Anatomy Of A Great Strategy Dan Greene

1. Anatomy Of A Great StrategyDan Greene

2. So Why is Strategy So Important?

3. Managing The Present So Why is Strategy So Important? The challenge for managers in our industry is to manage the present better, much better, as preparation for the unforeseeable future.

4. Strategy Implementation Strategies Are Designed To Be Implemented Ernst & Young “66% of Strategy is Never Executed” Why? • Doing something new is hard • Companies must overcome long standing traditions • Office politics and conflicting interests • Poor communication channels

5. Strategic Choices Companies Make Strategic Choices Strategic Choices Based On: • Trial and Error – What has worked? What has not worked? • What is Management’s appetite for Risk? • What have you learned from your analysis to date? • What are your thoughts on how to best proceed?

6. Strategic Frameworks Successful Strategies are simply a framework that helps business leaders better analyze, understand and employ the activities that have been shown to produce superior returns and create wealth from our business.

7. Insight from Good to Great Companies and DRIVEN Companies RETURN DRIVEN :Abbott, Kimberly-Clark,Gillette, Walgreens DRIVEN Criteria for Selection Start with >20,000 companies Three criteria (for > 10 years) Insight from DRIVEN: Innovate the Entirety of the Offering Target Unmet Needs of the Right Customer Groups… Engage Employees and Others GTG Criteria for Selection Start with 1,435 companies. Screening and selection process Total Shareholder Returns Insight from GTG: Level 5 Leaders Hedgehog Concept Right People on the Bus…. Confront the Brutal Facts

8. Criteria Achievements of Top Performers The performance of the top companies researched in the Return Driven Strategy is based on 3 Dimensions: • Superior and Sustainable ROI • Growth in terms of net worth while maintaining superior ROI • Provide company owners with above average returns

9. Performance Measurements CFROI vs Cost of Capital

10. Cash Is A Fact “Cash Is A Fact. Profit Is Opinion”

11. Cash Is A Fact “You Can Be Profitable and Still Go Bankrupt”

12. CFROI Cash Flow Return On Investment (CFROI) • How well did your investments pay off? • Investments, not only in equipment, but in the right people, marketing programs, etc.

13. Opportunity Cost Cost of Capital • We looked at this because every business requires some amount of reinvestment to fund equipment, inventory, receivables, and other assets. • These investments have a Real Opportunity Cost. • The CASH spent on investments in the business could have been invested elsewhere.

14. When To Grow Every Manager should seek to reinvest when rates of return can be generated higher than the Cost of Capital, and consider shrinking the business when returns are below.

15. Return Driven Strategy

16. Commitment OBJECTIVE: Increase Wealth or Net Worth • Wealth of the Company • Wealth and Security of Employees • Define in both monetary and non-monetary terms, the goals and risk levels

17. Benefits of Wealth Creation What comes from an increase in the Company’s Wealth: • Pricing Power • Reinvestment into productive assets that will generate higher returns • Improve the livelihood of not only owners, but employees and customers

18. Return Driven Strategy

19. Wealth Comes From The Customer Creation of Wealth and Higher Returns Come Through The Customer • By fulfilling their unmet needs • High Performance businesses deliver an offering which customers believe is not otherwise available

20. BMW

21. Target Markets Targeting Appropriate Customer Groups • We need to target clients whose needs are large enough to justify the upfront and ongoing investments to create and deliver the right offerings. (Example Aluminum Extrusion in the Rental Market, in-house tension fabric capabilities) • Recognize how being the dominant provider to any particular customer group sets the stage for higher returns (based on volume), but still requires fulfilling the customers’ unmet needs (General Contractors)

22. Return Driven Strategy

23. Competencies There are three Competencies required to achieve increased wealth in the higher performance companies: • Deliver Offerings (often taken for granted) • Innovate Offerings • Brand Offerings

24. eBay

25. Innovation Recommendations on Innovation would be: • Innovate the Entirety of the Offering • Innovate when previous offerings are dying • Innovate offerings with no Pricing Power

26. Branded Offerings “Branding” our Offerings Trade shows and events are two of the most powerful branding tools available to clients. • Brands create the connection between the customer and the need it fulfills • We should brand consistently with the “Delivery Of Our Offerings” to create the strongest connection • Brand the Offerings and the need, Not The Company.

27. Abbott Laboratories

28. Return Driven Strategy

29. Support Five Contributors to Supporting the Delivery, Innovation, and Branding of our offerings: • Partner Deliberately • Map and Redesign Processes • Engage Employees and Others • Balance Focus and Options • Communicate with a Purpose

30. Yahoo

31. Support Five Contributors to Supporting the Delivery, Innovation, and Branding of our offerings: • Partner Deliberately • Map and Redesign Processes • Engage Employees and Others • Balance Focus and Options • Communicate with a Purpose

32. Return Driven Strategy

33. Idea Sharing Idea Sharing