exponential manufacturing and ma integration
TRANSCRIPT
"Exponential Manufacturing & M&A" We will begin soon...
Presenter: Thomas H Kessler, Partner – Global PMI Partners Germany
Moderator: Ana Hasbun Marketing Manager Midaxo
Exponential Manufacturing and Mergers and Acquisitions
September 2016
Thomas H Kessler German Partner
+49 172 255 9788 [email protected]
Why is understanding
“Exponential Manufacturing”
important for M&A Integration?
Why is “Exponential Manufacturing” important for M&A Integration?
“Exponential Manufacturing” is a concept that
demonstrates how any
industry can create value
‘exponentially’
Creating growth & value
are two fundamental
concepts of
Mergers & Acquisitions
Therefore we need to ask us the question
How will we handle exponential growth in M&A Integrations?
M&A Value creation is linked to exponential growth
4
What is “Exponential” growth!
The development steps of each and every exponential growth trend
The 6 D’s of any Exponential Framework
6
Source:SingularityUniversity;PeterDiamandis
From Deceptive to Democratization
Deceptive and Disruptive
Growth
Dematerialization
7
Demonetization Making it digital means that the marginal cost
of replication and distribution is almost zero
Democratizing by following the exponential path we can
reach all over a sudden 1 bn customers
Source:SingularityUniversity;PeterDiamandis
IoT
8
Results:65%par/cipa/on
• 18%implementedit
• 29%startedit• 53%startedtoexploreit
… THAT WILL IMPACT Exponential Manufacturing
THE 8 ACCELERATING TECHNOLOGIES …
Network computing
Artificial Intelligence
Robotics (incl. Sensors)
Material science
Nanotechnology
Energy (Solar specifically)
Biotechnology
Medicine
9 Source:SingularityUniversity;PeterDiamandis
Democratization multiplies the value creation options!
10
WHEREWILLYOUDEMATERIALIZEANDDEMONETIZEBEFORE
SOMEONEELSEDOESITTOYOU?
Case: The GE Appliance
approach to “Exponential
Manufacturing”
Traditional vs. exponential approach
How does GE Appliances use exponential manufacturing to renew itself?
12
Traditional
OPTIMIZATION
Exponential
INNOVATION
Source:GEAppliances;KevinFNolan
Innovation at the edge of the company
13 Source:GEAppliances;KevinFNolan
Learnings from making a Pizza Oven Innovation at the edge of the company
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How is it made?
o Traditionally a USD 10 - 15 mn investment
¨ The tools (FLEXIBLE TOOLING) spent for this pizza oven have been USD 150
o The first one sold is generating returns, this is all about LOW VOLUME, VALIDATION, LEAN and PULL
¨ No product is made until there is a purpose or an order
o Even the WORKFORCE it is PULL
¨ ’1B-fistbuild’ is 80% student run
o Fabrication is all programmable and flexible
¨ 1B has capital invested in a maker space; but it is not dedicated; its all about flexible machines
o Implementing 6 sigma 1B went back to the very basic concepts
¨ It is about speed, flexibility and low cost
o Validation thru sales: Create the idea, Launch a competitive web based design challenge, Sell via Indiegogo
Lessons learned
Source: GE Appliances; Kevin F Nolan
Results:
T2M extremely short, platform approach transforms an engineered product into a scalable (democratized)
end product
Learnings from
“Exponential Manufacturing”
for M&A Integration
What can we learn from ‘Exponential Manufacturing’ and GEA
How to bring “Exponential” to M&A Integration
If we can innovate at the edge of the company …, like GEA to
exponentially accelerate new product introduction while
reducing the cost of innovation dramatically, …
… then we need to think about M&A integration at the edge of
the company to accelerate value creation exponentially
Therefore we need to ask us the question, …
Why, When and How can we create exponential value in M&A Integration?
16
This framework can be used across several industries
How to bring “Exponential” to M&A Integration
Questions to answer:
Why integration at the edge is important!
When to integrate at the edge?
How to integrate at the edge?
What are the ‘must do’s’ for integration at the edge?
17
18
Results:70%par/cipa/on
• 16%organic
• 37%acquisi/on+standard
• 47%acquisi/on+tailored
Why integrating at the edge is important
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Operational Excellence
Product Leadership
Customer Intimacy
Major value can be destroyed when the target operating model is implemented without taking note of the acquisitions existing value generation capability
Successful firms differentiate themselves by focusing relentlessly on a single value discipline, while achieving at least industry average in the other two – never seek the ‘mediocre middle’
Achieved by offering of the best products to the market by focusing on product or service innovation.
Achieved by a deep and detailed under-standing of customer drivers and values the cultivation of lasting relationships with customers, and striving to satisfy their unique needs
Achieved by product and service provisions at the lowest cost and with the least inconvenience by focusing on cost management and operational effectiveness
Why integrating at the edge is important
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Ne
ed
for o
rga
niza
tiona
l aut
ono
my
Depth of integration
Imp
ort
ant
U
nim
po
rta
nt
Unimportant Important
Retention
• Strategic capabilities linked to specific organizational units
• Development of capabilities requires a stable environment
• How can sufficient value be generated to justify the purchase price of the acquisition?
