CREATING NEW GROWTH PLATFORM

1. CREATING NEW GROWTH PLATFORM Group-2: Alven Desnecmen, Calvin Gelgel, Fera Damayanti, Liza Widyasari BY DONALD L. LAURIE, YVES L. DOZ, AND CLAUDE P. SHEER Oyster International 12-year Research | Harvard Business Review Building Corporate Growth – MME 34- 12 November 2009

2. GROWTH Creating New Growth Platforms | Group 2 - MME 34

3. Acquisition, which destroyed more value than they create Extending Business Model to areas where they did not fit well Developing business models the companies were unable to operate Changing Regulatory Environment Industry Growth Rate Slowed  Company Growth Performance Gap Ability to generate Growth falls New or Converging Technologies Social Pressures Forces of Change Growth Decline High Growth Industry  High Growth Company Turn Around Creating New Growth Platforms | Group 2 - MME 34 Question: where does new growth come from, real, profitable, strategic growth that leverages the corporation’s capabilities and know-how?

4. How to Escape from Crisis? • Redefining profit driver • Building better business model • Moving into Adjacency (contoh paling kuat Nokia). • Breaking Compromises (compromise =no choice). • Creating New Growth Platform (NGP)

5. Industry Growth Rate Slowed  Company Growth Performance Gap SIGNIFICANT ORGANIC GROWTH • New Growth Platforms • Top Management Commitment • Independent senior level NGP unit Question: where does new growth come from, real, profitable, strategic growth that leverages the corporation’s capabilities and know-how? • build families of products, services, and businesses • extend their capabilities into multiple new domains Research Project “The CEO Agenda and Growth” to 24 companies with significant organic growth Significant & Lasting Growth High Growth Industry  High Growth Company • Acquisition: acquiring specific capabilities, assets, and market knowledge Creating New Growth Platforms | Group 2 - MME 34

6. FORMING NEW GROWTH PLATFORM Forces of Changes Creating New Growth Platforms | Group 2 - MME 34 Identifies potential NGPs

7. Formulating New Growth Platform Creating New Growth Platforms | Group 2 - MME 34 Back to slide 6

8. FORMING NEW GROWTH PLATFORM Capabilities needed for NGP Creating New Growth Platforms | Group 2 - MME 34 ACQUISITION AND INTEGRATION OF CAPABILITIES

9. INVERNESS MEDICAL INNOVATIONS Capabilities needed for NGP Creating New Growth Platforms | Group 2 - MME 34 Purchase INTEG To apply IDNT to Inverness’ Diabetes Testing Products Maintain 10 employees whose recommended skills, and focusing them on the Project

10. INNOVATION:A new product or service VS a new platform Identifies potential NGPs Creating New Growth Platforms | Group 2 - MME 34

11. 1900s: small parcel delivery • Mid 1900s: industry maturing, low GDP growth  UPS growth gap $1Bio  Need for “new strategic positioning” and “new growth platforms What UPS CEO Oz Nelson did? • established an organization of direct reports = NGP Group • Consist of smart, credible people; • led by Mike Eskew: sr operating executive • senior people who had diverse backgrounds, credibility within the organization, and the strength to frame and address issues that cut across business and political interests (not up-and-coming middle managers or innovative misfits Creating New Growth Platforms | Group 2 - MME 34

12. Questions: • Who are we? • We know we deliver packages, but we are also a technology • company, an airline (the ninth largest airline worldwide), • an insurance company, and one of the largest purchasers • of railcar capacity in the world • What are our capabilities, know-how, and assets? • UPS’s strengths were its unique market position of providing the physical connection between buyer and seller, as well as operational excellence, network planning, and global infrastructure • Next: identify the trends that could shape opportunities in UPS’s various market spaces in which the company searched for customers’ unmet needs. • customers needed to understand and control the flow of goods during transport • Enabler: technology that could globally integrate information, transportation, and payment. Creating New Growth Platforms | Group 2 - MME 34

13. How they found the customers’ unmet need • One customer approached with a problem: A major PC manufacturer’s customer service representatives request of one-day and same-day delivery • Shipping location: US=4, EU=4, Asia=2 • Work: overseeing central stock, field stock, transfer and returns • OPPORTUNITY: Managing Flow of Goods for Customer • Action: • Met with PC company to understand computer industry value chain • From customer calls to inventory and logistic management • To installation at the customer location • Identified which activities the PC company wanted to manage and which it was willing to outsource • Develop solution: forming SPL(Service Parts Logistic) • Prototyping & Market Test • New Growth Platform: supply chain management service • Action: • creating a warehouse in action to manage inventory in supply chain Creating New Growth Platforms | Group 2 - MME 34

14. SPL solid capabilities in supply chain management services • Finding other applications and opportunities to other industries with similar issues: Medical Research and Health Care Supplies Business • Customer’s needs: quickly transport goods needed on very short notice • Action: acquisition of Livingston Creating New Growth Platforms | Group 2 - MME 34

15. Originally: focus on Pacemakers • Change agent: CEO Bill George and CEO Art Collins • New platforms: • Products assisting in the treatment of cardiovascular, neurological, spinal diseases, diabetes • Independent and embedded NGP Unit in Metronic • Implantable Cardioverter Defibrillator • Established an independent business unit an led by high-potential manager • To develop ICD technology • No pressure on delivering short-term financial result • Without oversight of traditional approaches • Collaborative relationship with pacemaker unit • Leaders’ role • Referee and enable functional interaction, resource allocation, and priority setting (Griffin) • Champion the organization structure and resource allocation and making it received the same level of attention from CEO as the larger unit by Creating New Growth Platforms | Group 2 - MME 34

