Accelerating Value Creation Through Discontinuity

Company Presentation

Background

• There is a network of medium-sized companies that have suffered from Asian competition, undergone many changes in their offshore production, and in general have not been able to successfully transform their business model.

• Many of these companies have kept their proprietary industry outdated and oversized, carrying it on as an inevitable “liability”.

• The erosion of revenues and profits does not seem to offer prospects of recovery anymore.

The Opportunity

• However, these same companies are very often still the custodians of a savoir faire that contains a potential and exploitable value.

• The design, the taste, the attention to detail, the creativity and the ability to communicate are intangible assets essential to rebuilding a sustainable business model.

• This industry, although obsolete and inadequately sized, maintains a technical know-how, a knowledge of the production cycles, and an attention-to-detail that allow it to quickly update and integrate the latest available methods and technologies.

The RProject as Discontinuity

• In those companies is rooted a turnaround potential and an EBITDA multiplier, provided that they are prepared to undergo not just a “renovation” but a true “re-generation”.

• The re-generation requires a discontinuity, a radical change in the business model that often relies on an enabling technology.

• This is what we call an RPROJECT.

• Traditional turnaround models rely on simple cost and investment cutting and divestment policies that affect the cash and equity in the short term, leaving the company without the necessary foundational elements upon which to build long-term value.

• RPROJECT builds upon foundational qualitative elements – the “Italian Factor” or the “French Factor” for example – making it possible to quickly re-generate them to produce additional unexpected value. We are looking for EBITDA multiples supported by ground movements that can reposition the company for the long run.

The Simplification of the Strategic Approach

• The clarity and simplicity of our strategic approach ensures the effectiveness of the change in the business model and - not to be overlooked - the alignment of the top and middle management.

• There are basically two competitive approaches:

• 1 Cost leadership• Requires a cross-market solution and large scale industrial efficiency• Relies on mass production• Maximizes the volume

• 2 Differentiation• Requires a Uniqueness and increasingly, mass customization• Multiplication of niches to increase added value• Maximizes the value

• In both cases, the industrial discontinuity can be an enabling factor and the best foundation for further development.

Simplicity as the New Premium

• Today there are radical opportunities for simplification to help existing customers and gain new ones, disrupt competitors, and create new value that can even generate additional premium.

• People are not seeking more choices… but fewer and better ones. This creates the necessity for a simpler, more flexible approach to how information is consumed.

• Regardless of their diverse focuses, companies in ultra-competitive and saturated industries need simplification, providing customers with a smooth, user-friendly experience and creating value for which consumers are willing to pay a premium.

• Simplifying the key customer-facing business process:

Getting points of view from people who don’t live in your business or industry. Leveraging Design Thinking techniques to empathize with customers. Understanding how people use your product and their emotional responses and incorporating

them into product’s design. Being radical!

The Industry and the Investment

• Choosing the right investment (as opposed to freezing or divesting all investments) plays a strategic role in the process of re-generation and often follows the logic of discontinuity.

• The industrial investment must have at least these features:• Radicalization of Choices• Cost-effective Sustainability• Integration of Technologies

• The new Enabling Technologies are those that can bridge the labor and energy gap with the emerging economies - and then leverage on that level of flexibility and quality - to offer customization, service and design values rooted in the European DNA.

• It is the start of a new Industrial Renaissance: the discontinuity generated by the RFactor which will act as a value multiplier leading to growth, sustainability, and long-term strategic positioning.

Fostering a Culture of Innovation

• Organizational culture is reflected in nearly every aspect of a company. We see culture exemplified through factors such as: Are they are willing to take risks or do they prefer to play it safe?  Do they focus more on driving results and achievement or on people and relationships? Is the company open to new opportunities and change? How do they generate and disseminate ideas within the company?

• Strategy navigates towards a company’s desired destination, while culture is in the driver’s seat having a much greater influence on the company’s ability to evolve, innovate and leapfrog the competition.

• A company can have the best talent, best ideas, best processes, abundant resources and cash, but at the end of the day, if the key attributes and behaviors engrained in the organization’s culture do not align with the core concept or idea, successful innovation starts looking like a matter of luck and… innovation is too important to be left to chance.

"Made In": Entwining Manufacturing Strength with Design Values

• Leveraging on Innovation, Technology and Green Economy.

• Taste, quality, elegance, personality.

• Italy is one of only five Countries in the world (along with China, Germany, Japan and South Korea) to have a manufacturing surplus over the 100 billion dollars.

• Italy is the world leader, with the USA, in "re-shoring," i.e. the homecoming of companies that had previously outsourced / offshored their production. Between 2007 and 2013, re-location in Italy accounted for 60% of all Europe.

The Face of the New Technological Renaissance

• The evolution of technologies in the manufacturing sector are often so fast that even the leaders fail to keep up.

• As it was 600 years ago, we now have the opportunity to engender a new Renaissance. The world needs to be re-booted, re-organized, revived. To do that takes all the elements that are rooted in the Renaissance, from thinking in ways to challenging accepted norms.

• We are on the eve of the second age of the machines. Every company must take advantage of the digital elevator to get to the world market.

• It is now possible to reorganize and revitalize companies, making them leaner, closer to their consumer markets, dynamically networked and with the ability and flexibility to invest in discontinuous innovation.

Artificial Intelligence• In 1964, Isaac Asimov, wrote about a visit to the World’s Fair of 2014: “The world of

A.D. 2014 will have few routine jobs that cannot be done better by some machine than by any human being. Mankind will therefore have become largely a race of machine tenders.”

• The combination of massive computing power, comprehensive networking, machine learning, digital mapping and the “internet of things” are bringing about a full-blown industrial revolution on the same scale as the transformations brought about by steam power and electricity.  But whereas those earlier revolutions complemented human (and horse) muscle, the new one will replace human cognition, in that computers will ultimately do work that involved employing people to do information-processing tasks.

• We’ve already seen many jobs automated or outsourced with widespread globalization and the evolution of technology.  Therefore none of the above predictions should be shocking to anyone.

• Instead, they open us up to a whole new world of opportunities and new ways of doing business.

What Do we Do?

• Consulting (selected customers)• Innovation LAB (creation from scratch of market innovations) • Strategic Marketing of Discontinuous Innovation• Industrialization of Innovation (Light Production Units)• Scouting & External Origination • M&A Activities

Markets

• Textile / Apparel • Retail• Tele-medicine/ Advanced Diagnostic• Industrial solutions• Clean Manufacturing• Intelligent Manufacturing / Robotics• Environmental Solutions• Artificial Intelligence (AI)

Partners

RPROJECT INTERNATIONAL SAGLRegistered Office: Corso Elvezia 16, CH-6900 Lugano

Headquarters: Via Maggio 1 Building C CH-6900 LuganoPhone +41 (0) 91 260 1651

www.rproject.ch