CREATING PROFITABLE GROWTH WITH 80/20 · 2019-05-01 · BDO is the brand name for BDO USA, LLP, a...

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

CREATING PROFITABLE GROWTH WITH 80/20

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With you today

VAL LAUFENBERGPartnerManagement & Technology Advisory Services

KEVIN ROLAINSenior ManagerManagement & Technology Advisory Services

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Questions we will answer today:

What is the 80/20 platform? How does it apply to business?

What are the key 80/20 strategies that consistently deliver profitable growth?

What is the impact of creating an 80/20 mind-set in my business?

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What is BDO’s 80/20 practice?

A division of BDO USA, LLP which is an accounting and advisory firm with a national and international presence

Our 80/20 practice serves businesses from a variety of industries

The tools we teach have been derived from a number of world-class organizations

We are an advisory practice serving organizations by helping them gain

profitable growth through Focus and Simplification. We use a holistic

approach to improving businesses.

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Creating a culture with an 80/20 mindset

An 80/20 mindset enables you to take control!

Benefits of the process:

More Time

More Focus

More Competitive

More Money

Less Stress

6 80/20 Roadmap

Are you already an expert in 80/20?

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Treat Them

Differently

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What is the 80/20 rule?

20%EFFORT

80%RESULTS

=

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TIME IS A GIFT.

TIME IS MONEY.

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Desirable Business

Undesirable Business

Revenues

Customers / Costs

80%

Insignificant many80% of costs

20%

The BDO 80/20 hypothesis

Critical few20% of costs

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Real world experience with over 400 businesses

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After 80/20

Revenue Growth = 3X Market (46%)

14% Operating Income

Before 80/20

Revenue Growth = Market

5% Operating Income

Proven results for XYZ Company

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A B C D

Series 1 Series 2 Series 3

Polling question

Which of the following statements best represents your organization today?

A. We are constantly firefighting and lack focus.

B. Revenue is growing yet bottom line isn’t following.

C. We need to reduce business complexity.D. Everyday is sunshine and rainbows.E. None of the above.

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We often hear…

“We need to reduce business complexity.”

“We struggle to attract new talent.”

“Need to increase sales productivity.”

“We don’t have enough time to treat our best customers how they should be treated.”

“We’re burning out our best people.” “We’re experiencing

margin pressure.”

“We need to develop the management team.” “We lack focus.”

“We are constantly fire-fighting”

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Six milestones of 80/20

A FRAMEWORK FOR DRIVING AND SUSTAINING PROFITABLE GROWTH

Strategize

Manufacture Growth

Drive Efficiency

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SIMPLIFYCustomers, Products, Processes, Services & Vendors

Milestone 1

COMPLEXITY LIMITS SCALABILITY AND PROFITABILITY.

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Over time businesses become complex

Vendors Inventory Products Policies and procedures Customers Stacks of reports

Businesses often have too many:

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The foundation of 80/20

LISTEN TO THE DATA.

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Quartile report

Q1

Q2

Q3

Q4

250

250

250

250

Number of customers or jobs Sales Effort Profit

89%

7%

3%

1%

25%

25%

25%

25%

+++

+

-

- - -

Is Quartile 1 subsidizing Quartile 4?

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Polling question

Which of the following statements would be a possible objection to the Quartile analysis?

A. Some of our small customers will become big

B. All of our eggs will be in one basketC. We have better margins in Quartiles 3 and 4D. All of the aboveE. None of the above

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A B C D

Series 1 Series 2 Series 3

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Quartile report

Q1

Q2

Q3

Q4

250

250

250

250

Number of customers or jobs Sales Effort Profit

89%

7%

3%

1%

25%

25%

25%

25%

+++

+

-

- - -

Is Quartile 1 subsidizing Quartile 4?

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Any objections?

Some of our small customers will become big

All of our eggs will be in one basket

We have better margins in Quartiles 3 and 4

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“TRANSACTIONAL”- EFF IC I EN T

- TRANSACT I ON A L- ELECT R O N I CA L L Y - REMOT E L Y

“NECESSARY…but not desirable”

- NOT AS QU ICKLY

- NOT AS AFFORDAB L Y

- PERFE CT L Y

- W ITH CHERR Y ON TOP

Quadrant analysis80

Cus

tom

ers

20 C

usto

mer

s

80 Products/Projects 20 Products/Projects

Q1 Q2

Q3 Q4

“THE FORT”- IMMED IAT E L Y

- AFFORDAB L Y

- ENTHUS IAST IC A L L Y

- W ITH CHERR Y ON TOP

“RATIONALIZE”

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Simplification Case Study XYZ Company

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SimplificationXYZ Company

WHAT WE DID DATA! Quad 4 = 17%! Eliminated one entire business segment Remaining segments eliminated 600+ SKU’s Customer & Product filters Yes, but…

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SimplificationXYZ Company

WHAT WE DID DATA! Quad 4 = 17%! Eliminated one entire business segment Remaining segments eliminated 600+ SKU’s Customer & Product filters Yes, but…

