Staircases to Growth

McKINSEY Strategy & Growth

Agenda• Staircase of Initiatives & Opportunity • Assembling Platforms of capabilities• Leading Growth

o Concurrent management across 3 Horizonso Staircases to Growth

• 1. Build new capabilities • 2. Adapt business model • 3. Protect the venture

Staircase of Initiatives

• Many low-growth company are slaves to process for projecting a medium term budget

• Successful growers emphasizes both short term and long term Vision and Tactics

• They plan within a clear strategy

• Short term steps take advantage to o build new skills, when new opportunities is open up, they are able to move faster

than competitors

Coca Cola Amatil’s staircase

The Opportunity Pipeline

1. Maximizing existing customer

2. Attracting new customer

3. Innovation of product and services

4. Innovation of value-delivery system

5. Improving industry structure

6. Geographical Expansion

7. Stepping out into new business arenas

7. Stepping out into

new business arenas

6. Geographi

cal Expansion

5. Improving industry structure

4. Innovation of value-delivery system

3. Innovation of product

and services

2. Attracting

new customer

1. Maximizing existing customer

Disney’s : 7 Degrees of Strategic

Freedom

Teenage & Adult

- Home Video- Games

- Theme parks

Television – Wonderful World of Disney

Expand theme park

Promotional Relationship

with Macdonald’s and

Mattel

-Live Entertainment (Theater and Sport)-Cruise Liners-Resort-Television ABC

Assembling platforms of

capabilities• To emphasize the

importance of the skills inherent in an organization's people and processes

• Perspectives of growth opportunities Focus to "skills-based strategy" and "the core competence of the corporation“

• The important how to use capabilities to grow tends to be narrow and may reinforce managers' perception that they are hindered by having limited capabilities.

Business-specific Competences• DISNEY – led in industry since 1928, the first Mickey

Mouse cartoon, Steamboat Willie

Transformation

Growth-enabling skills• Focusing on

core competences

• Distinguished by their mastery of more generic "growth-enabling," skills, including making : acquisitionsfinancing, risk management and deal structuring, regulatory management, capital productivity enhancement.

Privileged assets.

To be valuable , bring competitive advantage• Brands : Disney • Networks • infrastructure• Information : databases of customers , information-

based marketing company as credit card • people skills : petroleum• knowledge-based assets• company processes.

Special relationships

Relationships are one of great growers' most important• SAP's products requires technical expertise at every stage

of implementation at growth formula by uses partnerships• Hardware that runs its software to sell the product and

provide technical support(IBM, Compaq, Bull, or NEC,)

• Systems consultants with the software developers that provide complementary business- worldwide standard in integrated business software(Price Waterhouse, Andersen Consulting, or Ernst & Young)

Breaking constraints by assembling new

capabilities• Flexibility to cut short unsuccessful and step to attractive

features of staircase approach• A company not need to strengths in all area of business,

just areas important to make money.

Flexible evolution of a business

• “Stick to the knitting” and “Focus on core competences” are prescriptions that require careful interpretation as record of Disney’s evolution.

Time

Value Horizon 3

Create viable options

Horizon 2Build emerging businesses

Horizon 1Extend and defend core businesses

Concurrent management 3

Horizons

3 Horizons of growthHorizon 1Extend and defend core businesses

Horizon 2Build emerging businesses

Horizon 3Create viable options

Types of businesses

Core businesses underpinning current profitability

New businesses and extensions of existing businesses fuelling revenue growth

Options to build future businesses

Managementimperative

Unlockincremental growth, then manage for value as the business declines

Exercise options, assemble required capabilities, and drive business-building initiatives

Source options (ideas, relationships, assets) for future growth and test viability of business concepts

Primary focus

Bottom-line performance and profitability

Top-line growth and capital efficiency

Future potential and robustness across multiple scenarios

Leading Growth

• Only 10 percent of companies with above-average growth will sustain it for more than ten years.

• A sound growth strategy is important. But it is a long way from a successful growth program.

1.Why do so few growth programs succeed ?

2.And what can leaders do to change the odds in their favor?

Reason for failure

• Many management teams do not integrate and balance the inspirational, strategic, and organizational imperatives of growth. Some executives begin in the wrong place.

• Executives find it difficult to concurrently manage initiatives with different pay-off horizons

1.Why do so few growth programs succeed ?

Leadership across three dimensions of growth

1.Commit to growth2.Build growth engines3.Cultivate entrepreneuship

2.And what can leaders do to change the odds in their favor ?