Embed Size (px)
Citation preview
How to grow against the odds?
Workshop with The Boston Consulting Group
10:45 – 12:00
Götz Gerecke, Nicolas Kachaner, Kermit King
medtechforum.eu
1
Corporate portfolio strategy
Identify areas to accelerate growth in the current portfolio and seek out new platforms for growth
Organizational growth enablers
Create growth mindset and remove internal barriers to growth
Business model innovation
Reinvent offering and/or operating model
M&A
Acquire or partner for access, scale, capability
Innovation
Enhance offering through successful organic innovation
Geographic expansion
Enter and grow in new markets
Go-to-market transformation
Near-term commercial initiatives
Where
to play
Maximize
the core
Expand into
adjacencies
Explore new
frontiers
Drive higher demand, penetration
or share in current fields of play
Project advantage into adjacent fields
of play (e.g. channel, category, geo)
Create or position to exploit
new emerging fields of play
| How
to win
1
2
3
4
5
6
7
Place your bets
2
Voting
Which of the following seven levers are most important to address to accelerate
profitable growth in your organization (please select up to three):
a) Corporate portfolio strategy
b) Go-to-market model transformation
c) Geographic expansion
d) Innovation
e) M&A
f) Business model innovation
g) Organizational growth enablers
LEVER 2: GO-TO-MARKET
MODEL TRANSFORMATION Near-term commercial initiatives
3
Pricing and reimbursement pressure
Stakeholders increasingly demanding value proofs
Shift in decision making to economic buyers and
market access authorities
New commercial model
for emerging markets
Innovation productivity declining
4
MedTech GTM model challenges Survey of 4'500 employees across 38 MedTech
businesses in US, EU-5, JP and BRIC countries
medtechforum.
eu
Particularly strong in Most often cited Least often cited
Key challenges reported in Commercial Benchmarking study
1
2
3
4
5
Source: BCG Commercial Excellence Benchmarking Study in Med Tech 2012 (4,500 employees surveyed)
5
MedTech today: Still high price
realization ...
COGS: Costs of Goods Sold Source: BCG Value Science Database; BCG Commercial Excellence Benchmarking in Med Tech 2012
1.6
2.4 2.2
3.6
Sales indexed to COGS (COGS = 1.0)
medtechforum.
eu
Revenue earned for each dollar of COGS
Medical Devices Medical Equipment High Tech Industrial Goods
> 1.5×
6
... but shifting from a "price & mix"
to a "volume" game
1. Range varies by Med Tech segment Source: BCG Med Tech Pricing Study 2008; BCG Future of Med Tech Study (2011)
medtechforum.
eu
Historical US MedTech revenue
development 1997–2007 (%)
Projected US MedTech revenue
development 2010–2020 (%)
-20
40–601
Price Total
100
Mix
30–501
Volume Total
100
Volume
130
Mix
-10
Price
-20
Sources
of growth
7
Even more substantial price pressure
in Europe
Source: BCG Future of MedTech Study; BCG Commercial Excellence Benchmarking Study in MedTech 2012
medtechforum.
eu
Projected US MedTech revenue
development 2010–2020 (%)
Projected European MedTech revenue
development 2010–2020 (%)
-20 -10
Price Total
US
100
Mix
130
Volume Total
Europe
100
Volume
145
Mix
-10
Price
-35
Sources
of growth
8
Unsustainably high commercial cost
structure
1. SG&A: Selling, General, and Administrative expenses (in this chart includes R&D expense) 2.COGS: Costs of Goods Sold Source: BCG Value Science Database; Company SEC reports; BCG Commercial Excellence Benchmarking in Med Tech 2012
0.3
1.6
0.5
2.4
0.9
2.2
1.7
3.6
SG&A indexed to COGS (COGS = 1.0)
Sales indexed to COGS (COGS = 1.0)
medtechforum.
eu
Revenue earned and SG&A spent for each dollar of COGS
Medical Devices Medical Equipment High Tech Industrial Goods
> 1.5×
> 3.5×
9
Need to re-invent the high-cost
commercial model
Source: SG&A on this chart excludes R&D expense. BCG Value Science Database; BCG Commercial Excellence in Med Tech Benchmarking Study 2012; Company Annual Reports
medtechforum.
