to improve to achieve the highest growth rate, financial return and strategic impact in growth-stage technology-based businesses.
Many of my friends from industry have asked for my opinion on the economic crisis and its impact on business. My answer to them is that the real problem is that companies simply do not internalise the proper actions to take in order to respond to such a situation.
And rarely is it more critical than in retail business strategy, and the far-reaching implications surrounding the phenomena often known as ‘wallet share’ or ‘share of wallet’.
‘Share of wallet’ is in essence an holistic term capturing the aspect of a retailer’s desire to understand and manage consumer spending, how much they have, and how frequent and recent this occurs. This clearly introduces the aspects of service, proposition, customer loyalty, and internal & external change as strategy components for serious consideration by the senior management team.
This paper seeks to explore these aspects of a Retail business strategy, giving insight and advice for a stronger business strategy in ‘Changing Times’.
The document discusses the importance of effective investor relations programs for public and pre-IPO companies. It introduces Wakabayashi Fund's dedicated investor relations services, which aim to provide valuable resources and practical insights to help companies maximize their IR efforts. The document then outlines various topics that will be covered, including audiences and contacts, regulatory best practices, shareholder registry management, and putting IR into practice.
The article discusses the seven stages of developing strategic leadership abilities over the course of a career. It argues that strategic leadership can be strengthened through self-directed neuroplasticity, where focusing attention on high-level thinking rewires the brain. The seven stages involve: 1) mastering impulses through executive function, 2) thinking about what others think through mentalizing, 3) becoming habitually self-aware through applied mindfulness, 4) balancing integrity and pragmatism, 5) managing success, 6) expanding aspirations, and 7) building a lasting legacy. Going through these stages shifts one's thinking to a "high ground" that favors long-term strategic decision-making over short-term problem solving and helps one
The document discusses how established companies can become more data-driven through a strategic transformation. It provides examples of how the Spanish hotel chain Ilunion and Transport for London used data analytics to improve decision making. The key steps for companies include linking data initiatives to business goals, creating a data-driven culture where all employees use data in their work, and implementing technology infrastructure to make relevant data and insights accessible. Becoming truly data-driven requires addressing cultural and technical barriers and viewing data as a strategic asset.
This document discusses how emerging technologies like blockchain, IoT, and AI can be used to automate trust and verification of assets and credentials. It provides examples of how supply chains, employee verification, and collaborative R&D projects could benefit from these technologies by creating secure and immutable records to track assets and credentials in real-time. This automated trust could reduce costs associated with counterfeiting and validation while also enabling new business models and revenue streams through secure data sharing and analytics.
An Conghui, president of Zhejiang Geely Holding Group and CEO of Geely Auto Group, explains the future of flying cars and the value of an international brand.
Telecom companies are struggling to find a profitable identity in today's digital sphere. The article suggests they could help customers control their personal data by offering "personal data manager" services that give users control over what data is collected and how it is used. By 2025, such services could allow users to monetize their data and recapture up to a quarter of the $400 billion value of the data economy. Telecom companies are well positioned to offer these services due to their network infrastructure, customer relationships, and experience in data and government regulation.
Governments around the world are developing national AI strategies to encourage innovation, protect citizens, and compete globally in artificial intelligence. These strategies aim to boost economic growth while addressing concerns about privacy, bias, jobs, and other issues. The document urges businesses to engage with governments on developing policies to help manage various tradeoffs around AI, such as innovation vs regulation and transparency vs vulnerability. National strategies and international cooperation will be important to balance opportunities and risks as AI increasingly transforms society and business.
The document discusses challenges faced by Chief Strategy Officers (CSOs) in fulfilling their role. It finds that only 25% of CSOs feel very successful in creating value for their company. Common issues CSOs face include unclear priorities, spending too much time on tactical tasks instead of strategy, and not having a strong voice at the leadership table. It provides recommendations for companies to better utilize their CSO, such as making strategy a top executive priority, improving the strategic planning process, and clarifying the CSO's role and focus on strategic questions. When implemented, these recommendations can help CSOs unlock their full potential to drive company strategy and competitive advantage.
