growth in challenging times costs
TRANSCRIPT
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Competing for growth Cost competitiveness – a tool for driving growth
Customer
reach
Operational
agility
Stakeholder
confidence
The markets you are in determine
your opportunity
Your growth is
determined by your
ability to respond
Your value and ability to fund growth is
determined by the confidence of your
stakeholders
Your profitability is determined
by your pricing and the
competitiveness of your cost
base
The new
normal
Cost of
variation
Cost
Competitiveness
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Cost competitiveness in the new economy
► Growth is back in fashion but competition for organic growth has increased
► Becoming more cost competitive in sales and distribution, and in production, are two of the top
five factors that companies expect to be most critical in the future
► For the past two years, reducing cost has been a constant focus of management around the world
and has dominated thinking in this area
► Profitable growth is, however, now the ultimate goal for many, but this requires focus on all cost
and revenue drivers
► Companies need to adopt a holistic approach to cost that covers both the organization and wider
supply chain
► Action is needed in four areas:
► Pricing
► Costs
► Cash
► Capital
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Where do you rank?
Challenges
61% expect to be able to increase their price
only by inflation amount or less, but a
number of factors are driving up costs further
Pricing is a critical skill and becoming more
complex – do you understand where most
value is created for your clients
Discretionary spending has already been
heavily cut – have you made changes to
processes to deliver strategic reductions
An holistic approach to costing is required
but must extend outside the organization to
suppliers
Over the past two years many contracts
have become much tighter – can you loosen
these constraints
54% of respondents intend to fund their
growth through their cash reserves – how
much working capital is still tied up in your
business
Leading
performers
are
Acting to preserve capital Cash reserves
Private equity investment
Passing on the pressure
Seeking better commercial conditions, discounts and promotions
Sustaining cost reduction
Increasing staff productivity through better process, tools and training
Focusing on most profitable customers and products
Use better promotion, sales and distribution technology to cut cost of sales
Informing pricing
Implemented new pricing strategy
Strategic Responses
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
13 15
19
27
12
6 5
1 0
2
5
14
29 31
9
4 3
1
Increased by morethan 20%
11%-20% increase 6%-10% increase 1%-5% increase No change 1%-5% decline 6%-10% decline 11%-20% decline Declined by morethan 20%
Over the next two years how do you expect prices for your company’s products or services to change?
High performers Low performers
Pricing: top performers price strategically
The majority of leading performers intend to increase prices to boost
margins
While many are aiming only for inflationary rises, nearly half intend to push
further
For some businesses, significant changes are required to successfully
deliver price increases without reducing competitiveness
Understanding the competitive market is key to this but it is also critical to
have a full understanding of how value is created
Developing sales force skills and marketing strategies are relevant but so
also is ensuring that full information on costs is available to the pricing
decision-maker
Client questions:
1. Do you understand your true
comparative position?
2. Do you understand what drives
your customers’ value
assessment?
3. Do you strategically manage
price?
4. What are your governance
processes?
5. How do you measure/model
results?
Percent of respondents
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Costs: top performers take a broad view
Techniques for delivering sustainable competitive cost reduction vary by
sector
Staff productivity is, however, key for 55% of top performers
Prioritizing business segments and focusing on the most profitable
customers and products are also key to nearly half of leading businesses
Tactical options such as head count reduction and trimming discretionary
spend are on the agenda for one third of leading businesses
Techniques around sales and distribution, and promotion are also
prioritized
Client questions:
1. Is cost reduction an ongoing
strategic priority?
2. Do you have a process to
measure and monitor progress?
3. Do you benchmark internally or
externally?
55
45 39
34 31 30 36
31
41
26 22
38
Increasing staff productivitythrough better process, tools
and training
Focusing on most profitablecustomers and products
Adjusting headcount tomarket demand
Using better promotion,sales and distribution
technology to cut cost ofsales
Seeking better commercialconditions, discounts and
promotions
Implementing sharedservices
Which techniques is your company employing to cut costs?
High performers Low performers
Percent of respondents
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
48 48
37 33
31 29
39
31
22 26 25 26
Added additionalproducts to meet
different market needs
Made internal supportfunctions more efficient
and responsive
Improved/broadenedworkforce skills
Made externalpartnerships more
efficient
Reduced fixed costs Improved supply chainto better cope withsudden changes inlevels of demand
Which of the following actions has your company taken to increase its flexibility?
High performers Low performers
Cash: top performers see the full value chain
Maximizing cash across the full value chain should be considered – fixed
costs are only one part
Nearly half of leading companies focus on improving support function
efficiencies
Investment in up-skilling the workforce is also seen as a key tool to
increase flexibility
Leading businesses see external sections of the value chain as
fundamental to competitiveness – both through partnerships and the
supply chain
Client questions:
1. Do you have a process to
monitor working capital?
2. Do you measure the impact of
changes on working capital?
3. Are you measuring working
capital across your entire supply
chain?
Percent of respondents
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
61
34 32
28
18 14
52
38 33
15 11
20
Cash reserves Debt Equity release Private equityinvestment
Sale of non-coreassets
Bond issue
How is your company’s growth strategy to be financed?
