strategy in an uncertain environment...© monitor deloitte 2019 grab’n’go| strategy in an...

Strategy in an uncertain environment

September 18, 2019

Grab N’ Go

Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 2


“Warnings Keep Coming About a Downturn That Will Hit in 2020” 5

Bloomberg

“More than 70% of economists think a US recession will strike by the end of 2021” 4

Businessinsider

Various sources estimate that the crisis will hit in 2020

Macroeconomics and uncertainty

“2020s Might Be The Worst Decade In U.S. History (…) will become a global recession2

Forbes

“The risk of a 2020 recession and crisis is growing”3

The Guardian

1. Source: The Independent, www.independent.co.uk, 16 Sep 2018 2. Source: Forbes, www.forbes.com , 24 May 2018 3. Source: The Guardian www.theguardian.com , 14 Jun 2019 4. Source: www.markets.businessinsider.com , 19 Aug 2019 5. Source: Bloomberg, www.bloomberg.com , 13 Sep 2018

“Next global financial crisis will strike in 2020, warns investment bank JPMorgan”1

The Independent


The economy has been growing for the last 10 years and will face another downturn in a near future. What we don’t know is the exact timing, severity and the length of it.

Macroeconomics and uncertainty

1960

History of recessions in the United States1

1970 1973-75 1980-82 1990-91 2008-09 ?-?

10 years 3y 5y 8y

2001

10y 8y 10 years…?

• Length: 10 months

• GDP2: -5% (Q4 1960)

• Unemployment3: 7.1%


• GDP2: -4.2% (Q4 1970)


?


• GDP2: -4.8% (Q1 1975)



• GDP2: -3.6% (Q4 1990)



• GDP2: -8.0% (Q2 1980)



• GDP2: -1.7% (Q3 2001)



• GDP2: -8.4% (Q4 2008)


1. Source: www.thebalance.com, 14 Aug 2019 2. Highest quarterly drop within the period 3. Peak unemployment rate


Vote: When will the next resession hit us?


c

Vote: Do you think proper business strategy can protect the company from a negative impact of a crisis?


Financial crisis

20122006 2007 201520132008 20102009 2011 2014 2016

+32%

2009 20132006 2007 2008 20112010 2012 2014 2015 2016

-37%


Crisis readiness


3 steps help companies prepare for the crisis to come, each supported by dedicated tools

Crisis readiness

How will we win?

What management systems do we need?

What is our winning

aspiration?

What capabilities

must we have?

Where will we play?

Strategy&

Execution

Capabilities&

innovation

Governance &

financials

Culture &

commitment

Create strong and coherent strategy Assess the strategy execution maturity Design the business transformation map

2019-20 2021 2022 2023

A4

A1

A2

A3

A5

B1

B2

B3

B4

B5

C1

C2

C3

C5

D1D2

D3

D4

C4

Commercial Excellence

Operational Efficiency

M&A and divestments

People & Culture

Time

Ambition

40%

80%

90%

100%


The Strategic Choice Cascade is designed to support creation of a strong and coherent strategy

Crisis readiness

How will we win?

What management systems do we

need?

What is our winning

aspiration?

What capabilities must we have?

Where will we play?

• Cost vs differentiation

• Value proposition to customers

• Sources of defensible advantage

• Profit model(s)

• Partnerships

• Supporting systems

• Performance metrics

• Incentive structures

• Purpose

• Image and position

• Financial objectives

• Non-financial objectives

• Core capabilities

• Configuration of assets, activities, and people

• Markets

• Value chain

• Customers

• Products

• Channels

• Geography


Let’s try it out

Crisis readiness

1 You have inherited 10 “pølsevogne” from your deceased uncle

2 With it are 6 concessions within the Copenhagen area

3 The rest are not used, or sometimes used for parties (business and private)

4 Staff are hourly hired and knows how to do it

5 The wagons have the traditional offering – only the marinated onions are a bit of a specialty

6 Income is on par with competitors and revenue has been relatively stable


Strategic Choice Cascade | Goals & aspirations

Crisis readiness

⚫ What are our values and culture?

⚫ What kind of organization do we want to be for our constituents?

⚫ What are our growth and return requirements?

⚫ What is our position in the industry?

⚫ What is our core business?