eu
Value selling and contracting Clinical selling and support
0.0
0.5
1.0
1.5
2.0
2.5
45 40 35 30 50 85 80 75 70 65 60 55
Gross margin %
SG&A spend for each $ of COGS
Orthopedics and other implants
Advanced surgical/therapy equipment
Advanced consumables
Generic consumables
Diagnostics
Other equipment
Multi-sector
Cardiac High cost models
Low cost models Models need to evolve in
reaction to pricing pressure
and changing practices
10
Three archetype selling models in the
market today
Source: BCG's Commercial Excellence Benchmarking Study 2012
Clinical model Hybrid-model Admin model
Lower SG&A Higher SG&A
Value selling and contracting Clinical selling and support
Companies need to change the mix of these three models
medtechforum.
eu
11
Admin model with 2–3x higher rep
productivity than clinical
Source: BCG Commercial Excellence Benchmarking Study in Med Tech 2012
0
2
4
6
8
10
Revenue 2011/Sales Rep (in M$)
Clinical Hybrid Admin
Max
Min
majority
of players
5.9 2.9 1.7 Average
(in M$)
0
2
4
6
8
10
Revenue 2011/Sales Rep (in M$)
Clinical Admin Hybrid
medtechforum.
eu
3.1 2.3 1.3 Average
(in M$)
Rep productivity higher in the US than in EU5,
primarily driven by higher price levels
12
Access-buying process also evolving
by type of market
Source: BGC
Access driven market Demand driven market
Potential access guidance by region/
GPOs, price and conditions set by
hospitals, demand driven
by surgeons
Access granted/restricted by regional
authorities, payers or GPOs, with
hospitals still influencing demand
Price and conditions set by individual
hospitals, demand driven by
surgeons' choice
Clinical selling Value selling
Three archetypes of markets, requiring different models
Demand/access
driven markets
BCG's demand-access continuum
medtechforum.
eu
Reimburs. planning and execution
Information Technology
KOL and stakeholder management
13
Industry self-assessed "intermediate"
commercial readiness
Note: all BUs equally weighted and all countries within BUs equally weighted Source: BCG Commercial Excellence Benchmarking Study in MedTech 2012
medtechforum.
eu
Industry (n = 4,500)
Intermediate Initial Advanced Optimized Basic
Commercial strategy
Service strategy
Service management
Service organization
Services
Performance mgmt. and incentives
Targeting
Quality of interaction
First Line Sales Mgr. effectiveness
Sales organization
Sales
KAM strategy and selection
Key account planning
KAM
Market and customer insight
Product strategy and objectives
Resource optimi– zation and tactics
Product launch effectiveness
Marketing
Organizational enablers
Cross– functional interfaces
Human Resources Report tracking and KPIs
Pricing planning and execution
Reimbursement strategy
Pricing strategy
Pricing model
Pricing organization
Reimbursement and Pricing
Marketing organization
Keys to winning (profitability)
Prioritized focus/ opportunities
Portfolio/product strategy
1
2
3
1
3
4
5
6
1
2
3
4
5
1 2 3
1
2
3
4
5
6
4
6
2 1 3
Key account organization
Key account mgmt. and execution
1
2
3
4
Resourcing and activity level 2
Basic
14
BCG recommends six transformation
moves to win in the near term
medtechforum.
