Strategy in an uncertain environment
September 18, 2019
Grab N’ Go
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 2
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“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
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 4
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%
• Length: 11 months
• GDP2: -4.2% (Q4 1970)
• Unemployment3: 6.1%
?
• Length: 16 months
• GDP2: -4.8% (Q1 1975)
• Unemployment3: 7.1%
• Length: 9 months
• GDP2: -3.6% (Q4 1990)
• Unemployment3: 7.8%
• Length: 22 months
• GDP2: -8.0% (Q2 1980)
• Unemployment3: 10.8%
• Length: 8 months
• GDP2: -1.7% (Q3 2001)
• Unemployment3: 6.3%
• Length: 19 months
• GDP2: -8.4% (Q4 2008)
• Unemployment3: 7.8%
1. Source: www.thebalance.com, 14 Aug 2019 2. Highest quarterly drop within the period 3. Peak unemployment rate
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 5
Vote: When will the next resession hit us?
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c
Vote: Do you think proper business strategy can protect the company from a negative impact of a crisis?
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Financial crisis
20122006 2007 201520132008 20102009 2011 2014 2016
+32%
2009 20132006 2007 2008 20112010 2012 2014 2015 2016
-37%
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Crisis readiness
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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%
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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
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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
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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
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Strategic Choice Cascade | Where & How
Crisis readiness
Goals and Aspirations
Where to Play How to WinCritical
Capabilities
Configuration of People and Processes
⚫ 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
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Strategic Choice Cascade | Capabilities & Configuration
Crisis readiness
Goals and Aspirations
Where to Play How to WinCritical
Capabilities
Configuration of People and Processes
⚫ 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
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c
Vote: Looking at your own company, how well is it doing with the choice cascade? Has it made the right choices?
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 17
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%
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Best Managed Companies
What’s the organization’s Health Index?
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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…
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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
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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
Baseline criteria for a Best Managed Company
1. Resources and capabilities
2. Productivity
3. Innovation
4. Organisation and people
BMC assessment focus areas
1
4
2
3
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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
Baseline criteria for a Best Managed Company
1. Corporate culture
2. Brand (internal and external)
3. Compensation
4. Continuity
BMC assessment focus areas
1
4
2
3
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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
Baseline criteria for a Best Managed Company
1. Governance and oversight
2. Financial measurement and management
3. Financial capability
4. Reporting and monitoring
BMC assessment focus areas
1
4
2
3
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cVote: How well is your company prepared to execute a new strategy?
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 29
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%
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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
Commercial Excellence
Operational Efficiency
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
C3 Acquisition of …
C4 Acquisition of …
C5 … carve-out
D1 Reorganisation
D2 Capabilities development
D3 Succession planning
D4 New compensation plans
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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
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c
Vote: Does your company have a clear overview of activities required to transform the business and bring it to the next level?
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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
© Deloitte LLP and affiliated entities. 36
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
Grab’n’Go | Strategy in an uncertain environment© Monitor Deloitte 2019 44
Every year Deloitte awards the best managed Danish companies
©2018 Deloitte 45
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