4. Expectations of a New Age business
1. Profitability and growth
A return on shareholder funds after tax of 4 times the bond rate
Growth better than the industry average ( + international?)
2. Uniqueness in:
Product, IP and operations
Organisational culture
3. World best practice in:
Value for money for customers
Respect for the society in which it operates
Relations with other stakeholders
Treatment of the natural environment
6. Profitability By Major Industries
Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009
Communications 33.7
Mining 19.6
Hospitality 19.1
Cult & Recn Serv 18.9
Wholesaling 17.3
Transport 15.3
Prop & Bus Services 15.2
Finance & Ins 13.7
Average 13.3
Retailing 13.1
Manufacturing 12.5
Construction 12.5
Personal & Other 12.0
Agriculture 8.9
Utilities 7.8
Education 4.3
Govt. Adm. & Defence 1.8
Health & Community 6.4
0.4
Percent 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
Source: IBISWorld 22/12/09
7. Intellectual Property
Intellectual property can best be described as a
“cocktail” of:
• skills, special competencies, unique systems;
• patents, trademarks & brands;
• organisational culture, customer relation
protocols;
• vision, plans and documented achievable
strategies.
It is the "holy grail" of a enterprise, its core and its
most valuable balance sheet asset, whether recorded
as such in dollar terms or not.
8. Unique Organisational Culture
A unique culture is about attracting and keeping
good people to your business, and helping develop
ordinary people into extraordinary people.
This is built on a base of world best practice
principles of human resources management. But a
unique culture goes well beyond the basics: it needs
to have special elements of both a tangible and
intangible nature.
No matter how often we say it, employees are not a
firm’s most valuable asset, since slavery has been
outlawed for some considerable time! But in the
emerging “sellers market” we need them to stay.
11. How much do we need to know about . . .
The Influential Environments (4)
1. The world environment, growth, regions, nations, demography etc. ?
2. National resources,developed (infrastructure, IC&T), natural (resources, ecology) ?
3. Our community, its changing demography, lifestyles and spending ?
4. The economic environment, the “business weather” conditions ?
The Operating Environments (6)
5. The government environment, laws, taxes, policies, incentives ?
6. The finance market, equity, debt, exchange/interest rates, treasury ?
7. The services market, to outsource none-core activities and functions ?
8. The labour market, for executives, employees and customers ?
9. The purchases market, raw materials, semi-/finished goods, prices ?
10. Its market, local and global ?
The Immediate Environment
Our own industry, WBP, size, growth & disposition, competitors?
Our Own Business
Its IP, financials, sales, operations, TQC, productivity, R&D, HR etc. ?
12. In the Industrial Age businesses generally
planned and operated on an inside-out basis.
The external business environments were
largely opaque to an enterprise which tended to
be fortress style; and enterprises were opaque to
outsiders who saw enterprises as secretive.
In the New Age businesses must now forecast,
plan and operate on an outside-in basis.
The business environments are becoming
transparent to enterprises, and in turn the enterprises
are becoming more transparent to outsiders.
13. Business Intelligence
Expenditure on data and information, F2010(E)
Internally
Sourced
64.5%
35.5%
Externally
Sourced
$195 billion in Australia
(5.6% of all business revenue)
IBISWorld 17/11/09
14. Nearly two thirds of all business
data, information and intelligence in
Australia in F2010 will be internally
generated.
How much value-adding do we do
with this, to help with planning,
efficiency, revenue growth, CRM
and profitability?
16. Over one third of all spending on data,
information and intelligence by
enterprises in F2010 will be outsource.
This proportion has been steadily
increasing from less than 10% half a
century ago to an estimated 35.5% this
year.
We are spending more on information
and also outsourcing more of it.
17. Type Of Outsourced Business Information
Australia F2010 (F)
Exploratory
News/
Books/
Mags.
Online Info 2.0% Scientific 1
ISPs 1.7%
Conferences/ Research 1.2% Other
Data Process 1.5% Meetings2
Mkt. Research 1.3%
3.1% 2.2%
5.8%
Cons. Eng. +
26.2% Architects
20.3% Accounting
Legal Services
Services
10.6%
Note: 1 Public Relations
Credit Agencies 0.9%
Other 0.7% $68.8 billion Expenditure
2 Includes accommodation, (2.0% of national revenue)
travel, registration
fees, speakers etc
IBISWorld 18/11/09
18. Purpose Of Outsourced Information
About What? F2010 (F)
Exploratory
Government 1.0%
World 0.8%
Services 0.5%
Resources 0.5%
Own Industry 9.8%
71.6% About Our
Own Company1
From Accounting firms, Legal firms,
Management Consultants,
Consulting Engineers etc
Spending on information about
$ 68.8 billion expenditure
the external environment ($19.5 (Australia)
billion) is 28% of all outsourced
spending and 10% of all spending
IBISWorld 17/11/09
19. Of all the business spending on
data, information and intelligence -
$195 billion - only 10% is spent on
issues in the external environment.