Goals and Aspirations

Where to Play How to WinCritical

Capabilities

Configuration of People and Processes

How to create value to our shareholders


Strategic Choice Cascade | Where & How

Crisis readiness



Capabilities


⚫ In which markets should we compete?

⚫ In which part of the value chain should we compete?

⚫ Where should we compete geographically?

⚫ Which customer segments should we prioritize?

⚫ Which products should we offer?

⚫ In which channels should we compete?

Choices to narrow the competitive field

⚫ Which generic strategy do we chose? – Cost leadership or differentiation?

⚫ What positioning differentiatesus from our competitors in terms of products?

⚫ What are the sources of differentiation in terms of go-to-market strategy? – Marketing, branding, pricing etc.

⚫ What is our winning value proposition to customers?

⚫ What is our winning profit proposition?

⚫ What barriers make our competitive advantage durable?

Creating competitive advantage in the chosen field


Strategic Choice Cascade | Capabilities & Configuration

Crisis readiness



Capabilities


⚫ What is the range and quality of activities?

⚫ How must functions perform in terms of cost?

⚫ Which competencies are required?

⚫ How much capital is needed for investments?

⚫ Innovation? Brand building? Customer insight creation? Scale?

Specific capabilities required to enable the ‘how to win’ choice?

⚫ How should assets and activities be configured and managed to create the required capabilities?

⚫ What kind of people, systems and assets create these capabilities?

⚫ How should we organize?

⚫ What metrics and incentives must be in place?

⚫ Which management systems?

Configure to create required capabilities


c

Vote: Looking at your own company, how well is it doing with the choice cascade? Has it made the right choices?



Crisis readiness

How will we win?


What is our winning

aspiration?

What capabilities

must we have?

Where will we play?

Strategy&

Execution

Capabilities&

innovation

Governance &

financials

Culture &

commitment


2019-20 2021 2022 2023

A4

A1

A2

A3

A5

B1

B2

B3

B4

B5

C1

C2

C3

C5

D1D2

D3

D4

C4



M&A and divestments

People & Culture

Time

Ambition

40%

80%

90%

100%


Best Managed Companies

What’s the organization’s Health Index?


Best Managed Companis framework enables assessment of the current strategyexecution maturity gap

Crisis readiness

Strategy

• have a formal methodology for strategy development

• have the right capabilities and metrics in place to execute their strategy

• clearly and consistently communicate the strategy to all levels of the organization

Capabilities and innovation

• develop valuable capabilities and resources

• are highly execution-oriented

• are focused on productivity and innovation

Governance and financials

• actively develop their people and leadership

• provide a holistic compensation system

• create an inclusive culture

Culture and commitment

• install strong governance structures

• use KPIs to manage progress

• maintain a strong balance sheet

Best Managed companies typically…


Best Managed Companies | Strategy & Execution

✓ Has a shared, actionable vision and sticks to it

✓ Applies a formal strategy process

✓ Communicates clearly on its strategy

✓ Has appetite for growth

✓ Elaborates on external input and use of market data(outside-in view)

✓ Translates its strategy into clearly defined KPIs

Maturity model

• Limited resources for strategy implementation

• Stakeholders are not sufficiently equipped to drive implementation efforts

• The strategy is not monitored and evaluated in real-time

• Limited knowledge of relevant best practices

• Structured program management to drive strategic initiatives and actions

• Implementation is done using input from best practices, KPIs and financial parameters

• The strategy is executed through strong and ambitious leadership

• Managers are an integrated part of strategy implementation

BasicEmerging

GoodBest

Baseline criteria for a Best Managed Company

1. Purpose, vision, and mission

2. Strategy development

3. Strategy execution

4. Strategy communication and alignment

BMC assessment focus areas

1

4

2

3


Best Managed Companies | Capabilities and Innovation

✓ Defines a (budgeted) innovation process

✓ Relies on a partner strategy

✓ Has a high retention rate, incl. evaluation process and talent review

✓ Promotes knowledge management

Maturity model:

• No formal possibilities for employees to enter own innovative ideas

• No formal mechanisms, e.g. stage-gate process, in place

• Employees have the possibility to insert own innovative ideas in the company

• Has a system to manage ideas and budgets that centers on the innovation degree of ideas

• Different types of innovation are used simultaneously, e.g. product, process, profit model)