High performers Low performers
Capital: top performers prioritize reserves
Costs of capital can impact significantly on bottom line results
Leading businesses are overwhelmingly playing it safe and are using
existing cash reserves to finance growth
Given the low interest rate environment, over one third of top performers
are once again considering leverage
And for ambitious businesses, even private equity partnerships are on the
table
Client questions:
1. How will you fund your growth
plans?
2. How does your cost of capital
compare with your competition?
3. How do you control capital
allocation?
4. How do you measure the use of
and return on capital?
5. How do you maximize
acquisition value?
Percent of respondents
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
APPENDIX
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Pricing: set strategically and measure effect
Our internal research found that 74% of leading
performers intend to increase prices to boost
margins
Pushing up pricing can obviously improve
margins
But what about the impact on sales volumes?
Pricing – steps to success
1. Price strategy — set principles which reflect
strategic intent of organization or business unit
2. Price implementation and governance — create
suite of controls, checks and methods for
managing price
3. Price maintenance — ongoing maintenance of
pricing architecture to validate effectiveness
4. Price architecture — ongoing development of
pricing instruments to deliver required margin
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Costs: implement and sustain cost reduction
Our research survey found that 79% of leading
companies intend to continue reducing costs
Cost reduction can improve margins
But how can this be sustained without impacting on
quality
Costs – steps to success
1. Formal executive sponsorship and commitment
2. Clearly aligned with strategy and key initiatives
3. Program evaluated on fact-based quantification
4. Benchmarking for hypotheses and targets
5. Business cases, reviews and project approvals
6. Formal portfolio management and project
prioritization
7. Projects use standard methods, tools and
deliverables
8. Professionals available and have strong
experience
9. Accountability clearly established
10. Measures are clearly quantifiable
11. Meaningful, regular and integrated benefits
reporting
12. Defined and sustainable structure and ownership
13. Results linked to employee performance
evaluation
14. Reinforcement of cost reduction within culture
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Cash: optimizing working capital
Our Capital Confidence survey found that 57% of
companies intend to focus on optimizing cash
flow and liquidity
Enhancing working capital management can free
up cash, reduce funding costs and prompt supply
chain efficiencies
Tactical working capital initiatives can improve
cash and balance sheet presentation in the short
term
Long-term sustainable change requires that
working capital strategy is supported by
appropriate cultural
and structural enablers (KPIs,
incentives, etc.)
But how can this be leveraged without damaging
supplier relations and weakening credit ratings
Cash – steps to success
1. Incentivize management around cash
2. Manage payment terms for customers and
suppliers
3. Improve speed/accuracy of billing and cash
collection
4. Use data on disputes to eradicate the root cause
5. Increase billing frequency
6. Develop an agile demand-led supply chain
7. Build demand management into working capital
chain
8. Monitor financial health of customers and
suppliers
9. Identify key drivers of working capital
consumption
10. Identify, understand and quantify the trade-offs
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Cash: optimizing working capital (cont’d)
Potential to free up cash equivalent to 5%+ of turnover on a sustainable, bankable basis
Timely, clear and precise management reporting, including focused KPIs
Clearly aligned targets and incentives, across all functions
Clear roles and responsibilities and ownership of cash
Accurate cash flow forecasting
Tactical Short-term measures to achieve short-term needs
Operational Embedding changes in operational processes and
commercial arrangements to optimize cash
Structural Measures which impact organizational working capital
needs (through market, product, partnering or radical
redesign)
Other cash generation solutions Cash and revenue protection
Protect and enhancement of top line revenue through
―leakage‖ management
Treasury cash management
Tax including transfer pricing
Phasing of capital expenditure
Cross-border cash strategies, including repatriation of cash
Cash leakage and revenue enhancement
Working capital performance improvement
Sustainability
Cash
Impact
Tactical Operational Structural
Culture, visibility and control
Establishing the foundations for sustainable cash flow improvements
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
Capital: minimize costs and risks
Our research found that 61% of high performers
intend to fund growth through cash reserves and
48% will use some form of debt
Using cash reserves to finance growth is a low-
risk option
But is it the most effective method of providing a
return to investors
Capital – steps to success
1. Measurement — simplify and reset metrics
around cash, working capital and return on
invested capital
2. Review — implement systematic capital
allocation and portfolio reviews
3. Synergies — accelerate synergy release from
acquisitions
INSTRUCTIONS The font size on the slide master has been increased by 1pt, so that text sizes are applied to the standard two column layout in the correct font size.
Go to the View menu and select Header and Footer… to update the Proposal title and Date.
SEYMOUR SLOAN IDEAS THAT MATTER
TALK
TO US CONTACT:
Terry Chapendama - Director
Read our blog at:
www.seymourthinks.wordpress.com
Follow us on twitter
@seymoursloanuk
Visit us online www.seymoursloan.com
ABOUT Seymour Sloan
We formed the company in order to do
special things for our clients through the
creative use of new technologies and
techniques.
We help companies understand a
complex and ever-changing technology
landscape, along with changing
customer behaviours, developing
strategies and solutions to maximise the
opportunities available. We operate at
the intersection of digital, strategy and
customer, building a track record of
driving customer growth across our
three core industries.