0903 10 Core Tools To Drive Growth

APAC Chairman’s Series on Growth

The 10 Core Tools To Drive Growth Presented by Craig Baty

Martin Gilliland

Global VP, IT Practice,

VP, IT Go To Market Strategies

Sydney, Australia

Singapore

Frost & Sullivan

Frost & Sullivan

March 2009

Agenda 1.

Recap of Poll Result from Previous webcast

2.

Brief Overview: Where We Are in the Series

3.

The 10 Growth Processes

4.

Why Look at Growth Processes?

5.

Growth Process Analysis

6.

What is the Right Growth Strategy?

7.

Geographic Expansion

8.

Merger and Acquisition

9.

Outsourcing to Drive Growth

10.

New Product Launch

11.

New Product Development

Polling Questions from February APAC CSG (Chairman’s Series on Growth) Have you cut back your 2009 business plans due to the fear of an economic downturn? Q3 2009 17% Q4 2010 33% Q4 2009 50% Q4 2011 0%

Beyond 0%

Which of the following Growth Processes is your company depending more heavily on to drive growth?

What strategies are your company utilising during this period of economic turmoil? Please select all that apply: Wait Distribution and see Channel strategy 12% Strategies Cutting 19% operationaal Product costs Developmen 19% t: 19% Market share Rebound expansion Strategy 12% $ in growth M&A 19% strategy strategy 0% 0%

Which member(s) of your "Growth Team" are currently driving your company's growth strategy?

The Growth Acceleration System

The 10 Core Tools To Drive Growth •

Mergers & Acquisitions

•

New Product Development

•

Geographic Expansion

•

Strategic Partnering

•

New Product Launch

•

Growth Sourcing…Outsourcing

•

Distribution Channel Optimisations

•

New Customer Application

•

Competitive Strategy

•

Marketing/Sales Strategy

Why Look at the 10 Core Tools? 1.

Optimising Impact of Growth Pipeline

2.

Comprehensive Review of All Opportunities

3.

Avoids Over-Reliance on One Growth Process

4.

Checklist System Identifies Undiscovered Opportunities

5.

Supports Innovation and the Creative Process

6.

Global Environment is Increasingly Competitive

Annual CEO Survey on Growth Strategy Core Tool Analysis: 4 Measurements •

Where is the Growth Coming From?

•

The Current Utilisation of Growth Tools and Processes

•

The Most Difficult Growth Tools to Utilise

•

Evaluation of Organisations Skills per Growth Process

Sources of Growth…An Over-reliance on New Product Development Top Successes Regarding Growth.. #1 Success 30%

#2 Success

#3 Success

26% 21%

20% 20%

17%

16%

16%

14% 12% 10% 10%

14%14% 12%

13%

12%

11%

9% 7%

11% 9% 8%

10% 6% 5%

5%

0% Technology Development

Total Sample Selecting…

57%

Product Strategy

47% 21%

Marketing Strategy

Competitive Strategy

Customer Orientation & Support

42%

39%

31%

What are the top three areas that you have had the most success in growth?

Sales Strategy

31%

General Growth Strategy

Geographic Expansion

28%

Growth Tools & Techniques…Underutilized Management Tools By far, Strategic Partnering is the most underutilized management tool, as reported by 34% of CEOs. And, while Customer Research is the second most underutilized, various other management tools appear to be used more often.

Most Underutilized Management Tools... 40% 34% 30%

26% 20%

20%

20%

18% 16%

15%

14%

14%

14%

R&D

Marketing Strategy

New Product Launch

10%

0% Strategic Partnering

Custom er Research

Strategic Planning

Market Analysis

Mergers & Acquisitions

What are the main three management tools utilized by your organization to drive growth?

Technology Implementation

Sales Strategy

Difficult Growth Processes to Implement As previously reported, only 2% of CEOs report they strictly utilize Mergers & Acquisitions as a growth strategy…and most likely the primary reason is that Mergers & Acquisitions are considered the most difficult tool to implement (39%). Also notable, the same proportion (34%) citing that Strategic Partnering is underutilized also report that it is difficult to implement…thus, this seems to explain the earlier results.

Most Difficult Management Tools to Implement... 40%

39% 34%

30% 22% 20% 20%

19% 16%

15%

15% 13%

12%

10%

0% Mergers & Acquisitions

Strategic Partnering

Technology Implementation

Strategic Planning

New Product Launch

What are the main three management tools utilized by your organization to drive growth?