But this spending is growing nearly
2% pa faster than the economy in
response to the need to plan on an
outside-in basis, displacing the old
inside-out approach of the secretive
Industrial Age?
21. The Knowledge Pyramid
By Volume By Value
Vision
Vision & Strategy
Vision
Unique Unique IP
Expert Opinion
Decreasing IP
Value Wisdom Wisdom
Expert Opinion Expert Opinion
Intelligence Intelligence
Increasing
Information Information
Value
Data Data
Hearsay But interesting!
Hearsay, Rumour, Scuttlebut
Source: IBISWorld 18/11/09
23. Standard of Living 2008
20 Highest Nations GDP/capita, ppp basis
QATAR 110.7
Luxembourg 81.0
Norway 59.3
Kuwait 57.4
Brunei 53.1
Singapore 51.5
USA 46.9
Ireland 45.3
Hong Kong 43.7
Iceland 41.8
Switzerland 41.8
Netherlands 40.4
Austria 40.2
UAE 39.9
Canada 39.1
Australia 39.9
Sweden 38.1
Belgium 37.4
Bahrein 37.3
Equatorial Guinea 37.2
0 10 20 30 40 50 60 70 80 90 100 110 120
$US ‘000 (ppp) CIA FactBook/IBISWorld 20/10/09
24. Business Research & Development
(% of GDP)
2.6
2.4 World Best Practice: nations > 2.5% of GDP
2.2 (eg. Sweden, Japan, Finland, S. Korea, USA)
Australia 14th in 2008 among 30 OECD member.
2
1.8
BERD % of GDP
1.6 OECD
1.4
1.2
Australia
1
0.8
0.6
NZ (0.5%)
0.4
0.2
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Year, ended June
Source: DIISR
25. Australian Productivity Growth
GDP per hours worked (4-quarter moving average) to December 2009
5.0
4.5
4.0
20th Century average
3.5 was 1.9% per annum
3.0
2.5
2.0
1.5
%
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: ABS Cat NO 5206.0 IBISWorld 05/03/10
26. Australian Industries Productivity
5 year growth to 2008, % p.a (IGP / employee @ 2006-07 prices)
2006-
Communications 4.9
Finance & Ins 2.8
W'Sale Trade 2.5
Agriculture 2.4
Retail Trade 2.2
Personal & Other 1.5
Transport 1.3
Cult & Recn Serv 1.1
Govt Admin/Def 0.8
All Industries 0.7 Average
Construction 0.7
Manufacturing 0.5
Hospitality 0.8
Health 0.4
Prop & Bus Serv 0.1
Education -1.6
Utilities -5.8
Mining -7.6
Percent -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6
Source: ABS & IBISWorld 05/03/09
28. What the Best Enterprises Are Doing
1. They stick to one business at a time and do not diversify
2. They aim to dominate some segment (s) of their market
3. They are forever innovative, valuing the business’ IP.
4. They outsource non-core activities to enable growth.
5. They don’t own “hard” assets.
6. They have good and professional financial management.
7. They plan from the outside-in not the inside-out
8. They anticipate any new industry lifecycle changes.
9. They follow world best practice for their own type of business.
10. They develop strategic alliances.
11. They develop unique organisational cultures.
12. They value leadership first and management second.
29. Positioning
Secure a safe industry position in your
chosen industry to be master-of one’s-own-
master- one’s-own-
destiny by dominating something.
Domination can be of:
the whole industry class (being a major); or
major);
one category in the industry (a niche player);
player);
or
one product group1 (an ultra-niche player); or
ultra-
one product ( a boutique operator).
operator).
Note: 1 Or a customer segment; and occasionally a geographic area
30. Industry Share Strategy
(positioning for a winnable war)
5% 1-5
%
No-man’s-land
Major Player
25-75%
No-man’s-land (un-winnable position)
Caught between majors (“sledgehammers”)
and niche players (“knee-cappers”)
Source: IBISWorld
31. Outsourcing And A Virtual Corporation
In the Industrial Age, corporations set out to be self-
self-
sufficient - apart from obvious sub-contracting -
sub-
creating complex and multi-layered/multi-functional
multi-layered/multi-
structures.
In the New Age, all non-core/non-strategic activities
non-core/non-
are outsourced1 to specialists in the interest of
reduced complexity and to develop focus, lightness,
flexibility and faster growth of the business: a
virtual corporation. In 2005, over $450 billion of
non-
non-core activities are now outsourced by
businesses (20% of revenue)
1 Outsourcing is not to be confused with subcontracting
32. Business Outsourcing in the New Age
Trucking Accounting
Road transport industry. Payroll, Share Registers
Cleaning Full contract accounting.
Office, factory, hotel etc. Superannuation administration.
Laundry, work clothes. Computing
Canteens, Dining Rooms Software development.
Caterers. Computer services (IT
outsourcing)
Maintenance Property
Painting . Property trusts,
Engineering. Property management
Carpentry.