eu
Partner with key
accounts
3
Invest in pricing
and reimbursement
capabilities
5
Make service a
differentiator and
a source of revenue
6
Strategy
De-average your
go-to-market
strategy and
commercial model
1
Front office
Reinvent clinical
selling
2 Build real marketing
muscle that drives
home the value proof
4
Back office
Source: BCG Commercial Excellence Benchmarking Study in MedTech 2012
LEVER 6: BUSINESS MODEL
INNOVATION Reinvent offering and/or operating model
15
medtechforum.eu
The music industry has experienced
more than 10 years of recession
Recorded trade physical sales (CD)
Source: IFPI (Recording Industry in Numbers)
45
25
40
35
30
20
15
10
5
0
CD
12 11 10 09 08 07 06 05 04 03 02 01 00 99
Sales (B$) CAGR 99-12
- 8%
medtechforum.eu
But smart incumbents have
generated new revenue streams
"The music industry is growing, the record industry is not growing"
WMG's CEO - Edgar Bronfman, June 2007
1. CAGR 06-12
Source: IFPI (Recording Industry in Numbers), BCG Study for UM
+14%
+5%
+7%
+3%
+16%1
-8%
+1%
CAGR
99-12
0
10'000
20'000
30'000
40'000
Recorded physical music
Sales (B$)
99
Recorded digital music
Publishing
Touring
Merchandising
Sponsoring
12 11 10 09 08 07 06 05 04 03 02 01 00
medtechforum.eu
Nespresso: Reinventing the mature
coffee market
• Nestlé was already #1 in coffee worldwide
• Nespresso incubated in a separate BU
medtechforum.eu
Coffee market
Nespresso
Nespresso's
share
Profit
(CHF m)
300
35%
100+
Value
(CHF bn)
8–10
5–6
> 50%
Sales
(CHF m)
2'900
20%
573
Volume
(kt)
223
3%
6.3
Growth
(p.a.)
~ 0%
> 20%
> 100%
Value created is very significant
Example: Switzerland and France
medtechforum.eu
Mercedes: From selling trucks to
selling kilometers
Source: BCG Automotive Practice
Customer as system integrator Supplier as system integrator
Customer
Manufacturer Mercedes Charterway Dealer
Distribution
Admin.
Development
Manufacturing
Purchasing
Financing
Spare parts
Service
Margin
Financing
Overhead and selling commission
Depreciation
Running cost (registration, repairs, etc.)
Truck
mounting
Service
Inspection
Spare
parts
Financing
Contract
•
•
•
•
•
DM
From product to service, leveraging existing
structures, borrowing from other industries
medtechforum.eu
What is a business model ?
Value proposition
Operating model
Business model
Target
segment
Product/ service
offering
Revenue
model
Value chain Cost
Model Organization
medtechforum.eu
Understanding the spectrum of
choices is useful to guide a
Business Model diagnostic
• Existing
• Underserved
• Non users
• Adjacencies
• New markets
• Product
• Product
bundle
• Service
• Service
bundle
• Experience /
relationship
• Outcome /
facilitation
• Per unit sold
• "Razor
model"
• Subscription /
license
• Dynamic
pricing
• Per unit used
• Results
based / risk-
sharing
• Single step
focus
• Horizontal
integration
• Vertical
integration
• Orchestration
• Low cost
• Premium
• Fixed vs
Variable
• Asset Light
• By product
• By geography
• By customer
group
• By business
model
Target
segment Offering
Revenue
model Value Chain Cost model Organization
Value proposition Operating model
medtechforum.eu
7 major business model innovation
patterns
1) Trading up / trading down (low cost)
2) From product to service - Variabilization
3) Asset light (orchestrators) vs. integrators
4) Direct distribution
5) Free and 'razor & blade'
6) Open – ecosystems
7) Digital
Nike
medtechforum.eu
Organizing for BMI: value of a separate
incubation
Separate low cost fleet
Separately run
Separate labor contracts
Low cost
Mid-level prices
Clearly different brand
Differentiated offering between parent airline and
lowest cost airlines
Accessing new customers
Same mgmt team
Walled-off portion of parent fleet
No real labor cost advantage
Lower unit cost via
larger airplane
Low pricing for many seats, but
“managed up”
Differentiation limited to on-board
experience
Cannibalizing offering (better
value than Delta)
Customer confusion
Results:
Profitable,
growing
Results:
Reabsorbed
into parent
medtechforum.eu
Where to start: 4 types of BMI
initiatives
Explore Change
the game
Survive Adapt
Core Periphery
Area of focus
Protect
Grow
Primary
motivation
medtechforum.eu
Core Periphery
Area of focus
Protect
Grow
Primary
motivation