Market Competitive Benchmarking Grow th Analysis Strategy

Sales Strategy

Custom er Research

Growth Processes – The CEO’s Assessment of Skill Organization's Skill/Techniques Very Good 100% 9%

8%

29%

24%

Fair

Poor

Very Poor

Not Applicable

10%

10%

7%

12%

12%

31%

33%

37%

32%

38%

44%

39%

32%

14%

10% 80%

Good

60%

40%

49%

37%

43%

42%

40%

14%

10%

8%

36%

41%

47%

39%

32%

7%

9%

Strategic Partnering

Best Practices

New Product Launch

46%

46%

41%

20% 12%

21%

14%

12%

13%

9%

9%

Strategic Planning

Growth Strategy

Marketing Strategy

Sales Strategy

Customer Research

54%

53%

0% Technology Implementation

Very Good/ Good…

61%

R&D

58%

57%

53%

48%

Note: Proportions less than 5 percent are not shown.

How would you rate your organization regarding the following growth skill/techniques?

Geographical Expansion Model - Indicators Factors Business Environment Economy

Labor

Infrastructure

Education

Market Indicators

Description •

• •

• •

• •

•

• • •

Political stability Economic stability Purchasing power Labor force Labor cost trends Cost of operation Quality of Infrastructure Workforce availability Revenue potential Competition Resources

Indicators •

Political Stability

•

Degree of Openness

•

Corruption

•

Economic Growth

•

GDP Per Capita

•

Exchange Rate

•

Inflation

•

Employment

•

Youth Unemployment

•

Minimum Wages

•

Labor Cost

•

Computers and Internet Users

•

Real Estate Prices

•

Telephone and Cellular Subscribers

•

Telephone Charges and Broadband Subscribers

•

Number of Graduates

•

Graduate Enrolment Ratio

•

Language Skills - English and other languages

•

Revenues and Revenue Potential

•

Revenues and Revenue Potential (Region)

•

Availability of Qualified staff

•

Number of Competitors

•

Foreign Language skills

Geographical Expansion Model - Ranking

2000

2005

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

UK Argentina Czech Poland Germany Hungary Slovakia Slovenia Lithuania Estonia Latvia Croatia Serbia Macedonia Bulgaria Albania Bosnia

UK Argentina Poland Germany Czech Hungary Slovakia Slovevia Lithuania Estonia Serbia Croatia Latvia Macedonia Bulgaria Romania Albania

Sa m pl e

Rankings

2010 UK Argentina Poland Czech Germany Hungary Slovakia Slovenia Lithuania Estonia Latvia Croatia Serbia Bulgaria Macedonia Romania Albania

2015 UK Poland Argentina Czech Germany Hungary Slovakia Slovenia Lithuania Estonia Latvia Croatia Serbia Bulgaria Romania Bosnia Macedonia

What is the Right Growth Strategy? ORGANIC

M&A

Advantages

Advantages

• Greater control

• Speed

• Less capital structure risk • Involves less uncertainty

• Diversification/access to new product/ service line, intellectual property, and capabilities

• Allows focus on core competencies

• Increase global reach and market share

• Greater investor transparency

• Acquire talent and human resources • Game changing potential • Accelerate revenue growth

Disadvantages

Disadvantages

• Takes time and long-term focus

• Integration issues

• More reliant on own capabilities

• Increased potential to destroy shareholder value over long term

Key Challenges

Ke y Challe nges to an Organic Grow th Strategy Other, 14.6%

Key Barriers to a Successful M&A Strategy Other, 14.1%

Talent, 26.9% Political, 5.4%

Market Reaction, 5.0%

Material Costs, 5.8%

Valuations, 36.1%

Shareholder Concerns, 7.5%

Ideas, 10.4% Legal Issues, 9.1%

Cost of Capital, 15.4%

Shareholder demand for nearterm impact, 21.5%

Competition from Financial Buyers (Private Equity), 12.0%

Lack of Targets, 16.2%

Source: Frost & Sullivan

What is the right approach? • M&A should be used as a tool for growth - not necessarily a strategy in itself • A combination of organic and inorganic is best • Explore and understand alternative ways of measuring success, risk, and growth opportunities (cost of not doing a deal) Organic Growth – Process

Acquisition Growth - Issues

Successful firms have higher IRR hurdle rates

Proactive approach and opportunistic

Disciplined capital allocation process

Ongoing process

Internal communication

Setting the right expectations

Pipeline measurement and growth budgets

Clear goals and objectives

Effective understanding of strengths and weaknesses Clear goals and objectives

Systematic due diligence takes time and creativity Focus on pipeline creation as well as execution

The right structure and process are important for both options

M&A Thought Leadership We break the M&A process into four steps: 1.

Sector or trend overview

2.

Target specific analysis

3.

Transaction specific due diligence

4.

