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Big Winners and Big Losers : The 4 Secrets of Long-Term Business Success and Failure by Alfie Marcus Presented by David Keenan to the Minnesota Futurists.

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Presentation on theme: "Big Winners and Big Losers : The 4 Secrets of Long-Term Business Success and Failure by Alfie Marcus Presented by David Keenan to the Minnesota Futurists."— Presentation transcript:

1 Big Winners and Big Losers : The 4 Secrets of Long-Term Business Success and Failure by Alfie Marcus Presented by David Keenan to the Minnesota Futurists 27 May 2005

2 ISBN 0131451324 Hardcover Wharton School Publishing Oct 2005, 400 pages

3 Author Alfred A. Marcus BS, MS at Univ. of Chicago. Ph.D at Harvard Edson Spencer Chair of Strategic Management and Technological Leadership at the U of M, Carlson School of Management On Faculty since 1984. Teaches and conducts research in strategic management, macroeconomics, business ethics, and business and the natural environment. Visiting Professor at MIT's Sloan School of Management. Marcus is author or coeditor of 11 books Consulted and worked with many companies including 3M, Corning, Excel Energy, General Mills, and IBM.

4 Criteria 10, 3, & 1-year ave. annual market return –Winners = exceed industry average –Losers = below industry average 5-year ave. annual return –Winners = more than double the ind. ave. –Losers = less than half the ind. ave.

5 The Population Studied Wall Street Journal Shareholder scorecard 1000 companies from 1992 – 2002 41 of 78 industry groups had “winners” or “losers” 32 winners –$3.5 bil revenues, 14,500 employees ave. 64 losers –$10.5 bil revenues, 48,000 employees ave.

6 1992 – 2002 Winners & Losers Winners Southwest Johnson Controls Harley Davidson Best Buy Alliant Tech Amphenol Ball Brown & Brown Forest Labs SPX Cabot Donaldson Losers Goodrich Delta Disney Conagra ADM Merck Readers Digest Kodak McDonalds Nordstrom Halliburton Kmart Losers Mattel Honeywell Pharmacia Saks Snap On Parametric LSI Logic

7 Another Cut - Criteria Companies analyzed had to outperform or under perform their industries in the 6 months following Jan 1, 2002 About half the winners and losers dropped out

8 9 Comparisons Sector Winner 5 yr ave annual Loser 5 yr ave annual mkt return % mkt return % TechnologyAmphenol34.0LSI Logic 3.4 Mfg/ApplianceSPX28.8Snap-On 1.7 SoftwareFIServ31.2Parametric-21.2 FoodDreyers22.4Campbell Soup -1.8 Drugs/ChemForest Labs58.5IMC Global-18.7 Mfg/IndustrialBall23.9Goodyear-11.5 Fin’l/InsuranceBrown&Brown48.7Safeco -1.0 RetailFamily Dollar36.1Gap 9.8 Ent./ToysActivision24.1Hasbro -0.1

9 Analysis Methodology 45 analyses –5 replicates per company pair –Groups of 6 managers compiled reports –More than 500 managers contributed –Asked to explain reasons for sustained advantage or disadvantage

10 Report Outline Executive Summary –why is one so much better Brief Description of the companies Relevant Performance Critical competitive challenges Key internal strengths and weaknesses Main moves – response to challenges Why one performed better References

11 Findings AttributesSuccessFailure 1.Position “Sweet spot” Being in an uncontested space “Sour spot” Being in a contested space 2. Movement Agility Getting into uncontested space Rigidity Not getting to uncontested space 3. Hard to imitate capabilities Discipline Protecting uncontested space Ineptness Inability to protect an uncontested space 4. Concentration Focus Exploiting uncontested space Diffuseness Inability to exploit an uncontested space Exploration Exploitation Necessary but not sufficient

12 Position Examples Winner / Sweet Spot Loser / Sour Spot Amphenol Co-create Close to mkts Hi perf mil specs Harsh env Error free Design w/cust Shares R&D Forecast need Single source Snap-on Too costly Commodities Tools to sophisticated Little room to differentiate Fixated on patents, premium brand, tech. leader Dreyer’s Embed Low margin Private label Substitutes Runs local freezers Unique intimacy Safeco Too cheap Little loyalty to cust. Generic policies Missed actuarial risks, disasters WS tanked Activision Broker 12-28 yr old males Sequels Outsource development License brands Own distribution Gap Too complex 3 niches Fashion mistakes Too trendy Too many kinds of cust Design / timing