Marketing
Security Advertising, media buying
Security systems. Call Centres
Surveillance services. Distribution
Personnel Warehousing & Delivery
Recruitment. Information & Planning
Out placement.
Training. Database services
Strategic and Other Consulting
Reception Franchising
Serviced offices. Operations.
33. The External IC&T Industry
Australia Revenue based, F2009 (E)
Telecommunications
Computer 34.5%
Retailing
Mobile
17.2% (incl. resellers 2.9%)
Telecom Eqpt
Wholesaling
11.1% Wired
Computer 14.3%
Wholesaling 14.3%
4.1%
IT
Consult.
0.6%
IT Relay,
Manufacturing Satellite
IT Databases &
Maintenance Data Process
$116.1 billion
IBISWorld: 30/07/09
34. The New Age Virtual Corporation
Traditional Structure New Structure
Multi-layered Corporation Virtual Corporation
Board, CEO and Leader, Senate and
Top Management Top Management
Head Office functions Mostly
outsourced
Implementers
Middle No Longer
Management Mostly
Required
outsourced
Coordinators
& Operatives
Supervisors No Longer
& Employees Required
Mostly outsourced
and /or franchised
Functions provided back to company by
firms in new (specialised) industries (e.g
IT, personnel, legal, accounting, information,
transport, cleaning etc.)
35. Leadership
Leadership sits above management. It demands
special attributes such as loneliness in ultimate
decision making (after full consultation), often with no
(after consultation),
voting. And, sometimes, no consensus.
It is non-gender specific.
non-
Leadership involves more external focus than internal:
the opposite of management.
Apart from listening to experts and confidantes, it
involves communicating directly with major
customers at least once a year.
36. What can happen with great
leadership, and following the
Keys To Success (or most of
them)
The Leighton Group was mid-sized
not that long ago
37. Leighton Holdings Revenue & Profitability1
Revenue excludes JV & associates share 1962 to F2009
50 45%
45 Notes: 1 Net profit after tax on S/F 40%
2 Zero data are actually
40 ROSF
losses for those 3 years 35%
Revenue (A$ billion)
35
30%
30
25%
ROSF %
ROSF %
25
20%
20
15%
15
10%
10 Revenue
5 5%
0 0%
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
IBISWorld 30/03/10
38. Successful Mid-sized Businesses
5-year average ROSF (after tax) basis, % to F2009
Allen & Unwin 115.5%
Wotif.com 80.1%
Readers Digest 77.9%
Mini-
Mini-tankers Aust. 67.4%
Nielsen Company 66.4%
Ted’s Camera Stores 50.4%
Nick Scali 48.8%
Bakers Delight 42.3%
Wridgways 38.3%
Aust Steel Mills 35.1%
41. World’s 30 Largest Economies
2010 (F)
Poland 1.0%
S. Arabia 0.8%
Argentina 0.8% Purchasing Power Parity (PPP) terms
Thailand 0.8%
S. Africa 0.7%
Egypt 0.6%
Pakistan 0.6%
Colombia 0.6%
Malaysia 0.6%
Belgium 0.5%
Rest of World
(198 nations)
15.5% 20.5% USA
11th – 20th Nations 14.8%
2.5%
India
3.0%
4.0% 5.3%
Mexico 2.1%
Spain 1.9%
Korea S 1.9%
Canada 1.9%
Indonesia 1.4%
Turkey 1.3% World’s 228 nations
Australia 1.2% 17th
Iran
Taiwan
1.2%
1.0%
US$ 72.1 trillion
Netherlands 0.9%
CIA/IBISWorld 08/02/10
42. Economic Growth: 2009 (F)
20 Largest Economies (ppp ranking)
China/HK 8.0
India 6.5
Indonesia 4.6
Iran 2.6
Australia 1.3
S Korea 0.5
Brazil -0.3
France -2.2
Canada -2.5
USA -2.5
World World Growth -2.5
Taiw an 2008, -2.5% -3.6
Spain -3.6
Netherlan -4.0
UK -4.7
Italy -4.8
Germany -4.9
Japan -5.3
Turkey -6.0
Mexico -6.9
Russia -8.0
-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9
The Economist/IBISWorld 11/04/10
43. Economic Growth: 2010(F)
20 Largest Economies (ppp ranking)
China/HK 9.5
India 7.7
Indonesia 5.6
S Korea 5.3
Brazil 5.0
Taiwan 4.9
Mexico 4.3
Turkey 3.6
Russia 3.5
Australia 3.1
USA 3.1
Canada 3.0
World World Growth
2.5
2010 (f), 2.5%
Iran 2.3
Japan 1.9
Germ any 1.6
France 1.5
UK 1.3
Netherlands 1.1
Italy 0.7
Spain -0.3
-2 -1 0 1 2 3 4 5 6 7 8 9 10
The Economist/IBISWorld 11/04/10
