Michael Treacy - The Discipline of Marke...

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The Discipline of Market Leaders : 

The Discipline of Market Leaders Michael Treacy Treacy & Company Inc. mtreacy@gen3.com

Slide 2: 

2 How It’s Answered Key Question What does it take to grow profitably at Double-Digit rates?

Key Findings from our study on Double-Digit Growth : 

3 Key Findings from our study on Double-Digit Growth Commit to a superior customer value proposition Why should customers do business with you?

Unmatched Customer Value : 

4 Results Expertise Price Hassle-Free Uniquely Better Product Why should customers do business with you? Unmatched Customer Value Products “What we sell” Service “How we do business” Costs Benefits

Key Findings from our study on Double-Digit Growth : 

5 Key Findings from our study on Double-Digit Growth Commit to a superior customer value proposition Focus on five, and only five, sources of revenue growth

There are only five sources of revenue growth : 

6 There are only five sources of revenue growth What is your customer churn rate? What are you doing about it?

There are only five sources of revenue growth : 

7 There are only five sources of revenue growth How strong is your value proposition? How effective is your market coverage?

There are only five sources of revenue growth : 

8 There are only five sources of revenue growth Which market segments will grow most strongly over the next five years? How can we get positioned in those segments?

There are only five sources of revenue growth : 

9 There are only five sources of revenue growth In which markets do we have weak competition and leveragable advantage?

There are only five sources of revenue growth : 

10 There are only five sources of revenue growth

Key Findings from our study on Double-Digit Growth : 

11 Key Findings from our study on Double-Digit Growth Commit to a superior customer value proposition Focus on five, and only five, sources of revenue growth Manage a portfolio of growth opportunities

The growth portfolio bridges strategy and discipline : 

12 0.0 10.0 20.0 Percentage Revenue Growth switch clients in-line acquisitions 6% 2% Share Gain internal innovations adjacent acquisitions 3% 4% Adjacent Markets retain client base -3% Base Retention new LOB acquisitions 0% 0% Unrelated Business transformational innovation shift to growth segments market segment acquisitions 3% 5% Market Position The growth portfolio bridges strategy and discipline

Key Findings from our study on Double-Digit Growth : 

13 Key Findings from our study on Double-Digit Growth Commit to a superior customer value proposition Focus on five, and only five, sources of revenue growth Manage a portfolio of growth opportunities Build the management discipline to grow profitably

Performance Discipline: A new understanding of what drives sustained business performance : 

14 Toyota – quality Alcoa – safety FedEx – reliability A company possesses a performance discipline when the risks of sustained high performance against a particular objective have been largely eliminated and only hard work remains GE – productivity Olive Garden– growth BMW – product innovation Performance Discipline: A new understanding of what drives sustained business performance

The eleven “Good to Great” companies : 

15 The eleven “Good to Great” companies

The market has recognized some as poor performers : 

16 The market has recognized some as poor performers S&P500

Why do successful companies slide toward mediocrity? : 

17 Why do successful companies slide toward mediocrity? Some possible explanations: Poor strategic foresight – they missed a shift in the market Management hubris – they got complacent and lazy Unforeseen challenges – something unexpected hit them Their luck ran out – misfortune replaced good luck The result: Regression Toward the Mean

The antidote to backsliding : 

18 The antidote to backsliding There is only one remedy for the “gravitational pull” of regression toward the mean: Relentless Performance Improvement There are four keys to performance improvement: Setting the Right Direction Getting the Details Right Setting the Right Stretch Setting the Right Pace

We improve performance through insightful planning and diligent execution, right? : 

19 We improve performance through insightful planning and diligent execution, right?

Traditional Planning in Building Construction : 

Traditional Planning in Building Construction 20

Traditional Planning in Production Planning : 

21 Traditional Planning in Production Planning

There is no shortage of advice on how to improve performance : 

22 There is no shortage of advice on how to improve performance Bring clarity and certainty to an uncertain future through analysis Take larger strides to speed up the pace of improvement Fix execution to accelerate improvement Reduce complexity by focusing on process design and coordination Setting the Right Direction Creating Sufficient Stretch Driving the Right Pace Getting the Details Right

The risks to performance improvement have never been higher : 

The risks to performance improvement have never been higher 23 Risk

Sustained High Performance is built on Progressive Improvisation : 

24 Sustained High Performance is built on Progressive Improvisation Traditional Methods Progressive Improvisation Embrace unpredictability with a portfolio of initiatives, winnowed through progressive investing Setting the Right Direction Attack unpredictability and set the right direction through deeper analysis Compound the effects of rapid, small improvements to achieve larger gains Creating Sufficient Stretch Take larger strides to speed up the pace of improvement Shorten the plan-do-learn cycle to accelerate the pace of improvement Driving the Right Pace Fix execution to accelerate improvement Getting the Details Right Improve performance of a complex system through pressure, intervention, and mutual adaptation Reduce complexity by focusing on process design and coordination

Elements of a Performance Discipline : 

25 Enable environment of trust & learning larger role for the rank and file changing roles for senior mgmt talent development & mgmt Elements of a Performance Discipline Direct setting enduring objectives defining main parameters of value redirecting priorities Control shaping the portfolio of initiatives progressive investment decisions coaching & controlling initiatives Progressive Improvisation

Take Aways : 

26 Take Aways The annual cycle of centralized planning and control is significantly limiting our pace of improvement It encourages large, slow initiatives It isn’t synchronized to the pace of the market Senior management as planners and middle management as implementers is a poor division of labor Middle management are closer to the action Separation of thinking and doing weakens both actions Middle management are under-engaged in the challenge of sustaining high performance Progressive improvisation . . . . . . is difficult only at first . . . should be reserved for our most enduring business objectives

The Discipline of Market Leaders : 

The Discipline of Market Leaders Michael Treacy Treacy & Company Inc. mtreacy@gen3.com

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