13 Movement Examples Winner / Agile Loser / Rigid Fiserv Consolidate financial services Large data processing needs Outsource From smaller banks Infrastructure, software, hardware, service on or offsite Enhancements, seamless 110 acquisitions – best of breed LSI Logic Custom chips for mil Slow to move to generic chips for consumer electronics Found hard to compete on price Bought into storage area network bus. but ended up competing with customers Forest Labs From vitamin/candy to proprietary delivery system Celexa for Lunbeck, Zoloft/Paxil/Prozac for Pfizer/Lilly/Glaxo Lexapro – patent Pipeline incl. hypertension, alcohol, Alzheimers Generics to hedge risk Campbells Many brands from V8 Franco-Am, Swanson, Pep Farm, Godiva Failed to win w/ V8Splash 66% earning from soup Missed Progresso challenge Slow to chunky and cold blending

14 Capabilities Examples Winner / Discipline Loser / Inept Ball Mfg process control Exits antiquate plants Reduce material/retain integrity Specialty containers Monitors acqs and divests No union – training, particip, very selective, loyal Recycling leader Goodyear Failed turnarounds Revolving door CEOs Alienated dealers – took away access to deals to sell through WalMart Failed to win post Firestone Poor relationship with union, aging workforce, pension laiabilities Family Dollar Low overhead, open all time No credit, self service Expansion financed by cash flow, no debt No sales Brand names Hard goods Supply chain, IT efficiencies Accurate forecasting Hasbro Repeated restructurings, layoffs, plant closings, streamlining fails to deliver British price fixing scandal Failed against computer game growth

15 Concentration Example Winner / Focused Loser / Diffuse Brown & Brown (D&O insurance) No underwriting just broker Distribution only, low ohead Specific profitable niches Mid size businesses Professionals and Prof Associations Auto dealers, dentists, lawyers, top level company officers Parametric (Pro E CAD software) Numerous indirect distributors, 3 rd parties, resellers Indirect sales alliances, not completely loyal as sell competitor products Out of touch with cust. Customers complain (globally) about need to invest own time and money to train and integrate W/out customer contact unable to do good R&D or product updates

16 Best Selling Business Books Divided Agility Innovators Dilemma –Christensen Why Smart Executives Fail –Finkelstein Creative Destruction –Foster & Kaplan Transform Your Business –Godin Value Migration –Slywotzky Revival of the Fitest –Sull Discipline & Focus Execution –Bossidy & Charan Good to Great –Collins Balanced Scorecard –Kaplan & Norton What Really Works –Nohria & Joyce Discipline of Market Leaders –Treacy & Wiersman Profits from the Core –Zook Alfie says ‘Winners do both well’

17 Implications: Manage the Tension Sweet spotAgility (Move)Discipline (Protect) Focus (Extend) GoalAchieve GrowthEnhance ProfitsProfits and Growth InnovationEfficiencyReform and Refinement ReinventionOperational Excellence Fine-tuning ActionsExploreExploitExplore and Exploit ProspectDefendAnalyze

18 Implications: Manage the Tension Sweet spotAgility (Move)Discipline (Protect) Focus (Extend) StrategiesVisionMissionMission-vision ConditionsDisequilibriumEquilibriumEquilibrium- disequilibrium TechnologiesDisruptiveSustainingSustaining- disruptive IndustriesDynamicStaticDynamic-static Image of the future UnpredictableLike todayGradually evolving PeopleRevolutionaries (break the rules) Controllers (enforce the rules) Improvers (Fix the rules)

19 Summary Big winners: 1. Occupied sweet spots. 2. Possessed the ability to move into these spots. 3. Disciplined themselves to defend their spots. 4. Exploited and extended their positions. Big losers: 1. Occupied sour spots. 2. Were rigid. 3. Could not defend their positions. 4. Could take advantage of their positions.

20 Discussion Understanding the critical importance of unleashing creativity with Bill Peter Excerpts from The Change Makers: From Carnegie to Gates, How the Great Entrepreneurs Transformed Ideas into Industries by Maury Klein 2003


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