Example: GE Health Care filling the
matrix
Partner
3rd party Consulting
Asset
Management
Teleradiology
Home
Health
Pay per use
Miniaturir-
-zation
medtechforum.eu
Some lessons
• Business model innovation (BMI) can create massive value
– Even in mature or declining markets (music, coffee, trucks,…)
– As an incumbent or as an attacker
• BMI should be managed like any R&D activity
– Dedicated resources, systematic approach
– Project portfolio, trial and error (pilots)
– Open research: learn from outside
• New models often benefit from separate incubation
– Dual branding often adviseable
• Successful BMI does not require breakthrough innovation
– Following is usually OK
– Execution quality more decisive than novelty
medtechforum.eu
SIX ESSENTIALS
28
medtechforum.eu 29
Voting
Which of the following six success factors represents the greatest barrier to
profitable growth in your organization (please select up to three):
a) Set your aspiration
b) Know your advantage
c) Stretch the thinking
d) Force tough choices
e) Fund the journey
f) Build aligned capability
30
1. Set your aspiration
Six essentials
31
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Net sales
(M$)
Historical growth
Current trajectory
Aspirational growth
+3.9%
+10% Growth gap
+2.3%
% CAGR 1998–2003 % CAGR 2003–2008
Source: BCG case experience
Defining the gap
32
0
20
40
60
80
100
-20 0 20 40 60
Percent Rank
5 year Annualized TSRs (Through Sept 2013)
Dr Reddy’s 37%
Biogen 37% Novo Nordisk 30%
Mylan 27% Bristol-Myers Squibb 23%
Gilead 22%
Amgen 15%
Bayer 14% Pfizer 14%
Merck 14%
AstraZeneca 9% J&J 8%
Lilly 8% Abbott 7%
Glenmark 2% Teva (2%)
3rd Qtr =
3.5%
Median =
11.6%
1st Qtr =
20.4%
Historic 5 year TSRs vs Long-Term S&P 500
Reflects investor judgment of
management action
Reflects business and
financial strategy
Reflects change: "has no
memory"
Comparable across
companies
Total shareholder return aspiration
incorporates value
33
"I will build a motor car for the great
multitude. It will be so low in price that
any man making a good salary will be
able to own one—and enjoy God’s
great open spaces"
Henry Ford
34
1. Set your aspiration
2. Know your advantage
Six essentials
35
36
$2B consumer goods company
50 years of steady growth in sales,
profits, market cap
Premium branded niche
Peer beating multiple
Slowing single digit core growth
Wrigley's core and adjacent
drive for growth
Brand management
Branded share (%)
Importance of flavor
Value density ($/M )
Shelf life (months)
% Sold in impulse locations
Purchase frequency
(x/year)
HH Penetration (%)
Ad spend as % of sales
Gross margin
Relative market share Industry
structure
Innovation Selling and
merchandising
~15%
~60%
~2
~95%
5
~9K
~12
~90%
~14x
~70%
Sales
OP
RTSR
'98 - 05
2.1x
2.0x
1.5x
37
Wrigley's core and adjacent
drive for growth
Importance
today
Importance
in 2014
Degree of
advantage
• Local market knowledge (customers, consumers)
• Advantaged cost position
• Ability to pilot initiatives in low-risk ways
• Ability to efficiently scale (latent advantage)
38
1 2 3 4 5
Not important Very important
Not advantaged Highly advantaged
Response scale
• XXX national brand
• Strong, local geographic brands
• Credibility
4
4 4 3
4
4
4
5 5
5
5
5
5
5
5
5
5 5 5
5
4
5
3 4
5
5
5
5
5
5
4
5 2 3
5
3
4
3 5
4
1
5
5
3
4
• National online verticals
• Online marketing advertising services
– Local (latent advantage)
– National
• Culture: Productive, resilient, loyal employees (Great executors)
• Strong editorial staff across platforms/media
• Strong balance sheet (generate cash flow, pay down debt, invest)
• Access to major customers
• Largest local sales and news-curation staffs (newspaper markets)
• Large audience reach (aggregated audience is increasing)
Positions, capabilities or assets which
potentially confer Client advantage
The "advantage audit"
39
1. Set your aspiration
2. Know your advantage
3. Stretch the thinking
Six essentials
40
Where to play
Maximize
the core
Expand into
adjacencies
Explore new
frontiers
Faint signals
Favoritism
Trade up/down
Extend advantage
Periphery
Repeatability
Look out, look in
Partnerships
BMI archetypes
Wider field of vision
41
1. Set your aspiration
2. Know your advantage
3. Stretch the thinking