The corporate center of many major companies will undergo significant changes over the next 5 years. The size of headquarters will shrink as more transactional work is outsourced and automated, reducing costs by 25-40%. Headquarters staff will transition from administrators to specialized experts in areas like data analytics, digital technologies, and change management. Corporate functions will be restructured as flexible, cross-functional teams that form around priorities and dissolve when work is complete. This will require recruiting new types of digital talent and offering more flexible employment.
For Greg Lehmkuhl, president and CEO of Lineage Logistics, temperature-controlled supply chains for perishables are one of the world’s next great platforms.
Henry Schein has embraced a stakeholder value approach that focuses on long-term trust-based partnerships with key stakeholders like customers, employees, and suppliers. This approach seeks to harness the power of these stakeholder partnerships by designing a system like a flywheel that efficiently stores and releases the energy generated by stakeholders. Building this stakeholder flywheel requires aligning the company's purpose, strategy, culture, and execution around creating trust with stakeholders so they are willing to contribute their time, energy, and passion. Henry Schein's focus on performance, caring, and purpose has energized stakeholders and powered the flywheel effect, producing long-term value for all stakeholders including investors and society.
This document discusses how some companies have achieved unprecedented power and success by leveraging three new forms of capital: behavior capital, cognitive capital, and network capital. It provides examples of how companies like Amazon, Google, and healthcare consortia are using these new sources of capital to transform industries. The document argues that to thrive in this new "bionic" business environment, all companies will need to undergo a transformation and reinvent what they do and who they benefit by shifting from a supply-oriented to demand-oriented approach, treating knowledge as flows rather than stocks, and adopting a platform business model.
As more and more companies in a range of industries adopt machine learning and more advanced AI algorithms, the ability to provide understandable explanations for different stakeholders becomes critical. If people don’t know why an AI system made a decision, they may not trust the outcome.
Leaders may think that awareness programs are suitable for addressing unconscious bias, but they are just the start. Raising awareness of unconscious bias through presentations and tests does not actually change behaviors or outcomes. To effectively address unconscious bias, organizations need to focus on changing behaviors through shared knowledge, language to discuss biases, and structural approaches like requiring diversity in hiring panels. The most effective strategies are concrete rules and policies that change outcomes by increasing minority applicants and representation, rather than just focusing on awareness.
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Secrets of the Activist Manager
1. strategy+business
ISSUE 82 SPRING 2016
REPRINT 16101
BY LARRY JONES AND JOSEPH DUERR
Secrets of the
Activist Manger
Outside investors have their megaphones. But
insiders have a more powerful tool for creating value:
deep knowledge of their business and customers.
2. leadingideasleadingideas
1
strategy+businessissue82
least seven instances of what we
identified as highly “activated” com-
panies. In four of the five industries,
the targets improved EBITDA mar-
gins relative to their “non-activated”
peers during the three years after be-
ing activated. But in all five indus-
tries, highly activated companies
grew revenues much more slowly
than their non-activated peers in the
same time frame.
Why is growth so important?
When breaking apart an average
company’s stock price in the S&P
500, we find that a third of the value
of the company is driven by future
profitable growth. So short-term ac-
tivism that focuses only on immi-
nent margin improvement is miss-
ing a large part of what drives
long-term shareholder returns.
And yet management often has
difficulty responding to specific
activists. To respond more effective-
ly, and increase the chances of
boosting long-term value, manage-
ment should develop a solid plan
before being approached by an ac-
tivist. Senior managers can do so by
making use of their chief advan-
tage: information.
What does management know
that the activists don’t? Plenty. As
Secrets of
the Activist
Manager
Outside investors have
their megaphones.But
insiders have a more
powerful tool for creating
value: deep knowledge
of their business and
customers.
by Larry Jones and Joseph Duerr
I
n theory, management and
shareholder activists have the
same goal: maximizing long-
term value. A stronger and more
valuable company not only benefits
its shareholders financially, but lays
the economic foundation for the
company to serve the interests of
other stakeholders, including cus-
tomers, employees, suppliers, and its
community. Many activists — insti-
tutions and individuals who take a
position in a publicly traded com-
pany with the intent of improving
its value by changing its strategy, fi-
nancial structure management, or
board — share these long-term ob-
jectives. But some, the type often
branded as dangerous corporate
raiders, take a short-term view. They
believe it is possible to push share
prices higher (and soon!) by reduc-
ing costs, increasing leverage, and
selling assets. According to a 2015
PwC report (“Shareholder Activism:
Who, What, When, and How?”),
the number of hedge funds pursuing
such strategies has increased dra-
matically since 2005, and they col-
lectively have more than US$100
billion in assets.
