The document discusses how technology companies can increase shareholder returns through effective strategic planning and business alignment. It argues that companies often fail to achieve their strategic goals because their corporate decision model is not properly aligned with their new strategy. It provides examples of large tech companies that improved performance by realigning their corporate structure to better support their strategic objectives of innovating, integrating solutions, or focusing on operations. The document advocates analyzing a company's strategy, decision model, and making changes to the model before implementing strategic plans in order to improve investment returns.

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Thestrategic
planning
imperative
kpmg.com
How tech companies can increase
shareholder returns through effective
business alignment

3. In response to these threats, business leaders attempt to deploy new corporate
strategies to remain competitive and address long-term growth aspirations. The
majority of these strategic attempts end up failing, because the organization’s
corporate decision model is not appropriate for the new strategy.
Unfortunately, technology companies are trying to achieve tomorrow’s goals
with today’s operations strategy. A simple example observed is when a
company’s business strategy shifts from stand-alone products to integrated
solution offerings, but internal operations and external partners are disjointed
and not tightly integrated.
We observe that when most technology companies continue to operate
similarly while forming new strategies, this results in investment dollars being
spent inefficiently or not aligned with a new strategy. From there, we see
the expected outcomes on financial results and Return on Investment Capital
(ROIC) typically do not materialize for them.
More than ever, strategic planning plays a critical role in how companies prepare
for the future. When done effectively, business leaders can efficiently deploy
capital resources and maximize the effectiveness of the corporate strategy.
While the tactical steps within strategic planning are generally agreed upon,
most research does not acknowledge that planning may need to be approached
differently depending on:
—— Where a company is in its life cycle (e.g., new product introduction verses
mature markets)
—— What level of strategic change an organization is required to undertake.
Successful changes to strategies must be addressed by the board of
directors, CEO, COO, and CFO early on in the planning process rather than
“downstream” in the organization in order to improve expected outcomes.
In the technology industry, where markets shift more rapidly by the day,
addressing these upfront changes first becomes even more critical.
KPMG LLP’s (KPMG) experience working with FORTUNE 500 technology
companies has found:
—— There are three main corporate strategies for technology companies:
(1) innovate, (2) integrate, and (3) operate.
—— Each corporate strategy has a natural grouping with one of four corporate
decision models: (1) portfolio holding, (2) strategic guidance
(e.g., business strategy, business structure or operating structure),
(3) integrated management, and (4) actively controlled.
—— A company’s corporate strategy and corporate model must align to
maximize the speed and effectiveness of investment returns.
Mature technology companies face constant
pressures from new market entrants and
industry disruptions.
“It’s unreasonable
to believe you
can reinvent your
strategy without
changing the way
your organization
looks and governs.
To stay relevant
in the market,
technology
companies need to
constantly evolve
the way they run
their business and
deploy their capital to
maintain an agile and
effective business.”
– Richard Hanley,
KPMG Technology
Sector Leader
1The strategic planning imperative

4. Consider your new corporate strategy
In an industry of rapid change and innovation like that found in tech, it is
increasingly important for organizations to be prepared to develop and deploy
new strategies to spur growth. This generally occurs through some form
of strategic planning in which market scenarios are developed, strategic
alternatives are prioritized, and investment choices are made to achieve
strategic objectives.
While each company has a mix of strategic pursuits, the core vision for how
value may be created in the market and with shareholders can be categorized
into three distinct options:
Operation
Innovation
Differentiated and focused market positions
(mature companies can have more than one focus area)
1. Create new markets
2. Redefine existing markets
3. Set new standards
Integration
Integrated technologies and offerings into an
ecosystem, solution, or platform
1. Drive user engagement across the platform
2. Provide value through solutions versus products
3. Drive high switching costs
Scale and operational excellence
1. Expand the channel
2. Compete on price to protect market share
3. Meet short-term earnings goals
Corporate strategy Description
KPMG’s research
analysis and
experience with the
top 100 publically
traded tech
companies over
the last 10 years
has shown that
companies that focus
on differentiated
products,
“innovators,” and
integrated solutions
have outpaced the
S&P 500, while
tech companies
that focused their
investments on scale
and operational
effectiveness
were challenged
to increase stock
price and distribute
dividends.

