Preparing for disruption with a strategic mind-set

December 11, 2017

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Everywhere you look, disruptors are in the news

Here’s why bitcoin will take over

Clothing, beauty retailers experiment with augmented reality

Small businesses that have already changed the world

The Amazon disruption dilemma Tesla vs. the auto industry WeWork: Reworking the

office

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1. Macroeconomics/ demographic shifts

2. Asset lite platforms

3. Customer engagement

4. Unicorns play by different rules

5. Proliferation of startups and funding

6. Technology companies are crossing industry barriers

Why is this period so disruptive?

1

2

3

4

5

6

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Over the past 50 years GDP growth has continued to slow 1

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The speed of technology adoption is increasing and disruptorsare levering asset lite platforms

Years to achieve 50% penetration in US households

0

20

40

60

Telephone Automobile HomeComputer

Internet Smartphone

50 years

6 years

Most of these companies were founded within the past 13 years.

Technology enabled platforms

2

Pinterest

Etsy

LyftUber

fitbit

Warby Parker

GroupongrubHub

wework

GILT Airbnb

IndieGoGo

gofundme

Amazon Mechanical

Turk

Source: JPMC; KPMG analysis

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Disruptors are leveraging their technology platform to engagewith the customer in new ways

How we discover a need for

certain products and services

Explore

How we browse and compare options, make trade-offs and

decisions

Shop

The products and services to meet our new

needs

Products & Services

The buying process and experience

Purchase

The way products and services are

delivered to us

Receive

How relationships are built with brands

and influence decisions

Engage

3

Pinterest Etsy Amazon.com Prime

Uber Shyp Warby Parker

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Unicorns play by different rules

Source: (1) Business Insider, CB Insights, KPMG analysis

4

0

(3)(2)(1)00

-$5

$60

$40

$5

$65

$0

$70

20132012

40

20162015

63

2014

68

Valuation Net income

4

Emphasis on growth over profits

Pursuit of superior returns on riskier bets by investors

Delay in entering public markets by private unicorns

Uber valuation and net income ($b)

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Global corporate venture capital investment ($b)

Access to capital for startups has increased…

Source: Venture Pulse Q2 2017, Global analysis of venture funding, KPMG Enterprise, 13 July 2017

$0

$5

$10

$15

$20

$25

$30

$35

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2010 2011 2012 2013 2014 2015 2016 2017

5

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Number of active global unicorns and aggregate value ($b)

…unicorns continue to proliferate

Note(s): totals based upon value at year end; unicorns that have completed an exit are not included in the YoY total; Source: http://graphics.wsj.com/billion-dollar-club/?co=Mode%20Media; KPMG analysis

0

150

300

450

600

750

20162014 2015 2017

Aggregate Unicorn Valuation ($b)Count of Active Unicorns

5

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Established technology companies are becoming moreubiquitous

0

500

1,000

1,500

2,000

2,500

2015 2017 YTD

20102005Note(s):(a) Includes any publicly available shareholder conference calls (b) Data through Oct. 11 (c) Google and Alphabet included in 2015 and beyondSource: (1) FactSet

Alphabet/Google

Amazon

6

Mentions of Alphabet/Google and Amazon on shareholder conference calls

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Innovation is not enough to defend disruption

Disruption: introducing new value chains to existing markets

Innovation: building upon existing value chains

Razor industry disruption summary

Double-edged

safety razor

Three Blade

FiveBlade

Subscription

Stainless steel mass production

Two-blade razor /

disposables

1900 1950 2000 201519751925

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To be a successful disruptor you need to drive multiple outcomes

Expand & enhance

ecosystem

Lower CostIncrease

value

Improve customer

experience

Expand market reach

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Example: Transportation

Expand & enhance

ecosystem

Lower CostIncrease

value

Improve customer

experience

Expand market reach

x

?Uber

Lyft

Tesla

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Example: Amazon’s ecosystem is disrupting grocery

Amazon has urban scale

Purchasing power

Connect supply chain execution with customer service

Strong online platform

Amazon Whole Foods

Expand & enhance

ecosystem

Lower CostIncrease

value

Improve customer

experience

Expand market reach

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Three steps we believe companies should be taking now

Control the controllable Determine your exposure Explore the horizon

Cut Cost Reinvest for growth

Go Northeast

Disruptive Threats

Timing

Weak signals

Hard signals

Strategic options

Achievablestrategicoptions

Prioritizedoptions

Capabilityfilter

Increase value proposition & customer experience

Likelihood

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Questions

Thank you

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