But the reality is that in many
instances, although activist investors
are successful at improving margins,
they struggle to drive growth. We
analyzed 55 companies over the past
10 years in which shareholder activ-
ists had a significant impact on com-
pany governance and strategy, and
compared their performance to that
of their industry peers. (The aims of
activist actions included business fo-
cus, board composition, business re-
structuring, director election, focus
on growth, board representation,
general cost cutting, operational ef-
ficiency, and removal of CEO.) In
each of five industries, we found at
Leading
Ideas
3. 2
leadingideas
IllustrationbyRobertNeubecker
insiders, senior managers have access
to a deep and detailed understand-
ing of the company’s operations,
customers, markets, and competi-
tors. Because they know how the
business works, they can determine
which customers, geographies, and
business lines are creating value for
the company and which are con-
suming it, and where profit pools
exist in the market. They can trans-
late this information advantage into
a performance advantage by devel-
oping new strategies to capture a
greater share of these profit pools
and by making better resource al-
location decisions.
Accordingly, the activist man-
ager should follow a three-step ap-
proach. First, evaluate, systemati-
cally and dispassionately, where the
opportunities for value creation ex-
ist. Second, evaluate and execute
options to deliver on those oppor-
tunities. And finally, communicate
the growth plan to value-oriented
investors.
Understanding Where Value Lies
Value is always highly concentrated
within a business — by company at-
tribute, segment, product, customer,
and geography — often to a degree
not evident on the surface. Despite
the wealth of disclosures that com-
panies make in regulatory filings,
investor presentations, and media
releases, outside activists get only
snapshots (often fuzzy ones) of
what’s going on inside the company.
By contrast, management has the
ability to see in high resolution and
in three dimensions. Understanding
where and why value is concentrated
enables management to prioritize
investment in the highest-potential
areas for growth and identify areas
where margins need to be improved.
Management should use this infor-
mation to develop a plan that is
more effective than any an outsider
could create — and do it in advance
of being approached by an activist
investor.
In most customer and product
markets, only a third of customers
or products create value for share-
holders; another third are value-
neutral, and the final third are actu-
allydestroyingvalue.Understanding
where and why value is concentrat-
ed at this granular level allows man-
agement to reduce investment in
areas where value is being destroyed
and to increase investment in areas
with the highest potential for profit-
able growth.
In fact, the further you dig
down within a company, the more
concentrated value becomes. In one
industrial products company, the
top 5 to 10 percent of the company’s
customers in a single market repre-
sented 60 to 70 percent of current
profitability and 70 to 90 percent of
the potential profitable growth for
the entire market segment. Before
this analysis was done, managers
had a hard time justifying invest-
ments in new offers, services, pric-
ing, and support. Why? They were
attempting to serve the needs of
their average customer, including
the vast majority who were not pro-
ducing much value. An outside ac-
tivist likely would have made the
same recommendation. But as soon
as inside managers identified the 5
to 10 percent of customers who were
truly creating value, they felt com-
pelled to make investments to cap-
ture a greater share of these relation-
ships. Within a year, the territories
that employed the new techniques
for priority customers were growing
10 times as rapidly as those employ-
ing the standard approach.
Management also can best un-
derstand which areas of the business
are consuming value, and then use
that knowledge to improve margins
through a combination of improv-
ing price, enhancing mix, and re-
ducing costs. Doing so will improve
the company’s long-term health and
enhance its ability to serve all its
stakeholders. In these cases, man-
agement will take many of the same
actions an outside activist would —
but the managers’ information ad-
vantage will enable them to care-
fully cut with a scalpel, rather than
wield an ax.