Merger
• Complete consolidation of operations/organization/ culture
• Key is complete removal of boundaries
• What time is best for complete integration?
Partial integration
• Initial coexistence, then increasing interdependence
• Balance between transfer and interdependence
• Define ideal time horizon & path to mutual dependence? • Brand management • Sales channels • R&D
• Decision making freedom
Value chain extension
• Complementary sales channels
• Complementary research and development
• Special, non-transferable competitive advantages (e.g. modularization of intellectual property)
Functional extension
• Research and development • Sales channels • Customer relationship
management
Functional consolidation
• Economies of scale (e.g., capacity utilization)
• Procurement • Sales channels • Shared Service Centers Question the strategic
reasoning of the deal
Gro
wth
foc
us
Cost / investment reduction focus
Imp
ort
ant
U
nim
po
rta
nt
Unimportant Important
Major value can be destroyed when you select the wrong integration approach, e.g. when you stifle the targets growth engine and / or its organizational autonomy
Why integrating at the edge is important
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Major value can be destroyed when the target operating model is implemented without taking note of the acquisitions existing value streams
Value stream mapping
steps
Process steps
Information flows
Process data
Time line
Inventory optimization
Multiple suppliers and
customers
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Results:69%par/cipa/on
• 30%M&AStrategy
• 70%M&AStrategy,Integra/onStrategy,andIntegra/onPlanpre-signing
When to integrate at the edge (checklist)
q You recognize that the acquisition will fill a very important gap in your strategy
q You buy the business especially for its IP and talent
q The acquisitions organizational and management structure varies significantly
from yours
q The acquisitions business processes contrast yours
q The acquisitions talent resource capacity is not sufficient for a large scale
integration
q You understand that the acquisitions cultural environment is very different from
yours
q You observed that the communication within the acquisition and between the
acquisition and its stakeholders is very different from yours
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How to integrate at the edge (ToDo’s vs. Don’t do’s)
Keep the target’s operating model running! q Keep the nimble structures and
existing business processes alive q Keep autonomy, responsibilities,
span of control, decision making freedom
Leverage IP and talent q Adopt the spirit q Become part of the team in a non
controlling, learning way q Leverage knowhow / approach
into acquiring organization through beachheads
Foster success culture q Identify and continue to foster the
culture that lead to success prior to the acquisition
Continue communication style q Retain internal communication style
to support the success culture q Connect with customers and suppliers
using the established communication style
Define value streams and docking points for value exchange q Identify the best approach to channel
the value created within the acquired company to the operating units of the acquirer
q Take extra care to define the exact point in time
Lean, pull and leverage q Leverage the success through
additional investments that enable the value generation to scale while protecting the nucleus, eg. the business approach
q Ensure full responsibility is clearly delegated to the leadership team of the acquired company
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What are the ‘must do’s’ for integration at the edge?
At the time of acquisition ENSURE:
o Financial integration (financial / tax accounting)
o IT integration (only within clearly defined parameters so that it does not stifle growth, hinders proven business processes etc.)
o Legal integration (legal framework: tax and corporate laws, code of conduct, confidentiality & insider rules, etc.)
o Implementation of key communication rules of acquirer with stakeholders other than employees, customers, suppliers; e.g. shareholders, press, government authorities
After 24 – 36 months of successful value transition:
o Test stronger operational and value stream integration to shift overall organization towards more agile business processes
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Results:62%par/cipa/on
• 89%Yes
• 11%No
What our clients have said about us
“GPMIP greatly exceeded my expectations”
“You understood our culture, how we operate, how we work – you just got it”
“You weren’t just consultants, you were part of the team”
“Consulting differently is what we experienced. You are not a typical
consulting firm”
Our clients’ results are our currency, so we really care what they have said about us:
In the next section, we show you more specifically how GPMIP could work with you on a European integration programme.
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Books & academic
Since 2009, GPMIP Partners have delivered knowledge through:
social networks (LinkedIn)
conferences (MergerMarket, HEC, DFCG, CSOEC, …)
university lectures (ZHAW, Pepperdine, Tilburg, TAU, Wharton, …)
dedicated corporate seminars and trainings (Ericsson, Airbus, Mölnlycke, …)
podcasts, newsletters
conferences (China Outbound M&A conference in Beijing, January 2016,
Global M&A Summit – Silicon Valley in Palo Alto, CA USA, October 26th 2016)
Next Training: M&A Integration Essentials for Executives - Stockholm
books (Wiley)
Our approach benefits from our academic and training activity.
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Q&A
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The Berlin Airlift is a symbol for cultural is described by many as the birthplace of the Industrial Revolution.
The United Kingdom continues to build on its long history as a global leader
in engineering, R&D and innovation of all kinds, be it technology, life sciences, media, financial services, consulting or law.
The Berlin Airlift integrated two seemingly separate parts of Germany. It build the cornerstone for the reunification of East and West Germany and thus created significant cultural and financial development.
A global consultancy specialized in pre and post merger
integration separation and transformation
Thomas Kessler Partner GPMIP Germany +49 172 255 9788 [email protected]
Thank you for your attention!
Contact us: [email protected] Thomas H Kessler [email protected]
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