affiliated distributors electrical division conference october 2011
DESCRIPTION
Delivered at the 2011 Affiliated Distributors CFO Conference, this presentation offers macroeconomic and c-level researce. This provides the basis both economic analysis and implications on those in the construction trades.TRANSCRIPT
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2012: Cutting Through the Fog of War
Prepared for Affiliated Distributors Electrical Supply Division
2 October 2011
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Simplicity Partners
“We are an elite team of practitioners who make businesses sustainable.”
•Our Mission:•To be the premier business growth firm•To provide the best value in the marketplace•To create and share a culture of learning
Profit/ PractitionerDrives Our Economic
Engine
We Can Be The Best In The World At Helping
Companies Work Efficiently and Effectively
We Have A Passion For
Making Things Work Right
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A Well Managed Business
Goals
Objectives ObjectivesObjectives
Action/ Behavior
Action/ Behavior
Action/ Behavior
Action/ Behavior
Action/ Behavior
Directi
on Feedback
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ECONOMIC INDICATORS: DOUBLE DIP OR SLOW GROWTH?
2012: Climbing Back From The Bottom
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US Leading Economic Index
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US Coincident Economic Index
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US Lagging Economic Index
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Jan-93
Jun-93
Nov-93
Apr-94
Sep-94
Feb-95
Jul-95
Dec-95
May-96
Oct-96
Mar-97
Aug-97Jan
-98
Jun-98
Nov-98
Apr-99
Sep-99
Feb-00
Jul-00
Dec-00
May-01
Oct-01
Mar-02
Aug-02Jan
-03
Jun-03
Nov-03
Apr-04
Sep-04
Feb-05
Jul-05
Dec-05
May-06
Oct-06
Mar-07
Aug-07Jan
-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-10
Dec-10
May-11
100,000
200,000
300,000
400,000
500,000
Value of Private Nonresidential Construction Put in PlaceSeasonally Adjusted Annual Rate
($ Millions)
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Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09Jul-0
9
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10Jul-1
0
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11Jul-1
1
100,000
200,000
300,000
400,000
500,000
Post-Lehman Private Nonresidential Construction ValueSeasonally Adjusted Annual Rate
($ Millions)
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Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-110
50
100
150
200
250
Private 2+ Multi Unit Permits Seasonally Adjusted Annual Rate(000's)
Private Multi Unit Permits Linear (Private Multi Unit Permits)
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Aug '10 Sep '10 Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11 May '11 Jun '11 Jul '11 Aug '11 Sep '11 (E)10.50
11.00
11.50
12.00
12.50
13.00
13.50
US Automotive SalesSeasonally Adusted Annual Rate
(Millions)
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Aug '10 Sep '10 Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11 May '11 Jun '11 Jul '11 Aug '11 0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
US Auto Sales SAAR By Type(Millions)
Total Car SAARTotal Truck SAAR
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But Don’t Forget Psychology• Will the economy fall into recession?• What happens to commodities?• Will the consumer stop spending?• Are industrial production numbers a mirage?• What about automotive?• Where will construction go?• Will we have jobs?• What about the debt reduction plan?• What happens if Europe collapses?• Will a slowing China ruin everything?• Will energy prices skyrocket?• What happens if stagflation returns?
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Ambiguity
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DISPELLING AMBIGUITY: THE C-SUITE PERSPECTIVE
2012: Cutting Through the Fog of War
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How Does This Impact Demand?
• 2,642 C-level executives invited to participate• 153 respondents in total• Research completed between September 14
and September 29
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Constructi
on/ Dev
elopmen
t
Manufac
turing
Business
Servi
ces
Distrib
ution/ Wholes
ale
Finan
ce
Facili
ties Man
agem
ent/
Mainten
ance
Retailin
g
Telec
ommunications
Archite
cture
0%
5%
10%
15%
20%
25%
30%
35%
40%37%
31%
12%6% 4% 4% 2% 2% 2%
What is your firm's primary role?
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Less t
han $5 m
illion
$5 milli
on to $24 m
illion
$25 milli
on to $99 m
illion
$100 milli
on to $249 m
illion
$250 milli
on to $500 m
illion
Greater
than
$500 milli
on0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
10%
24%
46%
11%5% 4%
What are your company's anticipated 2011 revenues?
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Decrease by more than 10%
Decrease by up to 10% Remain Flat Increase by 10% Increae by more than 10%0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
12%4%
43%
29%
12%
Compared to the prior 12 months, how much investment in new facili-ties or facilities expansion would you anticipate your business com-
pletes in the next 12 months?
