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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.
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?
7 7
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 [email protected]
KEVIN ROLAINSenior Manager, Management Technology & Advisory [email protected]
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Thank you!
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Material discussed in this publication is meant to provide general information and should not be acted on without professional advice tailored to your needs.
© 2019 BDO USA, LLP. All rights reserved. www.bdo.com
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, and advisory services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through more than 60 offices and over 650 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 80,000 people working out of 1,600 offices across 162 countries.
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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