4. Force tough choices
Six essentials
42
43
1
2
3
SIZE OF PRIZE
RIGHT TO WIN
PATH TO ACHIEVE
Attractiveness
Advantage
Rigorous qualification of ideas
44
Option
lens
Reinforcement
lens
Cluster
lens
Collective
lens
+
+
+
Ideas must be evaluated in context
45
1. Set your aspiration
2. Know your advantage
3. Stretch the thinking
4. Force tough choices
5. Fund the journey
Six essentials
46
0
20
40
60
80
0 3
23
75
% performers
Neither Margin Only Growth Only Both growth and margin
0
20
40
60
80
% performers
2 6
23
69
0
20
40
60
80
% performers
2 9
45 44
0
20
40
60
80
13 6
56
25
% performers
Top Quartile TSR 2nd Qtr TSR 3rd Qtr TSR Bottom Qtr TSR
Based on S&P Global 1200, 2003-2012 Source: Capital IQ; BCG analysis
Top value creators simultaneously
grow revenue and improve margins
47
Initiative Description Addressable cost base Owner
COGS improvement
and promo optimization
• Negotiate vendor contracts to improve margin
• Standardization of methodologies & process
XX XX
Indirect Sourcing and
Procurement
• Reduce indirect sourcing costs through standardization of
processes and centralization of systems
XX XX
Business Process
Outsourcing
• Increase portion of labor pool outsourced/offshored XX XX
Sales Force • Headcount reduction, increase use of inside sales force,
productivity improvements
XX XX
Bank Charges • Incentivize customers to use different payment options XX XX
Logistics/Supply Chain
• Network
• Inventory
• Consolidate, optimize, and align delivery network
• Optimize inventory stocking decisions fo sales and margin
XX XX
Division A:
• Store labor
• Inventory
• IT
• Operational improvement
• Network optimization
• Payroll optimization
• Inventory reduction
• Transition to VOIP
• POS improvements
• Close closure/downsizing
XX XX
Division B:
• Customer service
• Reduce call center contacts through self-service options
XX XX
Division C:
• Store closure and
downsizing
• Store labor
• Property sale &
leaseback
• Close underperforming stores
• Downsizing of stores
• Rationalize store management structure
• Adjust or redeploy level of hourly staff labor
• Sell store and home office properties and leaseback
XX XX
Example: funding the reinvention
48
1. Set your aspiration
2. Know your advantage
3. Stretch the thinking
4. Force tough choices
5. Fund the journey
6. Build aligned capability
Six essentials
49
• Effective, strategic HQ selling
• Best-in-class category management and distribution
• Strategic customer/channel segmentation/targeting
• Effective trade spend and merchandising
• Cutting edge data and analytics
• Flawless retail execution
• Synced sales/marketing
• End-to-end supply chain built for lowest cost
• Net revenue management/pricing and margin optimization
• Unparalleled safety
• Organizational efficiency
• Aligned culture and dedication to success
• Agility/flexibility to support growth and innovation
• Differential, effective concept to market processes and metrics
• Sustained post-launch support
• Culture of innovation and learning
• Holistic organization alignment
• Clear, expansive definition of innovation
• Clear innovation strategy linked to division/function strategies
• Comprehensive market, trend, and consumer knowledge
• Optimal media mix
• Product quality linked to brand strategies
• Effective consumer targeting/messaging
• Clear portfolio strategy and aligned resources
• Deep consumer/shopper empathy
• Effective insights to action
• Brand positioning, extendibility
• Agency management
• Price architecture
Leading customer
growth
Operational
excellence
Breakthrough
innovation
Brand
building
Current gap
Client strength
Mixed strength/gap
Capabilities evaluation
50
Gannett's transformation
51
Gannett's transformation
medtechforum.eu 52
Final voting
If your organization made a special effort to accelerate profitable growth, by
how much do you think you can flex your momentum trajectory:
a) +1% p.a.
b) +2%
c) +3%
d) +4%
e) +5% and more
53
Thank you!
Götz Gerecke Partner, BCG Zurich Mail to : [email protected] Phone : +41 79 373 8631
Nicolas Kachaner Senior Partner, BCG Paris Mail to : [email protected] Phone : +33 6 17 81 36 36
Kermit King Senior Partner, BCG Chicago Mail to : [email protected] Phone : +1 312 498 45671