Plan of Action
Once opportunities for improving
margins and enhancing profitable
growth have been identified, the
activist manager will also have a
better-informed view than the out-
side activist of the best course of
action. Short-term activists often
assume, as a default response, that
The reality is that in many instances, although
activist investors are successful at improving
margins, they struggle to drive growth.
4. 3
strategy+businessissue82
leadingideas
understanding of what additional
capabilities need to be developed or
acquired to support the growth plan.
In the example of the consumer
packaged goods company, if the
management team had not had the
capability and capacity to fix the Eu-
ropean business, exiting the business
would have been a preferable choice.
This capabilities-driven strategy can
create a cycle of continuous renewal
that leads to top-line growth in both
existing and adjacent markets.
Once strategies have been agreed
upon, they need to be translated
into a specific implementation plan
that lays out clear roles, responsibili-
ties, actions, resources, key perfor-
mance indicators, and financial
commitments. This detailed plan is
essentially the road map for a corpo-
rate transformation. Execution of
the plan should be a top priority for
management, and must encompass
the alignment of current resources,
budgeting, performance manage-
ment, and incentives.
Communicating the Plan
The value-maximizing plan must be
communicated not only to preempt
or respond to an activist, but also to
attract shareholders who voice their
objectives for long-term value cre-
ation. Here, again, management
should focus on building an infor-
mation advantage — this time
about investors. Understanding and
attracting the right type of investors
is like understanding and attracting
the right type of customers. Man-
agement needs to know the moti-
vations of the company’s current
business segments or groups of cus-
tomers that are consuming value to-
day should be exited or abandoned.
But “firing” customers should be
done only as a last resort, because it
closes the door on any potential fu-
ture growth from those customers
or segments. In many cases, manag-
ers can use their detailed under-
standing of their customers and op-
erations to fix the underlying issues
that have caused these relationships
to be unprofitable. In the process,
they can unlock hidden value and
future growth.
For example, a global consumer
packaged goods company was strug-
gling to make one of its European
businesses profitable. Management
was considering divesting the busi-
ness. But a thorough review revealed
that the business could be profitable
if management could successfully
provide new and more valuable of-
fers to customers, become more dis-
ciplined about pricing, reconfigure
the supply chain, and streamline
support. Rather than sell, manage-
ment embarked on an 18-month
turnaround that made the business
profitable, and generated tens of
millions of dollars more in share-
holder value than it would have with
a quick sale.
Not every strategy will work for
every company, as each has a unique
history and set of capabilities. For
that reason, these strategic options
need to be grounded in the set of
distinctive capabilities that enable
the company to deliver in its key
markets in a way that competitors
can’t match, and in management’s
shareholder base, and to be able to
identify investors who don’t hold the
stock today but who would benefit
from holding a position in the fu-
ture. Senior managers can make
their investor relations (IR) function
a proactive force rather than an en-
tity that merely responds to investor
questions. The IR team should re-
search and understand the motiva-
tion of current and potential in-
vestors. In particular, companies
should identify and target share-
holders who are making decisions
based on the long-term intrinsic
value of the company. Management
needs to understand which key vari-
ables these investors are using to as-
sess the company, and adjust the
company’s messages, metrics, and
methods to tell the value story most
effectively.
Leaders of companies in which
activists express interest should start
from a position of confidence. They
already know which management
practices work best for the com-
pany. And the secrets of the activist
manager are embedded in the infor-
mational advantages that manage-
ment already possesses. By seizing
these advantages — unearthing
them, understanding them, acting
on them — leaders can reinvigorate
their company and create long-term
profitable growth in ways that com-
petitors, upstarts, and activist inves-
tors won’t be able to match. +
Reprint No. 16101
Larry Jones
larry.jones@pwc.com
is a principal in the strategic value consult-
ing group of the PwC US deals practice. He
is based in Chicago.
Joseph Duerr
joseph.d.duerr@pwc.com
is a director in the strategic value
consulting group of the PwC US deals
practice. He is based in Portland, Ore.
Senior managers can make their IR function a
proactive force rather than an entity that merely
responds to investor questions.