16. Originally: branded consumer goods manufacturer • Change agent: CEO A.G. Lafley • NGP Unit: FutureWorks • stand-alone BU to build growth platforms and search for opportunities between and beyond of existing BU • Challenge of Platform • Put credible chief growth officers in charge • Believe that the team is more important than the idea • Have NGP units that are independent and embedded • Guarantee financial independence • Systematize the NGP creation process Creating New Growth Platforms | Group 2 - MME 34

17. PLATFORM AS business model Creating New Growth Platforms | Group 2 - MME 34

18. CEO LEADs the platform growth • Believe that the work is important • Establish business innovation as a priority • Take the best people • Become engrossed in the work • Feel that he will learn and the answers will come If a CEO didn’t comment on poor package handling, workers and supervisors might conclude everything must be all right Creating New Growth Platforms | Group 2 - MME 34 • Lead in identifying the revenue gap • Spend time with customers • Be an active participant in the NGP unit’s discussion • Spend significant time (50%) for NGP • Delegate responsibility on the core business to others Common trap for CEO: Focus on the performance and morale of the large core businesses

19. NGP FAILUREs Creating New Growth Platforms | Group 2 - MME 34

20. “Now when we identify a new product opportunity, we examine it through the new platform lens. We are looking for the products, services, or businesses that can be created from this innovation that we had not yet begun to consider. By doing that we accelerate time to market and generate hundreds of millions of dollars in additional revenue.” (Gil Cloyd – Chief Technology Officers of P&G) Creating New Growth Platforms | Group 2 - MME 34

21. SUMMARY Finding New Growth Platforms • Establish NGP Unit • Top Management Commitment • Explore NGP Creating New Growth Platforms | Group 2 - MME 34 • Customer Problem: WHERE • Unmet - Dissatisfaction Process (HOW) • Market Trend’s: WHAT • Faster or Bigger Good Company NGP Execution

22. Thank you Creating New Growth Platforms | Group 2 - MME 34

23. When Growth Decline • Turnaround: • The recovery of a company’s economic performance following an existence threatening decline • The dynamic of Declining Performance • Strategic frames becomes blinders • Process harden into routine • Relationships become shackle • Value harden into dogmas  Pemecahan masalah: Turnaround Cari Key performance, petakan performancenya over time. Yg membuat penyebab penurunan kinerja tidak terlihat adalah sbb: Pandangan yg membutakan (arogan), ct.IBM dulu believe komputer terkecil yg akan pernah ada adalah ukuran 2ton seperti yg mampu dibuat IBM krn dia believe yg paling pintar ada di IBM Hub dg customer menjadi terbelenggu, terlalu lekat dg customer yg sama sementara consumption rate turun, ct kasus bir kirin (tentara) vs asahi (anak muda) Creating New Growth Platforms | Group 2 - MME 34

24. Turnaround • The recovery of a company’s economic performance following an existence threatening decline Creating New Growth Platforms | Group 2 - MME 34

25. The signs of Failure Management • The management fails to listen to warning signs and believes only its own rhetoric • The management makes a poor choices or no choice at all • Management makes misrepresentation to the outside world (melihat dunia tidak boleh bersaing) Creating New Growth Platforms | Group 2 - MME 34 The signs of Failure LEADERSHIP • The management breaks down • The employees concentrate on their own agenda

26. The psychology of corporate decline • Some people began to do minimum, showing up at work just to earn their end-of-year bonus • As problems mounted, people tended to either blame or avoid one another • People’s time and energy were spent on self protection instead of joint problem solving • It became rare for all the senior executives to sit down in one room together • Finally, people become passive and helplessness  Sign to turnaround Creating New Growth Platforms | Group 2 - MME 34

27. Turnaround leadership Is a person who has the ability to convince others to follow the path he or she decides • The role is to change a company for the better • The function is to save the company Creating New Growth Platforms | Group 2 - MME 34

28. Turnaround Executives: • Who they are The turnaround leader should be able to lead and manage all the critical ingredients that make up a good turnaround Turnaround executive is a spectrum ranging from those: “who specialize in crisis stabilization” to “who undertake the complete turnaround” • Crisis stabilization, recovery, and return to growth • Who they are • Crisis Stabilization Executives: • aim is to ensure that caused the crisis is in the first place • Complete turnaround Executives: • aim is to deal with the underlying caused of decline and bring the conmpany return to growth • Initiate and lead refocusing company’s strategy, process improvement, and organizational change Creating New Growth Platforms | Group 2 - MME 34

29. Turnaround process • Recognize performance declined • Asses financial condition • Stabilization • Conserve cash (amankan uang kita, krn so far blm pernah ada kredit utk turnaround process) • Safeguard assets (jaga aset) • Foster open communication • Reorganization • Review business strategy • Review management process • Sales of business (utk dapatkan uang) • Return to growth • Develop and implement new business strategy Crisis Stabilization Creating New Growth Platforms | Group 2 - MME 34 Complete Turnaround