Post-deal integration and strategy

Leverage specific tools and processes that support each step Deal Origination

Sector and Trend Overview

Target Specific Analysis

Transaction Due Diligence

Post-Deal Integration and Strategy

Our Approach to Growth-Sourcing Our highly-skilled team of

Internal

External

consultants can help you meet your growth objectives by:

•

Assessing the external outsourcing opportunities utilising Frost & Sullivan Growth Sourcing Model

•

Evaluating your internal growth objectives and execution capabilities

•

Partnering with your team to translate these opportunities into measurable growth

Frost & Sullivan Outsourcing Model

GROWTH ZONE & STRATEGY

Off-shoring Growth Objectives

Financial Benefit – ROI/EVA Internal

Growth Sourcing Methodology

Review of Current Outsourcing Status and Growth Objectives

Client Briefing on Objectives and Current Outsourcing Status

Secondary/ Primary Research

Frost & Sullivan Industry Database, Country economic forecasts, primary research with successful companies in industry or adjacent markets, case studies

Quantitative and Qualitative Analysis

Frost & Sullivan outsourcing modelDestination of choice. Growth Thought Leader: Growth Workshop, Operational Best Practices, Outsource Strategy

Financial Impact and Economic Benefit

Return On Investment, Economic Value Add. Outsourcing for growth on top-line and bottomline

STRATEGIC REVIEW COMMITTEE Frost & Sullivan's Strategic Review Committee, composed of Senior Partners, reviews the research strategies, findings, and recommendations at key points throughout the project. This process is designed to ensure that 1) the project objectives are completely met, 2) the findings and recommendations provide the utmost strategic value to clients, and 3) the client’s research investment is fully maximized.

Frost & Sullivan Growth-Sourcing Model In d ic a to r

M e a s u re m e n t

P o litic a l S ta b ility B u s in e s s E n v iro n m e n t D e g re e o f O p e n n e s s C o rru p tio n

Econom y

Labor

In fra s tru c tu re

E d u c a tio n

F iv e Y e a r G ro w th G D P P e r C a p ita E x c h a n g e R a te In fla tio n FDI E m p lo ym e n t Y o u th U n e m p lo y m e n t M in W a g e s Labor C ost C o m p u te rs ( p e r 1 0 0 ) C o m p u te rs ( 1 0 0 0 0 0 0 ) In te rn e t U s e rs (p e r 1 0 0 ) In te rn e t U s e rs (p e r 1 0 0 0 ) R e a l e s ta te p ric e s T e le p h o n e T e l C h a rg e s B ro a d b a n d S u b s c rib e rs G ra d u a te s G ra d u a te E n ro lm e n t S iz e o f E n g lis h S p e a k in g P o p u la tio n

F r o s t & S u lliv a n - F r o s t & S u lliv a n - U s e r - S u b S u b W e ig h t T o ta l W e ig h t W e ig h t 4 0 .0 0 7 .5 3 0 .0 0 3 0 .0 0 1 0 0 .0 0 1 0 .0 0 5 0 .0 0 7 .5 1 5 .0 0 1 5 .0 0 1 0 .0 0 1 0 0 .0 0 1 2 .0 0 2 4 .0 0 50 2 0 .0 0 4 4 .0 0 1 0 0 .0 0 1 3 .0 0 4 .0 0 1 3 .0 0 8 .0 0 20 1 4 .0 0 6 .0 0 1 7 .0 0 2 5 .0 0 1 0 0 .0 0 3 7 .0 0 15 1 3 .0 0 5 0 .0 0 1 0 0 .0 0 100

U s e r - T o ta l W e ig h t

F r o s t & S u lliv a n T h r e s h o ld

U ser T h r e s h o ld 1

0 .0 0

0 .7 5

0 .0 0 1 0 .0 0

1

0 .0 0 1 0 .0 0

0

Business Environment For doing business, stable political conditions, consistent policy, and regulatory environment are important and have a greater degree of influence on the decisions relating to the choice of offshore locations. Economy Consistent economic growth helps in stable economic indicators such as inflation, exchange rate, and interest rate has significant impact on costs and business and profits. Labor For outsourcing decisions, wage differential among the countries is the key. Employment and unemployment and labor cost trends are Infrastructure Measures use and penetration of ICT technologies and trends in telephone and internet charges Education Resource availability and quality of the workforce are important determinants of location choice decisions.

