build, buy or sell? applying strategic thinking to the next step of wealth creation

Fox Management Consulting | Temple University

Build, Buy or Sell?Applying Strategic Thinking to

the Next Step of Wealth Creation

Dr. TL Hill

Associate Professor, Strategic & General Management

Managing Director, Fox Management Consulting

EMSDC R.O.A.R CONFERENCE

Growth Symposium

20 September 2016

Fox Management Consulting | Temple University2

TL HILL | [email protected] TYRA FORD | [email protected]

EXECUTIVE OVERSIGHT. ACTIONABLE RESEARCH. LASTING VALUE.

mailto:[email protected]

mailto:[email protected]


There are only 3 options for using profit to meet your goals

Build: Reinvest in sales and operations – organic growth

Buy: New opportunities or capabilities – inorganic growth

Sell: Take out as dividends – whether to spend, save, give away or invest outside of the business

What is your wealth goal?


Wealth is value, created & stored in many formsHuman Capital: The capabilities that we all develop through study, experience & perspective

Financial Capital: Stored profit generated from the interplay of previous investment, natural inputs & labor

Social Capital: The access to knowledge, finances & people stored in networks

Cultural Capital: The cultural cues that unlock social capital

Natural Capital: The source & model for all stored value.


Which kinds of wealth are you creating? What are your priorities?


What is the next challenge that you must meet to meet your goals?

OwnershipManagement

LegacyGiven a dynamic business context


Where in the chain of commerce do you operate?

1. Markets2. Market norms3. Industry boundaries4. Industry power dynamics (past, present, future)5. Environmental context – via stakeholders


Is there profit where you operate?

• Operating margin: Industry reports, interviews• Share: Profit amount x total sales in sub-segment

Ope

ratin

g M

argi

n

Acquisition Funding Servicing 100%0

20%

Share of Industry Revenue

BankingO

pera

ting

Mar

gin

Funding Servicing 100%0

20%

Share of Industry Revenue

Banking

Acquisition


Will there be profit, or even space, in the future?

Author Publisher Wholesaler ReaderRetailerAgent

Sales groups

Direct marketing

Packager

Amazon

Borders

Harper & Row

Consortium, InBook

Bertelsmann B&N


Strategic IntentPassive Average Aggressive

Low

Aver

age

High

Core

Cap

abili

ties

How aggressive & strong are your competitors?


Core Activities

Threatened Not Threatened

Core Assets

Threatened

Radical ChangeEverything up in the air!Publishing

Creative ChangeConstant reinventionEntertainment, investment banking

Not Threatened

(Dis) Intermediating ChangeFragile relationshipsProfessional services, education

Progressive ChangeIncremental adjustmentsAirlines, beverages, truck leasing

How volatile is your industry?


Think & Feel?

Say & Do?

See?Hear?

Pain Gain

What matters to your customer?


Price

Timeliness

Does your customer see value in what you offer?


Think & Feel?

Say & Do?

See?Hear?

Pain Gain

What might change? Is a tipping point approaching?

Each arrow is a force.Lengths and/or weights indicate relative strength.


How is the context changing? Who controls resources now? How will that change?

Environmental Conditions-Political & administrative structures-Economics & markets-Geography & infrastructure-Culture & social fabric

Competitors-Friendly & unfriendly

Focal Organization-Business model canvas

Opponents-Disruptors-Political foes

Beneficiaries-Customers-Direct & indirect

Complementary Organizations-Allies-Partners

Resource Providers-Capital-People-Knowledge-Networks-Technology-Other

Bystanders-Government, etc


Opportunity screen: Build, buy or sell?

Idea Ecological Implications

Impact on Image

Capital Cost Cash Flow

1. Sell: Timber ( - ) Negative Low $60,0001 time

2. Build: Cemetery ( + )…allows regeneration Positive Low (gradual) Slow (renewing)

4. Buy: Go Ape! Neutral to small Mixed $50,000 Immediate, recurring, growing?

5. Build/Buy: Cut-Branch Nursery

( - ) ( + ) seedlings

Neutral Positive

Quite High Low

3-5 years 1-2 years


Value driver decision aid

Tips• Group criteria into “impact” and “probability” buckets…(eco + impact | $ +$)• Create some sort of weighted scale (rough is OK)• Array options • Test your logic and evidence: Can you defend your choice?

Probability of Success

Impact

L

H

H

[Gamble] Cut Branch Nursery

Timber Harvest

Go Ape

Cemetery

[Low-hanging fruit]


Build an opportunity screen…drive a decisionIdea Criterion 1 Criterion 2 Criterion 3 Criterion 41.2.3.

List several ideasDefine criteria

Mission fit, revenue potential, etc. Fill in the cells – with research

Conclusion + evidence. Argue until comfortable

This is your business! . Array onto the matrix

What falls out? Gut check

Probability of Success

Impact

L

H

H

[Gamble]

[Low-hangingFruit]

High-Value Decision