5. 3The strategic planning imperative

6. Top 100 publically traded tech stock performance
(2006–2015)
25%
15%
20%
10%
5%
0
Operator
1%
Integrator
12%
Innovator
21%
S&P 7%
Performance indicators
Innovator Integrator Operator
P/E ratio
(5-year avg.)
45x 30x 27x
Operating
margin
(5-year avg.)
17% 20% 9%
Revenue CAGR
(5-year)
21% 13% 1%
— Innovators and integrators consistently outperform operators in both growth and earnings.
— Integrators spend similarly to operators on Research and Development (R&D) proportionally
to revenue but appear to get a significantly better return on their investment.
Source: CapIQ
—— Innovate differentiated products or services. Optimally secure niche
portions of the market in a semi-monopolistic position led by holding
companies to 21% growth and 17% margins. Target an increase of 14% in
stock performance to surpass the S&P 500 10 year average of 7%.
—— Integrate adjacencies. Expand offerings to become a solutions provider
with 13% growth and 20% operating margins. Target a minimum increase
of 5% in stock performance to surpass the S&P 500 10 year average of 7%.
—— Operate, consolidate, or secure cost competitive market positions.
Reinvigorate and innovate to exceed growth of 1% and 9% operating
margins. Target a minimum increase of 5% in stock performance to reach
the S&P 500 10 year average of 7%.
Innovation and integration strategies provide the highest returns for
technology shareholders.

7. Our perspective on aligning corporate strategy
Investors are observing the technology index and asking for larger returns on their investment from
boards and executive teams. In the event the executive leadership team has a desire to provide
returns outside its current “value stock” position, many executives are faced with complex operating
models that lack agility, diverse product portfolios that operate in silos, and demanding shareholders
expecting near-term earnings performance.
The question boards of directors and executive leadership in these companies are asking is: “How
do we reinvigorate our innovation and growth strategy?”
Although companies frequently devise new strategies to address this and attempt to execute these
strategies through strategic planning, they come up short time and time again—not understanding
the reasons behind their failures.
KPMG’s experience in working with some of the top tech firms in the world has found that
companies fail to maximize the value of their strategic planning efforts for a number of reasons.
While most challenges are well understood, the importance of tight alignment between corporate
strategy and the corporate decision model is a less discussed but vital part of strategic planning.
Our experience has shown that companies with a mismatch between their corporate strategy and
decision model attempt to deploy new strategies without applying the necessary rigor to internal
analysis that is required to be successful.
Technology companies’ strategic planning challenges
Corporate
decision model
——Organizations attempt to achieve tomorrow’s objectives with
today’s company.
——Misaligning future strategy and enabling corporate structure
hinders value creation.
——Large organizations often lose focus and are unclear for which
products investments have been committed to.
——Diluted investments result in inefficient deployment of capital
and human resources.
Investment
focus
——Many investment decisions are based on historical spend
assumptions.
——Lack of investment approach rigor may lead to subscale or
ineffective funding.
Decision making and
trade-offs
——Often, performance management is narrowly focused on
achieving Profit and Loss (P&L) targets.
——Lack of attention on strategic investments leads to short-
sighted results.
Postinvestment
performance mgmt.
——Most (if not all) companies have functional or geographic
organizational barriers.
——Stakeholder disconnects lead to suboptimized solutions and
slower execution.
Coordination across
stakeholders
Strategic planning
challenges
Description
Significant issue associated with achieving investment returns
5The strategic planning imperative