Frost & Sullivan Growth-Sourcing Model Rankings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

2000 India The fYR of Macedonia Serbia and Montenegro Estonia Bulgaria Latvia Poland Lithuania Croatia Slovakia Czech Republic Hungary Albania Rom ania Bosnia and Herzegovina Argentina Slovenia Cyprus Malta USA UK G erm any

2005 India Estonia The fYR of Macedonia Serbia and Montenegro Poland Lithuania Bulgaria Slovakia Croatia Hungary Latvia Czech Republic Rom ania Argentina Albania Malta Slovenia UK Bosnia and Herzegovina Cyprus USA G erm any

2010 India Lithuania Estonia Poland Bulgaria Serbia and Montenegro The fYR of Macedonia Latvia Slovakia Croatia Czech Republic Hungary Argentina Rom ania Malta Slovenia Albania Bosnia and Herzegovina USA UK Cyprus G erm any

2015 India Lithuania Estonia Poland Bulgaria Serbia and Montenegro Slovakia Latvia The fYR of Macedonia Croatia Czech Republic Rom ania Hungary Argentina Slovenia Malta Bosnia and Herzegovina Albania USA UK Cyprus G erm any

•

Allows quantitative analysis of location (country and city) attractiveness

•

Detailed investigation based on 22 critical indicators

•

Allows users to assign weights

•

Built-in flexibility to factor industry-specific or company-specific issues

•

Frost & Sullivan consultants utilize model in context of company objective and industry dynamics to develop optimal strategy

•

Provides ranking for Business Environment, Economy, Labor, Infrastructure and Education. Also provides overall rankings

Product Launch Process

The Growth Acceleration System

(FGP)

Vision: What We Do for You What:

Frost & Sullivan helps clients perform at industry best-in-class levels for growth, innovation and leadership

Vision: How We Do IT How:

Frost & Sullivan clients leverage our Growth Acceleration System which provides disciplined research and functional best practices to generate, evaluate and implement powerful growth strategies

Vision: When Should We Start Now:

Now is the time to partner with Frost & Sullivan and leverage our Growth Partnership Service to drive your career and company

An Unrivaled Value Proposition to Drive Growth External Challenges

Internal Challenges

TEAM Research

Best Practices

Growth Acceleration Industry Insights

Career Insights

Single User-License Annual Membership Program

The Growth Partnership Service: User License Industry-Focused Research: External Growth Environment

•

Technical Insights Research & Alerts

•

Growth Opportunity Newsletters

•

Country Industry Forecasts

•

Movers & Shakers Interviews

•

Decision Support Databases

•

Market Engineering Research

•

Economic Impact Articles

•

Market Insights

•

Analyst Briefings

•

Client Value Enhancement

•

Analyst Inquiry Hours

•

Client Councils

•

Best Practices Research

•

Client Portal

•

Financial Benchmarking & Analysis

•

Industry Tracker

Industry and market intelligence for critical growth decision making

The Growth Partnership Service User License Career-Focused Research and Services: Internal Growth Environment

•

Ask the Thought Leader Webcast

•

Growth Process Toolkits

•

Best Practice Guidebooks

•

Executive MindXchange

•

Growth Innovation & Leadership Global Congress

•

Executive Briefings

•

Growth Strategy Dialogues

•

Online Executive Forum

•

Growth Excellence Matrix Diagnostic

•

Client Councils

Supporting the CEO & the Growth Team with Growth Strategy

GIL GLOBAL 2009

www.frost.com/gilglobal

A global community focused on Growth, Innovation and Leadership

May 2009 London

October 2009 Kuala Lumpur October 2009

September 2009

Shanghai

San Francisco

October 2009

December 2009

Middle East

Sao Paulo

October 2009 India

February 2010 Tel Aviv

Next Steps


Request a proposal for Growth Partnership Services to support you and your team to accelerate the growth of your company.




Attend Frost & Sullivan Executive MindXchange best practice networking events (http://www.frost.com/cal) to share and address strategic challenges




Consider Conducting a 360 Degree Growth Workshop to support your long-term growth strategy




Join us at a Growth, Innovation and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth (www.frost.com/gilglobal)




Register for the next Chairman’s Series on Growth: (http://www.frost.com/growthapac)




Schedule a Recession Strategy Session with a Frost & Sullivan Industry consultant (email us: [email protected])




Schedule a One-on-One Growth Strategy Dialogue with a Frost & Sullivan Growth Consultant (email us: [email protected])




Register for Frost & Sullivan’s Growth Opportunity Newsletter and Growth Team Membership e Bulletin to keep abreast of growth opportunities in your industry and best practices in your career track. (www.frost.com)

Contact Us If you have questions or would like further information about anything we discussed, please send your query to the email provided below and we will get back to you shortly.

Alvin Chua Account Manager Automotive, Transportation & Logistics DID: +65 6890 0997 Mob: +65 9199 4566 eMail: [email protected]