• Uses all available channels for business development

• Specific people are responsible for innovation management

• Both incremental and radical innovations are available to the company

• The organisation measures innovations using both quantitative and qualitative metrics

BasicEmerging

Good Best


1. Resources and capabilities

2. Productivity

3. Innovation

4. Organisation and people


1

4

2

3


Best Managed Companies | Culture and Commitment

✓ Promotes a one team culture

✓ Conducts performance reviews based on SMART goals and clear expectations

✓ Has a formal HR role

✓ Offers growth opportunities for employees

✓ Develops formal process to guarantee continuity

✓ Invests in people development, e.g. training

Maturity model:

• No formalized training or commitment towards equipping the next generation of leaders

• Diverse leadership team but few formalized processes to ensure long term stability and knowledge transfer

• Limited focus on the future

• Leadership has infrequent reviews of market trends and long-term challenges

• Organisation does not actively maintain a pipeline of future leaders and their development

• Leadership consists of both young and experienced team members

• Deeply ingrained focus on the long term

• Succession strategies are well integrated across dimensions

BasicEmerging

GoodBest


1. Corporate culture

2. Brand (internal and external)

3. Compensation

4. Continuity


1

4

2

3


Best Managed Companies | Governance and Financials

✓ KPI framework

✓ Budget and mid-range plan

✓ Reporting and follow-up process

✓ Internal control systems

Maturity model:

• Appetite for risk is not supported by effective financial management

• Limited/no plans to re-invest in company capabilities

• Growth aspirations deterred by limited potential for risk mitigation through financial practices

• Re-investment in capabilities is ad-hoc when financial success allows it

• Financial management supports moderate risk to achieve growth

• Company budgets for re-investment in innovation / CapEx

• Relatively high Free Cash Flow

• Effective financial management mitigates risk to support growth aspirations

• Strong balance sheet allows for consistent re-investment in innovation / CapEx

• Strong revenue, profit, and Free Cash Flow

BasicEmerging

GoodBest


1. Governance and oversight

2. Financial measurement and management

3. Financial capability

4. Reporting and monitoring


1

4

2

3


cVote: How well is your company prepared to execute a new strategy?



Crisis readiness

How will we win?


What is our winning

aspiration?

What capabilities

must we have?

Where will we play?

Strategy&

Execution

Capabilities&

innovation

Governance &

financials

Culture &

commitment


2019-20 2021 2022 2023

A4

A1

A2

A3

A5

B1

B2

B3

B4

B5

C1

C2

C3

C5

D1D2

D3

D4

C4



M&A and divestments

People & Culture

Time

Ambition

40%

80%

90%

100%


Transformation map helps design the business transformation program and guides later execution

Crisis readiness

2019-20 2021 2022 2023

A4

A1

A2

A3

A5

B1

B2

B3

B4

B5

C1

C2

C3

C5

D1

D2

D3 D

4

C4



M&A & divestments

People & Culture

Time

Ambition

40%

80%

90%

100%

Initiatives

A1 Key accounts roadmap

A2

Sales playbook

A3 Contracts transparency

A4

CRM

A5 Sales effectiveness dashboards

B1 Operational KPIs

B2

Operational standarizationB3

Optimization of core processesB4

Digitalisation of core processesB5

Customer satisfaction

C1 Acquisition of …

C2 … divesture



C5 … carve-out

D1 Reorganisation

D2 Capabilities development

D3 Succession planning

D4 New compensation plans


Operational KPIsB1

• Currently only financial KPIs are measured and followed-up on• In order to efficiently manage operations we need to identify and

introduce operational KPIs, which will be linked to financial performance

Description

Owner: Anders Andersen Team: Operational Excellence

• X

Activities, responsible and resources

Q3 19 Q4 19 Q1 20 Q2 20 Q3 20

• Key KPIs identified and measured manually by the end of 2019 • Electronic KPI dashboards in available by March 2020• Other operational KPIs added to the dashboard

Ambition

KPI’s

A: Progress %

B: Investment consumption %

C: Usage %

Key KPIs (Adam A.)

Dashboards (Mette S.)

Other KPIs (Jan A.)