8. The principal error these organizations make is attempting to achieve tomorrow’s objectives
with today’s company.
Executives must realize that the role of the corporate leadership team does not stop at developing
the appropriate strategic vision. It must also include the leadership and coordination of internal
stakeholders (and investors) to align the appropriate investments, budgets, and activities that
reinforces the corporate strategy. Corporate decision models define the roles and interaction between
corporate and business groups in the following way:
Once the executive team aligns on a corporate strategy, it is critical to shift to the complementary
corporate decision model to enable strategy deployment before addressing downstream changes
related to strategy execution. A shift in strategy may require a shift in corporate decisions. Each
corporate strategy has a complementary corporate decision model to reinforce success:
Portfolio
holding
Strategic
guidance
Integrated
management
Actively
controlled
Narrow specialty –
Drives focused
differentiation
Innovators
Corporate oversight
hinders innovation
Too many layers of
management
Business is too
complex (multiple
specialties)
Business is too simple
(single specialty)
Light corporate
guidance isn’t
enough to force
collaboration across
groups
Business groups
are differentiated
enough to require
some autonomy
Business too
complex to actively
manage with a
reasonable
corporate layer
Business too complex
to actively manage
with a reasonable
corporate layer
Lean G&A structure
for cost
competitiveness
Drives integration
across desperate
capabilities
Multiple specialties –
Reinforces need for
tailored investment
approaches
Integration across
products/services
requires corporate
to tie business
together
Business groups
require a greater level
of corporate oversight
Integrators
Operators
Portfolio
holding
Strategic
guidance
Integrated
management
Actively
controlled
Description and
philosophy
— Investment company
— Decisions are primarily
focused on financial returns
and portfolio balancing
— Strategic leadership of
collection of loosely related
entities
— Management and strategic
leadership of tightly linked
entities
— High degree of synergies
across investments
— Relatively low complexity
— Flat organizational structure
Corporate role
— Unified operating model
designed by corporate
— Enforce structured
model management.
— Provide KPIs/financial
objectives to BU GMs
— Provide strategic vision and
guidance to business
— Coordinate with BUs to set
financial and strategic
objectives
— Set strategic vision and
provide set of priorities/
objectives to BUs
— Considered GMs of the
business groups
— Set and execute priorities/
objectives
Business unit
(BU) role
— GMs prescribe to KPIs with
no oversight from corporate
— Limited synergies across
BUs
— Drive strategic vision for
BUs
— Execute current projects/
products
— Execute current projects/
products
— Monitor and control
performance
Corporate decision models

9. 7The strategic planning imperative

10. Changing strategies and shifting
structural gears
In recent years, some high-profile tech
companies have publicly acknowledged
their challenges of managing investments
under a misaligned corporate decision
model.
While their growth strategies are
still unfolding, top executives from a
FORTUNE 100 technology conglomerate
and a FORTUNE 50 IT provider have
provided positive feedback that their
choices to better align their corporate
governance to the strategic vision of their
companies.
The case for rearranging a holding
company model structure:
A FORTUNE 100 technology conglomerate
shifted to a more relevant holding company
model to better manage its complex
portfolio of innovative products.
—— The company is a leading Internet
innovator. Their product was superior
to initial competition, enabling it to
capture a leading position in the
market and reap incredible growth
and profits.
—— As the search business matured,
the company realized the need to
continue innovating. They began
undertaking a series of bets
using a 70/20/10 rule (70% focus
on core, 20% on adjacency,
10% “moonshot”).
—— As these adjacencies and moonshots
developed, the company’s business
became larger and more complex.
Leadership discovered that the
“20/10” began distracting them from
the core business.
—— They shifted the corporate model to
a holding company to successfully
provide operating divisions more
leeway in making their own decisions
and keep the businesses more nimble.
”Structurally, this gives us the ability to
focus on the various ‘other bet’ entities,
to be a catalyst and a magnet for great
entrepreneurs, in a way that may have
been more difficult under one umbrella.”
— CFO, FORTUNE 100 technology
conglomerate, Foreign Affairs Magazine,
2016
Case study #1: Innovator