RESULTS Inventory reduced $3.3M Production efficiency up 23% NPD projects on time 22% 95%

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SEGMENT & ALIGNUnlike Businesses and Resources

Milestone 2

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SegmentationXYZ Company

SITUATION

Moderate growth; declining profitability

CI diminishing returns

Strategic plan ineffective

Key leaders ‘focused’ on entire business

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SegmentationXYZ Company

WHAT WE DID

One overall business three business segments

GM for each segment (full P/L)

• dedicated Sales, NPD, Ops

Strategic plan for each segment

• KPI’s aligned with corporate objectives

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SegmentationXYZ Company

RESULTS

Greater FOCUS

Accountable teams

Stronger relationships with top customers

Empowered, engaged employees

Leadership strategically elevated

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STRATEGIZEPreparing to Succeed

Milestone 3

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Polling question

TRUE or FALSE?My organization has a well defined strategy and deployment team that drives meaningful actions and generates intended results.

A. TrueB. False

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A B C D

Series 1 Series 2 Series 3

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80/20 approach to developing strategy

FOCUS ON WHAT MATTERS MOST

BUSINESS SEGMENTATION

ALIGNMENT OF RESOURCES

STRATEGYHOW? WHAT? WHEN?

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(before 80/20)

Seeing what’s important

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(after 80/20)

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(after 80/20)

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(after 80/20)

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MANUFACTURE GROWTHDriving Above Market Sales Growth

Milestone 4

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Your best customers

MUST BE“RAVINGFANS!!!”

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Efficiently Serve and Support Growth(e-Commerce)

Strategic SelectionsHigh Potential

Precision Selling

Key Accounts

High Value

Value Expansion Potential

Transactional

Target Prospects

Aggressively Grow

OverserveDefendGrow

High

Low

Moderate to High

High

Strategy Outside Sales Intensity

80’s

20’s

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DRIVE EFFICIENCYStreamline Processes

Milestone 5

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80/20 on the plant floorSeparate and focus

HIGH VOLUME Lean, in-lining, etc. *Price advantage*

LOW VOLUME

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FACILITATE ACCOUNTABILITYLay the Foundation For Driving Goals

Throughout the Organization

Milestone 6

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BDO 80/20 operational toolbox

3 Year Business Plan

Annual Company Goals

Segment Goals

Key Employee Goals

Budget

Financial Scorecards

Key Performance Indicators

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Wrap-up

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After 80/20

14% Operating Income

Revenue Growth = 3X Market (46%)

% of Revenue from New

Products = 45%

Patents = 11 in 12 months

Dedicated, segmented teams

Before 80/20

5% Operating Income

Revenue Growth = 1X Market

% of Revenue from New

Products = 0%

Patents = 1 in 40 years

Leaders “focused” on entire

business

Proven results for XYZ Company

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Before 80/20

P R O F I T A B I L I T YP R O F I T A B I L I T Y

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After 80/20

P R O F I T A B I L I T Y

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Operations Purchasing

HR Sales

Bidding/Pricing

Accounting

80/20

A holistic business program

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We’ll get you there!

1DISCOVERY

2ANALYSIS

3TRAINING

4IMPLEMENTATION

Y O U R B U S I N E S S

(TODAY)

S A L E S

PRODUCTIVITY

EMPLOYEE SATISFACTION

SALES GROWTH

PROFIT IMPROVEMENT

CULTURE OF ACCOUNTABILITY

Y O U R B U S I N E S S

(FUTURE)

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Your business ecosystem

YOU

PEER NETWORKS

CUSTOMERS

SUPPLIERS

EMPLOYEES

FAMILY

LEGALFINANCIALPARTNERS

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The results of our engagements

In the first 12 months, PES clients from all industries see a…

6.28%average increasein annual revenues

43.67%average increase in annual operating income

10Xreturn on investment

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Summary of what we covered today:

What is the 80/20 platform? How does it apply to business?

What are the key 80/20 strategies that consistently deliver profitable growth?

What is the impact of creating an 80/20 mind-set in my business?

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FINALLY… THE ULTIMATE 80/20

YOUR

FAMILY

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TIME IS A GIFT.

TIME IS MONEY.

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Q&A

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Is sales growth dropping incremental income to your bottom line?

Do you have a plan/process for creating "Raving Fans" amongst your top customers?

Are you increasing workforce productivity?

Is business complexity diluting productivity and creating stressful operatingenvironment?

Is your management team aligning effort and resources on critical business drivers?

Are you satisfied with the development of your management team?

Do you have concerns retaining and recruiting key talent?

Is your business prepared for any type of transition?

Are you realizing the enterprise valuation objectives for your business?

Are key decisions being driven more by opinions than data?

Do you have a “healthy” culture of accountability throughout your organization?

Reflection- How are you doing in each of these areas?

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For more information

VAL LAUFENBERGPartner, Management Technology & Advisory Services608-828-3151vlaufenberg@bdo.com

KEVIN ROLAINSenior Manager, Management Technology & Advisory Services608-821-8825krolain@bdo.com

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Thank you!

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BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

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