On Thursday, February 1, 2018, Clarkston Consulting hosted a group of executives from South Florida to talk about some of the most important challenges facing their businesses. On the agenda of this Executive Exchange dinner were topics such as drivers of business transformation, growth strategies, and the impacts of mergers and acquisitions.
One of the key themes this group of executives discussed was the constant transformation impacting businesses today. Nothing stays the same – in fact, 75% of the S&P 500 is expected to be different within 15 years and three companies are expected to delist within the next five years. What can we do as business leaders, if we don’t want our company to become the next failure in the news? How do we lead the pack and successfully transform our businesses?
At our dinner we discussed the difference between incremental and strategic transformations. Incremental transformation, or the improvement or automation of existing processes can enable a company to more efficiently support their core business model. Strategic transformation ensures the business can re-invent and reimagine their place as the industry evolves. Successful leaders are able to discern and spot the right balance and respective degree of transformation in accordance to their market dynamics.
At the table, we discussed how business transformation and consolidation were happening at nearly everyone’s company, even as the constant need for growth continues to drive business forward.
Steven Chavez, from Kuehne-Nagel, shared that business transformation is happening at companies everywhere and he emphasized that data was one of the key drivers. “As our ability to utilize massive amounts of data enhances, companies everywhere can begin to use this information to revolutionize their ability to deliver on key supply chain metrics like order fill rate and on-time delivery.”
The group also expressed that the continuous pressure from investors to improve revenue and operational efficiencies necessitate strategic action. As stated by Charles Irizarry, from FoodLogiQ, “New and innovative technologies, like blockchain, will change the way we operate as a business. In order to stay competitive, all executives must invest time to be aware of the business drivers changing our industry.”
For an invitation to attend a future Executive Exchange event, as we host them around the country, please contact us.
The general consensus is that transformations are not easy, but when done right, they will allow companies to leapfrog the competition; as Juan Alarcon, CEO of Fyffes NA shared “business model transformations could and should disrupt the existing status-quo across the core elements of people, process and technology; therefore as leaders we need to ensure we adapt quickly to ensure the future success of the organization”.
We also discussed the volume of mergers and acquisitions in 2017 that significantly influenced the business landscape. There was $2.93 trillion worth of deal activity in 2017. 2018 is off to a fast start in deal-making with the pharmaceutical industry initiating over $30 billion in January. Companies in the consumer products industry are also making moves in 2018 with Nestlé selling their US-based chocolate business to Ferrero and Newell’s announcement to divest $5 billion worth of their business in an effort to focus on their core portfolio, just to name a few.
Each merger, acquisition, or divestiture deal has its own complexities. Many of these deals fail to achieve the return they seek pre-deal. Many of the failures stem from issues related to integration execution, a poor transition from due-diligence to integration, gaps in due diligence, or overvalued deals due to poorly conducted due diligence solely focused on financials. The executives in attendance discussed experiences with how deals can achieve the expected results and what typically goes wrong and why. We certainly enjoyed sharing our perspective with the audience about what could be done better and what must be done differently to ensure hitting the stated objectives pre-deal.
In a closing thought, Paul Garrison, President of Clarkston Consulting, shared his perspective on business transformation. “Business transformations require focus and speed; go-slow to go-fast allows organizations to launch and execute strategic transformations successfully; leading organizations tend to strike the right balance between planning, analysis, and structure with the intrinsic sense of urgency and focus dictated by market dynamics.”
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