11. The case for splitting up a global
technology organization into two:
Over the years, a FORTUNE 50 IT
provider found itself in a complex
operator strategy and split the business
to improve focus on integrated solutions
and new innovations.
—— The company built itself into
a massive global technology
organization with offerings spanning
across hardware, software, and
services, serving both businesses
and consumers.
—— As many of its markets became
commoditized, significant changes
were required within the organization
in order to remain agile and thrive
in the competitive, rapidly changing
technology market.
—— On the consumer side, the company
wanted to innovate on the enterprise
side. There were restructuring needs
and a desire to become an integrated
solution provider.
—— Recognizing the difficulty in driving
this scope of change through such a
complex organization, the company
decided to split the company in two.
—— This enabled each company to
choose a corporate model to fit their
unique strategic needs and enhance
trade-off focus.
“We’re starting to see now the real
benefits of focus.... What the split has
allowed us to do is to accelerate the
turnaround…and focus on a smaller
number of things.”—CEO, FORTUNE 50
IT provider, Bloomberg Interview,
March 2016
9The strategic planning imperative
Case study #2: Operator to integrator
transformation

12. Establishing the right operating structure for your business strategy
So, the primary question is: How can large, complex technology organizations successfully
deploy new strategies to reinvigorate growth and innovation and maximize returns to
shareholders? KPMG has identified two overarching methods for companies facing significant
business direction and strategy, structural, or operational divergence:
1. Focus on the enabling structural changes first. Prior to deploying detailed strategy action plans,
reorient the corporate decision model as a first step (and may be required in complex strategy
shifts).
2. Orient the leadership team to a new way of operating in parallel to detailed strategy planning (for
faster deployment of strategy).
Corporate decision model framework
Performance
management
Roles and
responsibilities
Information flows
and interaction
Systems
Organization and
financial design
Corporate
decisions
Effective corporate decision-making, which includes an organization’s business strategy, business
structure, or operating structure, occurs through alignment across five key elements:
—— Organization and financial design – Structure the organization in a way consistent with
strategic and financial goals.
—— Roles and responsibilities – Clearly define ownership and accountability of decisions. Structure
a hierarchy of decision rights.
—— Information flows and interaction – Design the way groups and functions interact with
each other. Define the information that is required. Develop the right operating model and
interaction cadence.
—— Performance management – Identify appropriate metrics to manage investment decisions.
Turn transparency into performance. Establish a formal review process cadence. Standardize the
process for any budget plan changes.
—— Systems – Structure how systems will enable workflows and information capture. Design
interaction among systems.

13. This is not a “design by consensus” effort. There will be winners and losers in the new
design; a well-respected executive who can balance the pros and cons should be the
single-point authority on final decisions.
Organizational design and alignment can be complex. A good practice is to set up a
focused program office to drive change.
Depending on the size of your business and degree of change, these efforts take time.
Given the importance of business alignment to the strategy, the executive team needs to
reinforce the importance in the face of competing priorities.
Communicating the vision and objectives of the effort broadly has shown positive results
to improve coordination and speed of achieving desired goals.
Implementation lessons learned
Single executive
champion
Run it like a
program
Stay focused
Communicate often
Steps to establish a new corporate decision model
Choose the
right team
— Design by consensus is not efficient.
— Future leadership team may be different than today.
Key actions
Set milestones
Description
Develop design
alternatives
Define new
operating rhythm
— Define timeliness and set accountability.
— Address variances quickly and effectively.
— Align strategy to corporate governance (e.g., an
organization's business strategy, business structure, or
operating structure) options.
— Identify role and capability requirements.
— Architect day-to-day information flows and interfaces.
— Develop system requirements.
Organization and
financial design
Roles and
responsibilities
Information flows
and interaction
Performance
management
Systems
1
2
3
4
Elements addressed
11The strategic planning imperative