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Decline >10% Decline 1% - 10% Flat Grow 1% - 10% Grow >10%0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0%
14%
28%
33%
23%
5%
10%
36% 34%
15%
12%
4%
43%
29%
12%
Compared to the prior 12 months, how much investment in new facili-ties or facilities expansion would you anticipate your business com-
pletes in the next 12 months?
Pre Aug 8Aug 9 - Sep 13Sep 14 - 29
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New factory/warehouse construction; 18
Existing fac-tory/ware-house ex-
pansion; 15
New office building construction; 24
Existing of-fice building expansion;
15
Factory/warehouse
renovation; 30
Office renovation; 72
Sale of exist-ing
factory/warehouse space; 21
Sale of existing office space; 15
Which of the following will your organization likely undertake in the next twelve months? (Select all that apply)
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Significant decline in worldwide GDP
Small decline in worldwide GDP
No growth, but no decline Modest increase in worldwide GDP
Significant increase in worldwide GDP
0%
5%
10%
15%
20%
25%
30%
35%
14%
25%
31% 29%
0%
How do you believe the broader global economy will perform in the next twelve months?
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Postpone indefinitely Postpone a few months No impact Slight increase in pace of implementation
Rapid completion of all projects
0%
10%
20%
30%
40%
50%
60%
10%20%
55%
14%
2%
What impact will your expectations of the global economy have on the pace of implementation of planned construction and/or renovation
projects in the coming year?
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IMPLICATIONS FOR THE CONSTRUCTION TRADES
2012: Cutting Through the Fog of War
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Implications for the Construction Trades
• Corporate hesitance to spend• Longer and more involved sales cycle• Increased price competition• Diminished value of relationships in place• Shift from build to renovate
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ADAPT TO SUCCEED2012: Cutting Through the Fog of War
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Adaptation #1: Managed Ambiguity
• Multiple higher-likelihood scenarios• Timeline and action driven• Heavy focus on next 90 days• Well defined future state• Clearly outlined assumptions • Short term focus on revenue, internal
obstacles
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A Well Managed Business
Goals
Objectives ObjectivesObjectives
Action/ Behavior
Action/ Behavior
Action/ Behavior
Action/ Behavior
Action/ Behavior
Directi
on Feedback
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Elements, In Triplicate Please
• Clearly defined future state• Small number of achievable objectives• Understanding of external threats• Documented list of assumptions for success• Internal focus on why it won’t work• 90 day action plan
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Plan the Work, then Work the Plan
• Review weekly– Sales activity– General assumptions– KPI
• Review monthly– Revenue– Specific objectives
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Harness Your Team
• Small group of leaders who can get things done
• Define a game plan, playbook for each scenario
• Fewer meetings, more joint work• In God we trust, all others bring data
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Adaptation #2: Push the Sales Team
“Increased revenue cures most ills, but the right revenue cures them all!”
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The 45 Second MBA in Marketing
• Three ways your company can compete1 – Best total cost = Operational Leadership– Best product = Product Leadership– Best total solution= Customer Intimacy
• World class organizations choose one to drive their business
• Which model describes your company?
1. Treacy and Weirsema: The Discipline of Market Leaders. 1997, Perseus.
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Cost
Price
CustomerValue
SupplierProfit
CustomerBenefits {Zone
ofPossibleAgreement
Driving Force For CustomerTo Buy
Driving Force For SupplierTo Sell
Source: Frank Cespedes, Harvard University. November 2008, YPO MI West
Maximizing Pricing and Value
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Success and FailureSuccess:
Solution Marketing SolutionProgram and Resources Opportunities
Transaction Marketing TransactionProgram and Resources Opportunities
Failure:Solution Marketing Solution
Program and Resources Opportunities
Transaction Marketing TransactionProgram and Resources Opportunities
Source: Frank Cespedes, Harvard University. November 2008, YPO MI West
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A Tale of Two Sales Guys
Charlie, the Finder
• Sets aggressive goals• Communicates progress• Asks for field support• Works with ops to improve• Consistently beats
expectations
Bob, the Minder
• Accepts your targets• A black hole• Hides “His” customers• Lets ops figure it out• Consistently tells you why
he missed expectations
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The Big Finish!
• Do not expect a double dip recession in 2012• Data is quieter than fear, but still positive• Companies continue to plan for construction• Slight downgrade in anticipated demand• Prepare for increased ambiguity• Manage your sales team
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DISCUSSION2012: Climbing Back From The Bottom