Investment needs

Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020

Key KPIs 0.1 0.1

Dashboards 0.2 0.4

Other KPIs 0.1 0.2 0.2

Internal resources External resources

1 FTE from finance department…

…

Working group with DD

Input from MD

…

Version: 1.1 Last updated: 05/9-2019

Each transformation initiative needs to be properly set up and tracked

Crisis readiness


c

Vote: Does your company have a clear overview of activities required to transform the business and bring it to the next level?


cDiscuss: What is your company doingto prepare for the upcoming crisis?

3535

It is time for some hard earned credit for Denmark’s best managed companies

3737

This is why Denmark needs Best Managed Companies…

The programme is a recognition

and celebration of the hard

work, the passion, and the

pioneering ideas that emanate

from the Danish mid market.

BMC is a global initiative already

present in Sweden, Canada,

Ireland, Mexico, Belgium, Chile

and the Netherlands.

The designation is a well-

regarded international stamp

of quality for best managed

private companies.

The programme looks into how

Danish companies master their

growth strategies across all key

management functions.

It culminates with a big awards

ceremony to celebrate the

organisational success and

achievement.

3838

What it is all good for…?

Enjoy some time with

experienced business coaches

to revise your entire

management practice.

Benefit from the experience of

our coaches to get some

alternative approaches to your

strategy and governance.

Well…it is not a full business

review but we will pick on you and

your entire management team –

and you will come out a better

company because of it.Enjoy the boost of confidence

and awareness that winning a

prize like this will give your

entire company. Will this

improve your earnings?

You will get the free experience

and honest opinions of our coach

teams to sharpen up and make

best practices to your every day

job.

3939

Why should you enter the BMC programme

Exclusive use of the Denmark’s Best Managed Companies designation – a symbol of corporate success and a well-regarded international stamp of quality for best managed private companies.

An enhanced ability to attract and retain talents.

Benchmarking against other strong private companies who also meet the criteria for applying.

An opportunity to reflect upon the company strategy and business plan and take a deep dive into its strengths and weaknesses. Coaches provide valuable insights along the way throughout the application process.

An award that recognizes and honors the entire company, not only individuals.

An opportunity to get some hard earned recognition to lift the purpose of the company.

40

CHILE

MEXICO

CANADA

IRELAND

BELGIUM

TURKEY

ITALY

SWEDEN

GERMANY

CHINA

NETHERLANDS

AUSTRALIA

UNITED STATES

SOUTH EAST ASIA

SCOTLAND

NORWAY

CARIBBEAN

CZECH REPUBLIC

DENMARK

4141

Turnover in excess of DKK 370 million

Established for at least 5 years

More than 50 full-time employees

Majority stake (> 50%) owned by Danish residents or entities

Who can participate in the Best Managed Companies?

© Deloitte LLP and affiliated entities. 42

How to be a best managed company

All submissions are confidential and the programme is compliant with privacy and confidentiality policies.

StrategyCapabilities

&Innovation

Culture &

Commitment

Governance &

Financials

…join us in the lab and find out

©2018 Deloitte 43

Key dates for applicants

1. November – 31. JanuaryApplicants will be notified of their status.

Coaches will have in person meetings with eligible companies and coach them in filling out the Phase II application.

An independent jury will score different companies based on the framework criteria. Deloitte will assist in preparing the cases and can provide opinions but has no vote in the process.

11. MayOpening for Phase I applications.

30. OctoberEnd of Phase I, applicants will be filtered based on the eligibility criteria and judged on the framework criteria.

2019

1. February – 15. MarchAll applicants receive in-depth feedback.

The winners of Best Managed Companies are selected and informed.

2020

30. AprilAward ceremony


Every year Deloitte awards the best managed Danish companies

©2018 Deloitte 45

About Deloitte Deloitte provides audit, consulting, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries and territories bringing world-class capabilities, insights, and high-quality service to address clients’ most complex business challenges. To learn more about how Deloitte’s approximately 264,000 professionals make an impact that matters, please connect with us on Facebook, LinkedIn, or Twitter.

Deloitte Touche Tohmatsu LimitedDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms and their related entities. DTTL (also referred to as "Deloitte Global") and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

© 2019 Deloitte Statsautoriseret Revisionspartnerselskab. Member of Deloitte Touche Tohmatsu Limited.

www.bestmanagedcompanies.dk

strategy in an uncertain environment...© monitor deloitte 2019 grab’n’go| strategy in an...

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