14. Conclusion: Reinvent or risk losing
The technology industry is constantly changing—and rapidly. Its largest
companies got to where they are by creating innovative new technologies that
created or redefined markets. Companies typically can create strategies and
align investments to these strategies.
However, as these markets have matured, these companies have struggled to
keep pace with a new crop of innovators. Execution typically fails because the
decision model does not change to reflect the company’s new strategy. If they
cannot reinvent themselves, their businesses will continue to slowly erode into
obsolescence.
It is important to keep in mind:
—— Aligning decision models at C-level will drive change throughout
organization.
—— Decision models should focus on organizational design, roles and
responsibilities, Key Performance Indicators (KPIs), and systems.
—— The level of change required to make this transition may fundamentally
change the way an organization looks, and stakeholders with vested
interests in the status quo will resist the change. Roles and responsibilities
may need to change.
—— The scope of change to be successful spans the entire organization and a
piecemeal approach will fail.
—— For publicly traded companies, shareholder focus on short-term earnings
may inhibit the time and investment requirement needed.
Next steps
With the right strategic planning approach, innovation, growth, and maximized
return to shareholders are within reach of your organization’s future endeavors.
Here are some immediate next steps in taking your assessment:
—— Determine if you are shifting your corporate strategy and if the corporate
decision model aligns with it.
—— Discuss, determine and communicate the integral roles of your executive
team members as it relates to strategy and hold them accountable.
—— Assess spend and resources related to each one of your strategic initiatives.
—— Assess the ROI for the historic (and current) capital deployments in R&D,
sales, marketing, and acquisitions.

15. About the authors
Samir P. Ajmera
Principal, KPMG in the U.S.
Samir is a Principal in KPMG’s Strategy Practice focusing on the
Technology, Media and Telecommunications sector. Samir has nearly 15
years of experience advising technology clients with strategic initiatives that
range from corporate growth strategy and business model transformation
to operating model design and cost optimization.
Christopher M. Maynard
Managing Director, KPMG in the U.S.
Christopher is a Managing Director in KPMG’s Strategy Practice focusing
on the Technology, Media and Telecommunications sector. Christopher’s
specialziation is positioned at the intersection between growth strategy and
operations, providing operational solutions to client strategic objectives.
His work includes market sizing, commercial and operational due diligence,
strategic business planning, operating model design, and cost optimization.
Rakesh Bhatia
Director, KPMG in the U.S.
Rakesh supports KPMG’s Technology, Media and Telecommunications
practice with more than 10 years of experience in technology industry.
His client experience includes operations strategy, growth strategy, and
due diligence (operational and commercial).
Brian May
Senior Associate, KPMG in the U.S.
Brian is a Senior Associate in KPMG’s Strategy Practice focusing on the
Technology, Media and Telecommunications industry. He has a breadth
of experience, advising clients on both growth strategy and operations.
His work includes Research and Development portfolio optimization,
Mergers & Acquisitions strategy, strategic business planning, and cost
optimization.
13The strategic planning imperative

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The information contained herein is of a general nature and is not intended to address the circumstance of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the
particular situation.
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Contactus
Samir P. Ajmera
Principal
Technology, Media, and Telecommunications
U.S. KPMG Strategy
T: 408-367-7620
E: spajmera@kpmg.com
Christopher M. Maynard
Managing Director
Technology, Media, and Telecommunications
U.S. KPMG Strategy
T: 310-892-4133
E: chistophermaynardtkpmg.com
Rakesh Bhatia
Director
Technology, Media, and Telecommunications
U.S. KPMG Strategy
T: 765-409-3510
E: rakeshbhatia@kpmg.com
Brian May
Senior Associate
Technology, Media, and Telecommunications
U.S. KPMG Strategy
T: 408-367-6076
E: bmay@kpmg.com
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